Payments News from Glenbrook Partners

A Deeper Look at the BJ's Wholesale Club Litigation

Ethan Preston is an attorney in Chicago practicing IT security law. In an email to Payments News, he writes:

I've collected some of the pleadings in the PSECU v. BJ's Wholesale case and written them up.

See his comments here. He writes:

I wrote that the development of information security depends on litigation, and litigation between private parties, specifically. The BJ's Wholesale litigation is especially interesting because it involves credit card security, the plaintiffs are large companies (specifically, banks), and it raises some novel legal issues.

Today's Headline News - Sunday, May 22, 2005

• Buffalo News: I.D. theft aided by rampant use of Social Security numbers
• International Herald Tribune: Wireless: A world of potential for e-passport market
• New York Times: The Check? It's Lost. It's in the Mail. Maybe the Dog Ate It.
• Baltimore Sun: 'Smart-card' plant may turn brilliant
• GUS to go ahead with Experian demerger
• Chicago Tribune: Pranks become piracy on the Web
• UK: 'Phishing' slows online banking

Note: This posting is updated regularly throughout the day.

Get music at your fingertips from the Apple Store.

Today's Other News - Saturday, May 21, 2005

• Givex Gift Card Solutions Now Available On Dinerware POS
• Givex Integrates With SpeedLine POS - Kick-Start to Pizza Chain Gift Cards
• UK: Banks agree to speed up payments

Note: This posting is updated regularly throughout the day.

Today's Other News - Friday, May 20, 2005

• GE Money Drives Expansion with New Products and Customer Focus
• nCipher helps combat phishing attacks with Chip and PIN
• Technology Leads the Way at Visa - Interview with Visa USA CEO Carl Pascarella
• eGov Monitor: UK Plans Cheap Digital IDs for eGovernment
• Economist: Bank of America Reportedly Invests in China Construction Bank
• Federal Reserve: Remarks by Governor Mark W. Olson At the 2005 Payments Conference, Federal Reserve Bank of Chicago
• Debit cards relished by crooks, should be kept in safe place
• Asia Pay Announces Quarterly Results
• Enterprise Payment Solution for Banks Outlined by eCommLink CEO

Note: This posting is updated regularly throughout the day.

Today's Other News - Thursday, May 19, 2005

• Rand Commentary: Businesses Need Explicit Policies for Using Data from Access Control Cards
• Microsoft preparing InfoCard identity management solution
• Germany's Sparkasse Hannover Purchases NCR's Personas M Series ATMs for Cash Deposit and Cash Recycling Functions
• ISD Announces Second Round of Funding
• Elan Financial Services Forms Partnership with Pacific Coast Bankers Bank
• Wells Fargo Becomes First Major U.S. Bank to Offer Consumer Remittance Service to El Salvador and Guatemala
• International Card Establishment (I.C.E.) Enters Into Processing Agreement with First Data Merchant Services and Fleet National Bank
• Planetwide Games Joins Forces with First Data to Launch Authentication Product for the Video Game Industry
• ING Direct Flies Into Phoenix
• Carreker's Global Payments Consulting Offers Image Exchange Workshop
• First Data to sell $1 bln notes in two parts Thurs
• Bankruptcy judge warns teens of credit card dangers
• Students' credit card debt worries Schumer
• Commentary: South Korean credit crisis offers a lesson for China
• First Data Renews Card Processing Agreement with MABA; Relationship Continues with Processor's Original Customer

Note: This posting is updated regularly throughout the day.

Today's Other News - Wednesday, May 18, 2005

• H-E-B develops new Visa prepaid card with savings option
• Visa USA says 1Q consumer spending rises
• World's First Published ATM PIN
• Australia: Giant GE picks Wizard strategy
• Technology Veteran Gary Epple Joins Paymetric as Vice President - Development
• Credit First National Association Improves Service Levels with Speech-Enabled Customer Service Applications from Intervoice
• Acies Corporation Appoints Industry Expert Jeffrey D. Klores to its Board of Directors
• S1 and VASCO Team to Deliver Security Solutions to Financial Institutions
• JPMorgan Chase Selects SAP as an Integral Part of Financials Technology Platform
• Remote Corporate Deposits Lead Types of New Products and Services Bankers Seek for 'Check 21' Imaging
• Harvard Credit Card To Fund Fellowships
• Visa in talks for Singapore's national e-payment hub project

Note: This posting is updated regularly throughout the day.

Today's Other News - Tuesday, May 17, 2005

• HDFC Bank Joins Euronet's Cashnet Shared ATM Network in India
• Asia Pay Announces Launching of Beijing Credit Bureau Pilot Program with Beijing Purple Stars Appraisal
• P&H Solutions: Financial Institutions Increasing Focus on Payments Security; Recent Fraud Incidents Stimulate Interest in Token Authentication Modules
• Motley Fool: Why Take iPayment Private?
• BioPay Announces Age Verification Feature Now Available With Payments
• PayStar Announces $5 Million Financing Commitment
• Carreker and BISYS Announce Alliance to Offer Payment Strategy Consulting

Note: This posting is updated regularly throughout the day.

Today's Other News - Monday, May 16, 2005

• Turning the Tables on Identity Theft: TableSwipe(TM) Wireless Device Keeps Credit Card Payment in Customer's Hands
• BB&T introduces new payroll card for employers
• Dynamic Solutions International Renames CardWizard Division to Dynamic Card Solutions
• Harvard Alumni Association and the Barclays Group (Juniper Bank) Announce New World Mastercard
• Vigilar Earns MasterCard International Site Data Protection Vendor Approval to Perform Credit Card Network Security Scans
• Chicago Tribune: CTA's "smart" cards give some CTA riders free, unlimited rides
• S1 and Digital Envoy Cooperate on Identity Fraud Prevention for Financial Institutions
• Cub Foods Launches Biometric Payment Technology
• Apropos Technology Improves Customer Satisfaction at Genpass

Note: This posting is updated regularly throughout the day.

UK: GE Moves From Store Cards To Take On Banks

Sarah Ryle reports for Guardian Online about moves that GE is making in the UK to become a direct consumer provider of multiple financial services products.

'Once we have customers in through the credit and store cards we want them to use us for their other financial services,' said UK GE Capital boss Brad Cooper. 'We have been providing finances to those customers via retailers and other intermediaries and now we will rebrand as GE Money and become a direct provider.'

Quick Credit Cards Coming

Bob Keefe of Cox News Service writes about RFID-equipped proximity payment cards.

Bruce Cundiff, an analyst at technology research company Jupiter Research, doesn't give the new contactless cards a much better chance than those chip-embedded cards in the United States.

The biggest problem, Cundiff said, is convincing merchants to shell out millions to add new payment terminals to their stores. So far, he said, the card companies have typically helped pay for new equipment at partner merchants. "It's just going to take a lot of money, and it's not going to come from the merchants, because they don't really need this," Cundiff said.

Today's Other News - Friday, May 13, 2005

• GonzoBanker: Death of Internet Banking?
• AP: N.C. Banks Send Notice of Security Breach
• WSJ: Casinos Bet on Radio-ID Gambling Chips
• VeriFone and Pay By Touch Form Strategic Partnership for Biometric Payment Solutions
• Transaction Network Services Acquires FusionPoint Technology Solutions
• Pay By Touch Selects Cogent's Technology to Enhance Their Secure Biometric Payment System

Note: This posting is updated regularly throughout the day.

Today's Other News - Thursday, May 12, 2005

• Web merchants behind in meeting payment security deadline, expert says
• Wachovia Ranks Number One in Web Site Satisfaction Among Customers
• Litigation Threatens to Capsize U.S. General Purpose Gift Cards Market
• Credit card too slow for your busy life?
• AP: 43 Pct. of Adults Get 'Phishing' Contacts
• WSJ: American Express Legal Deal Unravels
• BitPass Enables Premium Podcasts
• GE Consumer Finance to Acquire 49.99 Percent Interest in BAC International Bank Inc.
• Alliance Data Systems Selected by Top-10 Jewelry Retailer Crescent Jewelers to Provide Private Label Credit Card Services

Note: This posting is updated regularly throughout the day.

New Credit Card Spots Show Fierce Competition for High-End Consumers

Eric Dash reports for the New York Time's Advertising section about new advertising efforts being launched by American Express, MasterCard and Visa.

Like the candy and cola wars, the three-way advertising frenzy among the credit card companies reflects the challenges of a saturated marketplace. Until recently, the payment associations, which provide the electronic processing network and basic card platforms to their issuing banks, largely left product advertising to their members. But as debit card use has risen and credit card growth has slowed, the companies are struggling to find new customers and get existing ones to use the cards more.

Today's Other News - Wednesday, May 11, 2005

• Debit Card Designed Exclusively for Kids Introduced Nationally
• Utah Stores Offer Biometric Payments for the First Time in the State
• Visa Finds Small Businesses Want Greater Cash Management Efficiencies
• Fiserv Expands Check Fraud Detection Services with Outsourced FraudGuard Secure Seal Positive Pay
• Speculation re: American Express and Discover
• China: Bank card has golden week
• Milaukee Paper: Metavante to make acquisition
• CSO: The Five Most Shocking Things About the ChoicePoint Debacle

Note: This posting is updated regularly throughout the day.

US Bank Acquires Genpass

US Bank announced this afternoon that it has purchased Genpass, making US Bank the second largest third-party ATM processor in the US.

"This transaction makes U.S. Bank a leader in every major payment processing business and creates a foundation for future growth," said Pamela Joseph, vice chairman of U.S. Bancorp, who leads the company's payment services businesses.

"U.S. Bank has a long history of innovation and growth in the payment services industry and the acquisition of Genpass affirms our commitment to grow all aspects of the payments business. U.S. Bank brings scale, capital, expertise, and new products to the Genpass customer base, while maintaining the highest commitments to quality."

Consumer Spending on Visa Signature Surpasses $100 Billion For Past 12 Months

Visa USA announced today that consumer spending on Visa Signature cards in the US surpassed $100 billion over the past 12 months.

"The strong growth in Visa Signature sales volume and in average ticket size illustrates the value the product provides to all of our stakeholders," said Jim McCarthy, senior vice president, consumer credit products, Visa USA.

"Cardholders have emphatically adopted the incremental benefits and features that deliver against life's priorities, helping them achieve what they truly want to accomplish. At the same time, our merchant partners and Members reap the benefits of Visa Signature card usage, with this cardholder segment averaging more than seven times greater annual spend per account than traditional Visa consumer credit cardholders."

Metavante to Acquire MBI

Metavante announced this morning the signing of a definitive merger agreement to acquire Med-i-Bank (MBI) for $145 million.

MBI is a leading provider of electronic payment services for employee benefit and consumer-directed health care accounts. MBI's Flexible Spending Account (FSA), Health Reimbursement Arrangement (HRA) and Health Savings Account (HSA) solutions are currently used by approximately 200 third-party administrators (TPAs) and health plans that service over 15,500 employers and approximately 1.3 million employee accounts. The company was founded in 1995 and employs approximately 70 persons.

Merchants: "Plastic Slices into Bottom Line"

Alan Wechsler reports for the Times Union (Albany, NY) on merchant resentment about the fees charged for accepting credit cards.

Today's Other News - Tuesday, May 10, 2005

• BitPass Teams With Content Delivery Networks Abacast and Fast-Serv Technologies
• Cyota Launches the World's First Anti-Pharming Solution
• American Express says would consider acquisitions
• Banks Continued to Create Significant Shareholder Value in 2004
• Arcot Systems Secures $11.0 Million From Investors
• Ping Identity Completes $7.5 Million Series B Financing
• Phishing is Yesterday's News - Get Ready for Pharming
• AuthenTec Sensor Helps Secure Mobile Banking and Protect Sensitive Data for LP3550 Phone
• First Data and Provident Bank & Trust of Belize Sign Payment Processing Agreement
• Stephen S. Cole Elected to Online Resources' Board Of Directors
• MasterCard Reunites Top Fraud Fighters at Third Annual Global Risk Management Symposium
• Opinion: New credit card-bankruptcy law ignores the real reasons behind debt
• UK: New Research Highlights Card Fraud Fear
• VeriSign Announces Mother's Day-Period Online Shopping Activity
• VeriSign Outlines Roadmap for Consumer Authentication and Protection Against Identity Theft at Digital ID World 2005
• Hypercom Corporation Announces First Quarter 2005 Financial Results
• Fiserv, Inc. Signs Definitive Agreement To Acquire Assets of U.S. eLending Business from Emergis
• PayPal Wins Webby People's Voice Award for Best Financial Services Web Site

Note: This posting is updated regularly throughout the day.

Today's Other News - Monday, May 9, 2005

• China Credit Card Use to Explode
• MMI Gives Guidelines for Minimum Payments on Credit Card Accounts to Ensure Faster Pay Off; Card Issuers Given Guidelines To End Negative Amortization
• Mobile Payment Forum Adds First Data and Sprint to Board; New Members, Proximity Payment Activity Highlighted at Spring Plenary
• Wells’ Debra Rossi takes on a new responsibilities in a multi-channel world
• Linsco/Private Ledger First Brokerage Firm to Offer American Express-Branded Card Through MBNA
• MBNA Canada Selected to Issue Alterna Credit Card
• NCR Unveils Comprehensive ATM Fraud Detection Technology and Security Consultancy Service
• U.S. Bank Expands Rewards Card Portfolio With New Category of Business-to-Business 'Partner Cards'
• Former Visa Division Head Arnold Birenbaum Appointed Chief Operating Officer
• Computerworld: Biometrics: Getting Back to Business
• Click Here: Passwords are at Your Fingertips with American Power Conversion's New Biometric Mouse Password Manager
• Deluxe and Integrated Data Systems Form Alliance to Assist Credit Unions

Note: This posting is updated regularly throughout the day.

Kansas City Fed International Payments Policy Conference on Interchange Fees

Lloyd Constantine, chairman of law firm Constantine Cannon, was a featured speaker last week at the International Payments Policy Conference "Interchange Fees in Credit and Debit Card Industries: What Role for Public Authorities?" held in Santa Fe by the Payments System Research Department of the Federal Reserve Bank of Kansas City.

Constantine's speech titled "The Need for Federal Reserve and Antitrust Intervention in the Failed U.S. Debit and Credit Markets" is available online (PDF) on his firm's website.

Three things stand in the way of ending this cartel mechanism, which extorts billions of dollars annual from U.S. merchants and consumers, through supra-competitive credit card interchange fees.

These three things are the now thoroughly discredited Nabanco decision, the two-sided market argument being prepared for imminent litigation, and the still unknown resolve of a public or private enforcer of the antitrust laws to forcefully and skillfully litigate this price-fixing case.

MasterCard's Noah Hanft was also a keynote speaker at the conference -- the day after Constantine's speech -- and responded in his speech "Let's Get Real!" (PDF):

Ladies and gentlemen, it’s not really about high interchange fees, it’s really about high attorney’s fees. Yesterday, we all heard from one class action lawyer who is articulate and well spoken. But make no mistake about it, he and his fellow class action lawyers appeal for clients so that they can extract enormous fees for themselves and their colleagues. His speech vividly demonstrates that at bottom it is not about economic theories. It is not about market realities. It is about pure and simple – money-lust.

He went on to close with:

I conclude my remarks today with a message to those class action lawyers, and economists that are in that perverse boutique making their living vilifying interchange. It is very simple message. Stop trying to grow your hidden tax! Find something else to do with your time.

MasterCard provides an incredible service to the global community. It is one that is cherished by consumers – it should be celebrated, not regulated.

Additional presentations available on the conference's home page include (all PDF):

• Interchange Fees in Various Countries: Developments and Determinants
• Economic Rational for Interchange Fees
• Public policy and the invisible price: competition law, regulation and the interchange fee
• Payments System Reform: The Australian Experience
• Interchange in a changing market: Observations from the euro area perspective

Paying More For Overseas Purchases

Matthai Chakko Kuruvila writes in the San Jose Mercury News Business section today about the escalating fees associated with using credit cards overseas.

Fair Isaac Introduces Falcon One System to Combat Fraud at Every Customer Interaction

Fair Isaac has introduced Falcon One, a new enterprise software solution for effectively combating both existing and emerging types of fraud at every customer touchpoint.

"With the complexity of the current business environment and the growing sophistication of fraud perpetrators, gaining control of fraud losses requires an enterprise-wide approach," said Ted Crooks, vice president of Fraud Protection Solutions at Fair Isaac.

"Incorporating the Fair Isaac fraud technology that protects two-thirds of the world's credit cards today, the Falcon One system provides financial services providers with essential connections and flexibility to reduce the impact of fraud at every point of customer contact."

PayPal vs. iPayment

With the release of iPayment's first quarter results this morning, it's interesting to do a comparison of it with PayPal's first quarter results.

Coincidentally, they both reported essentially the same payment volume for the quarter: $6.2 billion. PayPal's payment volume growth in the first quarter was 44 percent while iPayment's grew 118 percent including recent acquisitions.

But the revenue yield from that quarterly payment volume was quite a bit different between the two. On the top line, PayPal's net revenues for the quarter were $233 million; iPayment's revenues were $163 million.

Note that both companies include the cost of interchange in their revenues (unlike most of the other publicly traded merchant acquirers) -- so any comparison to other companies has to net out interchange expense up front. On a percentage basis, PayPal's interchange expense is lower per dollar of payment volume because of its hybrid funding model -- where slightly more than half of its funding activity is sourced from credit card accounts.

While they're really different businesses (one operating exclusively in the ecommerce space, the other in the small merchant physical point of sale space), it's interesting to also look at valuations. iPayment currently has a market cap of about $650 million; PayPal was acquired by eBay in 2002 for about $1.5 billion (in eBay stock) and recently an analyst commented that PayPal was probably worth $6-7 billion.

Do you have any more insights to offer re: comparing these two companies? Comments are open for this posting.

[Update: iPayment stock got hammered following the earnings announcement and conference call this morning - closing down over 10 percent and reducing its market cap to $580 million.]

Today's Other News - Thursday, May 5, 2005

• Citigroup Teams with State and Local Prosecutors to Lock Up ID Thieves
• Digital Insight Integrates PageShare Co-Browse Technology to Bridge Internet Banking Customer Service Channels
• Disney's Visa Card Brings Magical Moments to the 'Happiest Celebration On Earth'
• The Distra Switch Is the Next Generation in Payments Switching
• City to bring in all-purpose smart cards 'within weeks'
• First Data to Host Investor Conference May 12
• iPayment Reports First Quarter Earnings
• TowerGroup Debuts European Banking & Payments Research and Advisory Service
• eFunds Corporation to Acquire National Check Protection Services, Inc.
• Canadian Small Payment Specialist Dexit Announces First Quarter Financial Results

Note: This posting is updated regularly throughout the day.

New Merchant Group Forms to Win Regulatory Relief on Interchange

Digital Transactions reports on the recently formed Merchant Payments Coalition.

After years of friction between banks and merchants over the subject, this appears to be the first organized effort by retailers to gain regulatory relief on interchange costs.

Today's Other News - Wednesday, May 4, 2005

• New Agreements Herald New Day for Fed Wire Service Bureau
• myFICO Announces 10 Million FICO Scores Purchased by Consumers
• Experian Interactive Launches With Acquisition of LowerMyBills.com
• Whittle Transaction Group Acquired by Planet Payment
• Billing Concepts, Inc and Webpay International, AG Join Forces to Deliver Comprehensive Global Payment System
• RDM Selects Mitek Systems for Point-of-Presentment Check 21 Imaging
• Mary Cirillo Joins the Board of The Thomson Corporation
• Electracash eChecks Selected by Paradata Systems
• Chordiant to Showcase Process-Driven Card Solutions at the 17th Annual Card Forum and Expo
• Retailers Welcome Federal Reserve Focus on Credit Card Fees
• Retail Decisions Works with Mi-Pay to Deliver Pre-Pay Top-Up to Mobile Operators
• Credit card minimum payments doubling
• MasterCard Europe and ICE deliver card-based travellers cheques
• Pay By Touch Names Three New Board Members
• Visa Debit Reforms Will Hurt Cardholders: Australia's Cuscal
• Britons are saving less and using credit cards more
• SunTrust to Deploy Alogent's Remote Deposit Automation for Corporate Clients
• UK: Eternal Goldfish card debt
• Payment Data Systems Fulfills Additional Order for 50,000 Debit Cards
• Fraudsters deploy Botnets as DNS Servers to Sustain Phishing Attacks

Note: This posting is updated regularly throughout the day.

The Interra Concept

Red Herring profiles the Interra Project created by former Visa International CEO Dee Hock and Greg Steltenpohl, founder of Odwalla.

The Interra system seeks to crease consumer empowerment, transparency in buying and giving decisions, and support for local economies, all at the same time.

The foundation of the system is, as it describes itself, "a payment card and transaction platform, that rewards customers for purchasing from locally owned and sustainable businesses, donates automatically to community organizations and facilitates connections to like minded members in a self organizing manner."

Today's Other News - Tuesday, May 3, 2005

• Netcraft Launches Phishing Site Feed
• ACE Cash Express Announces a New Savings Account on the ACE MasterCard
• CafePress.com Beats Home Depot and Target.com: Named Top Retail Web Site in Webby Awards
• Nonbank Payments: Are Banks Green? Yes And No
• StoreNext and Pay By Touch to Collaborate on Electronic Payment Solutions for Independent Grocers
• 2005 E-Crime Watch Survey Shows E-Crime Fighters Making Headway
• Key Possibilities Card Promotes Heart Health Awareness, Keeps on Giving
• Revolutionary Savings Program Helps Unbanked Americans Save for the Future
• ChoicePoint Adds to Government Services; Expands by Acquiring EzGov Operations in the Americas, Caribbean
• ACI Worldwide Creates Payments Infrastructure for Algerian Bank
• Fiserv and the Endpoint Exchange Network Announce Agreement to Exchange Check Images between Networks
• Corillian Recognized as 'Clear Leader' in Online Banking
• Fidelity Information Services Recommends Banker's Toolbox in the Nation's Fight Against Money Laundering Activities
• Shopping.com Debuts Services Category With Beta Launch in Mortgages
• SVPCO: Daily Check Image Exchange Volume Surpasses $1 Billion
• India: Safety chip makes plastic money dearer
• Smart Card Alliance Supports Higher Security Levels for Electronic Passport
• Yodlee's OnCenter Reduces Loss from Identity Theft
• New Bill Payment and Check Cashing Kiosk Expected to Drive Increased Store Traffic and Sales
• US Dataworks Wins Contract to Deliver ARC Processing Solution
• Snafu puts 600,000 at security risk
• Malaysia: Visa International to Revive Debit Card Business (Electron)

Note: This posting is updated regularly throughout the day.

Merchants Welcome Fed Conference on Credit Card Fees

The Merchants Payments Coalition today issued a press release applauding the Federal Reserve Bank of Kansas City for holding a conference on credit and debit card interchange fees later this week. The conference on interchange rates is scheduled for May 4-6 in Santa Fe, New Mexico.

"Merchants have known for years that banks' interchange fees are a hidden tax that is driving up the cost of merchandise and services for American consumers every day," Merchants Payments Coalition Chairman Mallory Duncan, senior vice president and general counsel at the National Retail Federation, said. "The Federal Reserve needs to question whether the growing use of cards rather than cash and checks - especially high-interchange debit cards - undermines the Fed's ability to measure and manage the nation's money supply. We welcome the fact that the Federal Reserve is concerned enough to hold a conference focusing on this issue, and hope that this is a sign of action to follow. American consumers and the American economy deserve protection."

"The fees that the credit card companies charge defy logic and they are using them to increase profits far more than to provide any meaningful benefits to retailers," coalition Secretary Teri Richman, senior vice president for public affairs and research at the National Association of Convenience Stores, said. "Credit card company rules effectively prohibit retailers from providing discounts for cash or checks in all but a handful of situations. As a result, consumers pay more even when they don't use their cards. It's time for this constant picking of consumers' pockets to come to an end."

"U.S. consumers and retailers pay among the highest interchange rates in the world, which makes no economic sense," coalition Executive Committee member Jennifer Hatcher, director of government relations at the Food Marketing Institute, said. "With interest rates down, fraud down, and volume growing exponentially, U.S. rates should be among the lowest. As consumers increasingly use credit and debit cards as replacements for cash and checks in millions of daily purchases, the Federal Reserve must expand its oversight and regulatory role to maintain control over this significant part of our money supply and deliver efficiency for consumers."

"We applaud the Federal Reserve's exploration of the role of public authorities regarding interchange fees in the credit and debit card industries. Interchange has become a tax on consumers," coalition Executive Committee member Stuart Zlotnikoff, senior vice president at the National Grocers Association, said. "The United States has the highest credit card interchange fees of any industrialized country. Paradoxically, costs should be less in the United States due to our greater economies of scale. Yet interchange rates have continued to increase, even while the costs of processing, borrowing and fraud have declined. The international precedents for cost-based interchange are persuasive and demand serious review by U.S. public authorities."

