Recent Changes to Debit Economic Model Substantial; Durbin Has Unintended Effect As Consumers Will Absorb Negative Impacts
TSG Metrics, a division of The Strawhecker Group (TSG), released details today on the economics of debit signature and PIN debit transactions for three purchase amounts ($100, $40, and $5) before and after new interchange fee regulations were implemented on October 1. This provision is a cap on the fees that the largest U.S. debit card issuing banks (those with more than $10 billion in assets) can collect when their customers use a debit card to make a purchase (bank interchange fees).
Interchange is only one component of the cost of the transaction as shown on the charts on the following analysis. Beyond the banks that issue cardholders debt cards, there are thousands of companies that make debit card transactions possible, from merchant acquiring companies who provide merchants the ability to accept debit cards, to various technology and transaction execution players in between. Consequently, these companies collect fees for the services they provide – these are in addition to the regulated interchange fees.
Click here for TSG's in-depth analysis.
Welch to Holder: New Debit Card Fees Warrant Federal Anti-Trust Investigation
Amid widespread outrage over new debit card fees charged by Bank of America and other big banks, Chief Deputy Whip Peter Welch (D-Vt.) and House colleagues on Thursday called on Attorney General Eric Holder to investigate whether big banks are coordinating their fee strategies in violation of federal anti-trust laws. “Statements made by individual banks and their trade associations raise questions about whether some price increases that have occurred this year have actually been coordinated.”
Bank of America $5 Fee in Lawmaker Crosshairs
10/12/11 The Street
Two U.S. House lawmakers will introduce legislation Wednesday to repeal financial regulation that caps debit-card swipe fees, arguing that such price controls hurt consumers and ultimately lead to Bank of America charging a monthly fee of $5 for debit-card purchases. Rep. Jason Chaffetz (R., UT) and Rep. Bill Owens (D., NY) said they seek to repeal the legislation under the Dodd Frank Act, known as the Durbin Amendment.
Bank Transfer Day: A Protest With Your Money
10/12/11 Yahoo! Finance
The social uprising — called "Bank Transfer Day" — encourages bank customers to take their cash out of big banks and put it in smaller banks and credit unions instead. The movement is ostensibly in response to aggressive fees institutions are rolling out to recover profits lost from new financial regulations, notably Bank of America's decision to stick debit card users with a $5 monthly fee and Wells Fargo's $3 test of the same. As of Oct. 10, the group's organizers say 6,500 Americans have already signed up.
Durbin Continues Blasting BofA Debit Fee with ‘No Way BofA’ E-mail Campaign
10/10/11 Digital Transactions
U.S. Sen. Richard Durbin its ratcheting up the pressure on Bank of America Corp. by launching what he calls his “No Way BofA!” e-mail campaign urging consumers to protest the bank’s planned $5 debit card fee by e-mailing chief executive Brian T. Moynihan. Durbin, the Illinois Democrat who sponsored the debit card interchange price controls that took effect Oct. 1, strongly criticized BofA’s fee when it became public last week and urged consumers to shop for friendlier terms from smaller FIs.
Visa, MasterCard Accused of Price Fixing by ATM Operators
Visa Inc. and MasterCard Inc. (MA), the world’s biggest payment networks, were sued by a trade group representing operators of automated teller machines over claims the firms fix prices and suppress competition among ATM networks. The group, in a lawsuit filed today in federal court in Washington, accused Visa and MasterCard of antitrust violations for restricting independent ATM operators from charging varying prices for customers using alternative networks such as STAR, Shazam Inc. or TransFund.
September Retail Sales Rise, Giving Recovery Momentum
Retail sales grew at their fastest pace in seven months in September as consumers shook off concerns about a weak stock market and political gridlock, giving a bit more momentum to the economic recovery. Sales rose 1.1 percent from a month earlier, boosted by strong auto purchases, the Commerce Department said on Friday. The reading beat the median forecast in a Reuters poll for a 0.7 percent rise. Sales growth during August was revised upward to 0.3 percent.
First Data Releases September 2011 SpendTrend®
10/11/11 First Data
First Data Corporation, a global leader in electronic commerce and payment processing, today released its First Data SpendTrend® analysis for the full month of September 2011 compared to September 2010. SpendTrend tracks same-store consumer spending by credit, signature debit, PIN debit, EBT cards and checks at U.S. merchant locations. Overall year-over-year dollar volume growth continued to show improvement at 9.5% in September versus 9.0% in August.
