Wednesday, May 14, 2008

HomeATM Headline Payments News





This list was compiled by Glenbrooks Payments News. Clicking on any of the links will redirect you to Payments News website.


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Friday, May 9, 2008

Disruption in the Payments World





New Celent report focuses on disruptive influences to payments arena.

The consumer payments world is in transition. The current euphoric era for many issuers will be disrupted and quite possibly eliminated over the next three years, according to a new report, Disruption in the Payments World from Celent, a Boston-based financial research and consulting firm.

Key findings of the report include:
  • Pressures on interchange are mounting, and it's becoming increasingly questionable whether or not issuers will be able to reap the profits of a higher rate.

  • Alternative payment options that pose a real threat to issuers and credit are emerging. While the barriers to entry have always held strong, there are rifts that could give way to new initiatives. Nontraditional players like Wal-Mart or Google could eat into market share, and the growth of a new network that rivals MasterCard or Visa is almost certain.

  • A new spin on debit cards, decoupled debit, has the potential to shake things up among the issuing community, giving credit providers the chance to capture greater wallet share but threatening profit margins for debit issuers.

  • The evidence is mounting against the issuing business, and lawsuits will continue to add pressure to act. Celent believes that free rewards programs will be the first real casualty as issuers are forced to re-evaluate their card portfolios and justify high-cost programs.

  • In the long run, the card industry will be forced to return to a fee-based system that aligns the cost to the beneficiary. This will likely persuade consumers to seek their free lunch elsewhere, and the door to other payment methods will be opened even more.

  • Credit-only or credit-centric issuers are expected to diversify their payments mix (a necessity during this economic time and consumer trend to debit) and focus on building their debit payment options by way of decoupled debit programs.

    For more information, please find the press release below or at: http://www.celent.com/PressReleases/20080507/Disruption.asp

    HomeATM Blog readers can access the full report at:
    www.celent.com/reports/PaymentDisruption/PaymentDisruption.pdf .

Source: Company press release.

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Tuesday, May 6, 2008

High Rankings Execs Get Whaled On...

Editors Note: Whaling is the term used when "phishing" attacks are aimed at the "big fish." (i.e. senior ranking executives) Once harpooned, they unwittingly download and install software which allows remote control of the computer. Keystrokes, financial data, screen scrapes (creating a .jpeg picture or screen capturing) passwords, etc. can then all be captured.

I find it interesting that the success rate of these types of attacks is higher than when attacking the general public. In this case, phony subpoenas were used as the lure. The story mentions that unlike the phony, spelling mistake laden emails that gave "phishing" its name, this new trend involves the use of more professionally crafted and believable storyline/designs. However, one would think that high level executives would have "caught" at least one of two blatant "giveaways," Sending, and thus receiving a subpoena via email would be one, the other was the email itself directing them to a non-government site. Common sense is an important commodity, never underestimate its power.

On the subject of common sense. If a floating PIN Pad was designed to prevent "keylogging", what aspect of the design would prevent "screen scraping? Seems to me that if a hacker had remote control of the computer, they would have remote control of the "Prt Sc" button and be able to print the screen everytime you moused over the floating PIN Pad and clicked it.

Here's the article:

SAN FRANCISCO (AFP) - US federal court officials have warned that hackers are emailing phony subpoenas embedded with malicious software to high-ranking executives to steal valuable corporate information.

Thousands of powerful US executives have received the bogus emails that contain links which, if clicked on, install software letting hackers take control of computers and swipe passwords or other sensitive data. Internet security insiders refer to the attacks as "whaling" because they use social-engineering trickery involved in "phishing" but target individual "big phish" instead of casting nets in a sea of Internet users.

"The success rate was incredibly high," Websense Security Labs manager Stephan Chenette told AFP. "Most likely due to the nature of the content and the real data, the emails had their exact names and legal language in there that made it seem like a serious subpoena."

The emails are crafted with the seal of the US federal court in San Diego, California, and are addressed to executives using their names, addresses and other individual details.

Clicking on a link to see a "subpoena" displays a realistic looking document and stealthily installs malicious computer code in the reader's computer. "When the recipient tries to view the document, they unwittingly download and install software that secretly records keystrokes and sends the data to a remote computer over the Internet," court officials said in their warning.

"This enables criminals to capture passwords and other personal or financial information and starts software that allows the computer to be controlled remotely."

Subpoenas in the United States are usually served in person to assure judges that the orders from courts have been properly received by those named. US investigators believe the hackers are not familiar with the court system because the website executives are directed to use a "uscourts.com" domain name while actual court online addresses typically end in ".gov." Aspects of writing in the messages appear British, according to police.

Among the targets have been executives at banking giant CitiBank, Time Warner-owned America OnLine and Internet auction house eBay, according to the courts. There is a trend toward more convincing, targeted "whaling" attacks, according to Chenette, who says to be wary of supposed court or tax department emails.

