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May 1, 2008

News Digest

JPMorgan and First Data to part company...ING DIRECT beefs up online security...INSIDE Contactless shines in Canada...CSC drive MasterCard flagship service...An OSCA for Oberthur.

By Verdict Staff

JPMorgan and First Data to part company… ING DIRECT beefs up online security… INSIDE Contactless shines in Canada… CSC drive MasterCard flagship service… An OSCA for Oberthur…

PAYMENTS PROCESSING

JPMorgan and First Data to part company

Ending speculation, JPMorgan Chase and First Data have agreed to an early termination of their joint venture (JV) Chase Paymentech Solutions (CPS). The move represents early termination of the JV formed in 2005 and which was originally due to run until 2010 and follows a change of control early exit clause triggered by the $29 billion buyout of First Data by US private equity company Kohlberg, Kravis, Roberts & Co in September 2007.

Financial services conglomerate JPMorgan Chase will retain allocated merchants, 51 percent of the JV’s assets, including most of its employees, CPS’s Canadian and European operations and Dallas headquarters. JPMorgan Chase will name its payments and merchant acquiring business Chase Paymentech following the JV’s termination in late-2008.
First Data will continue to provide transaction processing and data services for allocated merchants through its technology platforms. First Data will also assume management of CPS’s independent sales organisation and agent bank unit of the JV and integrate 49 percent of the JV’s assets and a portion of CPS’s employees into its merchant acquiring business.
Founded in 1985 as Paymentech, CPS is the world’s largest merchant acquirer, its customers including 600,000 merchants in nearly one million locations worldwide. CPS processed 19.7 billion payments valued at $719 billion in 2007.

  SECURITY

ING DIRECT beefs up online security

Internet bank ING DIRECT’s US unit has begun offering online security software developer Trusteer’s Raport identity theft protection software to its customers. Recently ranked ‘America’s safest bank’ by the Berkeley Center for Law and Technology at the University of California in Berkeley, ING DIRECT is the first bank in the US to offer Raport.

“With this new product, our customers have the opportunity to install free fraud-prevention software that protects against even the most sophisticated online threats,” said ING DIRECTS’ chief information officer Rudy Wolfs. He added that Raport forms part of ING DIRECT’s strategy of adding and changing security layers and complements rather than replaces existing security measures.
According to Trusteer, Raport creates what it terms a ‘secure-pipe’ within the computer that protects all information flowing between the machine and the ING DIRECT website.
This secure pipe prevents malware from stealing confidential information from the consumer, conducting unintended transactions on the consumer’s behalf, or tricking the consumer to enter their private banking or e-commerce credentials into look-alike websites.
ING DIRECT is to extend the Raport security offer to all its 14 million customers worldwide.

  CONTACTLESS PAYMENTS

INSIDE Contactless shines in Canada

A newcomer to the Canadian market, French contactless payment technology developer INSIDE Contactless has made significant inroads, delivering more than 5 million of its MicroPass contactless payment chips for MasterCard PayPass deployments in Canada in its first six months of operation. INSIDE Contactless believes this is just the start of bigger things to come.

“When Canada’s largest quick service restaurant chain, Tim Hortons, began supporting contactless payments in its 2,200-plus locations last year the stage was set for a surge in demand for this technology,” said INSIDE Contactless’ executive vice-president of payments Charles Walton. “Canada is also in the midst of a major EMV migration, creating what we believe will be a substantial market opportunity for dual-interface cards later this year, and we are preparing to support this market as well,” he added.
MicroPass is already the leading technology in the US where more than 50 million MicroPass-powered bank cards have been deployed. Worldwide INSIDE Contactless has now delivered over 100 million contactless microprocessor platforms.

  PAYMENTS PROCESSING

CSC drive MasterCard flagship service

Announced in May MasterCard’s Integrated Processing Solutions (IPS) service is set to streamline the launch of next-generation payment systems, claims Tim Murphy, president of MasterCard’s US region. When IPS is launched shortly in the US powering it will be CAMS II, a payment card processing and management system developed by US technology vendor Computer Sciences Corporation (CSC).

