Mobile Payment Industry News

Thursday, October 16, 2008

Happy Birthday! The Green Sheet Turns 25!

Editor's Note: When I read that Paul Green's "Green Sheet" was turning 25 this week, first, I couldn't believe it and second, I had to post about it. I've been receiving the Green Sheet since 1996...that's a dozen years already! Whether you're in the payments industry or not, The Green Sheet is a great publication. Paul Green has done a tremendous job with the magazine through the years. And there's no denying what it is when you see one lying on someone's office desk, with it's trademark all green color. Heck of a branding strategy too.

He featured one of the company's I co-started with a Mr. Craig Tims, Hot Off The Press: Merchant's Getting P.A.I.D. which I aptly named P.A.I.D (an acronym for Payment Authorized Instantly Debited). I say aptly because it converted a potentially very bouncy paper check into a "one-time/real-time" debit transaction. Yes, that was back before banks figured out how much money they'd make by approving transactions in DDA accounts that didn't contain sufficient funds and then charging $30+ bucks a pop to their customers.

Back then, the way it worked was if there wasn't enough money in the account to pay for the transaction the EFT networks actually declined the transaction due to insufficient funds...or approved them which guaranteed the merchant they would "Get P.A.I.D" Easiest Sale Pitch in the world. Want to Get P.A.I.D? Should've never sold it to Pay By Touch. Should've just included the CheckElect/RCK biz in the sale and kept that one.

Ironically, and I say ironically, because throughout the years, not too many companies have been a "Featured Company"...not even Pay By Touch made the grade...The Green Sheet also did a "Company Profile on HomeATM, which you can find here: Homing in on E-Commerce

GS always makes for interesting reading and I looked and continue to look forward to every issue...especially the Quarterly's. (I like the colors!) So Happy 25th Birthday to The Green Sheet and congratulations to Mr. Paul Green!

The Green Sheet turns 25

he Green Sheet celebrates its 25th anniversary this month. Said like that, you wonder where the time went.

It all began in October 1983 when payments industry pioneer Paul H. Green founded The Green Sheet as a four-page monthly newsletter produced by a staff of two. It was reproduced on a copy machine and distributed to American Marketing Corp. (Amcor) sales reps as a resource and tool to support them at their jobs.

Remember, Amcor was the first ISO in the United States, founded by Paul in 1982. With the vision of building a network of ISOs across the nation, Amcor was also the first Super ISO. In its first year of operation, Amcor sold $1.5 billion – yes, with a "b" – of new bankcard business. Paul's position within the payments industry and his passion for the craft of honest selling made him ideally suited to deliver timely news and opinion about the industry.

As with most overnight successes, it took almost 10 years before The Green Sheet expanded its readership base beyond Amcor reps to reach a much wider audience of over 1,100 ISOs and nearly 150 individuals.

In March 1994, Paul's now ubiquitous “Good Selling” signature appeared for the first time in the newsletter. About a year later, distribution of The Green Sheet had grown from 300 copies per week to 2,200; the content had expanded to six pages; and it became a biweekly publication now received by thousands of sales professionals, ISOs, third party service providers and even banks.

In the first April 1994 issue, the influential Resource Guide made its first appearance. A few months later, the letters to the editor feature debuted with one letter. By 1995, The Green Sheet had gone "hi-tech" with an e-mail address through America Online.

But The Green Sheet was only getting started. A full blown Web site soon followed. April 1997 ushered in the first issue of the newsletter to include paid advertising.

To read the entire article, take a moment to visit Paul Green's "The Green Sheet" You'll be glad you did!

You Say You Want a Revolution?

Revolution Money has announced that RBS WorldPay (formerly RBS Lynk) will be offering RevolutionCard as a payment option to its merchants. According to the companies, the agreement extends the RevolutionCard network to nearly 300,000 online and physical merchant locations.

In August 2008, RBS WorldPay began processing RevolutionCard's PIN-based transactions for participating merchants. Merchants will be charged absolutely no interchange fee and a nominal 0.50% transaction fee - saving them up to 80% in transaction fees compared to other payment brands. The PIN-based security benefits of the RevolutionCard also help reduce merchant expenses associated with disputes, chargebacks and unauthorized transactions.

In addition to lowering a merchant's cost per transaction, and enhancing the scope of both national and local merchants' selection of electronic payment solutions alike, RBS WorldPay and Revolution Money have joined to provide a first-of-its-kind Independent Sales Organization (ISO) program that will enable ISOs to offer this new payment vehicle.

"RBS WorldPay is committed to providing the widest array of payment options to its clients," said Ian Drysdale, senior vice president of Market Development for RBS WorldPay. "Revolution Money's groundbreaking solution addresses two of the paramount concerns for any merchant: reducing the cost of payment acceptance and reducing the incidence of fraud."

Jason Hogg, (Editor's Note: I've heard Mr. Hogg is a capitalistic pig...like me:-) Revolution Money's Founder and CEO, added, "We're excited to supply RBS WorldPay's merchants with RevolutionCard's low fees, customer loyalty opportunities and exceptional security features. With the development of an ISO program, this relationship brings us one step closer to reaching 1 million merchant locations in the U.S. that accept RevolutionCard."