Trick emails with giveaway spelling errors of the kind that gave "phishing" its name are giving way to well-crafted, believable messages honed using confidential information about targets. "The future of spam is to become more evasive and successful," Chenette said. "It is always a cat and mouse game ... a very real game."
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Monday, May 5, 2008

PIN Your Credit Card Starting June 4th in AU

I came across an interesting article this morning. The reason I found it interesting was how it relates to a specific HomeATM Technology called PIN My Card,. PIN My Card would allow online consumers to attach a PIN number to a credit card or PIN-less debit card and thus formulate the basis for Internet Retailers to be able to process these transactions at a lower "card present" rates.

Here's the release.

Click the graphic on the left to enlarge and read the entire press release.

Australian credit card customers will soon have the option of signing their name or keying in a PIN when shopping.

Pen or PIN project spokesman Simon Greig said the change would make it faster to make a purchase with a credit or charge card.

"Australians are among the most prolific card users in the world, making more than 118 million card transactions per month,'' Mr Greig said. "The introduction of PIN on credit and debit cards will give cardholders a quick and easy alternative to signature authorisation when making purchases in person.''

The change is set to occur on June 4 and will be available to all American Express, Diners Club, MasterCard and Visa customers, at more than 600,000 point of sale terminals across the country.

The introduction of credit card PIN will bring Australia in line with several other countries, including New Zealand, who have been using the system for several years.

More information: www.penorpin.com.au
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Towering Debit Card Growth

Tighter financial markets, new waves of bankruptcies and foreclosures, and economic uncertainty have caused a constriction in the availability of credit. Yet despite current challenges in the credit markets, new research from TowerGroup finds that the debit card’s increasingly dominant position as a payment vehicle will continue through 2009 and beyond. Prepaid cards will also continue their rapid growth as a result of foreclosures affecting credit scores and consumers continuing to require the benefits of payment card access.

Transactions for debit cards in the United States surged three times faster than those for credit cards from 2005 to 2007, as consumers separated purchases into “lending” versus “spending” products.

Debit cards have absorbed a growing share of consumable purchases – such as gasoline, groceries, and other day-to-day consumer expenses – leaving the credit card for durable goods purchases.

As consumers and businesses work their way out of a sluggish economy, TowerGroup projects the weakened economy will continue to erode the rate of credit card transaction growth. Although personal savings rates in the U.S. fell to record lows in 2004, debit card volume continued to grow both steady and aggressively. Even as consumers tightened their budgets or were unable to save discretionary cash, their reliance on payment cards for business transactions is visible.

TowerGroup believes the debit market is primed for growth from channels and relationships beyond the confines of traditional retail banking products. There are several emerging and high-growth debit markets that should carry substantial transaction volume and value as they come to fruition. These include person-to-person payments via the emergence of mobile and “contactless” transactions, micropayments covering low-value transactions, and pre-loaded debit products aimed at the teenage and college markets.

The research report, titled “Crediting Debit: How Debit Cards Will Grow in a Changing Environment,” is authored by Brian Riley, senior analyst in the TowerGroup Bank Cards practice. The report explores why debit cards will continue strong transaction growth regardless of a downturn in the economic climate and its uncertain impact on aggressive credit card lending.
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The Rise of Alternative Payments - Mercator Study

The rise of alternative payment services - from PayPal to Google Checkout, Bill Me Later, HomeATM and many others - is a response to both consumer demand for an improved online payment experience and merchant need to lower shopping cart abandonment rates, payment processing fees, and raise the appeal of online shopping to specific consumer demographics.

Mercator Advisory Group's latest report, Alternative Payment Services: Moving into Traditional Payment Territory, examines the role and adoption of these competitors to traditional online card-based payments and online merchant acquiring.

The report offers an in-depth look at the principle providers of alternative payment services. The report examines the payment modalities supported by these alternative payment services and the consumer demographics they appeal to. While retail point of sale continues to be the largest area for consumer payments, online consumer spending has yet to reach its potential from the payment perspective.

In 2000 less than 1 percent of sales were via the internet. Today, that spending is likely to be $116 billion in the United States, a full 5% of retail spending.
But this annual growth is predicted to slow from 20 percent to 16 percent by year end and further to 13 percent by 2008. As these rates slow, online merchants must meet their customers "where they are" with the right payment mechanisms to maintain the highest possible growth and the widest possible sales funnel.

Alternative payment systems are fast becoming an important way for merchants to sustain and accelerate that online sales flow. Highlights of this report include:
  • An overview of the current state of online commerce in the US.
  • A discussion of consumer segments that employ alternative payment solutions.
  • A discussion of the value of alternative payments to both e-commerce customers and online merchants.
  • A review of some of the main providers of alternative payment solutions: Bill Me Later, PayPal (with a specific look at PayPal Pay Later), Google Checkout, Amazon Financial Payment Services, Pay By Cash and Paid By Cash.
  • A brief look at the future of alternative payment solutions.
In Alternative Payment Services: Moving into Traditional Payment Territory, Mercator Advisory Group reviews the current and future roles of alternative payment services.

The report discusses some of the drawbacks and issues of each alternative payment service and its payment modalities in relation to both the consumer and merchant including the IT challenge of integrating multiple payment methods into an e-commerce site.

The report contains 34 pages and 5 exhibits.

