At its Investor and Analyst Conference earlier this week, First Data CEO Ric Duques listed seven trends in the payments industry: economic globalization, increased consumerism in developing countries, payment options = competitive advantage, emerging potential in mobile payments, double-digit growth of prepaid cards, online payments will grow at double-digit rates, and evolving consumer expectations.
David Berlind blogs for ZDNet about how banks are dealing with the the FFIEC guidance issued last fall to strengthen online authentication while trying to avoid changes that inconvenience their customers. According to Berlind, "the trick has been to come up with "1b" or "single factor+" solutions: solutions that primarily rely on what you know, but that also emulate, to the extent that they can, what you have (the 2nd factor in true multifactor security)."
Earlier this week, we announced the publication of Professor Ronald J. Mann's new book "Charging Ahead - The Growth and Regulation of Payment Card Markets". Mann is a professor at the University of Texas School of Law in Austin. We've had our hands on the book for a couple of days and thought we'd share some of our reactions to it here. All in all, we highly recommend Mann's new book!
The latest Nilson Report has arrived featuring a look at midyear results for general purpose cards in the US (subscription only). This issue also has articles discussing PNC's re-entry into the payment card business, a new service from Quake for mobile remittances, and Discover's recent network expansion deals.
Intuit held an Analyst Day yesterday. Of particular interest is the Small Business presentation given by Senior Vice President Brad Smith which includes some great insights into the small business market in the US along with Intuit's success with its Innovative Merchant Solutions merchant card acquiring business.
Discount retailer Dollar General Corporation, and Visa USA have announced that consumers will be able to use Visa credit and check cards at more than 8,000 Dollar General stores in 34 states, beginning tomorrow, September 22. Dollar General has been accepting PIN-based debit cards since 2003.
Jackie Crosby writes for the Minneapolis-St. Paul Star Tribune about the University of Minnesota's plan to allow tuition payments to be made by credit card. According to Crosby, "students will be able to pay using American Express, MasterCard and Discover cards, but not Visa, which sought to collect higher fees to provide the service." The university will be charging a 2.75% convenience fee on the credit card payments it accepts.
The Payments System Research department of the Federal Reserve Bank of Kansas City has published a new working paper titled "Payment Industry Dynamics: A Two-Sided Market Approach" by Zhu Wang and James McAndrews. The paper explores the "micro-foundations of two-sided payment markets, and emphasizes the roles that consumers' income distribution and merchants' size heterogeneity play in adopting new payment devices. The findings suggest that both the increasing concentration of payment card networks and the growth of consumer income relative to card service costs may help explain the puzzles surrounding payment card interchange fees."
The Payments System Research department of the Federal Reserve Bank of Kansas City has published a new working paper titled "Payment Card Rewards Programs and Consumer Payment Choice" by Andrew Ching and Fumiko Hayashi. The paper "seeks to analyze the effects of payment card rewards programs on consumer payment choice by using consumer survey data."
Ecommerce malls are back. In the early days of ecommerce, there were some true believers who felt that the real-world shopping mall would transform into online malls. Some tried, most failed. Today, they're back. In the latest mall news, American Express today launched the Bonus Points Mall, "a new benefit that enables Membership Rewards enrollees to earn two points for virtually every dollar spent at more than 100 top
brand name online retailers."
Market Platform Dynamics recently interviewed YeePay CEO Bin Tang about the Payments Ecosystem Challenges and Opportunities in China and has posted it on their Paying with Plastic website. YeePay recently announced the completion of a round of financing led by Draper Fisher Jurvetson, DFJ Dragon and joined by Intel Capital China, WR Hambrecht and several other institutional investors
Darry Madden writes for the Brattleboro, VT Reformer about the city's just finalized plans to deploy a smart card-based parking payment system. Madden says "rarely does anything related to parking get characterized as "so cool." According to the story, initially the card will be a simple parking card available at convenient spots downtown. But eventually some would like to see it accepted at area businesses, like any debit card. "That way, in this cashless economy, anyone with a parking card could buy a cup of coffee, for example."
Melissa McGrath writes for the Idaho Statesman that WinCo Foods has started accepting debit cards - but not credit cards. McGrath quotes Mike Reed, a WinCo spokesman, who says "debit cards don't charge nearly as much as credit cards. The costs of (debit cards) are pretty close to check-handling fees." WinCo is, to some extent, following the strategy of Costco who only accepts PIN-debit or American Express cards. Other merchants try to "steer" consumers to PIN-debit transactions because of the cost savings vs. signature debit or credit cards. The settlement in the merchant litigation vs. Visa and MasterCard in June 2003 allowed merchants to accept either only debit cards or both debit and credit cards with those brands. Debit cards are also now clearly marked as being debit cards so merchants can quickly identify them.