Interchange, a fee that is collectively set by Visa and MasterCard's member banks, is a percentage of each transaction - sometimes accompanied by a flat fee - that banks collect from retailers every time a credit or debit card is used to pay for a purchase, adding up to billions of dollars each year. Visa and MasterCard together make up 90 percent of the U.S. credit and debit card business.

Complex fee structures make it difficult to precisely calculate an average interchange rate, but a recent Morgan Stanley report found that a weighted average for Visa and MasterCard interchange had increased from 1.58 percent in 1998 to 1.75 percent in 2004 (an increase of 10.8 percent) and is forecast to grow to 1.86 percent in 2010 (an additional increase of 6.3 percent over 2004 and 17.7 percent since 1998). With the growing use of plastic, the dollar volume of interchange collected has grown from $9.4 billion in 1998 to $17.4 billion (an 85 percent increase) and is projected to reach $32.4 billion in 2010 (an 86 percent increase over 2004 and 244 percent since 1998).

The latest rise in interchange rates came April 1, when Visa and MasterCard imposed a series of significant increases. Some of the new rates are as high as 2.9 percent, particularly for new premium cards. In addition to increasing rates, Visa and MasterCard are urging consumers to move to the higher-rate premium cards and away from lower-rate standard cards.

Banks say they charge interchange to make up for bad debt or fraud. With fraud costs consistently decreasing in recent years, however, the costs interchange is intended to cover aren't nearly as much as the amount charged, and banks already make huge profits from cardholder interest and fees. Moreover, the coalition believes that much of the fraud that interchange is intended to cover is the fault of banks' poorly designed card programs, not the fault of merchants.

The coalition is looking at a variety of avenues to help U.S. merchants obtain more reasonable interchange rates. Among other steps, the coalition is examining regulations recently adopted or under consideration around the globe: Australia adopted regulations in 2004 restricting interchange rates, the European Union is adopting restrictions and Great Britain is examining the issue as well. U.S. interchange rates are roughly three times Australian levels.

Coalition members include the American Petroleum Institute, the Food Marketing Institute, the National Association of Chain Drug Stores, the National Association of College Stores, the National Association of Convenience Stores, the National Council of Chain Restaurants, the National Grocers Association, the National Restaurant Association, the National Retail Federation, NATSO (the National Association of Travel Plazas and Truckstops), the Petroleum Marketers Association of America, the Retail Industry Leaders Association and Shop.org. The coalition estimates that interchange collected from its members accounts for about one-quarter of U.S. interchange.

Today's Other News - Monday, May 2, 2005

• Citibank Celebrates Mother's Day with Complimentary Citibank Global Transfers to Mexico
• Business Week: A Bank-Friendly Bankruptcy Law?
• Postini Reports That Phishing Remains Major Threat Despite 45 Percent Decrease In April Phishing Attempts
• Dynamic Currency Conversion (DCC) Point-Of-Sale (POS) Application Receives 'Class A' Approval From Vital
• Carreker's New Payment/Guard Solution Offers Financial Institutions Advanced Protection Against Double Posting of Image Replacement Documents
• U.S. Bank and Korean Air Announce New SKYPASS Visa Company Business Credit Card
• ITI Unit of Fiserv and FSV Payment Systems Join Forces to Offer Stored-Value Solutions
• Kansas City Fed: Early Experience with Check 21 (pdf)
• Frost Bank Selects NCR's ImageMark Technology for Remote Capture of Commercial Customer Deposits
• Mercedes-Benz Dealership Plans to Pay CREDITZ Digital Currency to High-Value Customers
• Financial DNA has released its preliminary findings on PayPal's prospective role away from E Bay auctions
• RBC Royal Bank & Esso team up to offer rewards
• eCOST.com Launches New Consumer Credit Card
• Bankrate Launches Redesigned Web Site
• ChoicePoint Acquires Magnify, Expanding Fraud Detection and Analytics Services
• Diebold Acquires Global Electronic Security Integrator TASC
• Nova Scotia Gamblers to Control Habit with Smart Cards
• Creative Payment Solutions Licenses Carreker's WebCapture for Small-Volume Customers

Note: This posting is updated regularly throughout the day.

Future Debt In The Cards For Teens

Al Lewis writes for the Denver Post about plastic cards and teens.

Today, 11 percent of teenagers have credit cards in their names, according to a recent nationwide survey by Junior Achievement, a Colorado Springs-based group bringing financial literacy to kids. The group found that 6.2 percent of all 13- and 14-year-olds have plastic in their pockets, too.

Today's Other News - Sunday, May 1, 2005

• Visa and MasterCard Cracking Down on Small Merchants
• RON WILKINS: Credit cards are equivalent of slavery

Note: This posting is updated regularly throughout the day.

Today's Other News - Saturday, April 30, 2005

• California bill would ban tracking chips in IDs
• JPMorgan Chase Environmental Policy Triggers Tipping Point for US Bank Sustainability

Note: This posting is updated regularly throughout the day.

VeriFone Completes IPO

VeriFone completed its initial public offering this morning. Its new stock symbol is PAY. The IPO was priced at $10 per share, down from its expected pricing range of $12 to $14 per share. VeriFone's latest SEC S-1/A filing is available online.

Today's Other News - Friday, April 29, 2005

• CitiBusiness Credit Cards Helps Protect Small Business Owners with Identity Theft Solutions
• Motley Fool: Why's My FICO Score Wacky?
• Slashdot: Would You Submit Biometric Data to Join a Gym?
• ChevronTexaco Lowers Credit and Debit Card Processing Fees for Summer Driving Season
• Citi Cards Call Center Opens In Greensboro
• Wachovia Launches Web-Based Loan Fulfillment System
• Paying in dollars costs more when using credit card abroad
• Finextra (UK): Net threat
• Synovus execs celebrate past growth, predict more of same

Note: This posting is updated regularly throughout the day.

Scotland: Fraudsters Steal Thousands in Card-Cloning Bank Scam

The Evening Times reports on unauthorized withdrawals from ATM's in Glascow, Scotland over the last ten days.

Today's Other News - Thursday, April 28, 2005

• Your Credit Card Companies on Capitol Hill
• Lightbridge Announces First Quarter 2005 Financial Results
• Heasley Resigns From Board of Fair Isaac
• ActivCard Signs Agreement With Mastercard to Deliver First Multi-Channel Cap Authentication Server

Note: This posting is updated regularly throughout the day.

Today's Other News - Wednesday, April 27, 2005

• Moneris Solutions President & CEO Jim Baumgartner Named Electronic Transactions Association Member of the Year
• Bank of America Launches Hispanic Savings Program in Miami
• ASK to Further Deliver 700,000 Contactless Cards for Taipei
• Pay By Touch Introduced in Discover Financial Services' Company Cafeteria
• Metavante Announces Record Financial Technology Contract Renewals for 2004
• CyberSource Launches Payment Card Industry Security Compliance Service
• Blair Corporation and Alliance Data Systems Announce New Private Label Credit Agreement
• Student Sues eBay And Paypal
• india: MasterCard, SBI & BPCL announce debit card tie-up

Note: This posting is updated regularly throughout the day.

Lloyds TSB to Issue American Express Cards

The Financial Times reports this morning that Lloyds TSB will announce today that it will begin issuing American Express cards in the UK.

[Update: American Express has issued a press release confirming the Lloyds TSB relationship.]

Today's Other News - Tuesday, April 26, 2005

• Japan Times: Credit card fraud -- how they do it and how to protect yourself
• Wright Express Reports First-Quarter 2005 Results
• Ariba Adds GE vPayment Tool to Ariba Supplier Network
• InterContinental Hotels Group Launches 'Any Hotel, Anywhere' Card
• U.S. Bank E-Commerce Suite Delivers Cost-Saving Results
• FinCen: GUIDANCE TO MONEY SERVICES BUSINESSES ON OBTAINING AND MAINTAINING BANKING SERVICES (PDF)
• FinCen: Interagency Interpretive Guidance on Providing Banking Services to Money Services Businesses Operating in the United States (PDF)
• Parascript Partners With SQN Banking Systems to Combat Fraud
• MasterCard International Announces New Program to Empower Consumers with the Tools to Manage Debt
• Taipei Times: MasterCard offering firms a line of corporate credit
• VeriSign Achieves Three Industry Security Certifications for Payments Services

Note: This posting is updated regularly throughout the day.

Today's Other News - Monday, April 25, 2005

• ABC News: Pharming Your Identity
• Regal Entertainment Group Casts MasterCard PayPass in Starring Role As New Payment Option for Movie Fans
• Ritz Camera Centers to Expand Acceptance of MasterCard PayPass to Over 1200 Locations
• Wachovia Introduces New Enhancements to Its Web Site
• VeriSign Introduces Three-Year SSL Certificates
• American Express Redefines Spring Fever with New 'My WishList' Online Shopping Experience
• Get paid with prepaid products
• Gemplus Announces Agreement to Acquire Setec
• Pay By Touch Announces Chief Financial Officer
• Your Credit Card Companies: Understanding Information in Your Credit Card Statement Can Improve Overall Credit Management
• Wachovia No. 1 in Small Business Lending by Dollar Volume for Third Year in a Row
• Encryption and Smart Card Technology Leaders Develop Identifier-Based Encryption for Portable Formats
• Yodlee Congratulates Its Customers Bank of America and E*TRADE on Winning Forbes Awards
• Bloomberg: HSBC to Double Workers, Add More Branches in China

Note: This posting is updated regularly throughout the day.

Using Payment Cards in Business

GTnews.com is published a six-part series in association with HSBC on the effective use of payment cards in business. The first two parts are now available: Introduction to Payment Card Business and Corporate Travel & Entertainment Cards.

Today's Other News - Friday, April 22, 2005

• Slate: AMERICANS Pay Off Credit Card Debt!
• USA Today: 'Pharmers' hit online bank users with fraud scam
• ZDNet: Retailers feel security heat
• USA Today: New credit card fees take a further swipe at dollar
• Fair Isaac Appoints Campbell to Lead Global Product Organization
• Delaware Online.com: MBNA sees sharp decline in earnings

Note: This posting is updated regularly throughout the day.

Today's Other News - Thursday, April 21, 2005

• Beijing: Citigroup Announces Approval to Provide Renminbi Currency Services
• TRX Powers Data Integration for MasterCard Hotel Folio Initiative
• VECTORsgi Introduces Replacement for Paper-Based Capture Systems; Solution Manages Transition from Paper to Electronic Image Exchange
• California's Save Mart to Speed Checkouts with NCR Point-of-Sale Solution
• Ussery To Retire From TSYS After 40 Years of Service Retaining Position as Chairman of the Board
• Fortis Bank Live on IntraNet Worldwide's iMTS Solution; iMTS Solution Provides Bank with Best-of-Breed Payment Processing Functionality
• Govolution to Offer Lower Cost Bill Payment Option: PIN-less Debit
• EBay Looks to China for Growth
• LAN Airline Alliance Carriers and Western Union Offer Travelers Additional Payment Options
• Students and the credit card binge
• Revitalizing the Pay-Per-Call System
• Digital Insight's Proprietary Marketing Programs Drive Significant Growth for Banks and Credit Unions
• People's Daily Online: POS terminals are installed on the Xisha Islands in Hainan
• China Daily: China Merchants Bank sets sights on elite customers
• Remarks by President Bush in Signing the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
• A&B Vending Begins Installing the Cashless e-Port(R) in Vending Machines at Roadside Rest Stops

Note: This posting is updated regularly throughout the day.

Today's Other News - Wednesday, April 20, 2005

• WSJ: A Cottage Industry Blooms To Help Victims of ID Theft
• Global Payments Announces Processing Agreement with Ark Restaurants Corporation
• WSJ: How European Banks Keep A Tighter Lid on Online Data
• Experian Establishes the World's Most Comprehensive Consumer Classification System
• MoneyGram International Announces First Quarter Results; Increases Guidance for 2005; Money Transfer Volume Grows 36 percent in First Quarter
• America Online Launches Major Campaign against Phishing
• Purchasing Card Growth Dramatic in Programs Adopting Master Agreements, According to AberdeenGroup Research
• Seasoned Software and Internet Executive, Bill Harris, Joins WebSideStory's Board of Directors
• Royal Bank of Scotland Credit Card launches PrivacyGuard to protect identity
• National City and Union Bank of California Launch Check Image Exchange Using SVPCO Check Image Exchange Network
• Triversity Leads the Way in Incorporating Payment Card Industry - PCI - Data Security Standards into its Customer-Centric Retail Solutions
• Business Week: May I See Your Voice, Please?
• DoCoMo Shares Rise on Card Company Investment Report
• Latest ID snafu: 200,000 investors lose data
• Biometric breakthrough - credit cards secured with fingerprint recognition made feasible

Note: This posting is updated regularly throughout the day.

Today's Other News - Tuesday, April 19, 2005

• TSYS Reports 41.7% Increase in Net Income for First Quarter; After Largest Quarterly Increase in Five Years, Company Raises 2005 Earnings Guidance to 22-25%
• Intersections Inc. and ID Analytics Announce Partnership to Strengthen Consumer Protection From Identity Fraud
• Overwhelming Majority of Americans Feel Consumers Are Taking on Too Much Debt
• StoreFront E-Commerce Integrates Payer Authentication Services, Offers Merchants Valuable Tool to Combat Fraud
• Portland-Area Resident Pays By Touch and Wins a New Car
• Geek.com: Online Retailers Forced to Get Secure
• Internet Security Systems Arms Enterprises With Data Privacy Protection Offering in the Battle Against Organized Crime
• American Express Business Travel Introduces New Corporate Online Solutions for China
• India's ICICI Bank Purchases 5,000 Hypercom Card Payment Terminals
• Pegasystems Tops 350 Million in Supported Cards
• Axalto and Caixa Penedes Pioneer the Migration to EMV Technology in Spain
• GAO: Information Security: Internal Revenue Service Needs to Remedy Serious Weaknesses over Taxpayer and Bank Secrecy Act Data
• Russia’s Anti-Trust Body Closes Case Against Visa International
• PassMark Security and Business Systems Group Offer FIs Fully-Managed Internet Authentication System
• PassMark Delivers First Two-Factor, No Hardware Authentication System to the U.K.

Note: This posting is updated regularly throughout the day.

Today's Other News - Monday, April 18, 2005

• American Express Relaunches the Hilton HHonors(R) Platinum Credit Card Adding Richer Rewards Benefits
• Spitzer: LEGISLATIVE PACKAGE AIMED AT REINING IN IDENTITY THEFT
• Euronet Announces Management Changes in EFT Processing Segment
• Fifth Third Bancorp Selects TSYS for Credit Processing
• Australian IT: Banks dally over safe card system
• Federal Reserve announces redesign of financial education web site
• ComputerWorld: Breach of Credit Data May Have Broad Scope
• MasterCard Usability Team Honors the Most Usable Sites on the Web
• Ingrian Nets $15.4 Million in Fourth Round Funding
• Pay By Touch Announces Chief Security Officer
• Asia Payment Systems Reports Delay in Annual 10-KSB Filing
• Information Week: Big Bucks In Micropayments

Note: This posting is updated regularly throughout the day.

Today's Other News - Friday, April 15, 2005

• Visa USA Marks 'Financial Literacy Month' With Re-Launch of Practical Money Skills for Life
• Battling Fraud on eBay: Part 2
• New York Times Editorial: Identity Thieves' Secret Weapon
• Fortune: Identity Thieves Spying on Your WiFi?
• Alliance Data Systems to Provide Project Management and Systems Integration Services to Cobb Energy
• Business Week: Personal Data Theft: It's Outrageous
• Payday Lenders Quietly Out Sourcing Their Lead Generation to New Breed of Online Marketing Experts
• Boston Globe: Retailer knew last fall about security breach that recently roiled credit card companies

Note: This posting is updated regularly throughout the day.

Today's Other News - Thursday, April 14, 2005

• Digital Currency Service Unveiled for Consumers
• New Haven Introduces First Fully-Functional Comprehensive Parking and Local Merchant Smart Card Payment System In U.S.
• Bank of America Introduces Power Rewards Platinum Card
• Globe and Mail: How to Keep a Tight Lid on High-Tech Fraud
• Bruce Schneier: Mitigating Identity Theft
• Oberthur Card Systems Showcases Its ``TotalIDOne'' Smart Card Solution at CardTech/SecurTech 2005
• Payment Data Delivers the Industry's First Microsoft(R) .NET-Connected Web Service for Acceptance of ACH/eCheck Payments

Note: This posting is updated regularly throughout the day.

Credit Card Use, and Debt, Growing

Tim Pennington reports for the Cincinnati Enquirer on credit card use and consumer debt.

Today's Other News - Wednesday, April 13, 2005

• BitPass, 'Blair Witch Project' Creator to Demonstrate Future of Filmmaking at NAB 2005
• VECTORsgi Solutions Enable XML Documents to Exchange in ACH Format
• PassMark Security Raises $7.7 Million Series B Funding Led By Menlo Ventures
• Wachovia Ranked Number One in Online Customer Experience Among Prospective Customers By Keynote Systems
• Axalto Network Card Receives Card Technology Breakthrough Award for Innovation
• Legend Credit to Enter Gift Card Trading Business With New Site
• Bank of Communications Hong Kong Branch Selects First Data to Provide Payment Processing Solutions
• Sinclair Oil and Wright Express Develop Joint Distributor Program
• AdWeek: Visa to Hire SSK for Youth Marketing
• U.S. Secret Service Trains Peruvians on Fake Bills
• Gemplus Wins ICMA Award for Innovative ‘Zing’ Card Design

Note: This posting is updated regularly throughout the day.

Visa USA and PropertyBridge Collaborate on Online Rent Payment Acceptance Program

PropertyBridge and Visa USA have announced a strategic alliance to market online rent payment services for residential properties.

"PropertyBridge's combination of technology and financial expertise has created a new level of data integration that is enormously attractive and productive for property managers," added Jim Eitler, VP, Merchant Relations, Visa USA.

"Through this relationship, we hope to continue to grow the opportunity within the property management space, offer property managers the benefits of card acceptance, and extend added convenience to Visa cardholders."

Today's Other News - Tuesday, April 12, 2005

• GeoTrust Publishes White Paper to Alert Internet Users to New Phishing Vulnerability that Will Enable Highly Convincing Attacks
• New Study by Global Advertising Strategies Shows That Banks Don't Understand How to Reach Unbanked Americans
• U.S. Bank Earns One Million Internet Bankers in Just Over a Year
• CheckFree and Hyland Software Offer End-to-End Solution Enabling Payee Verification Fraud Protection and Exception Management With Check Images
• Decline of Cash Concentration Services Signals Fundamental Shift in Corporate Banking Payment Practices
• ACI Readies Canadian Customers for Interac Chip Card Migration
• LaSalle Bank Corporation Selects NetDeposit Software for Remote Check Capture and Electronic Clearing
• Meta Payment Systems Announces Partnership With NetSpend Corporation
• RDM Corporation introduces new imaging solution for Check 21
• Experian Launches Auto Prospect Online Credit
• LexisNexis Data on 310,000 People Feared Stolen
• Credit card company claims approval from Harvard; one student received over 40 calls
• VeriSign Celebrates Tenth Anniversary
• Arizona Federal Renews, Expands Strategic Partnership with Digital Insight
• Giesecke & Devrient and Wave Systems Announce Strategic Partnership
• bd's mongolian barbeque Gives the Gift of Stir-Fry with Gift Card Solutions
• Digital Defense Unveils New Self-Contained Biometric Security Card; Bioprivacy Guaranteed by Cutting-Edge Enrollment and Authentication Technology

Note: This posting is updated continuously throughout the business day.

Glenbrook Announces Executive Workshops on Payments

Glenbrook will be holding two executive workshop "boot camps" during May near our headquarters in Menlo Park, California.

The first workshop, a two-day "deep dive" into the US payments industry, will be held May 19-20 and taught by Carol Coye Benson and Scott Loftesness.

The second workshop, a one day intensive session examining payments from the merchant perspective, will be held May 26 and taught by Jay DeWitt and Allen Weinberg.

Both of the May workshops will be held at The Computer History Museum in Mountain View, California.

Today's Other News - Monday, April 11, 2005

• McDonald's Plays Cards

• ACH Direct Announces a New ODFI Partnership with The Bancorp Bank at NACHA's Annual Payments 2005 Conference

• JPMorgan Chase Launches Distributed Payment Capture Solution That Integrates ACH and Check Clearing Channels

• National City Receives NACHA Quality Award for Integration of Check and Electronic Payment Systems

• Check Free Receives NACHA Quality Award for ARC Processing

• Investors Business Daily profiled Global Payments in its Friday issue last week.

• TRUSTe and Ernst & Young LLP Issue Guide to Help Companies Avoid the Risks Associated With Phishing Fears

• VeriSign Announces VoIP Solution for Financial Services Industry

• CheckFree Introduces e-Check Bridge, a Solution to Mitigate Risk for Corporate Check Conversion Fraud

• US Dataworks Broadens Clearingworks(TM) Functionality and Introduces Distributive Capture Capabilities at PAYMENTS 2005

• American Bank Note Holographics' HoloMag-TM- to Be Featured on Visa Branded Cards

• Bottomline Technologies Receives U.S. Patent on Award-Winning Electronic Payments Platform

• Alacris(R) Announces Strategic Partner Relationship with Axalto

Note: This posting is updated continuously throughout the business day.

Higher Visa, MasterCard Merchant Fees

Lisa Haarlander reports for the Buffalo News on higher merchant fees imposed by Visa and MasterCard beginning April 1.

"The way this market works is they try to encourage banks to issue their cards by offering higher fees," said Bill Greer, director of editorial services for the Food Marketing Institute. "The competition is over increasing fees rather than decreasing fees. It's a substantial expense for merchants."

Today's Other News - Friday, April 8, 2005

• ID TECH Introduces Miniature Smart Card Reader

• Fidelity Information Services Forms Partnership For Electronic Document Solution

• Acacia Technologies Licenses Credit Card Fraud Protection Technology to Petco

Note: This posting is updated continuously throughout the business day.

DiamondCluster Reports Shift to Electronic Payments Quietly Eroding Banks' Margins

DiamondCluster has announced a new report that concludes that the increase in electronic payments will have major ramifications on the US payments industry including:

A shift in the payments battleground to the retail store and point-of-sale; the realization that the information about the electronic payment transaction may become as valuable to banks and others as the payment transaction itself; and, an understanding that old networks may be used in ways that aren't to banks' advantage.

Today's Other News - Thursday, April 7, 2005

• NetDeposit Signs Agreement to Integrate Orbograph Technology Into its NetCapture Family of Products

• MoneyGram Expands Its Electronic Bill Payment Capabilities With Acquisition of ACH Commerce

• Payment Application Developers Look to Ambiron for Compliance

• Global Payments' Executive to Serve on MasterCard Canada Board of Directors

• Digital Insight's Funds Transfer Made Easier With Aggregated Accounts

• KeyBank Acquires Payroll Online, Expanding Services to Small Business, Corporate Clients

• Smartpay Launches Real Time Payment Services in Shanghai and Hebei

Note: This posting is updated continuously throughout the business day.

Today's Other News - Wednesday, April 6, 2005

• Elite Group of Panelists Set to Discuss Verified By Visa at Financial DNA's Emerging Payments Conference in San Francisco

• Levenger Now Offers the Bill Me Later Payment Option

• Open Solutions Acquires SOSystems

• Corporations Vulnerable to Payments Fraud According to AFP Survey

• Datastrip Partners with Cogent Systems to Aid Government Security Efforts with a Portable Fingerprint Identification System

• eFunds Enhances Payment Card Fraud Detection With Fair Isaac's New Falcon Fraud Manager 5.1

• Digital Envoy Establishes New Approach To Multi-Factor Authentication For Banking Industry

• CyberSource Wins Third Consecutive Customer Satisfaction Award

• Huntington Bancshares Goes Live With Metavante Electronic Statements

• Card Marketing Group (CMG) Partners With Trycera Financial

• HBOS Selects Trintech's PayWare to Streamline Chargebacks

• Gemplus Secures First e-Passport Roll-Out in Singapore

Note: This posting is updated continuously throughout the business day.

Today's Other News - Tuesday, April 5, 2005

• American Express and Russian Standard Bank Announce Card Issuing Alliance

• Wachovia to Acquire Insurance Brokerage Firm, Palmer & Cay

• Paradata Systems Announces the Release of CheckPay, a Fully Integrated E-Check Payment Product

• Alliance Data Systems Signs Long-term Agreement with Hanover Direct, Inc. To Provide Integrated Private Label and Co-brand Credit Card Services

• UATP Offers Airlines Significant Savings; Critical to Future Airfare Sales

• SVC Financial Announces Distribution Partnership With Merit Financial
  

• TNS Announces Tender Offer to Purchase Up to 9 Million Shares

• Harland to Acquire Liberty Enterprises, Inc.

