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July 28, 2011

Region round-up

Koreas largest lender, Kookmin Bank, plans to spin off its credit card unit after setting up a holding company as part of efforts to beef up its non-banking business..

By Verdict Staff

• Korea’s largest lender, Kookmin Bank, plans to spin off its credit card unit after setting up a holding company as part of efforts to beef up its non-banking business.. • Vodafone Italy and financial services provider Citi have renewed their existing partnership with the introduction of the Citi Vodafone One Visa credit card… • Rwanda Commercial Bank has announced that it will be installing 100 ATMs throughout the country.. • Brazil’s Unik plans to launch a credit card targeted at people receiving pensions from the Brazilian government’s INSS (National Institute of Social Security)…

ASIA-PACIFIC

 
China Merchants Bank, China’s largest credit card issuer, said that its 2007 net profit has increased by 124.36 percent from the previous year due to increased interest income. In 2006, its profit increased by 81 percent over the previous year. About 83 percent of its 2007 revenue came from interest income, which has increased by 57.62 percent year-on-year. The stellar financial results have seen its shares gaining 3.83 percent despite news that the central bank raised the reserve requirement ratio to a record high of 15.5 percent in March.
China UnionPay and the French Tourism Office have signed an agreement that will allow Chinese tourists to France to pay with their China UnionPay credit cards in large shopping centres and duty free shops in tourist spots. China UnionPay started offering its card services and allowing cardholders to withdraw Euros from 20,000 ATMs in France in April 2006.
Guangdong Development Bank’s credit card customers will be able to pay their bills in 2,000 convenience stores across Shanghai. The bank will now have nearly 3,000 payment points in the city.
Industrial and Commercial Bank of China (ICBC) has launched China’s first fleet card, the Peony-PetroChina Fleet Card that targets companies and government institutions.
• The Monopolies and Restrictive Trade Practices Commission has issued a notice to India’s ICICI Bank and its insurance arm ICICI Lombard for imposing “unfair and unjust” conditions on insurance cover for its credit card customers. Customers were reportedly denied insurance claims on the grounds that the cards were not used two times within 90 days from the day of accident. Although ICICI denied receiving the notice the Commission said that terms and conditions were not conveyed to customers while issuing the card and were only mentioned in the welcome kit.
• Korea’s local press has reported that 40 million IC chips will be in demand by credit card companies due to the plans by the local regulator to replace all cards with IC-installed ones by 2008. KB Card and BC Card plan to issue 10 million each while Shinhan Cards plans to issue 6 million in 2008. Woori Card and Lotte Card are looking at 3 million and 2.8 million cards respectively while Samsung Card and Hyundai Card intend to issue around 2.5 million cards. Around 30 percent to 70 percent of cards have been replaced by the credit card companies. Companies that do not meet the deadline will receive penalties.
Barclays Bank has rolled out its Hello Money service for mobile banking transactions in India. Account holders will be able to pay credit card and utility bills. The bank began operations in India in 2007 and now has 100,000 deposit/loan customers and 500,000 credit card customers.
