Tuesday, December 30, 2008

Worst Holiday Since 1970...maybe 1929?

Worst holiday shopping season since "at least 1970"  
CNN Money reports that the recession, discounts and bad weather are to blame.
NEW YORK (Reuters) -- The U.S. holiday shopping season is the worst since at least 1970 due to the recession, heavy discounting and harsh winter weather just before Christmas, the International Council of Shopping Centers said Tuesday.
Sales at U.S. chain stores fell 1.8% in the week ending Dec. 27 compared with the previous year, while sales fell 1.5% compared with the prior week, according to the ICSC-Goldman Sachs Weekly Chain Store Sales index.

The ICSC expects holiday sales in November and December to fall 1.5% to 2%.

That would represent the first decline since the ICSC began tracking holiday sales in 1969...(so it could be the worst since '29?)

Related Stories at CNN Money

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Holiday Top 40 - Satisfied?

ForeSee Results - Holiday 2008 Top 40 Online Retail Satisfaction Index
Holiday 2008 Top 40
Online Retail Satisfaction Index

The Top 40 Online Retail Satisfaction Index assessed customer satisfaction with leading online retailers during the holiday shopping season, the most critical time of the year. 2008 was the fourth year in a row that ForeSee Results conducted this research, allowing for valuable insights on year-over-year performance by individual retailers.

Overview Commentary: This report ranks the Top 40 retailers in terms of how well they satisfy customers online and contains high-level insights into drivers of customer satisfaction during the critical holiday shopping season. Highlights include:

  • Amazon and Netflix top the list and are the only two online retailers to score above 70.
  • Only 10 websites improved satisfaction year-over-year, while more than 40% saw satisfaction decline.
  • More than a quarter of all websites scored 70 or lower, well below industry standards

To download the free report you'll need to fill out a form on ForeSee's website.  They also have a free report on the Top 30 online retailers in the UK available for download.  

To read more, the NY Times Blog has a story on it in today's publication. Click here to read "How E-Commerce Sites Stack Up" there.

Here's a snippet: 

Those that score 80 or greater are classified as excellent. Only Netflix and Amazon.com, which tied at 84, made the cut, which might help explain why Amazon.com recently reported its best holiday season ever during the worst holiday season for e-commerce as a whole. Close behind were QVC, the Apple Store, Barnes & Noble, L.L.Bean, Walmart.com and Newegg.com (which sells computer parts.)
Tying at 69, the lowest score in the group, were Circuit City, HSN, Overstock.com, (that's what happened) HomeDepot.com, Neiman Marcus and Gap...

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Consumers Don't Trust Mobile Security - Javelin Research

Javelin Strategy and Research » Consumers fear mobile banking security threats – study
Consumers fear mobile banking security threats – study

The Paypers- Another widespread opinion among consumers who chose not to sign up for mobile banking is the fact that since mobile transactions are not yet mainstream, mobile banking services providers cannot anticipate the type of attacks fraudsters could launch against users once mobile banking adoption rates climb. Despite inherent safety features such as real-time transaction alerts and transaction level validation, the research indicates that consumers overlook advantages and mainly fear security threats such as malware, which are not widespread or can be easily blocked in mobile devices.

Thus, 73 percent of consumers fear hackers can remotely access their phones, 68 percent of interviewees are concerned sensitive mobile banking data can be stolen using a wireless signal despite encryption, and 54 percent of consumers worry that their mobile phones can be stolen.

The same study points out that all the major US mobile banking platform vendors offer authentication tools which comply with the standards set out by the Federal Financial Institutions Examination Council (FFIEC), however 56 percent of them have not implemented strong authentication systems for their mobile banking platforms.

The study was conducted by financial services market research company Javelin Strategy & Research. Read Full Article

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E-payment Fraud up 11% Over 2007

E-payment fraud projected to hit $4 billion in 2008, up 11% over 2007

E-commerce fraud losses in the U.S. and Canada are expected to reach $4 billion in 2008, an 11% increase from $3.6 billion in 2007, according to CyberSource Corp's 10th annual survey of e-commerce fraud.

Chargebacks accounted for almost half of 2008 online payment fraud losses. The percentage of online revenue lost to fraud held steady from 2007 at 1.4% of online sales, the report says.

Merchants fight only about 50% of the fraud chargebacks they receive, with a third of merchants challenging less than 10%. Merchants that do challenge chargebacks recover, on average, 28% of that revenue, CyberSource says.

