Thursday, 15 September 2011

UPDATE: MasterCard: Focus On Affluent Customers, Prepaid Cards Key To Growth

By Andrew R. Johnson 
NEW YORK (Dow Jones)--MasterCard Inc. (MA) is emphasizing products aimed at affluent consumers as well as emerging categories like prepaid cards and mobile payments to drive growth, executives said Thursday.
The Purchase, N.Y., credit card company is trying to convert more of the world's transactions from cash and checks to electronic payments and capture a larger share of those transactions, President and Chief Executive Ajay Banga told analysts on a conference call for investors.
Eighty-five percent of retail transactions worldwide are made with cash or check, providing MasterCard with a big opportunity to capture more volume with its credit, debit and prepaid cards, Banga said. The company makes money by processing transactions made with its branded payments cards, which are issued by partner banks.
The company has been putting a bigger marketing effort behind its World Elite program, a rewards program offered to affluent consumers, Tim Murphy, MasterCard's chief product officer, said. The company also this summer launched its Priceless Cities program, which will allow MasterCard customers to gain access to special events using their cards. The first market for the program is New York.
"It's a wide-ranging campaign that goes from television advertising to print to outdoor to make sure that consumers that live in New York and want to enjoy what is available here can really get access to it," said Alfredo Gangotena, chief marketing officer at MasterCard said.
MasterCard hopes such efforts can blunt the effects of new restrictions on debit-card fees that begin taking effect in October. The rules, which were part of the Dodd-Frank Act signed into law in 2010, were finalized by the Federal Reserve Board in June and cut in half the fees banks can charge merchants when a customer swipes a debit card.
The rules also require that banks provide multiple network routing options on their debit cards, which MasterCard executives have said could help it steal share from competitor Visa Inc. (V), which dominates the debit card market.
The additional revenue MasterCard is able to generate by expanding its debit processing services will be incremental but also "high margin, and it will be profitable," said Chris McWilton said, the president of U.S. markets at MasterCard.
Despite recent turmoil in the financial markets and persistent unemployment, MasterCard said its customers are spending.
The volume of U.S. credit card transactions that MasterCard processed in July and August grew 6.5% from a year earlier, compared with a 5.9% increase in the second quarter. The volume of processed U.S. debit card transactions grew 20.1% in July and August, compared with a 16.8% increase in the second quarter.
"While consumer confidence is low, consumers are spending, there's no doubt about it," McWilton said.
MasterCard also is pushing its prepaid card business to spur growth.
Prepaid cards, which traditionally have been offered to low-income or "underbanked" consumers, are also a focus.
Increasingly, interest in prepaid cards "will be driven by banked consumers looking" to divide up and budget their spending, Murphy said.
Earlier this year the company formed a partnership with Wal-Mart Stores Inc. (WMT) to sell versions of the discount retailer's prepaid MoneyCard carrying the MasterCard brand. Wal-Mart also sells versions carrying the brand of MasterCard competitor Visa Inc. (V)
MasterCard's shares were up 1.5% at $342.54 in recent trading.


A First Look at PayPal’s Strategy for Challenging Visa and MasterCard at the Register