• India’s Tata Group is considering the introduction of a common credit card and loyalty scheme for its subsidiary companies. The proposed card will be launched by Tata Capital and all group companies have been asked to participate.
• The Indonesian authorities are still investigating a card counterfeiting scheme that is estimated to have cost $3 billion in losses. A police spokesperson said that investigations are under way and that the figure could increase. The scheme was uncovered during a drug and gambling raid in Jakarta, the nation’s capital.
• In Japan, Sagawa Express, a delivery company, will offer to verify the identities of credit card recipients in person starting 21 April. For an additional $2 on top of the regular delivery charge, Sagawa’s delivery will personally verify the identity of the card recipient by showing a driver’s licence, passport, passbook or registration certificate for foreigners.
• The South Korean government has unveiled plans for a debt bailout scheme for individuals. The government will help around 290,000 credit delinquents to pay back their debts by allowing them to retrieve their deposits in the national pension fund ahead of schedule. There were 1.42 million credit delinquents at the end of 2007. The plan is meant to stimulate economic growth. In 2004, about 1 million credit delinquents were bailed out after the credit crisis but credit problems have since grown again.
• Korea’s largest lender, Kookmin Bank, plans to spin off its credit card unit after setting up a holding company as part of efforts to beef up its non-banking business. The holding company is tentatively named KB Financial Holding and will be set up in September, and the credit card business will be spun off within a year. If its application is successful, Kookmin will be the country’s fifth holding company with eight subsidiaries such as banking and securities.
• Korean issuer Lotte Card has jointly developed with Lotte Data Communications company an integrated dongle (a gadget that authenticates a piece of software) for its IC chip card to be deployed in retail outlets such as Lotte Department Stores and Lotte Mart. The service will allow Lotte’s 19 retail affiliates to share their customer information with each other and provide a customised service such as offering a discount coupon on the customer’s birthday. The company plans to roll out other chip-based services.
Citibank Singapore’s credit card customers can no longer pay with their fingerprints as PayByTouch, the bank’s development partner, filed for US Chapter 11 bankruptcy protection. The One-Touch biometric service was launched in November 2006.
• After the decline in bankruptcy petitions in Singapore in the last four years, the delinquency rate is rising again. In January 2008, there were 292 petitions for bankruptcy and 215 bankruptcy orders passed. Last year, 268 petitions were filed and 230 orders passed on average each month. In December 2007, the delinquency rate for credit cards was 1.42 percent. In July 2007, the rate was 1.16 percent. The majority of credit delinquents are between 21 and 44 years old and 70 percent are men. Around 80 percent have credit cards with at least two banks.
• Thailand’s opposition Democrat Party will submit three draft laws that call for legalised debts, credit information and credit cards. Currently there are no laws protecting credit card customers, claimed the party’s spokesperson. The draft laws seek the establishment of an independent organisation which will oversee the debts of cardholders and allow them to complain if issuers use illegal measures to demand debt payment. There would also be a limit on the number of cards held by each cardholder. The number of credit cards in use increased by 995,763 as of end of January, according to the central bank.