The consumer electronics category showed the highest 2008 fraud rate at 2%, nearly double the average among the eight industry segments measured. Merchants with online revenue of $5 million to $25 million faced the most fraud.

The annual survey also found that order-rejection rates tied to suspicion of fraud showed a significant drop to 2.9% of incoming orders, down from 4.2% in 2007. On average, 1.1% of accepted orders were fraudulent, CyberSource says. Merchants have made little progress in minimizing the time spent manually examining good orders, CyberSource says.

Merchants in 2008 accepted an average of 73% of orders they manually reviewed, roughly the same percentage as in 2007. About half of merchants accepted 90% or more of the orders they reviewed.

CyberSource surveyed 400 online merchants in the U.S. and Canada between Oct. 21 and Nov. 11.

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Only 1% of US Consumers Will Charge More

It looks like 2009 is going to be the "Year of the Debit Card."  According to a US Banker poll, only 1%  of U.S. Consumers are going to use their credit cards more this year.  In the wake of 3% growth in 2008, look for a decline in 2009.  Meanwhile, according to The Nilson Report, debit card usage grew at 13% in 2008.  Look for growth in prepaid and debit cards to surge in 2009...

New Poll Finds Only One Percent of U.S. Consumers Plan to Charge More - 01..2009 - U.S. Banker Article

U.S. credit cardholders are not in the mood to charge, according to national poll results recently released by Bankrate, Inc. The phone study was conducted from December 5 through December 7.

Just one percent of those surveyed plan to charge more in 2009, while 32 percent are likely to use their cards less frequently and 15 percent won’t be taking out the plastic at all. Forty percent of these consumers wouldn’t care if their credit lines were cancelled.

As far as credit availability goes, 41 percent of those polled reported that their credit lines were increased, while 44 percent said their lines were unchanged; only six percent experienced a decrease.

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Credit Line Cuts Could Backfire

Credit Line Cuts Could Boomerang - 12.29.2008 - American Banker Article

Credit line reductions, account repricing, and other steps that card issuers are taking to control risk could soon start causing their customers to do something many homeowners did this year: walk away from their obligations.

In the past month current and former industry executives and observers have raised concerns that prevalent risk management tactics may spur such behavior — even among customers who still have the capacity to pay.

For example, some observers said aggressive repricing could lead to a spike in "bust-outs" — when cardholders decide to run up as large a balance as possible before abandoning the account. In the past, bust-outs have typically been perpetrated by fraudsters who always planned to default, but they may soon become more common among regular consumers who obtained their cards in earnest, these observers said...

continue reading at American Banker
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Facebook Scraps Payments Initiative

According to "Inside Facebook"  the company has temporarily abandoned its initiative to launch a platform payment system which would enable retailers to conduct e-commerce transactions and accept payments directly inside their Facebook applications." 

Facebook announced the beta test version of a payments platform initiative in December 2007. It was originally billed as a means to allow Facebook users to carry out transactions and purchase virtual and physical goods and services without resorting to third party payment platforms such as Paypal.

Facebook Payments was also initially designed to act as a revenue generator for Facbook via payment processing commissions, and a means for the social networking website to gather consumer data to facilitate future direct transactions such as the purchase of Facebook’s virtual gift offerings.

However, one year after the initiative was made public, the payment system has not yet been developed and Facebook representatives have confirmed that no further developments are currently conducted regarding the project.

China Online Growth Continues

The Paypers. Insights in payments.

China's online transaction volume to reach EUR 9.4-9.9 billion in Q4 2008

In Q4 2008, the online transaction volume is expected to reach between EUR 9.4 and 9.9 billion in China.

In spite of the financial crisis, the online transaction volume is on an upward curve as a result of the expansion of payment channels and application fields and boosted by the launch of new online payment services. Alibaba's online payment services provider Alipay has made an online payment system available for utility payment, allowing Chinese internet users to pay online for water, electricity, town gas, and mobile phones. Tenpay and PayEase have had similar initiatives, the first teaming up with ten partners for the delivery of online payment services for air tickets. The total transaction volume of online shopping in China reached EUR 7.51 billion in Q3 2008. Data has been released by market research firm iResearch Consulting Group.

According to estimates for the full year of 2008, the volume of e-commerce transactions is to jump to EUR 27.2-28.3 billion.

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RBI to Allow Outward Remittances?