Acquirers Are Turning A Profit On IRS Reporting
The merchant-acquiring industry is turning an Internal Revenue Service reporting requirement into a profit center, some analysts suggest. To accomplish that feat, however, companies are sidestepping a ban on levying fees for reporting merchants’ transactions to the IRS, Adil Moussa, an analyst for the Boston-based Aite Group LLC, tells ISO&Agent Weekly. “Merchant acquirers plan to give the fee a generic name so they can circumvent the IRS forbiddance of charging for this service,” Moussa says.
Heartland Payment Systems® Releases Latest Durbin Impact Statistics
10/12/11 Heartland Payment Systems
From October 1, 2011 to October 11, 2011, Heartland passed along $5,532,318 in signature debit interchange reductions to its merchants across the U.S. Restaurant merchants received $1,972,770 of this reduction. The company estimates its average merchant will save more than $1,000 in the first year alone.
Square Readies for Battle with PayPal
Square is still an upstart in the mobile payment world but it’s showing that even with the approach of a new merchant payment system from PayPal this week, it’s got plenty of momentum on its side yet. The San Francisco start-up said today it’s up to $2 billion in annual payments processed and has activated 800,000 merchants for its payment system, up from half a million in May. And it’s made a key change in the way it process payments to appeal to larger merchants.
eBay Announces Facebook Integration, Commerce Ecosystem
10/12/11 PC Mag
We are going to make commerce easier for our customers to stop filling out forms and start buying," said Mark Lavelle, the vice president of strategy for eBay. All customers have to is click once on a button, and affiliated merchants now have access to the customer's identity, Lavelle said. Merchants get the information they need to compete the sale, and customer get the security to complete the transaction.
NCR, S1 and PayPal Partner on Person-to-Person Payments
10/12/11 Atlanta Business Chronicle
NCR Corp. teamed with San Jose, Calif.-based PayPal Inc. and Norcross, Ga.-based S1 Corp. to develop technology for real-time person-to-person payments from bank ATMs to almost anyone with a mobile phone or e-mail address. A customer will authenticate himself at the ATM, then get the option to send money. The customer then will enter the recipient’s e-mail address or mobile number, choose an amount to transfer and the money will be immediately credited to the recipient’s PayPal account.
Facebook Totally Caved To Apple On Its New Mobile Platform
Facebook announced a huge extension of its mobile platform today, and as long rumored, the company is going to be spreading its payment platform, Facebook Credits, to the mobile versions of all Facebook apps. This could have been a blow to Apple, giving a way for developers to sell content -- like virtual goods, song downloads, or news subscriptions -- within iPhone apps without having to go through Apple's App Store and give Apple its 30% cut.
Citi Rounds on ISIS, Urges Other Banks to Join Google Wallet
"It's unclear what they are trying to achieve, other than extract a toll as gatekeepers," he said. "There's so much more that they could do...as it is they are just hampering the development of NFC as a mass-market commercial proposition." Citi has been actively involved in the development of Google's mobile wallet strategy, which at launch is available only to consumers in posession of a Citi MasterCard or Google-branded pre-paid MasterCard.
Mobile Payments Looking at Turbulent Times
While the mobile-payment players acknowledge that partnerships are necessary for long-term viability, many are gearing up for some chaotic times. The idea of a digital wallet and the opportunities that come from moving payments onto the smartphone were major themes at the CTIA Enterprise & Application show. American Express executive Dan Schulman used his keynote address to call for more alliances, noting that, "no single company can do this alone."
JPMorgan Chase's Income Drops 4 Percent, Durbin Forces Rethink of Branch Expansion
10/13/11 Washington Post
If JPMorgan Chase can’t do well, investors worry that other banks may do even worse. The New York bank, widely considered the strongest in the industry, reported a 4 percent drop in income last quarter Thursday on weakness in investment banking and more costs related to litigation over mortgage investments. Because of the lower debit card fees and other regulations that restrict revenue, JPMorgan said it would scale back on the number of bank branches it is opening around the country.