PayPal demonstrated today, for the first time, how it intends to provide payments to physical retailers as the race heats up to make wallets and clunky metal registers obsolete.
A sneak peek was offered to merchants today by the eBay-owned company, at a partner event in Rancho Palos Verdes, Calif., and separately to me in one-on-one briefings by executives.
PayPal had said it was going to launch pilot projects later this year, but this is the first time it is discussing how it will approach the digital market and how it will defend itself against incumbent payment providers like Visa, MasterCard and American Express, and new entrants like Google and San Francisco-based Square.
There were roughly 150 merchants present at the event, including Home Depot and Sports Authority.
In the resort’s ballroom overlooking the Pacific Ocean, PayPal set up several user scenarios that are intended to disrupt the way we pay for things online and in stores today, using a variety of technologies.
What stood out was that none of the scenarios required merchants to adopt new infrastructure or buy new terminals. Likewise, customers won’t be required to upgrade their phones or have certain types of bank accounts.
Instead, PayPal users (of which there are 100 million worldwide) will be able to pay by entering a phone number and a PIN code at the existing payment terminals, or by swiping a PayPal-issued card that’s not associated with a bank and does not have an account number printed on the front.
“We are doing something so big that it will change the face of payments,” said PayPal President Scott Thompson. “We can’t be so bold or arrogant to think that you’ll adopt to the standards we’ve created. If we said ‘Throw away your terminals and get a new one, or buy a new phone’ … no one has that level of influence and pull.”
“We will work with the new and the old,” he added. [More information from Thompson in a Q&A can be found here.]
A lot of criticism has surfaced recently that new mobile payment solutions relying on near-field communication will take three-plus years to adopt, because of the infrastructure required by merchants and consumers.
Others have pointed out that near field doesn’t exactly solve a problem for consumers, since swiping cards at retail is easy enough.
“No one is solving the friction in the entire payments process. We are not going to change consumer behavior,” admits Sam Shrauger, PayPal’s VP of global product and experience.
No photography was allowed at the event today, but PayPal walked me through the scenarios, demonstrating how the technology would work. A lot of it was repetitive, so here’s a brief overview:
Grocery store: In this senario, PayPal demonstrated how someone could use their phone number to pay. At the payment terminal, a user will be able to enter their phone number and a PIN code. The purchase will then be applied to the bank account or credit card associated with their PayPal account.
Coffee shop: In this scenario, PayPal demonstrated how it will allow users to continue using plastic cards if they wish. The card will be issued from PayPal and will not have a Visa or MasterCard logo on the front, and will contain no visible account information. As usual, the card will be swiped at the terminal and have an associated PIN.
Hardware store: In this scenario, a customer in a store sees a barbecue set that they’d like to buy. Using the phone, they scan the item’s barcode. PayPal would find that exact product that is in stock at that retailer, and the user would be able to check out in the store aisle and have the item shipped to his or her address, without ever going to the register.
All of PayPal’s scenarios had a few things in common. For example, users would be able to check in to a retailer’s location from the phone, like on Foursquare. That would enable a merchant to know that they are there, so they can interactively offer you coupons, or so you can place an order.
PayPal will also let users immediately apply for credit, so they can buy a new TV and pay in six easy installments!
The mobile application is also front and center in all of these use cases. Users will be able to find nearby retail locations and check in using a mobile application.
PayPal has stitched all of these technologies over the past year from several million-dollar acquisitions, including the acquisitions of BillMeLater, Milo, Where and Zong.
BillMeLater enables PayPal to extend users credit on the fly; Milo allows PayPal to look up the inventory within major stores; Where provides location-based offers; and Zong provides mobile payments using your phone number.


Saturday, 10 September 2011

imsinstantpay: The hidden cost of premium credit cards

imsinstantpay: The hidden cost of premium credit cards: By Stefania Moretti Not all reward point credit cards ar...

The hidden cost of premium credit cards


Not all reward point credit cards are created equal.
Some come with hefty interest rates or annual fees, while others cost business owners a small fortune in hidden transaction fees.
New data collected by the Canadian Federation of Independent Business, and shared first with QMI Agency, lists merchant fees for dozens of cards from Visa, MasterCard, American Express, Canadian Tire, President’s Choice and more.
Until now, it’s been difficult for small shop owners to know exactly what they are paying for the chance to do business with various credit card holders. To the naked eye, many premium credit cards are virtually indistinguishable from regular credit cards.
Premium cards don’t come with a warning to business owners, said Dan Kelly, CFIB’s senior vice-president of legislative affairs.
“How could an individual small-business owner hope to understand what is passing through his or her machine?” Kelly said.
Canadians are eager to swipe plastic in exchange for everything from travel miles to free groceries. Studies have shown Canadians collect and redeem more points than their American counterparts.
With a little digging, cardholders can easily compare interest rates and fees associated with premium cards.
The same cannot be said for business owners who want to know the cost of accepting those cards.
CFIB member merchants, for instance, pay credit-card giants Visa and MasterCard between 1.65% and 1.75% to accept basic cards.
Premium cards however costs CFIB business owners anywhere between 1.75% and 2.71%. Interchange rates on American Express cards are even higher.
On a $120 cut and highlights at a typical hair salon that’s an extra $3.25 out of the shop owner’s pocket.
Some so-called “high spend” premium cards charge merchants even higher fees when the shopper exceeds a certain income or spending level.
“That just makes no sense to a merchant,” Kelly said.
But affluent, premium cardholders are the most valuable customers for retailers, said Don Lebeuf, an executive at MasterCard Canada.
“These people will spend 47% more per transaction (on average) than regular cardholders.”
“That’s why there’s a different fee associated with premium cards,” he said, adding that premium cards represent less than 5% of MasterCard’s Canadian client base.
Still, MasterCard values transparency and that’s why the company plans to re-brand its premium cards starting next year, Lebeuf said.
Premium cards are also subject to added fees tacked on by payment companies like Chase Paymentech and Moneris.
“Everybody’s got their hand in the cookie jar and the cookie jar is the small business owner,” Kelly said.
Most cards with “gold” or “platinum” in their name are actually regular cost cards.
Whereas President’s Choice MasterCard, marketed as a budget-friendly card to consumers, charges merchants 2.5% of the purchase price in fees to accept the card.
It’s confusing, Kelly said.
A consumer collecting Aeroplan points with a CIBC Aerogold Infinite Visa can cause a merchant to pay 30% more in fees than one collecting Aeroplan points with a CIBC Aerogold Visa.
“The good news is that there are dozens of credit cards out there offering consumers points without imposing sky-high fees on smaller merchants,” Kelly said.
The TD Platinum Travel Visa and the ATB Gold Cash Back MasterCard for instance don’t impose higher rates on merchants and still provide consumer perks.
Kelly hopes Canadians will check the card in their wallets against the CFIB’s new list of fees to merchants.
“In addition to helping your local entrepreneurs, you’ll be helping keep consumer prices down for us all,” he said.
Some CFIB member business owners have posted in-store signage encouraging shoppers to pay using lower cost methods such as cash and debit.
While high-cost corporate cards have been around forever, banks have only really begun pumping out premium credit cards to everyday consumers over the last two years, Kelly said.
The Competition Bureau is fighting Visa and MasterCard’s policy of forcing merchants to accept premium cards if they accept regular cards by the same brand.
The complaint was filed at the Competition Tribunal after the federal government’s Voluntary Code of Conduct for the Credit and Debit Card Industry dropped the option from its final draft.
LeBeuf said MasterCard does not support changes that would allow retailers to accept some of its products but not others.
“That flies against our core value proposition to consumers that you can use your MasterCard at any one of the 25 million merchant locations around the globe,” he said.