Sending money overseas instantly could soon become a reality with the Reserve Bank of India (RBI) considering proposals to allow non-banking
entities like online money transfer portals to undertake wire transfers for outward remittances from India. At the moment the facility is limited to inward remittances, while only banks are permitted to carry out outward remittance orders.

According to sources close to the development, the central bank has been approached by a number of players to enable outward remittance facilities on their money transfer channels. The banking regulator is in the process of working out the know-your-customer (KYC) norms that are to be followed while sending cash abroad via online payment web-portals.

The first half of the ongoing financial year has witnessed outward remittances to the tune of $ 431 million, marking a sharp rise compared to $440.5 million during the full financial year of 2007-08, according RBI data...

continue reading

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Debit Growth for 2008

Americans switch purchasing options

Americans are turning away from credit cards and "shifting" to debit card usage.

Debit card purchases...at the end of 2008...are forecast to climb by 13% for the year, according to an industry newsletter by The Nilson Report.

Credit card purchases are predicted to be up a mere 3%.

The numbers seem to indicate a strong "shift" away from credit as the economy tries to find its way out of recession.   Look for more disparity in 2009...

Monday, December 29, 2008

Foresight is 2020

Mobile Phones Will Be the Primary Internet Connection by 2020

In a December 2008 survey, 77 percent of Internet activists, developers, and commentators said they believed that mobile phones would be the primary tool for accessing the Internet within the next 12 years.

The Pew Internet & American Life Project survey asked 578 leading Internet experts and 618 other respondents whether they agreed with several "scenarios about the effect of the Internet on social, political, and economic life in the year 2020."

The survey asked respondents to say whether they mostly agreed or mostly disagreed with this scenario:

"The mobile phone is the primary connection tool for most people in the world. In 2020, while "one laptop per child" and other initiatives to bring networked digital communications to everyone are successful on many levels, the mobile phone—now with significant computing power—is the primary Internet connection and the only one for a majority of the people across the world, providing information in a portable, well-connected form at a relatively low price. Telephony is offered under a set of universal standards and protocols accepted by most operators internationally, making for reasonably effortless movement from one part of the world to another."

Some 77 percent of the experts and 81 percent of all respondents mostly agreed with the statement.

While the survey is highly speculative, it is clear that mobile Internet browsing and, therefore, mobile commerce will become an important aspect of every online retailers business in little more than a decade.
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More E-vidence of the Paradigm Shift...

The Washington Post's Chadwick Matin wrote an interesting story last Friday providing further insight into the paradigm shift that is occurring within the retail bricks and mortar world. 

Call him a "Mall Bearer" as he's basically saying that the death of the malls is e-minent.... 

Here's some of what he has to say...to read the article in it's entirety click the title below...   

Tear Down That Mall - washingtonpost.com
It's hard to figure out what's changed about malls since then. Malls are a testament to the kind of consumer thinking that got us into the recessionary mess we're in today, after all. And that's why we need to close every single one of them.

Already, malls are in a considerable amount of trouble. Shopping centers on the block are selling for 25 to 35 percent less than they did a year ago. Retail vacancies are on the rise; nationally, 6.6 percent of stores were empty in the third quarter of 2008, a 20 percent increase over the same quarter last year and the highest rate since 2002. Much of the pain is interwoven with the retail sector, where analysts estimate 148,000 stores will have been closed in 2008.

And it will only get worse. Mall stalwarts like KB Toys, Steve & Barry's, and Linens 'N Things are all closing. The recession is expected to rage through 2009, and retail chains will probably be looking at dismal holiday numbers. A mall's chief purpose these days is to be there come the holidays. Now that we're beyond that season, many stores will need to shutter in the new year.

Every store that closes has an impact on the shops left behind. Fewer stores means less foot traffic; less foot traffic means less window shopping; less window shopping means fewer impulse buys. It's a positive-feedback loop that, for malls, is actually negative.

Thus, several of the biggest American mall owners are fighting to stave off bankruptcy as bad bets in real estate have weighed down their ledgers. But, just like with cash-starved families looking to sell their homes, buyers will now only purchase malls for a lowered price since the industry's outlook is so bleak. This would entail huge losses for the mall owners, so they continue to balk. At some point, though, something has to give.

And when it does, there's going to be major consolidation in the industry. Our current economic state is simply not able to sustain so many meccas of merchandise. Some malls will likely close as fewer and fewer chains are willing to spread themselves so thin. Because, really, if Starbucks isn't expanding, then nobody else is, either.