• Corillian Appoints Tyree B. Miller to Board of Directors; Former Bank One executive and banking veteran joins board

• Givex and MyThum combine talents to create the new Mx-Coupon program

• Identity Management in Financial Services Summit to Analyze New Federal Reporting Requirements
  

Credit Cards, Consumer Credit and Bankruptcy

Ronald Mann has posted a new paper (PDF) that examines the relationship between credit cards and consumer bankruptcy in various countries.

The paper analyzes data on consumer credit, credit card use, and consumer bankruptcy in the USA, UK, Australia, Canada, and Japan. Mann concludes that there is a statistically significant relationship between the increased use of credit cards, on the one hand, and consumer bankruptcy, on the other.

Mann is Visiting Professor of Law, Harvard Law School and Ben H. & Kitty King Powell Chair in Business and Commercial Law, Co-Director, Center for Law, Business & Economics, University of Texas School of Law,

Cashless Vending

AMonline.com reports from a white paper by Prof. Michael L. Kasavana of Michigan State University on rising consumer preferences for cashless purchasing from vending machines.

While some parts of the vending industry already accept card payment systems, widespread interest in expanded opportunities for cashless transactions are beginning to become more prevalent. Innovative payment technologies, designed to reshape vending transactions, have emerged and are being adopted at an unprecedented rate.

NRF Comments on Interchange Increases

The National Retail Federation has published a press release saying that Visa and MasterCard interchange fee increases scheduled to go into effect today will drive up costs for consumers.

"This is a hidden tax increase for American consumers," NRF Senior Vice President and General Counsel Mallory Duncan said. "When Visa and MasterCard arbitrarily increase the fees charged to merchants, those costs are forced into the price of merchandise, and consumers are the ones who end up paying."

"Interchange is out of control," Duncan said. "Credit card companies have become more than greedy, and are using these fees to increase their own profits far more than to provide any legitimate service to retailers or consumers. Retailers are seriously looking at their alternatives. Banks are on the verge of killing the goose that laid the golden egg."

Chicago Fed's 2005 Payments Conference

The Federal Reserve Bank of Chicago has announced details of its upcoming 2005 Payments Conference to be held May 18-19, 2005.

Banks and Online Retailers Losing Customers

Kathy Chu reports of Dow Jones Newswires reports on a study by Financial Insights that assessed the impact that fears of identity theft are having on online consumer behaviors.

The study, conducted by Financial Insights, of Framingham, Mass., said that nearly 6% of consumers have changed banks and about 18% have stopped shopping online due to concerns that their personal information will be stolen. This means that, overall, about 12 million U.S. consumers have likely switched banks and 39 million have ceased online shopping, according to Financial Insights.

Visa International Evolves Branding

Visa International has announced plans to refresh and evolve its brand identity. The changes include a new look for the blue, white and gold Visa logo and changes to card design features.

As part of the changes, the Visa dove hologram on the front of the card will be moved to the back and be integrated with the magnetic stripe, making card counterfeiting more difficult while allowing a larger part of the front of the card to be used for new issuer designs or communication. The 3-digit CVV2 code on the back of the card is also being moved -- off of the signature panel to an adjacent location.

New brand guidelines will be available to Visa member banks and card manufacturers in June while actual card changes will take place over the next three years.  Starting in late 2005, banks can issue new cards with the updated design and format while merchants replace Visa signage, such as window decals, tent cards, and cheque presenters.  

For an illustration of the new branding, see http://www.visa.com/brand and the Visa brand chronology (PDF).

"Over the last several years the scope of our business has increased considerably.   We were simply a consumer credit card company.   Today, debit and prepaid products, commercial payment solutions and processing and authentication services are major components of our business," said Christopher Rodrigues, president and CEO, Visa International.  

"We need to evolve the way the brand is used to enable consumers and merchants to distinguish between different Visa products and services while continuing to trust Visa to enable them to make efficient secure payments anywhere in the world. We are also taking this opportunity to refresh the look and feel of the brand to ensure it remains up to date and relevant."

"These are much more than just design changes," said John Elkins, executive vice president, Global Brand and Marketing, Visa International.  "We are introducing a new brand identity and architecture in a cost effective way that will provide more flexibility and value to our members and partners. It will allow for much greater innovation and support our growing number of products and services in the fast growing electronic payments industry."

"This is an evolution of the Visa brand that ensures that it stays relevant, innovative and forward-looking," said David Aaker, a recognized authority on global branding and vice chairman of Prophet.   "Every leading brand needs to undergo periodic review.  Visa is maintaining its key brand equities while expanding meaning and relevance to embrace its new business opportunities.  This change very much underscores the leadership role that Visa provides in the category.  This is an outstanding example of creative, innovative brand solutions to an expanding business opportunity."

Antitrust Activity in Card-Based Payment Systems

The Federal Reserve Bank of New York and the Review of Network Economics are sponsoring a conference in September 2005 to explore recent antitrust activity related to card payment systems.

In recent years, credit and debit card systems have been the focus of significant antitrust inquiries and actions. Card-based payment businesses in Asia, Australia, Europe, and North America have been investigated for their methods of determining interchange fees, exclusivity arrangements, no-surcharge rules, honor-all-cards rules, membership requirements, and governance policies. Antitrust activity worldwide has many similarities, such as a focus on interchange fees, and many differences, such as exclusivity rules in one country and no-surcharge rules in another. In addition, antitrust efforts directed at debit card and credit card systems show similarities and differences. This conference's focus is two-pronged: to present research on the cause and on the effects of antitrust actions. The organizers of the conference hope to address the need for better information on the efficacy of the different remedies mandated by the courts worldwide.

UK Bank and Credit Card Fraud

Miles Brignall reports in the Guardian on last year's UK results with respect to bank and credit card fraud.

Bank and credit card fraud rose 20% last year, costing British banks £505m, with part of the increase due to the introduction of new chip and pin cards. Apacs, the clearing payments association that compiled the figures on the banking industry's behalf, said the amount stolen using bank cards rose from £420.4m in 2003 to £504.8m in 2004.

Unravelling the Plastic Money Maze

Ross Gittins writes in the Sydney Morning Herald about what happens behind the scenes in Australia when a plastic card payment is made.

This web of subterranean payments matters a great deal to the banks, which means they put a lot of marketing effort into manipulating our choices, pushing us in directions that maximise their profits.

This is stuff you and I aren't meant to know about. And it's so complicated many people would prefer not to know. But if you like to know how the big boys are trying to manipulate you - and how the Reserve Bank is fighting back - keep reading.

Plastic Your Way

Forbes.com profiles the trend of quick service restaurants to accept plastic card payments.

Australia Payment Card Interchange Fees

Stephen Bartholomeusz writes in Melbourne's The Age about the Reserve Bank of Australia's actions regarding interchange fees.

The Reserve Bank's painful and painstaking attempts to reform interchange fees for electronic payments is inching towards its logical conclusion. Within two years it is probable that the fees banks and retailers pay themselves for credit card, Eftpos and other electronic transactions will be abolished.

That isn't quite what the RBA said yesterday when it issued draft standards for Eftpos and Visa debit card transactions under which fees would be slashed. It is, however, clearly the direction in which the RBA is heading, and it will inform its planned review of all card systems in 2007.

The Reserve Bank issued a press release yesterday on the subject including draft standards for the EFTPOS and Visa Debit systems.

In the Bank's opinion, the current levels of these fees are not conducive to the efficiency of the Australian payments system. In reaching this opinion, the Bank has considered not just the EFTPOS and Visa Debit systems, but also their interaction with other payment systems, including credit cards. It has also considered how the overall payments system is likely to evolve over time if the current incentives facing merchants, financial institutions and cardholders are left unchanged.

The RBA also announced it is seeking input on how to address the problem of credit card schemes with higher interchange fees being more attractive to issuers and asks whether essentially the same interchange fee should therefore be applied to all schemes.

For Some, No Purchase Is Too Small For Plastic

Dina ElBoghdady writes in the Washington Post about the use of card payments for low value purchases.

Discover Sees Debit, Overseas Growth

Reuters reports on Discover's growth strategies including entering new international markets, partnering with banks to issue Discover cards, and debit following its recent purchase of the Pulse EFT network.

Passion for Plastic

Dana Flavelle reports in the Toronto Star on the growth in Visa transactions in Canada.

Among credit card issuers, VISA holds 38 per cent of the Canadian market, followed by MasterCard with 17 per cent, American Express at 5 per cent and Diner's Club with less than 1 per cent. But all of them are eclipsed by Interac, which accounted for 40 per cent of purchase volumes, according to the Nilson Report, which tracks payment methods.

Fast Food Fuels Migration to Plastic Payment

Barrie McKenna writes in the Globe and Mail about the growth in acceptance of card-based payments in several emerging market segments including fast food restaurants.

These and other new markets for credit and debit cards recently pushed the United States past a historic threshold. The U.S. Federal Reserve Board reported in December that electronic payments exceeded cheque payments for the first time ever. Debit cards account for much of the trend, with transactions rising 24 per cent between 2000 and 2003.

One of the fast-growing areas of card purchases are small transactions, or micropayments. With Apple Computer's iTunes selling for 99 cents, no amount is too small.

Cybercash on Vacation

Writing for Technology Review, Peter Wayner takes a look back at financial cryptography.

Amex Plays Its Winning Card

Mara Der Hovanesian writes for Business Week on this week's announcement by American Express that it will be spinning off its brokerage and money management unit to shareholders later this year so that it can focus on its payment card business.

The move frees AmEx to focus ever more incisively on its core card business. "More companies like ours are recognizing that if you don't have focus, you're at a competitive disadvantage," Chief Executive Kenneth Chenault told BusinessWeek Online on Feb. 1, the day the deal was announced.

American Express Focuses on Global Payments and Network Business

Yesterday, American Express announced that it will be spinning off its American Express Financial Advisors business unit thereby enabling Amex to focus on its payments and network business.

Amex is also hosting a semi-annual webcast meeting for the financial community later today.

Update: the slides for this meeting (3 sets) are now available online.

After the spin-off, American Express will consist of the world's largest charge and credit card business, and a network that processes more than $400 billion in transaction volume from several million merchants throughout the world. It will have a broad based, global franchise with leadership positions in the consumer, small business, middle market and large corporate card sectors. It will continue to grow its network business which today has more than 85 partners worldwide. American Express will also operate the leading global travel and Travelers Cheque businesses and an international bank serving affluent consumers and financial institutions.

Cash? What's Cash?

Robin Sidel writes in the Wall St. Journal about the growth in card-based payments and some of the trends affecting the industry.

Morgan Stanley Investors Weary of Discover

Aaron Eistein writes in Crain's New York Business about investor frustrations with Morgan Stanley CEO Philip Purcell.

But now that banks that long issued only Visa or MasterCard are free to issue any card, analysts believe that most will team up with American Express rather than Discover.

AmEx charges merchants higher commissions, so it can share more revenue with banks that issue its cards.

Why Are Merchants Still Accepting Card Payments?

Fumiko Hayashi from the Payments Systems Research Department at the Federal Reserve Bank of Kansas City has published a new working paper: A Puzzle of Card Payment Pricing: Why Are Merchants Still Accepting Card Payments?

This paper presents models that explain why merchants accept payment cards even when the fees they face exceed the transactional benefits they receive from a card transaction.

Commerce Bank's Fee Free Visa Gift Cards

Commerce Bank has announced some of its early results of its free Commerce Bank Visa Gift Card program, the nation's only fee free complete packaged gift card offered by a bank. Commerce Bank sold more than 220,000 of the cards, worth $14.5 million (an average of about $66 per card), during the recent holiday season.

During the holiday season, Commerce's gift card sales out-paced that of other retailers that typically sell an average of seven to eight gift cards per day. Commerce Bank exceeded expectations with the Commerce Bank Visa Gift Card, achieving:

• 220,177 cards sold between November 23 and December 31, 2004, which exceeded original total projected sales of 80,000 to 100,000 cards
• Average of 30 gift cards sold daily per store (in December), which is more than four times the average among retailers; one Commerce store sold 112 cards in one day

"The overwhelming response to the Commerce Bank Visa Gift Card reaffirms our commitment to exceeding our customers' expectations by continuing to develop convenient new products and services that aren't typically found at other banks," said Commerce Bank Founder and Chairman Vernon W. Hill. "I am also pleased to announce that we have changed the terms of the gift card to extend its best feature - that it's free. We have eliminated all conversion, expiration, reissue and other fees from the Commerce Bank Visa Gift Card, thereby liberating gift card users from unnecessary and inconvenient fees."

Neither the buyer nor the recipient of a Commerce Visa Gift Card will incur any fees that are typically associated with retail gift cards. Most retailers charge fees for maintenance of the card after its expiration date, issuing cash for the value of the card and replacing lost or stolen cards.

The Commerce Visa Gift Card is packaged in a signature Commerce red box and tied with a white satin ribbon; the upscale packaging delivers what shoppers might expect from the world's finest retailers. Commerce customers can purchase the instant-issue Commerce Visa Gift Card for free, in any whole dollar amount between $25 to $500, in any of Commerce Bank's 319 retail locations. Unlike gift cards available from specific merchants, the Commerce Bank Visa Gift Card is accepted at millions of locations worldwide and enables recipients to buy what they want, when they want, wherever Visa debit cards are accepted.

CardTech / SecureTech

Thomson has published the agendas for its upcoming CardTech/SecureTech conference to be held April 12-14 in Las Vegas.

Passion for Plastic in India

The Financial Express reports from India on the growth in plastic card payments in India.

The total spend in India on a payment card is still less than 1% of the country’s percentile. This indicates that the growth potential of the payment card industry is enormous. Around 30 million people are eligible for creditcards and 150 million people are eligible for debit cards.

Consumer Protections

The Federal Reserve Bank of Phildelphia has published a research discussion paper by Mark Furletti and Stephen Smith analyzing the consumer protections available to credit and debit card users (PDF).

Notwithstanding the card industry’s efforts to make credit and debit card protections more uniform, the laws and regulations that apply to these two products remain complex, and the internal policies that apply to them are largely inaccessible to the general public.

The protections that derive from federal law, for example, are complex in part because they are subject to a series of (sometimes puzzling) exceptions and conditions.

Similarly, the few protections that card issuers explicitly advertise are complex because they are conditioned on consumers’ meeting standards that are ambiguous and open to broad interpretation by card issuers (e.g., consumers exercising “reasonable care” or not being “grossly negligent”).

In addition, details of the network and association rules that determine whether issuers can provide protections beyond those mandated by federal regulation are essentially secret.

American Express Settles Currency Conversion Lawsuit

Tami Luhby reports in Newsday on American Express' settlement of a lawsuit that challenged Amex's disclosure of its 2 percent fee levied on foreign currency conversion.

The company agreed to pay up to $75 million to U.S. cardholders who made purchases in a foreign currency from Mar. 28, 1997 to Oct. 15, 2004, according to a preliminary class action settlement. In addition, the credit card company agreed to include information about the fees on its monthly statements and other mailings to cardholders.

China Card Business Booming

Chinaview.com reports on the growth in China's bank card business.

 "Since 1985 when China started to issue bank cards, the country has become the second-largest holder, following the United States which has about 850 million cards issued," said Lin Caiyi, deputy director of the Strategy & Development Department of China UnionPay - the sole national payment network for Chinese banks.

The credit card sector has also enjoyed rapid development, with the number issued jumping from 1.55 million at the end of 2002 to the current level of over 10 million, according to figures made public by Lin at the 2005 China Credit Card Business Forum held in Shanghai over the weekend.

"However, these cards are used very infrequently and the transaction volume generated from their use is very small, especially in terms of personal consumption," she said.

Card Checkouts Getting Quicker

Erica Sagon writes in the Arizona Republic about no signature card transactions.

The no-signature method has raised concerns about fraud, but Gracia said, "It's as secure as any transaction that is signed for."

If that makes you wonder why people have been signing receipts for years, McKinley said it was more of a psychological exercise than a defense against fraud. "I don't think anyone pays a whole lot of attention to signatures anyway," McKinley said.

More Fast Food Restaurants Accept Credit Cards

Rachel Pleasant writes in the Lakeland, Florida Ledger about more fast food restaurants now accepting credit cards.

The time involved with making a credit card sale has dramatically decreased and is no longer an issue, Ross said, because retailers now have an online connection 24 hours a day, seven days a week.

"You're hooked into that computer at all times," said Ross, who owned the Sago Grill, a seafood restaurant in Lakeland that closed a few years ago. "The processing devices and telecommunications infrastructure has stepped up two or three notches and now it's almost an instant transaction."

Walgreens Decides to Continue to Accept American Express

Bloomberg News reports that Walgreens said Friday that it will continue accepting American Express cards, reversing a decision it announced last month.

Walgreen was too high-profile of a merchant for American Express to lose," said David Robertson, publisher of the Nilson Report, a trade journal for credit card executives. "They probably lowered the fee Walgreen pays to accept American Express transactions and maybe agreed to some other cross-promotional deal."

China's Consumers Flock to Easier Credit

Kathleen McLaughlin reports in the Christian Science Monitor on the expansion of consumer credit options by the banks in China.

Credit cards are fast gaining acceptance, accounting for 10 percent of all transactions in 2003, and usage, with 1 million Chinese cardholders, and the numbers growing every month, according to the central bank.

Merger of Pulse EFT and Discover Closes

Discover Financial Services and the Pulse EFT Association have announced the completion of their merger following approval by Pulse's financial institution members.

"It's a new day in electronic payments," said David W. Nelms, Chairman and Chief Executive Officer of Discover Financial Services. "We believe that the combination of PULSE's experience in debit and Discover's signature capabilities will enable us to offer additional choices in the important and growing debit market and offer a highly appealing alternative to serve financial institutions, merchants and consumers."

"The approval of this agreement by PULSE's members demonstrates that financial institutions recognize the strong benefits of combining the PULSE and Discover networks to establish a new choice for electronic payment products and services," said Stan Paur, PULSE President and Chief Executive Officer. "Our combined entity will be able to provide financial institutions of every size and type with a full-service debit platform and a comprehensive set of products, including credit, signature debit, PIN debit, gift card, stored value card and ATM services."

Verifone Holdings Files S-1

Verifone Holdings has filed an S-1 registration statement with the SEC. According to the financials included in the S-1, the company reported revenues of about $390 million for the year ending October 2004 and $0.6 million in net income.

Looking Back, Looking Ahead

In his new article "Looking Back, Looking Ahead" (PDF), Tom Brown of Second Curve Capital takes a look back at financial services industry highlights from 2004 and ahead on what to expect in 2005.

UK Store Card Rates Probed

Bloomberg reports on the UK's Competition Commission's inquiry into store card rates.

The commission is investigating whether companies such as GE Consumer Finance and HSBC Holdings Plc are stifling competition in Britain's 4.8 billion-pound market ($9 billion) for store cards, allowing them to charge interest rates as much as 10 percentage points higher than for ordinary credit cards.

China: Risks in Credit Card Business

China Daily reports on the credit card business in China.

Paying with Plastic - Second Edition

The second edition of Paying with Plastic is now available on Amazon.com.

I received my copy on Friday and have spent some time this weekend appreciating the quality of the effort that went into updating this classic work on the credit card industry. Even if you own the first edition, you'll want this edition for the fresh new content included.

Also, the authors of the book maintain a very useful web site at PayingWithPlastic.org. The document library on the site is particularly valuable.

Highly recommended!

Checks Share of Payments Declines

eMarketer looks at recent Federal Reserve data showing the the number of checks written has declined at 4.3 percent annual rate from 2000 to 2003.

Though the number of check payments has declined over the past few years, check payments still make up the biggest share of non-cash payments, as of 2003, at 45%.

Visa USA Releases Holiday Volumes

Visa USA today announced its sales volume during the recent holiday season. The top line news was spending on Visa branded cards in the US totaled $218.7 billion, a 15.7 percent increase over 2003 for the period November 1 through January 2).

Spending on Visa credit cards exceeded $110 billion, while debit spending grew to more than $90.6 billion, a 6.8 percent and 26.2 percent spike over 2003, respectively.

"Visa tracked continued growth across a wide range of retail categories, from discount stores to more discretionary categories like travel and entertainment, which generally indicates that consumers are comfortable with their own financial situation. That's a positive sign for the overall economy as we move into 2005," said Wayne Best, senior vice president of Strategic and Economic Analysis for Visa USA.

"E-commerce growth remained a bright spot this holiday, expanding by more than 33 percent since November 1, to more than $19.8 billion. This category experienced the biggest growth of all the retail segments during the holiday season - a sign that consumers are shopping online more frequently due to the convenience, security and rewards associated with using a Visa card for e-commerce purchases."

SpendTrak 2004 Holiday Season Highlights

Most Popular Shopping Days This Season - The top five Visa shopping days (sales volume) during the 2004 holiday season were:

• Thursday, December 23rd - $4,837,127,232
• Wednesday, December 22nd - $4,680,510,555
• Tuesday, December 21st - $4,627,681,135
• Friday, December 17th - $4,565,247,143
• Saturday, December 18th - $4,499,845,665

This year, sales volume on Black Friday reached approximately $4.1 billion, which ranked as the 12th busiest shopping day of the holiday season, further proof that the day after Thanksgiving is not the most accurate or significant indicator of overall holiday shopping trends.

Strong Growth Across Broad Cross - Section of Merchant Segment - Visa sales volume during the holiday season was largely driven by a 22 percent growth in Discount, Mass Retailer and Drug Store purchases, a 13 percent rise in Home and Garden purchases and an increase of nearly 12 percent of Travel and Entertainment purchases.

VisaNet: 100 Percent Reliability - Prior to the holidays, Visa undertook steps to upgrade VisaNet, the largest and most advanced payment system in the world, to allow Visa to sustain approximately 6,200 transaction messages per second. The upgrade was part of Visa's broader effort to ensure Member financial institutions, cardholders and merchants that Visa could deliver secure and reliable payments even during the busiest shopping days of the year.

While December 23rd was the overall largest shopping day for Visa by sales volume, on the 24th of December VisaNet experienced a peak-processing rate of 5,546 transaction messages per second, sustained over a one-hour period - a 8.3 percent increase over last year's peak processing rate of 5,119 transaction messages per second, on December 24th, 2003.

During this holiday season, VisaNet experienced 100 percent availability and on time clearing and settlement, enabling merchants to better serve their customers in a timely and secure fashion. The end result is quicker throughput at the cash register, shorter checkout lines, and fewer abandoned sales.

Visa - Leading the Migration to Plastic Payments

"The strong and steady growth we witnessed this holiday season indicates that cardholders are not only more comfortable with their financial situation but are switching in larger numbers from paper forms of payment like cash and checks, to electronic payments such as credit, debit and prepaid cards. In the process, consumers have come to rely on Visa as 'Today's Money,' one of the most accepted, convenient and secure forms of payment worldwide," said Carl Pascarella, president and CEO for Visa USA.

There are more than 450 million Visa branded credit and debit cards in the United States. Those cards represent over 14 percent of Personal Consumption Expenditures (PCE), indicating that consumers spend more than $14 out of every $100 using a Visa branded card. Only cash and checks have a greater share of PCE, making Visa products a strong indicator of consumer spending behavior.

BlueTarp Raises $14 Million Venture Financing

Matt Wickenheiser writes in the Portland (Maine) Press about purchasing card provider BlueTarp Inc.'s recent $14 million venture capital financing.

BlueTarp's business is this: It takes over the trade-credit business for building-materials suppliers. Typically, building contractors have a credit line with a hardware store, or several stores. The stores must manage those accounts receivable.

BlueTarp has made the whole system electronic. It also organizes the purchases in such a way that contractors can track their expenses, even nailing down how much they spent on materials each day on separate jobs. BlueTarp collects a tiny percentage from each transaction.

Former Concord EFS, Bank of America and Visa USA executive Bond Isaacson recently joined BlueTarp as CEO.

Circuit City General Counsel Joins Constantine

New York Lawyer reports this morning that W. Stephen Cannon, most recently general counsel of retailer Circuit City, is joining the law firm Constantine & Partners as president and a name partner. Cannon will open a Washington, D.C., office for the 20-lawyer Constantine firm, which will adopt the name Constantine & Cannon, effective Feb. 1.

The retailer was one of the major forces behind the antitrust class action suit in the Eastern District against Visa USA, Inc., and MasterCard International Inc., in which more than 5 million merchants claimed the credit card companies acted as a monopoly. The suit, in which Constantine & Partners was lead counsel, last April resulted in a $3 billion settlement, the largest ever for an antitrust case.

Deliver Us From Our Credit Cards

G. Jeffrey MacDonald writes in the Christian Science Monitor about faith-based financial counselers who teach spiritual principles for money management.

In 2004, more than 41,000 families went to church for a 13-week money management seminar called Financial Peace University, up from about 28,000 in 2003. Crown Financial Ministries - which runs its own 12-week church-based seminar urging participants to apply religious convictions to financial decisions - worked with 900,000 Americans in 2003 and 1.1 million in 2004; it projects a 25 percent increase in the US in 2005.

