Industry News

This section of our website is intended to keep our partners informed of the latest news surrounding the electronic payments industry.

November 20, 2017

Why Isn't Chase Pay Taking Off?

It wasn’t so long ago that JP Morgan Chase joined the mobile payments hunt with its Chase Pay system. Recent reports, however, suggest that the new offering is going over like a lead balloon, and isn’t drawing much in the way of a user base. Analysis of the overall condition suggests one root cause that may be to blame: customers just aren’t that interested in Chase Pay.

The same reports that suggest customers don’t care also go to some lengths to absolve Chase Pay; it’s not that it’s lacking in features, the word is, as Chase Pay has done quite well in presenting a mobile payments solution that allows users to pay with a smartphone. It works not only with brick-and-mortar stores, reports note, but also with online operations, making it a fairly complete solution.

Funding isn’t a problem either; JP Morgan Chase has dropped a reported $100 million into the development of Chase Pay, and JP Morgan Chase itself counted about 18 cents on every dollar of credit card debt—and about 60 million total customers—to its credit. It even staged a fairly impressive marketing blitz featuring tennis star Serena Williams playing ping-pong.

In pursuit of new interest, the company is actively pulling in retailer partnerships to get its brand front and center with shoppers. Even PayPal’s getting on board with this, in a deal that makes Chase cards easier to add to its app while at the same time allowing users to use Chase rewards points through PayPal.

Essentially, Chase is discovering what a bundle of other also-rans have also found by now: when you’re late to a party, you better have more than just what everyone else brought, or no one’s going to care. Chase has seemingly all the advantages: a hefty user base, a massive promotional bankroll, and the will to use both. But as long as Chase is offering little more than table stakes, it’s not going to draw users.

Chase Pay may be working to improve on that, but until it can make a significant distinction, it’s not likely to get out of the doldrums it’s currently in. It’s got to differentiate itself sufficiently to be worth paying attention to, even among its own user base, a good portion of which has likely been using something else for months anyway.

October 3, 2017

Whole Foods Becomes One of the Latest Major Card Breach Victims

Card breaches are, increasingly, a way of life in the mobile payments circuit. Sure, we’d rather these kinds of things not happen to begin with, but with so much money at stake, it’s just as easy to see why card breaches happen to begin with. Whole Foods recently took just such a breach on the chin, though reports suggest the breach may not be all that widespread.

Reports note that the payment card information illegally accessed was primarily that that came from full-service restaurants and taprooms contained within Whole Foods outlets, which use a different point-of-sale (POS) system than Whole Foods proper users. Thus, those who only used their card at the store’s checkout points and not at a restaurant or taproom within are likely exempt from this particular issue.

Whole Foods started in with an investigation once the breach was discovered, reports note. It called in a major cybersecurity firm to investigate, and also alerted law enforcement authorities, which is pretty much everything that a company should do in such a situation. Those who remember that Whole Foods was bought by Amazon recently, and are wondering about the health of those accounts, need not be concerned; the two systems haven’t been connected and may not be for some time.

Better news yet is only a comparative handful of Whole Foods locations actually have these extra features, so chances are most will never even come in contact with such outlets to pose a risk at all. Still though, for anyone who did—and just as a general proviso—it’s important to monitor accounts for potential fraud just to make sure. It’s also not the best of optics for Amazon, who will need all the positive press it can get going into the holiday shopping season. The fallout from this will likely be minimal, of course, but any bad press is still bad press.

While this particular breach may not do a lot of damage by itself, any breach is a bad one, and one that its victims would likely prefer never have happened. So hopefully, with some vigilance on our part, and on the vendors’ part, we can keep these to a minimum, and reduce the impact that follows when they do happen.

September 6, 2017

Website Steered U.S. Borrowers into Bad, Illegal Payday Loans

WASHINGTON, Sept 6 (Reuters) - The U.S. agency charged with protecting consumers from financial abuse took on a little-understood area of payday lending, where websites sell information on people looking for short-term, small loans, and fined a California company on Wednesday for steering borrowers into illegal and bad debts.

The U.S. Consumer Financial Protection Bureau has been working for more than a year to finish a rule that would restrict payday loans, short-term debt that is not collateralized and is historically repaid by a borrower's next paycheck. The loans are popular with people with low incomes, and are frequently used to cover the expenses of an emergency.

A final version of the rule is expected to be released soon.

The bureau imposed a $100,000 fine on California company Zero Parallel LLC, which as a "lead aggregator" identifies potential borrowers and then sells their information. The action shows the agency has its eye on the online side of the industry, which crosses state lines and has grown in recent years. Potential borrowers fill out web forms and then are immediately sent to a lender's site to take out the debt.

According to a CFPB statement, Zero Parallel sold applications to lenders it knew did not follow states' usury laws, interest-rate restrictions and prohibitions on who can make the loans, and kept borrowers in the dark about risks and costs.

Zero Parallel simply sold leads to the highest bidders, according to the CFPB, and borrowers did not know they were taking out illegal loans.

August 29, 2017

Amex Targets Debt-leery Consumers with New Card Features

NEW YORK, Aug 29 (Reuters) - American Express Co is unveiling a new option that could tempt young, budget-conscious consumers into taking on credit card debt.

On Wednesday, the No. 1 U.S. card issuer by spending will roll out a feature that will allow customers to borrow for big purchases like furniture, medical expenses, airplane tickets or weddings, while separating those balances from everyday items like $2 cups of coffee.

American Express is also adding a feature that will allow customers to immediately pay for small purchases from their bank accounts.

Under the new option as many as 10 purchases of at least $100 each can be siloed into installment plans, American Express said. A $1,000 purchase, for example, could be covered in six monthly installments of $172.18 costing an additional $33.06, or $5.51 a month, in finance fees. That is virtually the same as AmEx would charge in interest for a revolving balance on the account.

Other monthly spending would be interest free as long the cardholder pays in full by the due date.

July 7, 2017

Vantiv Strikes a $10 Billion Deal For WorldPay

British payments company Worldpay said on Wednesday it has agreed in principle to be acquired by U.S. credit card payments firm Vantiv for $10 billion.

The acquisition would create a global payments processing company at a time when financial technology upstarts like Stripe and Square are increasingly edging into the space.

Worldpay had received offers from both Vantiv and JPMorgan, it said on Tuesday. JPMorgan has until August 1 to make a counteroffer, in accordance with U.K. regulations, which is also the deadline that Vantiv has to make a firm offer. However, according to a JPMorgan spokesperson on Wednesday, the bank does not intend to make another play for the company.

The cash-and-stock deal represents an 18.9% premium to Worldpay’s closing price on Monday, before it announced it had received takeover interest from several parties. Shares of Worldplay fell 8% on Wednesday, while shares of Vantiv slipped 1%.

June 28, 2017

New Rules Will Cause Some Credit Scores to Rise in July

Consumers may be a few days away from a higher credit score.

Improved standards for new and existing public records in the databases of the three major credit reporting companies will be implemented on July 1. As part of this change, a majority of civil debts and tax liens will be excluded, which means some credit scores will edge higher.

The new standards follow a report by the Consumer Financial Protection Bureau that found problems with credit reporting companies and recommended changes to help consumers.

Altogether, about 7 percent of the population will have a judgment or lien removed from their credit file, according to a report by Fair Isaac. The company calculates and sells FICO scores, one of the most commonly used scores by lenders.

Once that information is stripped out, their numbers could rise by up to 20 points, Fair Isaac said.

"Analyses conducted by the credit reporting agencies and credit score developers FICO and VantageScore show only modest credit scoring impacts," the Consumer Data Industry Association, which represents Equifax, Experian and TransUnion, said in a statement.

Still, credit reporting and scores play a key role in most Americans' daily life. The process can determine the interest rate a consumer is going to pay for credit cards, car loans and mortgages — or whether they will get a loan at all.

June 7, 2017

Consumer Delinquencies Upin First Quarter

Delinquencies in both open- and closed-end loans rose in the first quarter of 2017, according to the ABA Consumer Credit Delinquency Bulletin released today. The rise in closed-end delinquencies was driven by an uptick in late payments on auto loans, the report noted. The composite ratio, which tracks delinquencies in the closed-end installment loan categories, rose 5 basis points to 1.56 percent of all accounts, but remained well below the 15-year average of 2.17 percent.

Delinquencies in indirect auto loans rose 8 basis points to 1.83 percent of all accounts, while direct auto lending delinquencies increased by 9 points to 1.03 percent of all accounts. Both remained well beneath 15-year averages, however.

In the home-related category lines tracked, home equity line of credit delinquencies and home equity loan delinquencies rose to 1.11 percent and 2.59 percent, respectively. Property improvement loan delinquencies held steady at 0.98 percent of all accounts. Meanwhile, bank card delinquencies rose 5 basis points to 2.74 percent of all accounts.

“Eight years into the economic recovery, it was inevitable that we’d start to see delinquencies edge up from their extremely low levels,” said ABA chief economist James Chessen. “Even in a strong economy with good job growth, there are always people living paycheck to paycheck. Any small bump in the road can be enough to cause them to miss a payment or two on their loan. The good news is that most consumers have been careful to manage their debt levels to ensure they can withstand those small setbacks and meet their obligations.”

March 31, 2017

The First Affordable and BAR-Compliant Financing Solution for Attorneys

TEMPE, Ariz. - March 31, 2017 - PRLog -- ePay Finance Targets Legal Offices by launching LegalFeeLending.com.

With the new legal financing program, law offices need only one application for all of their clients, regardless of credit. The marketplace lending platform features instant credit decisions, agressive credit policies and a "Check Your Rate" feature which allows clients to check approval terms without affecting their credit score.

A single soft credit pull gives clients access to multiple lending opportunities. The program often results in multiple offers from multiple lenders. This gives clients the luxury of choosing which offer is best for them based on the loan amount, interest rate and loan term.

BAR rules governing client financing are as follows:

  • No compulsion to perform
  • No limitation of choice of attorney
  • No compensation other than collection of legal fees
  • Arm's length transaction
  • Fair market pricing

ePay Management is not a broker and ePay receives no compensation from the borrower nor lender in any form whatsoever.

Loans are available from $1,000 to $40,000 with interest rates starting at 6%. The borrower application process is 100% electronic with no "ink to paper". Client is funded directly with no risk to the participating firm.

Click http://www.legalfeelending.com or call 1-877-493-3729 to learn how the ePay Finance program adheres to the BAR regulations or for more information.

March 20, 2017

QuickBooks Integration Tops Feature List of ePay Management Latest Mobile Payments Solution

Recurring billing, stored profile and service fee integration also impress.

TEMPE, Ariz. - March 20, 2017 - PRLog -- Accepting credit card and ACH transactions from a smart phone or tablet has never been easier. To get started, merchants simply download the free ePay mobile app, plug in the encrypted card reader and they are ready to go. Process payments instantly, allow customers to sign and receive receipts from a mobile device anywhere, anytime.

Where traditional mobile solutions end, ePay Wireless continues to impress with powerful value-ad tools.

Dynamic reporting functionality, FRISK Management Security and options ranging from QuickBooks integration to recurring billing and stored-profile.

Processing more than $4 billion per month, ePay's payment gateway has the ability to handle every type of transaction and are integrated with every major processing platform in the United States.

For merchants that are concerned about security, ePay offers encrypted card readers with both EMV (Chip and PIN) and encrypted magstripe capabilities to reduce the PCI scope.

Interested business owners can contact ePay Management directly or visit http://www.epaywireless.com for more information.

May 16, 2016

EMV-enabled VX 520s Available Today!

After much anticipation, Worldpay announced that all new orders for the VX 520 terminal will ship EMV-ready straight out of the box! Now you can offer your new retail and restaurant merchants a stand-alone option for accepting chip-card payments.

We are taking a phased approach to pushing software updates to your existing customers based on their connection speed and equipment capabilities. Merchants who have an IP connection will be first, followed by merchants who have an analog connection.

Existing customers should not call Customer Support to update their software. Each customer will be contacted directly to ensure an optimal customer experience. Rest assured that all customers will receive software update instructions. We expect this process will continue over the next several months. We're working diligently to add new EMV functionality to our lineup:

Currently, the EMV enabled VX 520 does not support cash advance transactions.

Near Field Communication (NFC) functionality like Apple Pay and Samsung Pay transactions can be processed on the VX 520, however at this time EMV security is not available for these NFC transactions. Future software updates will include additional features and functionality.

The launch of EMV-ready VX 805 PIN pads is forthcoming. We will send a follow-up communication once they are ready. In the interim, your customers will use the internal PIN pad on the VX 520 for PIN based transactions.

WorldPay

April 5, 2016

Merchants, Courts Debate Credit Card Surcharging

How and when to add convenience fees to credit card transactions has been fiercely debated since Jan. 27, 2013, when surcharging became legal in the United States as part of a class action settlement against Visa Inc. and MasterCard Worldwide. The ruling was subjected to further scrutiny by some U.S. states and territories, leading to additional stipulations and restrictions.

Payment card surcharges, also known as checkout fees, are restricted in 10 states: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. Merchants operating across multiple regions have the option of imposing surcharges in regions that support the practice.

States challenge ruling

Many state regulations remain in flux due to ongoing litigation. California's restrictions were overturned and subsequently appealed by the state. Similarly, a ruling supporting Florida's surcharge limits was reversed on appeal and remains subject to further actions by the court, legal analysts have noted. "Each state restriction was based on a historical event," stated David Leppek, Chief Executive Officer of Transaction Services LLC (TrxServices), an Omaha-based ISO and payment technology company. "California has not overturned the law but made it illegal to enforce; Florida overturned it and New York overturned it, but upon appeal says [surcharging is] prohibited," he said. "Some legal analysts expect the surcharging decision to be escalated to the Supreme Court."

Merchant solutions

Merchants in U.S. states and territories where surcharging is legal must comply with rules and conditions, such as:

Notification: Participating merchants must notify Visa, MasterCard and their payment acquirers at least 30 days before activating their surcharging practice.

Disclosure: Signage informing consumers of merchant fees connected with their bankcard purchases must be posted in-store at merchant entryways, at POS devices and on payment receipts. E-commerce disclosures must be visible on the first page displaying credit card brands.