IPS services to be run on CAM II include PIN and signature debit and prepaid transaction processing, fraud detection, rewards and loyalty programmes and ATM network management.
“We chose CSC’s leading payments management software over the alternatives for its deep functionality, scalability and flexibility,” said Philip Tollison, MasterCard Worldwide’s group head of integrated processing solutions.
Designed as an in-house processing solution for card issuers, CAMS II was the subject of a five-month assessment by US technology giant IBM’s Performance Management Testing & Scalability Services. The objective was to demonstrate CAMS II’s scalability and ability to support large card portfolios.
In the run up to IBM’s evaluation, CSC spent three months developing test profiles and data based on real-world card activity. According to CSC the assessment by IBM demonstrated that CAMS II can process more than 100 million active card accounts without sacrificing speed and performance.

  CONTACTLESS PAYMENTS

An OSCA for Oberthur

French payment technology developer Oberthur Technologies has scooped one of four Outstanding Smart Card Achievement (OSCA) awards presented each year by industry body the Smart Card Alliance (SCA). The award was presented at the recent CTST conference held under the auspices of the SCA and the largest event in the US dedicated to advanced payment and identification technology.

In a citation the SCA said Oberthur had received an OSCA award in the Outstanding Supplier Organisation category for its demonstration of leadership in several sectors of the North American smart card market, particularly contactless payment cards and the US Federal government’s Personal Identity Verification card programme.
The SCA added that Oberthur was also honoured for its active involvement in contactless technology development in the fields of transit, antennas and card shape.
Oberthur reported recently that it had delivered 115 million microprocessor cards in the first quarter of 2008, a 45 percent increase compared with the first quarter of 2007.

  MERGERS AND ACQUISITIONS

First Data bolsters position in SEPA

In a deal that will considerably strengthen its position in the evolving Single Euro Payments Area (SEPA), US payments processor First Data is to acquire a 50 percent stake in EUFISERV, a Brussels-based provider of inter-bank switching of POS and ATM transactions and settlement services to payment card issuers, acquirers and payment schemes.

No financial details of the deal with EUFISERV’s owners – 12 European banks and banking organisations and the European Savings Banks Group – were disclosed
Linking EUFISERV’s service, which provides holders of 118 million cards access to cash at 60,000 ATMs in nine European markets, and First Data’s European network will create a processing service encompassing 165 million debit and credit card accounts and providing cardholders access to 74,000 ATMs and 1.5 million POS merchants.
First Data noted that the reach of the combined network, which it expects to grow rapidly, will give “a major boost” to the creation of SEPA initiatives by making inter-operability possible between previously closed markets and increasing the choice of interbank providers.
“A strategic partnership between our two organisations positions us to grow our business strongly in the new market conditions created by SEPA,” said EUFISERV’s chairman, Chris De Noose.

  SECURITY

Barclays selects PGP

UK bank Barclays is to implement encryption software developer PGP Corporation’s PGP Encryption Platform to form what it termed “the foundation of its enterprise data protection strategy.” The platform will be deployed across Barclays’ retail and commercial banking operations in more than 50 countries.

“Together with its proven track record in delivering enterprise data protection solutions, the breadth of PGP solutions assured us that it could address a wide variety of encryption needs today, whilst supporting innovation for tomorrow,” said Barclays’ COO of Global Retail and Commercial Banking Technology, Rick Carey.
According to PGP its solutions are used by more than 80,000 enterprises, businesses, and governments worldwide.

  PAYMENT PROCESSING

ING and Atos launch joint SEPA solution

In a European first, a bank, ING, and an IT services supplier, Atos Origin, have joined forces to offer end-to-end services for back-office payment processing to banks and corporations in Europe. In a release the partners said that the offering combines ING’s payment processing expertise with Atos’ consulting and systems integration capability.

For banks the partners explained that the white label service will enable them handle payment transactions as if they were processed on their own systems under their own logo. Fully compliant with Single Euro Payment Area regulations, the service will also free banks of the expense of meeting SEPA compliancy themselves.
For international corporations the partners said their offering will provide a centralised in-house banking service, resulting in significant cost reductions. This has been made possible by European Union regulations that permit corporations to use a single account to handle all payments in any of the 31 countries that form part of SEPA. Prior to SEPA corporations were required to process transactions via local banks in the countries where they operate.
There is a “clear demand” for a service of this nature in the “volatile payments market,” stressed ING and Atos.

