Industry News
Are You Ready For International ACH?
September 18th, the new International ACH format – IAT – and accompanying NACHA rule changes go into effect. This is the most significant change to the ACH network in decades, affecting corporate payment initiators, financial institutions of all sizes, financial software companies, and payment service providers. The new rules have been a huge nightmare for banks and their system providers, but will open the door to greater use of ACH for cross-border transactions. Attn: payment managers, this could be a big opportunity! IAT affects all International ACH transactions that flow through the US ACH network, regardless of currency or country. The NACHA rule change both redefines what an International transaction is and creates a new International ACH transaction format. NACHA implemented IAT in order to meet the demand for more efficient and accurate Office of Foreign Assets Control (OFAC) review to support national security and foreign policy restrictions on money movement (more on OFAC below). Today, many transactions initiated overseas are introduced to the US ACH network by correspondent banks in the US as domestic transactions, making it difficult to identify them for screening. In addition, the current ACH transaction formats do not include sufficient information to properly screen International transactions, let alone automate screening. Back in 2004 NACHA began working with OFAC to define new International ACH transaction rules and develop a new ACH format IAT with sufficient information to identify all the parties to a transaction. The rules governing IAT have evolved since the new transaction type was announced, in response to new guidance from OFAC and requests for clarification from corporate originators, financial institutions, and technology providers. The previous NACHA definition of “International ACH” relied on whether or not the originator or receiver of the ACH transaction was outside the United States. Under the new rules, a transaction is classified as International (and must therefore use the IAT format) if the financial institution moving the funds is located overseas. After September 18, the current cross border ACH transactions, CBR (corporate cross-border) and PBR (consumer cross-border), will no longer be used. However, returns of transactions originated before the deadline are allowed in CBR/PBR format until December 31st. Many transactions that are currently non-International ACH transactions such as PPD (pre-arranged bill payment or direct deposit), CCD (cash concentration or disbursement), WEB (web initiated), or TEL (telephone initiated), etc. will now have to be formatted as IAT transactions if they fall under the new International ACH definition. Nothing has changed in terms of OFAC compliance rules, the IAT change only affects ACH transaction formats and the definition of what an international ACH transaction is. Note that although specific individuals and countries are identified as suspect by OFAC, that is not what makes an ACH transaction IAT eligible.The new IAT format will usher in a wide range of International payment products and services from banks, supporting the increasing number of businesses large and small with global trading partners, and the increase in person-to-person remittance payments from one country to another. The Federal Reserve, in conjunction with the NACHA IAT initiative, is working toward ACH interoperability with Europe/SEPA, in partnership with Equens SE, and with Panama, in partnership with ACH Directo. Countries in key regions, such as Asia, are targeted next. At Glenbrook, we’re monitoring the evolution of those partnerships and ACH International interoperability and will provide updates here at Payments Views. International ACH is not intended to replace Wire transfers, but is meant to be an alternative to check payments for non-urgent, low dollar transactions to and from foreign countries. While IAT will enable banks of all sizes to originate International transactions, enabling both P2P remittance transfer services as well as business-to-business trade payments, as payments industry insiders well know, the ACH network has provided fertile ground for payment innovation by non-banks. Glenbrook anticipates that IAT will open the floodgates for increased cross-border transaction services by banks and non-banks alike.
Payment News - August 19, 2009
E-billing, electronic payments impact customer retention and profitability - study. Electronic billing and online payments have a positive impact on customer satisfaction, retention and profitability, a recent study indicates. According to the research - which evaluated data from 8 million residential online consumers over an 18-month interval – the most significant linkage between billing and business benefits is evident among the so-called early tenure customers, namely those who have been using online billing and payments for less than 28 months. The study also indicates that customers who receive paperless electronic bills via a company’s website or at a financial institution’s website, or who use recurring payments, are more profitable for the billing organization. Among early-tenure customers, e-bill users were revealed to be 12.5 percent less likely to stop using the service, as well as 35 percent more likely to pay their bills on time, and purchase 20 percent more products than paper bill users. Also, automatic, recurring payment users are 14 percent less likely to switch banks or give up e-billing and 86 percent more likely to pay their bills on time. From a cost perspective, the study highlights the importance of delivering e-bills not only via an organization's own website, but also via financial institution sites; this is due to the fact that the circumstances in which a bill is received impacts payment method. Among the survey participants, 74 percent of customers who receive an e-bill at a bank site pay using a deduction from their bank account, a low-cost form of payment. Also, 40 percent of customers who receive bills at a company’s website pay using a card-funded payment, a higher cost method of payment. The study was commissioned by US financial services technology provider Fiservand conducted by Aspen Marketing Services.