Fee limits: Surcharging applies to credit cards only and may not exceed a merchant's discount rate or 4 percent, whichever is lower. Surcharging is not permitted on debit and prepaid cards. Merchants may not require minimum purchases for credit card sales.

Visa, MasterCard rules

Visa and MasterCard created additional brand-specific guidelines for surcharging and invite consumers to report any irregularities, such as being charged checkout fees in states that prohibit the practice, to their state attorneys general.

Visa Core Rules and Visa Product and Service Rules prohibit surcharging outside the United States unless there are local laws or variances that require merchants to participate, such as those in Australia and New Zealand, according to Visa's website.

MasterCard advises merchants to fully review rules before surcharging MasterCard brand card products to ensure that all criteria have been met. "Merchants are permitted to apply either a brand-level surcharge or a product-level surcharge to MasterCard credit cards," the MasterCard website states.

Both Visa and MasterCard allow brand-level and product-level surcharging. Brand-level surcharges involve the same uniform percentage on all MasterCard or Visa credit cards. Product-level surcharges pertain to a surcharge on a particular MasterCard or Visa credit product. "In both circumstances, the level of the surcharge is subject to a cap," MasterCard wrote.

Both card brands encourage merchants to consult card company websites and payment acquirers for further clarification concerning compliance requirements.

Greensheet

March 12, 2016

EMV Liability Shift Challenged in Federal Court

There's a new legal brouhaha underway in the payments space; it is pitting small card-accepting businesses against industry heavyweights. A lawsuit filed in U.S. District Court for the Northern District of California, in San Francisco, against the card brands, EMVCo and major card issuers alleges the liability shift from issuing banks to merchants for fraudulent transactions, which took effect Oct. 1, 2015, violates federal anti-trust laws and other statutes.

Lawyers for the merchants want the court to stop enforcement of the liability shift until all EMV (Europay, MasterCard and Visa) terminals are certified by the card brands and processors. Under the EMV liability shift fraudulent transactions that traditionally had been a cost borne by issuers became a liability for merchants when initiated using devices that are not deemed EMV compliant.

No chance to certify equipment

The lawsuit asserts that the liability shift was implemented even though EMVCo, the card brands and issuing banks knew it was not possible for all merchants to be running devices certified as EMV compliant in the time frame allowed. As a result, merchants are getting slammed with fraud losses despite spending hundreds, if not thousands of dollars installing EMV terminals, while issuers and the card brands skirt financial responsibility for card fraud, the lawsuit contends.

Milam's Markets IGA and Grove Liquors, two Florida merchants named as complainants in the lawsuit, found themselves in precisely this predicament, according to court filings. Both, working with their acquirer, Worldpay, spent money on device upgrades and staff training for EMV card acceptance well ahead of the deadline imposed by the card brands. Both also are still waiting for the devices to be certified, and until then they are amassing significant new costs in the form of chargebacks and related fees for fraudulent transactions.

Between Oct. 1, 2015, and Feb. 15, 2016, Milam's and Grove, combined, were assessed responsibility for 88 chargebacks for Visa Inc. and MasterCard Worldwide transactions totaling over $9,000, plus they were assessed $5 fees on each of those 88 items. During the same period the preceding year, the two businesses saw only four chargebacks, according to the complaint.

Temporary injunction, treble damages sought

"[W]hat defendants knew, but Milam's Market, Grove Liquors and the rest of the Class did not and could not know, was that purchasing new POS equipment and training staff was not going to be enough," the complaint states. "In addition, the equipment would have to be 'certified' after the fact in a murky, nebulous process that was utterly outside their control. Instead, the certification process is controlled by the very entities that benefit from the Liability Shift and it is the primary means through which defendants' illegal conduct has been able to flourish."

The merchants are claiming the liability shift violates the federal Sherman Antitrust Act prohibitions on agreements that restrain trade, as well as its California equivalent, the Cartwright Act, and the Clayton Antitrust Act. Lawyers said they are seeking to include in the class action any merchant that has invested in EMV terminals and is being assessed chargebacks while awaiting official certification of the devices.

The lawsuit seeks treble damages. The list of defendants in the case is long, and includes: American Express Co., Bank of America Corp., Capital One Financial Corp., Citigroup Inc., Discover Financial Services, EMVCo, JCB International Credit Card Co. Ltd., JPMorgan Chase & Co., MasterCard, PNC Bank, China UnionPay, U.S. Bancorp, United Services Automobile Association, Visa and Wells Fargo & Co. The merchants' motion for a preliminary injunction to halt imposition of the liability shift until all merchants with EMV-compliant terminals receive necessary certifications is scheduled to be presented in San Francisco on April 28.

Transaction World

June 2, 2015

Heartland Payment Suffers Another Data Breach

Heartland Payment Systems has reported it suffered another data breach last month.

In a letter to the California attorney general, the Princeton, N.J., payments processor disclosed a May 8 incident in its Santa Ana, Calif., office that may have compromised customers' personal information, including social security numbers and bank account information.

Heartland did not indicate the size or scope of the breach.

American Banker - Source Media

May 28, 2015

A Primer on Android Pay and Google Wallet

Google on Thursday confirmed the arrival of Android Pay and a revamped Google Wallet, an overhaul of the company’s mobile payments products, which was previously reported by The New York Times.

Both products are a shift from the company’s past mobile commerce efforts, which largely flopped. The new services, like the world of payments in general, are not simple. Here is how they work:

Click Here for the full story.

NY Times

April 28, 2015

The Merchant's Role In Mobile Fraud

As more merchants launch apps and mobile-friendly websites, payments industry observers believe retailers could be inadvertently exposing themselves and their customers to fraud as the mobile channel becomes more integral to the overall shopping experience.

Earlier this year, LexisNexis Risk Solutions released a report that found the revenue mobile commerce merchants lost to fraud spiked 70 percent in 2014 to 1.36 percent compared with 0.80 percent in 2013.

The study results also showed m-commerce merchants accept an average of 4.5 payment channels, significantly more than the 2.6 channels accepted by all merchants. Those companies have more fraud exposure than other types of retailers.

One contributing factor to fraud exposure is that merchants unintentionally sacrifice security when they rush to market with a strategy to take advantage of current consumer shopping trends, which now are more focused on the mobile experience than ever before.

Click Here for the full story.

Mobile Payments Today

March 26, 2015

CFPB Considers Proposal to End Payday Debt Traps

Proposal Would Cover Payday Loans, Vehicle Title Loans, and Certain High-Cost Installment and Open-End Loans.

Today the Consumer Financial Protection Bureau (CFPB) announced it is considering proposing rules that would end payday debt traps by requiring lenders to take steps to make sure consumers can repay their loans. The proposals under consideration would also restrict lenders from attempting to collect payment from consumers’ bank accounts in ways that tend to rack up excessive fees. The strong consumer protections being considered would apply to payday loans, vehicle title loans, deposit advance products, and certain high-cost installment loans and open-end loans.

“Today we are taking an important step toward ending the debt traps that plague millions of consumers across the country,” said CFPB Director Richard Cordray. “Too many short-term and longer-term loans are made based on a lender’s ability to collect and not on a borrower’s ability to repay. The proposals we are considering would require lenders to take steps to make sure consumers can pay back their loans. These common sense protections are aimed at ensuring that consumers have access to credit that helps, not harms them.”

Click Here for the full story.

Consumer Financial Protection Bureau

February 23, 2015

EMV Readiness Becomes a Numbers Game

The deadline by which most retailers must have EMV-compliant payment terminals in place and working is fast approaching. And depending upon who is running the numbers, the U.S. marketplace is either well positioned or seriously unprepared for the new security regimen.

EMV (for Europay, MasterCard and Visa) is an international standard for the interoperability of chip cards and chip-reading POS devices that's intended to protect card data from being hacked at the POS and throughout the acquiring stream. Under a migration schedule backed by major card brands, most merchants should be using EMV-compliant terminals by Oct. 1, 2015. (Gas stations with pay-at-the-pump terminals have two additional years to comply.)

Thereafter, if payment card data captured using noncompliant POS terminals becomes compromised, the noncompliant merchant who ran the cards becomes the de facto cause of the breach and is on the hook for all associated losses.

In October 2014, the Payments Security Task Force predicted that "at least 47 percent of U.S. merchant terminals will be enabled for chip-card acceptance" by the deadline. Visa Inc. and MasterCard Worldwide created the task force, whose members include representatives of banks, credit unions, processors, acquirers and merchants. Its estimates are based on forecasts from acquirers who together handle about 80 percent of U.S. card purchases.

Click Here for the full story.

The Green Sheet Online

January 12, 2015

Mobile's Gradual Ascent

ABI Research predicted the total value of transactions via mobile handsets and tablets will reach $1.8 trillion in 2014. However, adoption lags behind device availability as security continues to concern mobile device users. ABI believes a layered approach integrating trusted execution environments, host card emulation and tokenization will be critical to enticing consumers and protecting payments at the cloud, app and hardware levels.

The Green Sheet Online

October 28, 2013

Report Addresses CNP Issues

Fraudsters who perpetrate schemes in the card-not-present (CNP) sphere may unfortunately find comfort in the SecureBuy-Magento 2013 Fraud Report. Based on an online survey conducted from February to May 2013, the report found that merchants globally investigate CNP chargeback requests only 54 percent of the time. The result is that millions of dollars in fraud that could be avoided is not, the researchers concluded.

The report noted that chargebacks are on the rise. "It's gotten so bad that some merchants simply refund the customer without challenge, in order to avoid, at any cost, excessive chargebacks that could put their ability to process at risk," the report said. Up to 30 percent of U.S.-based merchants and 57 percent of international merchants do not conduct any form of fraud pre-screening, according to the report.

Additionally, the researchers found that over 40 percent of merchants surveyed rely on the manual review of at least some of their transactions, which is an expensive process fraught with human error and the specter of "false positives" − legitimate transactions that are flagged as fraudulent, which results in lost sales and angry customers.

Green Sheet Issue 131002

October 28, 2013

Report Addresses CNP Issues

Fraudsters who perpetrate schemes in the card-not-present (CNP) sphere may unfortunately find comfort in the SecureBuy-Magento 2013 Fraud Report. Based on an online survey conducted from February to May 2013, the report found that merchants globally investigate CNP chargeback requests only 54 percent of the time. The result is that millions of dollars in fraud that could be avoided is not, the researchers concluded.

The report noted that chargebacks are on the rise. "It's gotten so bad that some merchants simply refund the customer without challenge, in order to avoid, at any cost, excessive chargebacks that could put their ability to process at risk," the report said. Up to 30 percent of U.S.-based merchants and 57 percent of international merchants do not conduct any form of fraud pre-screening, according to the report.

Additionally, the researchers found that over 40 percent of merchants surveyed rely on the manual review of at least some of their transactions, which is an expensive process fraught with human error and the specter of "false positives" − legitimate transactions that are flagged as fraudulent, which results in lost sales and angry customers.

Green Sheet Issue 131002

September 9, 2013

Bitcoin Foundation opens dialogue with Fed

In late August 2013, members of Bitcoin Foundation, an organization seeking to standardize the crypto-currency bitcoin, met with federal regulators, policymakers, law enforcement officials and congressional staffers. The ensuing discussion focused on the future of digital currencies, which are increasingly under scrutiny by state and federal authorities.

In a statement to digital currency news outlet CoinDesk prior to meeting with officials in Washington, Patrick Murck, General Counsel for Bitcoin Foundation, and founder and Principal of Engage Legal PLC, said, "Our hope is that this is the beginning of an open and transparent dialogue between good-faith stakeholders to find common ground and develop public-private partnerships."

An early signal that further federal regulatory action could be imminent came from the Financial Crimes Enforcement Network, which introduced a preliminary set of guidelines in March 2013 that would regulate virtual currencies, including a provision for certain bitcoin businesses to register with the U.S. government.

Green Sheet Issue 130901

August 26, 2013

Court Smacks Fed over debit interchange rules

The Federal Reserve Board was ordered back to the drafting table to rewrite the controversial debit card regulations it promulgated to implement the Durbin Amendment to the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. The order, handed down July 31, 2013, by Judge Richard J. Leon of the U.S. District Court for the District of Columbia, was a firm rebuke of the assumptions and methodologies that led the Fed to cap debit card interchange at 21-cents per transaction.

"It appears that the Board [of Governors of the Federal Reserve] completely misunderstood the Durbin Amendment's statutory directive and interpreted the law in ways that were clearly foreclosed by Congress," Leon wrote in a harshly worded, 58-page rebuke. The judge's decision in the case (Civil Case No. 11-02075) sent shock waves through the financial community. Shares of Visa Inc. stock took a nose dive, ending the day trading at 7.5 percent lower than the previous day's closing price. MasterCard Worldwide share prices were down by about 2 percent.

Green Sheet Issue 130802

July 22, 2013

Supreme Court upholds AmEx's merchant contract

On June 20, 2013, the United States Supreme Court ruled in favor of the American Express Co. concerning contractual obligations of retailers when they sign up to accept AmEx-branded cards at the POS. In a five-to-three decision, the Court ruled that retailers must abide by contract terms that specify they cannot sue AmEx on a class-action basis, but that each retailer must seek arbitration over disputes with AmEx individually.

The case of American Express Co. et al v. Italian Colors Restaurant et al involved whether the contract entered into by an individual retailer with AmEx was binding even if the contract made it financially impossible for that retailer to sue the card company. The majority Court decision held that federal law does not permit courts to invalidate arbitration agreements just because the path of individual arbitration may be costly.

Green Sheet Issue 130702

June 24, 2013

First EMV-compliant ATMs in US go live

With the move to the Europay/MasterCard/Visa (EMV) standard underway in the United States, news comes from payment technology firm NCR Corp. that the first EMV-compliant ATMs have been deployed. People's United Bank, which operates over 400 branches on the East Coast, went live with a handful of EMV ATMs at its branch on Park Avenue in New York City in late May 2013.

NCR said the People's United ATMs included an upgrade to the card reader hardware inside the machines, as well as a software upgrade. The ATMs are only EMV-compliant for MasterCard Worldwide-branded payment cards processed over the card brand's European Maestro debit card network. So it is likely that the only EMV-enabled cards to be used at the ATMs will come from foreign travelers to the United States.

