Friday, January 8, 2010

The VISA Credit Card Scam: From Now On, Use Your PIN!

Today's Feature Story


There's has been a lot of media attention given to the recent NY Times article regarding Visa's push of the less secure signature debit over the more secure PIN Debit.  Here's Mick Arran, of OpenSalon's Take on Visa's Take on Signature vs. PIN Debit.  Take the time to read it.  I love his mix or sarcasm, sardonicism and petulance...but first, allow me to "sarcastically" refresh your memory about why Visa is pushing Signature over PIN.   This from a study conducted by Dove Consulting, a division of Hitachi Consulting for PULSE.  The study was done in 2005, providing more than ample warning to Visa that they should be protecting the integrity of their brand by protecting consumers and merchants from fraud.  Yet, five years later...they are still pushing signature debit over PIN Debit and won't allow genuine PIN Debit on the web...even though they certified our PIN Entry Device for eCommerce use. 







One of the most revealing findings was that the added security of using a personal identification number to authorize debit card purchases makes that method of payment approximately 15 times more secure than signature debit transactions, both in terms of losses per transaction and losses per sales volume. Costs associated with PIN debit fraud at the point of sale currently amount to $.001 per transaction, or .29 basis points. By comparison, losses related to signature debit are $.016 per transaction, or 4.21 basis points.















Well if that doesn't explain why Visa is pushing Signature Debit over PIN Debit,  I don't know what possibly could.  What's that you say?  Visa makes more money off insecure transactions?  But wouldn't they still make money off PIN Debit and protect the integrity of their brand?  Oh, nobody knows that they are doing this.  Well, thanks in large part to the NY Times article, I think that is about to change.  "From Now On,  Use Your PIN!" 

Here's the article from OpenSalon:







This is for those people who think maybe that all the credit scams of recent years are of recent vintage. Hardly. Credit card scams in particular have been going on as long as credit cards have been in existence. They'd barely broached the idea before the creditors were figuring ways to scam the consumers who used them. Watch carefully now. Which shell is the pea under?





Every day, millions of Americans stand at store checkout counters and make a seemingly random decision: after swiping their debit card, they choose whether to punch in a code, or to sign their name. It is a pointless distinction to most consumers, since the price is the same either way. But behind the scenes, billions of dollars are at stake. When you sign a debit card receipt at a large retailer, the store pays your bank an average of 75 cents for every $100 spent, more than twice as much as when you punch in a four-digit code.





Signature debit cards dominate debit use in this country, accounting for 61 percent of all such transactions, even though PIN debit cards are less expensive and less vulnerable to fraud.











Got that so far? Punch in a PIN, a 30c charge. Sign your name, 75c. multiplied by millions and millions and millions over decades. How, you ask, did they do it - besides hiding from consumers how much extra it was costing them to sign their names? Like this: they bribed the banks who service their cards.






How this came to be is largely a result of a successful if controversial strategy hatched decades ago by Visa, the dominant payment network for credit and debit cards. It is an approach that has benefited Visa and the nation’s banks at the expense of merchants and, some argue, consumers.





Competition, of course, usually forces prices lower. But for payment networks like Visa and MasterCard, competition in the card business is more about winning over banks that actually issue the cards than consumers who use them. Visa and MasterCard set the fees that merchants must pay the cardholder’s bank. And higher fees mean higher profits for banks, even if it means that merchants shift the cost to consumers.





Seizing on this odd twist, Visa enticed banks to embrace signature debit — the higher-priced method of handling debit cards — and turned over the fees to banks as an incentive to issue more Visa cards. At least initially, MasterCard and other rivals promoted PIN debit instead.





As debit cards became the preferred plastic in American wallets, Visa has turned its attention to PIN debit too and increased its market share even more. And it has succeeded — not by lowering the fees that merchants pay, but often by pushing them up, making its bank customers happier.





How we doing? Still with me? Essentially, VISA bribed banks to push their cards by offering to give up their piece of the action on the higher-paying signature cards. They were so successful that unnecessary and insecure signature cards dominate the market and bring in $billions$ in fees on top of the stratospheric and usurious interest rates they're already charging. (Thank you, South Dakota.) Mafia loansharks used to call this a "vig kickback" - a bonus for big customers to keep them tied to you. Public prosecutors pre-Reagan used to bring charges against companies that did this. They called it "kickbacks" too. Now it's just BAU.





In an effort to catch up, MasterCard and other rivals eventually raised fees on debit cards too, sometimes higher than Visa, to try to woo bank customers back.





“What we witnessed was truly a perverse form of competition,” said Ronald Congemi, the former chief executive of Star Systems, one of the regional PIN-based networks that has struggled to compete with Visa. “They competed on the basis of raising prices. What other industry do you know that gets away with that?”









And this didn't start under Bush, or even Reagan. This has been going for almost 50 years. And dig: VISA gets paid even though it doesn't do anything.






Visa does not distribute credit or debit cards, nor does it provide credit so consumers can buy flat-screen televisions or a Starbucks latte. Those tasks are left to the banks, which owned Visa until it went public in 2008.





So what do they get paid for?





Instead, Visa provides an electronic network that acts like a tollbooth, processing the transaction between merchants and banks and collecting a fee that averages 5 or 6 cents every time. For the financial year ended in June, Visa handled 40 billion transactions. Banks that issue Visa cards also pay a separate licensing fee, based on payment volume.





They're a middleman, that most glorious, well-paid, useless occupation. They don't even process the transactions. They just route them. And for this they get paid by both sides. What a gig.





