It’s been an exciting twelve months in cards and payments, Cards International looks back on the biggest shocks, successes and statements from 2012
This year has been the year that new payments technologies really started to blossom. One or two even fell over – in the case of Google Wallet. The Global Payments breach proved was a sobering reality check for the technology providers.
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Emerging markets stepped forward – Brazils card acquiring market took some interesting turns with Unibanco buying Redecard and Cielo posting high share prices.
Discover meanwhile moved out of the US for the first time and chose Latin America to expand into. Regulation continued to dominate and there were some high profile flexing of regulatory muscle in cases such as Amex 85m fine.
January
German Bundestag passed anti-money laundering
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By GlobalDataThe German Bundestag passed anti-money laundering (AML) laws – which put a restriction prepaid business opportunities in Europe’s largest economy. Under the regulation, any e-money product distributor will need to apply and comply with Know Your Customer (KYC) standards, for instance, seeing proof of identity.
Although the strict legislation looks likely to curb money laundering, its provisions also mean that prepaid cards can be reloaded up to a maximum of 100 ($133.82). For amounts above that, a full KYC procedure needs to take place every time the card is reloaded with credit above 100. The issuer then needs to archive that information for five years.
Western Union extended prepaid card platform to UK
The global payment services company launched both the Western Union MasterCard Gift Card and the Western Union GoCash Service, aiming to provide consumers with convenient ways to share money anytime of the year.
It was the first international extension of Western Union’s prepaid programme outside the US, with further expansion planned in Asia, Latin America and Europe.
The card was the first product in its category to offer a unique chip-and-PIN function making it – they said – the most secure gift card available to the UK market.
February
La Caixa rolls of contactless ATM network in Barcelona
La Caixa began the rollout of a contactless ATM network in Barcelona.
The bank will issue 1 million cards to its customers, more than 15,000 new POS terminals and more than 500 ATMs with built-in contactless readers.
The ATMs, manufactured by Fujitsu, will also be compatible with other contactless payments such as NFC-ready mobile phones, the bank said.
The contactless system in Barcelona will be fully compatible with other cards and contactless payment devices issued by other banks, both domestic and international.
The Japan NFC Mobile Consortium established
The Japan NFC Mobile Consortium was established by NTT Docomo, KDDI and Softbank Mobile with the aim of coordinate the adoption of multiple international standards for NFC technologies in mobile devices and services.
A statement by the three companies said the initiative aims to free mobile users in Japan, both residents and international travellers, from concerns regarding different NFC service standards.
It will also create an environment in Japan where service providers can offer efficient, low-cost NFC services based on common standards and rules, they said.
A universal NFC standard may streamline the domestic mobile payment services, with the added potential of enabling Japanese handset makers to sell their products in international markets.
EC publishes first eSEPA consultation paper
The European Commission (EC) published its first consultation paper, Towards an Integrated European Market for Card, Internet and Mobile Payments, to initiate debate among the various industries within payments on the best approaches towards the vision of a single European market.
In the paper, the EC highlighted the certain issues within the payments market such as Market access and entry for existing and new service providers, payment security and data protection, transparent and efficient pricing of payment services, technical standardisation, inter-operability between service providers, the countries in Europe are at varying degrees of payment product adoption, m- and e-commerce are emerging sectors which require testing and funding, there is no legal framework telling companies how to do business, so innovation and roll-out are based on trial-and-error.
March
Brazillian card acquiring moves forward
Three major events occurred within the card acquiring industry in Brazil: Itau Unibanco has announced that it would buy up all the shares it does not already known in Redecard on the day it published its full-year results. Redecard had announced its full-year results a week earlier. Then Cielo published its own full-year earnings and its share prices soared.
Itau Unibanco, which already owns half of Redecard shares, is bought out the outstanding shares Redecard to make it a privately-owned company.
Last year in July, the Cards International Country Survey on Korea had found that competition was heating up in the South Korean cards industry as a number of joint ventures and spin-offs were changing the landscape of the market.
Now competition is set to reach boiling point: Korea’s National Assembly has unveiled plans to revise the Credit Finance Business Act, which directly affects the credit cards sector.
PayPal partners with MasterCard
PayPal partnered with MasterCard to launch a new payment card that enables customers to spend and withdraw money from their PayPal account at POS terminals and ATMs.
The initiative meant that a PayPal Access Prepaid MasterCard holder who received a PayPal payment can spend or withdraw the money straight away with the card, without the need to transfer the funds to a bank account.
