Thursday, October 30, 2008

Want Scary? How Bout 100 Posts in a Month...Happy Halloween!

PIN Authenticated Card Present  Rates versus Card Not Present Interchange Fees...

Question of the Day...Which Rates Higher?
Treat Yourself to Lower Rates with Dually Authenticated "Card Present" Interchange from HomeATM!

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American Express Lays off 7000

American Express CompanyImage via Wikipedia
Pink Slips Fly at American Express
Don't leave home without what ... a job?

Credit card giant American Express (NYSE: AXP) became the latest financial company to hack off a chunk of its workforce, announcing it will lay off 7,000 workers, or 10% of headcount. It'll also slash investment spending, cut consulting, travel, and entertainment expenses (bah humbug) and freeze management-level salary increases.

These moves "will help us to manage through one of the most challenging economic environments we've seen in many decades" said AmEx CEO Ken Chenault, whose compensation is more tightly linked to stellar performance than many other corporate bigwigs.

The cuts should save AmEx a hefty $1.8 billion in 2009, which it very well may need heading into a pitiful economy where consumer spending could nosedive and defaults are likely to blow up. Banks and card companies that extend credit -- names like AmEx, Bank of America (NYSE: BAC) and JPMorgan Chase (NYSE: JPM) -- have been ratcheting up lending standards and actually cutting people's existing credit limits, a pretty clear sign that they're hunkering down and preparing for the worst. Companies like Visa (NYSE: V) and MasterCard (NYSE: MA) don't issue credit, so their downside risk heading into a recession is far lower.

Despite the bad news and a less-than-impressive quarter, many investors look at AmEx as a pretty compelling value story, including possibly one Warren Buffett. Take a great company with one of the world's best reputations, mix in a once-in-a-lifetime economic storm, and you get an opportunity to snag a great company at a great price, the thought goes.

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Constatine Cannon Notches 2nd Billion Dollar Win Against Visa/MasterCard

Constantine Cannon $cores $econd Billion Dollar Win Against V/MC card Network

New York, Oct. 29, 2008 -- Constantine Cannon LLP helped Discover Financial Services Inc. secure a $2.75 billion settlement from Visa and MasterCard earlier this week in the third largest reported antitrust settlement in U.S. history.

The landmark settlement comes on the heels of Constantine Cannon's role in 2003 as lead counsel in the historic In Re Visa Check settlement, which remains the largest antitrust settlement in history, and established Constantine Cannon as a leading law firm specializing in payments.

Shortly after the In Re Visa Check settlement, Constantine Cannon was retained by Discover Financial Services to join forces with Kirkland & Ellis to bring a damages action against Visa and MasterCard concerning their rules that prevented banks from issuing Discover Network cards. After four years of hard fought litigation, Visa and MasterCard agreed to settle the case the night before the trial was set to begin.

"It was our privilege to represent Discover and help it achieve such a just result in its longstanding dispute with Visa and MasterCard," said Jeff Shinder, (pictured at left) Managing Partner of Constantine Cannon's New York office.

"This strong result reflects both the skill and collaborative spirit that our firm and our stellar co-counsel, Kirkland & Ellis, brought to bear on this case," said Matthew Cantor, (pictured at right) a Constantine Cannon partner, who co-ran the case at Constantine Cannon with Mr. Shinder.

Shinder and Cantor also were among the lead lawyers in the In Re Visa Check case. In that case, Wal-Mart, Sears Roebuck, Safeway Supermarkets, Circuit City and The Limited led a class of 5 million merchants in a challenge to Visa's and MasterCard's Honor All Cards rules, which forced merchants that needed to accept Visa/MC credit card transactions to also accept their debit card transactions.

As they did in the Discover case, Visa and MasterCard settled the In Re Visa Check case on the eve of trial for over $3 billion and injunctive relief, including the elimination of the Honor All Cards rules, that the courts conservatively estimated as being valued at $25-$87 billion for the class.

Constantine Cannon LLP is a law firm specializing in antitrust counseling and complex commercial litigation with offices in New York and Washington with over 40 attorneys. In addition to expertise to clients in financial services and electronics payments, Constantine Cannon also represents clients involved in telecommunications/media, health care, transportation, and technology businesses.

For more information visit

Source: Company press release.