The PAYPERS - August 18, 2009
E-Payables: Electronic Payments. With current economic conditions forcing enterprises to focus on cost containment, top-performing organizations are driving efficiencies within the final phase of the accounts payable process to unveil a wealth of cost and time benefits, according to a new research study published by Aberdeen Group, a Harte-Hanks Company. The E-Payables: Electronic Payments research report, which examined the strategies, intentions, and performance of over 140 enterprises, found that nearly 70% of enterprises place a critical / high-priority level on improving overall payment processes and procedures, a figure that reinforces the notion that overall financial success within the enterprise rests on the operational shoulders of the accounts payable department. "Top-performing enterprises realize the value in automating the final phase of the A/P process," said Christopher Dwyer, research analyst and author of the study, Aberdeen. "By leveraging electronic payment methods, such as ACH, commercial cards and wire transfer, they have significantly cut payment-processing costs in addition to reducing the risk of payment fraud."
Money Central - August 11, 2009
SWIFTNet Goes Live In Hong Kong for High-value Payment. SWIFTNet went live on 25 May as Hong Kong’s financial messaging platform for Clearing House Automated Transfer System (CHATS) payments as the Hong Kong Monetary Authority (HKMA) switched from its proprietary network to SWIFT. The HKMA and Hong Kong Interbank Clearing Limited (HKICL) decided in 2006 that they would implement the new open platform and replace their proprietary platform. By mid-2010, SWIFTNet InterAct and Browse functions will be added to the platform. Customers will be able to use these two additional features to benefit from the interactive and query services available from SWIFT. Average daily traffic expected from the SWIFTNet platform is around 100,000 messages, mainly generated from the 30,000 payment transactions that have moved to SWIFT from the former proprietary platform.
China Payment New - August 5, 2009
Cash Carrying Consumers Look to Prepaid Debit Cards to Avoid Credit Card Woes. It's natural for consumers to want convenience, which explains why credit cards have been a hot item. But millions of consumers have either dropped them because of rising fees, or have been forced out by credit card issuers. Many of these cash carrying consumers have found a solution, by replacing their credit cards with reloadable prepaid debit cards. Unlike credit cards, prepaid debit cards are cash cards, putting consumers in control by preventing them from spending more than they have. While prepaid cards don't allow consumers to float balances, the good news is it means prepaid issuers do not charge interest rates. However, prepaid cards keep some of the best features of credit cards, making it a better option than cash.
Reuters - July 21, 2009
Healthcare Providers Want Electronic Payments. Payformance Corporation has released the results of a survey showing that healthcare providers want to transition to electronic claim settlement. The survey showed that only a small fraction of providers are receiving electronic payments and remittance advices, yet over 96 percent of respondents would like the option to settle claims electronically. An even greater percentage, 98 percent, believes that more health plans should offer this option to providers. The study was distributed to 3,343 healthcare providers; the electronic survey was completed and returned by 542 respondents. "Providers in the healthcare industry clearly want to settle claims electronically," said Dwayne L. McAfee, President and CEO of Payformance Corporation. "Electronic claim settlement lowers provider costs, improves cash flow, and reduces payment disputes. In fact, providers can save as much as $2.94 per claim settled electronically by using the comprehensive solution from Payformance." For the healthcare industry to effectively transition to an electronic claim settlement approach and address the issues raised by the survey, there are three key actions that payers and providers should focus on: (i) Payers -- elevate the priority of transitioning to electronic claim settlement and put solutions in place to deliver EFT and ERA to all providers desiring electronic settlement; (ii) Providers -- encourage all of their payers to offer EFT and ERA services; and (iii) Providers -- leverage inbound 835 ERA transactions to auto-post to their practice management systems, and avoid manual re-keying of remittance data. The study also found that providers believe that electronic claims settlement will be the industry standard within three years, as 92 percent of the providers who responded either agreed or strongly agreed to the upcoming trend in healthcare.
