Is V/MC Biting the Hand that Feeds Them?

Banks should revise revenue models based on user fees | DL-Online | Detroit Lakes, Minnesota

Big banks have relied increasingly on fees to pad their revenues — as much as 40 percent of their annual revenues in some cases. Late fees, bounced check fees, near-usurious interest rates … and a little known credit card fee on merchants often called the interchange fee, or swipe fee.

American consumers pay among the highest swipe fees in the industrialized world — up to $2 of every $100 spent by credit cards goes to banks in the form of these interchange fees.  Merchants hate them. That’s why some convenience stores require a $5 minimum purchase to use a credit card.

Here’s what the Merchants Payments Coalition says about swipe fees: “This is about fairness, plain and simple,” said Lyle Beckwith, vice president at the National Association of Convenience Stores.  “For years, Visa, MasterCard and the big banks have forced higher prices on small businesses and our customers by setting swipe fees behind closed doors with no transparency and no negotiation.”

For many businesses, swipe fees are now their highest non-labor cost, outpacing even health care, the coalition says.

As other countries have reined in excessive swipe fees in recent years, and the actual cost of processing a transaction has gone down, Americans are now paying triple the amount in swipe fees they paid in 2001, reaching $48 billion last year alone.

Now a bill has been introduced in the U.S. House to enable retailers to negotiate with banks to reduce those fees.  The measure, called the Credit Card Fair Fee Act, would help ensure fair negotiations over swipe fees.

Under the bill, merchants and retailers would be allowed greater access to negotiations with banks to establish rates and terms, while an antitrust attorney from the Department of Justice would be present at the talks.

This bill should become law because it’s good policy. The Merchants Payments Association says only 13 percent of the money generated from swipe fees is used to cover the cost of the transactions — the original purpose of the fee.  (Editor's Note: The VAST majority covers Rewards programs, click chart on right to enlarge)

Banks need to take a hard look at their business model and realize that revenues based on fees are unsustainable and simply bad business practice.

You can only bite the hand that feeds you so many times before the hand slaps back.

Interchange, Visa, MasterCard, Credit Card Fair Fee Act, HR 2695

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More On Electronic Payments Coalition Campaign Against HR 2695

Legislative Alert! Learn more about the bill in Congress that would shift one of merchants' costs of doing business to YOU. Small Business Alert! Will small businesses really benefit from giant retailers' "sweetheart deal" from Congress? Convenience. Security. Increased Sales. Peace of mind.   What is Interchange? Video » How Interchange Helps YOUR Community Banks and Credit Unions Letters to Congress: Important Voices Speak Out about Interchange Learn how damaging interchange legislation will hurt consumers and small businesses

Electronic Payments Coalition Responds Opposes HR 2695

Electronic Payments Coalition Opposes Chairman Conyers Interchange Legislation

Merchants Want Consumers to Foot the Bill for Their Costs of Accepting Credit and Debit

WASHINGTON, PRNewswire -- The Electronic Payments Coalition issued the following statement in response to the interchange legislation introduced today by Congressman John Conyers (D-MI):

"The Electronic Payments Coalition strongly opposes interchange legislation introduced today in the U.S. House of Representatives by Rep. John Conyers (D-MI) - a bill nearly identical to one that received broad bipartisan opposition last year.

This legislation is an attempt by giant retailers to make consumers pay for one of their business expenses - the cost of accepting credit and debit. It's simple: merchants do not want to pay their fair share to accept debit and credit cards, and they want consumers to foot the bill.

If this legislation passes, American families will end up footing retailers' bills when it comes to accepting debit and credit cards.

Merchants that accept credit and debit cards benefit from more sales, lower costs and greater profits. It is only fair that they pay a fee for this service.

At a time when American families everywhere are struggling to make ends meet, they shouldn't be forced to pay more so giant retailers can profit at their expense. We understand that every business wants to find ways to cut overhead costs for valued services, but forcing consumers to pick up the bill for giant retailers just isn't fair.

Consumers pay their bills. Giant retailers should pay theirs, too. On behalf of every American consumer who pays his or her own bills, the Electronic Payments Coalition urges Congress to oppose this harmful legislation."

