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August 31, 2009

News Digest

CONTACTLESS PAYMENTSIndian railways choose the contactless routeIn potentially one of the biggest contactless payments deployments yet the Centre for Railway Information Systems (CRIS), Indias Ministry of Railways technology division, has selected NXP Semiconductors MIFARE DESFire solution to power contactless smart cards for automatic fare collection.Full-scale deployment of contactless ticketing follows completion of a pilot project undertaken by the CRIS using NXPs MIFARE Classic contactless solution in Chennai.Some 500,000 contactless cards were issued during this project.In the full-scale deployment of contactless ticketing cards due to commence in September this year, fare collection will be facilitated by an automatic ticket vending machine (ATVM) system developed by the CRIS.Initially ATVMs will be installed in five major Indian cities: New Delhi, Secunderabad, Kolkata, Bhubaneswar and Pune.Manufacture of the contactless cards is being undertaken by Indian payment card manufacturing specialist Siepmanns Card Systems.Commenting on the development, Ashok Chandak, NXP Semiconductors senior director, global sales and marketing for India, said: We see a significant growth in the use of contactless smart card technology in transport systems in India.One of the worlds most intensively used railways, Indias system extends over almost 7,000 stations and transports some 18 million passengers daily

By Verdict Staff

MERGERS AND ACQUISITIONS

Jack Henry bulks up

Continuing a trend towards consolidation in the American core banking technology market set in motion by Fidelity National Information Services recent acquisition of Metavante, Jack Henry & Associates (JHA) has entered into a definitive agreement to acquire Goldleaf Financial Solutions (GFS).

GFS will bring with it 3,500 customers in the financial services industry though, notes JHA, many of these already form part of its existing customer base of 8,800. Based on 2008/09 results, GFS will add annual revenue of about $80 million to JHA’s $746 million.

Under the terms of the agreement GFS shareholders will receive $0.98 per share in cash, a 40 percent premium above GFS’ ruling price prior to the offer.

If accepted, this offer will entail a cash payment of $19.2 million in addition to JHA’ obligation to retire certain of GFS’ debt and accrued interest obligations, anticipated to total $42 million.

Commenting, Kevin Williams, CFO of JHA, said: “Our acquisition of Goldleaf supports our strategy to acquire companies that provide proven solutions that we can cross sell to our core bank and credit union clients, that generate new cross-sale opportunities among our respective client bases.

 

CONTACTLESS PAYMENTS

Indian railways choose the contactless route

In potentially one of the biggest contactless payments deployments yet the Centre for Railway Information Systems (CRIS), India’s Ministry of Railways’ technology division, has selected NXP Semiconductors’ MIFARE DESFire solution to power contactless smart cards for automatic fare collection.

Full-scale deployment of contactless ticketing follows completion of a pilot project undertaken by the CRIS using NXP’s MIFARE Classic contactless solution in Chennai.

Some 500,000 contactless cards were issued during this project.

In the full-scale deployment of contactless ticketing cards due to commence in September this year, fare collection will be facilitated by an automatic ticket vending machine (ATVM) system developed by the CRIS.

Initially ATVM’s will be installed in five major Indian cities: New Delhi, Secunderabad, Kolkata, Bhubaneswar and Pune.

Manufacture of the contactless cards is being undertaken by Indian payment card manufacturing specialist Siepmann’s Card Systems.

Commenting on the development, Ashok Chandak, NXP Semiconductors’ senior director, global sales and marketing for India, said: “We see a significant growth in the use of contactless smart card technology in transport systems in India.”

One of the world’s most intensively used railways, India’s system extends over almost 7,000 stations and transports some 18 million passengers daily.

 

ATMs

Commonwealth Bank ranked number one in Australia for service

Commonwealth Bank has been recognised by consumer financial services rating firm CANSTAR CANNEX has having Australia’s most comprehensive ATM and branch network.

According to the research firm, 90 percent of Australians live within five kilometres of an ATM and 87 percent live the same distance away from a branch owned by Commonwealth Bank.

The bank operates some 3,300 ATMs and 1,000 branches.

Commenting on the awards CANSTAR CANNEX’s head of research, product and strategy, Steve Mickenbecker, said: “Commonwealth Bank won both awards for the most comprehensive branch and ATM networks but it wasn’t simply a case of the bank which has the greatest number of branches and ATMs that automatically wins the prize.

“We looked at many other factors such as user-friendly process improvements and functionality.”