Tuesday, 6 September 2011

Syrian-issued Visa and MasterCard credit cards blocked

Dubai: Syrians in the UAE have been left stranded after Visa and MasterCard blocked all credit cards issued by Syrian banks.
The ban, which was put in place last week, is the result of severe US sanctions imposed on Syria in the face of violence against protesters in cities across the country.
Syrian visitors to the UAE were shocked to find that their credit cards were not working at Dubai airport.
"When all the ATM machines in Dubai airport refused to process any of my credit card transactions, an SMS message was automatically sent to me from MasterCard informing me that I could no longer use this card," one visitor told Gulf News.
When contacted by Gulf News, Visa and MasterCard confirmed that Syrian-issued cards were no longer valid and all transactions have been blocked.
Another Syrian businessman said that an international bank had sent him a message informing him that they had closed his account.
New account
"Since I can't use my credit cards or my bank account in Syria or abroad, I have opened a new account for my business in Lebanon to process the financial transactions," he said.
"I am here in Dubai to process my financial transactions manually. Even the local banks in Dubai don't process any transaction to the Syria-based banks," he added. "We have (been) obliged to deal (in) cash."
On August 18 the United States government issued an order prohibiting "the exportation, re-exportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of any services to Syria."
The ban on using the cards is part of the recent expanded sanctions which aim to put more pressure on the regime of President Bashar Al Assad and isolate the nation in the hope that an economic squeeze will force the government to cease its crackdown on pro-democracy campaigners.
Switch to euro
MasterCard told Gulf News that it began blocking all transactions originating in Syria on August 20 and would remain blocked until further notice.
Meanwhile, the governor of the Central Bank of Syria, Adib Mayala, announced that Syria has stopped dealing with the US dollar and switched to the euro, effective August 23.


Transport for London says new contactless tickets will be '100% safe'