About Electronic Payments Coalition

The Electronic Payments Coalition is dedicated to protecting consumer value, choice, and competition in electronic payments systems. The coalition is a broad-based group of payment card networks, financial services companies, and financial services trade associations whose primary goal is to educate policy-makers, consumers, and the media about the value of electronic payments systems -- including economic growth, convenience, speed, reliability, and security -- and to ensure the continued growth of global commerce by promoting consumer choice and the stability of the vast payment networks that connect millions of consumers with millions of retailers each and every day.


SOURCE Electronic Payments Coalition

H.R. 2695, HR 2695, Credit Card Fair Fee Act, Interchange, John Conyers, Electronic Payments Coalition

MasterCard Responds to Credit Card Fair Fee Act

Legislation Would Let Merchants Keep the Benefits of Card Acceptance But Make Consumers Pay the Price

Purchase, NY, June 04, 2009 - MasterCard said today that legislation introduced today by U.S. Rep.John Conyers (D-MI), by exempting merchants from antitrust laws, wouldtake away the fundamental protections that these laws provideconsumers. This would result in less credit availability, along withhigher prices and reduced benefits when Americans choose to use theircredit or debit cards. Antitrust laws are designed to protectcompetition and consumers, but this bill would have the opposite effect.

Conyers’ legislation, H.R. 2695, would give merchants a specialexemption from antitrust laws enabling them to engage inanticompetitive and collusive behavior when establishing the fees andterms applicable to accepting payment cards. The bill is part of anorganized merchant campaign to shift their card acceptance costs toconsumers, and does not require merchants to pass on any savings toconsumers if they succeed in lowering these fees.

When similar legislation was considered last Congress, it stirredconsiderable controversy and was only narrowly approved by a deeplydivided Judiciary Committee. In addition, a wide array of organizationsfrom non-profits to community banks and credit unions to minority smallbusinesses voiced their opposition. The Department of Justice alsoexpressed concern about the bill indicating that its antitrustexemptions “would appear to be the type of naked collusion that theantitrust laws condemn as per se unlawful because such conduct lacksplausible benefits to competition.”

Experience demonstrates that consumers lose when merchants no longerpay their fair share for the valuable benefits they receive fromaccepting payment cards. This is precisely what happened in Australiawhen the government reduced interchange fees. Although it cut costs formerchants, many Australian consumers now pay more for their paymentcards and receive less in return as a result of the government'sintervention. Furthermore, there is no evidence that merchants reducedprices for consumers as a result of the government's intervention.

Both merchants and consumers benefit from the ability to use and acceptelectronic payments, and in today’s free market system, each pays ashare of the cost of the service. The benefits and the cost of cardpayment services are now shared between merchants and consumers but themerchants behind the Conyers bill seek to retain the benefits whileshifting the costs to consumers.

Finally, MasterCard noted that any serious discussion of these issuesshould wait for the results of the Government Accountability Office(GAO) study ordered by Congress as part of the Credit CARD Act.Consumers stand to be severely damaged by government intervention andthe findings of the GAO study may help avoid consumer harm thatinevitably flows when merchants no longer pay their fair share for thebenefits they receive.


About MasterCard Worldwide
MasterCard Worldwide advances global commerce by providing a criticaleconomic link among financial institutions, businesses, cardholders andmerchants worldwide. As a franchisor, processor and advisor, MasterCarddevelops and markets payment solutions, processes approximately 21billion transactions each year, and provides industry-leading analysisand consulting services to financial-institution customers andmerchants. Powered by the MasterCard Worldwide Network and through itsfamily of brands, including MasterCard®, Maestro® and Cirrus®,MasterCard serves consumers and businesses in more than 210 countriesand territories. For more information go to www.mastercard.com.

Chase Paymentech Simplifies Chip and PIN Migration for Integrated Merchants

The latest payment offering from Chase Paymentech delivers a solution for EMV certification, providing a faster answer to the migration process for integrated merchants.

TORONTO, June 8 /CNW/ - Chase Paymentech(TM) is pleased to introduce their Electronic Cash Register Interface (ECRi); a semi-integrated solution that is certified for EMV and is PCI compliant.

"Chase Paymentech is always looking for solutions that help merchants improve the way they accept payments and the customer experience. ECRi is the ideal solution for the retailer who wants to migrate to EMV with as little work and cost as possible," Bill Farris, Product Management, Chase Paymentech

Beyond the benefits related directly to chip migration and PCI compliance, ECRi offers integrated merchants the option to leverage their existing Chase Paymentech point-of-sale (POS) solution and use the latest in payment technology for a fraction of the costs they would otherwise pay to certify their mag-stripe payment application.

