Mobile Payment Industry News

Monday, July 21, 2008

Australians More Likely to Purchase Online

A new study reveals that consumers in Australia and New Zealand are more likely to make online purchases than shoppers anywhere else in the world.

The study continued over a period of six months and looked at over 72 million online shopping sessions, specifically focusing on the habits of about one million ANZ users.

The research found a conversion rate of 4.4 purchases per 100 online sessions for Australia and New Zealand, which sits way above the global average of 2.96.

"The US and UK are thought to be the most tech-savvy, but the conversion rates suggest otherwise when it comes to e-commerce. US consumers tend to place 3.3 orders every 100 sessions, while the UK only place an average of 1.7."

"The significantly higher conversion rate of Aussies and Kiwis suggests consumers in the region are much more confident and comfortable with buying online than previously thought," said Kevin Mackin, general manager for Coremetrics ANZ, who conducted the study. The study also found that it is the companies utilising this enthusiasm for online shopping who are experiencing the most benefit.

Sites who provide online consumers with things like extra relevant content and third part recommendations are seeing higher pages views and longer visit times. Adding those little extras could prove to be extremely valuable to companies with an ANZ online customer base, as the study also found that consumers in the region spend a significant amount of time making purchase decisions.

"Another point to consider is that while Aussies are consistent with the average viewing time of 7.5 minutes per session, UK and US shoppers are making their decisions 1-1.5 minutes faster," said Mackin. "There’s strong reason to believe that this indicates a more considered online buying approach from ANZ consumers – an excellent reason to enhance the ‘stickiness’ of your site today." Mackin suggests that companies capitalize on ANZ customers’ tendency to stick around by not just focusing on how to attract visitors to the site, but to make sure they have a good experience once they get there.

"It seems that we’re only just beginning to think about search engine optimisation, when really we need to focus equally on engaging and retaining site visitors," he said. "It’s OK to attract them to your site but it’s what you do with visitors once they arrive that’s going to make or break the sale."

Travelers - "Price Beats Brands...When Times Are Tight"

Travelers Eye Prices Online

JULY 21, 2008

Price beats brands when times are tight.

More than four out of 10 US nonbusiness travelers surveyed expect to reduce the number of trips they will take in the coming year as a result of the economy, according to a June 2008 Destination Analysts' "The State of the American Traveler" survey. Nearly three out of 10 said they would spend less for their recreational trips in the next 12 months, nearly double the percentage that said so 12 months ago.

In the past 12 months, 23.6% of leisure travelers said they had taken a "staycation"—a vacation spent at home—in response to gasoline prices. Nearly three out of 10 said they planned to do so within the next 12 months.

"With more than half of travelers saying they will actively look for travel bargains and discounts and another third saying they will visit less expensive destinations, affordability is certain to be top-of-mind," said Erin Francis, managing partner at Destination Analysts, in a statement.

Several types of travel services were researched and purchased online by at least one-third of respondents, including destination information, hotel rooms and airline tickets. Only about one-fifth of recreational travelers went online for car rentals.

Fully 72.2% of Internet users in the US named the Web as their primary source for travel research in June 2008, according to a Prospectiv study.

The focus on value matters because price trumps brand in an economic downturn, according to a survey of consumers in the UK conducted by Loudhouse and RightNow.

Nearly eight out of 10 Internet users surveyed said that prices drove their purchase decisions during times of economic uncertainty. More than seven out of 10 also said that price and good online user experience were the second-highest-influencing factor on where to buy a product. Brand pedigree, product uniqueness and reputation were listed as least influential.

"Brands selling directly to the consumer be warned; as the credit crunch deepens and spending decreases, offering 'sweeteners' to consumers is only half the survival story," said Joe Brown, general manager at RightNow, in a Travolution article. "They won't tolerate corners being cut when it comes to customer service."

Although most travelers are getting budget-conscious, the luxury travel segment has yet to feel a slowdown, according to a July 2008 USA Today article. The article cited D.K. Shifflet & Associates' claim that households earning $100,000 and more now account for about one-third of hotel stays. "High-end is holding its own right now," Doug Shifflet, CEO of D.K. Shifflet, told USA Today. "But if the economy doesn't improve some, then it's going to start to see an additional slowdown."

eMarketer's US Travel Online: Planning and Booking report will be published next month. Click here to be notified when it is released.

More On the Online Shopping Market in China

Fan Huiwen writes for the China Economic Net on the gaining popularity of shopping online...

Online shopping gets popular with ordinary folks

By Fan Huiwen

In recent years, the e-shopping via Internet has been developed rapidly and has become an innegligible component in the e-business. E-shopping is a kind of online purchasing behavior of terminal purchasers, and consumers' shopping occupies most.

The fast development of e-shopping indicates that the core of e-shopping begins to transfer from B2B (business to business) to B2C (business to consumer) and C2C (consumer to consumer), and the e-shopping shows a new trend of popularization.

For most of e-shopping, commodities will be chosen online, purchase orders will be signed and commodities will be delivered to customers' doorsteps via logistics distribution, so the transaction cost is low, the e-shopping is convenient and prompt, and consumers will save the time of looking around marketplaces. As there is no need to rent storefronts for online shops, the operating cost is low and the price of commodities is relatively low, which enable purchasers to enjoy benefits. In large cities with a relatively high Internet penetration rate, e-shopping is more and more favored by people and becomes a fashionable life style quickly.