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The Benefits of Debit Cards by Bruce Cundiff via - Ask The Expert
Ask The Expert
Bruce Cundiff
Javelin Strategy & Research

Paying and Accessing Your Money with Debit: A Safe and Convenient Alternative to Cash

The debit card has emerged as a payment method of choice for many American consumers, with 72 percent using debit cards for purchases in the past 12 months, according to Javelin Strategy & Research1. In 2007, there were nearly 31 billion debit transactions at the point of sale, totaling purchase volume of $1.2 trillion2. These statistics highlight consumers’ preference for using debit cards when making purchases at the point of sale, and with good reason. Debit cards provide a safe and efficient method of payment with multiple benefits over more traditional types of payments such as cash and checks.

Recent media coverage of debit card use among consumers has focused largely on the perceived lack of security when using debit cards. This article provides a factual source of information to enable consumers to make informed choices and make the most of their debit cards.

Safe and Secure Access - Reducing Fraud at the Point of Transaction

Debit card fraud is not spiraling out of control, as many in the media would have consumers believe.

Debit card networks, financial institutions that issue debit cards, ATM owners, and merchants that accept debit cards at their points of sale, are constantly making improvements to ensure that debit card transactions are secure, and that they quickly and efficiently remedy any issues that may arise - fraudulent transactions or otherwise. Despite reports to the contrary, fraud rates for debit cards remain relatively low. According to the 2008 Debit Issuer Study, commissioned by the PULSE® ATM/debit network, debit card fraud losses at ATMs were, on average, 2.5 cents per transaction in 2007. The fraud-loss rate was lower at the point of sale, with an average fraud loss of 2.1 cents per transaction when the cardholder used a signature and even lower - only half a cent - when the cardholder used a personal identification number (PIN) to complete the transaction.

Fraud Prevention and Assistance

Should consumers become victims of debit card fraud, however, financial institutions work hard to ensure that the cardholder is made whole again. Limited liability was developed with consumer protection in mind. Unlike with cash, limited liability means that if a consumer’s debit card is lost or stolen, consumers have a chance to get their lost funds back. With stolen cash, once it’s gone, there is little chance of recovering it.

The amount consumers are liable for depends on how quickly the financial institution is informed of the illegal activity. Consumers should check with their individual financial institution for specifics on the level of protection provided.

In most cases, debit card issuers often limit consumer fraud loss exposure to $50. Javelin’s Identity Safety Scorecard, a survey of the security mechanisms the top U.S. financial institutions have in place, indicates that most issuers effectively have a "zero liability" policy. This means that consumers are not responsible for any fraudulent transactions initiated on their accounts3, as long as they report the transactions within a given time frame - usually within 60 days of when the fraudulent transaction was discovered.

Limited liability highlights the benefits of debit over cash. With limited liability for a lost or stolen debit card, consumers have a measure of protection as compared to the "final" nature of lost or stolen cash - once it’s gone, there is little chance of recovering stolen cash.

Debit Cards as a Financial Management Tool

Given the current economic climate, consumers are increasingly seeking assistance from their financial institutions for help with financial management and spending control. Debit cards offer an element of control for consumers in that the money spent in a debit card transaction is drawn from existing funds in their account. Account holders often view debit cards as a vehicle to control their finances and spend responsibly. Since the funds from debit card transactions come out of a bank account or credit union and are not borrowed from a line of credit, it is important to keep track of account balances and how much is being spent to avoid overdrafts and associated fees.

With debit cards, though, keeping track of balances is easier than ever. In addition to available balance information provided on many ATM transaction receipts, online banking allows consumers to check balances and transactions 24/7. Many financial institutions also offer e-mail alerts that can be set up to notify consumers when their balances reach a certain threshold - often defined by the consumers themselves.

There are instances when using a debit card will cause a hold on funds in the account to cover the anticipated amount of the transaction. Financial institutions can place a hold on an account as a means of ensuring payment to the merchant. This "preauthorization" has attracted a significant amount of attention recently as consumers use their debit cards more frequently at gas stations, where holds are common. With gas prices rising dramatically over the past year, merchants are now submitting a preauthorization request to confirm that funds of $50 to $100 are available to cover the cost of a tank of gas.

Financial institutions that issue debit cards are responsible for actually applying the hold, as well as setting the length of the hold, which varies depending on how the debit card is used (PIN or signature transaction). The amount of money in the account available for use during the hold period is reduced by the amount of the hold. To avoid potential overdraft fees that could arise from a hold at the point of sale, consumers should check with their financial institution to determine its policy on the length of debit holds. If a hold lasts longer than an hour for a PIN transaction, or a few days for a signature transaction, ask why.

