Thursday, January 8, 2009

Custom Fraud Possible? Yahmon!

Here's a letter to the editor of the "Jamaica Gleaner" published under the title: "A dangerous practice"

It illustrates how aware consumer's are becoming to potentially fraudulent/risky practices. Mr. Cooke knows better than to punch debit/credit card numbers into a computer. So I have two questions:

1. Why isn't the Jamaican Custom's Office as aware?

2. What on earth was the agent thinking (drinking) entering a PIN (using a keypad) into a computer?  It's high time they put some more energy into preventing this type of behavior...

As the title's a dangerous practice.    

The Editor, Sir:

Kindly publish this as an open letter to Director of Customs Danville Walker and Minister of Finance Audley Shaw.

Dear Sirs,

I wish to comment on a practice I encountered at the Customs office at Berth 6 Newport West on January 5. I attended there to clear a barrel of food and clothing sent by my wife's siblings in New York. The process was relatively quick and easy, given past experiences clearing personal effects there in 1999. But when I went to pay the customs duty at the cashier, I was shocked to be asked to hand over my debit card with which I was paying the fee.

Instead of asking me to swipe my debit card in a machine, as is usual, the clerk asked for my card and then entered the number of the card and relevant particulars in the computer, and enquired whether it was a chequing or savings account. She then asked me to enter my PIN and press enter, before handing me back my card.

I remarked to her that this was unusual, (translation: he wasn't "a custom'd" to this?) and that the card was private as it contained personal information that could be retrieved and used by someone fraudulently.

This practice is dangerous and should be stopped as identity theft has become a very prevalent crime in recent years. It should be necessary only to have the customer swipe his card, enter his PIN, and press enter to get confirmation from the card company for the amount required.

I must strongly object to this dangerous practice which can put customers' bank accounts at risk to unscrupulous persons. Please mister Commissioner of Customs and mr minister, review and change this practice for the security of your customs.

I am, etc.,
Royal Flat Box 642 Mandeville PO

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Mercator on China's Payment Market

New research report by Mercator Advisory Group.

China's payment card market continued to grow at dazzling speed from an already sizable base over the past two years.

By September 30, 2008, there were 1.73 billion credit and debit cards in circulation, up 18.8% from a year earlier.  By the end of 2008 the number should reach over 1.8 billion, making China by far the largest card market in the world by card numbers.

Even though payment cards' share of China's consumer spending still lags behind major developed card markets such as the U.S. and the U.K., there is tremendous upside potential for payment cards in China with the improving card acceptance environment and the growing consumer spending.

There are important changes in the industry in 2008; however, as the impacts of global economic recession caught up with China, consumer spending has slowed down. Sales and marketing costs have stayed high, the debit card market is quickly approaching saturation and growth has significantly slowed down. The credit card delinquency rate has risen sharply and could double in 2009. Regulators have issued alerts on the rising risks, and issuers are starting to adopt a more cautious approach towards new card issuing and to look at their existing card accounts more carefully. It appears that many credit card issuers might delay, change, or cancel their aggressive market expansion plans and put more focus on improving the performance of existing accounts than they used to.

This may not be a bad thing after all. Terry Xie, Director of Mercator Advisory Group's International Advisory Service and principal analyst on the report, comments,"The economic slowdown might be a disguised blessing to the development of China's credit card industry. There is little question that it would further delay the whole industry from breaking even. Nonetheless it provides an opportunity for Chinese credit card issuers to slow down their pace and re-examine their developments and possibly rethink their growth strategies before the problem becomes too big."

The latest report from Mercator's International Advisory Service provides an overview on the latest developments in China's payment card market. Market growth in card issuing, card acceptance, credit card receivables, and purchase transactions are discussed. Key strategic developments, including the slowing market expansion, changes in issuer strategies, increasing credit risks and card frauds, increasing roles of the Big Four, and the entry of foreign banks such as the Bank of East Asia, HSBC, Standard Chartered, and Citibank in the domestic card markets are also discussed.

Highlights from this report include:

After several years of explosive growth, China's payment card market is moving into a new development stage, in which risk control, profitability and controlled growth become key themes over the next two years.

China's card market continued to grow significantly over the past two years, and the growth is expected to continue through the next two upcoming years, though the pace will slow down.

Issuers will need to better control the increasing credit risks, even at the expense of slowing down their expansion plans.