EUROPE, MIDDLE EAST, AFRICA

• UK payments association APACS has announced the formation of the Payment Industry and Police Joint Intelligence Unit (PIPJIU), the result of the amalgamation of the banking industry’s Fraud Intelligence Bureau – the body that previously circulated information between the banking industry and law enforcement within the UK – and the intelligence section of the Dedicated Cheque and Plastic Crime Unit. The PIPJIU will be staffed by fraud specialists from the banking industry working alongside officers from the City of London and Metropolitan Police. There was a 25 percent rise in the fraudulent use of UK credit and debit cards last year, according to APACS. APACS has also unveiled a new Fraud Intelligence Sharing System that will enable the banking industry to share information on all confirmed, attempted and suspected fraud in a central, shared database.

• Payments processor First Data Middle East has unveiled the new MasterCard offering from Pakistan’s largest credit card issuer Bank Alfalah, on the company’s VisionPlus processing platform. The bank’s existing card and merchant portfolio will soon be migrated to the First Data platform.
• Vodafone Italy and financial services provider Citi have renewed their existing partnership with the introduction of the Citi Vodafone One Visa credit card, exclusively dedicated to subscribers of the Vodafone One rewards programme. The card comes free of charge and offers consumers one Vodafone One point for each €20 ($31) spent. Upon activation of the card, the cardholder receives 100 points as a welcome bonus. Cardholders can request the activation of Citi Alerting Service, which sends an SMS notification of all transactions, the month-end balance and a warning when the credit line limit is about to be reached. The Citi Vodafone One Visa also offers several free insurance coverages.
Barclaycard has partnered with payment services vendor Card Commerce to launch a service for UK retailers looking to offer prepaid gift cards to customers. Offered by Barclaycard Business, the gift card service will enable retailers to offer own-branded gift, savings club and refund cards to customers in a more cost-effective and convenient way. The new scheme will allow retailers access to real-time online management information, enabling them to track transaction details and monitor outstanding card balances. The prepaid technology can be integrated into its existing payment terminals, with no additional equipment required. “The set-up is very quick and easy and retailers are attracted to the all-in-one solution whereby they only have to deal with one supplier. Barclaycard Business will be working with Card Commerce and its business customers in order to take a lead role in this market and we anticipate significant retailer demand for this product,” said Bill Thomson, managing director of Barclaycard Business.
• Société Générale’s Romanian offshoot BRD Finance has teamed up with Renault Romania and Raiffeisenbank subsidiary RCI to launch a MasterCard-branded credit card for Renault vehicle owners. The new financial product is both a credit card and a discount, benefit and loyalty tool. Issued free of charge, the card comes with a 2.2 percent monthly interest rate and a maximum overdraft of RON15,000 ($6,450). Cardholders will also benefit from car part and/or service price discounts in the Renault network and loyalty points according to the amount spent and place of purchase.
• Payments processor FreeStar Technology has launched its POS terminal-based dynamic currency conversion solution with Monex FS throughout Europe. The two companies are planning to target the airline industry, hospitality sector and car rental industry, such as established industry leaders Hertz and Budget Car Rental. “This is a superb milestone for FreeStar as it allows the company to widen our pan European footprint as part of our overall global strategy. The significant investment by FreeStar in the new service over the last 12 months has come to fruition and will lead to potentially significant revenue growth for the Company in the foreseeable future,” said Paul Egan, CEO of FreeStar.
• At its seventh annual Debit Conference, MasterCard Europe revealed the emergence of a series of important cross-border purchasing trends in Europe coinciding with the official launch of SEPA, including a 24 percent rise in Maestro debit card usage for cross-border payments over the last 12 months. Furthermore, growth at traditional debit card usage locations such as petrol stations is being joined by other categories including supermarkets and clothing, up 28 and 30 percent year-on-year in 2007, respectively. “One trend we are noticing is a growth in the use of debit cards in neighbouring countries. For example, Maestro spend by German consumers in major population centres along the country’s borders including Belgium, Austria, the Netherlands and Poland, is increasing rapidly,” said Eric Tomlinson, senior vice-president, MasterCard Europe Debit.
Rwanda Commercial Bank has announced that it will be installing 100 ATMs throughout the country. Currently there are fewer than 17 ATMs in the entire country, which are said to be under-utilised because of their unreliability. Banks in Rwanda have always blamed Simtel, a consortium formed by the banks and government to provide electronic banking transactions, for failing to provide an adequate service. The government is aiming to modernise the national payment system and set up a national payment council, according to François Kanimba, chairman of Simtel and governor of the National Bank of Rwanda.
• Following the contentious decision to withdraw thousands of Egg credit cards from customers that were labelled ‘risky’, the head of consumer business at Citigroup UK has quit. Ian Kerr, who has headed Egg since November 2006, will be replaced by Bert Pijls, country manager for Citigroup in the Czech Republic. Kerr joined Citi when it bought Egg last year, and was given responsibility for Citi’s consumer business in the UK. with the goal of transforming it into a sizeable player. “We are building a business that will have the products and services to ensure that we are first choice for consumers as they look to meet their financial needs,” said Pijls.
The Office of Fair Trading, the UK consumer watchdog, has announced plans to launch a credit card comparison website to help consumers better understand potentially confusing credit card terminology, charges and products. This follows a statement from the Office of Fair Trading that credit card companies must stop using complicated jargon in small print, and must provide clearer terms and conditions on marketing materials and statements. “It is essential that consumers are given the right tools to make comparisons between credit cards more easily, and we can achieve this through some of the recommendations announced today which have received widespread support,” said an industry official.