Payments News - July 18, 2009
US online shoppers suspend purchases mainly because of high shipping costs – study. For almost half of US online shoppers (45 percent), high shipping fees are the top reason for abandoning online purchases. According to The Wall Street Journal, some of the online merchants do not reveal shipping prices and fees at the outset because of their belief that "having a low show rate will drive people to the shopping-cart page." But it is precisely the lack of clarity regarding shipping charges which determines online shoppers to give up online purchases, a study indicates. The need to make price comparisons, as well as the customers' intention to look for a coupon, cited by 37 percent and 27 percent of those involved in the study, were some of the other reasons why US shoppers bail out on online transactions. In addition, 26 percent of respondents preferred to make the final purchase in a brick-and-mortar store, 24 percent abandoned their shopping carts because their favorite payment option was not available at checkout, while 21 percent expressed concerns related to the security of credit card information they disclose online.
The PAYPERS - June 24, 2009
The New Card Act Requires Limits, Disclosures on Gift, Prepaid Cards. Title IV of The Credit Card Act of 2009 imposes limits on issuers of gift cards and prepaid cards with respect to dormancy fees and expiration dates to become effective within 15 months. Dormancy fees can't be charged unless fully disclosed and only after a one year period of dormancy. Expiration dates cannot be less than five years from either the original date of purchase or from the date of the most recent reload to the card and must also be fully disclosed to the purchaser. The Act requires that the Federal Reserve within 9 months prescribe regulations to carry out this section ... "including such additional requirements as appropriate relating to the amount of dormancy fees, inactivity charges or fees, or service fees that may be assessed and the amount of remaining value of a gift certificate, store gift card, or general-use prepaid card below which such charges or fees may be assessed."
Payment News - May 25, 2009
Consumers Still Unimpressed by Mobile Banking and Payments. Several years of hype haven’t yet motivated many consumers to embrace banking and payments through cell phones and other mobile devices, though there are signs that consumers are warming to the new technology, according to new survey results from KPMG LLP. The audit, tax, and consulting firm asked more than 4,000 people in 19 countries, including 500 in the U.S., for their attitudes about banking and payments through mobile devices as part of a broader survey completed last November. The good news for banks and tech providers: 85% of U.S. respondents believe mobile banking is important, according to a KPMG release. The bad news: 91% haven’t tried mobile banking, and hardly any think they should pay for it. Some 48% of those in the “haven’t tried” group cited security and privacy concerns for avoiding mobile banking. Mitch Siegel, director of payment advisory services in KPMG’s Financial Services practice, calls that finding “not surprising,” especially with the heavy media coverage about payment card data breaches. “People are just broadly concerned with security and how that pertains to mobile as a channel,” Siegel tells Digital Transactions News. Regarding payments, 95% of U.S. respondents said they never made a purchase from a vending machine using their mobile device and 95% said they never made a purchase using a mobile device through a retailer’s mobile Web site, according to KPMG. Those results further suggest unfamiliarity with or lack of comfort in using a mobile device for transactions and payments, KPMG says. Contactless payments, now primarily conducted with chip-equipped cards that also have a conventional magnetic stripe, probably will be confined to low-ticket niches such as fast food or movie theaters, according to Siegel. “We think of contactless as a stepping stone” to payments through mobile devices, he says. The poll was New York City-based KPMG’s third annual “Global Consumers and Convergence” survey, but it was the first to ask questions about mobile banking and payments. Most of the research was done online, although KPMG did face-to-face interviews in India and South Africa.