But why just consolidate? Let's close them all. I'm not saying that all of their tenants should close. Instead, the stores that once filled the malls should go and fill other empty storefronts dispersed across the city. Call it the great chain-store diaspora.

E-ditor's Note:  I call it E-vidence that the paradigm shift is E-minent...in fact, it's "virtually" guarant "e"d.

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Economic Confidence Improving?

Discover reports economic confidence improves among small merchants
Editor's Note:  Small Biz Owners being "cautiously optimistic" is good news amidst a flurry of bad...to see the data, click here to download in Microsoft Word Format.

Riverwoods, Ill., Dec. 29, 2008 -- After falling to its lowest measurement ever in November, economic confidence among small business owners rose slightly in December. The Discover(R) Small Business WatchSM rose to 72.8 in December, up 5.3 points from November. The index was buoyed by increased optimism that their own business prospects are improving and an indication that more will increase spending on business development in the next six months.

"While we saw small improvements in economic confidence almost across the board this month, the mood still remains cautious," said Ryan Scully, director of Discover's business credit card. "Most small business owners still believe that it will be at least into 2010 before the economy recovers."

December Key Findings:

  • 21 percent of small business owners believe that economic conditions for their businesses are getting better, up from 15 percent in November, which was the all-time low in the 29-month history of the Watch. Fifty-one percent feel the conditions are getting worse, which is down from 54 percent last month.
  • 24 percent of owners say they plan to increase spending on business development over the next six months. This is an increase from 20 percent who said the same in November. Forty-seven percent say they are planning to decrease spending on business development compared to 51 percent last month.
  • Cash flow issues decreased slightly in December as 42 percent of owners say they held off paying some bills in the past 90 days. Forty-four percent said the same in November.
  • 63 percent rate the economy as poor, down 2 percent from November; only 6 percent rate the economy excellent or good, the second-lowest rating in this category in the history of the Watch.
  • 12 percent feel the economy is getting better, which is the highest in this category since August 2008. The number of small business owners who think the U.S. economy is getting worse decreased by two percentage points to 70 percent in December; and 14 percent think it is staying the same.

69% of Small Business Owners Think U.S. Recovery Will Take At Least 12 Months

As the new year approaches, small business owners remain cautious about the amount of time it will take the economy to crawl out of its slump. Forty-two percent of owners anticipate that economic recovery will take between 12 and 24 months, while 27 percent believe that it will take longer than 24 months. Twenty-three percent think that the recovery will take less than 12 months.

"Economic confidence has been declining for the past year, and small business owners continue to be resilient by doing whatever it takes, including not relying on credit and taking home less pay," Scully said. "It's not surprising that they seem to be buckling down for a long recovery since more than half of them have been telling us the economy is getting worse every month for the past 22 months."

Government Bailout Support Mixed

  • Sixty-eight percent of small business owners say they do not expect that government bailout assistance to banks will help their businesses in the next six months.
  • Fifty-five percent of small business owners do not believe U.S. automakers deserve a chance to qualify for some form of federal bailout assistance, while 33 percent say they would support a bailout for automakers and 12 percent answered "not sure."
  • When it comes to themselves, 48 percent of small business owners say they should be entitled to federal bailout assistance, while 35 percent didn't think small businesses deserved federal bailout help and 16 percent were not sure.

Decreased Sales Pose Biggest Threat

When asked where they have felt the most negative stress on their business operations in the past year, 30 percent said decreased sales; followed by 23 percent who cited higher operating costs; 17 percent said taxes; 7 percent said financing and credit, and 17 percent said their business has not been under stress in the past year.

It appears fewer small business owners are extending credit to their customers. In December, 25 percent said they extend credit, and 72 percent of those who extend credit say that they have customers who have delayed a payment or asked if they could delay a payment in the last three months. In September 2007, 30 percent of small business owners were extending credit to their customers and 64 percent had received delayed payments or requests to delay payments.

The views and opinions expressed by small business owners and consumers who participate in the Small Business Watch survey are their own and do not necessarily reflect those of Discover Financial Services or its affiliates.