American Express Fees Fuel Merchants' Dissent

Barbara Hagenbaugh reports in Delaware Online about some merchants who are either considering dropping American Express or have already stopped accepting Amex cards altogether because of the higher fees that Amex charges merchants.

"American Express card members are higher-spending and exceptionally loyal," American Express spokeswoman Nancy Muller says. "They insist on doing business with companies that accept the card. That's the basis of our pricing."

Chip and PIN Take Effect in the UK

The BBC reports on Chip and PIN taking effect today in the UK.

An Association for Payment Clearing Services (APACS) spokesman said shops who had made the upgrade would gain protection "regardless of whether it's an old card or a new chip-and-PIN card, as long as the retailer conducted the same security checks they previously did to ensure that the card is not lost or stolen".

The article goes on to point out that the upgrade is far from complete. Card issuing banks need to issue an additional 53 million replacement chip cards and retailers have upgraded about 600,000 of an estimated 860,000 card acceptance locations.

Card Spending in UK to Overtake Cash

Alex Falk reports in the Financial Times that UK consumer spending using plastic cards will for the first time exceed the use of cash.

"The key driver has been the introduction of debit cards," said Apacs' Jemma Smith. "We're seeing a generation of middle-aged customers coming through who have grown up with both debit and credit cards."

Online Sales Rise Dramatically

Information Week reports on the growth in online sales this holiday season.

Online sales using Visa-branded cards for the week ended Dec. 26 reached $1.8 billion, up 58% over the same period last year, while the number of online transactions reached 24 million, up 43% from a year ago, according to Visa USA's SpendTrak report.

For the week ended Dec. 19, Visa's online sales were $2.7 billion (up 39%) and online transactions were 34 million (up 34%). Similar increases were recorded for preceding weeks.

Card Fraud Liability Shift in the UK

The BBC reports on the January 1st shift in liability for fraud on card transactions in the UK -- from card issuer to merchant if the merchant hasn't implemented the new chip and PIN acceptance technology.

"Many retailers have made a business decision not to convert their tills to chip and pin," says Bob Jarrett, professional services director for the British Shops and Stores Association (BSSA) which represents 4,200 shopkeepers. "Some of our members simply do not do enough business on cards to warrant going to the expense of changing their tills," he says.

The Credit Card King

SmartMoney.com profiles Scott Bilker of Barnegat, NJ who holds 80 credit cards with more than $300,000 in total available credit. Bilker operates the web site DebtSmart.com.

Coming Soon: A Swarm of American Express Pitches

Ron Lieber reports in the Wall St. Journal about the upcoming pitches consumers will be receiving for American Express cards.

Banks like the idea of issuing AmEx cards because an American Express generally pays them more than a Visa or MasterCard. But for consumers, AmEx has its limitations: It's not as widely accepted by merchants.

That fact was hammered home recently, when Walgreens -- the nation's biggest drug store chain -- announced it wouldn't accept American Express cards anymore. AmEx hits retailers with higher average service fees than MasterCard and Visa, and Walgreens says it decided the premium wasn't worth it.

Gift Card Sales Rise More than Forecast

Bloomberg reports that US retailers' holiday gift card sales may have risen to more than $20 billion this holiday season.

Gift card sales may have accounted for 11 percent of holiday expenditures, said Michael Niemira, chief economist for the New York-based International Council of Shopping Centers, more than his earlier forecast of 8 to 10 percent. Wal-Mart Stores Inc., the world's largest retailer, on Dec. 18 said gift-card sales were ``significantly'' above last year's level.

American Express Takes Flak Over Merchant Acceptance Fees

Barbara Hagenbaugh reports in USA Today on merchant reactions to the fees merchants pay to accept American Express cards.

American Express charges merchants an average 2.05% of sales made on the card, vs. 1.55% for Visa and MasterCard, Robertson says. Those averages are for both debit and credit cards and all types of cards offered by the companies, including corporate and consumer. That means that for every $100 in credit card sales, retailers pay American Express $2.05 and Visa and MasterCard $1.55.

Fraud Liability Shift Begins in UK January 1, 2005

Isabel Berwick reports in the Financial Times on the upcoming liability shift about to take place in the UK that will shift the liability for fraudulent transactions to merchants from card issuers -- if the merchant has failed to deploy new chip card and PIN capable point of sale equipment.

About 85 per cent of retailers have installed chip and pin so far, with some shops still waiting for banks to deliver the machines. Others, mostly luxury retailers, have decided to take the risk, claiming that they know their customers and that the cost of running the machines is expensive.

Ecommerce Sales Surge

Pete Barlas reports in Investors Business Daily on the growth in online ecommerce sales this holiday shopping season.

Christmas sales over the Internet are booming, far outpacing the growth of sales in physical stores, say reports. U.S. consumers using Visa debit and credit cards spent $16.8 billion online from Nov. 1 through Dec. 21, a 34% hike over the year-ago period, says Visa.

Shoppers Should Rethink How They Pay

Christopher Conkey reports in today's Wall St. Journal on the range of payment options available to consumers this holiday season.

From cash and checks to credit cards and the increasingly popular debit cards, it's easy to get confused. Debit purchases, for example, are often made with "check cards," while recent banking regulations are spurring many check payments to be scanned at cash registers as if they were debit cards. It has created what leading expert Mark Budnitz, a professor at Georgia State University College of Law, calls "a complicated and bewildering exercise for consumers."

WebLoyalty - Friend or Foe?

David Lazarus reports in the San Francisco Chronicle on WebLoyalty, a Connecticut-based direct marketing firm.

Webloyalty is able to obtain people's credit card numbers directly from many of its partners and will charge monthly fees for a service some people might not realize they've signed up for.

Exante Announces Health Benefit Debit Cards

Exante Financial Services has announced a new Health Savings Account MasterCard debit card.

"This valuable product, created through our relationship with MasterCard, will help medical benefit providers streamline and automate the administration of their health benefit programs and enhance consumers' choice and convenience," said Nick Santoro, CEO, Exante Financial Services. "Payment industry analysts forecast that in the next five years debit cards linked to HSAs alone could facilitate as much as $2 billion in annual spending, with as much as $9 billion in additional spending occurring through other types of consumer controlled health reimbursement accounts."

"Exante Financial Services is ideally suited to support health benefit providers as they apply electronic and card-based payment solutions to the latest in health care savings programs," said Bill Mathis, senior vice president, member relations, MasterCard International. "Providers of medical plans will be well served by utilizing Exante Financial Services' card issuing and financial services platform."

Bank of America Customers Spend Record $100 Billion in 2004 with Debit Cards

Bank of America has announced that its customers spent a record $100 billion on their debit cards for goods and services during 2004. Bank of America, the largest debit card issuer in the country with over 22 million cards issued, is the first financial institution to pass that milestone within any year.

Bank of America reached the $100 billion milestone because customers with debit cards are using them more often, and a higher percentage of customers are getting the cards when opening accounts, said Ken Kavanagh, Debit and Prepaid Cards executive.

"The convenience, security and record-keeping capabilities of debit cards make them a better way to pay than cash or checks," Kavanagh said. "People can use them at thousands of merchants, and get cash or balances at any Bank of America ATM from coast to coast for free."

"Consumers are realizing that they have choices when it comes to how they pay for goods and services," Kavanagh said. "People who decide they want to pay right away enjoy debit cards. Those who would rather pay later are using credit cards for their convenience, safety and speed. It's all up to the customer."

MasterCard Reports 9.2% Growth for Fourth Holiday Shopping Weekend

MasterCard reports that it saw an increase of 9.2 percent in transaction volume for the fourth holiday shopping weekend as measured through Saturday evening.

Walgreens to Stop Accepting American Express Cards

Walgreens, the country's largest drug store chain, has announced it will stop accepting American Express cards because Amex's service fees are higher than other cards.

Although American Express hasn't raised its rates since Walgreens began accepting the card chainwide in 1996, Walgreens is not seeing significantly larger purchases from American Express cardholders that might offset the high fees.

Plastic Fantastic?

Business Week looks at the Citibank / American Express deal.

Now that two of the biggest card-issuers are on board with American Express, it puts competitive pressure on other banks to sign on.

Next convert? Observers are putting their money on J.P. Morgan Chase, which has 92 million U.S. cardholders that American Express would like the opportunity to court.

American Express Announces Card Issuing Alliance with Citibank

Update: Jennifer Kingson reports on the Amex/Citi card issuing alliance in Tuesday's New York Times.

American Express this afternoon announced its second major US bank card issuing alliance with Citibank.

"As one of the world's most prestigious financial institutions, Citibank is a tremendous addition to the American Express network," said Kenneth I. Chenault, Chairman and CEO of American Express. "We are committed to working with outstanding partners like Citibank and the premiere customer experience they provide."

Citibank added: "We're looking forward to the new relationship with American Express, and we're committed to providing the same high quality Citi products and services to Citibank cardmembers using the American Express network that we provide today to all our cardmembers. This agreement will bring together two highly successful and internationally recognized brands."

MasterCard added its own comments on the Citi/Amex deal:

American Express recently announced that they will launch a program with Citibank. Given the competitive nature of the payments industry, this kind of experimentation is to be expected. The real test will be how much traction these programs get over the long term. As evidenced by the consumer complaints that have been the subject of media reports over the last several weeks, experimental programs with American Express have thus far proven to be neither innovative nor a win for consumers.

Credit Card King Doesn't Revolve

Steve Chawkins reports in the Los Angeles Times on Walter Cavanagh, the king of credit cards with 1,496 active cards.

At heart, the 61-year-old retired financial planner is a one-card guy. And, unlike the average American household, which carries more than $9,000 in credit card debt at any time, Cavanagh pays off his card (whose lender he would not disclose) in full each and every month.

Apple's iTunes Music Store Now Accepts PayPal

Apple and PayPal announced today that Apple's iTunes Music Store will now accept PayPal for purchases. The first 500,000 customers to open a new iTunes account in the US using PayPal as their form of payment before March 31, 2005, will receive five free songs.

"We are thrilled that PayPal users can now buy their music on the world's number one online music store," said Todd Pearson, general manager of PayPal's Merchant Services. "PayPal's virtual wallet offers iTunes customers the convenience of paying in the way they prefer."

US Consumer Average Credit Card Debt Up 14.5 Percent

Myvesta has announced the results of an annual credit card survey that indicates the average amount of credit card debt carried by individuals in the US has risen 14.5 percent.

The average American is now carrying $2,627 in credit card debt, up from $2,294 in 2003. Individuals are also carrying more credit cards in their wallets. Americans are now carrying an average of 2.9 credit cards, up from 2.3 in 2003.

Credit Card Ruling Ripples

Raymond Keating writes a commentary in the Washington Times about the recent US Department of Justice anti-trust lawsuit against Visa and MasterCard.

As so often is the case with antitrust, this wasn't about consumers, but about competitors using the government to gain ground in the marketplace.
Meanwhile, the court mandate for Visa and MasterCard to allow banks to offer other cards easily could translate into higher fees for merchants.

After all, if Card Issuer A cuts a more lucrative deal with a bank at higher fees, then wouldn't that bank have an incentive to push more customers to Card Issuer A and away from the lower priced transactions charged by Card Issuer B? Wouldn't Card Issuer B be compelled to raise its fees and provide a bigger chunk to the bank? Meanwhile, the merchants, including countless small businesses, would face higher costs.

Untapped Market for Credit Cards

Jennifer Kingson reports in the New York Times about opportunities for credit cards in China.

"It's a nascent business which is really beginning to explode," said Jim Allhusen, executive vice president and general manager of Visa International for China and the Philippines. "Consumers want your products; banks want to get into the market."

MasterCard Reports 15.8% Growth for Second Holiday Shopping Weekend

MasterCard reports that transactions processed by its Banknet network increased 15.8% over the prior year for the second weekend of the holiday shopping period through Saturday evening. The number of transactions over the second weekend exceeded those processed over the Thanksgiving weekend.

Swipe and Go

Jackie Farwell of the Bangor Daily News writes about using cards at fast-food restaurants.

Having penetrated just about every other market, including gas stations, department stores and sit-down restaurants, credit card companies now are targeting quick-service industries by offering a transaction that rivals cash for convenience and ease of use.

Credit Card Collector

Cynthia Neff reports in the San Luis Obispo Tribune about Walter Cavanagh, the world record holder in terms of number of credit cards.

Cavanagh has 1,497 valid credit cards to date (more arrive in the mail nearly every day), with a total potential credit line of about $1.7 million. The Guinness Book of World Records christened him "Mr. Plastic Fantastic," and has featured him nearly every year since 1971.

Small Business Financing: Credit Cards

The Wall St. Journal has a special section today on small business financing -- including a report on the use of credit cards.

"The issue is that almost all credit-card agreements have fine print with very sharp teeth," says Fred Wainwright, executive director of the Center for Private Equity and Entrepreneurship at Dartmouth's Tuck School of Business. "If you miss even one payment, the attractive terms can convert to over 20% annual interest rates and outrageously high penalty fees."

MasterCard Reports 9% Growth in Transactions Over Thanksgiving Weekend

MasterCard has announced that credit card authorization transactions over its BankNet network during the Thanksgiving weekend (through Saturday evening) totaled 64.2 million, an increase of 9.29% over the same period last year. On the Friday after Thanksgiving, MasterCard processed over 35.1 million transactions, a 10.1% growth over the 31.8 million authorization transactions it handled on the same day in 2003.

Separately, Bloomberg reports that the National Retail Federation claims that US retailers' sales during the four day Thanksgiving weekend totaled $22.8 billion.

Visa USA Reports Strong Growth in Sales

Visa USA has reported that sales volume on so-called Black Friday, the day after Thanksgiving and traditionally one of the busiest shopping days of the year, totaled more than $4.1 billion, up 15.5 percent compared to the same day last year. Ecommerce sales have grown at a 32 percent increase since November 1st this year as compared to last.

For the day, consumer spending on Visa credit cards exceeded $2.1 billion while debit spending grew to more than $1.7 billion, a 10 percent and 21.6 percent spike from this same time in 2003, respectively.

The increase in sales volume for Black Friday was largely driven by a 20.9 percent increase in Discount, Mass Retailers and Drug Store purchases, a 15.7 percent growth in Department and Apparel purchases and a 15.6 percent rise in Home and Garden purchases. Specialty Retail, Gift and Hobby purchases remained relatively flat, although consumers made more total transactions than on Black Friday 2003 and sales growth (on Visa branded cards) since November 1, 2004 has been positive at six percent.

"Based on the sales we witnessed Friday, and the steady growth in Visa volume over the past three weeks, merchants should be feeling more in the holiday spirit than in years past," said Wayne Best, senior vice president for strategic economic analysis for Visa USA. "Consumers aren't procrastinating this year. They began their holiday shopping in early November and hit the malls in force on Black Friday."

Best adds, "Visa is seeing continued growth across a range of retail categories, from discount stores to more discretionary categories like travel and entertainment. This pattern signals consumers are generally comfortable with their financial situation, which bodes well for merchants who have been hoping for a good holiday season. What's also encouraging is that debit transactions are far outpacing credit transactions, as consumers use available funds for their holiday purchases instead of taking on new debt."

Best concludes, "E-commerce growth remains a bright spot this holiday, expanding at nearly 32 percent since November 1, a sign more consumers appreciate the security and convenience of shopping with their Visa cards online. The one area we will continue to watch is Specialty Retail, to see if the sales volume again moves upwards as we expect."

Contrary to popular belief, Black Friday is not the busiest shopping season of the year. Over the last several years, Visa spending on the Saturday before Christmas was 8 to 19 percent higher than the Friday after Thanksgiving.

There are more than 450 million Visa branded credit and debit cards in the United States. Those cards represent over 14 percent of Personal Consumption Expenditures (PCE), indicating that consumers spend more than $14 out of every $100 using a Visa branded card. Only cash and checks have a greater share of PCE, making Visa products a strong indicator of consumer spending behavior.

UK to Overhaul Consumer Credit Rules

Bloomberg reports on comments made by Queen Elizabeth II in her annual speech to Parliament laying out the plans of Prime Minister Tony Blair's government. In her comments she indicated that the government is planning to reform consumer credit rules for the first time in 30 years.

The BBC has more on this story.

More Secret History of the Credit Card

PBS' Frontline aired its show Secret History of the Credit Card earlier this week. The Frontline web site has additional resources on the topic including a transcript of the show.

MasterCard Predicts Best Times To Shop

Using transaction data from prior years, MasterCard recommends shopping on Mondays, Tuesdays, or Wednesdays this holiday season.

"The common myth among Americans is that 'Black Friday,' which is what the industry calls the day after Thanksgiving, is the busiest shopping day of the season," explains Manchisi. "However, as busy as Black Friday can be, there are other very busy times in the month of December. Typically, at MasterCard, we have processed nearly 33 million transactions on each of the two Saturdays before Christmas -- almost a million more than on the day after Thanksgiving."

Wright Express Files To Go Public

Fleet card provider Wright Express has announced it has filed to go public in a spinout from parent Cendant Corporation. The company filed an S-1 Registration Statement yesterday with the SEC.

How They Get You: History of the Credit Card

NPR's Jennifer Ludden talks with Frontline reporter Lowell Bergman about The Secret History of the Credit Card, a documentary by PBS and The New York Times. The documentary airs on PBS stations this Tuesday evening.

Next Tuesday on PBS: Secret History of the Credit Card

Frontline and the New York Times have joined forces to examine the credit card industry in Secret History of the Credit Card to be aired Tuesday, November 23, at 9 PM on PBS.

According to Harvard Law Professor Elizabeth Warren, the credit card companies are misleading consumers and making up their own rules. "These guys have figured out the best way to compete is to put a smiley face in your commercials, a low introductory rate, and hire a team of MBAs to lay traps in the fine print," Warren tells FRONTLINE.

Discover Acquires PULSE EFT Network

Discover Financial Services has announced that it has entered into a definitive agreement to acquire the PULSE EFT Association for a purchase price of $311 million.

"We believe the combination of the PULSE® and Discover® networks will create a leading electronic payments company offering a full range of products and services that will represent an attractive choice for financial institutions, merchants and consumers," said David W. Nelms, Chairman and Chief Executive Officer of Discover Financial Services. "Together, we intend to be a robust competitor in the important and rapidly growing debit market."

"This strategic partnership will join the forces of PULSE and its 4,100 member banks, credit unions and savings institutions with Discover Network and its more than 4 million merchant and cash access locations," Nelms said. "The combined entity will provide financial institutions of every size and type with a full-service debit platform and a complete product set, including credit, signature debit, PIN debit, gift card, stored value card and ATM services."

"In a rapidly changing environment, PULSE's Board has elected to team with a company that has a suite of products and resources that will enable us to continue our growth and success," said Stan Paur, PULSE President and Chief Executive Officer. "We believe that PULSE's experience in debit, combined with Discover's signature capabilities, will create a highly appealing alternative for small to large institutions across the country."

American Express Sues Visa, MasterCard, Banks

American Express today filed a lawsuit against Visa, MasterCard and eight major bank members of the card associations including J.P. Morgan Chase, Bank of America, Capital One, U.S. Bancorp, Household Bank, Wells Fargo, Providian National Bank and USAA Federal Savings Bank.

Amex's complaint is available for downloading online (PDF).

American Express to File Private Litigation Against Visa and MasterCard

American Express has announced its intention to file private litigation against Visa and MasterCard. Amex says David Boies, founding partner of Boies, Schiller & Flexner, will serve as American Express' lead outside counsel in the matter. A teleconference to provide more details will take place at 11 AM EST this morning.

Debit Cards: PIN or Pen?

Paul Wenske reports in the Kansas City Star about the differences between PIN and signature-based debit transactions.

Debit Cards in Australia

The Weekend Australian reports on the debit card market in Australia and a new marketing push by Visa.

More on UK Interchange

The Guardian reports on the UK Office of Fair Trading's investigation of credit card interchange fees.

In its proposed findings, the OFT argues that the arrangement between the members of MasterCard on transactions in Britain by UK-issued MasterCards infringed competition rules. "The OFT believes that the agreement leads to an unduly high fee being paid to card-issuing banks on every such transaction. The cost of these fees is passed to retailers and ultimately to consumers."

New Zealand Credit Card Fees

The New Zealand Herald reports on investigations into credit card fees in New Zealand.

UK Pressures on Credit Card Interchange Fees

The Scotsman reports on action by the UK's Office of Fair Trading announcing an inquiry into Visa and issuing a last-chance warning to MasterCard regarding interchange fees. The OFT's press release on the matter is available online.

American Express Aligns with MSN for Music

American Express has announced an agreement with Microsoft's MSN to deliver free music downloads through the MSN Music Service to American Express cardholders in the US.

"This agreement with MSN is music to the ears of our Cardmembers and consumers," said Larry Sharnak, executive vice president and general manager of Consumer Lending at American Express. "Both music and the Internet are important to our customers, and with MSN Music we are able to offer consumers a place to discover new music, find out what's happening with their favorite artist, and earn free music."

"Both MSN and American Express are committed to bringing consumers new ways to discover and listen to the music they're most passionate about," said Rob Bennett, senior director for MSN Entertainment. "Through In the Mix and our offer of free tracks, we are making downloading music even easier and more rewarding for music fans."

MasterCard Research Finds Online Shoppers Looking for More Security

MasterCard has announced the results of their SecureCode Holiday Shopping Survey conducted by Harris Interactive.

The survey results showed that "nearly one-quarter (23 percent) of online shoppers indicated they often avoid making purchases online because of perceived security weaknesses and nearly half (46 percent) indicated that they'd be encouraged to shop online more often if merchants would incorporate additional security measures for payment."

"MasterCard SecureCode provides important reassurance for two-thirds (66 percent) of online shoppers who seek out extra security measures when shopping online," said Stephen Orfei, senior vice president and head of the e-Commerce Center of Excellence for MasterCard International. "All they have to do is look for the MasterCard SecureCode mark at a website to know that protective measures are in place to make buying online as safe and easy as shopping in a retail store."

Update on GE Consumer Finance

In late September, GE Consumer Finance Americas President and CEO Mark Begor spoke at an investor conference. The slides from his presentation are available online (PDF) and provide some great insights into the business strategies GECF is pursuing.

Visa USA Reports November Volumes Up Nearly 16% Driven by Debit Growth

Visa USA has announced that spending on Visa branded payment cards during the first week of November 2004 rose to $22 billion, an increase of 15.7% over the same week last year.

Consumer spending on Visa branded credit cards surpassed $10.8 billion while debit spending reached more than $9 billion, a 5.8 and 28.7 percent increase from the same period in 2003, respectively.

There are more than 450 million Visa branded credit and debit cards in the United States. Those cards represent over 14 percent of Personal Consumption Expenditures (PCE), indicating that consumers spend more than $14 out of every $100 using a Visa branded card. Only cash and checks have a greater share of PCE, making Visa products a strong indicator of consumer spending behavior.

"These early numbers are encouraging, as they indicate that consumers are not only continuing to spend, but increasingly they're doing so with available funds accessed through their Visa check cards," said Wayne Best, senior vice president for strategic and economic analysis. "The Visa data reflects a general increase in consumer spending combined with the continued migration of consumer and business spending away from paper forms of payment, such as cash and check, to plastic forms of payment, such as Visa."

Mr. Best adds, "Based on this week's spending data and our broader economic analysis, Visa is cautiously optimistic that this will be a good holiday season for merchants, consumers and Visa's Member financial institutions."

MBNA Begins American Express Card Issuance

Forbes carries an AP story this morning on MBNA beginning its rollout of American Express-branded cards.

More details available from this MBNA press release.

Consumer response to initial pre-selling activities for the MBNA Affinity Rewards American Express Cards has been overwhelmingly positive. To date, MBNA has already issued more than 300,000 American Express-branded cards. Early consumer demand for these cards demonstrates clearly that customers want richer rewards on a product that represents their membership in an affinity organization.

Bruce Hammonds, chief executive of MBNA, which is headquartered in Wilmington, Del., said that adding American Express to its Visa and MasterCard offerings means "we are able to give our customers more choice than they've ever had before."

In a recent interview with The AP, Visa president and chief executive Carl Pascarella said his company's signature card already had more than 35 percent of the $125,000 a year-and-above income group and that new Visa small business products were making inroads into an area that American Express had dominated.

Next Estate Communications Launches WebSecret

Next Estate Communications, in partnership with Columbus Bank and Trust, has launched WebSecret, an online buying product designed to "protect consumers from identity theft and improper use of their personal information."

WebSecret is a non-reloadable prepaid product that requires no personal information for its purchase or use. The product can be loaded with up to $500. WebSecret can be purchased at participating local and national retailers for $14.95. Consumers must be 18 or over to purchase the product.

"WebSecret is a major victory for consumers who want to shop online without fear of identity theft or invasion of privacy," said Steve Streit, NEC President and Chief Executive Officer.

