Tuesday, December 23, 2008

Visa "Anti-Trust Worthy" Discover's Morgan Stanley

As I mentioned in a post on December 5th, Morgan Stanley apparently had "secret talks" with Visa behind Discover's back and now they are suing each other over the $2.75 billion take that Discover collected from Visa in an antitrust lawsuit. What was Morgan Stanley thinking?

Bottom line is that Discover says it's not paying a dime to Morgan Stanley because they tried to sabotage the settlement talks behind their back and thus forced them to settle for less than they would have. Kind of puts a new twist on antitrust, and once again Visa is involved. Morgan Stanely should have just left well enough alone, but since they were capped at 1.5 billion, Discover claims they had no vested interest in seeing the case go to trial.

As the title of this post suggests, my guess is that Visa played Morgan Stanley in order to reach a lower settlement...and it worked. Now there's a whole new court case that is arising out of the settlement of another. It's a crazy world, but that's life, and life accepts Visa! Apparently, Visa is worthy of forever being associated with antitrust...

I'll continue to follow the case here on the PIN Debit blog. As it looks right now, the case won't reach trial until the end of 2009, but I'm sure there will be some interesting tidbits in the meantime, and I'll cover those tidbits here.

From todays New York Post:
"The negotiations with Visa and MasterCard dragged on, and the two sides were set to go to trial this October.

But the weekend before the trial was to start, Discover claims that it learned for the first time that Morgan Stanley was talking separately to Visa and MasterCard to try to settle case before it moved to trial. Fearing that Morgan Stanley had in some way compromised its trial strategy, Discover says that it was forced to settle the case for much less than what it might have gotten at trial.

Discover then refused to pay Morgan Stanley its cut of the settlement, claiming that Morgan Stanley violated the terms of their agreement that Discover had sole negotiating power.

Morgan Stanley sees things quite differently. It has sued Discover to get its $1.3 billion cut of the $2.75 billion payout.

Morgan Stanley claims that Discover always knew it was speaking with Visa and MasterCard in order to work out a deal. It even gave up $100 million of its cut to get Visa to sign on to the $2.75 billion, nonnegotiable figure proposed by the arbiter of the case.

Discover has now countersued, claiming that Morgan Stanley’s attorneys were under pressure from John Mack, Morgan Stanley’s chief executive, to settle the case quickly. Discover claims that since Morgan would not get a penny over $1.5 billion, it had no interest in seeing the case go to trial, where Discover could have reaped more cash

Continue Reading at NY Times

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TSYS Enters Turkish Payments Market

TSYS Hires New Business Development Director for Turkey

Columbus, Ga. and London, 22 December 2008 — TSYS today announced Bulent Senver as Business Development Director for its entry into the Turkish payments market.

Mr. Senver brings more than 25 years experience and extensive knowledge of the Turkish banking and card payments industry. He has worked with more than 20 Turkish and foreign banks in an advisory role as a management consultant and as a senior executive in the bank environment, a position in which he was named 'Banker of the Year' by the Turkish Press Institution.

Kelley Knutson, executive vice president of Global Services for TSYS, said, "TSYS is very pleased to welcome Bulent as Business Development Director for Turkey. He has helped achieve many milestones in his respective market, including the first photo credit card, the first soccer club debit card and the first telephone banking system. He has in-depth knowledge of the payments industry and local market requirements, and embodies the service excellence and integrity associated with the TSYS brand."

"With a strong, stable economy, growing population and rising income levels, we believe that the Turkish card market shows tremendous potential for further growth. It is a key, strategic market to TSYS and we are fully committed to investing long-term in the region," added Knutson.

The Turkish payments market has grown at an accelerated rate during the last five years and is now the third-largest card market in Europe. In terms of payment options and product differentiation, Turkey is one of the most sophisticated and innovative markets in the world.

TSYS, which grew its international operations 33 percent in 2007, confirmed its intent to participate in the Turkish marketplace with its unique value proposition, TS Prime, an efficient server-based issuing and acquiring card management platform adopted by more than 100 financial institutions worldwide.

TSYS supports more than 300 clients in 75 countries and has been a leader in the global payments industry for more than 25 years. Its market presence extends to 18 offices supported by more than 8,000 personnel.

About TSYS
TSYS (NYSE: TSS) is one of the world's largest companies for outsourced payment services, offering a broad range of issuer- and acquirer-processing technologies that support consumer-finance, credit, debit, debt management, healthcare, loyalty and prepaid services for financial institutions and retail companies in the Americas, EMEA and Asia-Pacific regions. For more information, contact news@tsys.com or log on to www.tsys.com. TSYS routinely posts all important information on its website.

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Chip and PIN Coming to Dubai

Decision to switch based on recent hack and rise in card related fraud.
Many banks across the UAE experienced a concerning rise in the instances of card related fraud in the latter part of this year.

Much of the fraud involved card “skimming” which is when a device is attached to an ATM or a Point-Of-Sale card reader and details are copied from the card’s magnetic strip. Details copied would include the card’s PIN number making it possible for fraudulent transactions to be made.

To help combat this Lloyds TSB Middle East has taken the decision to launch Chip and PIN cards – a more protected system for cards.

Chip and PIN cards contain a chip, making them more difficult and more expensive to counterfeit. Signatures can easily be forged and are often not checked carefully. So entering your PIN at a till instead of signing a receipt helps to prevent someone else from using your card.

