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February 10, 2009updated 24 Jan 2022 8:25am

Region Round-up

Australia-based prepaid card provider OnCard has reported a 13.4 percent increase in half-year profits... Network International, a Middle East card payment solutions provider, has formed a joint venture with Bahrain Electronic Network for Financial Transactions... Mexicos fifth-largest bank, Banco Banorte, stated that its fourth-quarter 2008 net profit fell to MXP1.27 billion ($0.08 billion)...

By Verdict Staff

Australia-based prepaid card provider OnCard has reported a 13.4 percent increase in half-year profits…

Network International, a Middle East card payment solutions provider, has formed a joint venture with Bahrain Electronic Network for Financial Transactions

Mexico’s fifth-largest bank, Banco Banorte, stated that its fourth-quarter 2008 net profit fell to MXP1.27 billion ($0.08 billion)…

US Financial Services Group has officially launched MobileProPay, an iPhone and iPod touch credit card processing application aimed at businesses…

 
Asia-Pacific
 

• Australia-based prepaid card provider OnCard has reported a 13.4 percent increase in half-year profits to December 2008 over the previous corresponding period. Sales of loyalty, rewards and prepaid cards increased 120 percent, reaching 29 million in Asia and 23 million cards in China alone.

Its China operations contributed A$3.23 million ($2.14 million) in profit, an increase of 1.9 percent from the corresponding period last year. OnCard is expected to make announcements regarding Asia-based acquisitions and joint ventures in the next few months.

Industrial and Commercial Bank of China’s cardholders will now only be charged interest for the rollover balance on their credit cards if minimum payment is made. Previously, cardholders were charged interest based on the total amount borrowed if they were unable to pay off the whole sum before the due date.

Although the move was welcomed by cardholders, it will affect the bank’s profits. The bank claims that credit cards account for 10 percent of the bank’s operations and will thus not have a significant impact. The bank also recently reported that credit card spending in January 2009 rose by 27 percent from January 2008.

Punjab National Bank, India’s second-largest public sector bank, has launched Global Gold and Global Classic credit cards in collaboration with Visa. The photo credit card offers a 50-day credit period and no annual fees. It will be available in the bank’s 1,200 branches across India.

• The Reserve Bank of India has proposed a maximum prepaid card limit of INR50,000 ($1,026). Semi-closed prepaid cards may be issued with a limit of INR1,000 without being subjected to know-your-customer reporting requirements while prepaid payment instruments for utilities, telephone and insurance may be issued with a limit of INR10,000.

GE India will exit the consumer loans business and focus on credit cards, commercial lending and infrastructure financing. It will miss its 2010 revenue target of $8 billion and may take another year to reach the targeted revenue.

The risk of fraud and defaults in the unsecured lending segment in India is high although foreign banks are still very keen to grow their operations in the region in the long-term.

• India’s Supreme Court has suspended an order by a consumer rights panel to cap credit card interest rates at 30 percent. A joint plea by HSBC, Citibank and Standard Chartered cited the high business costs such as the costs of call centres, monthly statements, fee waivers, and marketing and loyalty programmes.

Current interest rates range from 36 to 49 percent.

ICICI Bank, India’s largest private sector bank, has been reviewing its growth in the credit card business with the current economic concerns.

Indian cardholders are delaying payment on their credit cards as total credit card outstandings registered a sharp increase of 69.3 percent in the 12 months ending 19 December 2008. The bank has a 30 percent market share and shrunk its portfolio by 3.7 percent from 2007 to 2008.

• Smart card manufacturer Gemalto will partner with India-based mChek to boost the range and choice of secured mobile banking solutions available on Gemalto SIM cards in South Asian countries such as India, Sri Lanka, Bangladesh and further afield, in Indonesia and the Philippines.

American Express has appointed Rajesh Saxena as chief executive officer of American Express Banking in India. Saxena, formerly with Citibank, will manage the international consumer card and small business services.

• Indonesia’s central bank, Bank Indonesia, has warned card issuers to prepare for an increase in defaults among credit cardholders. The default rate as of the end of 2008 was at 10 percent, a decrease compared to the default rate of 12 percent in 2007.

South Korean credit card firms are facing rough market conditions with the ongoing economic slump. Delinquency rates in Samsung Card and four other card issuers rose to 3.43 percent by the end of 2009, according to data from the Financial Supervisory Service.