U.S. acquirer Vantiv LLC is Peoples Bank's card processor. Chuck Gidaro, Vice President for ATM Channel Management at Vantiv, said Peoples United had terminals that were "almost ready to go with EMV." The ATMs were brand-new and state-of-the-art, and "just needed a little bit of a software upgrade," Gidaro added. "So we worked with them to get those ATMs in production."

NCR, which was heavily involved in transitioning the payments infrastructure in Europe to the EMV standard in the late 1990s, said that 36 percent of bankcards and 65 percent of terminals operate with EMV globally.

The company noted that France was the first country to implement EMV and has seen an 80 percent reduction in fraud since. EMV is considered more secure than mag stripe technology because EMV-based chip and PIN cards are harder for fraudsters to counterfeit.

Green Sheet Issue 130602

May 13, 2013

NACHA seeks input on QR codes

The Council for Electronic Billing and Payment, a committee of NACHA - The Electronic Payments Association, is prepared to embark on an evaluation of the quick response (QR) code guidelines it released in December 2012, and it seeks participation from the payments industry. The CEBP said evaluation of the QR Encoding for Consumer Bill Payment Guidelines will last from May 1, 2013, to June 30, 2014.

The guidelines identify standards for using QR codes in both biller direct and consolidator/aggregator billing and payment models. Recommendations include the size of QR codes, what data the codes should contain and how that data should be formatted in the code. The document describes ways QR codes can be employed, such as to view bills, make bill payments, and enroll consumers in e-bill and online banking services.

Industry evaluation of the guidelines, considered the second phase in the overall evaluation of the document, seeks to confirm the efficacy of the specifications contained in the guidelines, as well as clarify how QR codes should be used in billing and payment models and how they can be used to reduce costly bill payment exceptions.

How QR codes can reduce exceptions

Robert Unger, Accredited ACH Professional and Senior Director at NACHA, said via email that most bill payment exceptions occur due to user error, such as customers entering incorrect account information when setting up online banking accounts.

NACHA and the CEPB commissioned a 2012 study on exceptions that showed 0.58 percent of total bill payments in 2011, including check, automated clearing house, card and cash payments, could not be posted accurately upon their receipt by billers because of missing or incorrect data associated with the transactions. The report concluded that the costs of handling approximately 130 million exceptions in 2011 totaled $720 million for financial institutions.

Unger noted that such billing errors also cause reputational damage to financial institutions, but QR codes can help minimize that damage. "If the consumer scans the QR code - instead of entering the data - there should not be any data entry errors, thus no (or much fewer) exceptions when compared to customers who enter data themselves," he said. NACHA said the goal of the guidelines is to establish a single, standardized QR code format to be employed by financial institutions and billers that will provide "certainty for biller and banking clients" and ensure a "consistent experience for consumers.

Green Sheet Issue 130501

April 22, 2013

Fed Report Shows Mobile Adoption Soaring

After more than a decade of unfulfilled promises, mobile technology is beginning to influence the way U.S. consumers shop and bank, especially the young and the financially underserved. I drew that conclusion after reviewing the Federal Reserve Board's latest report on mobile banking and payments.

Consumers and Mobile Financial Services March 2013 is the second mobile report released by the Fed in as many years. "The ubiquity of the mobile phone is changing the way consumers access financial services," the Fed wrote. For example:

- Twenty-eight percent of all mobile phone owners used those devices to conduct banking transactions in 2012, up from 21 percent in 2011. Primarily, they checked balances and transferred funds.

- Among nonusers, 10 percent expect they will probably try mobile banking this year.

- Smart-phone users are the most prolific mobile bankers; 48 percent told the Fed they had used mobile banking applications last year, up from 42 percent in 2011.

- Twenty-one percent of mobile banking customers deposited checks to their bank accounts via mobile phones (called mobile remote deposit, or mRDC) last year; that's twice as many as in 2011.

In addition, the Fed reported the following about mobile payments:

- Fifteen percent of mobile phone owners made payments using those devices last year, up from 12 percent in 2011; bill payments were the most common transactions.

- Twenty-two percent of mobile phone users expressed interest in using their phones to make POS purchases.

- At 24 percent, the share of smart-phone users who made mobile payments in 2012 was unchanged from 2011.

- Six percent of smart-phone owners used their phones to make POS payments in 2012, up from 1 percent the year before.

The Fed also found skepticism about the benefits and security of using mobile devices for banking and payments. For example, more than half of mobile phone owners who don't use mobile banking applications said they weren't apt to use them in the future either.

"Consumers are similarly skeptical of the benefits and security of mobile payments, or believe it is simply easier to use another method of payment," the Fed wrote. After all, mobile payments are appealing in theory, but in practice they're cumbersome and not as easy as pulling a credit or debit card out of a pocket and swiping it through a POS device.

The making of educated consumers

Mobile shopping - now that's a different story. "Smartphones are changing the way people shop," the Fed wrote. According to the Fed's data, 42 percent of smart-phone users have used those devices to comparison shop while inside stores, and 32 percent have used their smart phones to scan product bar codes to search for the best prices on items. (This latter statistic struck me because it is a relatively new phenomenon, and I've yet to see anyone inside a store scanning a product's two dimensional bar code or quick response code with a smart phone.)

Even more telling, 64 percent of smart-phone owners who used their phones for in-store comparison shopping told the Fed's researchers they purchased products elsewhere based on the information they accessed while inside stores.

In addition, 44 percent said they had used their phones to browse product reviews or other product information while shopping in-store, and 70 percent of those folks said they had changed their purchase decisions based on those reviews and information.

Green Sheet Issue 130402

March 11, 2013

New cyber threat targets SMBs

Security awareness training firm KnowBe4 warned of a new security threat to small and mid-sized businesses (SMBs). The threat, called Advanced Persistent Threat, or APT, is usually initiated via spear-phishing attacks orchestrated by teams of fraudsters, according to KnowBe4. The attack targets company executives who have access to businesses' most sensitive and secure information. KnowBe4 said APTs are typically sponsored by governments that have the capabilities and intent to persistently target specific entities.

KnowBe4 founder and Chief Executive Officer Stu Sjouwerman explained how the attacks work. Fraudsters target a business and hone in on key employees, then research and harvest data about those individuals, including emails, pictures and financial records.

Sjouwerman said the APT then carries out its attack by sending the target an email from a seemingly recognized source. The email contains an attachment. When the attachment is opened, the computer is infected with malware that allows fraudsters to gain undetected access to the organization's computer system. Sjouwerman noted that victims may remain unaware of the virus for years because of the subtle nature of the attack.

Phishing in growth mode

In an August 2012 blog post on the website of RSA Security Solutions, the Security Division of EMC Corp., RSA documented the global rise of phishing attacks in the first half (1H) of 2012. Compared with fraud statistics from the second half (2H) of 2011, RSA said businesses experienced 19 percent more phishing attacks in the January to June 2012 timeframe, with attacks heavily targeting organizations in the United Kingdom, the United States and Canada.

The blog post, entitled "Phishing in Season: A Look at Online Fraud in 2012," said the number of 1H2012 phishing attacks averaged 32,581 a month, and represented the fourth straight increase in the number of attacks recorded since 2H2010. The estimated global fraud losses from phishing attacks in 1H2012 surpassed $687 million, up 32 percent from 1H2011, RSA stated.

Human emotion is the reason phishing attacks persist and, in fact, continue to grow. "What makes phishing so successful is its social engineering component which drives the schemes used by cybercriminals today to manipulate online users into disclosing private information," said the post. "In social psychology, one of the routes to persuasion is designed to get a person to purposefully not think - but rather react emotionally and react immediately." RSA noted that the most successful phishing scams play upon common human motivators and emotions through:

- Tax refund and prize offers

- Unwarranted lottery winnings and "419" scams (originating in Nigeria)

- Accusatory tax fraud reports from purported authorities

- "Look who has been searching for you" schemes

- Fake order confirmations from well-known online merchants or shopping sites

- Fake emails from banks, service providers, investment firms, social networking friends or professional network colleagues/ business associates

Red flag warnings

SMBs are being victimized by APT attacks because they are not taking proactive measures to prevent attacks, according to Sjouwerman. One measure is for SMBs to train employees on how to detect potential phishing attacks. The security firm said various fields in emails can provide red flags of potential attacks, such as:

- An unusual email address from the email sender in the "From" field

- An email that was cc'd to an unknown individual or individuals in the "To" field

- An unusual time the email was sent, such as 3 a.m., in the "Date" field

- Irrelevant or discordant wording in the "Subject" field that does not match the content of the email

- Content that includes bad grammar or spelling errors

- A hyperlink that shows a strange web address when the hyperlink is hovered over

- Email attachments that were not expected or would be unusual from the particular email sender

KnowBe4 offers SMBs the Kevin Mitnick Security Awareness Training online program, which includes case studies, live demonstration videos and short tests. Mitnick, who heads Mitnick Security Consulting LLC, is notorious for hacking exploits perpetrated in the early 1990s.

Green Sheet Issue 130301

February 11, 2013

Visa, MC allow merchant surcharging

Visa Inc. and MasterCard Worldwide enacted a rule change Jan. 27, 2013, allowing merchants to surcharge customers up to 4 percent on credit card transactions to cover the costs of interchange fees. The new surcharging rules - revealed by Visa Dec. 20, 2012, and by MasterCard Dec. 21, 2012 - were instituted as part of a $7.9 billion preliminary settlement agreement in the class action lawsuit brought on behalf of 7 million retailers against the card companies.

The merchants alleged the two card brands are violating the Sherman Antitrust Act by unlawfully fixing interchange fees and rules. The proposed settlement was given preliminary approval by the Federal Eastern District of New York in November 2012.

Agreement partly in effect

Many retailers, both in and out of the class, are objecting to the terms of the proposed settlement. The district court has scheduled a final approval hearing for September 2013. In the meantime, as part of the preliminary agreement the two card companies are implementing two of the provisions in the proposed settlement immediately: enabling merchant surcharging and contributing to the Interchange Rate Relief Fund.

"As a party to the settlement agreement MasterCard is required to ... permit merchants in the U.S. region and U.S. territories to apply an extra fee, also known as a surcharge, to customers who pay with MasterCard credit cards," the company stated when it disclosed the new rule.

Visa said it will require merchants who surcharge to disclose surcharge practices at the store entry point and at the POS. MasterCard also requires merchant disclosure, and it is reminding merchants that acquirers may also impose notification requirements. While both card companies allow merchants to surcharge credit card transactions, they prohibit surcharging for debit and prepaid card transactions.

MasterCard allows merchants to add surcharges up to "the lesser of the merchant's average effective merchant discount rate that the merchant pays its acquirer for MasterCard credit acceptance or the maximum surcharge" of 4 percent. Visa also caps surcharging at 4 percent.

However, merchants must handle surcharging of all credit card transactions in the same manner. Thus, if a merchant accepts cards from a competing network that does not allow surcharging, the retailer cannot surcharge Visa or MasterCard credit card transactions either. When surcharging is permitted, the cost imposed must be the same for all cards.

"The amount of the surcharge on the competing payment network brand must equal at least the lesser of: the cost to accept the competing brand's credit cards or the surcharge imposed on Visa Credit Cards," Visa stated in a memo to its U.S. merchants.

Merchants skeptical of motives

An attorney on the court appointed team that negotiated the settlement confirmed the preliminary agreement also requires Visa and MasterCard to set aside 10 basis points from all of their U.S. credit card transactions for the next eight months and contribute the money to an interchange relief fund set up by the court. If the settlement is not approved the money collected for the relief fund will still be divided among the class retailers.

The attorney called the card companies' acceptance of settlement terms prior to final agreement "unprecedented." Doug Kantor, an attorney representing the National Association of Convenience Stores, one of the class-action plaintiffs objecting to the settlement, agreed it is unusual for terms of an agreement to go into effect before it is final.

"I think the card companies anticipate that a lot of merchants are going to be upset by this settlement," he said. "I think they are trying to find ways to lock in the settlement as a done deal that can't be changed. They may be trying to box in the merchant who may not like the settlement by getting that merchant to accept the terms of the agreement before it is final."

Kantor said he anticipates few merchants will elect to surcharge, in part because the credit card companies are making it difficult for retailers to do so, and in part because customers don't like to be surcharged. Kantor said some retailers believe that if they do surcharge, the card companies will publicly complain that retailers are being unfair to consumers. Also, nearly 40 percent of Visa and MasterCard merchants affected by the settlement are located in states that ban surcharging.

Green Sheet Issue 130202

January 28, 2013

AmEx restructuring, reimbursements force job cuts

American Express Co. reported its 2012 fourth quarter net income was negatively impacted by restructuring charges, reward redemption enhancements and the cost of consumer reimbursement following the company's October 2012 consent agreement with several U.S. regulatory agencies. The company additionally said it is eliminating 5,400 jobs, mostly in its Global Business Travel division, and it is reducing overall 2013 staffing levels 4 to 6 percent below the current 63,500 positions.

Fourth quarter results

AmEx reported a fourth quarter adjusted net income of $1.2 billion which matched the adjusted fourth quarter net income of the same period the previous year. Total revenues were up 5 percent from the previous year to $8.1 billion and card member spending was up 8 percent over the previous year. Final full year and fourth quarter results will be released Jan. 17, 2013.

"In addition to strengthening our ties to merchants and cardmembers, we have launched products for new customer segments, expanded into new geographies internationally, and extended our presence well beyond the traditional American Express footprint," Kenneth Chenault, AmEx Chairman and Chief Executive Officer, said.

Reimbursement costs

The company recently discovered that, over several years' time, late fees of approximately $28 million were collected from cardmembers who did not receive proper notice of the transgression; members were charged interest of approximately $24 million on disputed balances; and it failed to credit $68 million in reward bonuses to cardholders.

The consent agreements the company signed with the Federal Deposit Insurance Corp., the Consumer Financial Protection Bureau, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency and the Utah Department of Financial Institutions require reimbursements to said customers of approximately $153 million, the company reported.

"We never want to make mistakes, but we are fully committed to correcting them and providing compensation when appropriate," Chenault explained. "The material costs for reimbursement that we are able to identify have been recognized, but we are going to continue to work closely with regulators and strengthen our controls."

