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December 22, 2009

News Digest

Black Friday bonanza for online retailers The day after the US Thanksgiving Day holiday has come to be called Black Friday, not because of any regular quirk of nature but, rather, the congestion that accompanies the beginning of the traditional Christmas shopping season.

By Verdict Staff

ONLINE PAYMENTS

Black Friday bonanza for online retailers

The day after the US’ Thanksgiving Day holiday has come to be called Black Friday, not because of any regular quirk of nature but, rather, the congestion that accompanies the beginning of the traditional Christmas shopping season.

However, increasingly consumers are shunning the human scramble and turning instead to the convenience of online shopping.

This year’s Black Friday saw more consumers than ever opting to shop online with payment card issuer, payment processor and anti-fraud specialist Retail Decisions (ReD) reporting that US online retail sales hit $3 billion on the day, up an incredible 52 percent compared with Black Friday 2008.

According to ReD, the busiest minute for online retail sales saw a 131 percent like-for-like increase on 2008, while between the hours of 12:00 and 13:00 retail sales peaked at $183 million – an increase of 61 percent.

On the downside, ReD recorded a significant increase in online fraud on Black Friday.

On this aspect Carl Clump, ReD’s CEO, commented: “While online retailers witnessed a huge upturn in sales this Black Friday, fraudsters are also ‘spending’ more, with an average value of $248 per transaction online, 23 percent more than the average genuine customer.”

SECURITY

Merchant e-Solutions’ token-based security

Merchant e-Solutions (MeS), an internet-based payments processor focused on US community banks, has begun providing merchants with token-based security solution to protect credit card data. With the free service, MeS follows a lead set by processing giant First Data which recently launched a token-based data transmission solution, First Data Secure Transaction Management.

“Using tokenisation, the actual card number is only transmitted in the initial payment request, then with the approval or decline of the transaction MeS returns a token instead of the actual card number,” explained Jim Aviles, MeS’ COO. “We’re providing merchants with a secure process to help eliminate the risk and expense of storing credit card numbers on their business systems, thus lowering their operational costs.”

With MeS’ solution, card numbers are replaced with a unique identification, or token, and must be combined with a merchant profile identification and key, making it unusable if intercepted during transaction processing. Tokens are stored on MeS’ servers, which comply with the Payment Card Industry Data Security Standard.

Founded in 1999, MeS processes some $14 billion in payments annually for 65,000 merchants. MeS’ platform supports 150 currencies and all major credit, debit and alternate payment methods.

COMPANIES

Heartland victorious in class action battle

Heartland Payment Systems, the fifth-largest payments processor in the US, has successfully defended against a shareholder class action brought against it, its chairman and CEO Robert Carr, and its president and CFO Robert Baldwin.

The class action was brought against Heartland following its announcement on 20 January 2009 that it had been the subject of a massive breach of its data security systems.

Participants in the class action alleged that Heartland had failed to provide adequate protection of its customers’ data and had unnecessarily delayed making an announcement of the data breach.

Following the announcement of the breach, Heartland’s share price collapsed from $15 to $5 per share.

The class action against Heartland was dismissed in its entirety with prejudice.

MOBILE PAYMENTS

Billing Revolution builds impressive partner base

Adding another major partner to its lineup, US mobile payments specialist Billing Revolution has been selected by POS vendor Retail Data Systems (RDS) to enable its merchant customers to accept credit card payments initiated on internet-enabled mobile phones.

Laying claim to being the US’ largest supplier of POS hardware and software, RDS serves some 13,000 merchants – primarily in the restaurant, grocery and retail sectors where it has been active for 60 years.

“Through our partnership with Billing Revolution, merchants can easily enable remote ordering and payments from any web-enabled mobile phone,” commented Richard Roscher, head of RDS’ payments division. “This allows them to easily make the move to mobile without having to make costly updates to their existing infrastructure.”

The addition of RDS came hard on the heels of Billing Revolution’s announcement in November of its appointed by PayPal as a mobile commerce partner. Other significant new Billing Revolution partners include payments processor Elavon, a unit of the US’ sixth-largest commercial bank US Bancorp.

Billing Revolution’s major backer is SK Telecom Ventures, the US-based private equity arm of Korean telecommunications giant SK Group.

REMITTANCES

Mexican remittance continues to fall

Inward remittances into, the world’s third-largest remittance recipient, Mexico continued their downward spiral in October, falling 36 percent compared with October 2008 to $1.69 billion.

The data quoted by the International Association of Money Transfer Networks (IAMTN) was derived from Mexico’s central bank, The Bank of Mexico.

Compared with inbound remittances in September 2009, inbound remittances were down $1.74 billion. In the first 10 months of 2009, they were down by 16 percent compared with the same period in 2008 to $26.07 billion.

The IAMTN noted that remittances of $25.14 billion in 2008 were 3.6 percent lower than in the all-time high of $25.14 billion in 2007.

Mexico accounted for just over 36 percent of total inbound remittances into Latin America in 2008.

Despite the dismal showing of remittances in October, the IAMTN’s MD Leon Isaacs noted that they should be seen in the correct context.

“This looks like a very depressing number,” he said, “but as [economist] Sanket Mohapatra from the World Bank points out, October 2008 was a time of massive growth in volume remitted to Mexico because of the strength of the dollar. A year on it may be dangerous to take a like-for-like comparison at face value.”

PAYMENTS PROCESSING

VocaLink teams up with BBP for SWIFT services

VocaLink’s ambitious growth strategy has taken another step forward with the formation of a partnership with BBP, operator of Switzerland’s largest SWIFT service bureau. Under the agreement with BBP the UK payments service provider is positioned to offer banks and their corporate customers a comprehensive hosted connectivity service to SWIFTNet for routing payments.