 

SECURITY

VeriFone and RBS intro end-to-end encryption

RBS WorldPay, the payments processing unit of Royal Bank of Scotland, and US payment systems vendor Verifone have announced a collaborative effort to market VeriFone’s VeriShield Protect, an end-to-end solution for encrypting payment card data.

The move follows a similar initiative now underway by US payments processor Heartland Payment Systems in conjunction with encryption specialist Voltage Security.

The objective is to develop a system that provides security beyond that achievable under the Payment Card Industry Data Security Standard (PCI DSS).

Both RBS WorldPay and Heartland share a powerful motivation to enhance security standards following damaging data breaches suffered earlier this year.

The breaches led to both processors being temporarily suspended by Visa from its published list of service providers compliant with the PCI DSS.

In the RBS WorldPay data breach details of 1.5 million payment cards were exposed while in the Heartland breach involved a record 130 million payment cards.

According to Verifone, VeriShield Protect eliminates usable cardholder data from the merchant’s POS applications, networks and servers using Advanced Encryption Standard (AES) level encryption.

The AES is the encryption standard adopted by the US government and is viewed as a significant advance compared with the still widely used, older Data Encryption Standard (DES).

Heartland has also opted for AES for its solution.

 

INDUSTRY TRENDS

Visa reports significant Latin American growth

Tough economic times have not halted surging growth in Latin America’s payment card market, indicates data from Visa reflecting a 23.3 percent year-on-year increase in the combined transaction value of all Visa-branded products to $189 billion in the 12 months to 31 March 2009.

Though below the annual growth rate, growth in the quarter ending 31 March 2009 remained at a healthy 15.2 percent compared with the same quarter in 2008 – taking the total value of transactions to $42 billion. All growth rates are in constant US dollar terms.

Commenting on the release of the data Eduardo Eraña, president of Visa Latin America and Caribbean region said: “Visa is driving a secular process of migration from cash to electronic payments and at the same time is enhancing its products, systems and services to create better money.”

According to Visa its focus in Latin America and the Caribbean region is on debit, electronic commerce, prepaid, money transfer and mobile payments.

 

CHEQUES

Fiserv and Mitek take cheque deposits mobile

Enabling mobile phone users to deposit cheques using their mobile phones may appear at first to be an innovative gimmick.

Not so, believes financial technology vendor Fiserv which has backed its view with an agreement with imaging technology specialist Mitek Systems to market Mitek’s IMagePROVE mobile deposit solution.

IMagePROVE is, claims Mitek, the first and only available application that allows financial institutions to accept cheque deposits via camera-equipped mobile phones.

Fiserv noted that its research indicates that financial institutions believe that several market segments will be willing to pay for the convenience and faster funds availability of mobile device cheque capture.

Targeted users IMagePROVE are small and large businesses that sell products and services at the buyer’s location, such as home appliance repair businesses and distributors with trucks in the field.

According to Mitek, when depositing a cheque, the user initiates a mobile banking session, keys in the deposit amount and photographs the front and back of the cheque. The software captures the check image and prepares it for transmission to the bank.

Before transmitting the cheque image IMagePROVE corrects image distortions and skewing and confirms that it meets accepted image quality standards.

 

ATMs

China UnionPay cards gain UK acceptance

In a key extension of its international reach China UnionPay (CUP), China’s only card organisation, has reached an agreement with UK ATM network operator LINK that will enable 1.8 billion CUP cards to be accepted at LINK’s 64,000 ATMs.

Indicative of the importance of the agreement, the UK’s Office of National Statistics estimates that 141,000 Chinese tourists visited the UK in 2007, spending an estimated £181 million ($295 million).

In addition about 100,000 Chinese students study for more than one year in the UK and each of them is estimated to spend around £25,000 per year.

CUP’s tie-up with LINK adds to a growing number of countries in which CUP cards are accepted.

These include the US, Japan, Australia, Malaysia and Singapore, France, Germany, Spain, the Netherlands, Italy, Switzerland South Africa and Egypt.

 

INDUSTRY TRENDS

UK acquirers at risk of high merchant churn

UK acquirers should prepare themselves for a high level of churn in their small- to medium-sized merchant customer bases, indicates a survey conducted by research and advisory firm East & Partners (E&P).

Indicative of potential churn, in E&P’s survey of 505 merchants with annual turnovers ranging from £2 million ($3.3 million) to £50 million, one in five will look to change their current acquirer during the next six months.

According to E&P, merchants surveyed process an average of 72,000 card transactions annually with the card processing costs in some instances reaching up to 3.9 percent of net card turnover.

The key reason for contemplating an acquirer change among merchants is dissatisfaction with service, with poor terminal support the most important service issue of 17 service issues covered.