Members of Mercator Advisory Group have access to these reports as well as the upcoming research for the year ahead, presentations, analyst access and other membership benefits. Please visit us online at www.mercatoradvisorygroup.com.
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Saturday, May 3, 2008

ATMDirect President's Response to Open Letter

On Thursday, I received a telephone call from Nandon Sheth, the President and new owner of ATMDirect. We had a pleasant conversation and Nandon addressed a few of the issues made in "An Open Letter Letter to ATMDirect".

Regarding the "PIN-OFF" Challenge which HomeATM invited ATMDirect to participate in. Nandon replied that he would rather have the "marketplace" decide which technology emerges to the forefront. We have no argument with that logic as that was the reasoning behind challenging them to the PIN-OFF in the first place.

Apparently a panel of industry experts are not part of the marketplace in his view.

In our view, especially in light of the recent Digital Transactions News article "PIN Debit Meets the Web," a "PIN OFF" would, in fact, be tremendously influential in deciding who, as the graphic on the left states, the next president should be.

A debate sways the marketplace in an election, we just want the super-delegates to be there for this one. Call it our conventional approach to a PIN-OFF.

Personally, I am of the opinion, that a panel of industry experts, (super-delegates in my analogy) comprising of EFT Network representatives from First Data's Star, Metavante's NYCE, and Fisev's Accel Exchange, (along with Industry Analysts, such as Gartner's Avivah Litan or Javelin's Bruce Cundiff) would bring significant attention to both technologies and thus become an "enabler" in terms of letting Internet Retailers know the results.

One doesn't have to win and one fail...both could pass the muster, which, again, would provide Internet Retailers, EFT Networks and Industry analysts, with the information that is obviously lacking, based on the Digital Transaction News article.

Of course, one (or both for that matter) might not "pass the muster" in which case, both entities would at least know what they had to accomplish in order to provide a solution everybody agrees is viable.

So whatever the reason, ATMDirect has "Officially Declined to Participate in a PIN-OFF". That's too bad. Had they agreed and both companies compared technologies, it would have made for some good media and market exposure to both sides. I guess it would safe to assume that, at leaset at this stage, HomeATM is a bit more confident in their technology.

Nandon went on to say that he thinks it would be better to work together with HomeATM rather than "square-off" against each other. As I just mentioned, I am not of the opinion that it is "squaring-off" as much as I believe in furthering the understanding of both technologies to key players in the industry.

With that said, I certainly respect his business philosophy of working together. Both HomeATM and ATMDirect do share a common goal, which is to further enhance the payments landscape by introducing a PIN Debit solution for Internet Retailers. I'm not quite sure how he would propose working together. but HomeATM is certainly available anytime to hear any proposals to that end.

By the way, just so I am clear on the issue. I believe competition is a good thing, as it has always motivated companies to produce better technology, better products and better pricing, thus the end-user is always the ultimate beneficiary in a free marketplace.

Getting back to our conversation...I explained to Nandon that HomeATM doesn't have any type of vendetta or ill-will against ATMDirect. I did tell him that we were however, taken aback by some of the statments made in their press release.

One had to do with the number of patents they claimed to have bought from Pay By Touch. Nandon informed me that maybe I didn't see the complete documentation (I don't know how that would have happened) and that they have accomplished a lot since taking over ATMDirect 30 days ago, but couldn't elaborate or "pin it down" for me on account of the fact that it was Intellectual Property and we are the competition.

Regarding the statement made by Rajiv Grover, an investor in ATMDirect who said. “Our intention is to own Internet PIN debit" Nandon replied that Rajiv was overly enthusiastic and, in hindsight, maybe should've toned down his enthusiasm a little bit. I understand enthusiasm. If there was a top ten list of the people enthusiastic about bringing PIN Debit to the Web, I am certainly, without a shadow of a doubt, on it.

Let me remind you, that I did the Pay By Touch Blog from December 2005 through March of this year when they closed their doors. Go ahead and visit PBT's Blog site and do a search for ATMDirect. I have consistently praised their intention of bringing PIN Debit to the Web and even went so far as to go on the record that ATMDirect could potentially be Pay By Touch's "Cash Cow." I was probably one of their biggest supporters.

Let me also remind you, that because of my enthusiasm for both the market and the potential, I looked at acquiring ATMDirect. I certainly had the backers to come up with $600k, even more, but the one thing that concerned me is apparently the same issue that concerns one industry analyst. (click picture on left to read her analysis)

In fairness to ATMDirect, another industry analyst, said that he believes the floating PIN pad is secure and that people he knows "have signed off" on it. Hmmmm. there certainly seems to be some confusion in the marketplace. I wonder if that could be alleviated with published results of a "PIN-OFF"?

In hindsight, instead of calling it a "PIN-OFF" maybe we should have called it "The Show Case". That may have been something that Nandon would have been more willing to participate in. Indeed, we will be "showcasing" our technology, as will he, to quite a few interested parties in the near future. Why not have a professional upfront evaluation already a matter of record for all interested parties to see?