The company also identified more cardmembers who are eligible for a part of the restitution it was ordered to pay under the consent orders. The restitution will reimburse AmEx customers for regulatory violations in the company's debt collection practices, credit card solicitations, late fee charges, reporting of disputes to credit bureaus and new account approval processes.

Under terms of the consent agreements AmEx agreed to pay $27.5 million in fines and establish an $85 million account to pay for customer refunds. The company said the majority of the refunds are related to debt collection and late fee charges.

Job reductions and rewards increase

The job cuts will take place across seniority levels, businesses and staff groups in positions that generally do not directly generate income. The bulk of the layoffs will be in the company's travel business which it believes "is being fundamentally reinvented as a result of the digital revolution."

"Against the backdrop of an uneven economic recovery, these restructuring initiatives are designed to make American Express more nimble, more efficient and more effective in using our resources to drive growth," Chenault noted.

The company is also adding $342 million to its membership rewards reserve to account for an anticipated increase in reward redemptions. "Loyalty and reward programs are one of our major competitive advantages," Chenault said. He noted the success of the rewards program encouraged AmEx to expand it during the last few years to give customers more opportunities to earn and redeem rewards points.

Green Sheet Issue 130102

December 10, 2012

PCI SIG risk assessment guidance released

The PCI Security Standards Council (PCI SSC) recently released a set of best practices designed to help organizations assess and correct security vulnerabilities.

The supplement's objective is to help merchants, service providers, acquirers and issuers comply with the Payment Card Industry (PCI) Data Security Standard (DSS). The document was produced by the PCI Risk Assessment Special Interest Group (SIG), which included representatives from banks, retailers, security assessors and technology vendors.

The PCI DSS requires businesses to have a process for assessing payment card data threats and vulnerabilities in their payment systems. This is in addition to requiring that businesses take certain steps to protect data, as well as correct vulnerabilities found.

A risk assessment helps companies to reduce exposure to data theft. The new PCI DSS Risk Assessment Guidelines Information Supplement offers guidance from members of more than 60 payments industry organizations.

A key focus area for stakeholders

"As there are a number of risk assessment methodologies out there, our stakeholders were looking for guidance on how to effectively apply these principles to their organizations to meet PCI requirements," said Bob Russo, General Manager of the PCI SSC. "As an open standards body, SIGs are one of the many ways we're able to tap into the brain trust that is our global community."

The supplement recommends that businesses formalize risk assessment methodology in a simple way that accommodates the corporate culture and organizational requirements. It also urges businesses to implement risk assessment continuously to mitigate threats and vulnerabilities quickly.

The document additionally reminds businesses that implementing risk assessment doesn't relieve the organization of its duty to comply with the PCI DSS or other PCI standards. And it emphasizes formal training on risk assessment processes for risk assessors to help them understand threats and vulnerabilities that could negatively impact their companies' systems.

Green Sheet Issue 121201

November 12, 2012

Challenges Ahead for EMV

ISOs, acquirers and processors are beginning to confront the challenges they face as the United States moves toward adoption of the Europay/MasterCard/Visa (EMV) standard mandated by the major card brands, Randy Vanderhoof, Director of the Smart Card Alliance and Acting Director of the EMV Migration Forum, said in an interview with The Green Sheet.

EMV is a global standard for integrated circuit (chip) cards. Considered to be more secure than mag stripe cards, EMV cards are already used in most regions of the world. EMV cards work with traditional terminals equipped to accommodate them; the cards can also be enabled with near field communication (NFC) for terminals that accept contactless payments. "EMV is not a technology change so much as a fundamental platform change to how payments processors accept transactions," Vanderhoof noted.

U.S. EMV migration topics

What the EMV migration means to the U.S. payments industry was the topic at the recent EMV Migration Forum's inaugural meeting at MasterCard Worldwide headquarters in Purchase, N.Y. The forum is an independent organization created by the SCA to assist in EMV implementation in the United States.

Vanderhoof said discussion among the 130 forum participants covered the impact of EMV on debit networks, clarification of EMV testing and certification standards, and EMV education and communication, among other topics.

Challenges for issuers

"Issuers aren't being told they have to issue a specific type of card," Vanderhoof noted. He said among the decisions issuers face are whether to issue contact-only cards, contactless cards or both; and whether the chip will require a PIN, a signature or neither.

The decisions aren't easy. NFC-enabled cards are significantly more expensive to produce than more traditional cards. And when combined with chip and PIN, non-NFC cards achieve the main objective of EMV implementation: to significantly reduce the use of counterfeit cards at the POS.

Issuers also are working on processes for assigning a PIN when a card is issued and for when the password is reset. Credit providers are additionally trying to resolve how to capture a sale when a legitimate customer doesn't have or remember the PIN.

EMV's impact on ISOs

Vanderhoof said the U.S. payments industry is unique because there are so many processors and acquirers here. No single supplier has the market power to make one solution prevail. Merchants and acquirers are instead faced with multiple POS options, along with multiple tests and certifications.

"Processors and acquirers don't have to be able to process EMV transactions by the deadline; they only need to have their application tested and approved by the deadline," Vanderhoof pointed out. "But each card brand has its own application certification and testing procedure in place."

Getting ATMs ready for EMV is another challenge for the industry. "ATMs vary in their software and hardware," Vanderhoof said. "They are not like the POS; you don't just unplug them and swap them out.

"The upgrades needed, and the complexity of preparing ATMs to accept EMV cards, are only just beginning to be evaluated. From a fraud standpoint, as merchant terminals are hardened by EMV, fraudsters will move to the least secure point, and in some cases that will be the ATM."

Mobile's impact on EMV

Regarding mobile payments and EMV, Vanderhoof said, "Merchants will have to make complicated choices in terms of accepting mobile payments, and this could delay adoption of EMV. But the reality is merchants are not in a position to refuse any method of payment a consumer wants to use.

"Though it may be in the merchant's best interest to ride an alternative payment rail, it doesn't take away from the fact that most consumers come in with their bankcard from their financial institution, and that will be the way they will choose to make their payment rather than with a mobile app."

Also, after 2015, the cost merchants who are not EMV-compliant will bear for card fraud associated with them will be far greater than their current processing costs and Payment Card Industry Data Security Standard compliance fees, and that's another incentive for adoption, Vanderhoof said

Green Sheet Issue 121101

October 22, 2012

Happy complicated first birthday, Durbin

Oct. 1, 2012, marked one year since implementation of the Durbin Amendment to the Dodd-Frank Act, and the debate over debit card interchange regulation is as contentious as ever. Depending on whom you ask, the Durbin Amendment has lowered merchants' debit card acceptance costs, resulting in savings being passed on to consumers, or it has done nothing of the sort. The Merchants Payments Coalition, which backed the legislation, said retail profit margins have declined since the amendment was implemented and concluded this indicates savings are being passed on to consumers. As an example, the MPC gave the Home Depot U.S.A. Inc., which said lower operating costs due to debit interchange reform led to price cuts on 3,000 items.

The MPC also cited gas stations, where station operators are taking advantage of lower processing costs for debit card transactions by offering customers discounts to get them to pay with debit cards.

"Debit swipe fee reform has been a win for consumers and Main Street businesses, especially small businesses," said Mallory Duncan, Senior Vice President and General Counsel for the National Retail Federation and Chairman of the MPC. He added that "where fees are lower, prices are lower."

Fees down, prices up?

But the Electronic Payments Coalition, which represents the financial services industry, said the $8 billion retailers have saved in processing costs over the last year have not been passed on to consumers in the form of lower prices; in fact, consumers are paying an average of 1.5 percent more for goods and services since the amendment's implementation.

The EPC conducted field research on the matter. To compare retailers' prices before the amendment's enactment to after, 36 shopping trips were undertaken to 18 stores nationwide, where the same items were bought pre- and post-Durbin. The research showed that, of the retailers visited, 67 percent either raised prices on those same items, or kept prices the same.

EPC spokeswoman Trish Wexler said, "With a wink and a nod, giant retailers promised to lower prices for their customers if Congress passed the Durbin Amendment. ... Let's just call a spade a spade - this was a political handout to big-box retailers, who are now scrambling to make excuses for why they couldn't pass these savings along to customers."

Battling bank rating sites

The MPC also cited new data from Moneyrates.com that shows debit interchange reform did not affect what banks charge for their services. The MPC quoted a representative of the National Grocers Association, who said fluctuations in checking account fees and other fees are "fundamentally the same" post-Durbin as they were pre-Durbin.

However, the EPC said a recent BankRate.com survey found that checking account costs for consumers rose dramatically post-Durbin, "with some bank fees rising 25 percent or more," due in part to regulations limiting overdraft and debit card interchange fees.

Green Sheet Issue 121002

August 27, 2012

Durbin urges merchants to reject proposed settlement

Sen. Richard Durbin, D-Ill., denounced a proposed settlement of claims that the interchange fees charged by MasterCard Worldwide, Visa Inc. and a number of issuing banks are unfair and violate provisions of the Sherman Antitrust Act. Durbin authored an amendment to the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act that gave the Federal Reserve Board authority to cap debit interchange fees.

The more than $7 billion settlement proposal agreement was divulged in July 2012 by lawyers appointed by the Brooklyn Federal District Court to represent the nearly 7 million merchants in the class. If Federal Court Judge John Gleeson accepts the settlement, which merchant lawyers said will be submitted for the court's preliminary approval by Oct. 19, it would be the largest settlement in Sherman Antitrust history.

Nonetheless, some of the largest retailers and retail organizations in the country, organizations such as Wal-Mart Stores Inc. and The National Association of Convenience Stores, said they intend to opt out of the settlement.

Green Sheet Issue 120802

August 13, 2012

Global Payments' Breach Update

International payment processor Global Payments Inc. said the data breach it discovered in March 2012 cost the company $84.4 million in remediation expenses and card company penalties this fiscal year. The company publicly shared the price of the breach damage for the first time in its fourth quarter year-end earnings report released July 26, 2012. Global Payment's fiscal year ended May 31, 2012.

The company also reported its investigation of the breach is complete and is working with the card brands to restore its Payment Card Industry (PCI) Data Security Standard (DSS) compliance certification - a process the company believes will be completed by the end of 2012.

In a conference call discussing the earnings report, company Chief Executive Officer Paul Garcia said he anticipates Global Payments will spend between $55 million and $65 million more in remediation in 2013. These costs may be partially offset by up to $28 million in additional insurance payments.

"The data intrusion incident will soon be behind us, and we will emerge with a world class technology infrastructure offering future operating leverage," Garcia said.

Green Sheet Issue 120801

July 09, 2012

Data security best practices for SMBs

The Top 5 Security Best Practices for Small Merchants, a white paper published by payment security and compliance solutions provider ControlScan, is available free to small and midsize businesses (SMBs) and the acquirers who serve them. The purpose of the paper is to help SMBs become less likely targets for data thieves. The document provides detailed information on best practices that can be implemented easily and cost-effectively, the company said.

"Small merchants represent the path of least resistance to data thieves," said Steve Robb, ControlScan Vice President of Products and Services. "The Top 5 Security Best Practices white paper arms these merchants with a stronger awareness, as well as proven, easy-to-implement tactics for protecting their business."

Recommended tactics include:

  • Understand sensitive data, where it is and who is responsible for its protection.
  • Avoid storing sensitive data; if required to do so, secure it.
  • Protect perimeters with firewalls.
  • Fortify interiors with people, procedures and technology.
  • Get to know service providers and their level of PCI compliance.
  • In addition, the paper cites several recent studies that reinforce the importance of Payment Card Industry Data Security Standard compliance and security. According to the paper, even the smallest data breach can have a business-ending result for the average merchant.

    "This is a very serious issue, and we approached it with that mindset," Robb said. "Our significant experience working with Level 4 merchants and their acquiring banks helped us make this white paper a solid representation of the top five data security best practices small merchants can put in place to significantly reduce their risk of a breach."

    Green Sheet Issue 120701

    June 11, 2012

    MasterCard's EMV Push, Introduction of Mobile POS

    MasterCard Worldwide is encouraging adoption of Europay/MasterCard/Visa (EMV) technology and working to ensure its payment rails are included as an option in the latest mobile devices.

    Speaking at the Smart Card Alliance's NFC Solutions Summit 2012 in Burlingame, Calif., May 23, 2012, James Anderson, MasterCard Senior Vice President for Mobile and Emerging Payments, noted that EMV has the ability to provide quick, relevant data when, for example, people want more information about exhibits in museums or more information about advertised products. "Payment can be an enabler to a rich ecosystem of services," he said.

    Anderson also said MasterCard embraced near field communication (NFC) because it has the "fundamental requirements" for payment security in the transaction, and it allows a two-way exchange of information between payor and payee.

    MasterCard is participating in the Google wallet and the Isis wallet launches, Anderson pointed out. "We are going from an environment where the payment device is the center of the industry" to a new model where there are opportunities to leverage the mobile platform and consumer preferences on a shared platform, he stated.

    Anderson called for standardization of both the wallet interface and security. "Standardization across payment networks - that's what we do," he said, adding that MasterCard has already certified several new mobile devices as 'PayPass Ready,'" that is, capable of NFC payment.

    Calls for industry cooperation

    MasterCard is also forming a multi-industry group to help networks, issuers, merchants, acquirers, processors, terminal manufacturers, card manufacturers and others implement EMV in the United States.

    Chris McWilton, MasterCard President of U.S. Markets, said, "Industry collaboration has proven to be critical to the successful migration to EMV in other parts of the world. It's our goal to bring the industry together in an objective forum."

    MasterCard envisions the group focusing primarily on providing guidance on technical issues and standardization, creating common terms, descriptions and guidelines for EMV devices, and sharing and implementing best practices.

    New mobile POS program

    In addition, MasterCard is launching a global effort to educate mobile POS solution providers and merchants on best practices when using new mobile POS technology.

    The MasterCard Mobile Point-of-Sale (MPOS) Best Practices document includes advice on securing MPOS payment applications, securing transaction data captured by an MPOS card reader accessory, securing personal account numbers, EMV chip transactions and more.