April
Payments tech companies get behind Isis app
VeriFone, Ingenico, ViVOtech and Equinox Payments lined up to integrate and support the Isis Mobile Commer App.
The tie-up with the companies meant that the distribution network among merchants will accelerate, giving merchants more combined payment acceptance systems with NFC- capabilities and remote software upgrades.
Green Dot buys Loopt
Green Dot Corporation, "entered into a definitive agreement" with social network mapping app Loopt to acquire it as part of Green Dot’s expansion plans into mobile technology.
Loopt has "several patents" in the mobile marketing space, including location-based real-time mobile messaging.
Green Dot said these patents "will be important strategic assets as it pursues its mobile business opportunities" and is planning on spending $43.4m for the acquisition.
For Green Dot, the acquisition would result in three strategic benefits, included: improved customer acquisition and retention on prepaid card products, marketing of new banking and payment products to new customer segments, a fast entrance into the mobile wallet space, as well as a competitive edge in rewards and payment solutions at merchants.
Morgan Stanley and Amex offer co-brand cards
American Express and Morgan Stanley are going to issue two new co-branded cards for the bank’s affluent customer base.
The Morgan Stanley Credit Card and the Platinum Card were issued to clients of its Smith Barney division and offer brokerage accounts and rewards.
On the Morgan Stanley Credit Cards, clients earn 10,000 membership reward points if they spend $1,000 in the first three months after opening their account. The card had no annual fee for the first year and cost $95 afterwards. Additional cards are free of charge.
The Platinum Card offers 50,000 membership reward points for purchases of $1,000 or over in the first three months.
Other offers include one additional card free of charge, $200 Airline Credit and no foreign exchange fees. The card costs $450 per year.
Elavon launches chip-and-PIN for smartphones
US Bancorp’s acquiring arm Elavon rolled out MobileMerchant, a device that is able to transform mobiles into terminals.
As with similar products, the merchant downloads an app onto their smartphone. No payment information is stored on the smartphone, however. Instead, a bluetooth connected chip-and-PIN device captures and encrypts the data.
The launch of the MobileMerchant for the UK market followed on from the release of VirtualMerchant in North America last year. VirtualMerchant is a solution that enables mobile payment acceptance on mobile devices.
Once the transaction is done, the customer receives the receipt via email or text message. Elavon said that the service meets all the UK banking standards.
June
New Brazillian Credit Card Company offers 200 instalments
A new credit card company in Brazil is set to entered the local cut-throat market.
Shopcards began its operations in mid-April and offered re-payments of up to 200 instalments – this would be equal to about 16 years or more.
The company, however, said that it will be up to individual merchants to decide whether they want to allow 200 instalments, or whether they want to offer fewer instalments.
The payment in instalments is very common in Brazil, but generally in a maximum of five instalments.
Global payments security breach
The rumour-mill was running overtime regarding the security breach suffered by Global Payments in the US. Confirmed details of the problem were few – and assumptions are many.
In a conference call for investors, the company’s CEO Paul Garcia did not spend much time elaborating on the cause of the problem, but did make efforts to definite its scope. He was careful to say that the exposure was limited to Track 2 data for 1.5 million cardholders in North America.
As far as identifying the hackers’ entry point, Garcia confirmed that it did not occur at merchant or ISO level.
Following the breach, Visa announced that it had taken Global Payments off its register of service providers that meet PCI Data Security Standards.
Garcia confirmed that Global Payments was continuing to process Visa transactions. According to PCI DSS expert and QSA Colin Dixon of consultancy Ascentor, the company is able to do so thanks to its position in the chain.
Despite falling between two stools, Garcia did emphasise, very strongly, that the company was taking the PCI DSS revalidation process seriously.
He told investors that the team was working around the clock to regain compliance to the standards.
The closest the CEO came to tackling this question of "why?" was to refer to the reputational impact of Visa’s decision.
In the investor call, Garcia isolated the problem to "a handful of servers", but was unable to elaborate on the investigation currently underway.
Ascentor’s Dixon says it can be narrowed down to a very small number of possibilities.
"It is most likely to have been a compromise of an external-facing server by a hacker who found a vulnerability."
"The company has said that security codes were compromised during the breach. There are only two possible ways that could have happened," explained Dixon. "Either Global Payments has been storing security codes on its servers – which is illegal, and highly improbable – or the hacker set a trojan to work, monitoring the transactions running through the systems.
"This is by far the most likely scenario."