CAIMR - Center for Applied Identity Management Research

Secret Service, IBM, Others Form Alliance - Desktop Security News Wire - Dark Reading

Secret Service, IBM, Others Form Alliance
Corporate, government, and academic leaders unite to fight cybercrime, identity theft, and other identity management challenges

OCTOBER 16, 2008 | WASHINGTON -- An unprecedented coalition of leading corporate, government and academic institutions today announced the formation of the Center for Applied Identity Management Research (CAIMR). CAIMR is focused on developing research and solutions for society’s most daunting identity management challenges such as cyber crime, terrorism, financial crimes, identity theft and fraud, weapons of mass destruction, and narcotics and human trafficking. The Center is the first of its kind to bring cross-disciplinary experts in criminal justice, financial crime, biometrics, cyber crime and cyber defense, data protection, homeland security and national defense to address identity management challenges that impact individuals, public safety, commerce, government programs and national security.

CAIMR’s founding members represent an extraordinary alliance of non-profit, public sector and corporate institutions including: Indiana University, U.S. Secret Service, LexisNexis, IBM, Cogent Systems, Visa and Intersections. Dr. Gary R. Gordon, a nationally recognized expert in economic crime and a Senior Scholar in Identity Management at Indiana University School of Law - Bloomington will serve as Executive Director of the Center. Under their guidance the Center will undertake applied research projects concentrating on the identity management aspects of the following:

* Public Safety: Identity theft, cyber crime, computer crime, organized criminal groups, document fraud and sexual predator detection
* National Security: Cyber security and cyber defense, human trafficking and illegal immigration, terrorist tracking and financing
* Financial and Corporate Fraud: Mortgage fraud and other financial crimes, data breaches, e-commerce fraud, insider threats and health care fraud.
* Individual Protection: Identity theft and fraud

CAIMR will identify the key challenges, the gaps in knowledge and the research needed to provide solutions to these challenges. Additional members include Fair Isaac, University of Texas at Austin, Wells Fargo & Company, U.S. Marshals Service, Dragnet Solutions, ID Experts, Identity Theft Assistance Corporation (ITAC), Information Technology Association of America (ITAA), and National Center for Missing and Exploited Children (NCMEC).

“CAIMR is a trusted public private partnership of organizations focused on solving some of the nation’s most challenging identity management problems,” said Gary R. Gordon, Ed.D. Executive Director, CAIMR. “As a non-profit organization governed by its partners with a strong affiliation with its host academic institution, Indiana University, CAIMR is uniquely positioned to foster a collaborative applied research environment that brings together the multi-disciplinary talent, resources, data sources, and analytical capabilities to take up this challenge.”

LexisNexis

First Data/Wasau Financial Team for Remittance Processing Agreement

First Data - First Data & Wausau Financial Systems Expand Relationship

DENVER/MOSINEE, WIS., Oct. 16, 2008 - Remittance processing partners, WAUSAU Financial Systems (WFS) and REMITCO LLC, a wholly-owned subsidiary of First Data Corp., have entered into a new agreement that expands WFS' proprietary software solutions into a full service offering.

Under the agreement, WFS will provide multiple levels of service that allow organizations to choose end-to-end remittance processing or a more limited solution that can grow over time. The expanded solution can be used by a number of industries, including financial services, utilities and insurance companies.

First Data, a global technology leader in information commerce, will host the software environment, manage the service facilities, and provide the labor necessary to process the transactions. The agreement also calls for First Data to beta test new WFS product development and new releases and upgrades to the software.

The WFS payments solution is third-party accredited as being best-of-breed by Celent and Aite Group. The WFS remittance solution supports nearly 4 billion transactions annually. REMITCO has used the WAUSAU Financial Systems software within its lockbox network for nearly five years.

"Funding internal resources to keep up with technology advances has proved challenging for both large and small organizations. This expanded relationship provides both corporate and financial institutions with innovative solutions that increase efficiencies and reduce costs, thereby allowing businesses to reinvest capital dollars and grow," said Joe Delgadillo, president and CEO for WAUSAU Financial Systems. "This partnership is now uniquely positioned to provide superior solutions and services to the market and we are pleased to be partnering with First Data to do so."

"With WAUSAU Financial Systems, we saw a tremendous opportunity to build on our existing technology relationship to deliver innovative new technology and expand the services available," said Sally Else, general manager of First Data's Issuing and Payment Services. "This is a great example of First Data's commitment to constantly seek innovation and new technology in all that it delivers to the marketplace

Editors Note: Speaking of Remittance, Look for a Post examining HomeATM's HomeRemittance Program. I personally used this service myself and it's quite interesting. Just need to take a few screenshots and a couple digital shots of HomeATM's SwipePIN device in action and I'll take you through the whole process... JBF

Wednesday, October 15, 2008

Costco E-Commerce Sales Increase 41.7%

InternetRetailer.com

Despite a weak economy, Costco.com has wrapped up another year of strong web sales.

For the 2008 fiscal year, Costco Wholesale Corp. generated web sales of $1.7 billion, an increase of 41.7% from web sales of $1.2 billion in fiscal 2007.

Good News/Bad News Editors Note:

Had Costco offered HomeATM's PIN Debit solution during this past fiscal year...and converted only 35% of their $1.7 Billion in sales to PIN Debit, they would have an extra few million dollars in their coffers right now. PIN Debit is significantly more secure...so it has a significantly lower interchange rate.