About the Small Business Watch

The Discover Small Business Watch is a monthly index measuring the relative economic confidence of U.S. small business owners who employ less than five employees, a segment that consists of 22 million businesses producing more than a trillion dollars in annual receipts. The Watch is based on a national random survey of 1,000 small business owners. It is commissioned by the Discover Business Card, which strives to offer the best business credit card for American small businesses, and is conducted by Rasmussen Reports, LLC (www.rasmussenreports.com ), an independent survey research firm. The numeric index is calculated by assigning values to responses to a set of six consistent questions. The base value of the Watch was established at 100.0 based on surveys conducted in August of 2006. In addition to generating the index, the Small Business Watch surveys small business viewpoints on key business drivers, and also surveys 4,000 consumers to gauge purchasing behavior and attitudes towards small businesses. For past results and small business survey data, visit www.discovercard.com/business/watch . For information on Discover Business Card, visit www.discovercard.com/business .

About Discover Financial Services

Discover Financial Services (NYSE: DFS) is a leading credit card issuer and electronic payment services company with one of the most recognized brands in U.S. financial services. The company operates the Discover Card, America's cash rewards pioneer. Since its inception in 1986, the company has become one of the largest card issuers in the United States. Its payments businesses consist of the Discover Network, with millions of merchant and cash access locations; PULSE, one of the nation's leading ATM/debit networks; and Diners Club International, a global payments network with acceptance in 185 countries and territories. For more information, visit www.discoverfinancial.com .

Source: Company press release.

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"Amazon" Thanksgiving Day Parade?

Amazon had it's "best season ever." (results from Macy's 2008 holiday season results have yet to be released)  But make no doubt about it.  Macy's  is in trouble.  Sure, they just negotiated looser terms on its $2 billion in currently unused bank loans, but...

There's about $950 million of debt coming due in 2009 and the company still has $226 million of debt maturing in 2010,  $650 million coming due in 2011 and $1.3 billion payable in 2012, along with its bank line of revolving credit. 

So the "paradigm shift" I've been blogging about for months, could, in this case, be called a "parade-igm" shift.

Will we see the annual Macy's Thanksgiving Day Parade shift into the Amazon or Costco Day parade?  Don't be "amazed" when/if they put Amaz-on it.

Consider the following press release from Amazon on it's "best ever" holiday season...

(SEATTLE) — Online retailer Amazon.com Inc. called this holiday season its "best ever," saying Friday that it saw a 17 percent increase in orders on its busiest day — a rare piece of good news in a season that has been far from merry for most retailers, including online businesses.

Amazon customers ordered more than 6.3 million items on Dec. 15, compared with roughly 5.4 million on its peak day last year, the company said. It shipped more than 5.6 million products on its best day, a 44 percent surge over 2007, when it shipped about 3.9 million on its busiest day.

Amazon's best-sellers included the Nintendo Wii game console, Samsung's 52-inch LCD HDTV and Apple Inc.'s iPod touch.

Analysts agreed Amazon's report was good news for the online shopping giant, but they were divided over whether the results indicate strength in online commerce in general.

Forrester Research analyst Sucharita Mulpuru said Amazon's experience shows the current economy is favoring discount retailers, both online and offline. "The Amazon story doesn't surprise me because Amazon has always traditionally been a leader on price, and they're one of the first places consumers go when they're looking for things online," Mulpuru said. "In many ways they're like the Wal-Mart of the online world."

Holiday sales typically account for 30 percent to 50 percent of a retailer's annual total, but rising unemployment, home foreclosures, the stock market decline and other economic worries led many shoppers to slash their shopping budgets this year.

SpendingPulse — a division of MasterCard Advisors — said its preliminary data show that online sales fell 2.3 percent compared with the 2007 holiday season, while retail sales overall fell 5.5 percent to 8 percent, including sales of cars and gasoline. The decline was 2 percent to 4 percent when auto and gas sales are excluded.

Online shopping may have gotten a boost from winter storms during last two weeks before Christmas, which made travel to brick-and-mortar stores more difficult.

And, although Amazon's orders rose, the company didn't say whether orders were, on average, worth more or less than last year. Spokeswoman Sally Fouts said the company would release revenue results in its fourth-quarter earnings report, due in about a month.

But she said this was Amazon's "best season ever."

Orders to Amazon on the peak day of its holiday season have jumped in the double-digit percentage range for at least the past 5 years, according to data released by the Seattle, Wash.-based company since 2002. Last year, Amazon's orders spiked 35 percent to 5.4 million at their peak, from 4 million in 2006.