Ingenico and First Data partner on security
Payments hardware provider Ingenico is to roll out First Data’s a TransArmor security solution its Telium range of products in the US.
TransArmor replaced all cardholder details and transaction information with a numerical token.
Ingenico’s Telium devices support EMV and NFC technologies and meets the PCI Data Security Standards for encryption and tokenization, the companies asserted.
TransArmor can help retailers in two ways, according to Ingenico’s senior VP of Product and Development Gregory Boardman: "Not only are their transactions better shielded from compromise from data breach threats, but they preserve the reporting, risk management, and support they receive from their processor."
MasterCard develops real-time e-commerce fraud tool
MasterCard unveiled a fraud detection tool for online transaction that works in real-time.
The tool called Expert Monitoring Fraud Scoring for Merchants and MasterCard said it improves merchants’ view of customer behaviour "behaviour beyond a merchant’s website or a cardholder’s shopping cart".
The tool helps merchants calculate a fraud score by considering a longer span of transaction history than in card present transactions.
The tool targets fraud on US-issued cards.
Germany starts contactless prepaid pilot
The German banking industry committee, Deutsche Kreditwirtschaft, commenced a contactless prepaid card pilot in the cities of Hannover, Braunschweig and Wolfsburg in mid-April.
More than 1.3m cards will be eligible for contactless payments of under 20 as of mid-April. The prepaid card can be preloaded with up to 200 and select retailers will offer top-ups in stores.
The card can also be signed up for automatic preloading.
The pilot will go on for a year and the Committee is considering enabling girocards (debit cards) with a contactless option in the medium term as well.
This is the first time a contactless pilot is not taking place at a football stadium. The Committee has signed up, among others, food retailer Edeka, petrol retailer Esso, perfume chain Douglas, fashion retailer AppelrathCüpper und confectionary business Hussel.
Edeka has been using contactless terminals since 10 January this year across 100 stores in Hannover, Braunschweig and Wolfsburg. It plans to raise the number of stores that accept contactless payments to 250 by the end of May.
July
MasterCard loses appeal; EU outlaws interchange fees
The General Court of the EU ruled that the multilateral interchange fees (MIFs) levied by MasterCard are contrary to competition law.
MIFs are multilaterally agreed inter-bank fees charged by a cardholder’s bank to a merchant’s bank for each card transaction made at the point of sale (POS).
The EC ruled that such fees inflated the cost of card acceptance by merchants without leading to benefits for consumers.
The British Retail Consortium (BRC), a party in the proceedings argued that MIFs are an unjustifiable tax on retailers and consumers as they exceed the costs of processing card transactions.
MasterCard Europe said that it disagreed with the General Court’s decision and argued that the finding could make payments more expensive for consumers and threaten electronic payment technologies in Europe.
Barclaycard ends loyalty scheme in the UK
Barclaycard has announced it is ceasing the offer of rewards through its Freedom loyalty scheme.
The programme has over a million users were given two months to spend the points accumulated in the past two years when the scheme was launched.
Although available to "over eight million cardholders", Freedom was being used by just over a million customers.
The apparent unpopularity of the programme is attributed to limitations imposed to earning and redemption of rewards.
The points were only granted for spending in selected stores and could only be redeemed at an even more reduced range of retailers.
The expenditure-rewards ratio in the Freedom scheme was also smaller than the offered by other programmes.
Barclaycard Freedom customers were rewarded 1%, and even less, of their spend in most of the for most of partners outlets.
Ghana’s UBA unveils cardless ATM services
The United Bank for Africa (UBA) Ghana launched a package of ATM valued-added services that include cardless cash withdrawals whose beneficiaries can be third parties other than the cardholder.
UBA Ghana CEO and MD Oliver Alawuba told local media that the move is a part of the bank’s innovation strategy in the Ghanaian banking industry.
Other value-added services allows UBA customers to pay utility bills, TV subscription fees and top up mobile credit of their own or third parties’ phone.
The new ATM services are powered by mobile banking and payment processing platform e-Tranzact .
According to the bank, customers would be able to use the cardless ATM services through their mobile phones at the ATM and at a UBA branch filling an eRemit form.
The recipient of the cash gets an alert of the transaction and is given an access code at the ATM.
August
Indonesia: Issuers discontent with credit card regulation
Card issuing banks in Indonesia expressed their discontent with the Central Bank’s regulation, which aims to cap overdue payments fees for credit cards, local media reports.