How significant? Costco would have saved close to $6,000,000 on Processing Fees! The Bad News is that Visa and MasterCard have their $6 million instead. Now for the Good news...there's always next year! (spoken like the true Cub Fan that I am...)

In comparison, Costco, No. 18 in the Internet Retailer Top 500 Guide , grew total revenue by 12.6% while comparable warehouse sales rose year-over-year by 8%.

For fiscal 2008, Costco posted net income of $1.28 billion on revenue of $72.5 billion vs. net income of $1.08 billion on revenue of $64.4 billion in the prior year. Overall Costco.com accounted for 2% of total sales and drove 6% of the growth in revenue across all channels. “Internet sales for the whole year came in just shy of $1.7 billion, certainly beating our own budget,” Costco chief financial officer Richard Galanti told stock analysts on Costco’s recent year-end earnings call.

Though Costco didn’t break out specific numbers, Internet sales were softer in the fourth quarter, growing year-over-year by 26% compared with 34% in Q4 of fiscal 2007. “In recent weeks we have seen a slight reduction in the average ticket, but not in frequency of transactions,” Galanti told stock analysts. “Our average ticket is over $400 and big-ticket items have certainly slowed.”

Overall In the fourth quarter ended Aug. 31 Costco posted net income of $397.8 million on revenue of $23 billion, compared with net income of $372.4 million on revenue of $20.5 billion in Q4 of 2007.

Costco members are upscale shoppers.

See: Surprise! Affluent "Spend Most"...Time Online

About 74% of Costco.com’s customers are college graduates with annual household income of more than $78,000 and 90% are homeowners. 50% of customers who shop online also are executive members who pay a higher annual fee for perks such as annual rewards and lower prices on services such as check printing, auto financing and long-distance phone service.

Costco ended fiscal 2008 with 7.6 million members and membership fee revenue of $1.5 billion. But Costco’s affluent shoppers are being more economical. “Our members are coming in and being a little bit more disciplined,” Galanti told stock analysts. “They are holding off on buying big-ticket items.”

Web Passes Bricks and Mortar as Preferred Shopping Channel

InternetRetailer.com - Daily News for Wednesday, October 15, 2008

Online becomes shoppers` channel of choice, but not because of price

For the first time, the web has become the preferred shopping channel for multi-channel consumers, surpassing stores, says a new consumer survey from Chicago-based consultants and researchers The E-Tailing Group Inc.

The survey of more than 1,000 adults who shop online four or more times per year and spend $500 or more annually, reports that 49% intend to do their holiday gift buying online while 44% plan to do so in-store.

Of the top five reasons that consumers say they prefer shopping online, four are more important than saving money: 88% shop online to save time, 84% to locate hard-to-find products, 83% to access greater selection, and 83% to avoid crowds at malls. 80% cited saving money.

The survey also reports, however, that 52% of consumers plan to buy fewer holiday gifts this year. The average number of gifts is projected to be down from 16+ last year to 11-15 this year.

Although these consumers plan to buy fewer gifts and spend less for those gifts, 72% vs. 65% in 2007 plan to research products online before purchasing. 91% plan to purchase the same number or somewhat more gifts online, equal to last year`s spending level.

The No. 1 reason consumers don’t buy more online is the cost of shipping, the survey reports. “Setting a fair policy then monitoring it competitively and across the industry will be even more important during this cash-challenged holiday season,” the report says.

The survey was sponsored by e-commerce technology provider Art Technology Group Inc.

Tuesday, October 14, 2008

Discover To Make a Killing and I'm Lovin' It!

About four months ago I blogged about Discover's $6 Billion lawsuit against the duopoly called Visa and MasterCard. Here's a direct quote from that post:

"MasterCard's settlement with AmEx is only Part One. Lloyd Constantine is heading up Discover's antitrust lawsuit and is seeking $6 Billion in damages. (Visa said at the time the amount was ``dramatically overstated'' and MasterCard called the suit "baseless.''

Maybe MasterCard might want to look up the word "baseless" in a dictionary. They might also consider the savings derived from representing themselves in court since their attorneys aren't getting "any better "results. Here's a better idea... admit wrongdoing and just pay up. Then consider ceasing and desisting with these types of business practices. After all, Visa and MasterCard have demonstrated this behavior for many years now and their track record in court is dismal."

Even armed with this helpful advice - (and I know they got it because James Issokson, Vice President, Reputation Management, MasterCard International (Hi Jim!:) subscribes to this blog) MasterCard remained "clueless" as to what "baseless" means. So...what do they do? At the very last moment (their modus-operandi, designed to squeeze every last penny from their anti-competitive/unethical practices) as jury selection in this baseless case was set to begin, they decided to settle rather than go to court and risk triple damages.

Never has there been two companies I'd love to see fall on their collective butts more than these two "snakes in the grass." I have my reasons for feeling the way I do and here they are: (from a previous post in this blog)

"How much did Visa and MasterCard profit over and above the settlements by engaging in this type of corporate rogueness? They have been found guilty time after time against "major players" in the industry. These major players (Wal*Mart, AmEX, Discover, etc) are laced with deep pockets and can withstand the enormously expensive and time-consuming process involved with taking these big duopoly boys on. Smaller players such as Pay By Touch, a company of which I was a founding member, aren't as fortunate.