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Dismal Holiday Numbers

Discounts Not Enough to Revive Online Retail Sales - WSJ.com
The Wall Street Journal reports on a dismal holiday season for retailers.  Based on the fact that the holiday season constitutes upwards of 30% of annual sales for some bricks and mortar retailers, this is indeed bad news.  Combined with the credit crisis, this could be the a death blow for some.  But it doesn't surprise me in the very least.  The paradigm shifting in consumer shopping behavior would have dealt a nasty blow to some bricks and mortar retailers in a mediocre economy.  In this one, you can start writing the obits...

Here's a snippet from WSJ...

Online sales held up better than the rest of the retail market during the dismal holiday period, but the season is still likely to go down as one of the worst on record for the traditionally booming e-commerce sector.

While online spending was down just 2% from Nov. 1 through Christmas Eve compared with a drop of 5.5% to 8% for retail as a whole, e-commerce strength wasn't widespread. Instead, it was clustered around several big-name Web sites such as Amazon.com Inc., Apple Inc. and Wal-Mart Stores Inc. Online sales were also fueled by discounts that aren't likely to continue.

Overall, in a sector where sales have historically increased 20% annually, this is the first holiday season where online sales haven'tgrown. E-commerce sales were "not amazing by any stretch," says JohnAiken, managing director and head of equity research for Majestic Research.

Many traditionally strong ecommerce sites also ended up losing
  visitors in what is typically their busiest period. Internet auction site eBay Inc.'s traffic dropped 16% between early November and mid-December, while Best Buy Co.'s site experienced a 17% decline in visitor traffic, according to comScore Inc., which tracks Internet activity. The number of visitors to e-commerce Web sites during the period grew less than 1%, compared  with growth of about 5% typically.

continue reading at WSJ
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Top 15 eCommerce Sites in November

Amazon...and you're done!

Amazon overtakes eBay as most-visited retail site, Nielsen says

For the first time, Amazon.com passed eBay.com in November as the most popular retail destination on the Internet, according to Nielsen Online. Kmart had the highest percentage gain in "unique visitors", up 35% while Overstock's had 7 million less unique visitors compared to last year, a 36% drop. (wonder what caused that?)

In addition to Kmart's 35% upswing, other double digit gainer's included Wal*Mart (13%) Sears (10%) Netflix (13%) Kohl's (26%) and the Home Depot (15%)

Dell (-10%) and Circuit City (-13%%) joined Overstock as the only double-digit losers.

Here are the top 15 retail web sites in November, with unique visitors in millions this year and last and the percentage change. Double digit growth is bold, regression is in red, double digit losers are red bold...

Amazon, 57,682, 53,630, 8%
eBay, 55,438, 59,041, -6%
Wal-Mart, 39,420, 35,003, 13%
Target, 35,902, 34,611, 4%
Best Buy, 22,138, 22,736, -3%
Sears, 19,541, 17,805, 10%
Dell, 17,058, 18,918, -10%
JCPenney, 16,933, 15,929, 6%
Circuit City, 16,609, 19,135, -13%
Netflix, 13,538, 11,954, 13%
Kohl's, 13,257, 10,516, 26%
ToysRUs, 13,041, 13,726, -5%
The Home Depot, 12,169, 10,608, 15%
Overstock.com, 11,812, 18,419, -36%
Kmart, 11,713, 8,693, 35%
*Unique visitors count only once each shopper who came to a site, no matter how many times the shopper visited.

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Gemalto President Calls for EMV in US

Paul Beverly, President of Gemalto North America,  in an  article published in Contactless News, is calling for the US to follow the lead taken by the rest of the world and implement EMV standards here in the US.

Editor's Note: The name EMV comes from the initial letters of Europay, MasterCard and VISA, the three companies which originally cooperated to develop the standard. EMV is a standard for interoperation of IC cards ("Intergrated Circuit (Chip) cards") and IC capable POS terminals and ATM's, for authenticating credit and debit card payments.  To learn more about Gemalto, click their logo above left...

He questions whether there's such a thing as "acceptable fraud losses" amidst the rising tide of criminal activity associated with "magstripe" cards.

Here's what Mr. Beverly has to say:  He starts us out with some some interesting statistics from 2008:

  • The Federal Trade Commission estimates that as many as nine million Americans have their identities stolen each year.
  • The Privacy Rights Clearinghouse estimates 245 million records have been compromised due to security breaches since January 2005.
  • The sting operation by security software provider Symantec showed stolen credit card accounts are sold like commodities online, at a quantity discount of one dollar if you buy 100 or more. These are for full packages with name and address, card expirations and CVV2 security numbers.
  • Gemalto’s own “Digital Trust Barometer” survey showed 57% of Americans are afraid someone will steal account passwords when banking online, 38% do not trust online payments, 74% are afraid of identity theft and 44% are afraid of online bank account hijacking.
I think it’s time executives in financial services; retail and online services start questioning a well-worn mantra that fraud losses are an acceptable cost of business.