For the record...HomeATM is game as we feel our technology is at the PINnacle!
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Friday, May 2, 2008

PIN Debit Meets the Web is DTN Cover Story



Digital Transaction News Cover Story for the month of May is "PIN Debit Meets the Web".

I'll have more on this later in the day, but if you'd like to read the article in it's entirety, you can either subscribe to Digital Transaction News for Free by clicking here

or:

You can download the entire May Issue of Digital Transaction News in Adobe PDF format by clicking here.

I've been a subscriber since for a couple years now and it's a great publication, I would highly recommend subscribing.


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Supermarket ATM/Card Reader Rigged with Illicit Scanner


Some shoppers at a supermarket in Los Gatos, Calif., got more than they bargained for in the past week: Over 100 have become victims of identity theft after the debit- and credit-card reader at the checkout was rigged to siphon off their debit- and credit-card information.

The perpetrators used the card information and PIN numbers to churn out cloned cards, which then were used to withdraw cash from the victims’ accounts and to incur fraudulent charges on their credit cards. The customers of the Lunardi’s grocery store in Los Gatos have been reporting cases of identity theft to authorities since last Sunday evening, and reportedly have been losing an average of $1,000 from their bank accounts, according to a published report .

"What we have here is more than one person -- they've been able to get in there (Lunardi's) and switch out the ATM card reader," said Los Gatos-Monte Sereno police Sgt. Tam McCarty in an article in the San Jose Mercury News. "Once they've done that, they can read the card and PIN numbers and either make a temporary card or sell the numbers over the phone."

It’s unclear so far whether the scam was perpetrated by an outside criminal or was an inside job. The Lunardi’s supermarket has since replaced its old ATM card readers with new ones that lock to prevent tampering.

Scanner tampering has long been a subject of concern for security researchers, who have demonstrated the ease of ATM machine hacks, as well as of smart card scanners for physical security.

The stolen card account incident at Lunardi’s follows a similar one in Los Altos in March at an Arco gas station’s payment machine.

Rob Enderle, president of Enderle Consulting, says this is yet another type of card-scanning scam. “It speaks strongly for the need for strong multifactor authentication over anything dealing with confidential data, particularly financial data“Attacks like this are likely to spread ,and it is relatively easy to search on the Web and find the parts you need to build one of these things," Enderle says. "I’ll bet there are sites in Eastern Europe where you can order the entire solution custom designed for the attack a criminal wants to make."
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Thursday, May 1, 2008

An Open Letter to ATMDirect Executives

With less than 13 days remaining, we still have yet to hear from ATMDirect even though our CEO, Kenneth Mages, has made them aware of it from the beginning. However, in the interest of complete and unbiased fairness, this morning I sent them the following. Word on the street is that they have no intention of participating in the PIN-OFF, but let's give them every opportunity I say.

An Open Letter to ATMDirect Executives

Mr. Nandon Sheth - President - ATMDirect
Mr. Tom Wilkerson - Vice-President Business Development -ATMDirect
cc: Ms. Danielle Duclos - Director of Marketing - ATMDirect

As you are surely aware, from daily emails sent by Kenneth Mages, HomeATM's CEO to your President, Nandon Sheth, as well as various coverage in both the blogs and the newswires, we have challenged ATMDirect to compare technologies.

I was a founding member of the former ATMDirect owner, Solidus Networks, and was the author and Editor of the "Pay By Touch Blog" since 2005 until it's final post on March 20th. I am a firm believer and staunch supporter of bringing PIN Debit to the Web (in fact, query ATMDirect on the Pay By Touch Blog and you'll see myriad posts praising the potential of Internet PIN Debit. As such, I personally inquired about acquiring ATMDirect.

However, after reviewing the materials sent to me by Ron Carter, and speaking with several "insiders" including Eric Bachman, (who, by the way speaks highly of Tom Wilkerson) former COO of PBT, I decided that there was much that remained to be done before it could be considered anything more than an "early stage startup" to quote Eula Adams. So I passed and instead, I've joined forces with HomeATM, whose technology I felt could stand up to the demands that are required for PIN Debit to work on the Internet.

I saw ATMDirect's recent Press Release claiming the purchase of Pay By Touch's "25 Global Patents". Frankly, from the materials that were sent to me during my acquisition inquiry, I know only of one. However, that is not the point of this communication. Our patent attorney, Donald E. Stout, has sent a letter to your president regarding our patent. The point of this e-mail is to invite ATMDirect to what we've called a "PIN-OFF".

Upon reading your press release and hearing the patent claims you're making, we would like to "call you" on these claims as well as the one made that you intend to "Own PIN Debit on the Internet". If, in fact, you feel that ATMDirect's technology can stand up to the scrutiny of an independent "Internet PIN Debit Payment Panel" we would welcome ATMDirect's participation by accepting our invitation. We have extended the courtesy of allowing you 30 days to respond.