Fraudsters will not be able to extract confidential information from a person's contactless bank card or other compatible technology as the type of data held on such cards will be restricted, Will Judge, head of future ticketing at Transport for London (TfL) has said.
Giving evidence to the London assembly transport committee about TfL's plans to introduce contactless payment to London's transport network, he answered yes when asked by a member of the committee whether the system was "100% safe" against "invisible pick pocketing".
"The first thing to note is that not all the information about a customer's account is recorded on the bank card itself. So, for example, the information that is recorded within the chip of the card or the magnetic stripe that many cards carry, or can be transmitted electromagnetically when the card is used for a transaction, doesn't include names and addresses information of that nature, so those are held by bank themselves not on the card itself," said Judge. "The set of information you can get from card itself is restricted and is not all of your personal data."
He said that he understood the fear that some customers may have about someone being able to manipulate a person's contactless card so they could access their account, but he said that he was confident that this would not happen. "You cannot extract enough information from a card to spend someone else's money," he stressed.
Shashi Verma, director of fares and ticketing at TfL, added that the potential for fraud was incredibly low because of the £15 limit that will be imposed on the card for individual transactions. "It has been thought about and has been rigorously tested," he said in his evidence to the committee.
TfL announced plans in October last year to introduce contactless technology, the first phase of which will be implemented next spring on buses. The project will give passengers with contactless-enabled Eurocard, Mastercard or Visa cards the ability to pay using existing Oyster card readers. This payment option will be extended to the tube, London Overground, Docklands Light Railway, tram and National Rail services in London later in 2012.
Judge also stressed that banks will not have access to people's travel data, which will be retained by TfL as is currently the case with the Oyster card, and will receive nothing other than transaction information. Similarly speaking about the concern about TfL holding additional financial information about customers, Verma said: "TfL never sells personal data, we don't share or sell personal data unless required by law."


SmartMetric Files Further Patent Infringement Lawsuit Against Visa and MasterCard

BAY HARBOR, FL, Sep 06, 2011 (MARKETWIRE via COMTEX) -- SmartMetric, Inc. SMME -5.00% today announced that the Company has filed a patent infringement lawsuit against smart card issuers Visa and MasterCard in California Federal Court. SmartMetric filed the lawsuit in defense of its U.S. Patent 6,792,464 ('464 Patent) which provides patent protection concerning both 'contact' and 'contactless' smart card technology specifically when used to automatically access a credit card company network via such contact points as ATM machines or Point of Sale (POS) machines.
SmartMetric is seeking preliminary and permanent injunction against both Visa and MasterCard to prohibit them from further infringements along with a cash award for damages and a royalty payment.
More information on the company's lawsuit against Visa and MasterCard can be found on Form 8-K filed by the Company today with the Securities and Exchange Commission. The filing can be found
About the SmartMetric:
The SmartMetric, Biometric Card Computer provides powerful computing with large memory capacity in a revolutionary size that has taken more than 10 years of research and development. Using the latest in sub micro technology electronics, the company has achieved a level of miniaturization that allows it to release a solution of portable computing power that combined with SmartMetric's biometric fingerprint in-card scanning technology, is so revolutionary it will change the way business is done and information is handled across a broad range of industries. For further information please go to the company website:
Safe Harbor Statement:
Certain of the above statements contained in this press release are forward-looking statements that involve a number of risks and uncertainties. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those indicated in the forward-looking statements as a result of various factors. 


