Don't Be Surprised With Drops In Price Of Visa And MasterCard Stocks

A trade group representing operators of ATMs has filed a lawsuit against Visa and MasterCard, accusing them of fixing prices and suppressing competition among ATM networks. ^[1]
The lawsuit was filed in federal court in Washington and alleges that Visa and MasterCard violate antitrust laws by placing restrictions on the prices these independent ATM operators can charge customers using other networks such as STAR or TransFund.

Lawsuit Targets Fee Agreements

Under the network rules of Visa and MasterCard, the service fee for any transaction at an ATM should not be less than the amount charged at that ATM for a Visa or MasterCard transaction. This effectively means that an ATM operator cannot offer customers a discount or benefit for completing a transaction over a network that is less costly to the operator. More competitive pricing might allow these smaller networks to gain market share and more business.

The lawsuit claims that this artificially raises the price consumers pay for ATM service, limits operators’ revenue, and violates antitrust laws. The lawsuit seeks national class action status and would be comprised of independent operators of some 200,000 ATMs in the United States.

Potential Impact on Visa, MasterCard

The lawsuit alleges some serious charges against Visa and MasterCard and the way these companies keep competition at bay. As a result of this lawsuit, the companies’ litigation and settlement expenses will likely rise, taking a toll on the profits that are already under pressure after the Fed put a cap on the fees on debit card transactions.

In the long run, if the courts find Visa and MasterCard to be in violation of antitrust rules, we may see a sharp increase in alternate low cost networks which would bring down transaction charges at ATMs. However there wouldn’t be a significant threat to Visa and MasterCard’s businesses, because their widespread networks across the world would take a new entrant at least a decade to establish.

URL: http://www.forbes.com/sites/greatspeculations/2011/10/18/dont-be-surprised-with-drops-in-price-of-visa-and-mastercard-stocks/

Visa, MasterCard to use buying history for ad targeting?

All the purchases you make with your MasterCard or Visa could be used to provide you with more-targeted ads as you surf the Web, a new report claims.
According to today's Wall Street Journal, the credit card companies are currently trying to work out a system whereby purchases consumers make in a brick-and-mortar store can be used to deliver more effective ads online.
A MasterCard document obtained by the Journal outlines some of the company's plans, which included linking Web users with purchases. According to document, the credit card provider said it believes "you are what you buy."
However, MasterCard told the Journal that the plans included in that document have been shelved because it would have revealed too much information about individual buyers. Instead, the company told the Journal, it is exploring ways to anonymously group a person's purchase history with others to create marketing "segments." That data would then be sold to marketing firms.
Citing a source, the Journal said that Visa is planning a similar service, which would aggregate its customers' purchase history into segments, including location, to make ads more effective at appealing to people in a respective area.
Although those plans might have a profoundly positive impact on the advertising industry, it does raise several privacy concerns. Although companies have long shared customer data with marketing agencies, individual consumers have always been wary of companies peering into where they are, what they're buying, and how much they're spending.
For its part, MasterCard told the Journal that customers have nothing to worry about. For one, the company says, it collects data, such as when a purchase was made and where, on 23 billion transactions, but it never includes who actually makes the purchase. Plus, both MasterCard and Visa, which also collects that information, allow users to opt out of the data collection, if they so choose.
Looking ahead, there's no telling what MasterCard and Visa will do, since, as the companies pointed out to the Journal, their plans are still "preliminary."
However, as the Journal's sources in the advertising industry said, buying history is a potential treasure trove for marketers. And MasterCard and Visa, along with other credit card companies, realize that. What's more, the Journal says, MasterCard could be getting close to selling purchase data through online data auction services, BlueKai and Exelate, though those firms have yet to sign an agreement.
Neither Visa nor MasterCard immediately responded to CNET's request for comment.