I've sent out "Internet PIN Debit Payment Panel" participant invitations to Paul Green, "The GreenSheet", John Stewart, "Digital Transaction News" Scott Loftesness, Payment News, Gwen Bezard, Aite Research Group, Avivah Litan, Garnter Research, Bruce Cundiff, Javelin Strategy & Research, David Brietkopf at SourceMedia and Evan Shuman, the former retail technology editor for eWEEK.com, PCMagazine, and CIOInsight, who are now all aware of HomeATM's PIN-Off Challenge to ATMDirect. We are all awaiting your acceptance/non-acceptance to this Internet PIN Debit challenge.

Please advise as to whether you plan on accepting, or forfeiting this opportunity to "showcase your technology". I'll await your response, along with other industry insiders who are "privy" to our so-called "PIN-OFF." My contact information is below...


John B. Frank
Executive Advisor
HomeATM e-Payment Solutions
Phone: 480-816-9578
Cell: 612-432-6980
JFrank@HomeATM.net
www.PINdebit.blogspot.com


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Wednesday, April 30, 2008

Will PIN Debit Become HomeATM's "Signature" Product?

Here's an interesting excerpt from American Banker in which they talk about PIN Debit vs. Signature Debit. The setting is restaurants, however, the point is still valiantly made why PIN Debit is the better of the two types and has a strong future as an Internet Payment Mechanism.

Mr. Rasori said VeriFone's research indicates that between 50% and 70% of all meals at sit-down restaurants are paid through signature debit transactions, which are significantly more expensive to the merchant than PIN debit payments.

According to Mr. Luria of Wedbush Morgan, the difference in transaction costs, depending on the restaurant's arrangement with its acquirer, can be "an order of magnitude." The typical transaction fee is 2.5% for a signature debit transaction and 1% for a PIN debit transaction. "These transactions are priced differently because of the risk," he said.

"A 'PIN card-present transaction' is the lowest-risk transaction you can do — that is why it is priced at the lowest level. For a signature debit or credit transaction, there is higher risk and higher pricing."

However, Mr. Rhodes' position assumes that the difference in transaction fees is matched by the difference in risk. Some industry analysts doubt that this is really the case.

Avivah Litan, a vice president with Gartner Inc., said that despite consumers' stated preference for PIN transactions, banks have been creating incentives for signature debit ones. "There are two reasons why banks like signature better," she said. "One is that they generate revenue through higher fees. Second, if a signature is forged, they can charge the amount of the transaction back to the merchant, but if a PIN is stolen, the bank is on the hook."

Mr. Bergeron says that in the long run he is not worried about efforts by banks to push signature debit over PIN debit. "Banks realize that increasing the size of the overall market is more lucrative than trying to squeeze extra fees out of a fixed market that faces increasing numbers of competitors," Mr. Bergeron said.

"One thing you can be sure of: Banks will always find a way to make money from handling transactions. The biggest issue for them is market share, so the more creative they can be in expanding the use of their cards, or the number of transactions they process, the better off they will be."
Related articles
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Payments News Adds HomeATM Blog to Favorite Blogs

The HomeATM (PINDebit) Blog has been added to the Payments News list of favorite "Payments and Banking Blogs", along with some of the big boys, like The Official PayPal, and Google Checkout Blogs, Javelin Strategy/Research and Jupiter Research to name a few. I'm honored to have the PIN Debit Blog included in this list.

Payments News, from Glenbrook Partners has been a leading edge Payments Blog for a number of years now and HomeATM and I thank Glenbrook's Scott Loftesness for including the "PIN Debit Blog" in their list.

Click this link to visit to Payments News which covers a wide spectrum of payment related news items.

More About Other Payments and Banking Blogs

The list of other payments and banking-related blogs we started last week has just about doubled in size over the last couple of days! We've now got over 25 blogs listed - along with widgets displaying the latest RSS feeds from each blog. You can quickly scan the page for stories that might be of interest and then click through to read the full text of each story. Clicking on the blog's name takes you to that blog's home page. Hope you find this useful and that it's helpful introducing you to some new sources of payments insights!

Other Payments and Banking Blogs

Below is a current summary of the latest content from some of our favorite payments and banking blogs based upon their RSS feeds. Scroll down to view them all - or click on the specific links below to go to a specific blog.
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Results of First Data's 2007 POS Debit Issuer Cost Study


First Data released the results of their 2007 POS Debit Issuer Cost Study. Highlights include the fact that the cost to support a PIN transaction is, remarkably, 50% lower than signature.

Click either of the screen captures to enlarge and read them.














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Tuesday, April 29, 2008

Pulse EFT 2008 Debit Issuer Study: Continued Debit Growth and Potential

Initial Findings of Comprehensive Survey...


Summary:

  • Survey Sample Represents 28 Percent of Debit Cards Issued in U.S.
  • Issuers Experienced Transaction Growth of More Than 14 Percent in 2007
  • “Best-in-Class” Issuers Outperform Market, Demonstrate Tremendous Potential in Debit
  • Fraud Remains Top Concern

    HOUSTON--(BUSINESS WIRE)-- Highlighting consumers’ increased use of debit, U.S. financial institutions experienced continued growth in debit card transactions in 2007, according to a new study commissioned by PULSE. The 2008 Debit Issuer Study also revealed superior performance by “best-in-class” issuers, suggesting significant untapped potential in debit for many financial institutions.

