Card Rewards to Fade with Reduced Interchange

A new report suggests that the landscape of the $150 billion card industry could be altered drastically in the next three to five years and end up costing issuing banks and card associations billions. The analysis also found that reward programs account for as much as 44% of interchange costs and such programs drive consumers to payment choices that are the most expensive for merchants. The research by Diamond Management & Technology Consultants says that once transparency comes to credit card pricing models, merchants will use the information to force an unbundling of interchange fee structures, and the interchange structure as we know it will disappear. Diamond says ACH payments will siphon payment volumes away from credit cards and emerging competitors like Pay By Touch, PayPal, and Google Payments will pose a genuine threat to dominant card operations. The report concludes that adjusting business models by unbundling the interchange components and charging directly for value delivered will enable issuing banks to develop new consumer card pricing models.

Details

MEI Acceptors Integrated into Pay E Mail Kiosks

PA-based MEI announced that the newly-deployed “Pay E Mail Internet” kiosks will utilize MEI Series “2000 Combo Acceptors” to let users pay with cash, credit or debit cards. Pay E Mail kiosks are vandal-resistant, constructed of heavy-duty steel and aluminum, and have a 15-inch flat screen and full-sized keyboard with a trackball mouse. The unit’s slim design severely restricted the available space for internal components, and so an all-in-one credit card reader/bill acceptor was an ideal choice. Pay E Mail, based in Cary, North Carolina, was developed by vending business professionals with 30-plus years of nationwide experience in the pay-phone and ATM vending business. MEI solutions are relied upon for more than 1 billion transactions per week in 90 countries.

Details

TNB Card Services Lands a NM FCU Portfolio

NM-based White Sands Federal Credit Union has sold its card portfolio to Dallas-based TNB Card Services. White Sands Federal Credit Union, originally chartered in 1952, serves employees of the White Sands Missile Range and residents of Las Cruces, New Mexico. With more than 32,000 members and five branches, the credit union is the eighth largest in New Mexico. TNB Card Services, owned and directed by credit unions since 1976, provides electronic payments processing, as well as an agent issuing solution for credit unions nationwide.

Details

Card Manufacturing Excellence Awards Issued

The ICMA has announced this year’s winners of its “Elan Awards for Card Manufacturing Excellence.” The “Best Gift Card” was won by Perfect Plastic Printing for its “Best Buy Snowman Colorshift” card. PPP also won the “Best Secure Card” for its “Discover Fabric Embedded Card.” The “Best Non-Secure Card” winner was UV Color for its Target card with peppermint with scent and raised ink. The “Technical Achievement” winner was Travel Tags for its Target “Teachers Rule Wood Card.” Travel Tags also won the “Judges Choice” award for this card too. The “Best ID Card” award was won by CPI Card Group for the Police Department of Mexico’s “Policia Preventiva” card. The “People’s Choice” award was won by Jet for its Optimum “Chili’s Mother’s Day Gift Card.” NJ-based ICMA is a non-profit association comprised of plastic card manufacturers, personalizers and related industry participants, with more than 200 members globally.

Details

AmEx Launches a Ticket Protection Plan

American Express has introduced a new benefit to reimburse cardholders for the cost of tickets purchased due to a covered incident. The “Event Ticket Protection Plan” will reimburse cardholders if they cannot attend an event due to medical emergency, cancellation of the event, transportation accident or jury duty, subpoena, death or call to active military duty. The free benefit is available to consumer and business “Gold,” “Platinum” and “Centurion” cardholders. “Gold,” “OPEN Gold” and “Executive Business” cardholders are covered up to the maximum limit of $1,000 per eligible occurrence. “Platinum” and “OPEN Platinum” cardholders are covered up to the maximum limit of $2,000 per eligible occurrence. “Centurion” and “OPEN Centurion” cardholders are covered up to the maximum limit of $5,000 per eligible occurrence.

Details

Utix Group Renews Discover Network Deal

MA-based Utix Group, an issuer and processor of pre-paid sports and leisure experience tickets, announced it has renewed its agreement to issue and settle Utix prepaid experience tickets on the Discover Network. The Utix pre-paid experience ticket system operates as a magnetic strip payment process for one-time admission or access to sports, recreation, leisure or entertainment activities or events and was granted US Patent No. 7,066,383 entitled “System for Marketing Leisure Activity Services Through Pre-Paid Tickets” that represents the first issued, in a series of patent applications relating to unique “non-monetary” magnetic strip gift ticket. Discover Financial Services LLC, a business unit of Morgan Stanley (NYSE:MS), operates the Discover Card with more than 50 million Cardmembers, and the Discover Network, with more than 4 million merchant and cash access locations. Utix issues its proprietary technology and co-branded prepaid experience products, including Golf, Bowling, Ski, Spa and Movie Tickets to the business-to-business industry and retail marketplace.