Case in point...Visa and MasterCard both classified" a "more secure" biometric transaction as a "less secure" Card Not Present (CNP) transaction. In reality, a biometric transaction is inherently more secure than a "card present (CP) transaction, let alone a CNP transaction. There's not an analyst alive who would disagree. But Visa and MasterCard did. The end-result of Visa/MC defining biometrics as a CNP transaction was severe in terms of preventing retailer participation. After all, why would a retailer switch to biometrics in order to pay a higher fee than what they were currently paying? They wouldn't, and Visa and MasterCard knew it. That's why retailers like SuperValu only allowed biometrics to be ACH based. V/MC froze us out of the market and it cost PBT (and me) millions. (FYI - Discover provided PBT with a special interchange rate)

Based on the V/MC track record in these anti-trust lawsuits, I'm thinking that shareholders of Pay By Touch should bring a class-action lawsuit against Visa and MasterCard. Better yet, if we could file a "baseless" one maybe in 5 years we'll read an announcement similar to this one...

Visa has reached an agreement in principle with Discover to settle litigation pending since 2004,” Visa said Tuesday. “The specific terms of the settlement are still being negotiated and will be made available when a final agreement has been reached.” MasterCard issued a similar statement.

Based on the fact that pretrial rulings by U.S. District Judge Barbara S. Jones in August were favorable to Discover, the case had base. Looks like MasterCard's comments regarding the case were the only thing that was "baseless" here.

I'm taking a wait and see approach on Visa's position that the $6 Billion was "dramatically overstated" as the terms have yet to be released. But Visa and MC settled with American Express for $4.05 Billion, and I suspect that this amount will be higher...

On a personal note, I've been involved in the payments industry for a long time and it absolutely thrills me to see companies that operate the way this duopoly known as Visa and MasterCard operate take $4 billion dollar hits.

In a post entitled:"There Are Some Things Money CAN buy" I stated that they solved their problem by IPO'ing. I even suggested a new ad campaign for MasterCard:

Screw with Wal Mart: $1.0 Billion
Screw with American Express: $1.8 Billion

Screw with Discover: $3.0 Billion?

IPO to cover damages: Priceless!

Here's the article from the Chicago Tribune...I'll follow up with the amounts that both Visa and MasterCard have to shell out when it's announced. Here's hoping it's the whole $6 Big Ones!

Discover settles antitrust suits against Visa, MasterCard
By James P. Miller | Tribune staff reporter 1:52 PM CDT, October 14, 2008

Discover Financial Services Inc., which has been pursuing antitrust claims against credit-card industry rivals Visa Inc. and MasterCard Inc., reached settlement agreements with both companies as the lawsuit was about to go to trial.

Terms haven't yet been disclosed, but the Riverwoods company has been seeking billions of dollars in damages from the two firms.

Discover hasn't issued a statement yet, but the settlements were disclosed as jury selection was set to begin in a Manhattan federal court.

MasterCard and Visa issued statements confirming that they had reached agreement in principle on an out-of-court accord with Discover and that the parties are discussing specific terms of the settlement. Details will follow the conclusion of those talks, the two companies said.

Discover sued in 2004, alleging that MasterCard and Visa had improperly damaged its business by pursuing a policy in which banks were forced to choose between issuing their cards or issuing cards issued by Discover.

American Express filed a similar complaint against Visa and MasterCard, and those two companies earlier agreed to settle the Amex lawsuit for up to $4.05 billion.

Under terms of its spinoff from former parent Morgan Stanley, Discover will pay Morgan Stanley the first $700 million recovered from the two defendants, and to split 50-50 any amount of the settlement proceeds above $1.5 billion, until Morgan receives a total of $1.5 billion.

Pretrial rulings by U.S. District Judge Barbara S. Jones in August were favorable to Discover, and probably increased the likelihood that Visa and MasterCard would settle, experts said at the time.

While details are scant so far, said Keefe,Bruyette & Woods analyst Sanjay Sakhrani in a report to investors, "we believe there is the potential for Discover to do something with a chunk of the money it receives such as: 1) add to the loan loss reserve and/or 2) using proceeds to spend towards some type of marketing campaign."

Look for Debit Transactions to Dominate Card Payments

The number of debit card transactions has already surpassed the number of credit card transactions, and now, in the midst of the "credit" crisis, issuers have begun to tighten the screws, resulting in lower credit limits. End result? Debit cards will be used more often and they'll be used for higher ticket items, normally reserved for credit cards. This bodes well for companies like HomeATM which can reduce the cost of processing debit transactions on the web. Here's a story that ran this morning on CBS...

Credit Card Terms Taking Turns For Worse, Vera Gibbons On How Issuers Are Tightening The Screws To Protect Themselves - CBS News

(CBS) The impact of ultra-tight credit markets is hitting your credit cards, and you might not even realize it.

On The Early Show Tuesday, financial contributor Vera Gibbons explained that lenders are tightening terms in numerous ways, and you need to be aware of all of them to avoid possible trouble down the road.

Behind the changes is the simple fact that lenders want to protect themselves from bad debt, so they're tightening standards and practices in hopes of avoiding defaults by credit card users.

What are they up to?