“It’s a penny here or there,” said Moshe Katri, an analyst who tracks the payments industry for Cowen and Company. “But when you have a billion transactions or more, it adds up.”





I'd say.





With debit transactions forecast to overtake cash purchases by 2012, the model has investors swooning: Visa’s stock traded at $88.14 on Monday, near a 52-week high, while shares of MasterCard, at $256.84 each, have soared by more than 450 percent since the company went public in 2006.





The company thinks all this just might be a "perspective problem".



“At times we have a perspective problem,” said William M. Sheedy, Visa’s president for the Americas. “Debit has become so mainstream, some of the people who have benefited have lost sight of what their business model was, what their cost structure was.”





We're not sure what specific "people" Mr Sheedy is talking about but we think it might be the merchants who accept the cards and pay all the extra fees consumers haven't got stuck with. Yet.







Visa officials said the costs of debit for merchants had not gone down because the cards now provided greater value than they did five or 10 years ago. The costs must not be too onerous, they say, because merchant acceptance has doubled in the last decade.





That's just the merest tad disingenuous. What with the economy running largely on credit for almost 3 decades now, since Reagan and the Pubs made it possible for corpo's to break unions and flatten ordinary wages below inflation and often below the poverty line and then keep them there for 30 years, merchants really haven't left themselves any choice but to accept credit cards. If all sales had to be cash, there wouldn't be any sales.





However, in the 90's debit cards came along as a convenience for consumers and a safeguard for merchants and banks: debit cards only work if there's cash in the account. Well, VISA didn't miss the chances with those.





“Visa and MasterCard have morphed into a giant cookie jar for banks at the expense of consumers,” said Mitch Goldstone, a plaintiff in the case.





Fees were not an issue when debit cards first gained traction in the 1980s. The small networks that operated automated teller machines, like STAR, Pulse, MAC and NYCE, issued debit cards that required a PIN. MasterCard had its own PIN debit network, called Maestro.





Merchants were not charged a fee for accepting PIN debit cards, and sometimes they even got a small payment because it saved banks the cost of processing a paper check.





That changed after Visa entered the debit market. In the 1990s, Visa promoted a debit card that let consumers access their checking account on the same network that processed its credit cards, which required a signature.





To persuade the banks to issue more of its debit cards, Visa charged merchants for these transactions and passed the money to the issuing banks. By 1999, Visa was setting fees of $1.35 on a $100 purchase, while Maestro and other regional PIN networks charged less than a dime, Federal Reserve data shows. Visa says the fee was justified because signature debit was so much more useful than PIN debit; at the time, roughly 15 percent of merchants had keypads for entering a PIN.





Merchants said they had no choice but to continue taking the debit cards, despite the higher fees, because Visa’s rules required them to honor its debit cards if they chose to accept Visa’s credit cards.





The entire structure, it seems is driven by the middleman. VISA is calling the shots and taking the nickels that go with it. In the trillions.





Bribery. It's the American way.





But VISA has paid off the banks and it would seem that banks are the only sector of the economy in whose welfare the Obama Administration can manage to interest itself, so it's unlikely we'll see any changes in this systemic rip-off anytime soon. Until we do (hah!), use your damn PIN number.











Bank Guarantees Online Banking Safety



DBS guarantees online banking safety

By CONRAD TAN



DBS Group will guarantee the financial safety of customers using its Internet banking service to encourage more people to bank online.



With its 'money safe' guarantee, DBS's online banking customers will be automatically protected when transacting online, with the bank reimbursing any losses in the unlikely event of unauthorised transactions on their online banking account, it said.



But customers will need to continue to do their part by keeping their log-in details and two-factor authentication tokens secure, to minimise the risk of unauthorized transactions, DBS added.  Editor's Note:  Read the fine print.  If malware steals your log-in details are you liable?  If so, this isn't much of a guarantee.



'We believe that Internet banking is becoming an increasingly important aspect of banking. Although the industry follows a set of high security standards, many still have concerns over transacting on the Internet. As the bank with the largest number of online users, we want to take the lead to give our customers greater peace of mind and assurance when they transact online with us,' said Rajan Raju, group executive of DBS's consumer banking group.



DBS said it has 1.35 million Internet banking customers in Singapore, giving it the largest market share at 35 per cent.

(Another) HSBC Outage Stops Customers from Withdrawing Cash





ITPro's Jennifer Scott reports that HSBC's Online Banking Platform crashed for a second time in six months



HSBC has experienced its second tech failure in six months, leaving customers unable to withdraw cash or access online banking.




By Jennifer Scott, 8 Jan 2010



HSBC customers were left without access to cash machines and online banking earlier today after the bank’s mainframe computer crashed.  The outage lasted for a couple of hours but a HSBC spokesperson said it didn’t affect every customer and everything was now working again.



“This was linked to a problem with our mainframe and [although all back up and running] we are monitoring it closely… to get to the route of the problem and make sure it doesn’t happen again.”  A similar event happened back in June when, again, customers could not withdraw cash or access their online bank accounts but the spokesperson did not draw a link between the two.



HSBC is currently upgrading its entire system under the name “One HSBC project” to move all its technology onto a single platform. The process is costing $1 billion and is expected to be completed in 2011.