"A main obstacle for consumers looking to use the Internet for commerce has been that putting their personal information and credit card data over the Internet leaves them vulnerable to financial fraud and misuse of their personal information. WebSecret addresses that concern."

LaunchPAD -- Pre-Authorized Debit

VeriFone, Mosaic Software and ID Data have announced LaunchPAD, an alliance to deliver pre-authorized debit (PAD) transactions.

The pre-authorized debit payment method leverages the infrastructure that is already being put in place for EMV, i.e. smart card readers and PIN pads, thereby minimizing further investment for the introduction of a wholly new payment product.

The pre-authorized transaction is debit-like, but reduces risk by guaranteeing that funds are available -- based on the fact that they have been 'ring-fenced' on the account for off-line spend.

Generally, using PIN-based identification at the Point of Sale (POS) to identify the cardholder, pre-authorized does not require any online authorization. The merchant terminal treats a purchase transaction as EMV-authorized offline and generates an audit trail showing the authenticity of the card and PIN. Cardholders will "top up" the value on the card at an online terminal, such as bank branch terminal or ATM. This is the only online transaction to ensure that, when the value is loaded, it is reflected immediately on the central system.

Visa USA Changes Debit Interchange

Lavonne Kuykendall reports in the American Banker this morning on changes Visa USA is making to PIN and signature debit card interchange fees.

MasterCard Reports Purchase Volume Up 11.1%

MasterCard International reported today that gross dollar volume (GDV) on MasterCard-branded cards grew to $365.9 billion in the third quarter of 2004, up 10.0% from the same period in 2003. Total purchases on MasterCard credit and offline debit cards increased 11.1%. MasterCard also reported that the number of cards issued grew to 656 million, up 8% from the same quarter last year.

MasterCard's performance in the third quarter was fueled by growth in both credit and offline debit programs. GDV for credit and charge programs worldwide grew 8.4% to $298.5 billion, and GDV for offline debit programs rose 17.7% to $67.4 billion over the same period in 2003. Gross transactions for credit and offline debit programs increased by 11.3% in 2004 compared with the third quarter of 2003.

Credit Card Receivables Growth Slowing

CardWeb reports on the increasing inclination of US consumers to pay down their credit card debt and the impact its having on the growth in receivables.

There are approximately 185 million bank credit cardholders in the USA. Of these about 70 million pay-off in full each month, 71 million make more than the minimum required payment, and 44 million make minimum required payments.

US Department of Justice Announces Internet "Carding" Arrests

The US Department of Justice has announced the the arrests of nineteen individuals "who are alleged to have founded, moderated and operated one of the largest illegal online centers for trafficking in stolen identity information and documents, as well as stolen credit and debit card numbers."

ID Analytics Launches UK National Study

ID Analytics has announced the launch of a UK national study of identity risk.

ID Analytics will lead and conduct the research in partnership with five of the six largest banks, three of the four largest mobile operators, five of the seven largest credit card issuers and two of the largest online and offline retail consumer finance companies in the UK. Participants are now actively contributing data to the ID Network, the region's first real-time analytic system built from the start to detect and prevent identity fraud. This broad UK-wide collaborative effort will provide an in-depth understanding of identity fraud across the customer lifecycle.

Credit Card Companies Lobbying for Airline Liability Protection

Scott McCartney reports in the Wall St. Journal (subs. reqd.) about lobbying by credit card companies for new legislation that would protect them from potential liability if an airline shuts down.

Pushing hardest for the protection is National City Corp. of Cleveland, which processes credit-card transactions for UAL Corp.'s United Airlines and other carriers. In its latest quarterly financial report, National City said the value of tickets on United that were purchased but not yet flown was $853 million on June 30, and National City had "no significant collateral" to back that debt.

Diners' CEO Inteviewed

Diners Club North America CEO M. V. Rajamannar is interviewed on Business Travel News.

American Express Reports 16% Growth in Cardmember Spending

In its third quarter financial results reported this afternoon, American Express reported a 16% increase in Amex cardmember spending over the same quarter last year and a 14% increase in discount revenue paid by card accepting merchants. Amex's average discount rate declined 3 basis points from 2.60% to 2.57% as compared to the same quarter last year.

The spending increase reflected higher average cardmember spending, the continued benefit of rewards programs and a net addition of 4 million cards-in-force. The higher business volumes also reflected growth in the retail, everyday spending, travel and entertainment categories. The benefits of higher cardmember spending were partially offset by a slightly lower average discount rate.

Amex also announced it would be prepaying $500 million to Delta Airlines for future purchases of Delta SkyMiles rewards points and would, in addition, be providing a $100 million loan to Delta. Amex said:

The company’s decision to participate in Delta’s restructuring program reflects its long-term partnership with the airline through its travel business, co-branded cards and the Membership Rewards program. While American Express’ Delta SkyMiles Credit Card co-brand portfolio accounts for less than 10 percent of the company’s total worldwide billed business and less than 15 percent of managed worldwide lending receivables, it represents a very attractive, high-spending, loyal cardmember base with excellent credit quality.

A 401(k) Card

David Vise reports in the Washington Post on Francis Vitagliano and his 401(k) card. Vitagliano worked with an MIT professor, the late Franco Modigliani to patent the idea over ten years ago.

Vitagliano's and Modigliani's patent (5,206,803 - System for enhanced management of pension-backed credit
) has been licensed by ING and is scheduled to be introduced at a conference tomorrow.

The credit card industry is not opposing the card's introduction, in part because the first 401(k) card will be a Visa card. In addition, ING is willing to sub-license the rights to the product to other financial services firms, which means that eventually there may be 401(k) American Express and MasterCards too.

National Geographic Special: Inside the U.S. Secret Service

The National Geographic Channel will be airing a TV special this Sunday, October 24, at 8 PM ET/PT titled "Inside the U.S. Secret Service".

The U.S. Secret Service is best known for guarding the President of the United States. Most of us have seen the agents in dark glasses shadowing the President, scanning the surroundings for any possible threats.

But few people may know that the U.S. Secret Service was created to combat counterfeiting. And it may come as a surprise that half of the Secret Service staff today is dedicated to investigating counterfeit currency.

The Secret Service also has responsibility under Title 18 USC Section 1029 for losses related to access devices (i.e., bank and other credit cards).

Although it is commonly called the credit card statute, this law also applies to other crimes involving access device numbers including debit cards, automated teller machine (ATM) cards, computer passwords, personal identification numbers (PINs) used to activate ATMs, credit card or debit card account numbers, long-distance access codes, and the computer chips in cellular phones that assign billing.

Chenault Driving Amex Growth

Bloomberg reports on American Express' growth under CEO Kenneth Chenault.

Paper or Plastic?

Tavia Evans writes in the St. Louis Post-Dispatch about the shift to card-based payments.

Economists long have predicted a cashless society, where digital transactions replace paper money and coins. Now, nearly one in three in-store purchases is made with a debit card, a study by American Bankers Association and Boston-based Dove Consulting shows.

Visa's Rodrigues Talks About Economic Growth

The Wharton School's Strategic Management newsletter highlights a talk by Visa International CEO Christopher Rodrigues at a conference last month in London.

Rodrigues likens a cash economy to walking, whereas "introducing electronic payments is akin to using the gears on a bicycle." Add in an efficient electronic payments system and you "kick [the economy] into high gear." Add better-controlled consumer and business credit and you notch up economic velocity even further.

Rodrigues sees a strong role for Visa in moving cash-based economies into the global financial systems. This includes working with institutions like FINCA International and Mibanco to provide microfinancing for low-income individuals and businesses, and enabling cost-effective funds transfer to support remittance to home countries by guest workers abroad.

Credit Card Repayments Up

Moodys reports that US consumers paid back credit card debt at record levels during August.

"The payment rate has increased from its year-earlier levels for the past 15 consecutive months, demonstrating an improvement in cardholders' willingness and ability to make payments on their credit card debts," Moody's said in a statement.

GE Consumer Finance Forms Specialty Retail Group

GE Consume Finance has announced that it has formed a new specialty retail group to focus on the unique financing and marketing needs of growing, mid-size retailers.

The new business unit is part of GE Consumer Finance's Retail Consumer Finance division, which provides retail credit card services to major retailers in the United States and Canada. The Specialty Retail Group will focus exclusively on providing private label and co-branded credit programs to apparel and accessory, home goods and other growing specialty retailers with portfolios of up to $200 million.

"We have a successful track record of partnering with specialty retailers to grow their credit and financing products, customer base and sales," said Margaret Keane, president and chief executive office of Retail Consumer Finance, part of GE Consumer Finance. "The Specialty Retail Group will sharpen our focus on this important market segment with dedicated resources and technology, greater functional expertise, and differentiated marketing programs."

Some Stores Stick With Cash

Lauren Bayne Anderson reports in the Washington Post on merchants who balk at accepting plastic cards for payment and are instead steering their customers to use in-store ATM machines to get cash for payment -- and making additional fee income in the process.

If Ben's took credit cards, it could pay up to 50 cents in fees for a $10 sale, the size of its average bill. Instead, it makes money each time a customer uses an ATM it installed. Industrial Bank supplies Ben's machine, and the restaurant gets 25 cents every time a customer pays a $2 transaction fee to withdraw cash.

Coinstar Releases Results of National Currency Poll

Coinstar has announced the results of its 7th annual National Currency Poll.

According to the Coinstar National Currency Poll, 61 percent report they are using charge/credit cards less today than in the past. In addition, 58.6 percent of respondents say their current financial situation has prompted them to spend less (26.7 percent say they are actually spending more). Saving habits have also been impacted with 56.7 percent reporting they are saving less today than in the past (28.6 percent report they are saving more today). In fact, those most likely to cut back on saving are those with an annual household income of $25,000 to $49,000. Overall, approximately 13 percent of respondents claim they have not changed either their saving or spending habits.

A Whole New World for Big Plastic

BusinessWeek takes a look at the Supreme Court's rejection of Visa and MasterCard's antitrust case appeal.

"It's the beginning of a seismic change in the credit- and debit-card market," says Attorney David Balto, an antitrust partner with Robins, Kaplan, Miller & Ciresi in Washington, D.C.

Discover Files Federal Lawsuit Against Visa and MasterCard

Following announcement earlier today of the US Supreme Court's refusal to hear an appeal in the US anti-trust decision against Visa and MasterCard, Discover Financial Services announced that it has filed a federal lawsuit against both associations seeking damages "for harm caused by anticompetitive business practices of the two associations."

"The rejection by the Supreme Court of Visa's and MasterCard's appeal means that they have lost every attempt to salvage their illegal barriers that have stifled competition for more than a decade. Visa and MasterCard lost in the trial court, lost in the court of appeals, and now they have lost their appeal to the Supreme Court," said David W. Nelms, Chairman and Chief Executive Officer of Discover Financial Services.

"The courts have ruled that Visa and MasterCard abused their market power to the detriment of consumers and competition, and that their exclusionary rules limited Discover's share of the general purpose credit card market and also barred Discover from entering the debit card market," Nelms added. "Now that Visa and MasterCard's anticompetitive bylaws have finally been struck down as unlawful, we are moving forward with our business plans and are seeking triple damages for the harm that those violations have caused us."

Visa, MasterCard Lose US Supreme Court Appeal

CNN reports that the US Supreme Court let stand a an earlier ruling that the Visa and MasterCard credit card associations violated Federal antitrust law by barring their member banks from issuing cards on rival networks.

Following the court's announcement, Visa USA spokesman Daniel Tarman issued the following statement:

"Today's ruling doesn't change the fact that American Express still faces the problem it has always faced: consumers who want an American Express card, despite being accepted at millions fewer merchant locations than Visa worldwide, either already have one, or know how to get one. Access to the market has never been American Express' problem -- they have a product problem. They have cultivated a reputation of higher prices and exclusivity that the broader consumer market and many merchants have not embraced.

"Our focus remains on competing for bank, merchant and cardholder business everyday. If the question is which payment network best serves banks, and not competing interests, Visa is the clear choice. Visa delivers leading products and services to support the success of our member banks, while American Express competes against Visa's members to market their own brand to the banks' payment card and financial services customers."

American Express issued a press release with a statement from chairman and CEO Kenneth Chenault:

"Today is an historic day for the card payments industry in the United States. The Supreme Court's decision means the end, once and for all, of Visa and MasterCard rules that have prevented banks from issuing cards on rival networks. In effect, the Court has decided that these rules are illegal and must be abolished. The appeals are over. A new era of greater choice for U.S. consumers and financial institutions has begun."

In a memorandum to Amex employees (PDF), Chenault went on to say:

For American Express, today’s decision means that we will now be able to open our network to other card issuers in the United States, just as we have done internationally. We will partner with banks and other financial institutions that will issue American Express-branded cards accepted on our merchant network. Building a network business in the U.S. that will operate in addition to our very strong proprietary card business will provide us with new and substantial opportunities for growth. It will have significant benefits for the company overall.

Chenault also told Amex employees:

Additionally, American Express is considering bringing private legal action against Visa and MasterCard. The Supreme Court’s ruling only reaffirms the viability of this course of action.

Discover CEO David Nelms also issued a statement:

"This is a victory for consumers, merchants and financial institutions. Today's decision frees financial institutions to partner with Discover Financial Services, which will provide more choice and value to consumers and merchants.

"Discover Financial Services has been in advanced discussions with potential partners regarding issuance of cards on the Discover Network. Now that Visa's and MasterCard's anticompetitive bylaws have finally been struck down, we are eager to move forward with these new partnerships."

Separately, the National Retail Federation also issued a press release welcoming the court's decision to deny the appeal.

"This decision clears the way for increased competition in the credit card marketplace that should lead to lower costs for retailers and the consumers we serve," NRF Senior Vice President and General Counsel Mallory Duncan said. "NRF has been a long-time leader in the drive for reasonable transaction and interchange fees. The fees charged by credit card companies are a hidden tax on American consumers that drives up the price of products for everyone, even those who pay by cash or check. Without competition, these fees have only gotten worse."

"As a follow-up to last year's settlement over Visa/MasterCard debit card practices, this case is another victory in creating a level playing field between retailers and credit/debit card companies," Duncan said. "Visa and MasterCard should not be allowed to dictate who gets into the market, and this case further enhances the right of retailers and consumers to have a choice."

Merchant Fees

Jeanne Ridgway of the Gannett News Service reports on the fees paid by merchants for credit and debit card acceptance.

By accepting a customer's plastic cards, merchants pay electronic transaction fees imposed by credit-debit card associations. Now some retailers are considering ways to recoup their increased operating costs, including boosting prices on their merchandise.

Update on Bank Cards in China

Dow Jones Newswires reports on a discussion about bank cards in China with with Willie Fung, senior vice president of MasterCard International.

In a nation of 1.3 billion people, only 100 million Chinese have a clear idea of what a bank card is, based on a Mastercard survey focusing on China's emerging middle-class household conducted in May, said Fung. But by 2010, the number of Chinese middle-class households with annual income above US$5,000 will rise to 150 million from 65 million currently, based on MasterCard data.

More Russians Say Charge It

Business Week reports on the growth in consumer credit in Russia.

According to the Russian Central Bank, retail lending to private citizens hit $15 billion by mid-2004, a 50% increase in six months, and up from just $1 billion since the start of 2000. Despite this phenomenal growth, Russia's consumer-credit market -- installment loans, credit cards, car loans, and mortgages -- is still in its infancy. Total consumer debt makes up just 3% of Russia's gross domestic product, compared with 75% of GDP in the U.S., and around 20% to 30% in Eastern European markets such as Poland.

Mobile Payments Impact on Cards

Wireless Developer Network reports on a roundtable held in London recently that explored the impact that mobile payments will have on established payment methods including cards.

Instead of replacing the credit card, mobile payments will evolve in two directions: managing transactions for small digital purchases and, in the long term, being integrated with credit cards so that phone users can trigger a larger credit card purchase from their phone. In this way mobile payments will complement, not replace the credit card model.

Card Compromises

MSNBC's technology correspondent Bob Sullivan reports on the growth in card compromises.

Payments 2004: The Merchant Perspective

Glenbrook's Allen Weinberg recently keynoted the Direct Response Forum's conference in San Francisco. Allen spoke on key issues and opportunities affecting card-not-present merchants.

Allen has turned his DRF presentation into an article titled Payments 2004: The Merchant Perspective that is now available on the Glenbrook web site.

Hip-Hop Tycoon Jumps Into Banking

Carolyn Said reports in today's San Francisco Chronicle on Russell Simmons' RushCard, a prepaid Visa debit card for the "unbanked" offered by Unirush Financial Services.

Simmons, whose company has signed up about 300,000 RushCard customers in 18 months, sees the card as consistent with his message of access, inclusion and empowerment.

"Everything that we do comes from hip-hop culture, which is the expression of people who are struggling," he said in an interview, speaking with the distinctive cadence of a man who sees poetry woven into daily life. "I'm doing something the banks should have done. The banks looked at the people in the face and did not see enough money in their eyes to pay attention to them."

Portland's Smart Parking Meters Take Cards

Betsy Hammond reports in the Oregonian on the smart parking meters developed by Sweden's Cale Access AB that are being deployed in the city of Portland and how they're a model for other cities considering similar systems.

So-called SmartMeters require motorists to walk as far as 100 feet from their cars to pay for a receipt to stick on the vehicle window. But the solar-powered machines have proved a hit in Portland, city officials say, because they take debit and credit cards -- the option chosen by more than half the Portland parkers given the choice.

Pluses and Minuses of Payroll Cards

The AP's Eileen Alt Powell reports on the pluses and minuses of payroll cards for workers.

FMI Urges Congress to Address 'Skyrocketing' Card Fees

CardForum reports that the Food Marketing Institute has filed testimony with the House Subcommittee on Financial Institutions and Consumer Credit urging Congress to investigate "skyrocketing" electronic transaction interchange fees and the lack of controls on those fees. The FMI testimony is available online as well as earlier comments it also provided to the Federal Reserve earlier this summer on this same subject.

The full text of the FMI press release provides an overview of the testimony by John J. Motley, III, FMI senior vice president of government and public affairs.

According to a 2003 report by the TowerGroup, food retailers handle over half of all electronic credit and debit card payment transactions. “At the same time,” Motley said, “the cost of accepting these cards has been skyrocketing, often exceeding the 1 percent net profit margin of the typical grocery store.”

Motley encouraged Congress to consider international efforts to control escalating electronic payment fees: “Several countries, including the United Kingdom, Australia and Israel, and the European Union have initiated caps on fees, changes in operating rules, antitrust/fair trade investigations, regulation of the allowed components of fees, studies and legislation.

“With fees that are higher than any of these international competitors, U.S. merchants and U.S. consumers are at a competitive disadvantage unless similar actions are considered in this country.”

FMI noted that the marketplace offers no incentives for financial institutions to reduce such fees. “The current interchange fee model is inverted from normal competitive market models — more volume means more cost,” according to the testimony. “Volume cannot be used to lower costs, [and] merchant fees are invisible to consumers.”

Shoppers Break Out Debit Cards

Eve Mitchell reports in the Oakland Tribune on the growth in debit card usage, displacing paper checks.

Like a growing number of consumers, Cindi Joost leaves her checkbook at home when she goes shopping. Instead, she carries a debit card.

"It's very comfortable to use," said the 23-year-old Oakland resident, who uses her debit card while shopping at grocery stores and drug stores, to buy movie tickets and to pay for restaurant meals. Not only does the card provide her with convenience, it also helps her manage her finances, she said.

"It's very comfortable to use because I'm never afraid of getting myself into debt. You can't spend more than you have with a debit card," said Joost, who has had her credit union debit card for seven years.

Debit Card and Network Trends

ATM&Debit News has released its 2005 EFT Data Book which includes details about ATM and POS volumes for the various debit networks.

OCC Issues Advisory Letter on Credit Card Practices

The Office of the Comptroller of the Currency has issued a new advisory letter regarding certain credit card practices of card issuers.

Three practices, in particular, have come to the OCC's attention and are addressed in this guidance. The first practice is soliciting for credit cards that advertise credit limits "up to" a maximum dollar amount, when that credit limit is, in fact, seldom extended. The second practice is using promotional rates in credit card solicitations without clearly disclosing the significant restrictions on the applicability of those rates. The third practice is increasing a cardholder's annual percentage rate or otherwise increasing a cardholder's cost of credit when the circumstances triggering the increase, or the creditor's right to effectuate the increase, have not been disclosed fully or prominently.

No Pal to Overspenders

Lorene Yue writes in the Hartford Courant about PayPal's recent alliance with GE Consumer Finance.

Canadian Banks to Launch PIN Debit for the Internet

Digital Transactions reports that Canada's five major banks will roll out PIN debit payments on the Internet next spring.

The service, called iDebit, has been at least 18 months in the making and is expected to be the first major initiative in North America to allow the use of PIN debit cards as a payment option in e-commerce. The banks behind iDebit-- Bank of Montreal, CIBC, Royal Bank of Canada, Scotiabank, and TD Canada Trust—control nearly all PIN debit card accounts in Canada.

MasterCard to Allow Surcharging in Germany

An FT Deutschland article reports that MasterCard will allow retailers to begin adding surcharge fees to its credit card transactions beginning in January 2005. Here's a rough English translation of the original German article.

Debit Cards Add Rewards

Jay Pfeifer writes in the Charlotte Business Journal about new debit card rewards programs being introduced by Wachovia and Bank of America.

Ken Kavanagh, debit and prepaid card executive for Bank of America, says rewards are an important step in boosting the use of debit cards. "A lot of people using credit cards are using them to get rewards," he says. "They're not revolving credit, they're just paying off their balance and getting reward points. With our debit reward program, we can convert those customers."

FDC Adds Support for JCB

First Data Corp. has announced that it is adding support for JCB to its VisionPLUS card processing system. The updated software will allow FDC's VisionPLUS customers to issue and acquire JCB cards.

Foreign Express Scheme Cuts Out Bank Card Issuers

Melbourne's Herald Sun reports on the launch by Travelex of a dynamic currency conversion system that allows travelers in Australia to pay by credit cards in their own currency. With the new system, revenues from currency conversion fees that used to go to the card issuers are now split between Travelex and participating merchants.

Australia: Aldi Imposes Credit Card Surcharge

Melbourne's Herald Sun reports on a new credit card surcharge of 1 per cent that the discount supermarket chain Aldi has begun imposing on Visa, MasterCard and Bankcard credit card purchases at its stores in Australia. Previously, Aldi only accepted cash and EFTPOS.

Australia's Credit Card Reform

In a new Insight report, Edgar, Dunn & Company's Robert White examines the impact of Australia's recent credit card regulatory changes on that country's payments value chain.

Discover Card Exclusively Accepted at Dollar General Stores

Discover Card has announced an exclusive acceptance agreement with Dollar General.

Discover(R) Card will be the only credit card accepted for payment at more than 5,500 Dollar General stores in 27 states and will be accepted at all of Dollar General's more than 7,000 stores chain wide. In the past, Dollar General accepted only cash and personal checks as forms of payment. Fifth Third Bank Processing Solutions has been selected as the electronic card processor for all electronic payments.

"Dollar General is a leader in the fixed price retailing industry and we are pleased that our Cardmembers will now be able to use their Discover Cards to take advantage of the terrific values offered by Dollar General," said David Nelms, chairman and chief executive officer, Discover Financial Services, Inc. "We are very excited about this exclusive partnership, which will allow our Cardmembers to use their cards for everyday essentials."

"Our partnership with Discover makes it possible for us to continue to provide convenience to our busy working families, while maintaining our low prices," said David A. Perdue, chairman and chief executive officer, Dollar General Corporation. "We are excited to partner with Discover to offer our customers a payment option that is fast, convenient and rewarding."

Counterfeit Card Losses

Datamonitor has published a new report on credit card counterfeiting, estimating that losses from counterfeiting have grown 30% in the last year.

Prepaid Debit

The Boston Globe's Ann Chin reports on the Usher card, a prepaid MasterCard debit card.

The Usher card is a debit card, not a credit card. It allows people to prepay or store cash in an account, which can then be accessed to make purchases at stores, and to get money from ATMs. The minimum amount that can be placed on the card is $10, and the maximum is $2,500, according to BankFirst, the Sioux Falls, S.D., company that issues the card.

GE Consumer Finance Plans Emerging Markets Expansion

Reuters reports on a Wall St. Journal story this morning about the growth plans of GE Consumer Finance for emerging European and Asian markets -- in a strategy similar to that of Citibank's.

Dealing with Credit Card Debt

Stacy Teicher writes about how American consumers are attempting to deal with big credit card balances in a two-part series in the Christian Science Monitor. The second part profiles four American consumers and how they are dealing with their credit card debit.

Separately, Reuters reports that US credit card delinquencies fell to a four-year low in June.

Moody's credit card delinquency index, which measures credit card bills 30 days or more past due, fell to 4.37 percent in June from 5.12 percent a year earlier. June marked the 11th consecutive month of declines in delinquencies and was the lowest since June 2000, the rating agency said.