    MasterCard solution providers can check their solutions against MasterCard Best Practices and apply to be listed on the company's website. Registration for the program begins in July 2012.

    Green Sheet Issue 120601

    May 14, 2012

    NY Attorney General Files Suit Against POS Leasing Firm

    New York Attorney General Eric Schneiderman filed suit April 23, 2012, accusing POS leasing firm Northern Leasing Systems Inc. and its affiliates of stealing between $3.6 million and $10 million from former customers. "These companies engaged in a series of deceptions to squeeze unauthorized fees out of their former customers up to a decade after their contracts expired," Schneiderman said. "We will seek both restitution for defrauded customers and substantial penalties from the companies to ensure justice and accountability prevail."

    Unexplained debits

    Schneiderman alleges Northern Leasing created a shell company, SKS Associates LLC, to make unauthorized debits from more than 100,000 of its former POS leasing customers. The attorney general additionally alleges SKS successfully pulled more than $10 million out of former client bank accounts, keeping at least $3.5 million. Some former customer accounts were debited as much as 11 years after their leases expired.

    The attorney general said SKS claims the fees collected were to pay for uncollected property taxes and administrative fees. "The company could not explain why it failed to collect the amounts previously, nor could it show that the alleged amounts were actually owed," the attorney general's office said. "In fact, 77 percent of the amounts SKS sought to collect were not taxes at all but 'administrative fees.'"

    Schneiderman believes SKS was formed to "deliberately mislead customers in an attempt to avoid any harm to Northern Leasing's business reputation." As a result, thousands of former Northern Leasing and affiliates' customers were surprised to find their bank accounts debited by a company they had never heard of or done business with.

    Multiple allegations

    The list of allegations filed against Northern Leasing includes:

    - Allowing SKS to begin debiting bank accounts before it was legally registered to do business

    - Sending out notice letters on the same day as, or only one day before, accounts were debited

    - Stopping customer notification of the charges and debiting accounts with no notice when complaints became overwhelming

    - Debiting accounts of former customers who opted to purchase the POS system and had releases from any further claims

    - Lying to former customers by telling them the unpaid taxes and fees were discovered when the account was audited when there was no audit conducted

    - Threatening customers with referrals to collection agencies and credit bureaus if the debits were challenged when there was no intention to carry out the threat

    Northern Leasing did not respond to phone or email requests for comment.

    Green Sheet Issue 120501

    April 23, 2012

    Global Payments, Payments Community Respond to Reported Breach

    Atlanta ISO and payment processor Global Payments Inc. was reportedly the victim of a data breach that potentially compromised an estimated 1.5 million North American accounts. Trading on Global Payments stock was halted March 30, 2012, after reports of the breach surfaced. Before trading was stopped the company's stock price had fallen just over 22 percent to $47.50.

    The break-in was first reported by the blog Krebsonsecurity.com authored by former Washington Post reporter Brian Krebs. He said Global Payments was compromised between Jan. 21 and Feb. 25, 2012; this was based on alerts sent out by MasterCard Worldwide and Visa Inc. to financial institutions shortly thereafter.

    Krebs said the thieves were able to acquire enough data to counterfeit new cards. He also quoted sources saying more than 10 million card numbers may have been compromised. He then went on to say PSCU Financial, a nonprofit cooperative credit union service organization, told its members 56,455 Visa and MasterCard accounts had been compromised, but fraud was found to have occurred in only 876 accounts so far.

    Card company statements

    Shortly after the breach came to light, MasterCard and Visa both issued statements acknowledging they had begun investigating a data breach at what Visa called a "third party entity" and MasterCard referred to as a "U.S.-based entity."

    Visa's statement referred to "a potential data compromise incident" involving "all major card brands." The company emphasized Visa systems were not breached and reminded the public of its zero liability fraud protection policy.

    "Every business that handles payment card information is expected to protect the security and privacy of their customers' financial information by adhering to the highest data protection standards," Visa stated, adding it is taking a proactive approach to news of the breach.

    "Visa has provided payment card issuers with the affected account numbers so they can take steps to protect consumers through independent fraud monitoring and, if needed, reissuing cards."

    Ongoing investigation

    MasterCard said in its statement it is alerting payment card issuers of "certain MasterCard accounts that are potentially at risk" because of the data breach. "Law enforcement has been notified of this matter and the incident is currently the subject of an ongoing forensic review by an independent data security organization," MasterCard said. "It is important to note that MasterCard's own systems have not been compromised in any manner."

    Discover Financial Services spokeswoman Laura Gingiss said her company is aware of the breach reports and is monitoring accounts for suspicious activity. She said the card company "will reissue plastics as appropriate" and pointed out Discover customers have no liability for incidents of fraud.

    Security sector response

    Mark Bower, Vice President of Voltage Security Inc., said payment processors such as Global Payments have been a target of attacks for years. "If there's one industry that absolutely needs to adopt a data-centric security strategy to mitigate breach risk, it's the payments industry," he said.

    "And the writing is on the wall for those payment acquirers that don't. The PCI Council recognizes these risks, so it should be no surprise if an organization that relies on older perimeter security strategies is breached and lands on the front pages of newspapers."

    Joe Levy, Chief Technology Officer for the security intelligence and analytics company Solera Networks, said, "It would not be surprising if the investigation slowly reveals that the breach involved techniques such as web application exploitation, maneuvering from a compromised public system into the internal systems and that the presence on the network was a longer-term than estimated.

    "These tend to be common characteristics of these kinds of events. And it underscores the fact that perimeter defenses are imperfect and will almost always be breached by a sufficiently motivated adversary. It also illustrates the insufficiency of our current incident response practices."

    Political perspective

    Reports of the data breach also brought a quick response from Congresswoman Mary Bono, R-Calif., Chair of the House Subcommittee on Commerce, Manufacturing and Trade. Bono is co-author of the pending Secure and Fortify Electronic (SAFE) Data Act. "You shouldn't have to cross your fingers and whisper a prayer when you type in a credit card number on your computer and hit 'Enter,'" she said.

    Global in a 'Catch 22'

    In an April 3, 2012, conference call, Global Payments Inc. Chairman and Chief Executive Officer Paul Garcia said Global had received a report of compliance with the Payment Card Industry (PCI) Data Security Standard (DSS) prior to the breach. But Visa stripped away Global's PCI DSS compliant designation following the breach. "[I]t's a little like a Joseph Heller novel Catch 22," Garcia said. "You are compliant prior, [but] if something happens, by definition you are no longer."

    Regardless, Garcia said the company is working "around the clock" to regain its record of compliance (ROC). "Visa has removed us from the PCI compliance list pending the results and resolution of our work," he said. "Upon reflection, this is not unexpected. We are focused on remediation necessary for full PCI reinstatement. It goes without saying we are providing uninterrupted service to our customers around the world as we speak."

    PCI DSS revalidation required

    Visa removed Global from its registry of PCI DSS-validated service providers on April 1. "Per our normal process, Visa has asked Global Payments to revalidate its PCI DSS compliance," the card brand said in a statement. "The PCI DSS has proven to be a highly effective foundation of minimum security standards when fully, correctly and consistently implemented across all systems handling cardholder data."

    In a statement, the PCI Security Standards Council reiterated that the PCI DSS is the "best defense against incidents of this kind. An intrusion need not result in card data compromise if an organization is following the 12 guiding requirements of the PCI Data Security Standard."

    Still open for business

    Despite the breach and the PCI DSS compliance delisting, Global is still processing payments. "The important thing is we are open for business and processing transactions," Garcia said. When pressed if Global is still processing transactions for Visa, Garcia responded, "Absolutely, positively yes."

    The CEO added that long-term relationships with clients, together with "a lot of technical relationships around it," means "today it's business as usual." He noted that the company continues to sign new merchants. "It is not a good thing not to have an ROC, but it doesn't mean we can't sign merchants or can't process," he said.

    ISOs, customers OK

    Garcia also emphasized the data breach suffered by his company "does not involve our merchants, sales partners or their relationships with their customers. ... Neither merchant systems nor point of sale devices were involved in any way." Garcia asserted that ISOs can be reassured that the breach had no impact on them. "This is not a merchant breach," he said. "This was not an ISO breach. This literally had nothing to do with them - end of story."

    Garcia said competitors contacted Global to inform the company they would not "inappropriately" take competitive advantage of the theft - a commitment he said Global made to its competitors when their systems suffered similar incidents of massive data loss.

    Garcia noted Global also received positive reports from customers who said they would not abandon the processor because of the breach. "We can't guarantee there will be no fallout," Garcia said. "We were very encouraged by the response."

    Liability not yet assessed

    Global will not be able to assess its liability until both its own investigation and the federal law enforcement investigations are complete. "Not being PCI compliant has financial liabilities," Garcia said, but added quantifying that liability will not be possible until the investigations are complete. "We can't reasonably estimate charges and costs yet," he added.

    A FAQ link on the Global Payments website said, in part, "We are aware that individuals attempting to perpetuate fraud, via the Internet and otherwise, may be using the Global Payments' name or a Global Payments' product name, (Global Transport and logo) to deceive consumers." The company urges customers who believe they have been victimized by fraud to visit the government's Internet Crime Complaint Center at www.ic3.gov and file a complaint.

    Green Sheet Issue 120402

    March 26, 2012

    Square Deals

    Square Inc., the company providing free credit card readers for mobile phones, is making inroads into the worlds of brick-and-mortar and transportation payments.

    For retailers of all sizes, Square updated its free Square Register application, which turns an Apple Inc. iPad into a cash register. Square stated that, when used with its card reader and an iPad, the updated application allows retailers to immediately begin operating virtual registers that accept payment with cards, cash or by just entering a name.

    According to a Square video on the company's Facebook page, Square Register can now do far more than accept payments. It can also track sales; customize inventory; provide detailed analytics; create loyalty programs; allow merchants to create and publish their profiles to the Square Directory; track and reward customers; allow merchants to print, text or email custom receipts; and allow merchants to log in from any location to see transaction details.

    Square on the move

    On the transportation front, the New York City Taxi and Limousine Commission approved a pilot program that enables Square to test its card readers in New York cabs. The commission said it approved the Square test, which will use the iPad "in lieu of the current passenger information monitor ... and [the] current driver information monitor to interface with the meter and evaluate cost savings, if any."

    The commission added that the Mobile Technology System will have "a passenger information monitor, hard mounted in the passenger area of the vehicle, and a taxicab driver information monitor, which will interface with the meter and aid the taxicab driver in performing his duties while the systems are recording trip data.

    "The Square's proposed Mobile Technology System will also be capable of recording and storing trip sheet data, processing credit card payments, and enabling communication between the [taxi and limousine commission] and taxicab driver and between the medallion owner and taxicab driver."

    In addition, Square's proposed Mobile Technology System will offer "new and different technological interactions and improved experiences for taxicab drivers and passengers, the possibility of lower credit cards rates and a faster driver payment turn around," the commission noted.

    Green Sheet Issue 120302

    February 24, 2012

    Facebook Becoming a Payment Business

    Facebook Inc. made $557 million from its payment business in 2011, up from $106 million in 2010, the company disclosed Feb. 1, 2012, in a much anticipated initial public offering (IPO) filing in advance of the social networking site becoming a publicly traded company. The Securities and Exchange Commission document gave potential investors insight into Facebook's payment revenues and its plans for building its payment business.

    The numbers

    Facebook said most of its revenues are generated from advertising and social gaming, with total payments reaching $188 million in the fourth quarter 2011. The company said its payment business accelerated in fourth quarter 2010 when platform developers began to adopt Facebook Payments in significant numbers. "Facebook Payments became mandatory for all games developers accepting payments on the Facebook Platform with limited exceptions on July 1, 2011," the IPO document noted. "In 2010, we generated approximately 62 percent of our revenue from advertisers and platform developers based in the United States, compared to 67 percent in 2009."

    Social gaming

    Facebook said social network game developer Zynga Inc. accounted for 12 percent of its total revenue in 2011 (up from less than 10 percent in 2009 and 2010). The revenue came from processing fees connected to sales of Zynga's virtual goods and from direct advertising purchased by Zynga.

    Facebook said Zynga is committed to using Facebook Payments as its primary means of payment on Facebook through 2015. "Under this addendum, we retain a fee of up to 30 percent of the face value of user purchases in Zynga's games on the Facebook Platform," the company said. The Menlo Park, Calif.-based social network added that platform developers received more than $1.4 billion through Facebook transactions in 2011. The company expects to do more payment processing as it increases payment volume and adds new payment methods to its platform.

    Facebook's platform accepts debit and credit card, PayPal Inc., mobile phone, gift card and other types of payments. When Facebook users transact on the social networking site, they primarily buy virtual currency to purchase virtual items in social games; Facebook takes a percentage of transactions for processing costs, the company said. Facebook uses the CyberSource Payment Management Platform to accept credit and debit card payments.

    Legal status

    In regard to the selling of virtual or digital goods, Facebook does not consider itself to be a principal, as opposed to an agent, in the sales process. "The indicators used to determine whether an entity is a principal or an agent to a transaction are subject to judgment," the company said. "We consider ourselves the agent when we apply the indicators to our facts.

    "We do not believe we are a financial institution subject to [U.S. laws and regulations]. However, it is possible that payments on the Facebook Platform could be considered a financial product and that we could be deemed a financial institution subject to applicable U.S., state or foreign regulation under certain interpretations of laws governing businesses such as money transmitters, check cashers, and sellers or issuers of stored-value."

    Facebook said it is applying for "certain money transmitter licenses in the United States," which will force the company to comply with U.S. laws concerning money transmission; gift cards and other prepaid access instruments; electronic funds transfers; anti-money laundering regulations; counter-terrorist financing initiatives; gambling; banking and lending; and import and export restrictions.

    The future

    Looking to the future, Facebook said it is "focused on enabling the development of apps in categories beyond games." As new social apps, such as customized music, news, movies and television, become available on the Facebook platform, developers will have more opportunities to create transactions, the company stated.

    One such opportunity is in rent payments. In January 2012, Campus Apartments LLC said its online student rent payment portal, SmartClick, added Facebook Connect. The partnership allows students and parents to pay rent for student housing via Facebook. "We plan to invest in enhancing our payments offerings and in making the payments experience on Facebook as seamless and convenient as possible for users and platform developers," the company said, adding that most apps have advertisements, and usually developers can add Facebook Payments if desired.