The Central Bank of Indonesia recently implemented a change to an existing law that affects credit card ownership (Bank Indonesia Regulation No. 14/2/PBI/2012).
The directive within that law now limits the fees to be levied for late payments credit cards to 3% of the total amount – which cannot exceed INR150,000, local media outlet reports.
Japan’s JCB expands into South Africa with acquiring licence from Equity Bank Kenya
Bank issuers expect to lose revenue due to the new regulations. Sigit Pramono, chairman of the National Banks Association (Perbanas) told Tempo, a Jakarta-based publication, that overdue fees are one of the banks’ largest sources of income.
JCB International (JCBI), a subsidiary of the Japanese payment brand JCB, and Equity Bank of Kenya have signed a merchant acquiring license agreement to extend JCB card acceptance at the bank’s merchant locations in South Africa, as well as Kenya, Uganda, South Sudan, Rwanda and Tanzania.
Equity Bank of Kenya said it plans to start operations in South Africa by December 2012.
With the move, the Japanese card issuer and acquirer seeks to reinforce its business on a global scale.
JCB said that the region has experienced an in-bound traffic of travellers in recent years, both from a tourist and business perspective, which lays out the potential for growth in the acquiring market.
NCR commences deployment of virtual teller ATMs in the US
NCR’s virtual teller ATM, called APTRA Interactive Teller, has been deployed by a financial institution for the first time.
US-based Sussex County Federal Credit Union (FCU) has installed the ATM devices between 19 – 23 March.
Now NCR is going to commence the roll out of the virtual teller ATMs at "other financial institutions throughout the US, Canada, Australia and other countries during the next three months," an official statement said.
NCR said APTRA ATMs can serve as a an expansion of a financial institution’s distribution network, by offering in-branch services such as intelligent deposit capture, bill payments and new account and loan initiations.
The APTRA ATMs also link bank personnel with the ATM user through live audio, and visually. The remote tellers can talk the user through transactions, which cuts down the length of queues at peak times in-branch, NCR said.
Sussex County FCU CEP Pamela Fleuette said staff were now able to serve customers faster and that the intuition had recorded "increasingly heavy transaction volumes".
September
MasterCard calls for market forces to prevail over centralised rules in Poland
MasterCard Polska has rejected The Central Bank of Poland’s accusations that it compromised attempts to drive uptake of card payments in the country through lowering interchange rates.
The National Bank of Poland said on that by not signing up to its proposals to cut interchange fees over the next five years.
MasterCard said it did not sign the agreement because market forces and not central decisions should determine interchange fees.
However, the network did confirm that it intends to lower some of its interchange rates in 2013 anyway.
MasterCard’s rejection of the central bank’s proposals caused a competition domino effect, with Visa also coming down on MasterCard for the failure of the deal before announcing that it would recommend its member banks reduce interchange rates for Visa payments.
Visa said in a statement it recommends "adjusting fees to the realities of the market and allowing continued competitiveness. Visa Europe will also be taking other market measures aiming to fullfill as many of the Programme’s recommendations as possible".
"We will present the new rate proposals to banks at our earliest opportunity, so that the Visa Polska Executive Committee can take the relevant decisions by the end of September 2012 and the new rates can be introduced in practice not later than provided for in the Programme, which means by 1 January 2013," Visa Europe said.
Visa emphasised their view that MasterCard’s refusal to enter into the agreement means that the programme to reduce card fees in Poland, cannot be implemented.
Visa denies iZettle in Nordics
Visa Europe has said that mobile POS service iZettle does not meet its standards for acceptance devices, preventing the company from processing Visa transactions.
In a blog post on iZettle’s website CEO Jacob de Geer said "a policy decision by Visa Europe" left the company with no choice but to suspend the acceptance of Visa cards in Denmark, Finland and Norway.
"Please know that we will continue to accept MasterCard in addition to American Express cards," the statement read.
Speaking to Cards International Visa confirmed that the prohibition extends to the UK, where iZettle launched in May 2012.
The manufacturer of iPhone-ready POS devices attracted investment from MasterCard in June.
The iZettle solution is not chip and PIN, but is EMV compliant and meets PCI DSS standards.
MasterCard: We will fight back into UK debit market
MasterCard told Cards International that developing a fully-EMV compliant chip & PIN mobile POS device was currently not economically viable.
Marion King, President of MasterCard UK & Ireland has said that Visa’s exclusion of other network-branded payments cards from Olympic venues is "a great example of why you need competition in the market".