Card fraud in China is still relatively low thanks to the fact that PIN's are required for all POS/ATM transactions on domestic cards. But ID theft, fraudulent cash advances, and counterfeit international cards are rising.

The Big Four state-owned banks will become dominating players in the credit card market, just as they have been in the debit card market.

Foreign banks will seek to play a more important role in the competition in the domestic market. But they will need to find their niche market segments and they still have a long way to go.

Members of Mercator Advisory Group have access to this report as well as the upcoming research for the year ahead, presentations, analyst access and other membership benefits.

Please visit us online at

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APAC Overseas Fraud

A spokesman for the APAC's says overseas fraud using British cards has increased over the last couple of years because scam artists are using them to pay for goods in countries that do not yet use Chip and Pin technology.   I wrote about this in early October.   (Some People Claim That There's a Woman to Blame)

They are advising cardholders to make sure their bank has up-to-date contact details for them and that they always check their statements against their receipts to detect any suspicious transactions.

"Your card can be used abroad even when you're not. You are getting cards being compromised in the UK and then going abroad without you," the spokesman said.

According to APACS fraud statistics for January to June 2008, plastic card fraud losses were up 14 per cent to £301.7 million in first six months of last year, of which more than 40 per cent was the result of fraud abroad.  Around 40 per cent of the total was due to fraud committed overseas, it said.

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Why $4.00 a Gallon is More Appealing to NPS

There's a company that came up with a nifty least it was nifty  when gas prices skyrocketed and gas station owners saw how credit card usage affected their bottom lines. 

According to  a story on (How to turn your driver's license into a debit card)  they  have come up with a patent-pending process that allows consumers to use their drivers license (or any card with a magstripe) to bypass the national bank-owned credit/debit card networks (Honor, Star, Interlink
and others) and offer debit card processing through the direct deposit Automated Clearing House (ACH) network to gas stations and convenience stores at a fraction of the cost.

I'll bet that National Payment Card is hoping that gas goes back up to $4.00 per gallon, because at that level, (IMHO) this program would have a lot more momentum.  Even their website uses the $4.00 per gallon comparison price point

My viewpoint is that at $1.60 per gallon, it doesn't quite have the stigma it would have at gas price levels we saw last summer.  Nonetheless, to go after a vertical with an ACH Decoupled Debit Platform, that uses any card with a magnetic stripe was/is an innovative approach after the Honor All Cards ruling in 2004, and if gas goes back up to $4.00 per gallon, then I'd look for this idea to be more appealing to petrol owners. 

Still, there's always Europe.  (oops, don't know if DL's have magstripes there)... In the US, less than 50% (24 states) use magstripes on the back of their drivers licenses.  (see map on right.)..the one's in yellow use magnetic stripes.  Still, the one's that do, make up 61% of total gas stations in the US according to their website. 

Still, I thought it interesting and innovative enough to share on the PIN Debit Payments Blog.  Here's some information on the program from their website:
National Payment Card is introducing a next-generation payment mechanism with the designation “Payment Card.” The National Payment Card substantially reduces your cost associated with "bank-networked" debit and credit card processing.
The Payment Card system provides consumers access to funds in their checking accounts so they may pay for fuel at participating locations. Editor's Note:  Once again, at $4.00+ a gallon there would be more of a willingness for gas station/convenience store owns to participate, but as of now, only a handful , well, six to be exact...are doing so...

The Payment Card is not a credit ordebit card that is linked through the national bank networks such as  “Honor, Star, Nice and Interlink."  The National Payment Card system can provide connectivity via existing payment processing networks or directly to the National Payment Card host services.Consumer authentication is via PIN at the pump.

How They Do It:
  • The Consumer becomes aware of the program at the station through pump toppers and audio messages.
  • The consumer enrolls in the program via the Internet, telephone or mail. The consumer's checking account information and consumer-selected PIN are the key elements of the enrollment data.
  • At the time of tender, a consumer who chooses the Payment Card as a method of payment will swipe the Payment Card as a credit card. The POS application will prompt for a PIN and the transaction will be sent to National Payment Card for validation.
  • The transactions are processed through the National Payment Card network.
  • National Payment Card then performs an EFT on the accounts, collects the funds and credits the gas station operator’s account within 24 hours. National Payment Card bills once a month for the transaction fees.
  • The entire process is computerized and automated with a solid audit trail. Reports can be sent by e-mail or viewed 24/7 on a secure VeriSign merchant web site.
  • At a predetermined time each day, transactions collected by National Payment Card are batched to the ACH for settlement.
  • The Payment Card is designed to be a traffic builder and loyalty program for your operators by providing consumers an immediate savings benefit while shopping.
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30% of Online Retailers Offer AltPay

According to a study conducted by Brulant and relRosetta, 30% of online retailers are offering AltPay methods, up from 24% last February.  Bill Me Later had the highest adoption at 21% followed by PayPal at 19%. 