When fraud and fear are undermining consumer confidence in e-commerce, as it is today, at some point that logic becomes bad business.  (continue reading at Contactless News)

Editor's Note:  I agree and the same "well-worn mantra" is hurting consumers as much, if not more, than it's hurting etailers.  (The only winner's here are Visa/MC and the banks who profit more from an unsecure transaction because of the higher interchange fees that come with them. )

Starting an EMV initiative here in the US would take years and cost billions.  Starting an Internet PIN debit initiative would take months and save millions.  What's unacceptable  is online debit for online shopping.  Fraud losses can be significantly reduced by making PIN based transactions "acceptable."

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Saturday, December 27, 2008

Max Vision/Blind Justice

Click here to read what I consider to be a fantastic story "on Wired (One Hacker's Audacious Plan to Rule the Black Market in Stolen Credit Cards) about one Max Butler, better known amongst security researchers as "Max Vision" who's about to (yet again) see what happens when subjected to "blind justice." At the end of the day, you can steal all the credit card information you want, but if you don't know the PIN code, you wouldn't be able to use them...except online, where PIN debit is frightening absent. HomeATM aims to correct this faux pas with "it's vision" of bringing PIN based transactions to the web...

Apparently Max isn't quite the visionary he thought he was...because most everyone else would've seen this coming from a million miles away.

Speaking of seeing something coming from a million miles away...let me take a crack at being a visionary...

The way I see it Max is positioned to become the next Frank Abagnale Jr. Unlike Frank Abagnale, Max Vision was a renowned security consultant first, but got played by the FBI (see Max Vision...FBI Pawn?) and, in what I'm guessing was an act of rebellion, evolved into "Evil Max" after his release from jail.

His "storied" hacking past (dating back to May 1998 when he penetrated a series of Defense Department computers) makes for a novel book idea and even merits some big screen potential. The stars are aligned...2009 is predicted to be the "Year of the Hacker" so I suspect he'll get some maximum exposure, being one of the original super hackers.

Ironically another "Max", former PayPal founder, Max Levchin rubs elbows in Hollywood, (he was Executive Producer for Thank You For Smoking , which BTW was absolutely hilarious) Given his "payment processing" background, combined with the fact that Evil Max wanted to "rule the black market world in stolen payment cards" he'd be the ideal person to bring this to the silver screen.

Speaking of movies, click below to see how professional card counterfeiting differs from card cloning, which the Today Show ran last week.

Fraudsters rack up millions of dollars in merchandise using fake credit cards with legit numbers hacked off the Internet. Detective Bob Watts of Newport Beach PD shows how it's done.

More on Max Vision:

Max Vision charged with hacking -- again
Sep 12, 2007 ... Federal prosecutors charge former security consultant Max Butler, better known amongst security researchers as "Max Vision," alleging that ...

Max Vision
: FBI pawn?
May 5, 2001... FBI agents called him 'the Equalizer': a security expert and confessed hacker who infiltrated the electronic underground to help the Bureau. www.securityfocus.com/news/203 - 34k

A 'White Hat' Goes to Jail

"Max Vision," a renowned hacker, security expert and FBI informant, is sentenced to prison in a case that angers many in the hacking and cracking community.

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Friday, December 26, 2008

"Going Dutch" Sets Debit Records?

On Christmas Eve, there were 10.4 million pinpas (pin debit card) transactions, the highest number ever recorded in the Netherlands on a single day. The figures come from Equens, the company which operates the electronic payments. Christmas Eve smashed the record set only the day before, Tuesday, when the cards were used 9.7 million times.

There were many more pinpas transactions during the last four days before Christmas, 39 million, than in the same period last year, 30 million. The fact that the cards were used more this year does not necessarily mean that more money was actually spent.

Editor's Note:  I can't help wondering if there were really only 5.2 million purchases made, but it wound up double that because they "go dutch" on everything...one dinner bill but two separate debit transactions :-)

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Wednesday, December 24, 2008

PC's Are Insecure...So Are You?