Details

Merchants Want Operating Rules Transparency

The Merchants Payments Coalition says the VISA and MasterCard recent decisions to publish interchange fees brings to light the need for further transparency. The MPC says the information shows a bewildering array of rates for different cards, merchants and types of transactions, which emphasizes the opacity of interchange. But, without the operating rules that govern how these fees are applied, the information is useless. The MPC also noted that VISA’s announcement last week inaccurately stated that merchants “do not pay interchange” but pay a merchant discount fee instead. The MPC says that in fact, interchange is a non-negotiable fee paid as part of the merchant discount fee, accounting for approximately 80% of the total merchant discount fee. VISA and MasterCard do offer merchants access to some of their operating rules.

Details

Struggling S1 Corp Searches for a New CEO

Atlanta-based SI Corporation announced this morning that its Chairman, Director, and CEO, James Mahan has retired. The announcement came as a Special Committee of its Board of Directors completed a review of strategic alternatives for the struggling firm. With Mahan’s departure the Company announced that Director John Spiegel has been elected Chairman and that a search for a new CEO is underway. Mahan was named CEO in July 2005. He had originally served as CEO from 1995 to 2000 as the founder. The Company also announced that it is planning a “Dutch Auction” tender offer to purchase approximately 15% of its outstanding common stock to raise about $55 million.

Details

5/3 Signs Three Processing Contracts

Fifth Third Processing Solutions has signed contracts for merchant processing services with Green Mountain Energy Company, Little Caesar Enterprise, and Western Michigan University. Green Mountain Energy Company is one of the nation’s leading retail providers of cleaner electricity products, offering residential, business, institutional and governmental customers the choice to support cleaner electricity generated from sources. Little Caesar Enterprise, Inc was started in 1959, and is the world’s largest carryout pizza chain and one of the top four international pizza chains with restaurant locations on five continents. Western Michigan University, located in Kalamazoo, was founded in 1903 and is a nationally recognized research university with an enrollment of more than 26,000. Fifth Third Bank Processing Solutions processes over 17 billion ATM and POS transactions per year for more than 1,500 financial institutions and over 147,000 retail locations worldwide, including the Armed Forces Financial Network (AFFN), First Niagara Financial Group, Sovereign Bank, The Kroger Co., AutoZone, Abercrombie & Fitch, Nordstrom, Inc. and The Finish Line.

Details

PayPal Payment Volume Up 37%; Tops $9B

eBay reported that PayPal had 122.5 million total accounts at the end of the third quarter, a 41% increase from one-year ago. Total payment volume rose 37% to a record $9.1 billion which includes payments initiated through the PayPal system but excludes its payment gateway business. The number of active accounts hit 30.9 million as of September 30th, its highest level to-date. During the third quarter, PayPal handled 146.2 million payments, a 2% increase over the prior quarter but, up 25% from 2Q/05. PayPal’s 3Q/06 transaction revenue rate was flat at 3.73%, but, up 13 basis points from one-year ago. The processing expense rate for the third quarter was 1.07%, compared to 1.11% for 3Q/05. PayPal’s transaction loss rate came in at 35 basis points, up 11 basis point from one-year ago. PayPal Merchant Services posted a record $3.3 billion in global TPV in the third quarter, representing a 59% increase from the $2.1 billion reported in the year ago quarter. During the third quarter, PayPal settled with 28 U.S. Attorneys General to simplify its user agreement and communicate more details on its fraud protection program plus pay $3.5 million in costs. For complete details on eBay/PayPal’s third quarter performance, visit CardData ([www.carddata.com][1]). (CF Library 9/29/06)

PAYPAL HISTORICAL
$VOLUME #ACCOUNTS
3Q/05 $6.7 billion 86.6 million
4Q/05: $8.1 billion 96.2 million
1Q/06: $8.8 billion 105.0 million
2Q/06: $8.9 billion 113.7 million
3Q/06: $9.1 billion 122.5 million
SOURCE: CardData (www.carddata.com)

[1]: http://www.carddata.com

Details

VISA Launches an Online Business Resource

VISA USA has launched an experiential online resource via MSN for small business owners. The new “Business Breakthrough, Presented by VISA” offers advice from small business experts, video case studies profiling five small business owners, a contest for small business owners to win their own expert consultation, as well as articles and tips that will help small businesses operate more efficiently. VISA recently reported that small business sales volume on “VISA Business” cards in the U.S. has now surpassed $100 billion over a 12-month period.

Details

Natl City Builds a Top Prepaid Portfolio

Cleveland-based National City reports it has topped one million VISA gift cards since it introduced the prepaid product in 2002. Approximately 60% of gift cards were sold this year through National City branches and 38% were purchased in bulk by business customers, either online or by phone. The average load on individual gift cards sold year-to-date is $129, representing an increase of 26% over last year for individual cards, and a 25% annual increase on the average load for bulk gift card sales to businesses. National City offers the “VISA Gift Card,” “Diamond Edition VISA Gift Card,” “VISA Buxx Teen Card” and “VISA TravelMoney.”

Details