The South Korean economy shrank 5.6 percent in the final quarter of 2008 from the previous quarter, its lowest since the 1997-1998 Asian crisis.

Credit card usage also hit a five-year low in January 2009. Market observers are expecting it to decline further as consumer confidence is shaken with 100,000 job cuts expected in 2009 and no signs of an economic recovery.

South Korean card issuers will also face a decline in fee revenue after being asked to reduce the merchant fee to as low as 2 percent from up to 3.3 percent previously. Smaller retailers are also lobbying for a decrease in their fees as they would be harder hit with merchant fees.

Large retailers such as discount chains and department stores currently pay 1.5 percent to 1.8 percent while restaurants pay 2.6 percent to 2.7 percent and lodging houses pay 3 percent to 3.2 percent.

• Malaysia’s MBF Cards has launched a Lady WalletGuard programme for its MBF Lady Platinum cardholders. Launched in collaboration with ACE Insurance Malaysia, the scheme offers financial relief for fraudulent transactions, stolen cash and medical expenses resulting from thefts.

RHB Banking Group of Malaysia has launched a co-branded credit and debit card with Tesco Stores and Visa. Cardholders will enjoy a 2 percent cash rebate and earn double Tesco Clubcard points.

On the last weekend of each month, they will enjoy a higher cash rebate of 5 percent. Debit cardholders will earn five times Clubcard points which can be used to offset future purchases at Tesco.

Bank of Ayudhya will acquire AIG’s retail banking and cards operations in Thailand. AIG is selling its two Thai units to concentrate on its insurance business and repay its debt to the US government.

In a deal expected to be completed in April 2009, Bank of Ayudhya will acquire the operations for $58.7 million or at 0.6 times book value.

This move will increase Bank of Ayudhya’s retail loans by 14 percent, bringing its retail loan contribution to 36 percent from 32 percent, and add 220,000 credit cards to its portfolio.

The bank is targeting its retail loan portfolio to make up 50 percent of its total portfolio by 2010. GE owns 33 percent of the bank.

 

Europe, Middle East, Africa

Network International, a Middle East card payment solutions provider, has formed a joint venture with Bahrain Electronic Network for Financial Transactions under which Network International will provide third-party ATM and card processing services for banks in the region.

This came in response to a request from the central bank of the United Arab Emirates (UAE) for banks to upgrade their ATM cards with EMV technology.

It is expected that more than 500,000 cards will be issued under the venture over the next five years, with revenues projected at around AED36.7 million ($10 million).

Kenya Commercial Bank, the largest bank in East and Central Africa, has deployed banking software provider Temenos’ banking system, T24, to support its retail and corporate banking operations.

The new system has gone live in 145 branches in Kenya, supporting approximately 675,000 bank accounts, with plans to expand to another 75 branches across East Africa.

• Global credit ratings agency Standard & Poor’s has teamed up with the Saudi Arabian Credit Information Bureau to develop a commercial and corporate credit information service for banks in Saudi Arabia.

The move will see default and recovery data from 12 local banks collected and assessed in a bid to strengthen the industry’s risk management standards.

Member banks will provide information on their mid-market and large corporate defaults, both historically and on an ongoing basis.

• UK banking group Royal Bank of Scotland (RBS) has launched RBS WorldPay as a new brand to consolidate its existing range of retailer payment solutions products and services.

The new brand brings together Streamline, Streamline International, WorldPay, Payment Trust, Bibit, RiskGuardian and RBS Lynk.

RBS WorldPay offers payment processing solutions across face-to-face, online, telephone and mail order platforms servicing all sizes and sectors of business. It is one of the largest merchant acquirers in Europe and globally, operating in more than 40 countries.

• UK banking group Barclays is offering its mobile banking customers free security software from anti-virus vendor Kaspersky to protect them against malicious software and SMS spam which can be downloaded from its mobile site.

Barclays claims it is the first in the UK to offer such protection for free. The mobile site has been revamped to make it easier to view account balances and statements and make transfers or payments.

• German prepaid solution provider paysafecard.com, issuer of the prepaid cards, has changed its trade name to Prepaid Services Company in order to reflect the growing use of prepaid solutions for e-commerce. In 2008 there were 15 million transactions using paysafecard.