  REGULATORY

MasterCard Europe meets EC deadline

MasterCard Europe (MCE) has heeded a December 2007 ruling by the European Commission (EC) that it scrap its cross border interchange fees on credit and debit cards in the European Economic Area. MCE’s alternative was to face daily penalty payments of 3.5 percent of its daily global turnover in the preceding business year.

However, MCE is not giving up the issue as a lost cause. “MasterCard’s policy is to comply with all applicable decisions and regulations, but to challenge them through appropriate channels when we believe that is necessary,” said MCE’s president Javier Perez. He added that MCE has “solid legal arguments supporting our appeal of the decision to the European Court of First Instance, and we will continue to vigorously pursue that appeal.”
Perez noted that the transactions affected amount to less than 5 percent of MCE’s volume and no significant near-term financial impact on MCE is anticipated.
Repeating MCE’s warning at the time of the EC’s ruling, Perez stressed that MCE believes that its cross-border interchange system has kept the cost of payment cards low for cardholders, and if left unchallenged the EC’s decision “will be bad news for European consumers.”

  CONTACTLESS PAYMENTS

Osaifu-Keitai comes to Singapore

Launched in July 2004 Japanese mobile service provider NTT DOCOMO’s payments solution Osaifu-Keitai which incorporates Sony’s FeliCa contactless payments chip in a mobile phone has proved a notable success and is now used extensively on public transport services and accepted by more than 640,000 Japanese retail outlets. Building on this success Osaifu-Keitai – Japanese for mobile wallet – will soon be introduced in the first market outside Japan, Singapore, in a joint initiative between NTT DOCOMO and StarHub, Singapore’s second largest communication services company.

“Osaifu-Keitai is a powerful end-to-end system that has revolutionised mobile payment and commerce in Japan,” said Takeshi Natsuno, MD of NTT DOCOMO’s Multimedia Services Department, Products & Services Division, Takeshi Natsuno who has championed the Osaifu-Keitai service since its infancy. “Singapore has the right pieces in place to enable the mobile wallet feature – factors such as high mobile penetration rate, the presence of a powerful contactless payment infrastructure as well as savvy consumers.”
In addition to contactless payments, Osaifu-Keitai has the ability to incorporate identity cards, credit cards and loyalty cards. According to NTT DOCOMO the number of users of its Osaifu-Keitai stood at 29 million as at 30 April 2008.

  PAYMENTS PLATFORMS

Indian boost for Planet Payment

UK multi-currency credit card payment service provider Planet Payment’s Pay in Your Currency (PYC) platform has received another boost with the decision by US payments processor Global Payments to offer it in India. A single platform, PYC can instantaneously perform conversions of up to 147 currencies.

The launch of PYC in India extends the relationship between Planet Payment and Global Payments which began with an agreement in November 2007 to launch PYC in Malaysia and Taiwan. This was followed in March 2008 with the decision of Global Payments’ joint venture with UK bank HSBC in China to launch PYC in China prior to the start of the 2008 Beijing Olympic Games.
Driven by growth in inbound tourism India is a significant market for PYC. According to India’s Ministry of Tourism inbound tourist numbers increased by 11.9 percent in 2007 compared with 2006 while industry body the World Travel and Tourism Council anticipates that India will be the world’s fastest growing tourist destination during the next decade, with a CAGR of 8.8 percent predicted.

  MOBILE PAYMENTS

MasterCard goes mobile in the US

Predictions that mobile phone-based payments are set for rapid growth in the US have been given more credence by MasterCard’s announcement that it is to offer a person-to-person mobile payment service to MasterCard issuing banks.

The service, MasterCard MoneySend, will be delivered on US mobile payment technology developer Obopay’s platform which enables access via all mobile devices and all mobile carrier networks.
The MoneySend service will cover all credit, debit and prepaid MasterCard-branded products and enable consumers to send and receive funds using their mobile numbers without disclosing any payment account number details.
“Our strong partnership with Obopay takes the development of the mobile person-to-person payments framework to the next level,” said MasterCard’s chief emerging technology officer, Art Kranzley.
MasterCard is also working with mobile carrier industry body the GSM Association in the development of an international mobile phone remittance infrastructure.

  REGULATION

Former Senator slams proposed credit card legislation

A housing legislation bill before the US Senate is an unusual place for provisions relating to electronic payments. However that’s where a provision that would impact nearly all card transactions is to be found, according to Dick Armey, chairman of nonprofit organisation FreedomWorks and former House of Representatives majority leader.