LOWER CREDIT LIMITS

This is the biggest and perhaps most ominous change of all -- and something many consumers won't realize has happened to them until it's too late. Here's what's scary: You don't have to "mess up" in order for a company to lower your credit limit. Big companies such as American Express, Bank of America and others say they can and will change terms at any time, based on market conditions and the economy in general. Any "perceived risk" can also lower your limit. That includes a decline in credit scores or late payments on other bills.

How much are credit limits being cut? In some cases, the cuts are big, Some companies are lowering the limit to right above your balance, and as the balance drops (meaning, as you pay off your debt), the credit limit drops, too. That makes it VERY easy to exceed your credit limit.

Credit card companies DO have to inform you that they're lowering your credit limit, but who really reads those small-print pamphlets that come in the mail? Consumers may not know their limit has dropped until they go over it and incur a large fee. Even worse than a fee, however, is how this affects your credit score. When a credit limit is lowered, it appears that you're using a much larger percentage of your available credit. That lowers your credit score, making it more difficult to obtain a mortgage, car loan, or even another credit card.

INACTIVE ACCOUNTS CANCELLED

Something else to keep your eye on: Banks are cancelling un-used -- and thereby, unprofitable -- accounts to eliminate the costs of maintaining those accounts. An inactive card can also be cancelled if your risk profile changes. That also hurts your credit score. Again, you may not realize this is happened. If you just have the card on hand "for emergencies," you're probably not paying any attention to it. But now, more than ever, you want to protect your credit score and keep it as high as possible.

FEWER CARD OFFERS

If you consider all those credit card offers in your mailbox, you'll be glad to hear that companies are sending out fewer solicitations. HSBC has sent out 54 percent fewer offers this year; Citibank, 45 percent fewer. But if you don't have great credit, that's bad news for you. When you get those offers in the mail, it means you've been pre-approved for a card. But if you have to search out cards and apply on your own it can, once again, lower your credit score. Plus, it's simply a pain in the neck, AND it's getting harder and harder to qualify for good cards. You may have to settle for one with a much higher interest rate.

FEWER ZERO-PERCENT OFFERS

Used to be that no-fee, zero-percent credit card offers were a dime a dozen. Carrying a lot of debt? Transfer to one of these cards for free, and pay zero percent interest for a year. Now, if you even qualify, the offers are more likely to be for six months. You're also likely to pay a balance transfer fee of 3 percent or more. If you're looking for a good zero-percent card offer (AND you have good credit), Chase and Discover still have a few deals.

NO SECOND CHANCES

Mess up once and that's it, you're out of luck. Banks won't hesitate to increase your interest rate or impose big fees if you pay late, etc. It used to be that if you were a good customer, you could call and basically apologize, explain your mistake, and ask that the fee be removed or your rate re-adjusted. But no longer. Card companies are holding firm to their punishments, and no amount of cajoling will change their minds.

More on Doctored POS Machines Made in China

Fraud Ring Funnels Data From Cards to Pakistan - WSJ.com

European law enforcement officials uncovered a highly sophisticated credit-card fraud ring that funnels account data to Pakistan from hundreds of grocery-store card machines across Europe, according to U.S. intelligence officials and other people familiar with the case.

Specialists say the theft technology is the most advanced they have seen, and a person close to British law enforcement said it has affected big retailers including a British unit of Wal-Mart Stores Inc. and Tesco Ltd.

The account data have been used to make repeated bank withdrawals and Internet purchases, such as airline tickets, in several countries including the U.S. Investigators haven't pinpointed the culprits. Early estimates of the losses range of $50 million to $100 million, but the figure could grow, said the person close to British law enforcement.

The scheme uses untraceable devices inserted into credit-card readers that were made in China.

The devices selectively send account data by a wireless connection to computer servers in Lahore, Pakisan, and constantly change the pattern of theft so it is hard to detect, officials say.

"Pretty small but intelligent criminal organizations are pulling off transnational, multicontinent heists that only a foreign intelligence service would have been able to do a few years ago," said Joel F. Brenner, the U.S. government's top counterintelligence officer.

U.S. intelligence officials, including senior National Security Agency officials, are monitoring the case, in part because of its ties to Pakistan, which has become home to a resurgent al Qaeda.

The scheme comes on the heels of the August indictment of a fraud ring that stole more than 40 million credit-card numbers from U.S. companies, including TJX Cos., the parent company of TJ Maxx.

In March, security officials at MasterCard Inc. saw a pattern of potential fraud in northern England. Meanwhile, a security guard at a U.K. grocery store noticed suspicious static on his cellphone and alerted authorities. Scotland Yard learned of the report and eventually connected it with the warning from MasterCard, according to the person close to British law enforcement.

Examining the store's credit-card readers, investigators discovered a high-tech bug tucked behind the motherboard. It was small card containing wireless communication technology.

The bug would read an individual's card number and the corresponding personal identification number, then package and store the data. The device would once a day call a number in Lahore to upload the data to servers there and obtain instructions on what to steal next.

A MasterCard spokesman declined to discuss details of the case but said safeguarding financial information is a top priority for the company.

There is no obvious visual indication that a machine has been altered, but those with the bugs weigh about four ounces more. For the past several months, teams of investigators have been weighing thousands of machines across Europe with a precision scale.