Amazon Business Solutions has launched "Fulfillment by Amazon" and "WebStore by Amazon," which Amazon says gives "small and medium-sized businesses access to Amazon's order fulfillment, customer service, customer shipping offers, and underlying website technology to improve the experience they offer their customers."
GlobalCollect has announced the integration of Ukash and paysafecard, two prepaid solutions, into its online payment platform WebCollect. According to GlobalCollect, "cash is still the only purchasing power for those who do not possess a card or a bank account such as young online shoppers. These prepaid solutions are also targeting shoppers who do not want to disclose payment details online due to fears around identity theft and security or those who desire anonymity and discretion."
We have received news of the following recent management changes:
mBlox and O2 have announced they'll be holding a seminar next Tuesday, September 26, in London to discuss "Mobile Banking: The 5th Channel To Customers". "Attendees on the day can expect detailed information on: the financial benefits of mobile banking; how to ensure customers have the best possible experience of mobile banking and a case study from MasterCard that demonstrates how SMS can help cut fraud. Speakers are confirmed from mBlox, LogicaCMG, MasterCard Worldwide, Garanti Bank, Informa Telecoms and Media and O2."
Raleigh, NC-based State Employees' Credit Union has introduced a new enhancement to its credit card payment program that allows cardholders to select a different fixed percentage amount for their minimum monthly payment. According to the credit union, the change was made to accommodate members who want to more aggressively reduce their credit card debt. Prior to the recent enhancement, the minimum payment default amount was 3% of the credit card balance. With the new option, members may now choose to have their default percentage set at an increased percentage amount of 4%, 5% or 6% of their balance. SECU also offers an "Auto Pay" feature that automatically drafts the minimum credit card payment from an SECU account to assure there is never a delinquency.
Gertrude Tumpel-Gugerell, Member of the Executive Board of the European Central Bank, gave a speech at the EFMA Cards and Payments Conference in which she looked at the future of retail payments in Europe. Among her comments, she says "the experience in Norway is a good indication that cards can become a good replacement for cash as long as they become a more convenient payment instrument than cash." Both the text and presentation slides (PDF) from her speech are available online. Her slides include one very interesting graph showing the consumer payment preferences in France based upon the amount of the purchase.
Sarmad Ali writes for today's Wall St. Journal about how SMS-based text messaging is the latest way consumers are ordering their morning coffee (and more) while in-bound to the office. Ali writes about New York-based Mobo Systems, Menlo Park-based MyTango, and UK-based Software For Restaurants and their different flavors of remote order and pay. Several years ago, a Seattle-based company named Ontain pioneered remote order and pay services (using a simple IVR approach instead of SMS-based text messaging) and conducted several trials in various markets with, among others, Starbucks. Ontain's approach failed to achieve commercial success, however, and likely was one of those cases of being ahead of its time.
Amy Hook of MarketWatch reports in today's Wall St. Journal about a slight downward trend in credit card balances of college students. Several recent articles have highlighted a decline in the acceptance of credit cards by colleges and universities for tuition payments - as university administrators are steering students to pay tuition bills using electronic checks instead of cards and, in the process, saving merchant card discount fees the universities would otherwise have to pay.
First Data International has announced a strategic, long-term agreement with Barclaycard, the UK-based international cards and lending business. Under the terms of the agreement, First Data International will provide credit card and loans processing for Barclaycard's new partnership programmes in the UK on its VisionPLUS processing platform, as well as a full range of contact centre services and managed services to include plastics personalisation, applications processing, payment processing, statements, letters and PIN mailers. Barclaycard intends to migrate existing partnership programmes and other portfolios to the VisionPLUS platform over time.
Morgan Stanley reported financial results for its third quarter ending August 31 - including results for its Discover card business unit. According to the company, "net sales volume was a record $25.7 billion, a 15 percent increase from a year ago, reflecting increased cardmember usage and the acquisition of the Goldfish credit card business."
Verid recently announced a deal with RSA Security to incorporate Verid's KBA (Knowledge Based Authentication) solution into RSA's "adaptive authentication" product suite. Glenbrook's Carol Coye Benson spoke yesterday with Kevin Watson, Chairman & CEO of Verid, to learn more about KBA and the company.