TSYS Renews Deal with Capital One, Could get HSBC Accounts
For TSYS, it’s a contract extension with one of its largest customers, Capital One. The deal will keep the heavily branded credit-card issuer with the Columbus firm deep into 2017. “We believe this is a good indication that not only will (TSYS) retain the processing of Cap One portfolio, but the company appears well positioned to gain the 27 million active accounts of HSBC. There have been concerns that this could go the other way, with Capital One’s cards migrating to HSBC’s platform.”
American Express To Release An API For Digital Wallet Platform Serve; Focuses On Data And Personalization
Serve integrates a variety of payment options into a single account that can be funded from a bank account, debit, credit or charge card. The company has also landed a number of lucrative carrier partner deals for Serve. Separate from Serve, American Express’ recent partnerships in the payments space include Foursquare, Facebook and even Zynga for personalized deals. We sat down recently with Harshul Sanghi, American Express’ new VP of Enterprise Growth Group to chat about Serve.
Global Payments Inc. Will Deploy Accertify Risk Management and Fraud Prevention Solutions for E-commerce Transactions
Accertify, a leading fraud prevention and risk management provider, announced today that Global Payments Inc., a leader in electronic transaction payment processing, will offer its e-commerce merchants a comprehensive and proven fraud screening solution based on Accertify’s leading risk management technology. Through the existing Global Transport® gateway, merchants will be able to easily leverage the fraud protection and data management capabilities of Accertify.
Fidelity Information Services Tops Tech Vendor Rankings
Fidelity Information Services tops the rankings in 2011 of the largest financial technology vendors in the world, according to the eighth annual FinTech 100 survey compiled by IDC Financial Insights, American Banker and Bank Technology News. The top global technology providers to the financial services industry also continued to grow, despite what IDC, Banker and BTN called “the impact of ongoing challenges within the global economy.’’
U.S. Bank First in Industry to Launch Mobile-Enabled Credit Card Application at Select Retail Locations
U.S. Bank, lead bank of U.S. Bancorp /quotes/zigman/278238/quotes/nls/usb USB -1.60% , announced today the launch of a new U.S. Bank Card app for select retail partners. The new iPhone app brings convenience and buying power into the users' hands by giving them the opportunity to apply for and receive on-the-spot credit to make immediate in-store purchases. The new iPhone app expands U.S. Bank's leadership in the mobile banking space.
Citi Debuts Browser-Based Mobile Payments App
Citigroup unveiled CitiDirect BE Mobile, a browser-based application enabling clients to receive notifications and authorize payments using their mobile phones. Available to over 50,000 clients and 300,000 users worldwide, the app includes SMS alerts that complement email and fax notifications and payment authorizations covering every type supported by Citi's online banking platform.
Who Needs Cash? More Issuers Let Users Spend Points at Amazon.com
"Our goal is that they [cardholders] continue to use our card as a primary card," says Dana Traci, Discover's vice president of rewards and product management. It's a solid strategy, says Adil Moussa, a senior analyst at Aite Group. Amazon integration "will actually push you to use that card more than any other," he says. Discover believes its system will be more appealing than its rivals' because it makes the points-to-cash translation straightforward: "A dollar in Cashback Bonus is a dollar" on Amazon.com.
Count on Users to Foil NFC Payment Security
Remember those demonstrations of how the payment-card numbers can be stolen from contactless cards by a thief carrying a card reader who bumps victims’ wallets and purses in a crowd? Yes, it’s been a staple of local TV news for years, and it’s a legitimate potential security risk—a risk that was going to be eliminated by NFC mobile payments. That, it turns out, didn’t quite work out the way the proponents of NFC phones were hoping it would.
Will Regulators Start Over on Risk Retention?
10/11/11 Securities Technology Monitor
With regulators facing the potential of significant revisions to their risk-retention rule, there is growing speculation among industry and consumer groups that the agencies will go back to the drawing board and issue a new proposal. The plan, mandated under the Dodd-Frank Act and issued in March, drew hundreds of comment letters that detailed objections to the proposal. The sheer volume of comments and magnitude of changes sought have fueled talk that regulators will have to start over.
Fed Leaves Door Open on QE3
At the two-day meeting that concluded Sept. 21, the Fed unveiled plans to sell short-term Treasuries and buy longer-term debt, a move popularly known as "Operation Twist," in an effort to drive down interest rates without pumping additional money into the economy. But the minutes released Wednesday showed that the possibility of a third round of asset purchases, known as quantitative easing or QE3, is still very much alive.