Hong Kong Banks Promoting Credit Card Usage

Brian Kelleher reports for Reuters on new advertising campaigns being launched by Hong Kong banks to promote credit card usage.

UK Competition Commission Inquiry into Store Card Credit Services

The UK Competition Commission has an active inquiry underway looking at store card credit services. On the Commission's web site there are some interesting responses from store card providers (e.g., GE Consumer Finance) as well as the notes of an open meeting (PDF) held on July 21 that includes the text of presentations from various parties.

Merchant-Controlled Debit Networks

Celent analyst Gwenn Bezard writes in Bank Systems & Technology Online about the evolution of merchant-controlled debit networks.

To succeed, Debitman will have to overcome these challenges, the main one being enlisting large retailers as issuers to build up transaction volumes. Fortunately for Debitman, rising competition between Visa Interlink, MasterCard and the regional networks is very likely to keep pushing the PIN debit interchange rates up, thus creating a favorable environment for the venture. To be sure, chances for a merchant-controlled debit network to gain momentum in the U.S. have never been so high.

BJ's Wholesale Club Reserves for Credit Card Claims

BJ's Wholesale Club reported in its financial report earlier today that it has been informed by its credit card processor of pending claims totaling $16 million ($6 million in actual claims with the remainder made up of certain card replacement and account monitoring costs). The Associated Press has a follow-up story on the announcement.

Pay By Touch Announces Strategic Alliance with Discover Card

Pay By Touch announced today a strategic alliance with Discover Financial Services that it expects to increase usage of Discover Card at retail point of sale locations as well as driving adopting of Pay By Touch.

"This is a mutually beneficial alliance because it allows Pay By Touch customers to take advantage of Discover Card's benefits, and Discover Cardmembers the option for a faster, more secure way to pay," said Craig Ramsey, chief executive officer of Pay By Touch.

"Consumers are always looking for quick and convenient payment options, which has contributed to the success of our own Discover 2GO(R) Card, the first key chain credit card in the industry," said Diane Offereins, Executive Vice President and Chief Information Officer, Discover Financial Services. "By teaming up with Pay By Touch, we can continue to provide our more than 50 million Cardmembers with the latest in payment technology by literally putting all of Discover Card's benefits at their fingertips," added Offereins.

TCF Introduces New Checking/Credit Card Combo

TCF Financial has introduced a high yielding checking account tied to a free platinum rewards card.

The new TCF Premier Checking Plus(SM) account with the TCF Miles Plus(SM) card is uniquely suited for customers who maintain checking account balances of $5,000 or more and pay off their credit card balance each month. TCF Miles Plus cardholders earn one point (or 'mile') for every dollar of purchases made with their card, while they continue to earn competitive interest rates on their entire checking account balance.

TCF customers will receive a very unique combined account statement, which shows not only all checking account activity but also all of their credit card purchases made with their Miles Plus card during the same time period. Card purchases are then automatically deducted from the checking account 15 days after the statement is generated. Customers can also view all of their account and card activity throughout the month using TCF's free on-line banking system, and can access the Miles Plus Reward center through TCF's web site at http://www.tcfexpress.com . TCF customers will also receive free bill payment with this account.

"The TCF Premier Checking Plus account and free TCF Miles Plus card will be very attractive to customers who consistently maintain higher checking account balances, but are frustrated with other airline credit card awards programs," Lynn Nagorske, TCF Financial Corporation President and Chief Operating Officer said. "Most airline reward programs have high annual fees of $90 dollars or more, are specific to one airline, and have 'blackout days' and 'no free seats' for popular destinations. This won't be the case with our new Free Miles Plus card."

Use of ATMs Declining

Sasha Talcott writes in the Boston Globe on how the increasing usage of debit cards is reducing the need for cash.

The ATM data point to a larger trend that economists have been talking up for years: the move toward a cashless economy. For the first time, the number of electronic payments has surpassed cash and checks, according to a study released last year by the American Bankers Association.

"It's just easier than carrying cash around," said Stephanie Wash, a Braintree student. Wash said she uses her debit card "more and more," including to get cash back, lessening the need to visit the ATM. She still uses cash for smaller purchases, including Burger King chicken tenders and fries.

Why Use Debit Instead of Credit?

Jonathan Zinman of the Federal Reserve Bank of New York has published a new 50 page staff report: "Why Use Debit Instead of Credit - Consumer Choice in a Trillion Dollar Market".

The results have at least two implications for the evolution of the retail payments industry and related policy issues.

First, they suggest that debit and credit are partial substitutes. This casts doubt on the widespread assumption, shared by bankers and theorists alike, that debit’s growth has come largely at the expense of cash and checks.

Second, the results imply that the adoption of general purpose stored-value cards will likely depend not only on network effects and safety/convenience advantages relative to paper-based media, but also on the marginal cost (broadly defined) faced by the consumer relative to credit and debit.

For example, if, in equilibrium, the pecuniary transaction cost for stored-value proves less than for debit (due, e.g., to lower verification costs), then stored-value will become a viable way for revolvers to avoid borrowing-to-charge.

MasterCard Reports Second Quarter Results

MasterCard has announced that total purchases on MasterCard credit and offline debit cards rose 11.7% in the second quarter of 2004 as compared to the same period in 2003.

"The first half of this year has been successful for both MasterCard and our customers," said Robert W. Selander, MasterCard President and CEO. "Many of the issues that limited economic growth last year are behind us, and we've seen stronger purchase activity across our global network as more confident consumers increased spending. Also this quarter, our Asia/Pacific region reported growth in gross dollar volume (GDV) up for the first time in 18 months reflecting renewed consumer confidence in the region."

Business Week: Charge!

Charge!, this week's cover story in the new issue of Business Week, reports on American Express' CEO Ken Chenault and his plans to partner with banks in the US to issue American Express cards -- and other services.

With his margins under pressure, Chenault must drive up how much consumers spend using his cards. He's doing just that; in the second quarter this year such spending leapt 19%, topping $100 billion for the first time. His strategy is simple: First, he wants to get more cards in people's hands by persuading banks to switch customers from Visa and MasterCard to AmEx. Then he aims to coax cardholders to spend more -- and, while they're at it, buy other AmEx products.

AmEx isn't looking to snag just any customer from Visa and MasterCard. It wants those from the affluent investor class, who earn between $100,000 and $1 million a year. They charge up a bundle, keeping the card's profile high, and pay off their balances in full. With thousands of new big spenders in the fold, Chenault's battalion of 12,000 financial advisers would move in to sell them advice and financial plans, which start at $500 a pop. Then they'll sell insurance and investment products, including AmEx's own. "We have to be the No. 1 provider to high-spending customers for both cards and financial advice," says Chenault. "We will have an advantage because we have a very clear focus on these customers."

Building a Business Using Cards

Business Week's Robbie Vorhaus takes a look at building a business using credit cards as a financing source.

NRF Says Banks Mislead Consumers on Debit Card Fees

The National Retail Federation announced today that it has filed comments with the Federal Reserve Board on the subject of fees charged by banks for consumers using a PIN number with their debit cards.

"Annual statement disclosures are insufficient -- they get buried among a host of other disclosures and they are rarely clear," NRF Senior Vice President and General Counsel Mallory Duncan said. "Only a concrete disclosure at the point of sale will make it clear and allow consumers to effectively comparison shop among banks and encourage efficiency in the marketplace."

"Customers come to us with their bank statements and express their surprise -- to put it mildly -- that they have been charged for entering their PIN," Duncan said. "Once we overcome their disbelief and explain the true source of the charge, the customers' anger is immediately directed at their banks. But this job should not be the retailer's responsibility."

American Express Discount Rate Declines Slightly

American Express CFO Gary Crittenden held a conference call yesterday afternoon to review second quarter financial results. In the talking points (PDF) prepared for the call, Crittenden noted that Amex's discount rate (fees charged to merchants) had declined 3 basis points from the first quarter of 2004 and from the same quarter last year.

The declines reflect seasonal influences and the ongoing shift in the mix of spending between various merchant segments due to the cumulative impact of the stronger than average growth in the everyday spend categories.

We have effectively managed the gradual decline of our average discount rate over recent years as a greater portion of our billings evolved to the everyday spend and retail sectors. We have a number of levers, including reengineering, that we can utilize to mitigate discount rate pressure that may result going forward.

Our pricing is based on the value we deliver to the merchant, through higher-spending Cardmembers, and value-added marketing programs, relative to the price we charge for card acceptance. We believe we are well positioned to continue to deliver this value.

American Express Reports 18% Increase in Discount Revenues

American Express has reported second quarter financial results including an 18% increase in card-related discount revenues.

"Our record results this quarter reflected outstanding growth in cardmember spending among consumers, small businesses, corporations and on cards issued on our network by bank partners," said Kenneth I. Chenault, Chairman and CEO. "Continued investments in the card business helped us to capitalize on competitive opportunities and generated broad increases in the retail, everyday spending, travel and entertainment sectors of the market."

WSJ: America Becomes a Plastic Nation

Jathon Sapsford reports in Friday's Wall St. Journal on how card-based payments are replacing cash in the USA.

Last year, cash was used in 32% of retail transactions, down from 39% in 1999. Credit card usage has remained stable, accounting for about 21% of purchases during that time. Meanwhile debit cards, which take money out of checking accounts immediately after each purchase, shot up to 31% of purchases last year, from 21% in 1999.

The Quest for a Cashless Society

Lesley Stones reports from Johannesburg in AllAfrica.com on the quest for a cashless society.

Expectations that electronic banking and plastic cards will ever create a cashless society are about as unrealistic as the fanciful notion that one day we will all work in a paperless office. Just as people will not relinquish sheets of paper for electronic documents, people trust cash too much to replace it entirely with transactions based on the electronic transfer of digits.

We heard from a European friend recently that banks in one of the Scandinavian countries were in the process of actually removing ATMs from their networks -- electronic payments having become so pervasive that the demand for cash from ATMs was on the decline.

Gift Cards Bought with Stolen Credit Cards

Emily Achenbaum reports in the Charlotte Observer on how stolen credit cards are being used to buy gift cards -- before the credit cards themselves are reported missing.

Glenbrook Research Note: Peppercoin V2.0

Glenbrook's Russ Jones has posted a new Glenbrook research note exploring the transaction aggregation platform recently announced by Peppercoin as V2.0.

Peppercoin 2.0 extends the notion of transaction aggregation into both the physical world of small point-of-sale payments as well as across multiple merchants. Through this new “universal aggregation” capability, Peppercoin plans to aggregate individual consumer purchases at multiple merchants into a single card transaction.

By doing this aggregation, the per-transaction fees that would otherwise be paid on each purchase are reduced—with the resulting savings shared between Peppercoin and merchants participating in the Peppercoin network.

This research note analyzes how Peppercoin 2.0 actually works, explores its new value proposition, and offers an initial assessment of its potential strengths and weaknesses.

Merchants Benefit from Australia Credit Card Reforms

The Reserve Bank of Australia has published an article reviewing the impacts that its recent reforms have had on the credit card industry (PDF) in that country. The article concludes that merchant service fees charged by banks in the Bankcard, MasterCard and Visa credit card schemes have fallen by 35 basis points -- amounting to a benefit to merchants of some A$430 million annually.

Duncan Hughes reports from Melbourne on the article in The Age.

The findings are expected to anger traditional bank brands Visa and MasterCard, which have told the RBA its reforms are unfair. Because Amex and Diners process transactions through their own networks, they are not regulated by the RBA. The RBA regulates the "open" system used by Visa, MasterCard and Bankcard. "These results are not surprising," a spokesman for Visa International said, adding that the RBA changes had "exacerbated" differences between Visa and MasterCard and their competition.

Visa USA Launches Signature Card Campaign

Visa USA has announced that it is launching a new national marketing campaign focused on positioning Visa as the card of choice among high-end consumers.

Through an extensive marketing program that launches this week and continues into the fall, Visa will help its Members court affluent customers by demonstrating how Signature cards deliver a strong value proposition and more relevant cardholder benefits than American Express. The campaign kicks off with special "Signature" events at select airports and restaurants, leading into a print, television and radio advertising campaign in August.

"We're now at the point where many of our Issuers are reaching critical mass with their Signature portfolios, and they are looking for Visa to help them continue to compete in this affluent segment," said Carl Pascarella, president and chief executive officer, Visa USA. "We've known for some time that we're leading in this space - now it's time for us to accelerate our efforts to extend our leadership. With Visa Signature, our Members' can offer their customers a better financial tool with greater benefits and more relevant rewards."

EU Challenges French Banks, Cartes Bancaires

The European Commission has announced it has sent a statement of objections to nine major French banks and Groupement des Cartes Bancaires relating to certain fees and rules regarding the issuance of CB cards in France that the Commission believes may limit competition.

The Commission sent its statement of objections to Groupement des Cartes Bancaires (GCB) and to the following banks, which are all members of its Board of Directors: BNP-Paribas, Caisses d’Epargne, Crédit Agricole, Crédit Mutuel, CIC, Crédit Lyonnais, La Poste, Natexis Banques Populaires and Société Générale.

GCB is a groupement d’intérêt économique (economic interest grouping) under French law which manages the French payment card system (CB cards, but also Visa and MasterCard cards issued in France). It comprises some 155 banks.

The Commission’s statement of objections in no way challenges the legitimacy of GCB as the joint and effective operator of the CB card payment system in France. In the Commission’s view, the agreement prevents new entrants from offering consumers CB cards at a lower price and restricts technical innovation by limiting the issuance of CB cards with new functions.

New Federal Law Protects Consumers' Credit, Identity

Your Credit Card Companies, a group of financial services companies whose membership includes Capital One, Chase Manhattan Bank USA, Citigroup, Discover Card, MasterCard and MBNA, has published a press release on the Fair and Accurate Credit Transactions Act of 2004 (FACT Act) highlighting the benefits of the act for consumers.

Fed: Credit Card Issuer Profits Rise

The Federal Reserve has released its annual report to Congress on the profitability of credit card operations by banks showing pre-tax net earnings of 3.66% of outstanding balances in 2003, up from 3.28% in 2002 and 3.24% in 2001.

Reflecting favorable trends in market interest rates, interest expenses fell 22 percent from 2002. Noninterest expenses also fell, but only by a more modest 3 percent. On the revenue side of the income statement, interest income as a percent of assets declined from the 2002 level by 9 percent. Further offsetting some of the beneficial effects of lower funding costs, income derived from noninterest sources such as fees, merchant discounts, and credit card securitizations fell about 1 percent.

Consumers Happy to Use Internet for Planning Travel

The Conference Board has released the results of a survey of 10,000 consumers that indicates that two-thirds of consumers are now using the Internet to make travel arrangements. However, consumer concerns about the security of credit card information remains the primary reason consumers don't actually book their travel online.

Travel search engines such as Travelocity, Orbitz and Expedia and individual company/service websites are preferred methods for making travel arrangements. Again, men are somewhat more likely than women to use these sites for setting up their travel plans.

However, concern about transmitting credit card information online is the number one reason given for not using the Internet to make travel arrangements.

The degree of concern expressed by women over conducting financial transactions online is greater than that expressed by men. Nearly a third of all women will not make travel arrangements over the Internet because they don't want to submit their credit card information, while only close to 28 percent of men share this concern.

GE Deal with PayPal Enables Microloans

Daniel Wolfe reports in the American Banker on GE Consumer Finance's recently announced deal with PayPal.

Margaret Keane, the president and chief executive of GE Consumer Finance, of Stamford, Conn., said this is the second lending product that GE and eBay, of San Jose, Calif., have introduced jointly. The first, which came out May 6 and was not tied to eBay's PayPal product, was aimed at more substantial businesses; it was a working capital line of credit for up to $50,000.

She said the newer product is meant to address the needs of smaller businesses and individuals. "This was our first venture with them on the consumer finance side," Ms. Keane said. Even if a consumer already has a credit card, the PayPal product "allows them to keep a line of credit aside for all their PayPal purchases," she said. Ms. Keane is open to future ventures with PayPal. "We're looking for new ways to expand our offerings in new channels," she said.

Servicemembers Civil Relief Act

The Office of the Comptroller of the Currency has issued an advisory letter to US national banks regarding the Servicemembers Civil Relief Act that was signed into law last December. Among other things, the Act caps interest rates that can be charged by creditors to servicemembers at six per cent.

Creditors must forgive interest in excess of 6 percent per year on debts (including credit card and other open-end debts) incurred by a servicemember before the servicemember entered military service. This limitation also applies to debts incurred jointly by the servicemember and the servicemember’s spouse. The act defines “interest” to include service and renewal charges or any other fees or charges (except charges for bona fide insurance) that are related to the debt. The act clarifies that creditors must forgive, rather than merely defer, interest above the 6 percent threshold during the time of service. The act also provides that the creditor must reduce any periodic payments due under the debt to reflect the reduced interest rate.

The reduced interest rate provision applies unless a court finds that the ability of the servicemember to pay interest on the debt at a higher rate is not materially affected by his or her military service. In such cases, the court may grant a creditor relief from the interest rate limitations of the act.

Finally, the act provides that the servicemember must give the creditor written notice, and a copy of the servicemember’s military orders, in order to receive the interest rate reduction. The notice must be provided to the creditor no later than 180 days after the servicemember’s termination or release from military service, and the creditor must then apply the interest rate reduction effective as of the date the servicemember was called to military service.

The Conman is Alive and Well

The Scotsman reports from the UK on the seemingly endless ways conmen are taking advantage of consumers and their financial services partners.

An earlier story explores the introduction of chip cards and PINs to the UK market.

So how does it work? There are two elements involved in making card transactions secure. The first is to ensure that the card is genuine; the second that the person presenting the card is the true owner. The chip does the former and PIN does the latter. The chip protects your card from the counterfeit, skimming or cloning fraudster, whilst the PIN prevents someone using your card if it’s lost, stolen or intercepted in the post.

PayPal Announces Buyer Credit

At the eBay Live! Community Conference being held this week in New Orleans, PayPal announced PayPal Buyer Credit in partnership with GE Consumer Finance. PayPal members can apply for Buyer Credit online at https://www.paypal.com/buyercredit.

Through an agreement with GE Consumer Finance, one of the leading providers of consumer credit, PayPal Buyer Credit offers U.S. PayPal customers the option to open a line of credit to fund purchases on eBay or any other Web site that accepts PayPal.

With PayPal Buyer Credit, customers can increase their purchasing power, allowing them to buy items when they want them and pay for them when they choose. Additionally, by using PayPal Buyer Credit for their purchases, buyers receive full Buyer Protection from PayPal if their items are significantly different than described on eBay, or if their items are never received.

PayPal Buyer Credit also benefits qualified eBay sellers by giving them the ability to offer deferred interest for up to three, six or 12 months for buyer purchases over $199. With these promotional financing offers, eBay sellers of all sizes can make their items more affordable to buyers and be competitive with traditional retailers that offer similar financing. Because buyers make payments directly to GE Consumer Finance, sellers are not at risk of buyer payment default. Sellers get paid in full by PayPal immediately upon close of the transaction.

"PayPal Buyer Credit gives buyers additional purchasing power with more flexibility to determine what they're comfortable paying and when," said Chris George, director of eBay financial services. "And for sellers, this new program is just one more example of how PayPal and eBay are truly leveling the playing field. Promotional financing is increasingly used by traditional retailers to effectively merchandise and drive sales of higher-priced items. Now, an eBay merchant of any size can attract more buyers by offering similar financing options."

"We're thrilled to work with PayPal and to give millions of registered customers in the United States the opportunity to access lines of credit to help fund their purchases," said Mark W. Begor, president and CEO of GE Consumer Finance -- Americas. "Working with GE Consumer Finance, PayPal now has the ability to help qualified sellers offer alternative financing for purchases, ultimately helping them to grow their businesses on and off of eBay."

Customers who apply for PayPal Buyer Credit receive a credit decision in as soon as 30 seconds. Credit lines are determined by GE Consumer Finance according to the buyer's credit history. PayPal Buyer Credit applications can be accessed from the PayPal Web site at https://www.paypal.com/buyercredit.

Cards Replace Coupons for Food Stamps

The New York Times reports that the Bush administration has completed one of the biggest changes in the history of the food stamp program, replacing paper coupons with electronic benefits and debit cards.

Consumers Union Urges Consumer Protections on Payroll Cards

Consumers Union and many other consumer organizations have asked the Federal Reserve Board in a letter to take steps to clarify that payroll card users are entitled to the same kinds of protections that consumers have with bank debit cards under the federal Electronic Funds Transfer Act, including liability limits and error resolution rights.

Companies marketing payroll cards, prepaid debit cards, and other stored value cards sometimes cite the VISA or Mastercard “zero liability” policies as evidence of the safety of these cards for consumers. However, these policies do not provide consumers with the same protections as the federal Electronic Funds Transfer Act.

For example, Mastercard’s policy does not apply if there are two or more instances of theft or unauthorized use of a card in one year. VISA’s “zero liability” policy does not apply when the card is used at an ATM. And VISA’s policy does not protect the consumer if the card is used for a PIN-based transaction processed on another network. Of course, a consumer cannot control whether a thief who gets their card and guesses the PIN chooses to use this information at an ATM or a non-VISA network.

Gas Rewards Credit Cards

Kathy Chu reports on the Dow Jones Newswire about the increased interest in credit cards that pay rewards on gasoline purchases as fuel prices have continued to climb.

In general, gas-rewards cards appeal to consumers because "gas is almost like cash in that you see the dollar signs right away," said Ms. Sneed, of Maritz. By contrast, with other rewards programs, consumers may find it difficult to calculate the value of points that can be redeemed for airline tickets and merchandise. This is especially true since how much a "bonus point" is worth, in dollar terms, fluctuates. Currently, one point is worth about a penny, according to Ms. Sneed.

Converting Monthly Bills into Free Plane Tickets

Ron Lieber reports in today's Wall St. Journal on Zevez Corp., a company that helps businesses make mileage collection from credit cards an integral part of their accounts payable process.

The latest entrant is a company called Zevez Corp., owned by Joe Graziano, the onion distributor, who is trying to make a business out of maximizing miles. His approach has been to develop a process that tries to make mileage collection an integral part of the accounts-payable process. After helping a company pick the right cards -- and figure out which vendors will accept them -- his software tracks a company's bills, cards, credit limits and rewards earned. It suggests the best card to use to pay a particular bill, depending on how many more dollars a customer needs to spend to meet their rewards goal. By using a variety of cards and paying them off quickly to circumvent credit limits, Mr. Graziano says he has earned about 125 first-class plane tickets himself during the past decade or so, including about 20 international trips just this year.

Single Use Credit Card Number Patent

EDI Secure LLLP has announced that its partner and inventor Jeffrey Ice has been granted a US Patent (No. 6,598,031) on single use credit card numbers.

Check Card Growth

Bank of America reports on the growth it is seeing in usage of Check Cards.

Discover, Utix, WildCard in Prepaid Deal

Discover Financial Services has announced a partnership with Utix and WildCard Systems for a prepaid gift product program utilizing Discover's NOVUS network.

The new suite of Utix prepaid products is one of the first designed under the exclusive partnership agreement between Discover Financial Services and WildCard Systems, and are accepted throughout the Discover/NOVUS Network. The Discover/NOVUS acceptance mark will be present on the back of all Universal Golf and Universal Spa prepaid gift cards. In addition, a directory of participating venues will accompany each prepaid card.

"The flexibility and functionality provided through the Discover/NOVUS Network and the processing experience and services provided by WildCard Systems were the driving forces behind our decision to move forward with the launch of our electronic prepaid gift products, said Tony Roth, president, Utix. "The use of the magnetic stripe will allow us to penetrate other leisure markets and fuel our business growth exponentially."

"The Utix magnetic-stripe gift tickets are revolutionary and require a complex technology solution. From not requiring merchants to change their existing point-of-sale process to making certain that customers are able to redeem their tickets at participating venues, these prepaid gift products call for a unique electronic payments platform," said Gary Palmer, chief operating officer, WildCard Systems. "But in the end, all consumers and merchants really expect is for these cards to work the first time and every time. The role of WildCard Systems and Discover/NOVUS Network is to make sure this happens."

"We are enthusiastic about this unique product offering and the opportunity to leverage the strength of the Discover/NOVUS Network," said Harit Talwar, senior vice president, Discover Business Services. "Our Network allows Utix branding flexibility, multiple methods of distribution, as well as targeted acceptance for their prepaid gift product and other card payment needs. This partnership makes it possible for clients to enhance their current practices with prepaid gift cards and open many doors for future growth."

Electronic Payments Key to Canada's Growth

Investors Business Daily reports on a Global Insight study commissioned by Visa Canada that highlights the benefits that electronic payments have brought to the Canadian economy over the last 25 years. The study is available for download (PDF).