“Fifty-three percent of £10 million and £50 million turnover merchants and a staggering 81.6 percent of £2 million and £5 million merchants have to wait 72 hours or more for terminal failures to be corrected,” said E&P analyst Nick Dowling.

 

REMITTANCES

Philippine National Bank targets China

Setting its sights on a significant share of China’s inbound remittance market Philippine National Bank (PNB) has increased its equity stake in Allied Commercial Bank (ACB) – headquartered in Xiamen China – to 90.4 percent.

PNB’s move involves the investment of an additional CNY591 million ($86 million) which will increase ACB’s total equity capital to about CNY1 billion.

“Through the equity investment in Allied Commercial Bank, PNB will have a significant opportunity to venture into the hugely untapped overseas Chinese workers market,” said PNB in a disclosure to the Philippine Stock Exchange.

The investment, added PNB in the disclosure, will enable ACB to expand its banking operations beyond its existing head office in Xiamen and one branch in Chongqing. PNB is licensed to operate throughout China.

PNB is currently completing a merger with Allied Banking Corporation, a move that will create the Philippine’s fourth-largest bank.

With a strong focus on global remittances PNB has remittance centres in the US, Canada, UK, Spain, the Netherlands, France, Germany, Austria, Italy, Hong Kong, Japan, Singapore, Malaysia and many Middle Eastern countries.

 

PAYMENTS PROCESSING

Logica hub raises messaging volume bar

Subjected to a performance benchmark test at IBM’s testing facility in Montpellier, France, Logica’s FASTWIRE Open messaging hub has proved its capabilities by processing over 5 million store-and-forward SWIFT Fin messages per day.

During the test – carried out in conjunction with a tier one bank which is one of world’s largest users of SWIFT’s messaging services – FASTWIRE Open achieved a maximum throughput of up to 200 messages per second, exceeding the target of 150 messages per second.

During the test the system concurrently managed day-to-day activities such as archiving and database replication.

Tim Brew, the UK technology and business services company’s director of global financial products, stressed that the test confirmed the messaging hub’s ability to cope with payment volumes that are increasing exponentially as global banks continue to grow, either organically or through merger and acquisition activity.

“The client that participated in this test has proven that its future FASTWIRE Open-based messaging platform will support significant growth in its messaging traffic,” said Brew.

“The solution can clearly support our clients’ business expansion, but it also enables banks to reduce the overall cost per message and handle the ever-increasing occurrence of unexpected volume peaks in messages.”

 

REMITTANCES

Pakistan shuts down Western Union agent

Acting on public complaints, the Pakistani government’s Federal Investigation Agency’s (FIA) Cyber Crime Circle has closed the 727 branches of Zarco Money Exchange, Western Union’s oldest money transfer agent in Pakistan.

As part of the FIA’s action, reports in Pakistan’s media noted that eight Zarco employees have been arrested on charges of money laundering.

In addition, the FIA has an arrest warrant against Zarco’s CEO Syed Lakht-ul-Hasnain.

Further reports in the country’s media refer to a report compiled by the FIA in which the agency alleges that Zarco illegally transferred PKR1.3 billion ($16 million) to Dubai between January and July 2009.

The FIA also alleges that Lakht-ul-Hasnain illegally transferred PKR380 million to his accounts abroad between November 2009 and May 2009.

In 2008 Zarco was the recipient of Western Union’s “Agent of the Year” award.

A year earlier Lakht-ul-Hasnain was awarded the “Businessman of the Year Award” from Pakistan’s prime minister at the time, Muhammadmian Soomro.

 

ONLINE PAYMENTS

China’s legion of online shoppers drive Alibaba to new heights

China’s shoppers continued to flock online in ever-surging numbers in the first half of 2009, reveals data published by China’s online commerce giant Alibaba.com.

According to Alibaba, its consumer e-commerce website, Taobao, recorded gross merchandise volume of CNY80.9 billion ($11.8 billion) in the first half of 2009, a 97 percent increase compared with the first half of 2008.

Taobao’s gross merchandise volume equated to 1.4 percent of total retail sales in China in the first half of 2009, based on data from the Chinese Bureau of Statistics.

Consolidating Alibaba’s dominant position in China’s online marketplace, its online alternate payments service Alipay exceeded the 200 million user mark on 6 July this year, up from 150 million users six months earlier and ahead of the 184 million accountholders reported by PayPal at the end of the first quarter of 2009.

Alipay, which was launched in 2004, processes some 4 million transactions daily with a total value of CNY700 million.