PYMNTS.com News



PYMNTS.com

WHAT'S NEXT IN PAYMENTS Friday 01.08.10







_________________________________________________________________________

TODAY'S TOP STORY

Cooperation Models for the Development of Mobile Payment SolutionsThe Decade's Greatest Developments in Payments

The payments industry had quite a decade. Industry expert and Paying with Plastic author David S. Evans takes a look at the events that have shaken up  and shaped the payments industry since 2000.  Read more



NEW IN THE LYDIAN PAYMENTS JOURNAL

Fumiko HayashiPayment Card Interchange Fees and Merchant Service Charges: An International Comparison by Fumiko Hayashi

As payment cards have become an increasingly important electronic retail payment type in many countries, payment card fees, especially interchange fees, have become the source of a good deal of controversy. Read more



To see the entire January 2010 edition of the Lydian Payments Journal, click
here








Highly Personalized Spear Phishing Campaign Spoofs Microsoft Outlook

SOURCE: Red Condor, Inc.

 
Red Condor Warns of Aggressive Highly Personalized Spear Phishing Campaign Spoofing Microsoft® Office Outlook® Web Access



Blended Threat Email Attacking Large Number of Domains; Includes Phishing Tactics and an Executable Containing a Zbot Trojan Virus




ROHNERT PARK, CA-  Email security experts at Red Condor today issued a warning for an aggressive spear phishing email campaign inviting recipients to "apply a new set of settings" to their mailboxes because of a recent "security upgrade" of their mailing service. An embedded link in the email connects users to a web site that appears to be a Microsoft® Office Outlook® Web Access page, including official Microsoft® and Microsoft Office logos. On the page, users are directed to "download and launch a file with a new set of settings for your e-mail account."



The executable is actually a Zbot Trojan virus similar to Trojans distributed in recent H1N1 and Facebook phishing attacks. Initially identified and blocked by Red Condor's Zero Minute Defense System early the morning of Thursday, January 7, the campaign has still only been detected by a few virus scanners.



"This spear phishing campaign is unusual in that it is highly personalized and is targeting a very large number of domains with a customized message for each domain," said Dr. Tom Steding, president and CEO of Red Condor. "Spear phishing campaigns usually target a single organization or domain, but this attack broke the mold as the volume and targets are very high. Once again, this is a perfect example of scammers modifying their tactics to thwart traditional security systems and demonstrates the importance of having an advanced, real-time email security solution. For Red Condor customers, the messages were blocked immediately, and a new filtering rule was in place within a few minutes of detecting the campaign."



A spear phishing campaign is a highly targeted form of phishing that typically targets a single organization. Emails appear as if they come from a trusted source, such as an employer who would normally send an email to the entire company or a well-known organization. This campaign was detected by Red Condor's Zero Minute Defenses, specifically its Fast Flux and Spam Trigger (formerly Spam Trip Wire) filters. Once identified, the campaigns are quarantined and reviewed as rules are written and automatically distributed to Red Condor's antispam appliance and Hosted Service customers.



About Red Condor Red Condor is revolutionizing spam fighting with its next generation technology. Red Condor's highly accurate email filter, hybrid architecture Vx Technology™, and fully managed appliances lead to a dramatic reduction in the cost of owning a premium spam filter. With solutions for small businesses, as well as ISPs with millions of email inboxes, Red Condor has a cost-effective, timesaving solution that is rapidly gaining market share. The system's design has built-in zero tolerance for lost email, and a near zero false positive rate while achieving long-term spam block rates greater than 99%. Red Condor Archive is a secure message archiving service with lifetime retention and unlimited storage. The company's next-generation technology is backed by a 24x7 customer care center staffed by email security experts at Red Condor's headquarters. For more information, visit www.redcondor.com.

Fujitsu Expands Retail Offerings to Provide End-to-End Solutions

SOURCE: Fujitsu America, Inc. | Jan 08, 201

Ranking in a Leading Analyst Firm's Top Four IT Service Providers in Retail, Fujitsu Increases North American Retail Revenue by 15 Percent Annually

SUNNYVALE, CA--(Marketwire - January 8, 2010) - Fujitsu (http://solutions.us.fujitsu.com) today announced it has expanded its North American retail market portfolio to deliver end-to-end technology solutions, introducing new IT infrastructure services that join Fujitsu POS and store-management systems and custom business intelligence (BI), enterprise resource planning (ERP), software as a service (SaaS) and supply chain management (SCM) integration solutions. Based on the popularity of Fujitsu retail solutions, the company has generated 15 percent compound annual growth over the past three fiscal years. Gartner, Inc. has ranked Fujitsu the number four Services Player in the Retail Industry by Worldwide Revenue Size, 2008 (Source: Gartner, Competitive Landscape: IT Service Providers in Retail, Addressing the Chaos in 2009, published Dec. 2, 2009).

News Highlights




  • New Fujitsu datacenter options for retailers range from cloud computing, managed data center services and hosted offshore solutions based on award-winning Fujitsu PRIMERGY(R) server, ETERNUS(R) storage and virtualization systems.


  • See Fujitsu retail solutions in action at the NRF Convention and Expo in New York, Jan. 10-13, at Jacob K. Javits Convention Center in booth 411. Fujitsu and partners Microsoft, Oracle, Salesforce and SAP will demonstrate how their offerings help retailers in North America reduce operating costs, apply technology and business intelligence tools to improve sales and employee performance, and streamline operations from supply chains to the point of sale.


  • Fujitsu currently serves 10 of the top 20 North American retailers. Gartner, Inc. ranked Fujitsu fourth by worldwide revenue size in 2008 for the retail industry in "Competitive Landscape: IT Service Providers in Retail," authored by Gartner, Inc. Research Vice President Jeff Roster, published Dec. 2, 2009.


  • Bruce Kopp, senior vice president of the retail business unit at Fujitsu America, now leads the retail solutions strategy, leveraging his 25 years of experience as senior vice president of sales and marketing at Fujitsu Transaction Systems prior to its consolidation into Fujitsu America on Apr. 1, 2009.