Digital Transactions - April 9, 2009
New BCG Report: Global Payments 2009. The Boston Consulting Group has announced its ninth major study of the payments industry titled "Weathering the Storm: Global Payments 2009" find that "banks must take forceful steps to overcome major challenges to their payments businesses if they are to bolster their overall profitability amid the ongoing financial crisis." The report, "Weathering the Storm: Global Payments 2009," BCG's ninth major study of the payments industry, says that although payments businesses have proved to be reliable revenue generators -- global payments revenues hit $805.1 billion in 2008, up from $654.3 billion in 2006, and are forecast to reach $1.4 trillion by 2016 -- their momentum is slowing. The darkest cloud over the industry is the steady decline in average revenues per transaction. According to the report, a variety of factors are contributing to price erosion and margin pressure. Regulatory forces are playing a prominent role in some regions, such as the Single Euro Payments Area (SEPA) in Europe and congressional pressure on credit card revenues in the United States. Also, competition is intensifying, and infrastructure investments (both obligatory and discretionary) are leading to higher costs but not necessarily higher revenues. Furthermore, the payments needs of different customer segments vary increasingly, while all customers are becoming more sophisticated and demanding. "On the retail payments side, the key to success will be a lean, end-to-end business model aimed at achieving the highest possible level of efficiency. On the corporate side, the key will be end-to-end service excellence rather than focusing solely on efficiency." The report says that convenience, price, security in transaction processing, and accessibility of funds are most critical for retail customers -- defined as individual consumers and small-to-medium-sized enterprises. In North America, the imminent challenge for payments providers is maintaining growth amid the credit crunch. The demand deposit account is suffering from tightening net interest spreads. Noninterest income sources such as overdraft fees and interchange revenues are being squeezed. Ultimately, the report concludes, the strongest institutions in the wholesale transaction banking business will be those that are able to meticulously monitor the performance of their chosen business model and adjust it accordingly.
Payment News - March 3, 2009
Why You Need To Seriously Consider Using Payroll Debit Cards. According to figures from the American Payroll Association, only three percent of its members are using payroll debit cards, also known as Payroll cards, at present. However, about half of the association’s 22,000 members are looking into using these types of cards in their payroll system in the future. Although there are already a number of banks who offer such services for more than a couple of years, not many are aware about these so-called Payroll cards. For those employers out there who are interested on this new system of paying wages, you can read on to learn more about this type of debit card. Even if the US is considered as one of the most technologically advanced countries, there are a lot of companies that still use checks as the primary payroll system. There are many areas in the country that are not using payroll debit cards. However, those employers and companies that have started to use this system of paying out wages are really very satisfied with this new bank service. For small to medium businesses that mostly employ students or new immigrants, using Payroll cards can be very beneficial not only for the owners, but also for their workers. One of the benefits of payroll debit cards for employers is a drastic decline in payroll processing costs. Loading Payroll cards usually cost employers 20 cents per transaction. However, paper checks are worth about a dollar (or sometimes even two) each. So, even if there may be a one-time cost for each debit card, your company will see a return on investment in no time at all. This option is also a very convenient option for companies who are employing part-time workers that do not have bank accounts. Believe it or not, about 17% of the workforce in the US actually does not have any bank account. Also, a debit card payroll system can help growing businesses in managing their payroll electronically. Employees also enjoy various benefits from payroll debit cards. First, employees do not have to pay exorbitant fees to check cashing shops just to cash their salaries. Some of these shops actually charge 10% for every check that they cash in. Also, cards are safer to carry than cash. Besides, you can also use Payroll cards as debit or credit cards. So, employees can conduct online transactions and even pay their monthly bills online.
Articlesbase – January 2009
MasterCard White Paper on Open Payment Systems, Interchange. MasterCard Worldwide has announced it has published a new white paper titled "Benefits of Open Payment Systems and the Role of Interchange " that the company says "dispels misperceptions about payment systems and explains the tremendous economic value that electronic payments bring to the economy as a whole and their role in advancing commerce." The paper, entitled "Benefits of Open Payment Systems and the Role of Interchange underscores the enormous benefits delivered by electronic payments, which have become so ingrained in everyday life they are often taken for granted or misunderstood. Few people ever stop to consider the complex and sophisticated system that allows transactions to occur within seconds, almost anywhere in the world. "Perhaps the easiest way to grasp the value of electronic payments is to envision a world without them. Clearly, if electronic payments came to a sudden halt, many facets of commerce - travel, trade and the Internet just to name a few - would face dire consequences," MasterCard President and CEO Robert W. Selander says in the introduction. The paper also discusses the role of interchange - a relatively small fee paid for the benefits merchants get from card acceptance. Interchange is critical to ensuring the system provides maximum benefits to all participants, including consumers and merchants in a fiercely competitive marketplace.