"For me the Olympics is a great example of what goes wrong if you don’t have competition," she said, in reference to the fact that only Visa-branded cards will be accepted in Olympic venues. "The UK debit market is dominated by one player. My role is to get a balance back, and I am going to fight hard to achieve that."
King said that the fight will not be primarily on grounds of cost, or product spec. "This is a commercial world, and we need to demonstrate why MasterCard should have a share in the UK’s debit market," she said.
"But it is not just about the price of the product, or its capability. It is going to be about growing long-term relationships around innovation, and providing capabilities beyond the standard card-based propositions we have today."
King believes MasterCard is well-placed to do that. "We are not bank-owned, are well-resourced and have the innovative capability. We now need to work hard to convince our customers that our way is the right way forward," she said.
MasterCard relaunched its debit portfolio at the beginning of this year, telling Cards International that it intended to offer its World Elite ‘premier debit’ product to UK issuers, and expecting to see significant interest from banks during 2012.
At the time, the network said intended to differentiate itself by enabling banks to build loyalty products around their debit portfolios.
King confirmed that, while there are economic barriers to doing so, the possibility of opening up the ‘Priceless’ loyalty platform to debit customers is "not off the table", saying she intends to "bring all the capabilities of MasterCard to bear in order to win back market share".
Visa pleased with contactless numbers
Visa Europe has said that contactless payments accounted for one in six sub-£20 transactions across Olympic venues.
The network’s head of contactless Mark Austin said the result was positive: "We are pleased with consumers’ response to the technology and have gained many useful insights that will help make contactless a commonplace payment method," he said.
Visa installed some 3,000 contactless terminals throughout the venues at the London 2012 Olympic and Para-Olympic Games to demonstrate the value and potential of contactless payments. Controversially, the network also prevented the use of any other card network at the sites ATMs and points of sale.
No China appeal against WTO e-payment ruling
China has decided not to appeal against a World Trade Organization (WTO) ruling that the country’s card processing industry discriminates against foreign companies.
The decision was made on 31 August during a Dispute Settlement Body meeting, after the 60 day period available for appealing had passed.
In July, the WTO backed US claims that the Chinese state-owned card network UnionPay had a monopoly on domestic yuan-denominated transactions, preventing foreign companies from operating in the country, in breach of WTO rules.
The WTO dismissed the claim that UnionPay was also an "across-the-board monopoly supplier", meaning that the ruling only applies to local currency transactions made with cards issued in China.
American Express to refund customers USD85m
The Federal Deposit Insurance Corporation (FDIC) and the Utah Department of Financial Institutions uncovered the issues during a routine examination in February 2011. The case was then passed on to the Consumer Financial Protection Bureau (CFPB), which put forward an enforcement action on 1 October 2012.
American Express and four subsidiaries, namely American Express Centurion Bank, American Express Bank, FSB, and American Express Travel Related Services Company were found guilty of a range offences.
The authorities ordered American Express to refund 250 000 affected customers with direct debit or by sending cheques by post, without the need for them to make a claim.
American Express also agreed to pay fines totalling USD27.5m.
Canadian code of conduct to extend to m-payments
Ted Menzies, the Canadian finance minister who proposed the addendum to the code, said: "While we support new and convenient payment options, small businesses and consumers should not be punished with new hidden fees or undisclosed conditions."
The proposal comes in response to the findings of the Task Force for the Payments System Review, launched in 2010. In March 2012, the Task Force put forward some recommendations for the government, including the suggestion to "partner with the private sector to create a mobile ecosystem".
Also in response to the Task Force’s call for more regulation and collaboration, in May 2012 the banking industry and credit union system announced the launch of the Mobile Reference Model, a set of voluntary guidelines for the development of mobile payments at the point-of-sale in Canada.
Mobile payments are increasingly gaining ground in the country. Canada ranked second in the MasterCard Mobile Payment Readiness Index released in May 2012, coming only after Singapore and positioning head of the US and Kenya.
MasterCard has acquired US loyalty solutions provider Truaxis to integrate its rewards programs and analytics technology into the payments network.
MasterCard completes Truaxis acquisitions
Truaxis was launched in 2007 as Billshrink. The company initially focused on providing deal comparing and money saving services through its online platforms Billshrink.com and StatementRewards.
Billshrink renamed to Truaxis in September 2011, following an expansion of its services into the provision of personalised customers’ rewards and analytics technology for financial institutions and merchants. It also specialises in the increasingly popular Merchant Funded Rewards.