EntroPay, a European prepaid solution provider, has launched the EntroPay MasterCard which is an extension of EntroPay’s existing prepaid offering available online.

Existing customers can now extend their EntroPay account functionality to upgrade to a plastic MasterCard.

EntroPay plans to develop a bespoke business service in 2009, where companies will be able to co-brand their EntroPay plastic MasterCard cards with their logo for employees.

• European IT service company Tieto has partnered with global payment processor First Data for a new payment card solution for state institutions in Latvia. The solution is based on the Tieto Card Suite Acquiring module and is aimed at speeding up payment processes.

Instead of multiple bank transfers, end users will now be able to pay for the services of Latvian state institutions with a payment card.

Citi Handlowy of Poland has announced that the number of Citi credit cards issued in the country has exceeded one million. Citi also claims to be the market leader in terms of the number and value of credit card transactions.

More than 3,200 points of sale in Poland now offer discounts to Citi credit cardholders, and Citi has also launched an SMS messaging service for cardholders.

• Global payment processor TSYS is to provide end-to-end payment services to Benelux card acquirer and processor PaySquare.

PaySquare began outsourcing payment processing operations to TSYS in October 2008, supporting MasterCard, Visa and Maestro card transactions through its Prime processing platform. It manages more than 55,000 merchants.

First Data has also started processing payment and loyalty cards for Mercator, a retail chain in South-east Europe.

The launch of the services, which are now live in Slovenia, Croatia, Serbia, Bosnia and Herzegovina and Montenegro, comes 10 months after First Data signed a processing agreement with Mercator.

Mercator operates more than 1,500 hypermarkets, supermarkets and grocery stores in the region.

First Data is providing issuing processing services for Mercator’s loyalty programme ‘Mercator Pika’, which has around one million members.

• Separately, TSYS has been selected by Germany’s Deutsche Bank for credit card processing.

TSYS will manage around 1.5 million card accounts for Deutsche Bank from the second quarter of 2009.

Valitor, a card acquirer in Iceland, has entered the UK through a strategic partnership with global payment services provider YESpay.

It has selected YESpay to act as its sales agent and payment processor in the UK to provide managed card payment services to multi-chain retail businesses in a range of sectors.

YESpay will perform various services, including merchant recruitment, risk assessment as well as payment processing services.

• Swedish bank, Handelsbanken has introduced a new fraud protection facility on its credit cards which will enable customers to temporarily disable them when they are not in use and also disable the overseas transaction facility.

Card fraud in Sweden has almost been eliminated with the introduction of PINs, but criminals are able to use cards abroad where the system has not been introduced.

 

Latin America

Smart card manufacturer Gemalto has teamed up with Corporación Cardtech, Venezuela’s largest supplier of magnetic stripe bank cards, and EMV specialist Newtech Solutions to help the country migrate to EMV-enabled credit cards in an effort to fight fraud. The firms predict that eight million cards may be in issue by the end of 2009. The country currently has 16 million debit and credit cards in circulation, which will all be replaced by July 2009.

• Brazil-based Global M-Payment Consortium has launched an off-the shelf and ready to use hardware component CodeOne, which could work at 3.8 billion points of sale from world-capable GSM handsets. The product, which the consortium claims meets international industry standards, can be deployed by banks to process all credit card-like transactions.

Global payment processor TSYS has signed a payment processing agreement with Tarjetas Unisoluciones, a wholly-owned subsidiary of Unibanco Brasil, for the launch of its Unicard México consumer card portfolio. The bank will be the first in Mexico to utilise TSYS’ platform.

Banco Bradesco’s 2008 results showed that the bank’s BRL65.4 billion ($28.8 billion) of card sales comprised BRL39.7 billion of credit card sales, BRL21.1 billion for Bradesco Visa Electron debit cards, and BRL4.5 billion of private-label card sales. Bradesco’s market share of the overall card market in Brazil stood at 18.2 percent at the end of 2008 as it had issued 33.7 million credit cards and 47.9 million debit cards.

According to press reports, the Brazilian consumer finance unit of Citi may be integrated into the bank’s credit card business. Citi has denied market speculation that it would seek to sell off any of its Brazilian operations.