“This is a provision with astonishing reach,” said Armey. “Not only does it affect nearly every credit card transaction but the bill specifically targets payment systems like eBay’s PayPal, Amazon, and Google Checkout that are used by many small online businesses. The privacy implications for America’s small businesses are breathtaking.”
According to Armey the proposal requires information reporting on payment card and third-party network transactions by all payment settlement entities to the Internal Revenue Service and to the participating payee.
One of his primary concerns is that many small businesses use their Social Security number for tax identification. He posed the question: “How will their privacy be protected?”
Armey concluded: “This bill reduces privacy across America’s payment processing systems and treats every American small business or eBay power seller like a criminal on parole by requiring an unprecedented level of reporting to the federal government.”

  ONLINE PAYMENTS

Online billpay on the rise in North America

The internet is gaining ground as the preferred means of undertaking bill payments in North America, indicates a study released by research firm E SOURCE. So much so that the study indicates “a major shift in customer behaviour,” stressed E SOURCE’s director of customer satisfaction services, Andrew Heath.

According to E SOURCE, 51 percent of internet users surveyed in the US and Canada now pay at least one bill each month online. This compares with 33 percent in a survey conducted by E SOURCE in 2004.
Indicating that adoption of online billpay is accelerating E SOURCE noted that a study by nonprofit body the Pew Research Center found that 38 percent of US internet users were paying at least one bill each month online in 2005.

  SECURITY

OECD calls for tough action on cyber crime

Online criminals are eroding trust and confidence in the internet economy yet not enough is being done by governments, regulators and communications service providers to protect consumers’ personal identity (ID) and financial details, stresses international body the Organisation for Economic Co-operation and Development (OECD).

A key element lacking in the fight against online crime highlighted by the OECD is that online ID theft or fraud is not a criminal offence per se in most of the 30 OECD countries and a crime in only a few.
The OECD pointed to the Council of Europe’s (CoE) Convention on Cybercrime which was adopted by the body comprising 47 European countries in November 2001. The convention is the first international treaty on crimes committed via the internet and other computer networks.
To date the OECD noted that though 25 of its member countries have signed the convention only eight have ratified it. According to the CoE 40 of its member countries have signed the convention and 22 ratified it. Four of its seven non-member countries have signed it and one, the US, ratified it.
Signatories yet to ratify the convention include the UK, Sweden, Switzerland, Germany, Spain, Belgium and Japan. Countries yet to sign the convention include Russia, Mexico and Philippines.

  ONLINE PAYMENTS

PayPal enhances eBay buyer protection

PayPal has good news for US buyers using its services to make payments for eBay purchases: they are soon to be protected for the full price of an item’s purchase price with no limit on coverage. In addition US sellers using eBay will receive enhanced protection against claims, chargebacks and reversals due to an unauthorised payment or an item that was not received when they are paid via PayPal.

“We’re combining the power of eBay and PayPal to give all buyers and sellers more confidence and trust,” said Lorrie Norrington, eBay’s president, marketplace operations. “Buyers who pay with PayPal on eBay will be covered, with no limits, on most transactions. Any seller who gets paid with PayPal will be covered on most transactions, too, and can ship to 190 countries worldwide where PayPal is accepted.”
According to PayPal 97 percent of eBay listings offer PayPal and over 90 percent of active eBay users in the US have PayPal accounts.

  ONLINE PAYMENTS

EU cross-border online sales in the doldrums

A third of consumers in the European Union (EU) have purchased at least one item via the internet this year, up from 27 percent in 2006, EU Consumer Commissioner Meglena Kuneva revealed in a speech in London.

However, of concern to Kuneva is that cross-border purchases increased only marginally from 6 percent to 7 percent and as a proportion of online retailer sales revenues from 16 percent to 17 percent.
“Consumers and retailers are beginning to embrace e-commerce at national level but internal [EU] market barriers still persist online,” said Kuneva. “We need to redouble our efforts to tackle the remaining borders,” she added.
Slow growth in cross border online sales does not appear to result from consumer concerns.
The EU found that while 37 percent of consumers are more confident making online purchases from sellers/providers located in their own country, 57 percent are equally or more confident making purchases online from sellers in another EU country.

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