"The 2009 Retail Council of Canada's STORE Conference was a great opportunity to introduce the ECRi solution to the retail industry," added Farris. "Current topics of interest with retailers are compliancy and software integration with existing POS. We are offering retailers the opportunity to experience the ease of our ECRi solution at the STORE Conference."

ECRi is now available with select Chase Paymentech VeriFone devices and gives merchants and software developers the ability to connect their existing point of sale system to an EMV-certified and PCI compliant payment terminal -all in just a few short weeks.

About Chase Paymentech

Chase Paymentech, a subsidiary of JPMorgan Chase & Co. with headquarters in Toronto, ON and Dallas, TX, is a global leader in payment processing and merchant acquiring. The company's proprietary platforms provide access to a wide variety of payment methods, such as credit cards, chip-and-pin debit cards, and prepaid stored value cards. Chase Paymentech also provides a full set of solutions aimed at accelerating cash flow and managing transaction data. On the Internet or at the point of sale, Chase Paymentech's unique combination of outstanding service, innovative solutions and financial strength offers solid benefits to Canadian companies both large and small. For more information please visit www.chasepaymentech.ca

Trademark of Chase Paymentech Solutions, LLC, Chase Paymentech Solutions authorized user.

Chase Paymentech, PIN, EMV, ECRi

73% of Companies Believe They are Vulnerable to Hacking

Seventy three percent of IT professionals admit their software applications are still vulnerable to hackers, only an eight percent reduction on last year’s startling discovery.

In a repeat of its survey conducted amongst IT security professionals, Fortify Software – the application security specialists, has learned that, this year, forty six percent think that hacking at the application level is the easiest way into a company - an increase on a third compared with last year’s Fortify survey. Worryingly five percent report that between 76% and 100% of hacks are targeted at applications.

Continue Reading

Fortify Software

East European ATM Sniffing = Poor Code Auditing

East European ATM sniffing down to poor code auditing

Reports that malicious hackers have developed a range of data-sniffing and stealing trojans that have skimmed cardholder data from Eastern European ATMs since the end of 2007 highlight what can happen if security code auditing is not carried out at all stages in program development, says Richard Kirk, Fortify's European director.

"Our colleagues at Sophos and SpiderLabs have discovered that the trojans home in on the data stream from the magnetic stripe of ATM users' cards and store/relay that data for subsequent fraudulent usage," said Kirk.

"What's interesting about this case is that, if the ATM program code - which probably runs on Windows operating system as most ATMs are driven by the Microsoft operating system - had been fully code audited from day one, the security loophole that allows this trojan to operate probably wouldn't be there," he added.

What is also of concern, says Kirk, is the fact that hackers were able to use their trojan applications for around 18 months - and refine their own program code many times - before being detected.

This, he says, indicates that the hackers probably have a development process equal to, if not better, than the developers of the ATM software.

This, he explained, is ironic, and illustrates the dedication – driven by the illegal revenues available - that criminal gangs now have when pursuing their illegal careers.  "Now that the hackers' trojans have been rumbled, they will probably move on to new revenue-generating pastures. It is to be hoped that these pastures do not include the bank's ATM-controlling computers, otherwise we're all in deep trouble," he said.

ATM Sniffer, Malicious Code, Eastern European ATM, Magnetic Stripe, Hacking, Sniffer

Phantom of the Soap Opera

Court rules in bank’s favor in “phantom withdrawal” caseby Gill Montia

Story link: Court rules in bank’s favor in “phantom withdrawal” case

A UK court has found against a customer who sued his bank afterbeing held liable for withdrawals from cash machines, which he claimshe did not make.

So called “phantom” withdrawals occur when money is withdrawn atbank ATMs without the card holder’s permission and where card detailshave not been revealed to third parties. Chip and PIN technology has been designed to prevent stolen and lostcards being used in this way but Halifax customer, Alain Job, claimedthat he was not responsible for £2,100 disappearing from his account.

However, Mr Job failed to convince Nottingham County Court that hiscard could have been used to withdraw the money at ATM’s without anynegligence on his part.  Lawyers argued that the card could have been cloned but Halifaxproduced evidence that it claimed showed Mr Job’s original card hadbeen used in the transactions.IT experts appear to differ over whether cloned cards can be used inthis way and Mr Job is reported to be considering an appeal.

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• BSMS - Both Sides of the Mouth Syndrome (pindebit.blogspot.com)