Tuesday, October 28, 2008

Interac Chip and PIN Transition Rollout Begins

INTERAC Chip Transition Goes National

Chip debit cards and terminals begin to rollout across Canada

TORONTO, Oct. 28 /CNW/ - INTERAC, Canada's national debit network and leading payment brand, today announced the start of the national rollout of chip technology, a new generation of payment card technology that will combatdebit card fraud and the production of counterfeit cards.

"INTERAC is committed to providing the most secure and innovative financial services network," said Mark O'Connell, President and CEO, Interac Association. "By putting the power of a computer onto the debit card, chip technology will enhance security and enable new INTERAC product offerings that continue to keep Canadians connected to their money."

Beginning this fall, members of the Interac Association will begin to distribute chip debit cards to their customers. As well, members will continue to replace Automated Banking Machines (ABMs) and retail terminals withchip-enabled devices, a process currently underway. Each financial institution and payment processor has its own timeline in place for the distribution of cards and terminals across Canada; therefore the introduction of chip technology will vary from one organization to another.

The complete migration to chip technology will take a number of years, given the vast number of debit cards, ABMs and store terminals across Canada that must be upgraded. Interac Association has set transition requirements to ensure that the majority of Canadians will be able to fully benefit from this new technology by 2010, at which point the majority of ABMs and debit cards will be converted.

"Interac Association has put appropriate deadlines in place for the transition to occur in normal business cycles," said O'Connell. "Magnetic stripe transactions will no longer be accepted at ABMs after 2012 and at store terminals after 2015. These timelines will ensure a timely transition, while also ensuring a smooth transition for our members and for merchants."

Chip debit cardholders will experience only a minor change in the way they interact with the store terminal. When conducting a chip debit transaction, cardholders will no longer swipe the card through the machine.  Instead, cardholders will insert their debit card chip first into the terminal and leave it in the device for the duration of the transaction, following the prompts and entering their PINs, just as they do today.

Chip cards will continue to carry the magnetic stripe, not only to facilitate the chip transition period, but also to allow cardholders to use their debit cards in other countries that do not use chip technology. (Editor's Note: and to allow fraudsters to clone cards :)
About Interac Association

A recognized world leader in debit card services, Interac Association is responsible for the development and operations of the INTERAC network, a national payment network that allows Canadians to access their money through Automated Banking Machines and point-of-sale terminals across Canada. Interac Association was founded in 1984 and is comprised of a diverse membership that includes banks, trust companies, credit unions, caisses populaires, merchants, and technology and payment related companies.

Other INTERAC-branded and related services include: INTERAC Online, for secure online payments directly from a bank account, INTERAC Email Money Transfer, for the transfer of money from a bank account to anyone with an email address, and Cross Border Debit, for point-of-sale access at more than 1.5 million U.S. retailers.

For further information: or to speak with an Interac Association spokesperson, please contact: Ian Lifshitz at Strategic Objectives, Tel.: (416) 366-7735, Email: ilifshitz@strategicobjectives.com; OR Tina Romano at Interac Association, Tel.: (416) 869-5062, Email: tromano@interac.ca

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Discover Gets $2.75 Billion Antitrust Settlement from V/MC

In a follow up to a previous post, Discover announced their settlement amounts with Visa and MasterCard for less than half of what they were originally seeking.

The V/MC Duopoly said their legal settlement with Discover Financial Services from earlier this month will cost them $2.75 billion

Discover was seeking $6 Billion.

In a statement distributed by PR Newswire Visa said that it will pay $1.8875 billion. Of that, $1.7425 billion will come from an existing escrow account.

MasterCard will pay $862.5 million to settle, that company said in a separate statement. MasterCard will take a $515.5 million after-tax charge, according to the statement.

In an interesting side story, Morgan Stanley was supposed to get some of that, but Discover said they breached the agreement so "no dough."  More on that below...

American Express, which sued MasterCard and Visa separately, settled for a little over $4 Billion in June.( $1.8 billion from MasterCard and $2.25 billion from Visa and its bank partners). 

The payments stem from a Discover lawsuit against MasterCard and Visa accusing them of blocking banks from issuing their cards. The parties settled on Oct. 14 without disclosing the terms. "This settlement will enable Discover to further strengthen its capital base,'' Discover Chief Executive Officer David Nelms said in a third statement. He said his company will develop its business by ``broadening global acceptance, expanding network volume and growing our deposit franchise.''