Growth in Mexican bank lending to individuals and companies fell in December 2008, with consumer credit falling sharply amid increased fears of defaults due to global economic turbulence. In recent months banks in the country have reined back the number of new credit cards issued.

Bank extension of consumer credit, including credit cards, fell 33.5 percent in December 2008, compared to the year-ago period, according to data from Mexico’s central bank. Most of that drop was attributed to Spain’s Santander and Banamex, the Mexican unit of Citi, which recently moved credit card debt off their books and into specialised lending companies.

Mexico’s fifth-largest bank, Banco Banorte, stated that its fourth-quarter 2008 net profit fell to MXP1.27 billion ($0.08 billion), a drop of 24 percent compared to a year ago, due to rising loan loss provisions. The bank had set aside MXP827 million in provisions for credit to retailer Comercial Mexicana, which defaulted on its debt in October 2008. Banorte also said it had increased reserves on its credit card lending amid the rise in defaults. Its non-performing loans represented 2 percent of its total at the end of December, up from 1.7 percent in September. Banorte’s credit card portfolio fell 8 percent in the fourth quarter from the third.

Venezuela’s Commission for Currency Administration (CADIVI) has slashed the amount of US dollars that Venezuelans may purchase each year to travel abroad from $5,000 to $2,500. The full dollar allowance will only be available to high-income consumers who qualify for gold credit cards. This is likely to restrict the ability of low- and middle-income Venezuelans to travel abroad. There are only around 2 million credit cards in issue in Venezuela, which has a population of 24 million.

Visa Latin America has deployed a new system which can detect potential fraud in real time across the Latin America and Caribbean regions. Advance Authorisation, says Visa, is the first service of its kind to be launched in the area. The system detects unusual spending patterns and monitors individual accounts for fraud.

Brazilian mobile financial services provider, Samba38, has launched a service which will allow consumers to top up prepaid mobile phone accounts as well as make mobile phone payments instead of using a credit or debit card. The company predicts that the Brazilian market for mobile payments will reach $164 billion by 2011. There are over 121 million mobile phones in the country already.

The Argentinean government has announced a new electronic ticketing system for Buenos Aires’ public transport system, which will cost the government $57 million. The decision came because of a dire shortage of coins in the economy, which led to their hoarding.

Commuters may only pay with change on Buenos Aires’ public transport system and as a result a black market had sprung up with street vendors selling coins at a profit – a practise which has now been made illegal.

Citi reported a plunge of 41 percent in its Latin America earnings, where 2008 saw net profits of $2.14 billion compared to $3.6 billion the previous year. Its global cards business in Latin America reported a net profit in 2008 of $491 million, down 60 percent from $1.23 billion the previous year. Credit costs increased 89 percent, reflecting higher net credit losses, up 37 percent, and a $231 million incremental net loan loss reserve build.

Bankcard Empire (BCE), a provider of merchant services processing which has operations in the US and the rest of the world, has added the Dominican Republic to its list of represented territories. They will begin the first quarter of 2009 by targeting Latino and Hispanic business operations as part of their diversification plans.

The US payments network provider Bling Nation and engineering firm Micrologica are teaming up to develop hardware and software technology which will support smartphones, wireless point of sale machines and contactless payment tags in Chile. They have received a $500,000 grant from CORFO, the Chilean economic development agency which will subsidise their business in the country. The grants are given to encourage US technology companies to invest in Chile, basing their research and development efforts there.

Banco de Chile has reported its fourth-quarter 2008 results, with total fees and commissions rising by 15 percent on the back of increased credit card usage boosted by marketing campaigns, new co-branding alliances and the incorporation of the Diner’s Club credit card aimed at high income individuals, previously administered by Citibank Chile.

Nexxo Financial, a self-serve remittance services provider to the US Hispanic and Latin American market, announced that its consumers had deposited more than $200 million in the company’s patent-pending money transfer ATM-like machines, called Cajeros, which allow the sender to use a touch-screen to conduct money transfers.

 

North America

• The National Payment Card Association (NPCA) of the US has raised $2 million from San Francisco-based KPG Ventures for the purpose of expanding beyond petrol stations and convenience stores to supermarket and pharmacy chains.

NPCA enables merchants to pay lower transaction fees on debit card payments by processing them through the Federal Reserve Automated Clearing House, an alternate payment solution it has offered since June 2006.