University of Toronto economist, Professor Jack Carr advised on the economic model developed and noted, "This study makes it clear that beyond convenience, electronic payments drive the economy by enhancing transactional efficiencies and expanding payment channels," said Professor Carr. The study found a strong link between payment system efficiencies and economic growth. Merchants and financial institutions can process and settle transactions more efficiently, reliably, and securely in an electronic payment system, thanks to lower payment system and infrastructure costs and greater economies of scale. These efficiencies can be as much as one percent of the value of goods and services produced. "The study highlights the importance of both debit and credit cards to transactions in the Canadian economy," says Mark Lauritano, Managing Director of Global Insight's Financial Practice Advisory Services Group. "Moreover, the high adoption of card payments in Canada provides a platform for the continued growth of e-business, which relies heavily on electronic payments." The research also found that $C 60 billion of growth in personal spending by Canadians over the past twenty years is directly attributable to electronic payments. Credit cards accounted for more than 82 percent of this growth, while debit cards accounted for just over 17 percent.

Credit on Campus

Claire Cahoon writes in the Chillicothe Gazette on college students and credit cards.

According to Nellie Mae, a company that works with colleges and universities to establish student loan programs, college students with credit cards are on the rise. The organization reports 54 percent of undergraduate students have a credit card by freshman year, and the number increases to 92 percent once they're sophomores.

JCB Launches Office Watch with Casio

JCB has announced that it has announced a two month trial of its new wristwatch "Offica" corporate solution.

The 'Offica Watch', in cooperation with Casio, contains employee ID, access control and cashless payment functions. Twenty-five JCB employees will use the Offica Watch instead of the current Offica card to access the JCB tower in central Tokyo, make purchases at company restaurants and stores, and carry out a variety of administrative functions."

This watch will improve convenience and user-friendliness for the wearers, as they don't have to take something out of their pocket or purse to open a door or pay for coffee. We think this has particular advantages in environments such as manufacturing plants or amusement parks where people should be hands-free and not have to carry a lot of things around." said Mr. Yuichi Momose, Executive Vice President and General Manager of Strategic Market Development department at JCB. "We'll be launching this solution commercially early next year, after a review of the 2 month live trial."

Payroll Cards

SmartPros reports on payroll cards.

About 56 million Americans don't have a bank account, and just 55 percent of American workers are enrolled in direct deposit. These statistics indicate that the two main forms of paychecks -- direct deposit and printed checks -- leave room for yet another paycheck solution.

Payroll Cards Poor Substitute for Checking Account

Julie Claire Diop writes in the Hartford Courant (free registration required) about payroll cards and why she thinks they're a poor substitute for having a checking account.

Although payroll cards are a better alternative than check-cashing stores, they have downsides, and anyone who can open a bank account should. The fees attached to most payroll cards are substantial, warns Gail Hillebrand at Consumers Union. Each company decides what fees to pass on to their employees, so the cost varies from company to company. They can include ATM fees, point-of-sale fees at stores, inactivity fees for not using the cards often enough, fees to replace a lost or stolen card, fees to load the card with money and fees to get money back when the card is retired.

Reserve Bank of Australia May Expand Card Regulation

The Reserve Bank of Austrlia, which earlier has imposed its regulatory will on credit cards and the Visa debit payment scheme in Australia, has announced it is considering also regulating the EFTPOS and ATM's in Australia. The RBA has invited public comment on its proposal.

Reuters reports that the RBA may also be considering regulation of American Express' card payment system in Australia.

PayPal Introduces Buyer Credit

PayPal has introduced a Buyer Credit feature in partnership with GE Capital. An FAQ is available.

Australian Retailers React to Amex, Diners Fees

Tim Boreham reports in the The Australian on retailer reactions to the fees charged for card acceptance by American Express and Diner's Club.

Coles Myer, the nation's biggest retailer, is pondering the unpopular option of surcharging customers for use of charge cards. Other options are refusing one or both of the cards, curtailing in-store loyalty offers or training staff to encourage customers to use another payment method.

MasterCard Advisors Acquires Watch Hill Partners

MasterCard Advisors has announced it is acquiring Watch Hill Partners.

Watch Hill Partners specializes in optimization of customer relationships through multiple channels and technologies, such as mobile networks and web services. Watch Hill Partners' Customer Relationship Management (CRM) methodology allows its clients to identify gaps between the business case for CRM and the deployment of processes and technology which affect overall success of CRM programs. Watch Hill Partners will be integrated with Advisors' Customer Experience Group (CEG), which offers a range of strategic and on-the-ground consulting services to companies seeking to deliver differentiated customer experiences. CEG works with clients to implement programs into day-to-day operations which provide meaningful customer experiences that meet or exceed customer expectations.

Wells Fargo Reports 50 Percent Growth in Internet Payments

Wells Fargo has announced that it handled $3.8 billion in Internet payment volume for over 61,000 online merchants in the first quarter, up 50 percent over the same quarter last year. Wells Fargo is also PayPal's payment processor.

"According to figures published by the U.S. Department of Commerce, Wells Fargo's e-commerce processing accounts for 15 percent of the nation's total online shopping volume."

MasterCard, Oracle and Corporate Card Payment Data

MasterCard and Oracle have announced a partnership that will allow MasterCard's enhanced transaction data to be integrated into selected applications within Oracle's E-Business Suite.

Cards Replacing Checks

Gerry Gilmour reports from Fargo, North Dakota on the shift from paper to plastic card payments.

McConn breaks down Alerus customers into three general demographic groups: the younger generation, which has fully embraced debit cards as a way of life; those in their 30s to 50s, who like their credit cards but are adjusting from checks to bank debit cards at the checkout; and older folks, who still prefer checks – and sometimes balance their checkbook in the checkout line.

Australian Bank Fees Up

The Reserve Bank of Australia has published its latest statistics on bank fees in Australia (PDF). Bank fees associated with credit cards were up 38% in 2003 to a total of A$604 million on total credit card purchase volume of A$108 billion (up 12%).

The continued rapid growth in credit card spending, together with increases in annual membership fees and higher charges for overdrawn accounts, late payments and cash advances, contributed to banks' fee income from credit cards.

Interestingly, Australia is a market where the financial regulators have been very aggressive with respect to credit card interchange fees. In spite of those efforts, the Australian banks have figured out new ways to drive credit card-related fee income.

The Best Mileage Earning Credit Cards

Gary Leff shares his recommendations on the best mileage earning credit cards. His favorites are the Starwood American Express card and Diners Club.

Metavante to Acquire NYCE

Metavante announced this morning that, subject to regulatory approvals, it will be acquiring all of the stock in NYCE for approximately $610 million in cash. FDC, the largest NYCE shareholder, will receive $389 million in proceeds.

NYCE had 2003 revenue of approximately $143 million and net income of approximately $30.7 million. According to the announcement, the transaction is expected to be approximately neutral to M&I's earnings per share in 2004 and accretive in 2005.

"Building upon our EFT industry experience and knowledge, Metavante has a significant opportunity to augment our electronic funds business by acquiring the nation's second-largest PIN-debit network in NYCE, which is a capability that we do not have today," said Frank R. Martire, Metavante president and chief executive officer.

"When this acquisition is completed, we expect to have another piece of the payment services solution set at Metavante, which will exchange, route and settle electronic payments on behalf of financial institutions to and from businesses and consumers. These include our existing electronic presentment and payment services and electronic funds transfer capabilities, as well as the electronic check-image exchange technology we are acquiring in Advanced Financial Solutions Inc."

"Electronic payment transactions in the U.S. are on an extraordinary growth curve, and NYCE will help complete single-source payment solutions increasingly requested by our customers," said Martire. "NYCE will become a Metavante subsidiary, operated as an independent business line under NYCE's current senior management team. The NYCE brand will remain intact as will its historic commitment to service, reliability and innovation."

New Jersey Looks at Escheatment

The Cherry Hill (NJ) Courier Post reports on plans by the governor of the state of New Jersey to have legislation adopted that would allow the state to benefit by taking any funds in gift card accounts after a three year period of inactivity.

New Jersey is one of 10 states that doesn't now count gift cards and gift certificates as unclaimed property, though another nine states shield only some types of the gifts, based on the kind of issuer or the value of the gift.

Stunt Double Credit Card Numbers

Jennifer Bayot writes in the New York Times about single use credit card numbers.

The companies have tried to make the numbers easier to use. A cardholder can now charge monthly phone bills and other recurring payments to the same disposable number, rather than entering a new one each time. Similarly, a cardholder can register a number with a favorite merchant for continued use only with that merchant.

"You'll never need to reveal your actual credit card number again," said Amy Radin, executive vice president for the e-business unit of Citi Cards, a division of Citigroup.

SmarTrip MasterCard

WJLA in Washington, DC reports on a new combination MasterCard and SmarTrip fare card for the Washington area Metro transit system to be issued by Citibank.

Visa EU Publishes Interchange Rates

Visa EU has updated it web site to include details of Visa's interchange rates as they apply to intra-regional transactions.

Card Skimming

News 11 in Atlanta is reporting on how the US Secret Service is going after waiters who skim credit and debit cards when diners pay for their meals.

Chip and PIN in the UK

Gareth Mackie reports in The Scotsman on the chip and PIN rollout in the UK.

By the end of this year, the majority of credit and debit cards in the UK will contain a small computer chip that will store data to identify the cardholder, and by 2005 most users will enter a four-digit personal identification number (pin) rather than signing a receipt.

Dual Use Cards

George Albert writes in India's Hindu Business Line about growth in dual use cards, particularly a focus for GE.

Discover in Quest to Find New Image

Ellen Kelleher reports in the Financial Times about Discover's prospects.

MasterCard Reports on Debit Growth

MasterCard has published information about the growth in debit card usage in the US market.

Debit cards are gaining in popularity for purchases under $20, making significant inroads into 'small-ticket' merchant categories that historically have been the exclusive domain of cash, according to a new MasterCard International Attitude and Usage Study. According to the findings, users of ATM/debit cards report making debit payments for nearly a third (29 percent) of all their purchases under $20 - a 61 percent increase since 2001 - while this group's cash payments for the same amount declined by nearly 15 percent. The study underscores the accelerating displacement of cash as a payment option.

Moreover, among users of ATM/debit cards, the MasterCard research confirmed that debit cards are now the most popular payment method for purchases between $20 and $100:

• In the $20 - $50 category, debit payments account for more than half (55 percent) of all purchases, a 31 percent increase since 2001; reported preference for checks and cash declined by 50 percent and 18 percent, respectively, during the same period.
• In the $50 - $100 category, debit payments capture 52 percent of all purchases, compared with 47 percent in 2001; check use (12 percent, compared with 25 percent in 2001) continues its steady decline, while cash's share remains unchanged at 9 percent.

Weekly grocery shopping and gasoline purchases are the most common occasions for using a debit card. The MasterCard study also found significant growth in adoption of debit cards for lower-ticket purchases at movie theatres, fast food restaurants and quick-stop convenience stores, and at higher-ticket establishments including casual restaurants and doctors' offices.

Discover Seeks Partnerships

Discover CEO David Nelms has announced that Discover is actively seeking partnerships with US financial institutions and merchants.

"We are prepared to welcome and serve financial institution partners of all sizes who can issue credit, debit, stored value and other payment types on our network," said Nelms. He also announced that Discover is having advanced discussions with several financial institutions to issue cards on the Discover/NOVUS Network.

During a keynote speech today at the 16th Annual Card Forum and Expo in Orlando, Nelms outlined a number of distinct advantages of partnering with the Discover/NOVUS Network, including cost efficiencies, increased differentiation and flexibility. He emphasized Discover's strong merchant acceptance, including a growing number of exclusive merchant partners.

"Given Discover's attractive cost structure, we can offer substantially lower assessments to issuers because our network is more focused and integrated," said Nelms. "Despite charging merchants less on average than other large card networks, our economics for financial institutions are attractive because issuers will not subsidize other products, international expenses, advertising, affinity/co-brand payments, overhead and legal fees," added Nelms.

While Discover can link its authorization and settlement systems directly to issuers who process in house, Nelms also announced that First Data, TSYS and Metavante Corporation have already taken steps with Discover to ensure that their bank customers can issue on the Discover/NOVUS Network. These new processor links will facilitate financial institutions' ability to issue card products on the Discover/NOVUS Network using their existing systems.

Nelms also invited merchants to pursue new partnerships with Discover. "U.S. merchants are fed up with ever increasing merchant discount rates for debit and credit cards, resulting from Visa and MasterCard price increases," said Nelms. "Merchants are finding that the Discover/NOVUS Network is their solution to the high card acceptance fees charged by other networks," added Nelms.

Plastic Overtaking Paper

Carolyn Said reports in this morning's San Francisco Chronicle on the growth in card payments and some other comments based upon an interview with Visa USA CEO Carl Pascarella..

Fighting Card Fraud

Innovations Report from Germany reports on Euclid, a technique that allows cardholders to remotely enable/disable their credit card accounts to help prevent fraud.

Diners Club and MasterCard Alliance

Diners Club and MasterCard have announced an alliance that allow Diners Club to issue new cards as MasterCards to enabled expanded merchant acceptance for Diners Club cardholders.

WSJ: Card Upgrades Could Result in Higher Fees

Kathy Chu reports in the Wall St. Journal on card upgrades (subscription reqd.) that some consumers are receiving from their credit card issuers.

Upgrades, while they can provide more favorable terms and benefits, can also backfire for consumers because higher credit lines can push them more into debt. And companies may market changes in contract terms as upgrades, even if they result in higher fees or other costs for consumers. The practice is legal under federal truth-in-lending laws if cards are sent to existing customers rather than to new ones.

Bank of America Enhances Purchasing Card Management

Bank of America has introduced new capabilities for its corporate purchasing card customers.

A substantial breakthrough, Bank of America can now connect an enterprise's pre-approval workflows straight through to the card network, enabling purchasing cards to become the payment vehicle of choice in business- to-business transactions.

The new capability is enabled by technology from Works, Inc.

UK: Credit Card Debt Soaring

The BBC reports on the growth in consumer credit card debt in the UK.

Chip and PIN Cards and Spending

Nicky Burridge writes in The Scotsman about the migration to chip and PIN in the UK and the potential effect it might have on spending based upon MasterCard research.

Payments with debit cards look set to rise by more than a third following the introduction of new-style, more secure “plastic”, according to research today. Four out of 10 people said they would use their debit card more often once chip and PIN cards were launched, while nearly a third thought they would carry less cash, according to MasterCard.

The Times of London also covers the MasterCard report.

Stratus Rewards Launches

Stratus Rewards, an ultra-premium card based reward program, launched today in partnership with US Bank.

Key Bank Renews with Star Systems

First Data Corp. announced this morning that Key Bank has renewed its agreement with Star System.

Under the terms of the long-term agreement, the STAR Network will continue to provide PIN-secured debit access at retailers and ATMs, and ATM and signature debit card processing for KeyBank's 2,200 ATMs and 4.6 million credit and debit cards.

American Express Seeks Bank Friends

Ellen Kelleher and David Wighton report in the Financial Times about American Express' efforts to strike partnership deals with banks.

Boston Cabbies Say No to Plastic

Keith Reed writes in the Boston Globe about how Boston remains a cash-only taxi fare city.

Most Boston cabbies accept only cash, even as cities around the country mandate that taxi drivers accept credit and debit cards. And some Boston drivers with the capability to process card payments dislike the practice so much that they discourage it.

New York City Cabs to Take Cards

Michael Luo reports in the New York Times on a significant fare increase coming for taxi-riding New Yorkers -- along with a plan for all New York City cabs to accept credit and debit cards by November 2005.

Visa USA Debit Payment Expectations

Ivan Schneider reports in Bank Systems & Technology that Visa USA expects debit card transactions are going to represent 15 percent of all consumer payments in the US by 2007.

American Express to Issue Cards in China

Jennifer Bayot reports in the New York Times on American Express' plans to issue cards in China.

Unlike previous credit cards issued in China by foreign banks, the American Express and Citibank cards allow payment not only in dollars but also in Chinese currency. That makes the cards viable for ordinary consumers.

More on the story in this press release from American Express.

Generation Debt

Tina Tran reports on AzFamily.com on student credit card indebtedness.

Healthcare Debit Card Spending Expected to Triple

Quicken.com carries a Dow Jones news story on the rapid growth expected this year in spending on prepaid healthcare cards.

Credit Counselers Under Scrutiny

Jennifer Bayot reports in the New York Times on abuses by credit counseling agencies. The Senate Permanent Committee on Investigations yesterday released a report (PDF) on the subject.

At the hearing yesterday, former employees of two leading agencies - both profiled in the subcommittee's report - testified that their jobs had largely consisted of extracting hefty service fees from indebted consumers.

"I thought that working for a nonprofit would be a great way to interact with people and make a difference in someone's life," said Johnpaul Allen of New Market, Md., who last year worked for AmeriDebt. "What I found at AmeriDebt was nothing short of a sweatshop - a telemarketing outfit taking advantage of thousands of people in bad financial situations."

What to Do if You Lose Your ID

Susan Stelling writes in the New York Times Travel section about what to do if you lose your wallet while traveling.

Push for Plastic

ABC News has a feature by Ari Weinberg on consumers' preference for card payments over cash.

New Push for Plastic Payments

Ari Weinberg reports in Forbes on the growth in electronic payments and the battle between card issuing banks and merchants over acceptance costs.

Credit vs. Debit

Ari Weinberg reports in Forbes on the growth in debit card volume in the US vs. credit card.

Consumers are increasingly turning to PIN and signature debit for everyday purchases. The dollars come out of a checking account immediately, alleviating the worry of credit card bills and interest rates. However, many debit cards still carry a maximum daily spending limit (sometimes up to $5,000) and don't offer cash-back rewards, so those big purchases will still have to go on your credit card. For now.

MBNA

Lowell Bergman and Patrick McGeehan report in tomorrow's New York Times about the departure late last year of long-time MBNA Chairman and CEO Charlie Cawley.

New Papers

The Payment Cards Center of the Federal Reserve Bank of Philadelphia has two new papers available online. The first is a bibliography of consumer payments -- to be updated quarterly. The second is a paper titled Prepaid Card Markets & Regulation by Mark Furletti. Both papers are in PDF format.

Experian Releases Study on Credit Card Usage

Experian has released the results of a nationwide study on credit card usage.

Richard Srednicki Elected Chairman of MasterCard US Region Board

Reuters is reporting that JP Morgan Chase executive Richard Srednicki has been elected chairman of the board of its US region.

Octopus Has Legs

Evan Ramstad reports in the Wall St. Journal on the success the Hong Kong Octopus e-money card has had.

About 1% to 2% of all cash transactions in the city are made with the card, says Octopus Card Ltd., a joint venture of the transit agencies that operates the card. "Our business assumption is we're going to compete with cash," says Eric Tai, the venture's chief executive.

Octopus is a stored-value card and behaves like a debit card. Money is subtracted when the card is held over a reading device, which is a low-range radio transmitter that can be incorporated into doors, turnstiles and countertops. Because reading devices can detect a card through leather and plastic, many people never remove their card but rather wave their purse or wallet over the reader. There is even a $35 Octopus wristwatch, with the card technology built in. Funds can be added to the cards at machines in subway stations, convenience stores and via an automatic draw from a bank account.

Star Launches Direct Check Debit, Verification Service

Star Systems has announced the launch of STAR CHEK Direct, a direct check debit and verification service.

"Given that half of adult consumers in the U.S., and 50% of active ATM/debit card users still write checks at the point-of-sale, it was inevitable that check debit would join PIN-secured debit as a risk management tool for core deposits -- both draw funds directly from the DDA account," said Ronald V. Congemi, president of STAR. "The advances we've made in check electronification mean that the future for the paper check is a more secure transaction, because the check can be a truly electronic transaction."

"Close to fifteen years ago, we recognized some important things about checks: they're costly and time-consuming to process, they're very fraud- prone, and consumers like them," Congemi continued. "The implications of these facts for payments system participants were enormous. So we established a goal to maximize the benefits of checks -- and minimize their risks and costs -- by making them as 'electronic' as possible. From developing the core technology and processing the first real-time electronic check debit, to processing the first real-time positive-file check verification at retail and the first imaged check at the ATM, STAR is proud of our leadership in check electronification at every step in its development."

STAR CHEK Direct is available for both retail POS transactions and telephone and Internet bill payments, with future deployment planned for financial institution teller windows and ATMs. EFSNet, Concord's leading edge Internet connection for payment processing, is an optional connection for STAR CHEK Direct users. EFSNet will allow smaller retailers, many of whom do not have leased line access or desire faster than dial-up transaction speeds, to participate. EFSNet is already in use by many of the nation's leading retailers.

STAR CHEK's three flexible service options include:

• Real-time funds availability verification against the consumer's DDA account, indicating whether the account is open and has sufficient funds -- available only with STAR CHEK Direct
• Real-time POS debit from the DDA account, assuring no NSF returns
• Verification against National Shared Databases(SM) of more than 200 million DDA accounts, confirming that the account is open and in good standing.

STAR began providing real-time account verification in 2000.

Debit Cards

ABC News.com consumer reporter Mellody Hobson takes a pretty comprehensive look at debit cards from a consumer's point of view.

Gift Card/Certificate Swapping Service

A new web site, CertificateSwap.com, allows gift card holders to swap their cards for others. The service charges sellers 7.5% of the sale price -- with sale listings being free of charge.

Chip and PIN Update

The UK Evening Standard's Patrick Hosking reports on the rollout of chip and PIN for credit and debit card acceptance in the UK.

Wyman points to France, which has had the system for years, reducing fraud by 80%. 'If the French can do it, we can do it,' he said.

Visa and MSN Introduce Small Business Web Site

Microsoft's MSN and Visa USA today announced Your Business, a web site targeting small businesses with ten or fewer employees. More by Joe Wilcox on the Microsoft Monitor Weblog.

The site offers a unique way to integrate Visa and Visa Extras branding, along with links to additional information about the rewards program, which invites businesses to earn points toward a variety of rewards when they use an enrolled eligible Visa Business debit or credit card to make certain types of purchases. "This campaign is a great example of how MSN provides advertisers new ways to reach small-business owners," said Jon Raj, director of advertising at Visa USA. "The campaign demonstrates Visa's commitment to serving small businesses by explaining the value of Visa Extras alongside other relevant ways small businesses can improve their bottom line and streamline their operations."

Paper or Plastic?: Payroll Cards

Diane Lewis reports in the Boston Globe on the increasing use of payroll cards.

BarclayCard to Implement Experian for Applications

Creditman reports that Experian has won Barclaycard's new application decisioning business.

Digital Transactions

Boland Hill Media has launched Digital Transactions, a magazine and associated online news site covering trends in the electronic exchange of value. Boland Hill Media was founded by Robert A. Jenisch and John D. Stewart, both of whom have long experience in the financial media.

Employers Using More Pre-Paid Cards

The AP has a story this morning on employers using pre-paid cards for paychecks, cash bonuses, flexible spending accounts and other fixed allowances.

Fortune: Plastic

Katrina Brooker provides a look back at how the credit card has changed life for the Fortune 500 and for the rest of us in the new issue of Fortune.

Plastic has changed American life. We pay bills, our rent, even our taxes, using cards. We get mortgages, in part, because of credit records we've built up by using plastic. Anyone can buy almost anything anywhere at any time: a computer from Dell at 3 a.m., a sweater from L.L. Bean on the commute home, a phone call from 30,000 feet in the air.

Think about how much time it used to take to buy, say, a new TV. Chances are the process went a lot like this: You found out how much it cost, you visited the bank to get the right amount, and then you went back to the store to buy it. Now you see that 48-inch plasma screen at Best Buy, briefly yearn for it, even more briefly wonder whether you can really afford it, and then throw caution to the wind and buy it on the spot. Indeed, stores count on our making impulse buys. And a massive, intricate, transglobal technological and financial infrastructure is waiting all day, every day, to make that impulse buy as easy as, well, an impulse buy.

European Payments Council

Simon Lelieveldt blogs about a recent summary report from the European Payments Council.

Pulse Studies US vs. Canadian Debit Payment Systems

In a press release today, Pulse EFT Association released the results of a study it commissioned comparing the US debit payments system with that of Canada.

The free market-driven U.S. debit payments system, in which both consumers and merchants have choices in debit processing options, saved cardholders more than $4.3 billion in fees last year when compared to the system utilized in Canada. Unlike in the U.S., every major bank in Canada charges its customers a per-transaction fee every time they use their debit card. Moreover, there is only one form of debit in Canada -- PIN- based -- and it is supported by only one electronic funds transfer network, Interac.

The full report is available online (PDF).

MasterCard Signs ABN Amro Bank to Strategic Alliance

MasterCard announced this morning that it has entered into a strategic alliance with ABN Amro Bank.

