All articles by Verdict Staff
Verdict Staff
UK prepaid usage raises new questions
How often have we heard in the prepaid industry the question when will someone do some real market research on prepaid cards? Well, Cards International listened, and working in partnership with the British Market Research Bureau (BMRB), commissioned the first major piece of prepaid card market research in the UK, interviewing 3,000 people between 24 July and 10 August 2008 using an internet Omnibus survey tool.
Debit – a bittersweet dilemma for banks
As credit cards become more expensive for consumers and as credit losses continue to mount for the banks that issue them debit card issuers are reaping the benefits of increased usage. If there is one bright spot to be found in the economic woes engulfing payment card players at the moment, it is that debit card usage is continuing to climb in all global markets as consumers rein in credit spending.
News Briefs
Al Salam Bank of Bahrain has selected Arab Financial Services (AFS) for its credit card processing services..
Israeli technology attracts interest
Despite its relatively small population size, Israels card market is one of the most innovative in the world, thanks to highly advanced technological development in the fields of analytics and smart cards. Joel Bainerman reports on the companies at the forefront of the development. The Israel Defence Force (IDF) not only keeps Israeli citizens safe against terrorist attacks and invasion by surrounding countries, it is also a benefit to major international corporations seeking leading-edge technologies, particularly in the card industry. Many Israeli entrepreneurs who come out of the elite units of the IDF leave with extensive expertise in internet technology, data security and software development three key features in designing new technologies for the international card industry. Israels security industry has pioneered entirely new areas of the international data security industry, with firms such as CheckPoint Software. Now, Israeli innovators are doing the same for the global card industry. Take Fraud Sciences, for example. Earlier this year the US financial services company PayPal paid $170 million in cash for the tiny Israeli start-up whose specialised technology was designed to differentiate between real and fraudulent transactions. That technology will be folded into PayPals anti-fraud systems.
Absa acquires stake in Woolworths
South Africas Absa has acquired a 50 percent plus one share stake in Woolworths Financial Services (WFS) as it looks to establish a consumer finance house approach to consumer banking. The bank, of which Barclays UK holds a 56 percent stake, will pay around ZAR875 million ($109.5 million) if the deal receives regulatory approval. It is also subject to a restructure of WFS to include all existing financial service products at Woolworths, a major food and clothing retailer.The deal gives Absa the ability to distribute cards at the point of purchase and increase its share of the consumer finance market. It should be able to generate extra revenue in the business by better using information on spending habits and upselling store card customers on to credit cards. It will also benefit from Barclays experience of the joint venture model in the UK.As of December 2007, Woolworths had financial services assets of ZAR5.559 billion. The WFS business, which has a credit account base of 1.6 million customers, includes store cards, personal loans and Visa credit cards, as well as insurance products. Absa already has plans to launch new financial products through Woolworths, including a premium Barclaycard offering, which it has a licence agreement to issue through its parent company, Barclays. Absa will provide the business with specialist financial services in an attempt to speed up growth and consider new funding arrangements. Its capabilities in funding, leading credit risk and customer value management, as well as its expertise in enhancing, were a factor in Woolworths decision to sell the financial services unit. The deal is expected to be completed in the third quarter of 2008.
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Barclaycard bounces back
A strategy for growth including strong monitoring and continued innovation has seen Barclaycard continue to expand its operations abroad and in the UK. Truong Mellor reports on the companys resilience amid ongoing difficult credit conditions.
Visa Europe hit with EC antitrust investigation
The European Commission has launched an investigation into Visa Europes interchange fees three months after it ruled MasterCards cross-border fee was illegal. The EC, headed by commissioner Neelie Kroes, said it would investigate Visa Europes cross-border multilateral interchange fees (MIF) as well as its Honour-All-Cards-Rule. The decision to investigate Visa Europes MIF, a charge paid by a retailer to a consumers bank when a card payment is made, comes after the expiry at the turn of the year of an exemption agreement between the card association and the Commission, dating back to 2002. The EC allowed Visa to continue to administer interchange fees at a reduced rate, in exchange for immunity from prosecution. The Commission ruled in December 2007 that MasterCards cross-border MIF was illegal and gave it six months to withdraw the charge. MasterCard has since appealed. Given that turn of events, the Commissions decision to launch an investigation into Visa Europes similar, though lower, fee structure was a widely anticipated move. Hugh Stokes, Visas senior legal advisor, told CI: The Commission has had a focus on interchange for a long time. This was not a surprise it was something it was always going to do.
Prepaid industry ‘smaller than anticipated’ – Fed
Prepaid card spending in the US is lower than many experts had predicted, according to research from the countrys central bank, the Federal Reserve. In its Electronic Payments Study, the Fed said the total number of prepaid transactions in the country for 2006 was around 3.4 billion, with a value of $49.9 billion.
EMV moves towards multi-applications
As EMV compliance and the functionality applications for payment cards are being pushed forward, there remain numerous challenges for the cards industry regarding the security of the technology. Truong Mellor investigates the progress being made. The primary business case for the introduction of EMV-compliant cards was the increased security factor that they were to offer. In markets such as France and the UK, which have traditionally seen high levels of card fraud, this was a huge factor in driving migration towards EMV standards. However, there are a whole range of other potential applications that could be employed with chip and PIN cards. Because the chip can support several different functions on the same card, banks can potentially join forces with business partners such as retailers and transport operators to include loyalty programmes or identification applications on the cards. While the migration towards chip cards began as long as ten years ago in some European countries, it has taken a fair amount of time to gather any serious momentum across the board. According to Visa Europe, 53 percent of its cards issued are now chip and PIN, and this figure looks set to increase over the next few years with the onset of SEPA requirements. The company has been one of the key movers behind the shift towards EMV compliance in Europe, and was unique in putting in place an incentive programme to facilitate this migration process. On the POS terminal side, the percentage we measure is the volume we get from devices that are EMV-compliant, Pekka Mattila, head of chip integration at Visa Europe, told CI. We compare the acceptance infrastructure, and on purchases in Europe it is around 57 percent. We also do this for the ATM side, which is currently around 83 percent.
GE deals signify new business strategy
GE Money has been at the centre of two recent major deals within the cards and consumer finance space, indicating a realignment of business interests and future areas of expansion for all involved. Truong Mellor reports on the implications. GE Money, the consumer finance arm of US-based conglomerate General Electric (GE) has agreed to sell Corporate Payment Services (CPS), its commercial card and corporate purchasing business unit, to American Express for $1.1 billion in cash. The sale also includes the purchase of GEs patented and renowned vPayment technology, which provides fast and efficient payment for large ticket purchases. This platform allows for fraud control over the processing of large transactions with the provision of unique account numbers for each transaction that expire once the sale is authorised. CPS was formed in 1992 to issue GEs corporate travel and entertainment cards and purchasing cards to employees of the company. Since then, it has expanded to serve over 300 large corporate clients. The company is largely based in Salt Lake City, and has approximately 350 employees. GE continues to be the units largest single client, and has signed a multi-year agreement to become a client of American Express. The corporate payments arm of GE Money has generated over $14 billion of global purchase volume in 2007, and maintained $1.1 billion in receivables at year-end 2007. Its billed business has grown at a compounded rate of 18 percent over the last five years. The services offered by the unit are comparable to those provided by American Expresss commercial card business, which handles the travel, entertainment and purchasing spending by employees of mid-sized companies to large corporations. Accounts are typically paid in full at the end of each month, rather than through a revolving credit account.