PC's are insecure and hackers constantly exploit flaws in their security.  This article provides some insight as to why software based solutions designed to run on a PC are sitting ducks for potential hackers... which, once again, is why HomeATM has taken a personal swiping device approach to bringing PIN debit to the web.  It's how they've done it in the stores, and it's how it should be done online.  Keep in mind that the Internet was not designed for eCommerce, it was originally designed as the "information highway." 

With our approach, the transaction is done "outside" the browser space, therefore "man-in-the-browser" attacks are nullified, as are keylogging, screen capturing and a symposium of  other hacking methods designed to drain  data from your PC.

Someone's eventually going to be swipin' your credit/debit card data...shouldn't you be the one doing the SwipePIN?  Any doubts?  See how easy it is..."to hack a PC"  

This, from the Wired Blog Network:

SecuniaImage via WikipediaHardly anyone runs a PC without known holes that hackers can exploit, a Danish security company reports. Of those who run the company's free security-scanning tool, nearly half have more than 11 out-of-date programs.

Secunia Software's Personal Software Inspector checks programs installed on a user's computer to see if the latest, patched version is installed. More than 98 percent of users had at least one program that wasn't the latest version, the company found in a study of 20,000 users of its software.

The sobering statistics are not surprising, but they come as malware makers turn from simply exploiting easy holes in Windows.

In addition, hackers have been finding vulnerabilities in browsers, media players and file-reading software as a way into other people's computers.

While it may not seem likely that a hacker would rig a website to exploit a patched hole in a lesser-known media player like VLC, hacking tools make it increasingly easy for an infected webpage to check for many vulnerabilities in a person's computer.

Number of insecure programs per PC/user:
0 insecure programs: 1.91% of PCs
1-5 insecure programs: 30.27% of PCs
6-10 insecure programs: 25.07% of PCs
11+ insecure programs: 45.76% of PCs

Secunia's Mikkel Winther says the study shows that its just as important to keep programs up to date, as it is to have a good firewall and anti-virus programs. He also says the real numbers in the general populace are likely worse, because their sample is of people who have looked for security software.

"The results are shocking and prove as well as emphasize the need for a patching solution for private users," Winther said. Keeping up with software updates can be quite tedious and annoying, even as software makers like Microsoft and Mozilla have built better update tools. Those who don't care to download Secunia's software can try it's online scanner, though it only checks version numbers on a hundred or so programs.

Secunia does not sell security software to individuals, but does market a networked version of this scanner to companies.

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B2C E-Commerce in Canada - 2007-2012

In the previous post I featured eMarketer's report on e-Commerce projections in the UK through 2012...here's their projections for Canadian eCommerce...

Canadians Are Warming Up to Online Shopping

In 2007, Canadian retailers sold C$13.8 billion ($12.9 billion) of consumer products and travel bookings online. But by 2012 eMarketer projects that Canadian business-to-consumer (B2C) e-commerce sales will reach C$22.8 billion ($22.2 billion).

That means that between 2007 and 2012, Canadian B2C e-commerce sales will show a compound annual growth rate (CAGR) of 10.6%. Not bad numbers in a tough economy.

But the numbers could be better.

“Until Canadian consumers show a larger appetite for buying big-ticket physical goods online, such as home furnishings and consumer electronics, the Canadian e-commerce market will remain small compared with other G-7 countries,” says Jeffrey Grau, eMarketer senior analyst and author of the new report, Canada B2C E-Commerce.

Consumers in Canada are avid online product researchers, on par with their US counterparts. But they are much more likely to make a subsequent purchase in-store rather than on a Website.

“The fact that Canadian Web retailers are required to charge sales tax is certainly a disincentive to online buying,” says Mr. Grau.

Because of the tax structure, Canadian shoppers have never seen much of a price advantage to buying online. This is one reason why Canadian e-commerce has grown at a more gradual pace compared with the explosive growth that occurred in the US.

“The upside of this is that the Canadian market is enjoying a longer period of solid growth,” says Mr. Grau, “albeit on a much smaller scale.”

Another factor that has depressed the growth of B2C e-commerce in Canada is the lack of product selection online. In fact, many prominent Canadian retailers have not found the ROI compelling enough to run an online sales channel.

“While Canada has about one-tenth the population of the US, the cost of running a transactional Website is about the same,” says Mr. Grau. “This creates a challenge for small to medium-sized retailers with fewer financial resources.”

Nevertheless, Canadian retailers are in a better position than foreign merchants to understand the needs and interests of local consumers. And like consumers across the world, those in Canada prefer to shop with indigenous retailers.

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