    Green Sheet Issue 120202

    January 09, 2012

    The Future of Contactless Payments

    ontactless payments may have gotten a boost when Visa Inc. released its plan to accelerate adoption of the Europay/MasterCard/Visa (EMV) contact and contactless chip technology in the United States.

    A new 23-page report from Mercator Advisory Group Inc. titled Moving Parts: EMV, NFC and Contactless Deployment in the U.S. looks at the implications and issues surrounding the push for contactless payment technology in the United States. The report evaluates Visa's decision to push EMV in the United States and what that decision may mean to the industry. It also offers insight into where contactless payments may be heading.

    The authors also assess the impact new payment methods may have on how merchants make acquisition decisions. They additionally review other, slightly different, contactless technologies such as MasterCard Worldwide's PayPass card and Visa's payWave card.

    Preparation required

    "If Visa Inc's view of the world comes to pass, merchants, acquirers and issuers will be embarking on the most complex update to their payments infrastructure in 20 years," Mercator Advisory Group said in a press release promoting the study.

    Among the issues the industry will face with widespread implementation of contactless payments is security. Mercator Advisory Group noted adoption of the EMV security standard is now going to be an issue in the United States for which stakeholders need to be prepared.

    "The expected EMV rollout in the U.S. will require no little choreography on the part of merchants, acquirers and issuers because it will touch every payment device," George Peabody, Director of Mercator Advisory Group's Emerging Technologies Advisory Group, noted.

    "Given the coincident timing of the EMV announcement and the arrival of NFC [near field communication], merchants have to carefully plan their POS infrastructure investments over the next five years and more.

    Timing is everything."As consumers move to increasing adoption of smart devices, Mercator Advisory Group urges anyone who accepts, processes, routes or assumes risk for payment to prepare for accepting both NFC and EMV payments.

    Green Sheet Issue 120101

    December 16, 2011

    PayPal Holding Your Funds? State Regulators Want to Know.

    For many eBay sellers who use PayPal to process payments, holds of up to three weeks (or in some cases, even longer) are simply a reality of doing business.

    PayPal generally explains the policy of holding funds as a response to transactions that are associated with risk or buyer disputes, though sellers often complain that the holds occur in situations where neither condition is in play. Moreover, critics of the policy have maintained that the holds are commonplace to the point of routine, occurring far too often to be explained by suspicions of fraud.

    What many sellers may not know is that they can seek redress from state regulators if they feel the holds are unfair.

    "If people feel that they have undue delays the best and the quickest way to find out why or how is to write a letter to their state regulator," said Joseph Rooney, assistant commissioner with Maryland's Office of the Commissioner of Financial Regulation.

    According to Rooney, every state but two - South Carolina and New Mexico - has a law governing money transmitters, a broad classification that includes financial institutions such as money order and travelers check services, as well as online payment outfits like PayPal.

    Many of those statutes cap the period of time that money transmitters can hold onto payments before releasing them to the recipient.

    In California, for instance, where PayPal is headquartered and registered as a money transmitter, section 1841 of the state's Money Transmission Act reads:

    "Every licensee or its agent shall forward all money received for transmission or give instructions committing equivalent money to the person designated by the customer within 10 days after receiving that money, unless otherwise ordered by his or her customer."

    Alana Golden, public information officer at the California Department of Financial Institutions, explained that the hold period provided in the statute is "meant to protect the consumer against non-delivery by sellers."

    Other states have similar provisions. In Florida, for example, the law requires that licensed money transmitters "shall, in the normal course of business, ensure that money transmitted is available to the designated recipient within 10 business days after receipt."

    An eBay seller in that state shared his experience with Ecommerce Bytes. The seller, who claims a 100 percent feedback rating with no history of major complaints, received word from PayPal in October that funds owed him would be held for 21 days. In response, the seller appealed to the state attorney general's office. About two weeks later, PayPal contacted the seller, saying that it had conducted a "second review" of his account, and the funds were released.

    "Bottom line: anyone that has a hold placed on their account, should take a few minutes to do some research, see if they have a leg to stand on, and complain to their state agency/agencies. It does work," the seller wrote.

    November 19, 2011

    28 Indicted in Theft of Steakhouse Patrons' Credit Card Data.

    The customers went for the dry-aged sirloin and tender cuts of filet mignon, like many at New York City’s better steakhouses. And, like many, they handed their credit cards to the waiters after their meals, expecting to tip, sign and be on their way.

    But in the last year and a half, at least 50 diners at restaurants like the Capital Grille, Smith & Wollensky, JoJo and Wolfgang’s Steakhouse ended up paying for more than just a fine piece of meat. Their card information — and, in effect, their identities — had been stolen by waiters in a scheme to buy and resell cases of vintage French wine, Louis Vuitton handbags, Cartier jewelry and even a Roy Lichtenstein lithograph of Marilyn Monroe.

    The diners had unwittingly become pawns in a “very high-tech, evolving group of criminal organizers,” Cyrus R. Vance Jr., the Manhattan district attorney, said Friday during a news conference to announce the indictments of 28 people.

    Seven waiters, he said, used lipstick-size electronic “skimmers” to extract data from the magnetic strips of American Express Centurion, or “black,” cards and other high- and no-limit credit cards belonging to patrons. Such customers, used to high credit card bills, would probably not have immediately noticed or been alerted by card companies to any suspicious activity on their accounts, Mr. Vance said.

    Equipped with the stolen data, members of the ring allegedly manufactured counterfeit credit cards and identification cards in an Upper West Side apartment using what Mr. Vance called “the tools of their trade”: computers, scanners, encoders, embossing machines and other high-tech equipment.

    The counterfeit cards, which the police commissioner, Raymond W. Kelly, described as high-quality duplicates, were used by “shoppers” associated with the ring to make purchases at high-end retailers like Bergdorf Goodman, Burberry and Chanel, in places as far away as Boston, Chicago and Florida. But first, to make sure the cards would be accepted, members of the ring used them for things like cab rides.

    Mr. Kelly — standing behind a display that included thick stacks of $100 bills, designer handbags and aged bottles of red wine seized from the defendants — called the ring “well organized and very selective.”

    October 20, 2011

    Whole Foods Market customers hoping to use their checkbooks at the high-end grocery this week were told to find alternative ways to pay.

    All five Triangle locations stopped accepting checks Monday in order to limit the amount of customer information the grocer collected and to increase checkout speed, said Whole Foods spokeswoman Teresa Jones. The policy is already in place at many of its 300 U.S. stores.

    "It's a noticing of a trend and an opportunity to take advantage of a trend," Jones said.

    It's true that check users are a dwindling minority in the retail world, but few stores have outlawed the payment method.

    There's no discernible trend of retailers adopting no-check policies, said J. Craig Shearman, a vice president at the National Retail Federation. The trend is actually the opposite. "What (retailers) prefer most is cash or checks," Shearman said.

    When customers pay by cash or check, the retailer receives 100 cents on the dollar. A retailer pays a transaction fee whenever a customer uses a credit or debit card.

    Last year, just 5 percent of consumers reported that writing a check is their preferred method of retail payment, down from 11 percent in 2005 and 18 percent in 2001, according to a study by BAI Research and Hitachi Consulting.

    Whole Foods let its customers know about the change in advance through signs posted at the checkout line.

    September 12, 2011

    ePay Management, LLC Introduces ePay Finance to Assist American Businesses by Lending to Underserved Consumers.

    ePay Finance is specialized in helping consumers with credit challenges purchase goods and services from our business customers. While most lenders approve only well-qualified borrowers, ePay understands that anyone can experience financial difficulty at times due to reasons beyond their control.

    ePay Finance offers unsecured loans up to $30,000 for prime to sub-prime credit customers, with credit scores as low as 550. Interest rates are as low as 8.99% with special promotions such as 12 month no interest or 90 days same as cash.

    Through the ePay Finance program, business and private lenders come together to make affordable funding available to consumers through an online platform. Each ePay Finance business customer is set up with an online account to submit loan applications There is no recourse or liability to the business for payment defaults. There are no minimum years in business requirements to participate.

    ePay Finance was created to help as many consumers as possible to purchase goods and services from our business customers within responsible lending limits.

    August 29, 2011

    The New Credit Score Rules: Forbes reports on credit scores in America in the following ariticle:

    The average credit score nationwide is 666, according to CreditKarma.com. That's not only an ominous number, but can be a costly one.

    Based on CreditKarma.com's data, the trend amongst lenders shows that a 660 credit score is the threshold to be approved for a mortgage, auto loan and unsecured credit card. Digging deeper into consumers' credit health, nearly 40% of consumers have a credit score below 660. That means 4 out of 10 Americans would likely be denied for a mortgage and auto loan, charged sky-high interest rates, and only qualify for a secured credit card.

    With credit scores controlling consumers' access to credit and the prices they pay for lending products, Americans must take control of their credit health.

    In the fine line between approval and denial in lending, consumers deserve to know more so they can do more about their credit health. While recent federal regulations have nudged open the door on consumers' access to credit, it's not enough. Consumers must be empowered to actively manage their credit, not just when they are transacting but also in their daily financial life.

    As legislation and economic changes evolve the credit industry, consumers' access to credit scores must be broadened. Here's what you need to know about credit now.

    • 1.) It's your consumer right to get a free credit score! Thanks to a recent federal regulation, consumers who are denied on a credit application or receive higher interests due to their credit profile are entitled to see their credit score for free. This only applies to declined consumers, so it begs the question: why aren't all consumers getting their credit score for free? With such significant impact on accessing and pricing of financial products, free credit score access should be a right of all consumers. We may see government efforts to provide free credit score access on the horizon. Once a mysterious and proprietary secret of the credit industry, credit scores are becoming a powerful tool in the hands of consumers.
    • 2.) Standards for accessing credit are always in motion. Once upon a time, the general "good" credit score standard was 660. During the recession's credit crunch, the standard jumped to 720. It appears some credit card issuers are again expanding their credit standards and approving lower credit tiers. Some mortgage lenders say a 720 credit score is needed to get the best mortgage rate, while others say 750 is the new standard. Additionally, lenders are increasingly focusing on other credit details aside from your three digit score. For example, a consumer can have a 780 credit score, considered in the excellent range, and be denied on a credit card application because their credit history is simply not long enough. It'll take time and economic stability till lenders comfortably agree on credit score standards; hopefully that keeps you on your toes and improving credit health every day.
    • 3.) It's not enough to check your credit score. One drawback of the federal regulation is its limitations. Giving consumers access to their credit after being denied is too little, too late. Credit scores can fluctuate suddenly, so a single snapshot isn't enough. What's necessary is for consumers to monitor their credit. Whether you have a 550 or an 800, tracking trends in your credit use and credit score helps identify areas to improve, habits to avoid, and most importantly, makes you conscious of how day-to-day financial decisions impacts your credit health. You might need several months' cushion to polish up your score, so begin monitoring your credit as soon as you plan to buy a home or car, or apply for a loan or credit card. If you aren't applying for credit but currently have a credit card, it's still imperative to stay on top of your credit health. Issuers periodically do an account review, and if any new credit blemishes appear, it could affect your card terms. Proactively use credit score monitoring services so you, and not lenders, are the first to know about recent changes on your credit.
    • 4.) Expect credit score differences. The federal regulation also shined light on the fact that there are dozens of credit score models in use. While many consumers consider FICO to be the "real" score and everything else to be a "FAKO", the truth is that every lender chooses differently: there are the credit bureau-specific models, the VantageScore, the FICO score, scores specific to lender type like mortgage, auto and credit card issuers, and even models particular to certain banks. If your TransUnion score and VantageScore have a 40 point difference, there isn't a "more accurate" score. It's similar to weighing yourself at home versus the gym or the doctor's office; the scales show different numbers because they're calibrated differently, but ultimately, they all measure your weight. Rather than obsessing over the three-digit score, focus on the risk factors involved such as your debt, number of accounts, and credit use. Just like diet and exercise will reflect in your weight across all scales, taking action to holistically improve your credit health will reflect across the broad spectrum of credit score models.

    While the recent federal regulation is a positive move for consumers, lenders have already found loopholes, reports SmartMoney. For example, if the lender uses its own scoring model, they aren't required to disclose that credit score to consumers. Also, insurance companies, which also use a credit score model to evaluate customers and price premiums, are excluded from this regulation and aren't required to disclose credit scores to consumers who are charged a higher premium.

    As the Consumer Financial Protection Bureau stretches its reach and more financial reform finds its legs, consumers must keep challenging Uncle Sam to keep the heat on the financial industry when it comes to credit score access. Consumers must also keep putting in the legwork to build healthy credit and keep an eye on their credit score.

    We're headed in the right direction when it comes to consumers' access to their credit score. But don't walk away from this topic just yet; we barely have our foot in the door.

    July 11, 2011

    Federal Reserve Sets Debit Interchange at $0.21: The Durbin Amendment went into effect on July 21, 2011. This legislation allows the Federal Reserve Board to reduce the cap of debit interchange at $0.21 per transaction plus 0.05% of the sale amount. There is much debate on who wins with this regulation.

    The amendments supporters are hopeful the wealth transfer from banks to merchants will result in lower prices to consumers. Yet many predict that banks will likely respond by eradicating debit cards. Restricting purchases, ending free checking and driving up fees to offset revenue losses. In order for the merchant to benefit from the reduction in fees their payment provider must also pass along the reduction in Interchange.

    ePay Management's merchants will no doubt be the winners of the lowered interchange cost due to their cost plus billing method. When Interchange costs go down, so does your bill with ePay.

    May 5, 2011

    $16 Billion In Rewards Points Go Unused: Companies that offer rewards reap the benefits when customers don't redeem them.

    Americans are great at accruing loyalty rewards points, especially from retailers, banks and credit card companies. Unfortunately, they're just as good at not cashing those rewards in.

    A new study from Colloquy, a marketing firm in Cincinnati, shows that about 33% of the 48 million rewards points earned by American consumers each year go unused, presumably due to neglect and misinformation, for a total value of $16 billion.