LATIN AMERICA

• Five multinational banks – Citibank (including Banamex), BBVA, Santander, Scotiabank and HSBC – are jointly responsible for 70 percent of all Latin American and Caribbean (LAC) ATM transactions, Ricardo Saenz, technology company NCR’s marketing and deployment manager, LAC financial systems division, tells CI. The total installed base of ATMs from all vendors in LAC is 224,369. Saenz says this figure will rise by 6 percent to 237,000 by the end of 2008. Brazil and Mexico respectively account for 63.8 percent and 12 percent of total LAC ATMs, he says.

• Chilean banks’ fee income rose by 4.3 percent in 2007, Fitch Ratings says. This represented a lower growth rate than in 2005 or 2006, due to tough pricing competition and reduced ability to cross-sell in highly penetrated banking markets. But Chilean banks increased their sales of fee-intensive products such as credit and debit cards in 2007, according to Fitch.
• Latin America has seen a 400 percent growth in MasterCard-branded EMV chip cards and an almost 100 percent rise in POS acceptance of EMV over the last two years. The growth is due to the significant number of MasterCard member banks which have begun issuing EMV cards in countries such as Brazil and Mexico, MasterCard says. “Banks in other countries such as Colombia, Venezuela, Costa Rica, Ecuador, Panama and the Caribbean are in various stages of chip technology migration,” it says. The trend to use EMV chips for additional applications such as contactless payments and secure card-not-present authentication is growing in importance in LAC, MasterCard adds.
Aconite, a UK chip card software firm, has teamed up with Brazilian card processing software vendor Gênia Tecnologia. The two firms will market Aconite’s FastTrack EMV software and Smart PrePaid card system to Brazilian issuers. FastTrack enables issuers to process EMV card transactions and to control their cardholders’ credit risk via real-time, post-issuance scripting. Smart PrePaid enables banks to issue low-value contactless EMV prepaid cards for applications such as transit. In December 2007, Aconite signed an agreement with Mexican card management systems firm Tecnica Comercial Vilsa to market EMV software to Mexican issuers.
American Express Mexico has launched a facility on its tax payment website (www.americanexpress.com.mx/impuestos) which enables cardholders living in Mexico City to pay their Predial (property) taxes using their Amex card. Amex is offering cardholders the option to pay their property taxes in six monthly instalments interest-free. After paying, cardholders can print out Mexican government-issued receipts. The site also offers the facility to pay car licences in the states of Nuevo León, Puebla and Mexico state as well as in Mexico City.
• On 13 March 2008, Citigroup sold 40.7 million shares in Redecard for BRL1.06 billion ($618.6 billion) as part of a secondary share offer in the Brazilian MasterCard processor (CI 394, Region round-up). Redecard held an IPO in July 2007 (CI 384, Region round-up). Citi has the option of selling an additional 6.13 million shares in Redecard. Following the share offer, including the sale of the extra shares, Citi’s stake in Redecard will fall from 24 percent to 17 percent. Brazil’s Itaú and Unibanco both hold 23.2 percent stakes in Redecard.