For the moment, China's e-shopping market is provided with the following characteristics: Firstly, the e-shopping scale keeps enlarging. According to related statistics, by the end of December 2007, the proportion of netizens' online shopping in China is 22.1 percent, and the purchaser population achieves 46.4 million. And the online shopping proportion of such netizens with Master degree or above has reached 56.5 percent. The scale of e-shopping market is RMB56.1 billion yuan with the growth rate of 117.4 percent year on year. This indicates that the penetration of Internet drives a rapid growth of e-shopping. E-shopping websites keep improving transaction modes, and consumers' acceptance degree to the e-shopping is enhanced increasingly.

Secondly, the transaction amount of B2C and C2C accounts for the most part of the total transaction amount of e-shopping. E-shopping contains the purchasing of terminal consumers and the commodity transfer between consumers, as well as the online shopping of part of manufacturing operators. In 2007, the transaction amount of China's C2C e-shopping hit RMB51.8 billion yuan, up 125.2 percent than the one in 2006. The transaction amount of taobao.com took up 83.6 percent of C2C e-shopping, paipai.com ranked No.2 with the transaction amount of 8.7 percent, and eachnet.com ranked No.3. In 2007, the transaction amount of China's B2C e-shopping hit RMB4.3 billion yuan, up 92.3 percent than the one in 2006. The transaction amount of dangdang.com ranked No.1 with the transaction proportion of 83.6 percent, joyo.com ranked No.2, and 139shop.com No.3. This illustrates that consumers' purchasing takes up a main position in the e-shopping.

Thirdly, the commodity scope of e-shopping is expanding increasingly. The early joyo.com and dangdang.com mainly operated books and video products. In recent years, their operation scope has been enlarged continuously, till now; joyo.com has expanded its commodity scope to 20 classifications and more than 700 thousand types. Except selling books, magazines and videos, dangdang.com is also involved in selling mobile phones, cosmetics, garments, shoes and hats, whose commodities have been rich in variety. The commodities of e-shopping have also broken the restriction of only providing tangible commodities, and expanded to digital products and services, so many professional websites supply the commodities in terms of digital content and network service.

Additionally, female consumer products occupy an important position in the e-shopping market. With the gradual transferring from e-shopping commodities to life consumer products, such female consumer products as cosmetics and garments become well-selling commodities. According to the statistics, the transaction amount of e-shopping of Shanghai netizens in 2007 is RMB7.01 billion yuan, ranking No.1 in China. And the commodities purchased by the Shanghai e-shopping group most are such female beauty supplies as cosmetics and perfume. Meanwhile, the commodities with the greatest quantity growth of e-shopping in Shanghai are female underwear and lady-used cases and bags; these data throw out female e-shopping group's scale of purchasing power. The female consumer product market is being paid more and more attention to by e-shopping websites.

With the popularity of Internet in the future, China's e-shopping transaction amount will keep a rapid growth, C2C will keep being the main driving power for the e-shopping growth, the commodity variety of e-shopping will be enriched further, and the attraction of online shopping communities to network subscribers will be stronger and stronger.

According to the research of CCID Consulting, by 2010, China's e-shopping transaction amount will be close to RMB400 billion yuan with the annual growth rate of above 60 percent. The driving factors of the rapid development of e-shopping include: a fast economic growth and a further improved residents' consuming level; Internet popularization and netizen increase in the second and third line cities; gradual classification expansion of e-shopping commodities; the participation of such new operators as baidu.com; the improved safety environment in terms of payment, logistics and online shopping, etc.

At the same time, on the present basis, the classification of e-shopping commodities will expand to all commercial fields. Seen from the hotspot and the trend in e-shopping market, the classification of e-shopping commodities will be enriched on the basis of such classifications as books and magazines, videos and music, mobile phones, cosmetics, and garments. The online reservation for various commodities and services just start to expand. The online group purchasing develops rapidly. Such commodities as consumer durables (such as autos), consumer products with a huge amount (such as houses) and luxury products (such as diamonds) also start to play important roles in e-shopping. These commodities will show an obvious elevation function for the sales volume of e-shopping.

What's more important is that the attraction of online shopping communities to network subscribers becomes stronger and stronger. Investigation indicates that more and more online consumers have begun to conduct transaction from purely via B2C platform to via C2C platform, and the trend of B2C subscribers' transferring to the C2C community is evident.

So to speak, the e-shopping represents the development orientation of commodity transaction in the information era, and China's e-shopping is very promising.

(The author is Director of Informatization Research Center of China Center for Information Industry Development)

Friday, July 18, 2008

U.K. Online Shopping Up 38% from Last Year

Despite the economic gloom, UK online shopping sales in the first half of 2008 were up 38% - to £26.5 billion - on the same period the previous year.

Out of every £1 spent by British shoppers 17p is now going to online retailers, as consumers switch away from traditional shops in favour of picking and paying at their home computer.

But the index predicts online growth will remain strong this year as a result of tight household budgets, the cost of petrol and "a general desire to shift to more sustainable shopping patterns".

According to IMRG 56% of people think buying online is more environmentally friendly than high street shopping

.

Figures from IMRG, Capgemini and the British Retail Consortium show that the 17 pence in every pound spent by Brits during the period is around half of the amount spent in supermarkets and more than the total spend for all retail sales of clothing and footwear.

IMRG and Capgemini say frugal Brits, hit by the credit crunch are looking online for bargains. E-commerce growth is expected to remain strong throughout 2008, driven by rising fuel costs, falling disposable income and smarter shopping habits.

However, despite faring well compared to the high street, the online channel is not immune to credit crunch woes, with a dip in growth of five per cent for June.