Commenting, Fred Bär, MD for euro services and channels at VocaLink, said: “By offering SWIFT capabilities and standards with BBP, VocaLink’s customers will benefit from a single route to SWIFT.

“This greatly reduces the operational overhead of managing SWIFT internally by outsourcing to certified specialists, enabling banks to focus on their core business. As a result, we are able to fulfil the highest requirements in terms of stability, availability and security at the same time.”

VocaLink also emphasised that banks’ corporate customers will benefit by gaining easier access to their chosen payment service provider and banks through a single access point for all of their payments, regardless of format.

BBP’s SWIFT Service Bureau already operates outsourced SWIFT services for over 200 customers in about 30 countries worldwide.

COMPANIES

Clear2Pay gets a €50m capital boost

Providing its financial resources with a significant boost, Belgian payment processing technology vendor Clear2Pay has secured €50 million ($74 million) in a capital raising exercise led by Aquiline Capital Partners. A US private equity firm, Aquiline Capital Partners focuses on investments in financial services companies and financial services technology vendors.

Commenting on the rationale for its investment in Clear2Pay, Aquiline’s CEO Jeff Greenberg said: “Clear2Pay is a profitable business and has the best growth potential in the industry due to its experienced management team, next-generation technology, strong customer relationships and proven ability to integrate strategic acquisitions.”

Clear2Pay secured a number of significant new business wins in 2009. These included a contract to supply Commonwealth Bank of Australia, Australia’s largest bank, with its Open Payment Framework (OPF) solution. The OPF solution was also selected by Spanish bank Santander for its group bank payments processing and other underlying solutions including Single Euro Payments Area direct debits and credits.

INTERNET BANKING

Raiffeisen takes direct banking route in CEE

An encouraging sign that banks are regaining the will to invest in new projects has come from an announcement by Raiffeisen International that it is to establish a new direct internet-based retail bank in Central and Eastern Europe (CEE). Raiffeisen International, which already has extensive banking operations in CEE, is 70 percent-owned by Austrian bank Raiffeisen Zentralbank Österreich.

“Our new direct bank will address the unique needs and interests of Internet-focused customers, who represent a fast-growing group in Central and Eastern Europe,” said Herbert Stepic, Raiffeisen International’s CEO.

Scheduled to be launched in 2010, Raiffeisen International’s direct bank is licensed by the Austrian Financial Market Authority.

The Single European Passport principle allows the new direct bank to enter the banking market in another European Union member state simply by following a notification process with the competent regulatory authorities.

Raiffeisen International, which first entered CEE in 1986, has managed subsidiary banks, leasing companies and a number of other financial service providers in 17 markets in the region. At the end of September 2009, it had 59,000 employees in the region and served about 15 million customers via some 3,100 business outlets.

MOBILE PAYMENTS

Luup forges ahead

Continuing its rapid expansion, Norwegian mobile payments technology developer Luup International has launched its Mobile Salary Disbursement solution in the Middle East and Africa region in a bid to serve the needs of corporate businesses disbursing salaries to their unbanked employees.

Businesses opting for Luup’s solution can provide unbanked employees with a stored value account into which salaries can be paid electronically and accessed through their mobile phone.

The employees can access their salary through ATMs or agents as well as make cross-border remittances.

“By removing the operational costs of cash handling as well as the security risks traditionally associated with paying employees in cash, corporates can reap double benefits from the Luup solution,” commented Luup’s CEO Thomas Bostrøm Jørgensen.

Luup’s service should prove particularly welcome in the United Arab Emirates, where a recent regulation, the Wage Protection System, requires payment of salaries by all companies to be made through electronic bank transfers.

Luup can look back on a highly successful 2009 which saw a number of important milestones reached.

Arguably the most significant was Luup’s selection by Deutsche Bank, Germany’s largest bank, to provide the platform for a mobile phone-based payments and money transfer service to serve its private and corporate customers in 80 European, Middle Eastern and Asian countries.

BANKING SYSTEMS

Infosys powers Société Générale in China

As a key element in its ambitious growth strategy in China, French bank Société Générale’s Chinese unit has completed implementation of Finacle, a core banking, customer relationship management, wealth management and consumer electronic banking platform supplied by Indian technology systems and services vendor Infosys Technologies.

The Finacle solution implemented by Société Générale China integrates all the bank’s communication channels – encompassing branches, the internet, ATMs and mobile.

Commenting on the implementation of the Finacle solution Jackson Cheung, Société Générale China’s CEO said: “The right technology backbone, with the scalability and flexibility to match our growth pace, is important for us at this juncture to achieve competitive edge in the Chinese retail and corporate banking market.”

For Infosys, the Société Générale China Finacle purchase represents its seventh in a major foreign bank in China.

ONLINE PAYMENTS

Chinese gamblers flock to the internet

Many Chinese internet users are also inveterate gamblers, suggests data from Chinese internet service provider Tencent, published by the country’s official news agency Xinhua.

According to Xinhua, Tencent’s CEO told delegates to the Seventh China International Digital Content Expo held in late November that China’s online gaming industry should reach CNY27.5 billion ($4 billion) in 2009, an increase of 49.6 percent compared with 2008.

In 2008 growth of almost 77 percent from 2007’s CNY10.4 billion to CNY18.4 billion was recorded.

While the lure of online gaming is clearly hard to resist for Chinese gamblers, it is also highly attractive for online gaming companies. Quoting newspaper the Beijing Daily, Xinhua noted that major Chinese online gaming companies including Sohu, Tencent, NetEase and Shanda, reported profit increases of 60 percent or more in the third quarter of 2009.

Chinese online game companies’ expansion overseas also contributed to their success, noted Xinhua.

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