A Small Price for a Great Convenience

Contrary to some inaccuracies that have been reported, there is rarely a service charge passed on to customers when using debit cards to make purchases. In fact, less than 1 percent of cardholders in the U.S. are charged a fee by their financial institutions for using a PIN-based debit card for purchases.4

While some financial institutions are adding surcharge-free ATM access, most ATM owners charge a fee of $1 to $3 for withdrawing money from an ATM not owned by the account holder’s financial institution. This charge, like the premium paid for valet parking or to drive tollways, is for the convenience of getting cash from an ATM owned by an organization other than the debit cardholder’s financial institution.

To avoid the surcharge fee, consumers can use the cash-back option at available merchants or get cash from their financial institution’s ATMs.

Bruce Cundiff is Director of Payments Research and Consulting with Javelin Strategy & Research - a leading provider of nationally representative, quantitative research focused exclusively on financial services topics.

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eMarketer's 2008 Online Shopping Holiday Preview

Will the Grinch Steal This Year’s Online Holiday Shopping Season? - eMarketer

Will the Grinch Steal This Year’s Online Holiday Shopping Season? OCTOBER 30, 2008

Amid a season of bad economic news, when overall retail sales growth is forecast to remain nearly flat, online retailers have reason to be guardedly optimistic.

eMarketer estimates that online holiday season sales will reach $32 billion in 2008, up slightly more than 10% over 2007.

“More than ever, in order to save money on holiday gifts, consumers will turn to the Internet to get gift ideas, find bargains and locate retailers that stock desired products,” says Jeffrey Grau, senior analyst at eMarketer and author of the new report, Online Holiday Shopping 2008 Preview. “In addition, shoppers will shift a larger share of their purchases from stores to the Internet to save gas money and take advantage of free shipping offers.”

Even so, online merchants cannot afford to be complacent

“In the past, e-commerce analysts believed that online shopping was immune to economic downturns because affluent consumers—the core online buyers—had the financial resources to weather hard times,” Mr. Grau says. “But this time around the wealthy have become unnerved seeing their stock portfolios and home values shrink.”

Feeling the financial pinch, high-income shoppers have told pollsters that they will reduce their total spending online and offline this holiday season. When they do buy, they will hunt for bargains just like other consumers.

“This new frugality is a large reason why eMarketer predicts that growth in online holiday sales will drop to one-half of what they were last year,” Mr. Grau says.

See what to expect this holiday season—before the season arrives, download the new eMarketer report, Online Holiday Shopping 2008 Preview, now.

Key questions "Online Holiday Shopping 2008 Preview" report answers:

  • What is the outlook for online holiday sales this year compared with recent years?
  • How is the economic crisis likely to affect online shopping behavior this holiday season?
  • How are online retailers preparing for the challenges they face this holiday season?
  • Which retail Websites stand to benefit from the economic crisis?
  • And many others…
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HomeATM on Facebook, Other Retailers Too

More retailers have fan  pages/applications on it than on other social media sites including HomeATM:

Facebook is the social media site of choice for many US online retailers, judging by an August 2008 study by Internet Retailer and Vovici.

Nearly one-third of responding businesses said they had a Facebook page, compared with 27% that had a MySpace page and just over one-quarter that had a page on YouTube.

A September 2008 study by Rosetta (formerly Brulant) that focused on the top 100 online retailers in the US found that 59 had a fan page on Facebook, up from 30 in May 2008. Among the 29 who added Facebook pages since that time were Best Buy, Toys “R” Us, Kohl’s and Wal-Mart.

“Social media sites continue to be an important source of community connection, and savvy retailers are reaping the benefits of Facebook’s rapid extension into new demographics, such as Gen X and seniors,” said Adam Cohen, partner with Rosetta’s consumer goods and retail practice, in an interview with eMarketer.

However, Mr. Cohen said that retailers should guard against casual attitudes toward their Facebook presences.

“It’s important that retailers don’t just slap up a page because everyone is talking about Facebook. An effective presence requires that you carefully consider what your customers are looking for, what you would like to communicate, and what role a fan page should play in your overall online strategy.”

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What is a Chargeback and How Can HomeATM Eliminate Them?

One of many benefits derived from utilizing HomeATM's PIN Debit/Credit Solution to help drive eCommerce sales is the cost savings due to PIN based transactions being more secure. 

Based on the fact that PIN is more secure, Visa and MasterCard provide much lower Interchange Rates for PIN based transactions...these rates can save etailers up to 100 basis points on transactions.