"Whilst online retail is not immune to the credit crunch, it is showing greater resilience than the high street," says Mike Petevinos, head of consulting for retail, Capgemini UK. "Convenience has a sharper edge in a world of soaring fuel prices and the ability to research and make more informed choices in a time of heightened price sensitivity is a key advantage of the online channel."

In the longer term e-commerce will continue to challenge the high street, with IMRG and Capgemini predicting that between 30% and 50% of all retail spending will be online in the next five years.

One important driver for this may be the increasing concern over environmental issues. According to IMRG research, 56% of people believe shopping online is greener in comparison to the high street.

One worrying side-effect of the explosion in popularity of online shopping is a rise in card-not-present (CNP) fraud. According to UK payments association Apacs, CNP fraud rose 37% to £290.5 million during 2007 and now accounts for more than half of all industry losses.

However, the payments association argues that CNP losses have to be seen in context of the huge rise in the number of people shopping online and over the phone. Apacs says CNP fraud losses have risen by 122% between 2001 and 2006 but over the same period the total value of online shopping transactions increased by 358% - from £6.6 billion in 2001 to £30.2 billion in 2006.

Debit Growth Continues at Torrid Pace

This 3rd edition of Debit Cards in the U.S. continues the story told in Packaged Facts' May 2006 analysis of this market...Growth.

The most notable ongoing feature of this market is its "astronomical growth." Packaged Facts estimates that transaction volume doubled between 2003 and 2007, and dollar volume escalated at a compound annual growth rate (CAGR) of 20%.

The battle between issuers and merchants persists over online, or PIN debit (preferred by merchants) Editor's Note: (AND Consumers) and offline, or signature debit (preferred by issuers), as do the interchange wars.

As predicted, rewards programs are driving market growth, debit fraud is on the rise, and younger consumers and prepaid debit are key elements in issuers' growth strategies.

The market remains dynamic, and much has transpired in the past two years. Most dramatically, Capital One has turned the industry upside-down with its "decoupled debit" program, which enables merchants to issue co-branded cards linked to a customer's current bank account. This has significant advantages for consumers and merchants, but significant disadvantages for banks, who stand to lose interchange revenues. Retailers are also turning to other alternative payment networks to bypass interchange.

First Data to Release Q208 Financials; Webcast Hosted by CEO Michael Capellas

First Data, whose Star Network offers PIN secured debit acceptance at over 2 million locations is set to release their 2nd Quarter Financials on 8/14. Here's their press release:

DENVER, (BUSINESS WIRE) -- First Data will release its second quarter financial results on Thursday, Aug. 14 at 8 a.m. MDT. The company will host a conference call and webcast to review the results. The information will be posted on the First Data Web site, http://www.firstdata.com/.

Michael Capellas, Chairman and Chief Executive Officer of First Data, will lead the call. Also participating will be Phil Wall, Chief Financial Officer, and Silvio Tavares, Senior Vice President, Investor Relations.

To listen to the call, dial +1-877-675-4751 (U.S.) or +1-719-325-4928 (outside the U.S.) ten minutes prior to the start of the call. The webcast will take place on the First Data Web site. Please click on the webcast link at least 15 minutes prior to the call. A slide presentation to accompany the call will be included in the webcast and will be made available under the "Investor Relations" section of the Web site, http://ir.firstdatacorp.com/events.cfm.

A replay of the call will be available through August 21, at +1-888-203-1112 (U.S.) or +1-719-457-0820 (outside the U.S.), replay passcode 4234243 and via webcast on the company's Web site.

About First Data

First Data is a global technology leader in information commerce. The company processes transaction data of all kinds, harnesses the power of that data and delivers innovations in secure infrastructure, intelligence and insight for its customers. With operations in 37 countries, First Data serves more than 5.4 million merchant locations and more than 2,000 card issuers and their customers. It powers the global economy by making it easy, fast and secure for people and businesses around the world to buy goods and services using virtually any form of payment. The company's portfolio of services and solutions includes merchant transaction processing services; credit, debit, private-label, gift, payroll and other prepaid card offerings; fraud protection and authentication solutions; electronic check acceptance services through TeleCheck; as well as Internet commerce and mobile payment solutions.

The company's STAR Network offers PIN-secured debit acceptance at 2.1 million ATM and retail locations. Through First Data's centers of excellence, such as security, analytics, customer loyalty and mobile payments, it offers data-driven commerce solutions for customers around the globe. For more information, visit http://www.firstdata.com/.

SOURCE: First Data

First Data Investor Relations

Silvio Tavares, 303-967-8276

silvio.tavares@firstdata.com

or

Media Relations

Arch Currid, 303-967-7188

arch.currid@firstdata.com

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Continental Airlines Choose 41st Parameter FraudNet for CNP Transactions

SCOTTSDALE, Ariz. - 41st Parameter Inc. (http://www.the41st.com), a leading provider of Internet Fraud Intervention Services and Technology for e-commerce and financial services, today announced that it has been selected by Continental Airlines Inc. (NYSE: CAL) to help detect and prevent Card-Not-Present (CNP) fraud in its online sales channels.

The airline will employ 41st Parameter’s FraudNet(TM) to help it identify legitimate versus suspect website transactions on a global basis, as well as to prevent fraudulent account access, enabling the airline to protect sensitive customer data. This is the latest in a progression of orders that has established 41st Parameter as a key supplier of advanced anti-fraud solutions to the global travel industry.

Important in Continental Airlines’ decision was 41st Parameter’s powerful covert proprietary technology that offers increased visibility and analysis of the airline’s online transactions. The FraudNet solution provides Continental Airlines with all its detection tools on a single workbench, thereby decreasing investigator training times and reducing the volume of manually reviewed transactions. 41st Parameter’s proprietary technology also allows airline investigators to identify interlinked activities and report genuinely fraudulent cases to law enforcement bodies.