Payment News – January 12, 2009
Fraudsters Run One-Stop Online to Sell Data-Stealing Code. Fraudsters are running an online trading post for highly sophisticated code that allows criminals to more easily steal consumers’ log-on credentials, Social Security Numbers, PINs, and other confidential information, according to the latest report from RSA Security Inc.’s Anti-Fraud Command Center. The fraudster Web site, which RSA analysts call a “Web Injection Shop,” sells so-called HTML injections, or bits of code that can allow phishing perpetrators to mimic the look of a financial institution’s Web pages, including pages that ask for log-on credentials. The code also allows fraudsters to add fields to the pages to ask for information the legitimate pages don’t ask for. The injections usually accompany Trojans, code that fraudsters install on the computers of unwary users when they visit certain sites or click on unknown e-mail links. Some 207 financial-institution brands were attacked in phishing campaigns in November, up significantly from 167 in October, the report says. The total includes 23 banks whose sites had not before been targeted by fraudsters. Regional U.S. banks were the target of 48% of the attacks, with credit unions accounting for 30% and banks that operate nationwide accounting for 23%.
Digital Transaction – December 29, 2008
Holiday Bonus to Workers: Pre-paid Plastic for Health Care. It’s increasingly hard in this economic environment for employers to give something a bit extra to their employees. But one company is providing something outside the box: a pre-paid card for workers to pay for health-care expenses, such as a doctor’s visit or a drug prescription. A few weeks ago, Farmacia Remedios of San Francisco, a chain of nine drugstores catering to the Latino community, began offering a $25 Christmas bonus on these prepaid MasterCard’s for health-care needs to 85 employees who aren’t on their health-insurance plans. In addition, when those employees use those cards at a specific clinic they are eligible to get a free flu shot and full health assessment, which would normally cost $128. “It’s a very easy program to use,” says Doug Ryan, chief financial officer of Farmacia Remedios. “For a small company to provide any kind of meaningful health care to employees, you have to look at what the company can afford and can easily administer, because we also have to look at what employees can afford and can contribute.”
Independent Street – December 24, 2008
Online Merchants May Have a Tougher Time with Fraud in 2009. While online merchants managed to keep a lid on fraud losses in 2008, a faltering economy could make 2009 a costlier year, a leading expert says. “It’ll be interesting to see if merchants can hold fraud rates steady” next year, says Doug Schwegman, director of market and customer intelligence at CyberSource Corp., an online-gateway provider in Mountain View, Calif. “As more people become unemployed, there might be more fraudsters out there.” While e-commerce merchants will lose a record $4 billion to fraud in 2008, growing revenues mean the loss rate will hold steady at 1.4% of sales, level with last year and 2006, according to CyberSource’s annual online fraud survey, released on Wednesday. Moreover, merchants kept the loss rate in check while at the same time approving more orders. On average, e-retailers are rejecting 2.9% of all orders on suspicion of fraud, down from 4.2% in 2007 and similar levels in prior years. “This was the first year we saw a statistically significant drop” in the rejection rate, says Schwegman. However, the merchants’ ability to continue driving down order-rejection rates while keeping fraud in check could come under pressure in 2009 as the recession sets in—though the relative youth of online selling means it’s hard to predict how well merchants will do. “They may be able to do that in ’09, but we haven’t been through too many economic cycles with e-commerce,” says Schwegman.
Digital Transaction – December 10, 2008
The New Card on Campus: Prepaid Debit. Many colleges have tightened rules on credit-card marketing on campus in order to discourage students from racking up huge amounts of debt. Now another kind of card is being pushed on campus -- with its own set of issues. This fall, financial-services companies are focusing more of their campus marketing on "prepaid debit cards," which work like standard debit cards except that they aren't linked to a traditional checking account. It's virtually impossible to incur an overdraft with prepaid debit cards. And students can't get into thousands of dollars of debt, as they can with credit cards. The average college graduate carries $2,748 in credit-card debt, according to a 2007 survey by student lender Nellie Mae. And nearly one in four graduates leaves school with more than $5,000 in credit-card debt, according to a recent survey by Zogby International that was commissioned by credit reporting agency TransUnion Corp.