URL: http://news.cnet.com/8301-13506_3-20125179-17/visa-mastercard-to-use-buying-history-for-ad-targeting/

More Lawsuits Take Aim At Visa And MasterCard ATM Policies

NEW YORK (Dow Jones)--Visa Inc. (V) and MasterCard Inc. (MA) face new lawsuits claiming their fee policies for ATM transactions are anti-competitive.
One suit, filed Monday in U.S. District Court in Washington, D.C., argues the companies, which process credit- and debit-card transactions, prohibit operators of automated teller machines from charging consumers different levels of fees depending on which card network processes their transactions.
"The ATM restraints prevent ATM operators from offering their customers a discount or benefit for completing a transaction over a network that is less costly to the ATM operator, so consumers cannot be rewarded for using a lower cost and more efficient network," the suit said.
In addition to Visa and MasterCard, several smaller debit-card networks offer consumers ATM access, including First Data Corp.'s Star network and Discover Financial Services' (DFS) Pulse network.
A separate lawsuit filed in U.S. District Court in Washington, also naming Bank of America Corp. (BAC), J.P. Morgan Chase & Co. (JPM) and Wells Fargo & Co. (WFC) as defendants, makes similar allegations, Bloomberg News reported Wednesday. The suit claims the banks conspired to fix ATM fees.
Last week a trade group called the National ATM Council Inc. filed a suit against Visa and MasterCard arguing the companies' rules amount to price-fixing. The group, which represents independent ATM operators, says the operators have suffered losses in the "tens of millions of dollars" because of the companies' rules.
A MasterCard spokesman wrote in an email Wednesday that the ATM operators' claims lack merit.
"These rules were put in place to protect consumers from ATM operators seeking to impose discriminatory surcharges on our cardholders," the spokesman wrote. "We believe these important consumer protections must be preserved and we will vigorously defend against the claims brought against us."
A Visa spokesman did not immediately respond to a request for comment.

URL: http://online.wsj.com/article/BT-CO-20111019-712283.html

WikiLeaks says "blockade" threatens its existence

After releasing tens of thousands of confidential U.S. government cables, WikiLeaks needs $3.5 million over the next year to continue operating, Assange said.
Visa and MasterCard stopped processing donations for WikiLeaks in December 2010 after the United States criticized the organization's release of thousands of sensitive U.S. diplomatic cables from its embassies all over the world.
In the 24 hours before credit card donations were blocked, the organization said it had received $135,000. Now, it is receiving on average about 7,000 euros ($9,700)a month.
Assange said there were no lawful grounds for the blockade by Bank of America Corp, Visa Inc, MasterCard Inc, eBay Inc unit PayPal and Western Union Co, which he said had cost Wikileaks 95 percent of its revenue.
"If WikiLeaks does not find a way to remove this blockade, given our current levels of expenditure, we will simply not be able to continue by the turn of the year," Assange told a news conference.
In July, WikiLeaks filed a complaint to the Directorate-General for Competition of the European Commission, saying Visa and MasterCard had breached antitrust provisions set out by the EU Treaty.
Assange, who is fighting extradition from Britain to Sweden, where he faces allegations of sexual misconduct, said he hoped the European Commission would make a decision to hold a full investigation by mid-November.
In interviews last year, Assange said WikiLeaks had extensive internal documents from a bank, believed to be Bank of America, an announcement that knocked 3 percent off the value of the bank's shares.
However, on Monday he said this data was now out of WikiLeaks' hands and in the possession of an unnamed suspended WikiLeaks employee.
"At this stage, we do not believe, unfortunately, that we will regain that material, which is a great loss," he said.
Daniel Domscheit-Berg, who last year was fired by Assange as WikiLeaks' co-spokesman, told Reuters in August that he had destroyed about 3,000 submissions that WikiLeaks had received relating to Bank of America.


URL: http://www.reuters.com/article/2011/10/24/us-britain-wikileaks-idUSTRE79N46K20111024?feedType=RSS&feedName=topNews

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

By Andrew R. Johnson 
   Of DOW JONES NEWSWIRES 
 

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.

URL: http://online.wsj.com/article/BT-CO-20110915-712021.html

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.



URL: http://allthingsd.com/20110914/a-first-look-at-paypals-strategy-for-challenging-visa-and-mastercard-at-the-register/?mod=googlenews

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