"After researching various alternates available for a specialized fraud detection and prevention solution, we found that 41st Parameter has proprietary technologies not available from their competitors," commented Tom Ferazzi, Managing Director, Cash & Investments Treasury, Continental Airlines. "We believe these capabilities will allow us to capture more fraud faster than any of the alternatives we reviewed."

"Card-Not-Present transactions on the Internet have grown significantly in the travel industry over the past few years, and with it the quantity and complexity of fraudulent activities. Our success in this market stems from the breadth and depth of our offering that is enabling companies, such as Continental Airlines, to successfully defend against the fraudsters who are targeting the travel sector," commented Ori Eisen, Founder and Chief Innovation Officer of 41st Parameter.

About Continental Airlines

Continental Airlines is the world’s fifth largest airline. Continental, together with Continental Express and Continental Connection, has more than 2,900 daily departures throughout the Americas, Europe and Asia, serving 144 domestic and 139 international destinations. More than 550 additional points are served via SkyTeam alliance airlines. With more than 45,000 employees, Continental has hubs serving New York, Houston, Cleveland and Guam, and together with Continental Express, carries approximately 69 million passengers per year. Continental consistently earns awards and critical acclaim for both its operation and its corporate culture. For more company information, visit http://www.continental.com.

About 41st Parameter

41st Parameter is the leader in Internet Fraud Intervention solutions, which detect and prevent online fraud for e-commerce companies and financial institutions. None of 41st Parameter’s solutions require end-user registration, enrollment, downloads or installations. To learn more about 41st Parameter, visit http://www.the41st.com.

All brands, names, or trademarks mentioned in this document are the propertyof their respective owners.

Contact:Dave Yohe

41st Parameter

Tel: 480.776.5518

Marketing at the 41st dot com

Manuela Whittaker

IBA - PR for 41st Parameter

Tel: +44.1780.721.433

mwhittaker at iba-europe dot com

SOURCE 41st Parameter Inc.

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Thursday, July 17, 2008

Brazilian E-Commerce Revenue Quadruples!

Online buyers doubling every two years

E-commerce in Brazil, like many other Internet activities in that country, is maturing quickly. Between the first half of 2005 and 2008, e-commerce revenues as reported in e-bit's "Web Shoppers" study nearly quadrupled to reach BRL3.8 billion ($2.2 billion).

According to Valor Economico, in 2007 alone the market expanded by 43%. In terms of the number of individuals buying online, the figures are almost as dramatic, with 2.6 million buyers in 2003 rising to 9.5 million in 2007. More likely than not, adult Internet users in Brazil have purchased something online, according to a December 2007 study by Symantec.

Brazil's 79% of users who have purchased online is in the upper reaches of worldwide rates, comparable to such advanced Internet players as Japan (82%), the UK (79%) and Germany (78%). In contrast, only 63% of US Internet users have made an online purchase. Simply put, Brazilians who use the Internet tend to use it for everything, including e-commerce.

Online buyers in Brazil are huge media consumers. Books, magazines and newspapers ranked as the top e-commerce categories with a 17% market share in 2007, according to e-bit.

Almost one-half (49.47%) of Brazil's online buyers use a credit card to make their purchases, versus 39.06% who use a banking ticket to buy online. Other payment methods, including debit or electronic transfer, and payment on delivery, were each favored by less than 10% of respondents to an Ipsos Public Affairs survey.

Females, who make up almost one-half of Internet users in Brazil, are a key factor driving the explosion of e-commerce. A study from e-bit reported in Business News Americas found that online transactions by females increased nearly 10% since 2000.

Citigroup passes debit card inspection

Citigroup yesterday said its debit card database on the mainland had passed inspection by the People's Bank of China, making it the third overseas lender eligible to issue yuan-denominated cards....

SHANGHAI - Citibank (China) Co Ltd. said it has won government approval to issue yuan-based debit cards to retail customers. Citibank said it has partnered with China Union Pay Data Services Co Ltd, the leading bank card third-party processor, to handle its mainland debit card transaction processing.

China Union Pay is the card-processing system backed by China's central bank. The launch of bank cards by locally-incorporated foreign banks has been delayed partly because of the issue of establishing data centers on the mainland. By partnering with China Union Pay, locally-incorporated foreign banks appear to have satisfied regulators.

Citibank said it will be in a position to launch debit cards in the near future. Citibank is the third foreign bank incorporated in China to receive approval to issue debit cards in China following Bank of East Asia and Standard Chartered, which won approval last week.

In June 2007, the China Banking and Regulatory Commission said it was reviewing applications submitted by four foreign banks to operate card businesses. The four banks were Citibank, HSBC, Standard Chartered and Bank of East Asia - the first batch of foreign banks that received regulatory approval in March 2007 to locally incorporate their mainland operations. Under WTO agreements, foreign banks in China are allowed to offer a full range of yuan services, including issuing yuan bank cards, once they are locally incorporated.

PayPal "Nets" $602 Million in 2nd Quarter

Image via Wikipedia

eBay reported second quarter 2008 financial results earlier today - saying that "PayPal had a strong quarter with $602 million in net revenue, an increase of 33% year-over-year. Net total payment volume (TPV) for the quarter was $14.93 billion, an increase of 35% year-over-year. Global active registered accounts increased to 62.6 million, representing 19% year-over-year growth."
44% of PayPal's payments revenue was from international. PayPal's transaction revenue rate was 3.89% - essentially flat from last year - while its transaction loss rate declined from 31 basis points to 27 basis points. PayPal's transaction processing expense rate increased slightly to 1.23%.