Quotes



Bruce Kopp, Senior Vice President of Retail Sales, Fujitsu America: "Since April 2009, Fujitsu America has made a substantial investment in the success of its retail business unit, as evidenced by a 15 percent compound annual growth rate over the past three fiscal years. I am pleased to take the lead as our retail solutions expand to a full spectrum of hardware, software and IT infrastructure and security services, as well as integration solutions with our alliance partners such as Microsoft, Oracle and SAP."



About Fujitsu

Fujitsu is a leading provider of IT-based business solutions for the global marketplace. With approximately 175,000 employees supporting customers in 70 countries, Fujitsu combines a worldwide corps of systems and services experts with highly reliable computing and communications products and advanced microelectronics to deliver added value to customers. Headquartered in Tokyo, Fujitsu Limited (TSE: 6702) reported consolidated revenues of 4.6 trillion yen (US$47 billion) for the fiscal year ended March 31, 2009. For more information, please see: www.fujitsu.com.



About Fujitsu America, Inc.

Fujitsu America, Inc. provides a complete portfolio of business technology services, computing platforms, and industry solutions. Fujitsu platform products are based on scalable, reliable and high-performance server, storage, software, point-of-sale, and mobile technologies. Fujitsu combines its renowned platform offerings with a full suite of onshore, near shore and offshore system integration, outsourcing, and datacenter services covering applications, operations, infrastructure, customer service, and multi-vendor lifecycle services. Fujitsu provides industry-specific solutions for retail, manufacturing, healthcare, government, education, financial services, and telecommunications sectors. For more information on Fujitsu America's business scope, visit http://solutions.us.fujitsu.com/.



Fujitsu, the Fujitsu logo and ETERNUS are trademarks or registered trademarks of Fujitsu Limited in the United States and other countries. PRIMERGY is a trademark or registered trademark of Fujitsu Technology Solutions in the United States and other countries. All other trademarks and product names are the property of their respective owners.

HomeATM Headline News through January 8, 2010









Domino's makes a quarter of sales online

New Media Age Ecommerce sales increased by 40.4% through the year to 78.5m, up from £55.9m in 2008, accounting for 27.8% of all deliveries compared with 23.2% the year ...



Ingenico launches tokenization product as it expands payment security team

The provider of Internet-enabled payment terminals is building out its security strategy with a new data-protecting tokenization product and an expanded security strategy team headed by former Best Buy chief information security officer Deborah Dixson.



Heartland's compliant breach was game-changer for payment ...

Pivotal Payments "Passing a PCI security audit does not make a company secure," Avivah Litan, an analyst with research firm Gartner, told PC World



Another Look at US Credit Card Interchange Fees


In an op-ed titled "Will Congress Take Another Swipe at Credit Cards?", Todd J. Zywicki, law professor at George Mason University and a senior scholar at the Mercatus Center, writes for the Wall St. Journal about pending legislation in the US Congress that would "artificially reduce interchange prices." Zywicki writes: "Credit cards are essentially a closed economic system: A reduction in interchange fees will have to be offset by increased revenues elsewhere or a reduction in costs. "



Visa's Debit Domination Makes Its Stock a Smart Buy

Daily Finance The type Visa does not like as much is a PIN debit card: It requires users to key in their four-digit codes before they can make their purchase



Why Paypal May Do to Payments What Apple Did to the Mobile Ecosystem

In the latest Commerce Fault Line post, industry expert Patrick Gauthuer on how PayPal will open up the walled garden of payments: "While I have been following with interest the likes of Boku, Zong and mPayy, the game changing announcement in my opinion came from PayPal, the "grand-daddy" of alternative payment platforms, as it was celebrating its 10th anniversary." Read more



ICICI Bank and First Data Enter Merchant Acquiring Alliance

SYS-CON Media (press release) First Data's services include offering merchants the ability to view their payment transactions securely via the Internet while benefiting from loyalty, ...



The debit card secret banks love: You sign, they win

Houston Chronicle The small networks that operated automated teller machines, like STAR, Pulse, MAC and NYCE, issued debit cards that required a PIN



B2C Instead of C2C will Become an E-Commerce Trend

EcommWire (press release) By China's E-Commerce Research Center, a few days ago, China Electronic Commerce Research Center released a survey which directing at domestic 100



How Visa, Using Card Fees, Dominates a Market

StarNewsOnline.com The small networks that operated automated teller machines, like STAR, Pulse, MAC and NYCE, issued debit cards that required a PIN.



A Look at US Debit Cards - Signature vs. PIN-based Debit


In the latest article in its Card Game series titled "How Visa, Using Card Fees, Dominates a Market", Andrew Martin writes for the New York Times about debit cards - and the differences in terms of acceptance economics for merchants between PIN-based and signature debit cards. The story includes a 7 minute video done in partnership with the PBS program Frontline.



Heartland breach shows why compliance is not enough


IDG The intrusion resulted in the "stark realization that passing a PCI security audit does not make a company secure," said Avivah Litan, an analyst with



The Bank Technology Hot List: Solutions That Sizzle


According to a cross section of bank tech executives, this could be the year that heretofore unproven solutions -- including mobile payments, cloud computing and social networking -- become essential components of banks' strategies.



Financial service center planning cyber attack simulation


SecureIDNews (press release) ... by the Financial Services Sharing and Analysis Center, testing the security functions of online payments processes is scheduled to take place Feb.

Best Buy Kicks Visa Contactless Out Of The Building

Within a few months of Best Buy threatening Visa that it will halt accepting its contactless card unless Visa changed its fees, the $35 billion 1,023-store chain made good on its threats and became Visa contactless-less.