Thursday, 1 September 2011

Visa vs. Google Wallet in mobile payments


The digital wallet wars have begun. And credit card giant Visa and search behemoth Google are likely to be among the first to face off in the market as they each try to convince consumers to ditch their real wallets for ones that store credit cards and other information on their cell phones.
(Credit: Visa)
In May, Visa and Google announced separately their plans to offer a so-called digital wallet or an application that stores credit card and rewards information to enable people to use their phones to pay for things.
The hope is that these digital wallets in conjunction with near-field communications technology, a short-range wireless technology that allows people to swipe a phone for payment, will replace the need for a physical wallet.
While several other companies are also planning to launch digital wallets and mobile payment systems, Visa and Google will be among the first companies whose applications will hit the market in the next few months. Google is expected to launch its Google Wallet by the end of the summer. And Visa will be out with its yet-to-be-named digital wallet sometime this fall.
Bill Gajda, global head for Visa Mobile, said he doesn't necessarily view Google as a competitor, but the similarities in the company's strategies are striking.
For one, both companies profess that their respective digital wallets will be "open," which means that they will eventually work with any credit card. And second, the companies also see big opportunity in leveraging the digital wallet to promote location-based advertising through offers programs.
While Visa will continue to generate revenue through traditional transaction fees it charges merchants when consumers use the digital wallet in stores, it will also add an advertising element that will allow the digital wallet to help merchants push new offers to customers based on where they made their last purchase.
"We can see the transactions in real time," said Bill Gajda, head of Visa Mobile Global. "So consumers can receive alerts about offers from nearby merchants."
Visa is already testing a program with the Gap that offers location-based discount offers to Visa card users via text messages, which promote discounts at local Gap stores.
Google, which already makes most of its revenue from advertising, has no plans to charge a transaction fee for the Google Wallet. Like Visa, it plans to work with merchants to help them promote goods and services to Google Wallet customers based on location.During the launch of Google Wallet, the company demonstrated how shoppers could get coupons delivered to their phones based on their location and they could redeem them from the phone.
Hedging its bets
Even though Google is likely to be a competitor to Visa in the digital wallet market, there's also a chance that Google may include Visa's payWave payment technology into the Google Wallet offer. When the service launches, Mastercard will be the initial credit card payment partner with its PayPass system. But Gajda said that Visa is also talking to Google about being included in the Google Wallet.
This wouldn't be the first competing digital wallet that Visa will work with. The company has already joined up with another digital wallet initiative known as Isis. Isis is a joint venture formed by three of the top four major wireless carriers, AT&T, Verizon Wireless, and T-Mobile USA. Now all four of the world's largest credit card issuers--Visa, MasterCard, Discover, and American Express--plan to participate in the Isis digital wallet, which is set to launch in 2012. Isis has already been conducting trials of its service in Salt Lake City and it has plans to add other cities, such as Austin, Texas, soon.
"Our relationship with Isis is not exclusive," Gajda said. "We have been in discussions with Google. And we will continue to talk to them. We will also continue to work with Isis. Our goal is to be truly open."
Gajda explained that the digital wallet market will initially be very crowded with different players jockeying for position. And then he predicts a shakeout with the market quickly consolidating to two or three main players.
Picking winners and losers
Visa's obvious advantage is its strong financial brand. Recently, Ogilvy & Mather asked 500 consumers who they trusted with mobile payments. The traditional credit card companies, which included Visa, MasterCard, American Express, and even PayPal, dominated the list. Visa actually had the highest rating with over 40 percent of consumers saying they trusted Visa with mobile payments. By contrast Google was at the bottom of the list.
Visa plans to leverage this financial reputation initially marketing the digital wallet service through banks. A bank like Citibank or Bank of America could offer the digital wallet application as part of their online banking service. Banking customers will be able to add any of their existing credit cards to their digital wallet as well as rewards cards. The online application will allow them to track their spending across all their cards as well as make one-click purchases online, eliminating the need to type in credit card information.
By marketing the service first to online banking customers or directly through its own Visa Web site to online users, Gadja believes the company will have a chance to build an audience before NFC technology becomes more widely available.
"Banks will be an important distribution channel for the digital wallets," he said. "So that's why we will first target these online customers by providing one-click shopping. And then we'll promote NFC."
Google's advantage is that the company will be the first with a digital wallet using the NFC technology to hit the market. And since the company controls the popular Google operating system Android, it can easily embed the technology and Google Wallet application into new devices coming to market over the next few years.

UK arrests 2 suspected computer hackers

Associated Press

British police on Thursday arrested two men as part of a trans-Atlantic investigation into attacks carried out by the hacking groups Anonymous and Lulz Security.
Scotland Yard said a 24-year-old and a 20-year-old were arrested at two separate U.K. addresses as part of a continuing investigation in collaboration with the FBI and other law-enforcement agencies.
"The arrests relate to our enquiries into a series of serious computer intrusions and online denial-of-service attacks recently suffered by a number of multi-national companies, public institutions and government and law enforcement agencies in Great Britain and the United States," said Detective Inspector Mark Raymond from the Metropolitan Police's Central e-Crime Unit.
Hacking group Lulz Security has claimed responsibility for attacks on targets such as Sony Corp., the CIA and Britain's Serious Organized Crime Agency.
The group is a spin-off of Anonymous, an amorphous group of activists, hackers and prankster whose targets have included Visa and MasterCard.
Anonymous cut its teeth with attacks on the music industry and the Church of Scientology but has lately turned its focus to law enforcement, intelligence and military-related sites.
Police said the two men arrested Thursday remain in custody and a computer seized in the investigation is being examined.
The arrests come amid a trans-Atlantic crackdown on Anonymous and its supporters. Dozens of arrests linked to the ad hoc international hacking collective have been made in recent weeks, including a cross-country FBI sting earlier this summer in which 14 alleged cybercriminals were arrested.
Earlier Thursday, British police said two more men have been charged in relation to denial-of-service attacks carried out by Anonymous.
The charges against Christopher Jan Weatherhed, 20, and Ashley Rhodes, 26, are considered part of a separate from the joint FBI investigation.
Weatherhed and Rhodes will appear at City of Westminster Magistrates Court on Sept. 7 alongside two others previously charged with the same offense.
Denial-of-service attacks choke websites with traffic the same way a telephone line might be jammed with thousands of crank calls.
Anonymous likens such attacks to online civil disobedience, but penalties can be severe. The maximum sentence for a conviction on such a charge is 10 years in prison.

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