So far, investigators have found hundreds of machines in at least five countries: Britain, Ireland, Belgium, the Netherlands and Denmark. They have turned up at European grocery chains including Asda, which is owned by Wal-Mart; Tesco; and J Sainsbury PLC, according to the person close to British law enforcement.

A spokeswoman for Asda said, "It's subject to a police investigation, so we can't comment." A spokeswoman for Sainsbury denied its stores were hit by the scheme. A spokeswoman for Tesco said: "We're aware that this was an issue for retailers." She said Tesco tested its devices and is confident they are now secure.

The device can be told to copy certain types of transactions -- for example, five Visa platinum cards or every tenth transaction. It can also be instructed to go dormant to evade detection. On average, only five to 10 card numbers would be phoned in to Pakistan, the person close to British law enforcement said.

Monday, October 13, 2008

Creating an Advantage in the Alternative Payments Space

The Commoditization Of Alternative Payments

In the past three years, alternative payments have gained considerable market value with no loss of momentum in sight.

Alternative payments currently account for roughly 15 percent of total e-commerce volume. However, by offering a superior value proposition to buyers, alternative payments pose a threat to traditional payment methods. This, according to a new report from Celent, LLC promoting their assessment that the strongest value is derived from the creation of sales lift.

Editor's Note: You think? The trick lies within creating an innovative way to do so. It is my strong contention that the Live Search CashBack program recently introduced by Microsoft has the potential to be sculpted into a true alternative payments masterpiece. Here's a little backgrounder for those unfamiliar with the program...

Reward your Customers with cashback on Purchases

Live Search cashback is a new program that combines the power of Live Search with a comparison-shopping engine to bring consumers some of the best deals on the Web. The program rewards consumers with a cash back rebate for a purchase, and gives advertisers the opportunity to sell on a cost-per-acquisition (CPA) basis.

Both Microsoft and it's Online Retail Participants are providing consumers with a "cashback" loyalty program. But what's missing is a way to provide participating online retailers with a cashback program of their own. (to help offset the costs.) I believe HomeATM's PIN Debit Solution when properly placed can emerge as the missing piece to this puzzle.

HomeATM significantly reduces the cost of processing web based transactions conducted via the CashBack platform.   By simply providing a "SwipePIN" device to consumers who sign-up for the Cashback program, MS would be "enabling" them to purchase using their PIN's. (thereby significantly reducing the cost of the transaction) Those savings, in turn, offset some of the costs of the cashback program. It's perfect harmony. Microsoft provides cashback to consumers and HomeATM provides cashback (in the form of a significant reduction in processing costs) to Internet Retailers.

So how do we get consumers to start swiping and entering their PIN numbers?   Offer them the SwipePIN device FREE...as a reward for signing up. (we could charge them $2.95 shipping to offset some of our costs)

MS creates further incentive to get consumers to participate by offering higher "cashback" percentages to those who utilize HomeATM's more secure SwipePIN device. Think of it as a "platinum" vs. a "gold" rewards platform. Platinum rewards go to those who use the "SwipePIN" device.

The consumer wins because it's a more secure transaction, the Internet Retailer wins because they can save up to 100 basis points, Microsoft wins because it drives participation and, of course, HomeATM would benefit mightily as well. More on all of this later... I just got going because I happen to agree that an alternative payment differentiation that provides an advantage over others is an alternative payment that creates a sales lift.

Back to the article:

In less than a decade, alternative payments have evolved from "dot bomb" burnouts to widely accepted, widely recognized forms of online payment, Celent notes.

Alternative players' business models once relied on their solutions' status as "something new" or the only way to pay in a particular online environment.

However, they now focus on providing greater value than payment cards. Card brands and issuers stand to forgo $345M in volume in 2010 and about $1.7 B in volume in 2015 to alternative payment.

Given cards' historical dominance over online payments, this market is the card industry's to lose, Celent says. Every time a bank account is debited via ACH rather than a card, the card industry loses roughly 1.5 - 2.4 percent or more of the transaction size.

The card industry must pay attention to alternative payments, which can be categorized as enablers, quasi-disruptors, or disruptors, in order to prevent further losses.

Enablers offer a technological "wrap around" for payment cards that lead to increased card volume when cards are used as the source of funds, Celent found.
Quasi-disruptors are players that allow for both cards and other funds sources (e.g., bank accounts) to be used. Should bank accounts be used instead, these same players take on disruptive qualities
Disruptors are solutions in which the card industry plays no role whatsoever.

However, the outlook is not entirely rosy for alternative payments. "Alternative payments players have already become commodities in terms of security, convenience and pricing.

The real differentiator is their ability to induce purchases and affect a corresponding sales lift.

"The greatest threat to the card industry is a disruptive alternative payments solution that has figured out how to increase online merchants' sales." "The spoils will go to those players who understand that their role is no longer simply making shoppers able to pay. Instead, such players realize that, going forward, they must make shoppers want to pay," he adds.

SOURCE: Celent, LLC

World Bank Hacked

World Bank Hacked, Sensitive Data Exposed - Desktop Security News Analysis - Dark Reading

The World Bank Group has been hit by a series of hacker attacks on its network over the past few months, possibly exposing sensitive data held by the anti-poverty agency, according to a published report.