Here's their press release along of their study.  The graphic is just a portion.  To see the full illustration, (PDF) click here.

Online retailers offering more alternative payment methods, new study shows
30% of 100 major online retailers were offering new payment methods as an alternative to credit cards in December 2007, up from 24% in February, according to a study by Brulant, a provider of interactive marketing and web site design services.

The study showed the highest alternative payment adoption rates for the Bill Me Later deferred billing service, at 21%, followed by PayPal at 19% and Google Checkout, 10%. 5% of the companies in the study offered all three of these payment methods.

“One of the most surprising findings is the increase in retailers offering all three alternative payment methods,” says Brulant principal Adam Cohen, noting that none of the same retailers offered all three methods in February 2007. “Today we find 5% adoption of all three at a variety of retailers from Toys ‘R Us to PetSmart to Rite Aid. This reinforces the ‘customer is king’ mentality, as retailers begin to offer a multitude of choices for checkout.”

Brulant also notes that 76% of online retailers surveyed accept private label gift cards as a payment method.

The study found that PayPal scored the largest increase in adoption between February and December 2007, at 217%, while the adoption of Google Checkout doubled. PayPal, a subsidiary of eBay Inc., is a third-party payment service that pays merchants on behalf of consumers, who fund their PayPal account with payment cards or bank accounts. PayPal also offers PayPal Pay Later, a deferred payment system that, like Bill Me Later, lets consumers make payments over time, often as part of a retailer’s promotional plan.

Google Inc.’s Google Checkout lets shoppers pay with their credit and debit cards through a streamlined checkout process. Google has offered merchants free card processing, an offer that ends Jan. 31. After that, online retailers will be able to process $10 in purchases free for every $1 they spend on Google’s AdWords search marketing program. Otherwise, Google will charge 2% of the purchase amount plus 20 cents.

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Triple DES for GAS

In an effort to fight an onslaught of card  skimming at gas stations,  Visa has mandated that all new gas dispensing machines must support Triple DES effective January 1st.  For existing machines, Triple DES must be implemented into pay at the pump stations by July,  2010.

Last night, when I was on ComputerWorld's site reading about CheckFree's 5 million (or more) customers put on alert, I also noticed this article announcing Visa mandating Triple DES support on all new fuel dispensing machines.  For your convenience,

I've included a couple links, in order to familiarize anyone who's interested in learning more about
Triple Data Encryption Standard

Here's a couple paragraphs from a story by ComputerWorld's Jaikumar Vijayan...

Clock Ticking For Gas Stations to Pump Up Security
Starting Jan. 1, Visa Inc. is requiring all new fuel-dispensing machines being installed at gas stations around the U.S. to support the Triple Data Encryption Standard, a mandate that is designed to make it harder for identity thieves to steal debit card data from gas pumps by shielding the personal identification numbers (PIN) of customers.

So-called card-skimming devices placed on gas pumps have been used to compromise payment card data in the past — for example, in 2005 at stations operated by Wal-mart Stores Inc.'s Sam's Club division.  Editor's Note:  And hundreds of gas dispensers across the country since then...this blog has covered many of those here for the complete list.

Visa's new requirement calls on gas retailers to ensure that all new pumps capable of processing debit card purchases are equipped with an encrypting PIN pad, or EPP, that supports Triple DES.

Although Visa is the only credit card company mandating the use of the encryption technology now, the requirement is expected to become part of a broader specification for unattended point-of-sale systems that is being developed by the PCI Security Standards Council, which is responsible for the Payment Card Industry Data Security Standard and other data protection measures.

Gas station owners have until July 1, 2010, to ensure that all of their existing pumps are upgraded to support Triple DES.

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Disqus for ePayment News