• Brazil’s CSU CardSystem returned to profit in the fourth quarter of 2007, with a net income of BRL 400,000 ($233,440). Its EBITDA (earnings before interest, tax, depreciation and amortisation) rose by 121 percent year-on-year to BRL11.3 million in the fourth quarter of 2007. CSU provides outsourced credit card issuing and management services (CI 396, Region round-up). Gross revenues rose by 5.8 percent year-on-year to BRL86.2 million in the fourth quarter. CSU’s average card base grew by 35.5 percent between the fourth quarter of 2006 and the same period in 2007.
• HSBC’s Mexican subsidiary Grupo Financiero HSBC says its credit card lending rose by 85.1 percent year-on-year to MXN27.3 billion ($2.53 billion) in the 12 months to 31 December 2007. In 2007, HSBC installed 304 new ATMs in Mexico. HSBC Mexico’s credit card base rose to 619,000 cards in 2007, which drove the bank’s share of the Mexican credit card market up by 3.5 percent compared to 2006. Loan impairment charges reached MXN9.5 billion in 2007, partly driven by higher impairment charges on credit cards.
• Brazil’s Unik plans to launch a credit card targeted at people receiving pensions from the Brazilian government’s INSS (National Institute of Social Security). The firm provides financial services to unbanked and underbanked consumers in Brazil. Its pensioner credit card will offer loans of up twice the cardholder’s income, with their INSS benefit being used to make repayments. Unik will issue the card in partnership with an unnamed Brazilian bank, and expects to sign up 500,000 cardholders. It currently has around 700,000 cardholders in total, including payroll cards. In November 2007, the Inter-American Investment Corp. approved an equity investment of up to BRL2 million ($1.16 million) and a convertible loan of up to BRL3 million in Unik.
• In the first quarter to 31 January 2008, Canada’s Scotiabank saw a 30 percent growth year-on-year in credit card lending in its international banking division. The unit includes operations in Mexico, Guatemala, the Dominican Republic, Chile, Peru and Jamaica.
• Scotiabank’s Mexican subsidiary Grupo Scotiabank says its credit card lending rose by MXN1 billion ($93 million), or 23 percent, year-on-year in the 12 months to 31 December 2007. The bank was forced to increase its loan loss provisions in 2007 compared to 2006 due to higher delinquencies in credit cards and mortgages. Scotiabank’s performing loan portfolio of credit card and other unsecured lending rose to MXN19.37 billion in 2007 from MXN189.36 billion in 2006. Credit card commissions totalled MXN741.9 million in full-year 2007 compared to MXN639.2 million in 2006.
VisaNet Brasil is planning an IPO in the first half of 2008, Reuters says. The acquirer is controlled by Visa Inc., Bradesco, Banco do Brasil and ABN AMRO’s Brazilian unit. The IPO will take place shortly after Visa Inc.’s IPO (CI 391 p1), Aldo Mendes, Banco do Brasil’s CFO, told Reuters. Visa Inc. raised $17.9 billion in New York on 18 March 2008.
Visa Brazil has launched the Visa CTA Hotel credit card, which enables large companies to manage their employees’ hotel spending. The card provides automatic reconciliation between transactions and management accounting systems. All transaction information including tax charges is automatically entered into the corporation’s accounting systems, Visa says.