Fees for debit, credit cards the focus of retailer frustration

Credit.com News Visa is also increasing fees on PIN debit card transactions. Though merchants complain about the fees, they are also seen as the cost of doing business.



Cyber Criminals Attack SMBs Using Online Banking Services

SPAMfighter News Avivah Litan, Banking Security Analyst at Gartner (a technology consulting company), states that criminals attack places where there is easy money,



FEATURED ARTICLE




How Visa, Using Card Fees, Dominates a Market

New York Times Monica Almeida



Every day, millions of Americans stand at store checkout counters and make a seemingly random decision: after swiping their debit card, they choose whether to punch in a code, or to sign their name. It is a pointless distinction to most consumers, since the price is the same either way. But behind the scenes, billions of dollars are at stake. When you sign a debit card receipt at a large retailer, the store pays your bank an average of 75 cents for every $100 spent, more than twice as much as when you punch in a four-digit code. The difference is so large that Costco will not allow you to sign for your debit purchase in its checkout lines. Wal-Mart and Home Depot steer customers to use a PIN, the debit card norm outside the United States.



Despite all this, signature debit cards dominate debit use in this country, accounting for 61 percent of all such transactions, even though PIN debit cards are less expensive and less vulnerable to fraud.



How this came to be is largely a result of a successful if controversial strategy hatched decades ago by Visa, the dominant payment network for credit and debit cards. It is an approach that has benefited Visa and the nation’s banks at the expense of merchants and, some argue, consumers. Competition, of course, usually forces prices lower. But for payment networks like Visa and MasterCard, competition in the card business is more about winning over banks that actually issue the cards than consumers who use them. Visa and MasterCard set the fees that merchants must pay the cardholder’s bank. And higher fees mean higher profits for banks, even if it means that merchants shift the cost to consumers. Seizing on this odd twist, Visa enticed banks to embrace signature debit — the higher-priced method of handling debit cards — and turned over the fees to banks as an incentive to issue more Visa cards. At least initially, MasterCard and other rivals promoted PIN debit instead.



As debit cards became the preferred plastic in American wallets, Visa has turned its attention to PIN debit too and increased its market share even more. And it has succeeded — not by lowering the fees that merchants pay, but often by pushing them up, making its bank customers happier. In an effort to catch up, MasterCard and other rivals eventually raised fees on debit cards too, sometimes higher than Visa, to try to woo bank customers back.



“What we witnessed was truly a perverse form of competition,” said Ronald Congemi, the former chief executive of Star Systems, one of the regional PIN-based networks that has struggled to compete with Visa. “They competed on the basis of raising prices. What other industry do you know that gets away with that?”



Visa has managed to dominate the debit landscape despite more than a decade of litigation and antitrust investigations into high fees and anticompetitive behavior, including a settlement in 2003 in which Visa paid $2 billion that some predicted would inject more competition into the debit industry. Yet today, Visa has a commanding lead in signature debit in the United States, with a 73 percent share. Its share of the domestic PIN debit market is smaller but growing, at 42 percent, making Visa the biggest PIN network, according to The Nilson Report, an industry newsletter.



The Risk of Refusing



Critics complain that Visa does not fight fair, and that it used its market power to force merchants to accept higher costs for debit cards. Merchants say they cannot refuse Visa cards because it would result in lower sales. “A dollar is no longer a dollar in this country,” said Mallory Duncan, senior vice president of the National Retail Federation, a trade association. “It’s a Visa dollar. It’s only worth 99 cents because they take a piece of every one.”



Visa officials say its critics are griping about debit products that have transformed the nation’s payment system, adding convenience for consumers and higher sales for merchants, while cutting the hassle and expense of dealing with cash and checks. In recent years, New York cabbies and McDonald’s restaurants are among those reporting higher sales as a result of accepting plastic. “At times we have a perspective problem,” said William M. Sheedy, Visa’s president for the Americas. “Debit has become so mainstream, some of the people who have benefited have lost sight of what their business model was, what their cost structure was.”



Visa officials said the costs of debit for merchants had not gone down because the cards now provided greater value than they did five or 10 years ago. The costs must not be too onerous, they say, because merchant acceptance has doubled in the last decade. The fees are “not a cost-based calculation, but a value-based calculation,” said Elizabeth Buse, Visa’s global head of product. As for Visa’s market share, company officials maintain that it is rather small when considered within the larger context of all payments, where, for now at least, cash remains king. While Visa may be among the best-known brands in the world, how it operates is a mystery to many consumers. Visa does not distribute credit or debit cards, nor does it provide credit so consumers can buy flat-screen televisions or a Starbucks latte. Those tasks are left to the banks, which owned Visa until it went public in 2008.



Instead, Visa provides an electronic network that acts like a tollbooth, processing the transaction between merchants and banks and collecting a fee that averages 5 or 6 cents every time. For the financial year ended in June, Visa handled 40 billion transactions. Banks that issue Visa cards also pay a separate licensing fee, based on payment volume. MasterCard, which is roughly half the size of Visa, uses a similar model. “It’s a penny here or there,” said Moshe Katri, an analyst who tracks the payments industry for Cowen and Company. “But when you have a billion transactions or more, it adds up.”



With debit transactions forecast to overtake cash purchases by 2012, the model has investors swooning: Visa’s stock traded at $88.14 on Monday, near a 52-week high, while shares of MasterCard, at $256.84 each, have soared by more than 450 percent since the company went public in 2006.