NPCA has also launched a ‘Gas Cap’ rewards programme which enables US customers to make savings on their utility bills. The rewards system, tied in with their existing loyalty programme, is funded by passing a portion of the transaction savings back to consumers. It is available through VeriFone, Gilbarco, Radiant and Wayne point of sale distributors.

Shell Canada Products has agreed to carry on as a sponsor of the loyalty and marketing solutions provider Alliance Data’s Canadian Air Miles reward programme. Shell Canada Products operates more than 1,500 retail service stations under the brands Shell, Turbo, Payless and Beaver and is one of the top five sponsors and suppliers of Air Miles rewards since 1993.

Payment services software developer Fidelity National Information Services and Cuna Mutual, a financial services provider, have teamed up to roll out plastic card fraud data sharing services for credit unions, which will transfer information from Fidelity’s systems to Cuna’s claims processing software. The companies say nearly 2,300 credit unions will be implementing such systems.

Optimal Group is planning to sell its wholly-owned subsidiary, Optimal Payments, to United Bank Card for $11 million.

The portfolio represents more than 5,000 merchant locations in the US. Before the deal is completed, Optimal will continue processing any residual transactions while paying a fee to United, but this will be adjusted against the final price.

Citigroup plans to lend a total of $36.5 billion to consumers, of which $5.8 billion will be as credit card loans. The decision comes after it received a $45 billion government bailout. US banks have been under increasing pressure to restart lending after receiving the rescue packages.

Nearly 6,300 students said they felt forced to sign up to a prepaid debit card provided by Chase Card Services in order to receive their student loans. The students must pay $2 each time they withdraw money using the cards, $10 for talking to a bank teller, or $1.25 for current account balances – services which are usually free for other Chase customers.

• A new credit card has been launched by the US Azeris Network (USAN) which will be issued online by Kansas City-based UMB, a multi-bank holding company. A spokesman for USAN said the network will receive a donation of $50 the first time a cardholder makes a purchase and a percentage on all purchases thereafter. The funds will be used by the Azerbaijani diaspora group for grassroots advocacy projects in the US.

Prepaid debit card solutions provider TransCard has launched a service which will allow consumers with MasterCard, Discover and STAR-branded cards to pay bills online or even make paper cheques for smaller utility companies who may not have the technology to process electronic payments.

Canadian coffee shop chain Second Cup has joined Visa’s roster of contactless-enabled payment merchants. Nearly 360 outlets will have implemented Visa’s payWave technology by 31 March. The deployment comes at a time when Visa is migrating to chip technology in Canada.

US Financial Services Group has officially launched MobileProPay, an iPhone and iPod touch credit card processing application aimed at businesses. The features on the application will be able to accommodate an unlimited number of users, order descriptions, tax/exemption, shipping cost and the ability to email customers. The new application could be used by merchants at places such as conventions or fairs as long as there was a wireless internet connection available to them. Users could set up an account with Authorize.net for $27.50 per month which charges them a $0.35 flat fee for each transaction, which will include a percentage cut for the card issuer. A similar application already retails at Apple stores across Australia as iCharge.

Old National Bank (ONB), the largest financial services holding company in Indiana, has teamed up with Southern Illinois University to offer a co-branded cheque card, designed in maroon which is the local sports teams’ jersey colour. Existing customers will be able to switch the to the new-look card which is acceptable at all Visa merchants across the US. The bank had formed a similar partnership with Indiana University in August 2008.

Banks in the US are seeing dwindling returns in non-interest earnings like ATM and overdraft charges – as customers are making fewer withdrawals and purchases. At TCF Financial, earnings from fees and other charges was $474.1 million for 2008, down 3 percent from 2007. TCF’s CEO doubts this trend points to prudence, but was more likely a result of curtailed spending symptomatic of the world economic downturn. He said the current sliding trend started six-to-nine months ago – but the falling rate had worsened by the quarter.

Of the 4,000 merchants in metropolitan cities like Chicago, New York and Paris surveyed recently by Motorola, 44 percent could be easily infiltrated by hackers. This figure has improved since 2007 when it stood at 85 percent. The mobile phone manufacturer has warned retailers not to use outdated encryption technology. It has refused to reveal the name

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