Only Eight Percent of Americans are 'Very Confident' Their Personal Data is Safe With Retailers, Banks and Governments

Reduced Customer Satisfaction, Loss of Trust, Reputation Damage Cited by Consumers as Leading Business Consequences from Security Breach

Only an average of eight percent of Americans say they are very confident in the ability of U.S. retailers, government and banks to protect their personal information, according to a national survey commissioned by CA, Inc., and conducted by The Strategic Counsel. The CA 2008 Security and Privacy Survey was done as in follow-up to the 2006 survey.

Additionally, the consumer survey indicated that an average of 79 percent of American consumers cite loss of trust and confidence, damage to reputation, and reduced customer satisfaction as consequences of major security and privacy breaches suffered by the business or government organizations that they deal with.

According to the survey, the nature of the threats plaguing businesses has changed. While respondents report that the number of computer virus attacks, network attacks and denial-of-service attacks are all down an average of 11 percent in the 12 months preceding the 2008 survey, as compared against the data collected in 2006, the findings also reveal that the number of internal security breaches - those that come from within the organization - have increased from 42 percent in 2006 to 44 percent. Even more significant is the increase from 15 percent of the respondents reporting internal breaches in the 12 months preceding the 2003 survey to 44 percent today.

“U.S. businesses and governments recognize it doesn’t take much to shake consumer confidence, and they recognize the need to do all they can to assure consumers and constituents,” said Lina Liberti, vice president, CA Security Management. “Businesses used to worry about the hackers and thieves launching denial of service attacks from outside the firewall, now they recognize that their greatest danger lurks within the organization. The good news is that increasingly businesses are turning to identify and access management solutions to ensure that confidential data is safeguarded and available only to the people within the organization who genuinely need to have it.”

The survey indicated that the number of organizations planning to roll out identity and access management solutions in the next 12 to 18 months increased 11 percent, moving from 49 percent in 2006 to 60 percent in 2008.

Personal information at large

A number of Americans reported that they have fallen victim to theft of their personal information, like their Social Security Number or credit card information. Of those polled, 22 percent said they have experienced personal information theft and nearly half (48 percent) said they know someone who has had their personal information stolen.

Spending on data security
The CA survey also revealed that a significant majority of consumers feel that businesses and governments do not spend enough on improving online security and privacy:
72 percent think retailers do not spend enough on online security and privacy.
68 percent think the governments do not spend enough on online security and privacy.
58 percent think major financial institutions do not spend enough on online security and privacy.
Their suspicions are not unfounded: an average of 32 percent of U.S. security executives believe that the investment their company makes in security is inadequate.

Wednesday, July 16, 2008

Interchanging as H.R 5546 Passes 19-16

NEW YORK (Associated Press)

House lawmakers are moving to mandate that credit card companies negotiate the fees they charge merchants for electronic transactions, escalating an intense battle between the credit card industry and retailers.

A bill passed Wednesday by the House Judiciary Committee on a 19-16 vote is backed by retailers, who accuse Visa Inc. and MasterCard Inc. of levying excessive fees. Card company executives counter that the legislation would simply push more of the cost onto consumers. (Editor's Note: Agreed!)

The so-called interchange fee, which Visa says averages about 1.6 percent, differs depending on the merchant and type of card.

The fees are set by Visa and MasterCard but are collected by the merchant's bank as part of a larger charge for processing the transaction. The credit card companies say they don't receive revenue from the fees.

Retailers complain the fees are set collectively by the credit card companies and large banks and are presented to merchants as a "take it or leave it" offer. Visa- and MasterCard-branded cards account for 80 percent of the credit card market.

Steve Pfister, senior vice president for government relations at the National Retail Federation, called the bill "a sensible solution to an escalating problem that's costing consumers more every day."

But Josh Floum, Visa's general counsel, said in a prepared statement that the bill "would mandate unnecessary regulatory intervention into a fiercely competitive industry that is benefiting consumers, merchants and financial institutions."

Edward L. Yingling, chief executive of the American Bankers Association, agreed and said the bill "is simply an effort by the merchant community to have government step in to reduce their cost of doing business."

The Merchants Payments Coalition (MPC) issued the following statement in response to the House Judiciary Committee passing the Credit Card Fair Fee Act, H.R. 5546, today. The Committee voted 19 to 16 in favor of the Act.

“We applaud the House Judiciary Committee’s leadership with the passage of the Credit Card Fair Fee Act of 2008, H.R. 5546. Today’s victory is a landmark decision that reaches far across party lines in reining in Visa and MasterCard’s stranglehold over merchants and consumers alike.

The Committee issued a loud, bipartisan wake-up call to credit card and financial services industry with the reporting of H.R. 5546, which they boasted would never see the light of day.

The Committee not only reported the bill with 10 Democrats and 9 Republicans voting to report it, but defeated every poison pill amendment by similar bipartisan margins." H.R. 5546 would end the anticompetitive practices of hidden credit card interchange fees, which cost Americans $42 billion last year.

We are encouraged by this momentum and effort by lawmakers to create transparency in the credit card marketplace and bring disclosure to everyone. We look forward to the Senate joining the House soon and to a strong floor vote on behalf of America's merchants and consumers.”