While there is little controversy about the fees that Visa collects, some merchants are infuriated by a separate, larger fee, called interchange, that Visa makes them pay each time a debit or credit card is swiped. The fees, roughly 1 to 3 percent of each purchase, are forwarded to the cardholder’s bank to cover costs and promote the issuance of more Visa cards. The banks have used interchange fees as a growing profit center and to pay for cardholder perks like rewards programs. Interchange revenue has increased to $45 billion today, from $20 billion in 2002, driven in part by the surge in debit card use.



Some merchants say there should be no interchange fees on debit purchases, because the money comes directly out of a checking account and does not include the risks and losses associated with credit cards. Regardless, merchants say they inevitably pass on that cost to consumers; the National Retail Federation says the interchange fees cost households an average of $427 in 2008.



While the cost per transaction may seem small, at Best Buy, the biggest stand-alone electronics chain, “these skyrocketing fees add up to hundreds of millions of dollars every year,” said Dee O’Malley, director of financial services. “Every additional dollar we are forced to pay credit card companies is another dollar we can’t use to hire employees, or pass along to our customers in the form of savings.”



Weighing Rules on Merchants



The Justice Department is investigating if rules imposed by payment networks, including Visa, on merchants regarding “various payment forms” are anticompetitive, a spokeswoman said. Several bills have been introduced in Congress seeking to give merchants more ability to negotiate interchange, which is largely unregulated. While interchange remains legal despite repeated challenges, a group of merchants is pursuing yet another class-action suit, this time in federal court in Brooklyn, against Visa and MasterCard that seeks to upend the system for setting fees. “Visa and MasterCard have morphed into a giant cookie jar for banks at the expense of consumers,” said Mitch Goldstone, a plaintiff in the case.



Fees were not an issue when debit cards first gained traction in the 1980s. The small networks that operated automated teller machines, like STAR, Pulse, MAC and NYCE, issued debit cards that required a PIN. MasterCard had its own PIN debit network, called Maestro.



Merchants were not charged a fee for accepting PIN debit cards, and sometimes they even got a small payment because it saved banks the cost of processing a paper check. That changed after Visa entered the debit market. In the 1990s, Visa promoted a debit card that let consumers access their checking account on the same network that processed its credit cards, which required a signature.



To persuade the banks to issue more of its debit cards, Visa charged merchants for these transactions and passed the money to the issuing banks. By 1999, Visa was setting fees of $1.35 on a $100 purchase, while Maestro and other regional PIN networks charged less than a dime, Federal Reserve data shows. Visa says the fee was justified because signature debit was so much more useful than PIN debit; at the time, roughly 15 percent of merchants had keypads for entering a PIN. Merchants said they had no choice but to continue taking the debit cards, despite the higher fees, because Visa’s rules required them to honor its debit cards if they chose to accept Visa’s credit cards.



A Seven-Year Battle



Wal-Mart, Circuit City, Sears and a number of major merchants eventually sued. After seven years of litigation, Visa and MasterCard agreed to end the “honor all cards” rule between credit and debit and to pay the retailers a settlement of around $3 billion, one of the largest in American corporate history. Visa paid $2 billion, and MasterCard the remainder.



Since then, only a handful of retailers have stopped accepting Visa debit cards, an indication that the crux of the lawsuit was “much ado about nothing,” Mr. Sheedy says.



And while some merchants said they thought the lawsuit would pave the way to a new era of competition, a curious thing happened instead: while Visa temporarily lowered its fees for signature debit, it raised the price on PIN debit transactions and passed the funds on to card-issuing banks, and its competitors soon followed.



The current class-action lawsuit joined by Mr. Goldstone contends that Visa’s PIN debit network, called Interlink, is offering banks higher fees as an incentive to issue debit cards that are exclusively routed over this network. Interlink, which has raised its PIN debit fees for small merchants to 90 cents for each $100 transaction, from 20 cents in 2002, is often the most expensive, especially for small merchants, Fed data shows.



One large retailer, who requested anonymity to preserve its relationship with Visa, provided data that showed Interlink’s share of PIN purchases rose to 47 percent in 2009, from 20 percent in 2002, even as its fees steadily increased ahead of most other networks — to 49 cents per $100 transaction in 2009, from 38 cents in 2006. Visa officials say its PIN debit network is taking off despite rising costs because it offers merchants, banks and consumers a level of efficiency and security that regional networks cannot match. “We are motivated as a company to try to drive value to each one of those participants so that they accept the card, issue more cards, use the card,” Mr. Sheedy said. At checkout counters, meanwhile, consumers are quietly tugged in one direction or the other.



Safeway, 7-Eleven and CVS drugstores automatically prompt consumers to do a less costly PIN debit transaction. The banks, however, still steer consumers toward the more expensive form of signature debit. Wells Fargo and Chase are among those that offer bonus points only on debit purchases completed with a signature.



Visa says it does not care how consumers use their debit card, as long as it is a Visa. But for now at least, the company says the only way to ensure that a purchase is routed over the Visa network is to sign.



“When you use your Visa card, you have a chance to win a trip to the Olympic Winter Games,” a new Visa commercial promises. The commercial does not explain the rules, but the fine print on Visa’s Web site does: nearly all Visa purchases are eligible — as long as the cardholder does not enter a PIN.















Contactless Smart Card with Built In OLED Display from Samsung

SecureIDNews ran a piece yesterday demonstrating the new Samsung contactless card technology, introduced at CES, with a built-in OLED display. I've included the video from Engadget...


Samsung presents animated OLED security card





At a pre-CES event in Las Vegas, Samsung previewed a new form of identification that uses a combination of contactless smart card technology and a new ultra-slim OLED display for security applications.