"We are delighted to have this opportunity to partner with ABN AMRO Bank on a global basis, and work with them to build and expand their payments business in alliance with the MasterCard brand," said Alan Heuer, Senior Executive Vice President of MasterCard's Customer Group. "MasterCard's strategy is to be our customers' best business partner and work to improve their profitability. We look forward to applying our expertise in all aspects of the payments space to help ABN AMRO launch innovative new products and strategies that will help them achieve their goals." Gerard Hartsink, Senior Executive Vice President, for ABN AMRO Corporate Centre said, "The ultimate challenge of the alliance is to create value in both mature and new growth markets. We were able to develop a partnership with MasterCard that will benefit all participants. The global agreement with MasterCard will create added value for our customers and also cost synergies for our group."

Visa USA 2003 Growth

Visa USA reported this morning that the dollar volume on Visa-branded cards increased to over $1.1 trillion, up 11.6 percent in 2003 as compared to 8.1 percent growth in 2002.

Total transactions were 16.1 billion from 429 million Visa-branded cards. In the US, Visa-branded spending represented about 13 percent of personal consumer expenditures. Visa credit card volume grew to $650 billion, up 6.6 percent. Visa check card volume grew to $454 billion, up 19.5 percent with debit card transactions making up 41 percent of total Visa volume and 59 percent of total Visa transactions.

Credit Cards in Australia

Sydney's Morning Herald reports on credit card growth in Australia.

US Consumer Credit Growth

The US Federal Reserve reported today that total consumer credit increased at an annual rate of 5-1/4 percent during 2003. Growth in total consumer credit for the fourth quarter of 2003 was only 3-3/4 percent.

Revolving consumer credit such as credit cards grew at an annual rate of 3.6 percent during 2003 with only a 2.8 percent growth in the fourth quarter. At the end of 2003, $742.5 billion in revolving consumer credit was outstanding.

American Express Hosts Financial Community Discussion

American Express senior management today provided the financial community with an update on the company. Presentations and text of management's speeches are available online. Remarks by David House focused particularly on Amex's partnerships with banks. An audio archive of the presentations along with almost an hour of Q&A is also available online.

Enhyper Announces Payments Systems and Security Conference

Enhyper has announced the Payments Systems and Security Conference to be held in London June 18-19, 2004.

Paychecks: Paper or Plastic

Chicago's NBC5 takes a look at payroll cards.

Visa USA Speeds Dispute Resolution Process

Visa USA has introduced a new program to resolve cardholder disputes more quickly.

Visa's new "RED" program, short for Re-Engineering Disputes, is a transformation of the entire dispute resolution process that will benefit consumers. The new Visa program will expedite disputes by increasing automation and communication, streamlining rules and procedures, and using electronic transmission in place of paper documents and the mailbox. This increased access to information means that customer service representatives will be able to assist cardholders more quickly -- usually within one billing cycle. RED allows cardholders to get more precise and immediate information when they inquire about the status of their dispute. Eventually, some issuers will be able to offer their consumers access to their dispute resolution information online as well.

Tax Refunds via Plastic

Jennifer Bayot writes in the New York Times about tax refunds being loaded on to stored value cards.

Many prepaid cards have routing numbers, just as checking accounts do. To send a payment to the card, a cardholder just provides the routing number. To the government or to an employer, making a direct deposit to the card is often indistinguishable from an electronic transfer to a checking account. As a result, many prepaid cards are already coded to receive tax refunds.

More on American Express/MBNA

The New York Times reports on the deal announced yesterday between American Express and MBNA.

Purchases on the cards would be routed through American Express, while MBNA would market and manage the cards and own any balances. MBNA said it planned to market the cards to potential customers and to its cardholders. The cardholders would not have access to American Express's full rewards program.The companies did not disclose the financial terms of their deal, but analysts have said for years that dividing the revenue in such a partnership could prove tricky. The companies have been competitors and in many ways remain so. Each is used to receiving almost all of the transaction fees that merchants must pay to accept their cards.

Merchants Lose: Impact of American Express/MBNA Deal

While American Express and MBNA are cheering their new partnership, merchants in the US have to get ready for the inevitable effects this new competition for card issuance will have on their costs.

Amex is in the fortunate position of having built an extensive merchant network that pays it a higher merchant discount than is the case today for competing bank card products. In the early days, Amex didn't have accounts that revolved -- and didn't benefit, as a result, from revolving interest income -- unlike bank credit card issuers where over half their revenue comes from interest income.

Now, however, Amex is leveraging its higher cost merchant acceptance network to incent card issuers to issue American Express cards so that consumers will use them at merchant locations rather than Visa or MasterCard. The assumption has to be that Amex is passing along to the new partner issuers an interchange income fee which is higher than that available from either Visa or MasterCard. That provides the basic incentive for an issuer to want to align with either Visa or MasterCard.

So, given the zero sum nature of this world, it's the merchants that lose. They'll be paying more in terms of merchant discount fees as more of their acceptance volume becomes Amex-based. In parallel, this will put pressure on MasterCard and Visa to raise their interchange rates so that they can compete with Amex for card issuance. If Visa/MasterCard merchant discounts go up as result, merchants lose a second time.

Others in the payment card food chain are affected as well. For example, Amex transactions are much less profitable for acquirers -- so as volume moves from Visa/MasterCard to Amex, they also lose. And, of course, either Visa or MasterCard also loses service fees from both their merchant acquiring and card issuing bank members on any Amex transactions. Isn't competition wonderful?

American Express and MBNA Announce Card Issuing Alliance

American Express and MBNA announced this morning a card issuing alliance where MBNA will issue American Express cards in the US, Canada, Spain, and the United Kingdom.

"Today’s news marks a fundamental change in the U.S. credit card industry and we believe it will lead to better value and greater choice for consumers," said Ken Chenault, Chairman and CEO of American Express. "Our partnership with MBNA will be a catalyst for change and generate an environment that fosters greater product innovation in the years ahead. This partnership will also leverage the American Express global network, and help to deliver even greater value to merchants in the form of additional high-spending, loyal customers."

Commenting on the announcement, MBNA President and CEO Bruce L. Hammonds said, "Research we’ve performed over the years tells us that our customers, our affinity partners, and the members of our affinity groups will be very receptive to an MBNA product with an American Express brand. We are pleased to have an agreement with American Express that makes economic sense for both organizations and that provides MBNA numerous marketing opportunities around the world."

This is a historic day for American Express -- having for years wanted to enlist major US banks as issuing partners. For MBNA, they're joining a third payment network -- in addition to MasterCard and Visa -- for their card issuing activities. American Express has established a business unit called Global Network Services to focus on partnering with bank partners. An FAQ is available online.

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Lipman Completes NASDAQ IPO

POS terminal supplier Lipman Electronic Engineering, Ltd. announced yesterday that it had completed an initial public offering on NASDAQ under the symbol LPMA.

Consumers Choose Debit as Most Preferred Card in Wallet

Edgar Dunn this morning reports the results of their PaymentDynamics 2004 Preferred Card Study.

 "Nearly 40% of Americans say they prefer to grab their debit card out of their wallet when making a purchase," said F. Alan Schultheis, a director of Edgar, Dunn & Company. "Convenience and widespread availability is only part of the reason. The study shows debit card use is tied to consumers' increasing commitment to greater personal financial discipline."

The survey is based upon a national probability sample of more than 6,500 respondents who are card owners, credit card decision makers and whose household annual income is greater than $20,000.

American Express Reports Earnings

American Express earlier today reported earnings for 4Q 2003. For the full year 2003, revenues were up 9 percent compared to 2002. Merchant discount revenues grew 11 percent reflecting a 13 percent increase in cardholder spending.

Notes from CFO Gary Crittenden's earnings conference call (available online) include mention that he is confident of doing a network related deal with a US bank sometime in 2004.

Concord EFS Says NYCE Lawsuit Without Merit

Concord EFS put out a press release earlier today saying that the lawsuit filed by NYCE last week is without merit.

"Contrary to the claims made in the NYCE complaint, Concord is in full compliance with all provisions of the 1993 agreement with NYCE," said Ronald V. Congemi, president of Concord Network Services. "The STAR(SM) network routing rules were specifically amended to support the NYCE agreement when STAR was acquired by Concord in 2001. STAR's network rules, which are established by its member financial institutions, support an open and flexible business environment that allows for collaboration, cooperation, and the resolution of issues when conflicting network rules come into play. The NYCE complaint attempts to undermine these rules by improperly extending to the entire STAR network the terms of an agreement expressly limited to the small number of financial institutions who are members of both the MAC and NYCE networks."

Ecommerce Ramps in the UK

The Economist takes a look at the explosive growth in online retailing happening in the UK. Generally high retail prices along with the relative inconvenience of retail shopping in the UK help make consumers appreciate the convenience of online shopping.

Amazon.com Seeks Global Payments Manager

Amazon.com is seeking a Global Payments manager based in Seattle.

The successful candidate should have extensive experience in the payments processing world with in depth knowledge of payment systems both internationally and domestically; will have 10+ years in the payments industry, preferably with experience at one of the Card Companies or with a major bank or acquirer; and will have the ability to be effective in a highly dynamic environment.

MasterCard Targets 40% Growth in India

The Financial Express reports from India on MasterCard's plans for growth in India.

Mastercard International is targeting a 40 per cent growth for the financial year 2004-05. At present, it has 7 million debit cards and 5 million credit cards. It is soon tying up with a credit card company to launch a card for consumers in the age group of 15 and 24, who till now were not considered to be the traditional cardholders.

Credit Bureau in India

India's Business Standard reports on the Indian credit bureau negative file system being built by the MasterCard-led India Cooperation Committee.

The negative file project or credit bureau has the names of all credit card holders and retail customers who have defaulted on their payments and whose accounts have been written off. The card base of the negative bureau, which currently is at six lakh, is likely to double in the next few months as these banks join.

Chase's Harrison: Visa or MasterCard?

In an exclusive Reuters inteview, William Harrison, Chairman and CEO of JP Morgan Chase, commented on the combined credit card business of Bank One and Chase.

Harrison said the companies have not decided if they will stick with either Visa or MasterCard when they combine their card businesses. Analysts have said the merged bank will likely shift the majority of its card business to one association or the other. But their combined size gives them bargaining power with the associations. "We have a lot more leverage with whomever we want to strike a deal with," Harrison said.

NYCE Sues Concord EFS

NYCE has filed a lawsuit against Concord EFS over debit card transaction routing agreements.

 In the complaint filed yesterday, NYCE charges that Concord has violated a 1993 agreement and engaged in other unlawful conduct as a result of certain operating rules it has adopted and is attempting to enforce. Those rules generally require that point-of-sale (POS) transactions conducted with cards branded with NYCE and STAR at similarly branded POS terminals, be routed to Concord's STAR-branded network, even if the card issuer has designated that the transaction be routed to the NYCE network.

The 1993 agreement obligates NYCE and the Concord entities to permit financial institutions that participate in both EFT networks to direct how POS transactions using their cards are routed. The agreement established a precedent for issuer designation and honoring of network priority routing.

Credit Card Slaves

The Wall St. Journal has a front page story this morning on the credit card crisis in Korea.

Because Korea's social structure makes family members feel accountable for each other's debts, one person's credit problems often ripple outward through entire families and social networks, curbing the spending of large groups of people and potentially prolonging a slump in consumer spending. Kim Jun Ho, an animator in Seoul, complains bitterly that his entire family has been turned into "credit-card slaves," with family members having to devote much of their income to supporting his sister and repaying her $42,000 in credit-card debt.

Perils of Plastic

Martin Wolk reports on MSNBC about the growth in credit card debt in the US.

Giving Yourself Miles

The Wall St. Journal reports on how some consumers are using the purchase of gift cards to rack up mileage points on their credit cards.

One way people are using the gift cards is to buy money orders at the post office or Wal-Mart and then deposit them into their bank accounts. They can then use that money to pay their credit-card bill, and start the process over again.

According to the article, Cleveland-based CharterOne Financial is the primary source of the MasterCard-branded gift cards. Unlike other banks selling gift cards, CharterOne isn't charging fees for issuing the cards.

Harris Interactive Releases Debit Survey

Harris Interactive has released the results of a survey of consumers regarding debit cards that was sponsored by MasterCard.

According to the survey, convenience, security and ease-of-use are significant factors behind consumers' choice to use debit cards.

Where Are Credit Cards Popular?

MapInfo shares some of its research on where credit cards are most popular.

"Understanding credit card usage in specific regions and markets can give businesses tremendous insight into the consumer, behavioral and lifestyle attributes of a particular population," said Chris Michels, PSYTE product manager for MapInfo.

"Following the holiday shopping season, when consumers tend to pull out their credit cards to make purchases more often, this analysis provides some timely profiles of particularly active markets. With MapInfo's PSYTE, companies can make more accurate predictions about consumer buying and lifestyle behavior and identify new potential markets or untapped areas within existing markets."

Credit Cards: What's Wrong with this Bill?

Consumer Reports has posted an article from its February 2004 issue advising consumers how best to dispute charges on their credit card bills.

Our examination of the regulations and interviews with Federal Reserve attorneys, regulators, card issuers, and consumers found that dispute rules are confusing, card issuers sometimes skirt them, and many consumers misunderstand the rights that they do and don’t have.

When Plastic Gets Toxic

David Lazarus reports in the San Francisco Chronicle on credit card debt in the US.

Meanwhile, the nation's credit card debt has soared to $735 billion, or almost $7,000 per household. Of this sum, the American Bankers Association said that a record 4.09 percent of card payments were past due in the third quarter of 2003, up from 4.04 percent in the previous three months. The association said this reflects a rising number of unemployed people using their plastic to get by.

A closer look at the Federal Reserve's latest monthly release of consumer credit outstanding shows that growth in revolving credit has been essentially flat for the last couple of months and, in fact, declined slightly in November (the most recent reporting period).

E4X Raises $14 Million in Financing Round

Israel-based GLOBES [online] reports on the latest financing round by E4X, a provider of multi-currency services to online merchants and partners. The company's press release provides more details.

From Paycheck to Plastic

Caroline Meyer reports in the Washington Post on the growth in usage of payroll cards.

Currently, about 2.2 million payroll cards are in use, double the number in circulation a year ago, according to Aaron F. McPherson, research manager at Financial Insights, a Massachusetts market research firm. By next year, McPherson estimates, there will be 3.5 million cards in use, and he expects that number to double by 2006.

The list of companies offering payroll cards includes such well-known corporate names as United Parcel Service Inc.; Blockbuster Inc.; Sears, Roebuck and Co.; Coca-Cola Co.; McDonald's Corp.; and Domino's Inc.

Credit Card Fees

Nicole Maestri reports on Reuters about increases in the fees US credit card issuers are getting.

Consumers are expected to pay $43.1 billion in late fees, over-the-limit fees, finance charges and other fees on their credit cards this year, up from $39.6 billion last year. That figure is set to rise again in 2004, according to R.K. Hammer Investment Bankers, which follows the credit-card industry. "You've got more fees, charged to more people, triggered more quickly than ever before," said Robert Hammer, chairman and chief executive officer of R.K. Hammer.

Credit Cards in China

Reuters reports this morning on the entry of two major banks into the credit card market in China.

U.S. giant Citibank and HSBC Holdings Plc, the world's two biggest banks by market value, have become the first foreign lenders to get their feet in the door of China's credit card industry. Offering technical and management expertise to their local partners, who have won approval to issue credit cards to Chinese customers, both banks can begin to make their mark on a highly lucrative but largely closed business in China. Still, analysts said on Friday the road remained long, since China was not committed to opening its retail banking sector until 2007 under pledges made on joining the World Trade Organization.

Star Raises PIN-Debit Interchange Fees

The American Banker reported yesterday (subscription required) that Concord EFS' Star network is raising interchange fees on PIN debit card transactions effective February 1st.

With the recent settlement of the anti-trust lawsuit against First Data and Concord EFS, Star will be competing in the marketplace with rival network NYCE, among others, for bank issuance of PIN debit cards. Increased interchange is one mechanism to motivate bank issuers to either stay with or join Star. Of course, it's the card accepting merchants that pay the price as the interchange increases come out of their bottom line.

Visa USA Details Holiday Spending

Visa USA has reported on the growth in US spending on Visa credit and debit cards over this holiday season.

Visa spending in the retail segment(1) topped $43.2 billion during the four weeks preceding December 28, a 10.3 percent increase over the same period of 2002. Visa debit cards (which include check cards and prepaid cards) showed the strongest year over year increase, growing 16.7 percent to $16.1 billion. None-the-less, the bulk of Visa spending on retail this holiday season was charged to credit cards for a total of $27.1 billion.

The first day of the traditional holiday season, Black Friday (November 28), was Visa's biggest retail day, with nearly $2 billion spent at retailers. However, December 20 sales came in a close second, accounting for over $1.9 billion in retail spending.

This holiday season, the highest grossing retail sectors for Visa cards have been Department Stores, Apparel, and Mail and Phone Order sales, for a total of over $10 billion from November 28 to December 28. Spending in the Specialty Retail and Hobby category grew the most among retail sectors, with dollar volume increasing 13.5 percent from 2002.

Retailers' Lawyers get $220 Million in Fees

Forbes reports that the law firm that represented retailers in the anti-trust lawsuit against Visa and MasterCard will receive $220 million in fees and an additional expense reimbursement of $18.7 million.

Lloyd Constantine, lead lawyer for the retailers, had requested roughly $600 million in fees, saying the sum was 18 percent of the settlement plus expenses. But Gleeson in his approval said the requested fee was "excessive."

Plastic Makes Perfect

In a pretty comprehensive look at the subject, Catherine Donaldson-Evans reports on Fox News on the growth in gift cards this holiday season. Starbucks, in particular, has had great success:

Since the company launched its gift card in 2001, there have been more than 100 million redemption transactions that have resulted in net sales of more than $400 million, according to spokeswoman Kristine Jimenez-Ortiz.

Jimenez-Ortiz said the Starbucks gift card business has seen a 30 percent increase from year to year; for fiscal year 2003, 10 percent of all company transactions were paid for with a gift card.

The article goes on to note that much of Starbuck's success is related to customers being able to reload the cards.

Gift Givers Love Plastic

Jennifer Inez Ward reports in this morning's Oakland Tribune on the rapid growth in popularity of gift cards.

Leaving paper gift certificates in the dust, electronic gift cards are taking off this holiday season as the plastic present becomes more and more the norm. According to a survey by the National Retail Federation, consumers plan to spend $17.8 billion on gift cards this holiday, which accounts for nearly 8 percent of all holiday sales. The survey found that 69.9 percent of consumers plan to buy gift cards during the holidays as well.

Plastic money growing rapidly in India

The Business Standard reports from Mumbai on the rapid growth in spending on plastic cards in India.

Avon, BankOne launch new Visa Platinum Card

Avon and BankOne announced this morning a new Visa Platinum card that rewards cardholders in points redeemable for Avon beauty products.

"By partnering with Avon, one of America's leading brands, we are providing a card product that is unprecedented in the beauty and direct-selling industries. Avon Representatives will be able to present this offer using a more personalized approach, instead of relying on a more traditional channel," said Tom Kerwin, executive vice president of relationship management for Bank One's card services division.

UK Chip and PIN rollout delayed

The BBC reports on delays in the rollout of chip and PIN in the UK.

The chip and pin system has been hailed as a major step forward in the fight against the £400m lost each year to card fraud. But some banks have not yet issued a single new chip card. And only one national retailer has the right equipment to read the cards in place in all of its stores.

The Association of Payment Clearing Services (Apacs), the industry body responsible for the change over, said it cannot confirm progress so far. But it said it was confident that most Britons would be using chip and pin by the end of 2004.

More information about the rollout is available at the Chip and PIN website.

Using Less Credit

The latest Cambridge Consumer Credit Index survey indicates that American consumers intend to use less credit this holiday season.

"The results of the Cambridge Consumer Credit Index show that more consumers plan to use less credit for Christmas shopping, implying that more will be making purchases using savings and cash. Consumers already burdened with credit card debt also have high hopes of paying off their balances in full when the bills arrive in January. However, Cambridge's experience with the Reality Gap shows that consumers usually underestimate their willingness to take on debt and overestimate their ability to repay it quickly," said Jordan Goodman, spokesperson/financial analyst for the Cambridge Consumer Credit Index.

Cards in China

Craig Karmin reported in today's Wall St. Journal on the Chinese government's emphasis on card payment systems.

Success also could depend on prodding Chinese banks to issue cards. So far, they have been slow to embrace credit, but looming competition may provide the spark. Beginning in 2007, foreign banks will be allowed to offer cards in which bills are calculated in the Chinese currency. Already, Citigroup Inc. has taken a 5% stake in China's Shanghai Pudong Development Bank and, subject to regulatory approval, can increase its stake to 24.9%.

China hopes to learn from Korea -- where card abuse followed similar initiatives.

Review of Network Economics

The June 2003 issue of the Review of Network Economics was dedicated to the economics of payments and card network schemes. The Review is "an electronic-based refereed journal that publishes papers on the economics of network industries that have the primary purpose of reviewing, surveying, or providing a fresh perspective on the existing literature." Articles included:

• Theory of Credit Card Networks: A Survey of the Literature, by Sujit Chakravorti
• An Economic Analysis of the Determination of Interchange Fees in Payment Card Systems, by Jean-Charles Rochet and Jean Tirole
• An Introduction to the Economics of Payment Card Networks, by Robert M. Hunt
• The Theory of Interchange Fees: A Synthesis of Recent Contributions, by Jean-Charles Rochet
• Approaches to Regulating Interchange Fees in Payment Systems, by Joshua S. Gans and Stephen P. King
• Automated Teller Machine Network Pricing - A Review of the Literature, by James J. McAndrews
• What does it Cost to Make a Payment?, by David Humphrey, Magnus Willesson, Ted Lindblomand, and Goran Bergendahl
• Technology Adoption and Consumer Payments: Evidence from Survey Data, by Fumiko Hayashi and Elizabeth Klee

American Express comments on Visa/MasterCard anti-trust lawsuit

American Express today issued a press release commenting on last week's decision by the U.S. Court of Appeals affirming district court judge Barbara Jones‚ ruling in favor of the U.S. Government in its antitrust lawsuit against Visa and MasterCard.

"We believe that the September 17th ruling by the appellate court effectively ended the legal arguments on the merit of this case. Visa and MasterCard have said they plan to appeal the ruling, but we believe that represents no more than a delaying tactic. Those delays are likely to run for months, not years. Based on our assessment, Visa's and MasterCard‚s delay tactics will run their course no later than mid-2004. "In the meantime, we will be renewing our discussions with banks about establishing network partnership agreements in the U.S. There is a strong interest among banks to partner with us in the U.S. just as they have internationally. We expect to have the first of our U.S. bank agreements signed no later than the second half of 2004. "As we have said earlier, we continue to consider the possibility of bringing private legal action against the card associations. The September 17th court ruling reaffirms the viability of this course of action."

Australia - Banks up card fees again

Matthew Horan writes about fee changes being made in the Australian market by bank card issuers.

An investigation has revealed the major banks have raised fees on virtually every card in the year since the Reserve Bank announced alterations to the interchange fees. The changes to the interchange structure mean retailers and other merchants can recover the cost of accepting credit cards ˆ often around one per cent of the value of the transaction. The savings are supposed to be passed on to consumers ˆ but the banks have responded by slugging card users with higher fees, according to a survey conducted for The Sunday Telegraph by leading financial industry monitor infochoice.com.au.

Australia - RBA interchange reforms upheld

MasterCard and Visa lost their appeal of the changes to interchange rates and other credit card-related provisions made last year by the Reserve Bank of Australia. An appeal is expected.

Visa, MasterCard lose anti-trust ruling

The U.S. Court of Appeals for the Second Circuit today upheld an earlier district court decision in a case brought in 1998 by the U.S. Department of Justice.

"The defendants have failed to show that the anti-competitive effects of their exclusionary rules are outweighed by pro-competitive benefits," Judge Pierre Leval wrote in the 23-page decision on behalf of a three-judge panel.

A PDF file of the Appeals Court decision is available online. Looks like the next stop for this case is the US Supreme Court.

Visa USA reports mid-year check card volume grows

In a press release, Visa USA reported yesterday that payment volume on its check card products increased twenty percent in the first half of 2003 as compared to the same period in 2002. During the period, more than 133 million U.S. Visa check cardholders spent more than $134 billion. Volume on the Visa check card now represents more than a third of total Visa volume in the U.S.

Visa card volume grows in India

The Business Standard reports that sales volume on Visa cards in India grew over forty percent in the second quarter over the same quarter last year.

The acceptance infrastructure have grown in the country with banks like HDFC bank and ICICI Bank which were the new kids in the block deploying around 30,000 and 10,000 electronic data capture (EDC) terminals in the last one and half years. These terminals were deployed majorly in the smaller towns. The total number of EDC terminals in the country is now at around 70,000.

American Express gives analysts' update

American Express CFO Gary Crittenden spoke yesterday at the Lehman Brothers Financial Services Conference. His slides and talking points are available online. Of note, the presentation highlights the business model advantages that American Express claims from higher spend enabling higher merchant discount fees thereby enabling richer reward programs to cardholders.