The Merchants Payments Coalition (MPC), UnfairCreditCardFees.com, is a group of retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses who are fighting against unfair credit card fees and fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition’s member associations collectively represent about 2.7 million stores with approximately 50 million employees. For further information, please visit

http://www.unfaircreditcardfees.com

Update on H.R. 5546

The HomeATM PIN Debit Blog continues to track legislation (H.R. 5546) designed to give business owners leverage in negotiating fees associated with credit card transactions. The House Judiciary Committee is in session to mark up the bill today, July 16.

Each time a consumer uses a credit or debit card to purchase something, the merchant is charged a fee on the sale. The money goes to the merchant’s bank, the consumer’s bank, and the credit company. H.R. 5546 would give merchants a seat at the table in determining those fees, which supporters of the bill say are too high.

If costs are reduced for merchants, as the proposal anticipates, it is unclear how lawmakers can ensure merchants’ benefits will be passed on to consumers. Some lawmakers are asking “how do we know that an oil company will not pocket any cost savings without reducing the price at the pump?” Further, lawmakers are also concerned that disrupting the existing system of default “interchange rates” under which payments are made by a merchant’s bank to a consumer’s bank, will provide disastrous for small banks and credit unions.

The legislation would create a limited antitrust immunity for merchants to negotiate fee agreements. If talks result in a stalemate, both sides would have to enter binding arbitration overseen by a panel of judges appointed by the Justice Department and the Federal Trade Commission.

The percentage is currently set by credit card providers, generally Visa or MasterCard, and averages 1.75 percent of a purchase. In 2006, it has been reported interchange fees amounted to $36 billion, up 117 percent since 2001. Last year, the fees amounted to $42 billion and are passed on to consumers in the form of higher prices for goods and services. Visa lowered interchange fees on gasoline sales last month after MasterCard capped its fees for gas purchases of more than $50. No word on what action American Express may have taken.
Critics of the legislation, such as MasterCard, contend it would set price controls. MasterCard officials told the House Judiciary Committee’s antitrust task force at a hearing in May the existing system is an efficient one and the bill would create price controls that would harm card services offered to consumers. It appears now that the Justice Department, the Federal Trade Commission, the Pentagon Federal Credit Union, and others have now come out and criticized the legislation.

I have learned a manager’s amendment is underway that would replace the panel of judges with Justice Department oversight, but would maintain the antitrust exemption for retailers. It is unclear where this legislation is headed, and the HATM Blog will continue to provide updates as information becomes available.

If you'd like to watch the hearing, click the link below: (requires Real Player)

Full Committee Markup of H.R 5546

Interchange, Duopoly's and Politics...Oh My!

As the House Judiciary Committee meets today to consider a mark up of H.R. 5546, the "Credit Card Fair Fee Act of 2008," many credible organizations and regulatory bodies have voiced significant concerns about this legislation.

The Department of Justice (DOJ), in a letter to U.S. Rep. Lamar Smith (R-TX), wrote that the establishment of the three-judge electronic payments panel raises constitutional concerns, that it would harm competition and consumers, and "cannot replicate the flexibility that is found in the free market." Editor's Note: Agreed!

In a letter to U.S. Rep. John Conyers (D-MI), the Pentagon Federal Credit Union shared its concern over the legislation, which it believes would increase costs and decrease card awards programs for its members, while merchants pocket the savings. Further, the letter underscores that "government controls involving the establishment of a very complex pricing regime would in our estimation more advantageously be informed by America's free market system."

I agree, as my take on the subject is simple. Alternative Payments exist for a reason. For example...online retailers can lower their interchange fees by up to 100 basis points by simply switching to an alternative payments system, such as the one offered by HomeATM. The only reason I see for involving a governmental body is when unfair competitive practices preclude a free-market system.

I know the free market is already "riddled" with bullets of regulation, but, nontheless, riddle me this? As long as payment options such as HomeATM are on the table, why on earth would anyone want our free market system crippled with government regulation?

Nordstrom's Executive VP, Kevin Knight may have said it best when he told the Judiciary Committee in a letter that Nordstrom believes that interchange fees represent "a fair price for the services we receive," adding that "we prefer market competition to regulation."

Editors Note: Call me a PIN Head by I consider Mr. Knight to be a Patriot! (and a man who doesn't go crying to Mommy everytime things don't work out...as it seems the NACS and NRF are doing). Here's a great(and juicy) story from POLITICO on the subject of today's hearing:

On credit card fees, blame game begins

By: Chris Frates July 15, 2008 04:47 PM EST

The nation’s retailers have found some fresh, sympathetic faces to help them lobby Congress to rein in credit card fees: gas station owners. The small-business people have descended on Capitol Hill to explain how credit card fees tied to skyrocketing gas prices are crushing their profit margins. And while the politically poignant pitch might grab headlines, it’s got one big problem: It’s not true, (according to the financial services industry).

More than a year ago, MasterCard capped its fees and charged only on the first $50 of gas pumped; anything over that was fee-free.

But those savings were not passed along to gas stations or their customers, leaving lobbyists to accuse oil companies of pocketing the difference.

“Big Oil has been picking the pockets of their franchisees, blaming Visa and MasterCard for the theft and encouraging their aggrieved small-business owners to visit Capitol Hill with the message that it is the banks, and not Big Oil, that have wronged them,” said a Republican financial services lobbyist.

The American Petroleum Institute said it was not privy to the details of business arrangements among card companies, retailers and suppliers. But the charge did not sit well with merchants. “This has nothing to do with Big Oil. They’re (Visa/MasterCard) trying to deflect the criticism from them to someone they perceive has as bad a public image as they do.

This is about Main Street vs. Wall Street,” said Lyle Beckwith, chief lobbyist for the National Association of Convenience Stores. Gas stations have not seen a cap on the fees, which has prompted Beckwith’s organization to question whether MasterCard even implemented its cap.