The card carries all information you would come to expect from a typical ID card. But the real fun is when you activate the embedded chip. This triggers a wafer-thin 2” OLED that is used to display a rotating image of the person for enhanced identification, with a QVGA 240 x 320 resolution screen with 260k colors and a 10,000:1 contrast ratio.





According to Samsung’s spokesperson, this product is finished and all ready to hit the market.



To read more click here.







Video Provided by Engadget



Ingenico Unveils Strategy to Provide Secure End-to-End Solutions for Merchants in North America

SOURCE: Ingenico

 
ATLANTA, GA--(Marketwire - January 7, 2010) - Ingenico, the leading provider of payment solutions and one of the founding members of Secure POS Vendor Alliance (SPVA), announced today its comprehensive strategy to provide secure end-to-end solutions to assist merchants in complying with the PCI Data Security Standards. The strategy addresses the entire payment transaction process including:



  • -- Data in flight -- an advanced technology enhancement at the point of card acceptance encrypts data in flight and is offered with no per terminal or per transaction fees.

  • -- Data at rest -- card and transaction-based tokenization provides unique data proxy to the point of sale eliminating the storage of sensitive card data and reducing the PCI footprint for merchants.

  • -- Architecture -- Ingenico's unique international PCI-DSS payment infrastructure offers security monitoring, estate management, and value added services to merchants and supports POS deployment from manufacturing to merchant operational environment.

For over 25 years, Ingenico has been known for providing superior secure solutions for merchants worldwide. Building on its solid base of innovative technology and security expertise, Ingenico has invested heavily to launch its security solutions strategy. The strategy has three core components:



Technology: Ingenico's On-Guard™ Card Acceptance encryption technology will be embedded within the entire line of new Ingenico payment devices deployed in North America as standard security functionality to provide secure data capture and transmission at the point of card acceptance. The company will offer this standard technology to all merchants without charging transaction fees.



People: With the same care that Ingenico has put into building its technical team, the company has assembled one of the most talented groups of security experts in the industry. The company's security know-how comes from people with real world, real transaction processing, real retail business and real security experience. Ingenico engaged security experts such as Jacques Stern, Ingenico's Chairman and world-renowned cryptographer; Christophe Dolique, Executive Vice President of Ingenico and Chairman of SPVA; and Deborah Dixson, the former Chief Information Security Officer for Best Buy Inc and now senior vice president of Security Solutions of Ingenico, North America to help craft and deliver secure solutions for retailers.



Partners: It is Ingenico's goal to help merchants find solutions that effectively reduce their PCI-Compliance footprint by providing a secure end-to-end transaction process. The company is forming strategic relationships with key implementation partners experienced in delivering security solutions to merchants to increase the likelihood of an on-time, on-budget deployment of custom security solutions.



"Today, there's no shortage of products in the marketplace that are targeted at specific elements of the security puzzle," said Christopher Justice, President of Ingenico, North America. "Merchants are telling us that they are struggling to sort through the promises and marketing hype to piece a set of disparate solutions together in the hopes that the outcome will provide a secure end-to-end process. They feel enormous pressure and responsibility to protect cardholder data as it finds its home in their databases. Our new security strategy will focus on delivering complete solutions meaning Ingenico will provide full support to its customers from initial environment security audits to on-field security and remote device management for key rotation and software upgrades Our core technology applications are created and tested by a global team of cryptology experts and will offer multiple layers of security including our On-Guard™ Card Acceptance and contactless encryption as a standard with no per transaction charges."



Major benefits that retailers can expect from Ingenico's end-to-end secure payment transaction solution:

  • -- Non-intrusive encryption option

  • -- Compliant with Visa's best practices

  • -- No per terminal or per transaction fees for encrypting/decrypting data in flight

  • -- Encryption algorithms offered as freeware, and available to all SPVA members

  • -- Flexible and customizable implementation options

  • -- Device management for key rotation and software upgrades

  • -- Reporting and security monitoring capabilities

  • -- Dedicated team to support customers in implementing and monitoring the solution

  • -- Payment network segmentation that reduces the PCI-Compliance footprint



"We are designing and will deliver solutions that merchants are looking for and need to keep their investments safe, their customers happy, and protect their brand from becoming a fraud casualty," said Deborah Dixson, Senior Vice President of Security Solutions, Ingenico, North America.



About Ingenico (ING) Ingenico (Euronext: FR0000125346 - ING) is a leading provider of payment solutions, with over 15 million terminals deployed in more than 125 countries. Its 2,850 employees worldwide support retailers, banks and service providers to optimize and secure their electronic payments solutions, develop their offer of services and increase their point of sales revenue. Ingenico generated pro-forma revenue of USD1.2 billion in 2008. Ingenico is ISO-9001 certified. More information on www.ingenico.com.



Global Payments Reports Second Quarter Earnings

ATLANTA, /PRNewswire-FirstCall/ -- Global Payments Inc. (NYSE: GPN) today announced results for its fiscal second quarter ended November 30, 2009. For the second quarter, revenues grew 12% to $409.0 million compared to $365.9 million in the prior year. Diluted earnings per share from continuing operations grew 25% to $0.71 compared to $0.57 in the prior year.



Chairman and CEO, Paul R. Garcia, stated, "Despite challenging macroeconomic conditions, we reported solid financial performance this quarter, driven by strong growth in our U.S. ISO channel and continued successful execution in our International businesses.



"Based on our current outlook for continuing operations, we expect fiscal 2010 annual revenue of $1,580 million to $1,615 million, or 8% to 10% growth over fiscal 2009, and we are increasing our fiscal 2010 diluted EPS expectations to $2.35 to $2.46, reflecting 12% to 17% growth over fiscal 2009 EPS," said Garcia.