One of the World's biggest banking groups, today announced that the bank will launch its Chip and PIN offering in January 2009. Following the increase in card-related fraud activity across the UAE, Lloyds TSB Middle East has accelerated the launch of its Chip and PIN credit and debit cards to ensure their customers' banking experience is even more secure.

"We are committed to delivering excellent customer service and protecting our customers", said Richard Musty, Consumer Banking Director. This is why we have brought forward the launch of our Chip and PIN credit and debit cards. These cards will offer our customers a more secure way to pay and improved protection against card-related fraud. Furthermore, our sophisticated fraud monitoring system will give us an early warning signal to potential fraudulent activity so we will be able to proactively tackle it.

Cards will be issued to existing customers on a renewal basis
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Visa's WarChest: $1.1 Billion

Visa Inc. (NYSE:V) today reported that it has deposited $1.1 billion into the litigation escrow account previously established under the company's retrospective responsibility plan (the "Plan").

Under terms of the Plan, when Visa funds the litigation escrow its U.S. financial institutions, the sole holders of Class B shares, bear the expense via a reduction in their as-converted share count.

"This transaction not only adds the necessary funds to our litigation escrow, but effectively acts as a $1.1 billion Class B share repurchase program," said Joseph Saunders, Visa's chairman and chief executive officer. "It has always been our stated intent to return excess cash to our shareholders in the form of dividends and share repurchases. We are obviously pleased that our strong financial position and excess cash flow allows us to do this."

The Plan was established at the time of Visa's initial public offering. It provides coverage and a payment mechanism for judgments or settlements in specific U.S. legal cases, protecting Visa and its Class A and Class C shareholders from any direct losses.

The deposit of the funds into the escrow account reduces the conversion ratio applicable to Visa's Class B common stock outstanding from 0.7143 per Class A share to 0.6296 per Class A share. On a converted basis, the 245,513,385 Class B shares currently outstanding are equal to 154,566,658 Class A shares of common stock.

The deposit of loss funds has the effect of a repurchase of 20,800,824 Class A common share equivalents from the Company's Class B shareholders. The amount paid per share represents the volume weighted average price (VWAP) of the Company's Class A common shares for the 15-day trading period December 1, 2008 to December 19, 2008.

About Visa: Visa operates the world's largest retail electronic payments network providing processing services and payment product platforms. This includes consumer credit, debit, prepaid and commercial payments, which are offered under the Visa, Visa Electron, Interlink and PLUS brands. Visa enjoys unsurpassed acceptance around the world and Visa/PLUS is one of the world's largest global ATM networks, offering cash access in local currency in more than 170 countries. For more information, visit www.corporate.visa.com .

Source: Company press release.

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Sorry Charlie...You've Been...Hired!

Last August I wrote a couple posts (Sorry Charlie...Youve Been Hacked and Sorry Charlie...The Cat's Outta the Bag) about the three MIT students that hacked into Boston's subway payment card system. (CharlieCard)

They had planned to present their findings at Defcom, but instead were sued by the Massachusetts Bay Transit Authority. The MBTA took legal action just before the students were scheduled to discuss: "generating fare cards","reverse-engineering magnetic stripes", and "hacking the RFID technology in the cards".

Instead, a judge issued an injunction ordering them to refrain from doing so. Now they've been "hired" by the MBTA. Ironically, yesterday I wrote a post entitled "Who Says Crime Doesn't Pay" and today, I saw this article that the MBTA had "hired" the three hackers who broke into their system.

So apparently it also pays to hack into a system and threaten to publicly share the results in a presentation at a hack convention.

It's a different world out there...the only "Hack" I ever heard of as a kid was "Hack Wilson" who set the record for most RBI's in a season (191) in 1930 for the Chicago Cubs.

Anyway, it's been an interesting turn of events so here's a follow up on the Sorry Charlie series from Yahoo news.

SAN FRANCISCO - A trio of Massachusetts Institute of Technology students who found a way to hack into the Boston subway system's payment cards have agreed to partner with transit officials there to make the system more secure.

The Electronic Frontier Foundation announced the agreement Monday, two months after the Massachusetts Bay Transportation Authority dropped a lawsuit against the students, who were represented for free by the EFF, a civil-liberties group that frequently takes up cases involving security researchers and computer hackers. The transit agency had sued to stop the students from presenting findings at a computer-security conference.

The students — Zack Anderson, R.J. Ryan and Alessandro Chiesa — have argued all along they were trying to help the MBTA by giving it advance notice of their planned talk last summer and keeping specific details of their hack secret. But the MBTA worried of widespread fare fraud if students discussed how they were able to add hundreds of dollars in value to MBTA's two primary payment cards — CharlieCard and CharlieTicket.

Before they could take the stage at the DefCon hacker conference in Las Vegas in August, the students were slapped with a lawsuit and a restraining order preventing them from giving the talk. Everyone found out what they were going to say anyway: All 87 slides of the students' presentation were already online, having been given out to conference attendees on CDs before the lawsuit was filed.

The MBTA argued it needed time to fix the problems, but the issue touched off a legal battle about whether the students' free-speech rights were violated and prompted the EFF to take up the students' case.

The judge eventually lifted the gag order and the transit agency dropped its lawsuit in October. The two sides have been working since then on how they would collaborate to make the fare system more secure and have the students' work taken seriously, said Jennifer Granick, the EFF's civil liberties director.

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