A WBG spokesperson acknowledged in the report that the agency had “repeatedly experienced hacking attacks on its computer systems,” but that no hackers had “accessed sensitive data in its treasury, procurement, anti-corruption, or human resources departments” as FoxNews.com reported Friday.

According to the FoxNews.com report, World Bank employees have been ordered to change their passwords three times in the past three months in the wake of the attacks, which spanned somewhere between 18 and 40 of its servers in multiple hacks, which began last year. The published report says there were six major break-ins in the past year, and that at least five servers containing sensitive data were exposed. FoxNews apparently obtained an internal email message and memos from the World Bank in response to the attacks that illustrate the complicated series of events and the agency’s response to them.

The revelation of breaches at the World Bank could not come at a worse time given the global financial crisis, but security experts say the hacks were coincidental and unlikely to be tied to the economic developments. The World Bank provides financial and technical assistance to developing countries, and includes 185 member nations on its board.

“We really don’t know at this moment what information was stolen,” says Graham Cluley, senior technology consultant for Sophos. “It’s just as possible that it was a bunch of college kids breaking into something they shouldn’t be as [it is for] some political or financial motivation. At the same time, economic and financial institutions basically bleed because of a [loss] in confidence and trust....

What Online Shoppers Research Before They Buy

What Do Shoppers Research on the Web? - eMarketer

What Do Shoppers Research on the Web?
OCTOBER 13, 2008

Examining the pricey stuff online

A growing body of market research shows the rising impact of Internet research on store spending. Many consumers prefer to shop for high-touch and expensive products in stores where they can feel items and talk in person with a sales associate.

A survey of what Internet users worldwide ages 16 to 54 research reveals several pricey items at the top of the list. Besides travel, more than one-half of respondents researched consumer electronics—and subsets such as digital music players and mobile phones—according to data released in September 2008 by Universal McCann.

Products and Services that Active* Adult Internet Users Worldwide Have Researched Online, 2008 (% of respondents)

Consumers have researched electronics online for years. In October 2007, STORES magazine published results of a study of online shoppers in the US conducted by BIGresearch and sponsored by Microsoft. Respondents named electronics at the top of the list of products they researched online before purchasing in a store.

Products that US Online Shoppers Have Researched Online before Purchasing in a Store*, 2007 (% of respondents)

The impact of online product research is greater on store sales than Web sales. In 2008, Web-influenced store sales will reach $625.2 billion, eMarketer forecasts. From 2007 to 2012, online-influenced store sales are expected to grow at a 19% average annual rate. By 2012, every $1 of online sales will equal about $4.68 in store sales influenced by the Internet.

Sunday, October 12, 2008

Ouch! Card Swiping Devices Now Being Doctored During Manufacturing

Image via WikipediaIt's bad enough when point of sale (POS) devices are tampered with at the physical retail location, but now it's getting a little ridiculous. Now... there's reports that the some POS devices are being doctored (by adding circuit boards which can transmit cardholders data to 3rd parties) during the manufacturing of the devices. They actually weigh 3 or 4 more ounces with the additional boards. It's still unclear whether the circuit boards were added "during the manufacturing" process or "shortly after leaving the production line.

Conclusion? This is getting downright scary and certainly supports the reasoning behind getting one of HomeATM's SwipePIN devices and shopping in the safety of your own home!

Here's a couple stories from the U.K. newspapers on this latest development...

Credit card scam: How it works - Telegraph

The gang is understood to have added tiny circuit boards to chip and pin machines during or shortly after the manufacturing process. Three circuits embedded in a metal card were added, enabling the machine to transmit a credit or debit card’s details to a third party.

The first circuit is designed to copy the card’s details and pin number before the device has time to encrypt the information. The second takes that information, encrypts it and stores it in a buffer. The third circuit acts as a tiny mobile phone transmitting the stored data to a computer in Lahore, Pakistan, where it is decrypted.

The stolen data is then used to make cloned cards. A source close to the investigation said: “In some cases it called in once a day, in others as little as once a week. It would say to the computer: here are the 50 card details I’ve stolen this week. How many and what type do you want me to steal next?

“It would then receive new instructions and act on them. It would act like a tick: it would continually sift blood without necessarily being noticed by its host.” To remain discreet, the criminals would tailor the sums they stole to the type of store a corrupted machine was operating from. “If it ended up in a small shop that only did a few thousand pounds of business a week, they would probably keep the amount of money drained very small. Whereas if a machine ended up in a high-value electronics store, they could crank it up and make it steal more money,” said the
source.

Organized crime tampers with European card swipe devices • The Register

Customer data beamed overseas
By Austin Modine • Posted in Crime, 10th October 2008 21:21 GMT

Hundreds of card swipers used by retail stores across Europe are believed to have been tampered by organized crime syndicates in China and Pakistan, according to US National Counterintelligence Executive Joel Brenner.

Brenner told The Daily Telegraph that criminals have doctored chip and PIN machines either during manufacturing in China or shortly after leaving the production line in order to send shopper credit card account details overseas. The devices were then expertly resealed and exported to Britain, Ireland, the Netherlands, Denmark, and Belgium.

"Previously only a nation state's intelligence service would have been capable of pulling off this type of operation," Brenner told the publication. "It's scary."