In fact, about 40 percent of the nation’s gas stations couldn’t have been cheated by the oil companies, as the financial industry claims, because they aren’t branded franchises. It’s a fight that has both sides blaming industries that everybody loves to hate. The merchants have tried to paint the fees as gouging by greedy credit card companies, which, in turn, have charged oil companies with skimming money from their retailers. It’s a classic Washington story: two major industries fighting over the bottom line.

One thing both sides agree on is that the battle is over far more than the fees paid by gas stations. The charges, called interchange fees, are paid by all retailers each time a customer swipes a Visa card or MasterCard. Merchants are upset because they have no say in how the fees are determined, even though it makes up the bulk of the card processing fees charged by their banks. MasterCard and Visa set the interchange rate to reimburse the customer’s bank for sending payment to the merchant’s bank.

The fee helps cover some of the risk that the customer won’t repay the bank. Neither MasterCard nor Visa profits from the fee, industry officials said. (say again?)

The merchants complain that MasterCard and Visa have a virtual duopoly. To inject competition into the market, retailers are pushing legislation to grant them an antitrust exemption to directly negotiate the interchange rate with the credit card companies. If an agreement is not reached, the parties would submit rules and rates to a three-judge panel to choose the plan that best reflects a competitive market. The financial services industry opposes the move because it would give the nation’s 9 million retailers the power to collude and dictate the interchange fee. Besides, industry lobbyists argue that competition already exists in the market. If the companies set the rate too high, merchants won’t accept their cards. If the rate is set too low, banks won’t offer the cards to their customers. The two constituencies together are a built-in equalizer.

The debate has sparked a huge lobbying campaign marked by Capitol Hill visits and briefings, coalitions and ad campaigns.“You essentially have the entire financial services industry working against these bills,” said Scott Talbott, chief lobbyist for the Financial Services Roundtable, which represents 100 of the nation’s leading financial services firms. Last month, the Roundtable held a briefing for about 50 congressional staffers and flew in executives from banks and credit unions for 33 office visits. When Congress held a hearing on the bill in May, the Roundtable spent about $75,000 on print advertising. The financial services industry argues that the legislation doesn’t require retailers to pass any negotiated savings to consumers.“They want all the wonderful things that come with a vibrant electronic payment system and the millions of customers who see the value in using credit and debit cards, they just don’t want to pay for it,” said Jason Kratovil, a lobbyist for the Independent Community Bankers of America.

A balanced interchange fee is what allows a $100 million community bank to offer the same cards as a behemoth like the $1.7 trillion Bank of America, Kratovil said. If the government steps in to help merchants depress that rate, smaller banks will no longer be able to cover the cost of offering the cards, which means fewer choices for consumers.

But the merchants argue that they’re not asking the government to set prices but to allow them to negotiate. National Retail Federation Senior Vice President Mallory Duncan, chairman of the Merchants Payments Coalition, argued that giving retailers the ability to negotiate a lower fee would allow them to pass along the savings to consumers through lower prices.

The allegation that merchants would pocket the difference is untrue, he said, because retail is “the most competitive industry in America,” with an average after-tax profit margin of 2 percent. Visa and MasterCard “have, for years, had thousands of banks acting as a cartel to set this system up,” Duncan went on. “For them to have to face mano a mano competition sounds like they doth protest too much.”

In fact, by capping their fees on gasoline purchases, Visa and MasterCard have “implicitly acknowledged that their interchange fees are driving up the cost of gas,” he said.“What they haven’t said is that it’s driving up the cost of food, the cost of clothing, the cost of vacation travel, everything else that consumers purchase is being driven up by the cost of these exorbitant credit card fees.”

That argument is wrongheaded, according to Visa spokeswoman Randa Ghnaim. There’s a cost to accepting credit cards just as there is for accepting cash and checks, she said. Industry officials said Visa and MasterCard capped gasoline fees because the companies understand that station owners make only about a dime on each gallon of gas, no matter how much a gallon costs. They hoped the savings from reduced fees would be passed on to consumers. Still, when gas prices rise, so does the amount of risk banks are taking when they loan their customers the money to pay at the pump, said Peter Madigan, executive director of the Electronic Payments Coalition.

© 2008 Capitol News Company, LLC

Groundbreaking Joint Effort or Careful What You Wish For?

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In a groundbreaking joint effort by the nations fastest growing union and trade associations representing merchants, the Service Employees International Union (SEIU), Food Marketing Institute (FMI), National Association of Convenience Stores (NACS), and the National Grocers Association (N.G.A.) sent a letter to every Member of the House of Representatives today calling on Congress to stop the nations biggest banks and credit card companies from continuing abusive practices which harm American consumers and businesses.

The groups jointly urged Congressional action to pass the Credit Cardholders Bill of Rights Act of 2008 (H.R. 5244), the Credit Card Fair Fee Act (H.R. 5546 and S. 3086), and the Credit Card Interchange Fees Act of 2008 (H.R. 6248).

I know the free market is already riddled with regulation, so riddle me this...As long as options such as HomeATM are on the table, why on earth would anyone want our free market system crippled with government regulation? Nordstrom's Executive VP, Kevin Knight may have said it best when he told the Judiciary Committee in a letter that Nordstrom believes that interchange fees represent "a fair price for the services we receive," adding that "we prefer market competition to
regulation."John B. Frank, HomeATM PIN Debit Blog, Jul 2008

The biggest banks have put working families and the economy on a rollercoaster -- but regulators arent paying enough attention to make sure it doesnt go off the track, said Stephen Lerner, Director of the SEIU Private Equity Project. Lawmakers and regulators have to act before the fees and bad practices hurting consumers derail the economy altogether.