    The study, conducted by Oliver Wyman, provides new data and comparisons to the results of the 2007 Debit Issuer Study, released in February 2007. This comprehensive study offers a revealing look at debit issuer performance in key metrics, recent debit card fraud trends and debit issuers’ outlook for the industry in 2008.

    Overall, the issuers surveyed experienced debit transaction growth of 14.4 percent in 2007, comprising a 15 percent increase in signature debit transactions and 14 percent growth for PIN debit. Although transaction growth remained strong in 2007, it was lower than the 18 percent growth rate experienced in 2006 by participants in the previous PULSE study.

    “    Despite having a strong year in 2007, issuers are implementing a number of programs aimed at improving the performance of their debit card programs in 2008,” said Cindy Ballard, PULSE executive vice president. “These efforts center on rewards programs, targeted cardholder promotions and expansion into new products and new merchant categories.”

    A total of 62 financial institutions participated in the study, including large banks, community banks and credit unions that collectively issue more than 74 million debit cards, or 28 percent of the debit cards in the U.S. The institutions also represent 46,000 ATMs and are balanced across institution size, type, geography and network participation.

    Issuer Benchmark Performance

    The issuers surveyed by Oliver Wyman indicated that 86 percent of their debit cards are signature-capable, with 14 percent being ATM/PIN-only cards. This is essentially unchanged from the 2007 study. In addition, approximately 20 percent of survey respondents said they are planning to convert at least some portion of their ATM/PIN-only cards to dual-capability (PIN and signature) cards during 2008.

    Of the debit transactions conducted by the issuers’ cardholders in 2007, 65 percent were signature authorized and 35 percent were PIN authorized. This ratio has fluctuated within a fairly narrow band since the original study was conducted in 2005.

    The study revealed an average debit card penetration rate of 73 percent for respondents in early 2008, compared to 72 percent in 2006, when the previous study was conducted. Respondents’ card activation (defined as the card being used for one signature debit transaction within the last 30 days) averaged 59 percent in early 2008 versus 56 percent in 2006.

    On average, active cardholders performed 16.6 point-of-sale (POS) transactions per month in 2007, an increase over the 16.1 transactions per active card seen in 2006. Respondents reported an average ticket size of $43 for PIN debit and $38 for signature debit, compared to $42 and $40, respectively, in the previous study.

    The survey also revealed that 9 percent of PIN debit purchases included cash back. ATM cash withdrawals exceeded PIN debit cash-back withdrawals by a ratio of 9 transactions to 1, and by a ratio of 30 to 1, in terms of dollars withdrawn.

    Of the issuers surveyed, 25 percent reported charging a PIN debit transaction fee at the point of sale to at least some cardholders. This is a decline from 28 percent in 2006, and from 32 percent in 2005. Per-transaction fees averaged $0.53 but affected only 0.6 percent of cardholders, compared to 5 percent in the previous survey.

    Best-in-Class Issuers

    While 2007 marked an easing of debit card transaction growth rates, best-in-class issuers – defined as the top 25 percent in each performance measurement – were as much as 50 percent more effective in key metrics, compared to the average for all respondents.

    Results for best-in-class issuers exceeded averages for all respondents by:

  • More than 20 percent in debit card penetration;
  • More than 30 percent in transactions per active cardholder per month; and
  • More than 42 percent in signature transactions per active cardholder per month.

    Best-in-class issuers also achieved more than 55 percent lower fraud losses per gross dollar value.

    Best-in-class issuers are not always large financial institutions, noted Tony Hayes, an Oliver Wyman partner, who served as project lead on the study. “In the area of fraud, for example, credit unions and community banks tend to lead large banks,” he said. “This is likely due in part to differences in account holder profiles among the institution types.”

    Fraud

    Debit card issuers’ fraud loss rates were higher for 2007 than for 2005, the period studied in the previous PULSE survey. Issuers surveyed lost 5.40 basis points (0.054%) per dollar spent through signature debit transactions in 2007 and 1.09 basis points (0.0109%) through PIN debit transactions.

    Data breaches, stolen cards and phishing were the mostly commonly reported points of compromise for debit card fraud involving card information only. For incidents in which PINs were also obtained, ATM tampering, data breaches and “friendly fraud” (unauthorized transactions conducted by the cardholder’s family or friends) were the most common points of compromise.

    All of the 62 financial institutions surveyed had debit cards potentially compromised in data breaches in 2007. At the same time, more than 80 percent of survey respondents reported implementing new fraud tools within the past year.

    “    Although tools such as CVV/CVC checking and neural networks have proven effective, fraud continues to be a significant challenge for financial institutions, and constant vigilance is required to combat increasingly sophisticated techniques,” said Hayes. “Most of the issuers surveyed believe the next step in the continued evolution of fraud management is to improve collaboration among key constituencies in the industry: issuers, networks, processors and merchants.”

    Industry Implications

    Respondents pointed to maintaining debit transaction growth and managing fraud losses as significant challenges for 2008. Despite these concerns, Hayes believes there is still plenty of upside potential for debit card issuers. Based on the most commonly used definition of “active cards,” for example, in any given month 41 percent of cards are not being used by cardholders to make debit purchases.