Mary Pilin – Wall Street Journal – September 11, 2008
Electronic Payments Now Account for Majority of Consumer Payments. Consumers are increasingly using electronic payments at the expense of cash and checks, according to a new nationwide consumer payment preferences study conducted by BAI and Hitachi Consulting. The research was sponsored by First Data Corporation and its STAR® Network, Harland Clarke, MasterCard Worldwide, Metavante, and PULSE. The 2008 Study of Consumer Payment Preferences found that 63 percent of all consumer purchases are made using electronic payment methods. Electronic payments now account for the majority of payments across all three major payment venues-including bill payment. Internet payments have always been predominantly electronic, almost by default. For in-store payments, the balance between paper and electronic payments shifted in 2003, leaving bill payment as the last bastion of paper-based payments. This is no longer the case, however, as paper-based payments' share of bill payments shrank from 55 percent in 2005 to 38 percent in 2008. Checks and now cash are giving way to card-based payments at the point of sale. Checks' share of in-store purchases has declined from 18 percent in 1999 to 8 percent in 2008, and after holding relatively steady for the past several years, cash has dropped to 29 percent. Contrary to robust forecasts, gift/prepaid card's share of purchases has not increased significantly over the past three years. Looking forward, electronic payments will likely continue to erode the share of payments made using paper-based methods. As one young consumer observed when answering the survey, "paper is old school!", and over the next two years, consumers expect to increase their use of debit and decrease their use of checks and gift/prepaid cards.
Hitachi Consulting – October 6, 2008
Electronic Payment Industry Touts Its Green Benefits. In a new study, the Federal Reserve reports nearly 50 percent of the total number of checks in the U.S. are written by consumers to businesses. Companies in the industry say that if consumers would make most of those electronically, it would produce huge environmental savings. The PayItGreen Alliance, a nonprofit group formed to promote the environmental benefits of electronic payments, has produced a study of its own, hoping to demonstrate the impact one household can have by switching from paper checks to electronic payments. By switching to electronic bills, statements, and payments. the average American household would, every year: Save 6.6 pounds of paper; Save 0.08 trees; Not release 63 gallons of wastewater into the environment; Save 4.5 gallons of gasoline to mail bills, statements, and payments; Not produce 171 pounds of greenhouse gases.
ConsumerAffairs.com – April 1, 2008
Debit Traffic Now Bigger Than Credit Transactions for MasterCard. The weakening U.S. economy that’s provoking angst in Washington and on Wall Street has yet to crimp No. 2 payment card network MasterCard Inc., which on Thursday reported strong fourth-quarter financials and transaction growth. MasterCard, however, is seeing a shift away from discretionary spending and toward so-called “everyday” purchases such as groceries and gasoline, chairman and chief executive Robert W. Selander said at an analysts’ conference call. “Regardless of what happens, we expect consumers will continue to transact,” he said. Selander added that MasterCard generates half its business internationally, which helps insulate it from a U.S. downturn. MasterCard is still benefiting from the long-standing shift from paper to electronic payments, and it doesn’t issue credit cards and thus doesn’t have lending exposure, he also noted. In the U.S., debit cards, which again led MasterCard’s growth, now account for more transactions than credit cards for the Purchase, N.Y.-based card network. Signature-debit purchase transactions hit 1.72 billion in the fourth quarter, up 17% from 1.47 billion in the year-earlier period. Purchase volume increased 16.4% to $71 billion from $61 billion in 2006’s fourth quarter. For the year, debit purchase transactions grew 26% to 6.46 billion from 5.13 billion in 2006. Dollar volume jumped 23.8% to $267 billion from $216 billion in 2006.
Digital Transaction – January 31, 2008
Taking Prepaid Debit Cards to the Next Level. The growth of e-commerce and the continuing expansion of outsourcing and the remote workforce are fueling a new approach to paying for services. Internet-focused companies are replacing traditional online payment transactions with prepaid debit cards. Some industry watchers predict that online payment options such as debit cards will take off this year. For example, analyst firm Celent predicts alternative payment methods such as debit cards will more than double by the end of 2008. These new transactions, known as Web payouts, now comprise 26 percent of all transaction volumes, while credit card volumes decline.