PIN authorized transactions occur in real-time and are dually-authenticated
, thus another benefit is the virtual elimination of chargebacks.  Chargebacks are costly, (you lose the cash and you lose the product!) time consuming (see chart which you may click to enlarge)  and can be virtually eliminated via the HomeATM ePayment Solution

Let's take a closer look at chargebacks in order to take a look as to why this should be important to all Internet Retailers. 


A chargeback is a transaction that an issuer returns to a merchant bank - and most often, to the merchant - as a financial liability. In essence, it reverses a sales transaction, as follows:
  • The card issuer subtracts the transaction dollar amount from the cardholder’s credit card account. The cardholder receives a credit and is no longer financially responsible for the dollar amount of the transaction.
  • The card issuer debits the merchant bank for the dollar amount of the transaction.
  • The merchant bank will, most often, deduct the transaction dollar amount from the merchant’s account. The merchant loses the dollar amount of the transaction.
For merchants, chargebacks can be costly. You lose both the dollar amount of the transaction being charged back and the related merchandise. You also incur your own internal costs for processing the chargeback. On top of that, if your chargebacks amount to more than one percent of your card sales volume, you may be fined and ultimately, lose your small business merchant accounts. Credit card processing companies get fined by the Associations when their merchants have excessive chargeback levels and are very strict in monitoring them.

Chargeback reasons

The most common reasons for chargebacks are:
  • Customer dispute. A customer may dispute a transaction because a credit was not issued when the customer expected it to be; merchandise was not received; a service was not performed as expected; the purchase was fraudulent. Most of these reasons indicate customer dissatisfaction and addressing their causes should be an integral part of your sales and customer service policies.
  • Fraud.
  • Processing errors.
  • Improper authorization.
  • Inaccurate transaction information.
Although you probably cannot avoid chargebacks completely, you can take steps to reduce or prevent them. Many chargebacks result from easily avoidable mistakes, so the more you know about proper transaction-processing procedures, the less likely you will be to inadvertently do, or fail to do, something that might result in a chargeback. Always ask your credit card processing service provider for help.

Your responsibility

The main interaction in a chargeback is between the card issuer and the merchant bank. The issuer sends the chargeback to the merchant bank, which may or may not need to involve the merchant who submitted the original transaction. This processing cycle does not relieve merchants from direct responsibility for taking action to remedy and prevent chargebacks. In most cases, the full extent of your financial and administrative liability for chargebacks is spelled out in your merchant agreement.

Chargeback remedies

Even when you do receive a chargeback, you may be able to resolve it without losing the sale. Simply provide your merchant bank with additional information about the transaction or the actions you have taken related to it. For example, you might receive a chargeback because the cardholder is claiming that credit has not been given for returned merchandise. You may be able to resolve the issue by providing proof that you submitted the credit on a specific date. Send this information to your merchant bank in a timely manner.

Avoiding chargebacks

Most chargebacks result from inadequate payment processing procedures and can be prevented with appropriate training. The following best practices will help you minimize chargebacks.
  • Always conduct an AVS check and ensure that you received a “positive AVS,” i.e. Address + 5 ZIP or Address + 9 ZIP.
  • Only ship to a billing address with an approved AVS response.
  • Obtain evidence of receipt of goods (e.g. signed shipping receipt).
  • Use “Verified by Visa” and MasterCard’s “SecureCode” programs (for eCommerce merchant accounts only), which guarantees the card was used legitimately by its owner and gives you strong representment rights.
  • Require a card ID (CVC2, CVV2 or CID), the 3- or 4-digit code on the back of the card (or on the front for American Express cards).
  • Process refunds as quickly as possible.
  • Notify consumers in writing (e-mail or regular mail) when a refund has been issued or a membership canceled. Provide them with the date of refund and a cancellation number, if applicable.
  • Always provide a clear billing descriptor and phone number so the consumer can contact you directly rather than calling their bank to discuss any dispute.
  • State terms and conditions of the sale (or membership) clearly and in plain view.
  • Use e-mail to notify the consumer at each billing cycle.
  • Obtain a signature from the cardholder giving you permission to charge their card on a regular basis for monthly fees or recurring payments.
  • Make it very easy for members or subscribers to cancel – have a “no-questions-asked” policy.
  • Authorizations must always be done for every deposit.
  • Deposits must not exceed the amount you have authorized.
  • Authorizations must be “positive.”
  • Avoid using voice authorizations.
  • Avoid recycled authorizations– get a new authorization for each deposit.

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