 

CONTACTLESS PAYMENTS

ViVOtech solution targets large-scale NFC mobile phone deployments

ViVOtech has released ViVO-nfc Suite 2.8, a solution the US contactless payments software specialist is targeting at large-scale commercial deployments of mobile phones equipped with near field communication (NFC) technology.

Running on Sun Microsystem’s Solaris 10 Operating System and Microsystems hardware ViVOnfc Suite 2.8 follows ViVO-

tech’s involvement in numerous NFC mobile payments pilot projects with most major players in the market and is designed for deployments targeting millions of users.

ViVOtech’s solution, which incorporates over the air card provisioning software, has three key components:

• ViVOnfc Issuer Server, which resides on-site, either at the issuer’s or at the outsourced partner’s location, provides card provisioning services for NFC mobile handsets;

• ViVOnfc Control Server, which resides either at the mobile network operator or at a service manager’s premises, provides administrative services to facilitate multiple payment, loyalty, and promotion applications through an embedded or SIM-based secure element on a mobile payment device; and

• ViVOwallet, which provides the interface for provisioning data to the mobile device, as well as transmitting payment card or coupon information directly to POS terminals equipped with a contactless reader.

 

POS

First Data launches go-anywhere wireless POS terminal

Mobility is becoming increasingly significant in the payments market, something First Data has taken heed of with the launch of the FD400, a low-cost, battery-powered, wireless POS terminal. The terminal features long battery life and runs on 3G wireless protocol.

According to the payments processor, the FD400 is the first POS device to provide merchants that do not have constant access to a power source and communication line with the ability to accept electronic payments at card-present rates.

In addition to payment cards the FD400 accommodates gift cards, loyalty cards, cheques and electronic benefits transfers.

“For merchants whose business is not always in a location with internet or dial up connections, this terminal really solves their connectivity dilemma” said Russell Bird, a First Data senior vice-president.

First Data believes that the FD400 is particularly suited for on-the-go merchants such as taxis, limousines, home delivery, farmer markets and in-home and on-site services.

Other features of the FD400 include an over-the-air software download ability for application updates, store-and-forward capability for offline capture and upload of transactions in non-coverage areas and a compact form factor, which is small enough to fit in a coat pocket.

 

COMPANIES

Monitise buys out VocaLink Monilink stake

Ending a partnership dating back to 2003, mobile payments technology specialist Monitise is to buy out the 50 percent stake in UK mobile banking service Monilink from VocaLink.

The UK electronic transaction service provider will receive an initial cash payment of £1.5 million ($2.5 million) with the potential to receive up to a further £1.5 million, subject to Monilink exceeding financial performance targets between now and 30 June 2013.

Monilink’s service is in use by five UK banks and enables their current account customers to check balances in real time, view mini statements and transfer money from their current account to apply credit up to five mobile phones.

According to Monitise 100,000 new customers register for its services in May 2009 and it is on target to reach a total of 1 million subscribers by the end of 2009.

 

REMITTANCES

Neovia debuts low-cost global remittance service

Signalling another ramp-up in competition in the global remittance market, Isle of Man-based online payments solutions specialist Neovia has launched NETELLER Money Transfer a service offering low costs and instant transfers.

Fees for the service are limited to 1 percent of the amount remitted up to a maximum of $10. Fees are paid by the sender, who can remit funds to anyone with an email address in 20 different currencies to over 180 countries, where NETELLER offers a service.

Receivers of funds are prompted to open their own NETELLER account and withdraw via a number of options including bank transfers, cheques, bank wires or through the Net + prepaid MasterCard card which can be used at over 1 million ATMs and 30 million POS terminals worldwide.

“The Net+ card has all the functionality of a normal debit card and places Neovia at a considerable advantage over competitors offering conventional prepaid cards,” Dan Starr, Neovia’s executive vice-president, sales, marketing and product, told EPI in a recent interview (see EPI 265).

 

E-GOVERNMENT

Omani e-purse goes live in ‘digital society’ push

As part of its strategy to create what it terms as ‘digital society’, Oman’s government has commissioned an e-purse solution enabling the sultanate’s 3.2 million citizens and residents load and store money in their National identity and resident cards issued by the Royal Oman Police (ROP).

The solution was developed jointly by the Network for Electronic Transfers Singapore (NETS) and Dutch digital security specialist Gemalto for the Omani government and will be implemented progressively into 2010 with all banks in Oman participating in the initiative.

With the project now launched it becomes mandatory for citizens and residents to use the cards to pay for transactions such as fees with the ROP.

In addition, government agencies and retailers will be able to collect payment via the card

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