Jack Germain – E-Commerce Times – January 16, 2008
REPORT: Debit Card Outlook Bright. Debit cards remain the fastest-growing payment devices and they seem likely to endure a possible economic slowdown better than credit cards, according to a new report from TowerGroup Inc. Nevertheless, financial institutions have a propensity to pump out many more debit cards than consumers want. Now embedded in consumers’ spending patterns, debit card growth rates will stay in their current ranges through 2009, with credit card transaction growth nearly flat, predicts TowerGroup, an editorially independent research unit of MasterCard Inc. The growth is coming at a time when the personal savings rate has plummeted, a trend attributed to consumers’ increasing preference for using debit cards for everyday spending such as groceries. “The transactions still need to come through”.
Digital Transaction – October 11, 2007
When It Comes To Online Security, It’s All About The Money. The electronic payments industry’s continued prowess in holding fraud in check despite the mounting scourges afflicting online transacting is all the more remarkable when you consider that the banking industry, whose fundamental business is risk management, is largely a no-show in this channel. Merchants and their security providers have managed to hold electronic crooks at bay along the front lines of the Internet security wars. But they still aren’t getting the help they really need—which is better economics. To be sure, Internet fraud is still a growing threat. The sophistication of electronic attacks is relentless and scary, what with new Trojan Horse viruses surfacing that are capable of automatically learning when they are being detected and shifting how they compromise credentials in order to evade further monitoring. And the proliferation of Internet-based business scams is aided in no small way by the ability of thieves to recruit their “mules”--needed for transshipping goods procured with stolen credentials--from the nation’s naïve and lovelorn, who offer assistance in return for promises of a quick buck or a hot date. So it’s hats off to all those who, according to CyberSource’s annual surveys on online fraud, have been able to keep the lid on fraud losses to just over 1% of sales volume. Yes, absolute dollars of fraud have been rising, along with transaction volume. But at a fraud rate of 1.4% in 2006, against an estimated $215 billion in sales, the industry deserves a big pat on the back. Or, at least parts of the industry do.
Steve Mott - Digital Transaction – March 15, 2007
Study Finds ‘Pervasive And Increasing’ Fraud In Payments. A survey released this week by a major trade association for corporate treasury officials raises an alarm about fraud in check and electronic payments and points to vulnerabilities in newer transaction channels, such as the Internet. “Payments fraud last year was pervasive and increasing,” says a report from the Association for Payments Professionals, which in January surveyed more than 3,000 of its members about their payments-fraud experience. The Bethesda, Md.-based AFP found that 72% of its 414 respondents had been victims of actual or attempted fraud in 2006, up from 68% in a 2005 survey. The January survey was underwritten by EPN, a unit of The Clearing House Payments Co. LLC. Electronic payments turn out to be significantly safer than paper, the survey finds, though payments flowing through the automated clearing house and the card networks are subject increasing fraud attacks, particularly in transactions on the Internet and over the phone. Nearly all respondents said they had been the target of actual or attempted check fraud in 2006, while 35% reported fraud activity in ACH debits. Seventeen percent said they had seen attempted or actual fraud with consumer credit cards. Of those who reported fraud activity with cards, consumer credit cards accounted for by far the most response (82%), with signature debit cards registering 18%, stored-value cards 7%, and PIN debit cards 4%.
Digital Transaction – March 15, 2007
Tab for E-Commerce Glitches Could Be $60 Billion By 2010. Problems with transactions could cost e-commerce merchants and other Internet businesses some $60 billion in sales through 2010, according to a consumer survey released Monday. Altogether, 88% of consumers reported problems with transactions at shopping, banking, travel, and insurance sites. About one-third of consumers who run into checkout or payment problems online go to a competing site, while another 7% simply abandon the transaction, the survey says. Problems cited by respondents canvassed by the survey include: payments that didn’t post, causing a late fee for the consumer; a Web site glitch that deleted all data entered by the consumer, including a credit card number; and an error message on a travel site that left the consumer in doubt whether his credit card had been accepted and he had booked the flight.