    That news will probably make the companies that promote them happy, as the banks, credit card companies and retailers benefit from a huge de facto profit-making engine without having to lift a finger.

    Of the $16 billion in unused loyalty points, the average American consumer squanders $205 -- enough to buy a round-trip plane ticket from Philadelphia to Miami, or to pay the average U.S. household phone bill for the month.

    "American consumers are leaving significant dollars on the table every year," says Kelly Hlavinka, a managing partner at Colloquy. "This report should alert savvy consumers to a great opportunity to stretch household budgets, and to do so by simply consolidating their loyalty rewards participation with their favorite brands, making it easy to accumulate and redeem them faster than ever imagined."

    Rules are hard to decipher. But one issue consumers have is trouble understanding what purchases do and don't qualify for the points. A cynic may wonder if complicated rewards rules are an intentional way for a company to make some extra cash, but it could be that either consumers are indifferent about using all their points (unlikely in this economy), or they're confused about how to leverage their rewards points, which the study's researchers feel is more likely.

    The study also reveals some interesting data on which industries are the most aggressive about offering rewards and travel miles. Not surprisingly, the financial sector tops that list:

    • The financial services sector is the biggest provider of rewards at $18 billion a year.
    • The travel and hospitality sector is the second-largest industry in terms of rewards at $17 billion a year.
    • The retail industry, although it makes up 40% of all loyalty program memberships, issues the smallest value in rewards at $12 billion a year.

    On the demand side, membership in such programs is up:

    • The number of loyalty memberships in the U.S. is 2.1 billion, up from 1.8 billion in the 2009 report and exceeding 2 billion for the first time.
    • The average household has signed up for 18.4 programs, compared with 14.1 programs in 2009.
    • Despite the increase in overall membership, the average number of programs in which households actively participate is just 8.4.

    It's up to rewards points providers to urge consumers to use their points, although that's not an alluring option when providers can save big bucks when shoppers don't use them. Plus, if you push a consumer too far, that business may never come back.

    "If redemption equals engagement, and engagement delivers customer satisfaction and profits, then loyalty marketers should encourage their members to make the most of their rewards," Hlavinka said. "In short, redemption is good."

    March 9, 2011

    Verifone Takes The Gloves Off, Accuses Square of Serious Security Hole: Mobile payments are heating up and companies are taking ruthless steps to knock down competitors. Today, VeriFone is claiming that Square’s mobile payments processor contains a serious security threat to credit cardholders and businesses.

    In an “open letter,” VeriFone CEO Doug Bergeron warns consumers and the industry of a serious security threat with Square’s card reader and calls on Square to recall its devices (we’ve pasted the letter below). Bergeron claims that anyone can “skim” or steal personal information off of a credit card’s magnetic strip using the Square card reader with a hacked app and to illustrate the vulnerability, VeriFone wrote a test app that can “skim” to prove their assertions.

    VeriFone says the flaw is in Square’s hardware, which the company says lacks the ability to encrypt credit card data. It’s unclear if VeriFone’s claims have grounds, but it is a serious move on VeriFone’s part to call out a competitor publicly. VeriFone offers its PayWare Mobile app and hardware to allow iPhone users to easily accept credit card payments. Clearly, Square is a threat to VeriFone’s product, so its intentions aren’t so pure when exposing this potential issue.

    Credit card fraud is not new, of course. Criminals steal credit card numbers all the time, both online and offline. Consumers are not liable for fraudulent charges, the credit card companies are. But if Square becomes a magnet for fraud, the credit card companies won’t be happy with that.

    We’ve contacted Square and are awaiting a formal response.

    An Open Letter to the Industry and Consumers

    Today is a wake-up call to consumers and the payments industry. Last year, a start-up named Square introduced a credit card reader for smartphones with the goal of making it very easy for anyone to accept credit cards through a mobile device. Seems like a great idea, but there is a serious security flaw that Square has overlooked that places consumers in dire risk.

    In less than an hour, any reasonably skilled programmer can write an application that will “skim” – or steal – a consumer’s financial and personal information right off the card utilizing an easily obtained Square card reader. How do we know? We did it. Tested on sample Square card readers with our own personal credit cards, we wrote an application in less than an hour that did exactly this.

    Let me explain how easy it is to exploit the vulnerability.

    A criminal signs up with Square, obtains the dongle for free and creates a fake Square app on his smartphone. Insert the dongle into the audio jack of a smartphone or iPad, and you’ve got a mobile skimming device that fits in your pocket and that can be used to illegally collect personal and financial data from the magnetic stripe of a payment card. It’s shockingly simple.

    The issue is that Square’s hardware is poorly constructed and lacks all ability to encrypt consumers’ data, creating a window for criminals to turn the device into a skimming machine in a matter of minutes.

    There are hundreds of thousands of these unsecure devices already floating out there and more are given away for free every day. And because anyone can get their hands on these Square readers, anyone can masquerade as a legitimate business or vendor and swipe your payment card. Your card data is then instantly and illegally captured in the smartphone, un-encrypted – and voila, you’re a fraud victim.

    Consumers who hand over their plastic to merchants using Square devices are unwittingly putting themselves in danger.

    Don’t take our word for it. See for yourself at www.sq-skim.com where you can download the sample skimming application and view a video of this type of fraud in action.

    Today we are handing a copy of the application over to Visa, MasterCard, Discover, American Express, and JP Morgan Chase (Square’s credit card processor), and we invite their comments.

    Consumer trust is what’s really at stake. If the industry allows Square and other similar attempts to short-circuit security best practices, it will seriously jeopardize the integrity and security of the payment infrastructure and financial systems developed over the last three decades.

    Secure payment systems, like those provided by VeriFone and other credible providers which adhere to the highest level of security practices, are critical in protecting consumers, merchants and banks. Without this protection, all commerce – conducted with plastic or mobile devices – is a catalyst for massive personal and institutional financial loss.

    There is great promise in the future of mobile payments and our innovations will help drive the industry forward. It is our hope that both consumers and merchants will take it upon themselves to become educated on the security risks involved with some of these experimental payment acceptance methods, like Square, and make informed decisions to protect themselves and their customers.

    We take security very seriously. Securing payment transactions is what we do, and yes – calling attention to and protecting against these types of security threats to consumers, merchants and banks is our responsibility.

    We call on Square to do the responsible thing and recall these card skimming devices from the market.

    Doug Bergeron

    CEO, VeriFone

    March 3, 2011

    Merchant Coalition Backs Interchange Overhaul: The Merchants Payments Coalition Inc., an association of convenience stores, supermarkets, retailers, fuel stations, and an assortment of other business owners, large and small, who accept card payments, continues to be an active proponent of the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The amendment was passed to regulate debit card interchange fees.

    According to the 2010 Federal Reserve Payments Study, debit card transaction volume in the United States surpassed all other forms of noncash payments in 2009, representing an estimated 35 percent of total noncash payments. In the Federal Reserve's Regulation II; Docket No. R-1404, the card networks reported debit and prepaid interchange fees totaling $16.2 billion in 2009, with the average interchange fee of 44 cents per transaction, at 1.14 percent per the average $38.58 transaction.

    "This has been an issue for our membership for well over a decade," said Liz Garner, Director of Government Relations, Food Marketing Institute, an MPC member.

    "Our relationship with the card companies is unlike any other business relationship we have. We can't negotiate rates; we can't negotiate terms of card acceptance. And that's why this is one of the fastest growing line items for all of our member companies - everyone from large, national retailers to small, independent operators like ours."

    Rachel Wolfe, a spokeswoman for the MPC, which represents an estimated 2.7 million stores and 50 million employees in the United States, said that in the price-competitive retail industry, every penny matters.

    "Unfortunately we've been seeing more than a penny increase in swipe fees and these fees are completely anticompetitive," she said. "We've seen those fees triple in the past 10 years, even though the cost of actually processing those transactions has gone down."

    According to Wolfe, much of the interchange debate has focused on large retailers, but smaller merchants have been hit hardest because most lack adequate capital reserves. "They don't have the corporate backing," she said, adding that escalating fees can even threaten the survival of small businesses.

    Garner elaborated: "Our smallest supermarket members saw a 35 percent increase on their cost of accepting just one PIN debit card network last year alone," she said. "That's the smallest supermarkets. Ultimately, that type of increase is going to impact our customers."

    Garner added that the card companies' fee structures "are different based on volume, the type of merchant, the type of transaction it is, but we've seen exponential increases.

    "That's why it's so important for us that this process plays out at the Federal Reserve, because any month we delay reform, it costs merchants and consumers ultimately close to $1 billion."

    Biff Matthews, President and Founder of CardWare International said, "The large merchants have always had the ability to negotiate better rates, but I think this will provide some opportunities for smaller merchants to participate in that a little better. Whether or not those savings to either merchant is passed on to the consumer is still very speculative."

    Furthermore, Matthews noted, "More ISOs today are doing pass through, so any reduction is going to go to the merchant's bottom line. I wonder, too, especially from a standpoint of revenue, not only for the ISO, but also for the merchant level salesperson, because their net income is based in large part upon the interchange, are they going to pass that through to the merchant? Don't know."

    He also believes card companies and financial institutions are likely to offset any revenue losses incurred through the new regulations with fee increases elsewhere. With about a month to finalize debit interchange regulations, Matthews said, "There very well could be a delay to allow for some initial refinement of the legislation to accurately reflect what the intent was."

    "And, depending on how the final legislation is drafted, I would expect to see some lawsuits," he said.

    February 12, 2011

    PRC Reports Data Breaches Increase in 2010: According to two reliable sources - First Data Corp.'s SpendTrend and the U.S. Federal Reserve - consumer credit card activity was up during December 2010 and January 2011. And some industry experts feel this may indicate consumer confidence is on the rise.

    A recently issued SpendTrend analysis for January 2011 indicates that transaction growth on credit cards was at a 13-month high in January, and year-over-year credit dollar volume growth was the second highest in over a year.

    The report tracks same-store consumer spending at U.S. merchant locations by credit, signature debit, PIN debit, electronic benefit transfer and check at U.S. merchant locations.

    The number of credit card transactions increased 5.9 percent year-over-year in January, while dollar volume growth for credit card purchases grew by 7.2 percent, according to SpendTrend.

    In the report, Silvio Tavares, Senior Vice President and Division Manager of First Data Information and Analytics Services, stated, "Consumer spending during the fourth quarter of 2010 and the momentum from the strong holiday season carried over into January."

    The SpendTrend report also pointed to year-over-year dollar volume growth increases in January for signature debit (9.7 percent) and PIN debit (5.4 percent) transactions; it also revealed a decrease for payments by check (-10.4 percent).

    Meanwhile, figures recently released by the Fed for consumer credit card transactions also showed an increase in December 2010. It's the first time since mid-2008 that consumer credit card spending increased, according to the report.

    The Fed report showed consumer revolving credit increased $2.3 billion, at an annual rate of 3.5 percent, to $800.5 billion during the last month of 2010. One or two months does not a trend make, but increased consumer spending, taken in concert with other signs, could strengthen the notion that the economy is improving.

    Joanna Stavins, Senior Economist and Policy Advisor for the Federal Reserve Bank of Boston, refrained from sweeping predictions on economic recovery, but she said she is happy to see the increase "because that is an indication that people are more optimistic. It's a self-fulfilling prophecy in many ways: as long as consumers are feeling more confident ... that might indicate other things are going to improve."

    December 1, 2010

    Global Payments Remain Strong: Global payment volumes continued to see growth in 2009, despite the financial crisis, according to initial data compiled by Capgemini U.S. LLC, the Royal Bank of Scotland PLC, and the European Financial Management & Marketing Association in the 6th annual World Payments Report 2010. The report examines emerging payment trends and discusses the potential impact of payment-related regulatory initiatives on global banking.

    The study found that cards remain the preferred noncash payment instrument globally, accounting for over 40 percent of payments in most markets, 58 percent worldwide.

    While the average value of card transactions in North America dropped to $57 in 2008, down from $63 the previous year, consumer debit card usage for everyday purchases rose by 13 percent for the same period.

    The growth of noncash payment volumes in developing economies, such as China, South Africa and Russia, is expected to outpace mature markets like North America, which saw a gain of 4 percent in 2008, accounting for more than 38 percent of world volume at 102.5 billion payments.

    Total combined global electronic payments and mobile payments accounted for approximately 20.3 billion transactions valued at $1.15 trillion in 2009, according to the report.

    Challenges to banks

    Nontraditional payment providers like PayPal Inc. are making inroads into revenue and markets traditionally held by financial institutions. About 75 percent of U.S. online shoppers maintain an alternative payment account, of which 70 percent use the accounts for online purchases.

    "Banks are currently facing a variety of challenges from the rapidly changing payments landscape," reported Brian Stevenson, Chief Executive, RBS Global Transaction Services.

    "These challenges also present significant opportunities for banks that are able to adjust their strategies and move quickly to take full advantage of new ways of working in the global payment industry."

    The report suggests banks will need to cooperate with third parties on revenue-focused opportunities to speed time-to-market, spread investment expenses and reduce operating costs of new payment initiatives.

    One trend seen in banking is the integration of bank operations into centralized payment hubs that optimize costs and leverage the profitability of each payment instrument, creating a more flexible and scalable model.

    November 4, 2010

    Visa survey provides gift-giving insights in time for holidays: San Francisco, Nov. 4, 2010 -- A new survey commissioned by Visa Inc. (NYSE: V) reveals that 78 percent of respondents will have a holiday budget in place before they begin their shopping. Of that 78 percent, 42 percent start with a specific budget for each individual on their shopping list, and 36 percent start with a specific overall budget number and plan accordingly.

    "At the same time, gift card recipients have the flexibility to treat themselves to a little luxury they've wished for, but might not otherwise experience, or to cover more practical needs."

    For consumers trying to keep holiday spending under control, prepaid gift cards are seen as one way to stay on track: 64 percent of respondents agree that giving a Visa Gift card can help them stay within their holiday budget.

    Visa Gift cards make it easy to stick to a financial plan while giving friends and family a gift that will be well-received. 85 percent of U.S. consumers would appreciate receiving a branded gift card - like a Visa Gift card - to buy something they really want or need. In fact, 65 percent of respondents would prefer to receive a branded gift card rather than a "non-essential" holiday gift, such as a holiday scarf or a bottle of cologne.