    The survey indicated that issuers are planning to take a variety of steps to improve the results of their debit card programs. These include:

  • Re-tooling debit card rewards programs;
  • Using customer segmentation to target promotions to selected cardholder groups;
  • Focusing on business debit; and
  • Increasing debit card usage in small-ticket environments, as well as for bill payments.

    The study results demonstrate significant reason for continued optimism among debit issuers.

    “    The 2008 Debit Issuer Study revealed compelling differences between best-in-class issuers and the average for all respondents,” said Ballard. “These key distinctions can be vital for counteracting the challenges of slightly slower growth and increased fraud. By sharpening their focus on debit, issuers have the opportunity to raise their game to the level of best-in-class performers.”

    About PULSE

    PULSE is one of the nation’s leading ATM/debit networks, currently serving more than 4,500 banks, credit unions and savings institutions across the country. PULSE is owned by Discover Financial Services (NYSE: DFS). The network links cardholders with more than 265,000 ATMs, as well as POS terminals at retail locations nationwide. The company is also a valued resource for industry research related to electronic payments and is committed to providing its participants with education on evolving products, services and trends in the payments industry. For more information, visit www.pulse-eft.com.

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Online with their Target

HomeATM's "target" market is the Internet Debit space, specifically the PIN (online) Debit Internet Space.

It is good they are "online" with their target because from everything that I've both been told and (gathered independently) since I was a youth was that... When aiming to hit your target it's "not good to be "off-line".

Thus, it is pragmatic to conclude that HomeATM is, in fact, "on target" with both their desire and technology that will finally bring "online debit" well...online. I know it sounds kind of stupid,... the concept of actually making "Online Debit available "online"...imagine that!

Furthering my risk of sounding "moronic", I guess the "Less-On" here is to be, well...uh..."more-on". I guess it all works somehow as "PIN-Heads" are also sometimes known as "Morons." Speaking of which, here's some "Moron" Online Internet PIN Debit...

According to a Celent Analysis, the Relative Value Proposition of Online Alternative Payments (see illustration on the right) PIN-Debit for the Web looks like a pretty good target market to be online with.

Even moron the background of PIN vs. Signature Debit...

Q: The terms "PIN-based" and "Signature-based" often come up in discussions about debit card acceptance. What do these expressions mean? And how do the payment options differ?

A: The terms refer to the two distinct ways in which debit payments are processed: Online and Offline. Online debit transactions call for customers to endorse payments by submitting their Personal Identification Numbers (PINs) at the point of sale, while Offline transactions require shoppers to sign sales receipts

Back in the 1980s, we had a simple, bifurcated world: there were credit cards (PIN-less and tied to a credit line); and there were ATM cards (always requiring a PIN and tied to a bank account).

Muddying the waters was the advent of the so-called 'check card,' which can be thought of as a 'dual mode' card - it can be used without a PIN as sort of a 'secured' credit card ('secured' in the sense that the cardholder is dipping into real money in a bank account) or with a PIN as a debit card.

Now, we get into some rather misleading definitions that this muddying has caused...
  • When you use that check card with a PIN, it's called Online Debit. For those of you familiar with ISO8583, that PIN-ed request is going to result in you (as the acquirer) formatting an 0200 (the typical MTI used for a Purchase/Sale) request to the Debit/EBT gateway.

  • The card issuer (or its authorizer) authorizes that request and treats it as the 'letter of record' to debit the account in its nightly posting cycle.

  • The Debit/EBT gateway may or may not require the inclusion of that Debit transaction in a nightly extract/settlement file (prepped and sent by the acquirer). As a case in point: the FDR North implementation requires that you put Debit/EBT transactions into a combined settlement file; the FDR Nashville (formerly 'Envoy' before parent Concord/EFS was scooped up by FDR) implementation has no associated extract requirement for Debit/EBT. [Same company...go figure.] Even for FDR North, those Debit/EBT transactions in the settlement file aren't there for issuer posting purposes; instead, they provide the basis for gateway-to-acquirer settlement, and they also feed into a 'suspense' process.

  • The Debit/EBT gateway may or may not require the inclusion of that Debit transaction in a nightly extract/settlement file (prepped and sent by the acquirer).

  • When you use the same card without a PIN, it's called Signature Debit, i.e., because you sign for the transaction like a credit card - of course, new regulations muddy the waters further: at some merchant categories, a signature is no longer required for purchases of less than $25, a regular experience at fast food outlets like McDonald's.

    Now, the ultimate in misleading definitions: Signature Debit is often called Offline Debit, this despite the fact that 99 times out of 100 (you're not obligated to authorize these, but you open yourself up to chargebacks), the acquirer sends an online transaction request to get an approval decision (for ISO8583-savvy folks, you send an 0100 - the auth MTI - in these situations). Where the 'offline' designation comes from is that this online auth is not the letter of record. In these situations, you (as the acquirer) are obligated - assuming the transaction isn't subsequently reversed - to put these 'offline debit' transactions into the settlement/extract file. And it is these items that the Issuer uses to debit the related bank account. In other words, the 'offline' appellation here refers to the manner in which the bank account ultimately gets debited, not whether you sent an online request at the time of purchase.