The abuse of American consumers and businesses by credit card companies and big banks needs to end, said John Motley, Senior Vice President, Government and Public Affairs of FMI. It is time for Congress to Act.

By combining the market power of all of the big banks, the credit card companies have the ability to dictate their terms to everyone, said Lyle Beckwith, Senior Vice President,Government Relations of NACS. They abuse businesses -- large and small -- in just the same ways they abuse individual cardholders. The ever-changing credit card terms and mystery fees hit everyone.

Credit card abuse is incredibly frustrating for our members, said Tom Wenning, Senior Vice President and General Counsel of N.G.A. They see how much money is taken out of their businesses in credit card fees and then they see the high rates and fees they get hit with as individual consumers. The credit card companies hit all of us twice -- and many people dont even know it.

Last year alone, banks made $42 billion in interchange fees. The top 10 banks issued 88 percent of the credit cards and made the vast majority of those fees. The biggest banks in the country have recently come under fire for abusive banking practices such as increasing credit card interest rates, high overdraft and late fees and rising costs of consumer products.

Members of Congress introduced bills that will help protect consumers and retailers from the banks and credit card companies continued abuses. Rep. Carolyn B. Maloney (D-NY), introduced The Credit Cardholders Bill of Rightson February 7, 2008; Rep. John Conyers (D-MI) and Rep. Chris Cannon (R-UT) introduced the Credit Card Fair Fee Acton March 6, 2008; Sen. Richard Durbin (D-IL) and Sen. Christopher Bond (R-MO) introduced the Senate companion to the Credit Card Fair Fee Acton June 5, 2008; and Rep. Peter Welch introduced the Credit Card Interchange Fees Act of 2008on June 11, 2008.

The text of the letter sent to the House of Representatives follows:

The biggest banks and credit card companies have used the power they wield in the marketplace to push unfair business practices that are costing our members -- retailers and working families -- tens of billions of dollars each year.

The credit card industry has moved steadily over the last several years to impose more burdensome penalties and fees on cardholders -- ratcheting up interest rates as high as 30 percent. At the same time, the industry has dramatically increased credit card interchange fee revenues. All banks charge the same schedule of fees which drives up the costs of nearly everything consumers buy, including necessities such as gasoline and food, and removes the competitive pressure to reduce the fees.

Each year, these banks flood our mailboxes with 9 billion pieces of junk mail promising cheap, easy credit. The banks then make all of us pay for these billions of offers -- without us even knowing it -- by using part of the more than $40 billion they collect annually in interchange fees. These fees are nominally paid between banks but are actually passed on to merchants and, ultimately, to consumers. These fees are tremendously regressive because credit card industry rules make sure they are hidden in the prices of goods and services so that cash shoppers have to pay for them just like premium rewards credit cardholders.

The federal agencies that are responsible for protecting American consumers from the credit card industrys worst abuses have failed to use their authority to stop the anticompetitive and deceptive and unfair practices that have become standard in the industry. It is now time for Congress to step in and begin to restore fairness in the financial marketplace for working families and merchants.

With that in mind, we urge you to support three pieces of legislation that would begin to reform this industry. These are: -- The Credit Cardholders Bill of Rights Act of 2008, H.R. 5244, sponsored by Rep. Carolyn Maloney (D-NY); -- The Credit Card Fair Fee Act of 2008, H.R. 5546, sponsored by Reps. John Conyers (D-MI) and Chris Cannon (R-UT) and S. 3086 sponsored by Senators Durbin (D-IL) and Bond (R-MO); and - The Credit Card Interchange Fees Act of 2008, H.R. 6248, sponsored by Rep. Peter Welch (D-VT).

These pieces of legislation are important steps forward in ending the abusive credit card practices that drain billions of dollars from working families and retailers each year. We urge you to support these bills and quickly pass them.

About the Organizations

SEIU
The Service Employees International Union (SEIU) is the fastest- growing labor union in North America, with 1.9 million members. Together with consumer advocacy organizations nationwide, were working to hold big banks accountable to working families and our communities.

FMI
Food Marketing Institute (FMI) conducts programs in public affairs, food safety, research, education and industry relations on behalf of its 1,500 member companies -- food retailers and wholesalers -- in the United States and around the world. FMI's U.S. members operate approximately 26,000 retail food stores and 14,000 pharmacies. Their combined annual sales volume of $680 billion represents three-quarters of all retail food store sales in the United States. FMI's retail membership is composed of large multi- store chains, regional firms and independent supermarkets. Its international membership includes 200 companies from more than 50 countries. FMI's associate members include the supplier partners of its retail and wholesale members.

NACS
NACS, the association for convenience and petroleum retailing, is an international trade association representing more than 2,200 retail and 1,800 supplier member companies. The U.S. convenience store industry, with over 146,000 stores across the country, posted $577.4 billion in total sales in 2007, with $408.9 billion in motor fuels sales.

N.G.A.
N.G.A. is the national trade association representing the retail and wholesale grocers that comprise the independent sector of the food distribution industry. An independent retailer is a privately owned or controlled food retail company operating a variety of formats. Most independent operators are serviced by wholesale distributors, while others may be partially or fully self- distributing. Some are publicly traded but with controlling shares held by the family and others are employee owned. Independents are the true entrepreneurs of the grocery industry and dedicated to their customers, associates, and communities. N.G.A. members include retail and wholesale grocers, state grocers associations, as well as manufacturers and service suppliers.

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