Discover said it will receive about $862 million in the current quarter and as much as $472 million a quarter in 2009. The quarterly payments are contingent upon Discover achieving ``certain performance levels in network sales volume,'' the Riverwoods, Illinois-based company said.

Here's an interesting twist

Under its agreement with New York-based Morgan Stanley, which spun off the card company last year, Discover was to pay it the first $700 million recovered. The bank was also to receive half of any settlement proceeds above $1.5 billion, up to a maximum of $1.5 billion, according to regulatory filings.

Discover said in its statement that it has notified Morgan Stanley that Morgan Stanley is in breach of the agreement,'' without elaborating.  Discover said  "the amount of Morgan Stanley's special dividend is a matter of dispute.''

Morgan Stanley filed a lawsuit in New York State Supreme Court last week seeking a declaratory judgment "to resolve this issue definitively,'' Mark Lake, a company spokesman, said in a statement.  There is absolutely no basis for Discover's claim that the agreement was breached,'' Lake said. The firm "is due to receive approximately $1.2 billion pretax,'' he said.

U.S. District Judge Barbara Jones in Manhattan ordered Visa and MasterCard in 2001 to stop forcing banks to choose between their cards and ones from Discover and American Express Co.  Her order came after the Justice Department sued the credit card giants for antitrust violations. Visa sued in 2004, after the U.S. Supreme Court refused to hear the case.

Reasonable Terms

Resolving this longstanding case on reasonable terms is in the best interest of Visa and our clients, cardholders and shareholders,'' Visa CEO Joseph Saunders said in the statement.  We chose to settle this lawsuit to avoid the uncertainty and distraction of a lengthy jury trial,'' MasterCard General Counsel Noah Hanft said in that company's statement.

Visa, based in San Francisco, is the largest credit-card company, with 51 percent of the U.S. credit- and debit-card market last year, according to the Nilson Report, MasterCard, the second-largest card company and based in Purchase, New York, accounted for 28 percent. New York-based American Express is third with 17 percent, according to the newsletter. Discover's share of the market was 3.8 percent. 

Visa had agreed with MasterCard to pay the bigger share of any settlement, primarily based on relevant business volumes. The value of U.S. credit card purchases was $2.17 trillion in 2007, up from $426 billion in 1993. The case is Discover Financial Services Inc. v. Visa USA Inc., 04-cv-07844, U.S. District Court, Southern District of New York (Manhattan).
Conference Call and Webcast Information

A conference call to discuss this announcement, as well as the impact of elevated funding costs on Discover's fourth quarter, was held this morning, at 7:30 a.m. Central time.

The general public is invited to listen to the call by dialing 866-362-4820 (U.S. domestic) or 617-597-5345 (international), passcode 13604805, or via a live audio webcast through the Investor Relations section of the Web site, www.discoverfinancial.com.

For those unable to listen to the live broadcast, a replay will be available on our Web site or by dialing 888-286-8010 (U.S. domestic) or 617-801-6888 (international), passcode 78817365, beginning approximately two hours after the event. The replay of the conference call will be available through Nov. 28, 2008.

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First Data to Release Third Quarter Financials November 14th

DENVER, Oct 27, 2008 (BUSINESS WIRE) -- On Friday, Nov. 14, First Data will release its third quarter financial results. The release will be available on the First Data Web site: www.firstdata.com.

The company also will host a conference call and webcast on Friday, Nov. 14, at 8 a.m. MDT to review third quarter 2008 financial results. Michael Capellas, chairman and chief executive officer of First Data, will lead the call. Also participating will be Phil Wall, chief financial officer; and Silvio Tavares, senior vice president, Investor Relations.

To listen to the call, dial 877-741-4248 (in the U.S.) or +1-719-325-4785 (outside the U.S.) 10 minutes prior to the start of the call. The webcast will take place on the First Data Web site at http://ir.firstdatacorp.com/events.cfm. Please click on the webcast link at least 15 minutes prior to the call. A slide presentation to accompany the call will be included in the webcast and will be made available under the "Investor Relations" section of the Web site at http://ir.firstdatacorp.com/events.cfm.
A replay of the call will be available through November 21 by webcast on www.firstdata.com and at 888-203-1112 (in the U.S.) or +1-719-457-0820 (outside the U.S.). Use replay pass code 9481919.

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