NORTH AMERICA

• The Federal Deposit Insurance Corporation (FDIC) says in its Quarterly Banking Report that credit card charge-offs by FDIC-insured institutions rose by $1 billion (33 percent) year-on-year in the fourth quarter of 2007. Non-current credit card loans – those that are 90 days past due – rose by $1.9 billion (26 percent) year-on-year in the fourth quarter.

• Canadians are increasingly paying their bills on time, according to data from Equifax Canada. A strong economy and low unemployment have enabled more consumers to make their payments on time, despite rising personal debt levels, says the credit rating agency. The average national delinquency rate declined by 21 percent between June 2005 and December 2007, says Equifax, with improvements coming largely from increased payments on credit cards, term loans, and personal lines of credit.
• The Bank of Canada has launched an anti-fraud training kit for retailers called Fighting Fraud on the Front Lines. The kit was developed in collaboration with the Royal Canadian Mounted Police, payment card schemes, Canada Post, and other law-enforcement agencies and industry associations. It provides retailers with advice on protecting themselves against four types of payment fraud; counterfeit bank notes; payment card crime; cheque and money order fraud; and ID theft.
Barclaycard US has named Scott Young as general manager, partnerships. Young joins Barclaycard from GE Consumer Finance, where he was president and chief executive officer of personal finance. Barclaycard says the growth of its US credit card business has been fuelled by its co-branded and partnership programmes. Tom Karinshak has also joined the executive committee of Barclaycard US as managing director of customer care and bank operations. He was previously senior vice president of customer management as AOL Time Warner.
Chase Card Services has acquired patient financing company Unicorn Financial Services. The combined company has launched its expanded set of products as ChaseHealthAdvance Financing Options. Chase says it wants to apply to healthcare the knowledge it has acquired from consumer credit cards. As well as providing for medical expenses, ChaseHealthAdvance will target elective procedures ranging from dental, vision correction and cosmetic procedures to veterinary care.
• Chase is expanding its ATM network in the New York region via a multi-year branding agreement with non-bank ATM operator Cardtronics. The agreement will see 107 Cardtronics ATMs at branches of Hess Express convenience stores branded with the Chase logo. The deal increases the number of Chase’s ATMs in the states of New York, Connecticut and New Jersey to 2,450 and its national total to 9,300. Chase customers do not pay a fee to get cash or to check balances at its ATMs.
• Thirty-two Cardtronics ATMs in Walgreens stores in the Hampton Roads area of Virginia are being branded by Old Point National Bank. The ATM operator says the bank’s brand will be prominently displayed on ATM signage and transaction screens and the bank’s customers will be able to use the ATMs surcharge-free. Cardtronics’ ATM branding programmes allow banks to expand their ATM footprint without incurring the cost of purchasing, installing and operating the ATM network, the firm says.
• US card transaction processor Heartland Payment Systems is entering the Canadian market via the acquisition of a majority stake in merchant services provider CollectivePOS. Based in Woodbridge, Ontario, CollectivePOS has 5,000 customers in Canada and processes US$1 billion transactions annually. Heartland says the deal will allow it to expand in Canada and to serve merchants which have locations in both the US and Canada.
HSBC, followed respectively by Bank of America/MBNA and Washington Mutual/Providian, tops the list of the US banks with the highest incidents of ID theft. Chris Hoofnagle of the University of California’s Berkeley Centre for Law and Technology compiled a list of top US banks for estimated annual incidents of ID theft per billion in deposits. The list was based on complaint data submitted by victims to the US Federal Trade Commission in 2006 and obtained under the Freedom of Information Act.
Union Bank of California, which operates in California, Washington State and Oregon, is to replace all its 1 million MasterCard debit cards with MasterCard PayPass-enabled debit cards. Adding PayPass functionality to magnetic-stripe debit cards will help differentiate Union Bank of California cards from competitors and make them the preferred card in customer wallets, MasterCard says. The rollout was due to begin 17 March with the issue of 100,000 debit cards in Los Angeles.
Monitise Americas, a US mobile banking and payments service provider, has named Jeff McLaughlin as Executive Vice President of Mobile Strategy. He will focus on expanding m-banking adoption in Canada, Mexico and the US. Monitise Americas is a joint venture between Metavante and Monitise UK (CI 394, Region round-up).
RBC Royal Bank has launched Canada’s first Visa Infinite card for private banking clients. Benefits offered by the invitation-only card include personalised servicing, customised rewards, travel assistance, concierge service, airport lounge access, premium insurance, and access to exclusive events and experiences. RBC is also launching a Visa Infinite edition of its Platinum Avion Visa card. The Avion Visa Infinite card offers enhanced travel rewards to cardholders.
• Canadian bank TD Canada Trust has launched the TD First Class Travel Visa Infinite Card. It says the card allows cardholders to redeem their reward points by booking travel any way they want. There is no requirement to book through a travel rewards programme provider with limitations on points tiers or seat availability, TD says.
• Foreign exchange provider Travelex has teamed up with MasterCard and West Suburban Bank to launch a prepaid foreign currency card aimed at US customers travelling to Europe. The company says its Cash Passport is the first prepaid foreign currency card to be available in North America. The card is available in euros and UK sterling, with the exchange rate locked in at the time the card is loaded.
• Global payments processor First Data has signed a multi-year contract extension with Wells Fargo to provide debit processing services to Wells Fargo for its 19.6 million debit cards. It also provides the bank with consumer credit and small business card processing services, statement production and mailing, plastic card personalisation and fraud detection services.

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