All articles by Verdict Staff
Verdict Staff
Card networks need to drive contactless
The advent of contactless payment has been heralded by industry players as one of the most promising payment breakthroughs in recent years, but a new report says that more needs to be done to drive adoption. Charles Davis reports. Cutting through the hype surrounding contactless payments in the United States, a recent report from payment research consultancy Aite Group concludes that the promising new technology will not result in significant volume unless card networks provide incentives for merchants to jump on board. Contactless Payments and NFC in the United States: Beyond Science Fiction, by Nick Holland, a senior analyst with Aite Group, concludes that only 0.5 percent of merchant locations in the US accept contactless card payments. Far more sobering, the report estimates that contactless locations will grow to only 2.5 percent by 2014. In other words, the contactless market in the United States currently has just 40,000 merchant locations, and will top out at a projected 271,000 in 2014. Holland found that the growth of contactless merchant locations will actually slow over the next few years, from 63 percent annual growth now to about 30 percent by 2014. Given all the publicity surrounding contactless payments, that seems almost impossible, but the report cites major obstacles to further growth.
Australian regulator warns of further interchange reforms
The Reserve Bank of Australia (RBA) has warned the countrys payment card industry that it is prepared to make further interventions to reduce card interchange levels in a bid to promote competition, unless the industry itself implements measures to open up the market.
Consumer collections in the spotlight
US issuers must take steps now to weather the growing credit crisis and recover more quickly when the economy normalises, according to a new report from TowerGroup, the research arm of MasterCard Worldwide.
European banks in talks for new payments network
The European Commission (EC) has said talks are currently being held with several major European banks regarding a new payments card network that could rival Visa and MasterCard.According to the Financial Times, Germanys Commerzbank and Deutsche Bank alongside French banks Socit Gnrale and BNP Paribas were preparing to decide on launching a new card network over the coming months.We have had a series of contacts with banks and other interested parties about payments cards, said commission spokesman for competition matters Jonathan Todd
Citi reshuffles card operations
Citigroup, the worlds largest credit card issuer, has reorganised its consumer finance business and created a Global Cards division in an effort to make it more nimble in its various cards markets. It has also reorganised its businesses along geographical lines, in a move that was predicted by industry analysts. The move is part of a wider shake-up at Citigroup, which its CEO, Vikram Pandit, said would help it focus resources on growth areas of the business and improve efficiencies. The Global Cards unit has been created out of the banks consumer group, which is being split into two distinct businesses, Global Cards and Consumer Banking. The creation of Global Cards brings together two card business units that had vastly differing fortunes in 2007. Citis US Cards section showed a significant drop in net income, declining 26 percent from $3.9 billion in 2006 to $2.9 billion in 2007. But its international cards business showed a 77 percent improvement, from $1.1 billion to $2 billion. The new cards division, which will be headed by Steven Freiberg as CEO of Global Cards, will mean the consolidation of Citis US and international cards businesses. Freiberg was head of the banks US consumer finance division and co-chairman of global consumer operations, alongside Ajay Banga, who was head of international retail business. Citigroup has also brought in Terri Dial, the head of UK retail banking business at Lloyds TSB, as global head of consumer strategy and CEO of consumer banking in North America to turn around the fortunes of Citis retail banking businesses.
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JCB expands in Asia-Pacific
Japanese payment card consortium JCB and its international subsidiary JCB International (JCBI) have launched a new JCB co-branded credit card in China.The Minsheng Lady Flower Aupres card has been launched in conjunction with China Minsheng Banking Corp, JCBs sixth Chinese issuing partner, and Shiseido Liyuan Cosmetics, a major cosmetics company in China.The card is aimed at women consumers in China, following JCBs established strategy of launching cards aimed at distinct consumer segments. The card comes in both standard and gold formats and currency can be denominated in both US dollars and Chinese yuan. The card also incorporates the Aupres loyalty programme, offering double points when purchasing Aupres products and other cosmetics-related rewards.The launch of the card is the latest milestone in JCBs expansion in China, where its brand acceptance network stretches to 70,000 merchants and JCB acquiring alliances with ten partner banks. In 2005 JCB began granting issuing licenses, starting with Bank of China, Bank of Shanghai, China Everbright Bank, China Merchants Bank and Shanghai Pudong Development Bank. More than one million residents of China carry a JCB brand card.
Congress turns up heat on card issuers
Merchants in the US are stepping up the pressure against issuers and networks over interchange, and new proposed legislation, if passed, could give merchants a seat at the table during interchange level negotiations. Truong Mellor reports. A new bill in the US is aiming to eradicate hidden interchange fees charged by card issuers that cost the consumer around $40 billion annually. The introduction of the Credit Card Fair Fee Act into Congress is the outcome of a hearing held in July 2007 where trade association the National Retail Federation (NRF) senior-vice president Mallory Duncan, testifying on behalf of the NRF and the pressure group the Merchants Payments Coalition (MPC), argued that interchange practices violate federal antitrust law. The bill, which is being introduced by the US House Judiciary Committee, follows the recent ruling by the European Commission against MasterCard over interchange fees charged on cross-border card transactions (see CI 393). Merchants are forced to deal within this system because it is simply not an option to refuse to accept Visa or MasterCard from their customers, said John Conyers, chairman of the US House Judiciary Committee. They are presented with take-it-or-leave-it options and are not part of the process by which the fees are set. Moreover, the card systems operate pursuant to comprehensive operating rules approved by the associations member-controlled boards, but these operating rules are not accessible by the merchants.
Belt-tightening hits loyalty programmes
With banks facing increased financial strain, customer loyalty schemes may be the solution for driving cardholder spending and acquisition. However, the cost involved for card issuers remains a hurdle. William Cain and Truong Mellor report. As markets across the globe have become increasingly competitive due to the sheer number of products being launched, players have turned to loyalty programmes in order to uplift customer acquisition and retention numbers. One of the key challenges is for issuers to effectively utilise loyalty schemes to differentiate themselves in the marketplace. Another challenge is to ensure that a loyalty scheme providing sufficient return on investment. Many of these programmes are in essence very similar, so it is crucial for card issuers to maintain a loyalty and rewards scheme that is appealing for its customers. However, it is unclear whether these types of programmes can be said to be a competitive differentiator any longer. According to Aneace Haddad, chairman and founder of France-based loyalty scheme and smart payments provider Welcome Real-Time, the focus is increasingly on making incremental changes and improvements to loyalty programmes to make them more attractive. He cites examples of banks moving away from air miles as they are expensive to provide, and encouraging customers to convert their air miles for benefits at department stores and other retailers. A more specific example of this trend is the move towards instant redemptions at the POS. Everybody has a loyalty scheme now, Haddad told CI. Everybody knows they are; they even know the mechanics of loyalty programmes and how they are funded out of interchange.
HSBC sets sights on Russia
UK banking group HSBC is regarded as one of the most globally outward-looking banks with a focus on emerging markets. With slim pickings to be found at home, in the retail market at least, HSBC is turning its attentions towards Russia with a bold expansion plan backed by $200 million of new capital.
Consumers approve of decoupled debit
A recent study by Aite Group in the US points towards a healthy consumer market for decoupled debit cards. Attractive rewards schemes are attracting customers; however, there remain several challenges to overcome before these products make it into the financial mainstream.