As a result of the company's recently announced divestiture of its Money Transfer business, the company has classified and reported Money Transfer as discontinued operations in its financial statements.





Conference Call



Global Payments will hold a conference call today, January 7, 2010 at 4:30 p.m. EST to discuss financial results and business highlights. Callers may access the conference call via the company's Web site at www.globalpaymentsinc.com by clicking the "Webcast" button; or callers in North America may dial 1-888-204-4317 and callers outside North America may dial 1-913-312-0963. The pass code is "GPN." A replay of the call may be accessed through the Global Payments' Web site through January 21, 2010.



Global Payments Inc. (NYSE: GPN) is a leading provider of electronic transaction processing services for merchants, Independent Sales Organizations (ISOs), financial institutions, government agencies and multi-national corporations located throughout the United States, Canada, Latin America, Europe, and the Asia-Pacific region. Global Payments offers a comprehensive line of processing solutions for credit and debit cards, business-to-business purchasing cards, gift cards, electronic check conversion and check guarantee, verification and recovery including electronic check services, as well as terminal management. For more information about the company and its services, visit www.globalpaymentsinc.com.



Editor's Note:  To see their numbers, posted at the end of their press release, click here



Heartland Agrees on $60 Million Settlement with Visa...MasterCard Next?



Related Settlement Announcements:

Heartland Payment Systems Agrees to Settle Cardholder Class Actions for up to $4.76 Million

Heartland Pays Amex $3.6 Million Over 2008 Data Breach

Heartland Payment Systems Agrees on Settlement to Provide Visa Issuers up to $60M for Data Security Breach Claims



PRINCETON, N.J. & SAN FRANCISCO--(BUSINESS WIRE)--Heartland Payment Systems® (NYSE: HPY), one of the nation's largest payments processors, and Visa Inc. (NYSE: V) today announced a settlement agreement under which issuers of Visa-branded credit and debit cards will have an opportunity to obtain a recovery from Heartland with respect to losses they may have incurred from the 2008 criminal breach of Heartland's payment system environment. Heartland will pay up to $60 million to fund the settlement program, which is subject to certain conditions, including a specified level of participation by U.S. Visa issuers. Visa will present details of the settlement to eligible issuers in the coming days.



"We believe issuers will benefit by participating in this settlement program because it offers an immediate recovery with respect to losses they may have incurred from the Heartland intrusion,” said Ellen Richey, chief enterprise risk officer, Visa Inc. “Helping financial institutions mitigate costs after a data security breach has been a long-standing component of Visa’s security strategy, along with promoting new security technologies, preventing fraud and leading efforts to secure sensitive data across the entire payment system.”



Bob Carr, Heartland’s chairman and chief executive officer, stated, “We are pleased to have reached a fair settlement agreement that helps issuers obtain a recovery with respect to losses they may have incurred from the intrusion. At Heartland, we are also committed to helping issuers – as well as all stakeholders in the payment ecosystem – mitigate future risk. We have assumed a leadership position in the development of enhanced data security and fostering the sharing of information.”



The Visa/Heartland settlement agreement is contingent upon acceptance by financial institutions representing 80 percent of the eligible issuers’ U.S. accounts that Visa considered to have been placed at risk of compromise during the Heartland intrusion. The settlement also includes mutual releases between Heartland and its sponsoring bank acquirers, on the one hand, and Visa on the other. Heartland will fund up to $59.22 million of the amounts to be made available to Visa and its issuers under the settlement program. Additionally, Visa will credit the full amount of intrusion-related fines it previously imposed and collected from Heartland's sponsoring bank acquirers towards the $60 million maximum funding of the program. The settlement amount represents a significant recovery to Visa issuers for losses they may have suffered from the Heartland data security breach.



All U.S. card issuers who participate in the program will be eligible to receive a portion of the specified recovery. The settlement also includes recovery for international issuers of accounts Visa considered to have been placed at risk of compromise.



Participation in the settlement program supplants any other recoveries that may be available to issuers through Visa and requires accepting issuers to release Heartland, its sponsoring bank acquirers and Visa from any legal and financial liability related to the Heartland intrusion.



Visa will be notifying eligible issuers in the coming days with details about the program and how to participate, and Visa will send eligible issuers their formal offers to participate in the program on January 14, 2010. To facilitate payment, eligible issuers will have until 5:00 pm PT on January 29, 2010 to opt-in to the program before the offer expires.



About Visa Inc.: Visa is a global payments technology company that connects consumers, businesses, financial institutions and governments in more than 200 countries and territories to fast, secure and reliable digital currency. Underpinning digital currency is one of the world’s most advanced processing networks – VisaNet – that is capable of handling more than 10,000 transactions a second, with fraud protection for consumers and guaranteed payment for merchants. Visa is not a bank, and does not issue cards, extend credit or set rates and fees for consumers. Visa’s innovations, however, enable its financial institution customers to offer consumers more choices: Pay now with debit, ahead of time with prepaid or later with credit products. For more information, visit www.corporate.visa.com.



About Heartland Payment Systems: Heartland Payment Systems, Inc. (NYSE: HPY), the 5th largest payments processor in the United States, delivers credit/debit/prepaid card processing, payroll, check management and payments solutions to more than 250,000 business locations nationwide. Heartland is the founding supporter of The Merchant Bill of Rights, a public advocacy initiative that educates merchants about fair credit and debit card processing practices. For more information, please visit HeartlandPaymentSystems.com, MerchantBillOfRights.com, CostOfABurger.com and E3secure.com.

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