  • Okay, to further complicate matters: this Offline Debit transaction is often referred to as a Credit . What? Well, you AUTH it via a 0100, like credit. And, when you stick the related entry into the nightly extract file, you format it as a Credit record. For example, in the FDR North extract file, these transactions get formatted as the Credit 'D' record, not the Debit/EBT 'Q' record. Indeed, from the perspective of a host-based payment system, you can't tell the difference between a purchase conducted with a 'true' credit card and one conducted with check card in PIN-less mode.

    Are we clear ? ... or is this something only a PIN-Head would understand?
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Strong Growth in Debit Card Use for Bill Payment

Study finds many debit card users keeping higher checking account balances, and displaying stronger loyalty than they show to credit cards.

SALISBURY, Md.--(BUSINESS WIRE)--Phoenix Payments, a Phoenix Marketing International practice, today announced the results of its 2007 Consumer Payments Preferences and Usage Study: Debit Card Opportunities and Challenges. The study findings include a detailed report on debit card issues, covering consumer preferences, attitudes, and usage of debit cards as well as debit’s relationship to other payment methods.

Roughly three-fourths of U.S. consumers have one card association-branded debit card that is tied to their primary bank account. The debit card is therefore at “top of wallet” for these consumers, making them unlikely to switch debit cards for a “better offer” as they more readily do with credit cards. Debit activity gives the primary bank opportunities to increase loyalty and wallet share.

“To some extent, debit card usage has replaced check writing,” states Leon Majors, President of Phoenix Payments. “But debit is also replacing cash and credit cards. Increased debit card transactional activity is requiring cardholders to maintain larger bank account balances to draw upon for their payments.”The preference for debit cards over credit cards to pay bills is strongest among middle-aged and lower-income consumers. Older consumers and those with incomes above $100,000 are evenly divided in their preferences for the two card types.

“As the customer’s debit card use increases, transactional activity with the primary bank increases as well,” continues Majors. “Debit card usage at point-of-sale will continue to grow. PIN debit has particularly strong growth potential at walkup centers and for recurring bill payments.”

Phoenix’s annual Consumer Payments Preferences Study was conducted online in late 2007, surveying slightly more than 2000 consumers with a national representation of the online U.S. population. Phoenix Payments will present its detailed findings at the NACHA Conference in Las Vegas May 18-21. For an executive summary of the research, please visit http://www.phoenixmi.com/pdf/PhoenixConsumerStudy-ExecSummary.pdf.

About Phoenix Payments Practice

Phoenix Payments Practice is one of the most comprehensive financial consulting and research firms in the US; having the only integrated payments program that tracks the entire 200 billion plus financial transaction market through large-scale quantitative research, specializing in issues that are of strategic importance to retail and corporate financial services and technology vendors.

About Phoenix Marketing International (www.phoenixmi.com)

Founded in 1999, Phoenix Marketing International is one of the fastest growing marketing services firms in the United States and partner to many of the largest companies in the financial services, consumer package goods, automotive, healthcare, and travel and leisure industries worldwide. With national offices, Phoenix offers advanced advertising, brand measurement, and direct marketing expertise.

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Sunday, April 27, 2008

Where's the PIN? HomeATM has the Beef!

I'm curious as to why Wells Fargo would specifically quantify (in red below) the rates for Internet "Non-PIN Debit Card Sales"

By the way, those very same "Non-PIN Debit Card Sales" have the exact rates as "credit card sales...which is probably another reason I see to avoid even making the distinction.

Does Wells Fargo find it necessary to post NON-PIN Debit Card Sales rates unless they also, in tandem, had and provided a solution, and thus rate, for Internet "PIN Debit Card Sales."

This from Wells Fargo's Internet Merchant Account Site:

Internet Merchant Account Pricing



One-Time
Set-Up Fee1$99.00 per location
Monthly
Monthly Service Fee (per location)$31 per month
Annual Compliance Support Fee2$40 per year
Payment Gateway FeeIncluded
Online ReportingIncluded
Statement Billing Fee3 (paper statement)

$7.50 per month
Processing Fees
Discount Rate4 — Visa®, MasterCard®, Discover® Network2.40% on Gross Credit Card Sales
Discount Rate4 — Visa, MasterCard, Discover Network
2.40% on Gross Non-PIN Debit Card Sales


Authorization/EDC Fee5 — Visa (Credit and Non-PIN Debit), MasterCard (Credit and Non-PIN Debit), Discover Network (Credit and Non-Pin Debit)

$0.30 per attempt
Non Bank Card Authorization (American Express)$0.27 per attempt
Non Bank Card Capture Fee (American Express and American Express — split dial)$0.03 per attempt
Voice Authorization Fee$0.75 per attempt
Address Verification Fee6$0.01 per attempt
Chargeback Fee7$25.00 per chargeback
Voice (Manual) Address Verification Fee
$2.00 per attempt

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