Hundreds of devices have been copying credit and debit card details over the past nine months and sending the data by way of mobile phone networks to tech-savvy criminals in Lahore, Pakistan, The Telegraph reports.

MasterCard International has alerted stores in affected areas and determined doctored devices can most easily be revealed by virtue of weighing an extra three to four ounces due to the additional parts they contain. MasterCard first uncovered the plot at the start of the year after detecting suspicious charges to British and other European accounts.

The scam is believed to have resulted in the loss of tens of millions of pounds by criminals creating cloned cards, making phone or internet transactions, or withdrawing cash from the account. The Telegraph reports the thieves usually wait at least two months before using the stolen data in order to make it harder for investigators to determine what happened.

Brenner said the scam should motivate card swipe device makers to not only do more testing, but guard their supply chain in the same way jewelry suppliers do.

Friday, October 10, 2008

Credit Card Processors to Ban WEP in 2010

Credit card processors finally get clue, will ban WEP
By Jacqui Cheng

* Related: Study: stores put customer data at risk with poor WiFi security practices

Companies that accept major credit cards will be barred from using WEP for their WiFi security, but not until mid-2010. The rule is part of new security standards defined and released this week by the Payment Card Industry Security Standards Council, which is made up of companies like Visa, MasterCard, American Express, and Discover. The sad thing is that WEP—which can be cracked in as little as two minutes—is still widely used in the old and decrepit point-of-sale systems used by many retailers; the new rules should help move along the long-overdue adoption of tighter security in credit card processing.

As part of the new Data Security Standard (DSS) agreement, retailers that accept credit cards from PCI council members may not implement new wireless payment systems that use WEP after March 31, 2009. For those that already have wireless payment systems in place, they must stop using WEP for security as of June 30, 2010. The council notes that the reason for this change is "to emphasize using strong encryption technologies for wireless technologies, for both authentication and transmission."

WEP's hackability has been widely known since 2001, and has been blamed for the largest incident of consumer data theft in history. TJX, parent company of discount retailers T.J. Maxx and Marshalls, disclosed last year that hackers had stolen data covering over 45 million credit and debit cards over an 18-month period. In addition to pilfering over 45 million—and possibly as many as 200 million—credit card and debit card numbers, the hackers were also able to obtain other personal data from over 450,000 customers. This included driver's license numbers and Social Security numbers.

Although TJX has become the poster-child for consumer data theft over WiFi, it is (by far) not the only company to use insecure wireless technologies. Wireless security manufacturer AirDefense released a report in late 2007 saying that a quarter of the 4,748 retail access points it surveyed across the US had no security whatsoever, while another quarter only used WEP, "one of the weakest protocols for wireless data encryption." Just under half (49 percent) of the surveyed hotspots used WiFi Protected Access (WPA) or WPA 2—much stronger encryption protocols than WEP. The firm observed that the large majority of the stores involved in the survey maintain stronger security of their physical property than their wireless routers, showing that retailers are still slow to take data security seriously.

Banning WEP is a long overdue move, and had the industry been faster to recognize the insecure nature of WEP, the TJX incident may never have happened. It's unfortunate that laggards will have until the middle of 2010 to drop WEP, as it unnecessarily puts customer data at risk for data theft.

Further reading:

* Found via Wi-Fi Net News: New Credit Card Processing Rules Kill off WEP (in 2009)

Shell Offers Cardholders 38 cents per Gallon Savings

Shell cardholders save money on gas

New Shell Platinum MasterCard Holders Save at the Pump and Beyond

Shell Oil Products US has launched its proven "Double Rebate" promotion for new card members of the Shell Platinum MasterCard(R) from Citi for purchases made both at the pump and everywhere MasterCard is accepted between now and January 4, 2009. Consumers who open a new Shell Platinum MasterCard account will be eligible to receive 10% rebates on Shell gasoline purchases, which can mean an average savings of 38 cents per gallon at $3.82 a gallon, and 2% rebates on all other purchases for the first 60 days after receiving their card.

"The 'double rebate' promotion is intended to demonstrate to consumers how they can lower the cost of driving without sacrificing the quality of their fuel. We believe new cardholders will agree the everyday value extends beyond the promotional period," said Carolyn Yapp, Shell US card and payments manager.

This promotion also will benefit Shell-branded wholesalers and retailers by driving more traffic to sites and increasing usage of the Shell Platinum MasterCard, which has a zero transaction fee for site operators. It will be supported with national print and online advertising, local co-op advertising and local store marketing as well as point-of-purchase (POP) materials, including pump toppers, pole signs, building signs and register toppers. In addition to the new credit card promotion, Shell retail sites will continue to feature messaging reinforcing the Shell "Passionate Experts" campaign.

The Shell Platinum MasterCard was the first gasoline rebate program of its kind and since 1992, offering the following everyday benefits to cardholders:

* 5% rebates on Shell gasoline purchases
* 1% rebates on all purchases everywhere else
* Rebates automatically credited to cardholders' statements towards future Shell gasoline purchases
* No annual fee for the first year, waived thereafter with nine or more Shell gasoline purchases a year
* Online account management
* "Lost Wallet Service" and more

Consumers can apply for the Shell Platinum MasterCard online at http://www.877myshell.com , via phone at 1-877-MY-SHELL and at Shell-branded stations nationwide. To find locations near you, go to http://www.localshell.com .