    The data was collected in a national survey examining consumers' perceptions and habits relating to gift giving.

    "Visa Gift card givers enjoy one-stop shopping and the ability to tailor gift card amounts to their budget - which is especially important as consumers keep a keen eye on spending this holiday season," said Hyung Choi, head of U.S. consumer prepaid products, Visa Inc. "At the same time, gift card recipients have the flexibility to treat themselves to a little luxury they've wished for, but might not otherwise experience, or to cover more practical needs."

    Give a gift they really want

    The survey also revealed the fate of well-intentioned, but off-the-mark gift ideas:

    • 42 percent of consumers still have at least one unopened holiday gift from last year in the back of their closet
    • Nearly as many (38 percent) admit to returning at least one holiday gift from last year
    • 28 percent admit to re-gifting at least one of their holiday gifts from last year

    The price of giving the wrong gift can add up. Of those unused and unwanted gifts, 24 percent of respondents estimate the dollar value to be worth $51-$100 and 11 percent estimate the gifts to be worth more than $100.

    Visa Gift cards let recipients choose the gift that means the most to them. When asked how they would use a Visa Gift card if they were to receive one this holiday season, the top three responses were:

    • To indulge in something they might not normally be able to afford, such as a special dinner, jewelry, clothing or personal electronics (65 percent)
    • To get what they didn't receive from their holiday wish list (57 percent)
    • To buy "life essentials" such as groceries or household products, or to pay bills (54 percent)

    Visa Gift cards can be used at the millions of locations that accept Visa Debit cards, giving recipients the convenience and flexibility to use the card where they want, for exactly what they want.

    September 27, 2010

    Tealeaf survey: Online retailers potentially lost over $44 billion:San Francisco, Sept. 27, 2010 -- Tealeaf®, the leader in online customer experience management (CEM) software, today announced the results of its commissioned survey of Online Transactions, conducted online by Harris Interactive®. The survey found that retailers who operate in the online channel may have lost more than $44 billion dollars over this past year as a result of transaction problems on their website.1 As more consumers forego brick-and-mortar stores in favor of online shopping, the impact of lost revenue from poor online experiences directly impacts the bottom line of businesses across diverse industries. Significantly, the Online Transactions study found that more than one-fourth of online shoppers (27 percent) would turn to an online or offline competitor if they encountered an online transaction issue, which further validates the need for organizations to have comprehensive insight into the online experiences of their customers.

    Specifically, the survey found that, if online shoppers were to encounter a problem while attempting to conduct an online transaction, they would react as follows:

    • 66 percent - contact customer service, including:
    • 53 percent - call customer service
    • 36 percent - email or log a web complaint with customer service
    • 32 percent - abandon transaction entirely, including:
    • 27 percent - turn to a competitor

    The Online Transactions survey also found that about 2 in 3 online adults (66 percent) have conducted a shopping transaction in the past year, and more than half (56 percent) have conducted a financial transaction such as managing their personal bank accounts, paying bills, and investing in the stock market. Nearly half of adults (49 percent) have conducted travel transactions online, while nearly 1 in 5 (17 percent) have conducted insurance transactions. Given the high volume of online transactions across industries, the need for delivering seamless online experiences is critical to avoiding potential lost revenue.

    Bruce Temkin, managing partner of Temkin Group, recently surveyed large and small enterprises to highlight the differences these organizations face in achieving customer experience success. "One common thread remained throughout our research," said Temkin. "The lack of a clear customer experience management strategy posed a significant obstacle to improving customer experience, regardless of company size. This is truly a universal problem, and the bottom line is that companies cannot achieve success without making customer experience a 'real' priority through the right technologies, behaviors and best practices."

    "The potential for lost revenue when customers have a negative online shopping experience is amplified by the rising use of social media," said Rebecca Ward, CEO of Tealeaf. "The 'echo chamber effect' caused by frustrated customers who voice their displeasure on social networks can significantly damage an organization's reputation. Proactively identifying website issues presents an opportunity for businesses to recover some of that $44 billion in potentially lost revenue, especially as we head into the upcoming holiday shopping season."

    August 13, 2010

    RSR Research says online retailers missing holiday opportunity: Coconut Creek, Fla., Aug. 13, 2010 -- Coming on the heels of passage of landmark finance reform, a new study from Mercator Advisory Group sponsored by National Payment Card Association, www.nationalpaymentcard.com , strongly indicates that consumers are likely to turn away from ubiquitous debit-based payment products if, as expected, issuers were to institute fees. The study found that consumers would first react to the institution of fees by turning to the use of cash but could be kept in the preferred electronic payments realm if merchants were to offer private label debit cards with no fees and rewards.

    "Debit cards are currently the preferred form of payment for many consumers at convenience, drug and grocery stores but that preference is tenuous at best when even a modest monthly fee is introduced into the mix"

    The study was designed to look at the effect fees and rewards would have on everyday purchase payment decisions at the point of sale with specific focus on the use of debit cards. With the ascendancy of debit cards as a preferred payment method, the impact of fees on their use could have a profound impact on merchants, issuers and consumers.

    With tighter regulation on issuers, it is widely accepted that consumers will see more fees added to their debit card accounts in the months to come as these issuers move to regain lost income. Specifically, the study asked consumers about the impact of monthly fees on debit card usage. The results showed that by adding just a $10 monthly fee would cause a majority to stop using their cards, clearly indicating a primary threshold had been reached. In addition, women were more likely than men to say they would stop using their card and more than 3/4 of individuals with incomes over $75,000 would stop using their cards across all store types.

    The study also showed that faced with a monthly debit card fee, consumers' first reaction would be to turn to cash above all other forms of payment. However, when asked about using a debit card product offered directly by merchants that was secure and without fees, an immediate 1/3 said they would be interested in such a product. When the benefit of merchant rewards was added to the offer, another 15% said they would be interested.

    "Debit cards are currently the preferred form of payment for many consumers at convenience, drug and grocery stores but that preference is tenuous at best when even a modest monthly fee is introduced into the mix," said Patricia Hewitt, Director, Mercator Advisory Group. "For merchants, this is a slippery slope unless they can offer some type of alternative. The study strongly indicated that a branded debit card of the merchant's own, absent any fees and accompanied by rewards, could be very attractive. For merchants, cash is not king as spending levels and purchase volume are likely to drop. They need to offer an alternative to maintain their business and a branded debit card could very well be the answer."

    "Consumers are seeking to avoid fees yet maintain the convenience of electronic payment and merchants must keep sales volume up and avoid having consumers turn to cash or checks for payment. Decoupled debit cards with no fees and rewards attached are a win/win for consumers and merchants," said National Payment Card Association President Joe Randazza. "This study clearly demonstrates just how price sensitive the consumer market is. Decoupled debit allows these consumers to avoid fees and obtain rewards and at the same time helping merchants regain control over payment choices, capture additional spend with the resulting incremental income and encourage loyalty."

    The Mercator study was conducted via an online survey panel of US adults 18+ between July 21 & 25, 2010. 1,000 responses were collected. The margin of sampling error for samples of this size is +/-3.1% at a confidence level of 95%.

    July 22, 2010

    Visa Inc. (NYSE:V) announced today that its board of directors unanimously voted in favor of two amendments to the Company's certificate of incorporation: declassifying the board and adopting a majority vote standard in uncontested director elections. Approval of the amendments requires support by the majority of outstanding shares of the Company's class A common stock at the Company's next annual meeting, to be held on January 27, 2011 (the "2011 Annual Meeting").

    Declassification of the board will permit Visa's stockholders to vote annually for all directors. Currently, the Company's three classes of directors are elected for staggered three-year terms. If the stockholders approve the proposal to declassify the board, all directors will stand for election each year beginning with the 2011 Annual Meeting.

    Under the majority vote standard approved by the board, each nominated director must receive more votes cast for his or her election than against to be elected. An incumbent director will be required to tender his or her resignation prior to the annual meeting, which will become effective if the director fails to receive a majority of "for" votes and the board accepts the resignation. This proposed amendment applies to director elections beginning in 2012. In the case of contested elections, directors will continue to be elected by a plurality vote.

    "The decisions to declassify the board and adopt a majority vote standard are consistent with Visa's commitment to sound corporate governance," said Joseph W. Saunders, Chairman of the Board and Chief Executive Officer, Visa Inc. "The board believes these proactive steps to amend the Company's certificate of incorporation are in the best interest of the Company and its shareholders."

    The Company also announced that the record date for the 2011 Annual Meeting is December 3, 2010. The Company's class A common stockholders at the close of business on the record date will be entitled to vote at the 2011 Annual Meeting

    June 2, 2010

    Effective July 1, 2010 Visa will be increasing their Acquirer Service Fee from 0.0925% to 0.11%.

    May 4, 2010

    In a development that may lead to dramatic change in the payments industry, the so-called Durbin amendment to the financial services reform bill passed the U.S. Senate by a 64 to 33 vote. The amendment would mandate the Federal Reserve Board to regulate interchange.

    In a statement following the vote on May 13, 2010, Sen. Dick Durbin, D-Ill., said, "Passage of this measure gives small businesses and their customers a real chance in the fight against the outrageously high 'swipe fees' charged by Visa and MasterCard."

    But MasterCard Worldwide believes otherwise, arguing that the amendment "will reduce competition and hurt consumers" because big retailers will not pass onto consumers the savings from lower interchange fees.

    Merchant advocacy groups, such as The National Retail Federation, the Merchants Payments Coalition and the National Association of Convenience Stores, support the amendment.

    According to Hank Armour, President and Chief Executive Officer at the NACS, the Durbin amendment "would give equality for check card and paper check fees - meaning that debit interchange, or 'swipe,' fees could be significantly reduced or eliminated."

    The Electronic Transactions Association, the payments industry's leading trade group, is opposed to the amendment. In a statement, ETA CEO Carla Balakgie said the amendment will "likely reduce credit availability for merchants and consumers, and raise the price of existing credit."

    A similar financial reform bill is working its way through the U.S. House of Representatives. But the House bill reportedly does not contain the same interchange language as the Senate bill. The ETA urges all payment professionals to make their opinions known by contacting their senators. Phone numbers and website addresses can be found at www.senate.gov/general/contact_information/senators_cfm.cfm.

    April 1, 2010

    MasterCard and Visa's planned April 2010 cost increases will average about 1.5 basis points. In an effort to preserve current margin on all of your merchants, RBS Worldpay will implement the following changes effective April 1st. ePay Management merchants were notified through messages on the February statements that MasterCard and Visa were increasing costs. A specific message will be included on the March merchant statements that will drop in early April as to the net effect of the increases as it relates to a merchants current pricing. Cost plus merchants: Simply pass through the increase "as is". Tiered merchants: ePay and RBS Worldpay will apply a 2 basis point increase to all tiered merchants (to all tiers) in order to keep your margins relatively even.

    March 16, 2010

    Women Networking in Electronic Transactions (W.net), an organization devoted to the development of women leaders in the payments industry, launched its 2010 individual giving campaign. The theme is "Strive-for-Five," in honor of the nonprofit organization's fifth anniversary.

    The campaign's goal is to raise $50,000 to help W.net further its mission "to inspire and empower women in the electronic transactions industry to maximize their individual potential and position themselves for greater personal success." Donations can be made at www.w-net.biz.

    February 11, 2010

    PCI Knowledge Base will be conducting a Webinar on Enterprise Tokenization Strategies on February 26. As more and more merchants try to lower their breach risk by reducing the amount of credit card data they collect and retain, the topic of tokenization comes up often. Although the term is most commonly used to refer to the replacement of credit card numbers with meaningless numbers that have no black market value, a few leading merchant and service provider are applying the process and technology to all confidential data. Visit KnowPCI.com for the webinar and other topics related to PCI Compliance.

    January 09, 2010

    ePay Gives Back - ePay Management is proud to announce the launch of the "ePay Gives Back" program. Merchants who choose ePay Management as their merchant service partner are making a difference in the community knowing that we donate 15% of the revenues generated from participating merchants to Cardon Children's Medical Center.

    At ePay Management we are aware of the effects of our actions and choose to use our resources to benefit social and environmental efforts. It is all a part of the "ePay Gives Back" program.

    December 03, 2009

    New proposed legislation, to take effective Jan. 1, 2011, would require acquirers and other providers of credit and debit card settlement services to start keeping track of gross transaction totals, by individual merchant, for annual reports to the Internal Revenue Service. The first of these reports - detailing monthly and annual gross total credit and debit card payments by merchant during 2011 - are due to the IRS early in 2012.

    The proposed rules contain an exemption from reporting for merchant accounts that process less than $20,000 in yearly credit card payments.

    The new rules were imposed under the Housing and Economic Recovery Act of 2008, and they mirror closely the reporting requirements already governing many banks and companies (those familiar 1099 forms). The major difference is that the proposed IRS Form 1099-K, unlike other "miscellaneous" income reports, asks for monthly as well as yearly gross payment totals by merchant (payee).

    November 05, 2009

    Visa Prefers Data-Field Encryption - When Visa Inc. speaks, the payments industry listens. the world's largest card brand issued a global best practices paper that advises all merchants that accept electronic payments to consider data-field encryption (also known as end-to-end encryption) technology be installed on their private networks as a necessary compliment to the Payment Card Industry (PCI) Data Security Standard (DSS).

    October 26, 2009

    VeriFone addresses PCI enforcement confusion - Two important sunset dates are July 2010 and December 2014, and both relate to PIN Entry Device (PED) terminals. The first date is the time by which terminals manufactured before 2004 must be swapped; the latter pertains to terminals manufactured between 2004 and 2007. Those cannot be used after 2014, but their sale has been forbidden since the end of 2007. In regards to new fees be implemented; "We know there is one major acquirer that has come out and said they are going to be charging noncompliance fees," Breitzke said. "But we've heard that several large acquirer processors have been charging these fees, so it's really up to the ISO to communicate with the acquirer processor to figure that out. "But I think that's going to be very likely [that acquirers in general will began levying fees for noncompliance] because the acquirer is the one that's going to be liable. So a way for them to recoup some of those costs of noncompliance or a breach would be to charge some kind of a fee."