Digital Transaction – September 25, 2006
Survey: Online Payment Alternatives Could Tap $14 Billion In Missed Sales. Some 74% of consumers would be willing to spend about $960 more per year on music, games, subscriptions, and other digital content online if they could use a form of payment that’s safer and more convenient than a credit or debit card, a survey released Tuesday reveals. Given current estimates of active consumers online, that adds up to $14.4 billion in forgone sales annually for Internet-based content sellers, say Javelin Strategy Research and Paymentone Corp. Javelin polled 2,038 consumers in March for PaymentOne, a processor of e-commerce transactions. The latest survey shows young consumers are even more likely to use payment alternatives, with 79% of respondents aged 18-34 saying they would buy more. Income also matters, with 80% of those with incomes of $50,000 to $150,000 indicating they would press the buy button more often if given alternatives. For all respondents, payment choices mattered more in making a purchase decision than better content (a three-to-one margin) and affordable broadband service (six to one).
Digital Transaction – June 28, 2006
Online Bill Payments Show Big Gains, But Some Fret Over Security. In another indication of the erosion of paper checks in consumer transactions, the volume of bill payments made by check as a fraction of all bill payments has fallen to 37.5% from 61.1% four years ago, according to a report released this week by online bill-payment processor CheckFree Corp. with data based on a recent consumer survey. Some 35% of these payments are now made online, the report indicates, up from 13% in 2002, and more than half of these payers are in the 25-to-44 age group. At the same time, non-users of online bill payment services are becoming more interested in the channel, with 19% of those surveyed showing such interest, compared with 15% in a similar survey conducted early in 2005. But security concerns weigh heavily on the minds of non-adopters.
Digital Transaction – May 18, 2006
ACI Worldwide has announced the results of a global electronic payments market study conducted with Global Insight, Inc. Finding that the annual number of electronic payment transactions, currently at approximately 210 billion worldwide, will double by the end of the decade and is growing at a compounded annual rate equal to four times the expected growth in real gross domestic product (GDP). During the five-year period from 2004 to 2009, forecast volumes for electronic payments are expected to double across the world, with China and India doubling more quickly at a rate of every three and four years, respectively. Conversely, the use of checks as a form of payment is forecast to continue its decline; as measured in 2004, approximately 20 percent of non-cash transactions were check-based; in 2009, only 10 percent of total payments are predicted to be in check form.
Payment News – May 4, 2006
A study in 2005 showed debit card spending in retail outlets exceeded cash spending for the first time ever last year. The figures, which cover all retail transactions in 2005 (both online and offline) show debit card spending at 37 per cent (£89bn) of the total £240bn spent, against cash at 34 per cent (£81bn). This shows retail debit card use up nine per cent on 2004 figures of £82bn of retail spending, against cash retail spending down four per cent from £84bn. Sandra Quinn, director of communications at APACS says: “at the end of 2004, we saw total UK spending on plastic overtake cash for the first time, signaling a real sea change in our payment habits. This change was mainly driven by debit card use. The 2005 figures show that this trend is continuing with debit card spending in retail outlets crashing through the cash barrier for the first time ever.
Payment News – April 18, 2006
Young consumers trying to avoid the pitfalls of credit debt now have wallets full of other forms of payment, including prepaid and debit cards. Teenagers are a fickle bunch: first they wanted credit cards of their own and now it seems they don't. That is not to say they avoid all plastic. These days, their wallets are full of other cards, including debit cards, which draw money from banking accounts, and a wealth of prepaid cards that store a certain cash value that can be tapped with a swipe of the card.
Jennifer Alserver, New York Times – September 25, 2005
REPORT: Prepaid cards' growth will pressure money-transfer nets. with banks issuing or planning to issue more and more prepaid debit cards to handle remittances overseas, more banks are expected to enter the market, putting pressure on the established money-transfer businesses like western union holdings inc., a new research report concludes. According to the report, entitled "money transfer cards & the accidental global customer" and published by the AITE group, a Boston research firm, there will be 1.7 million active money-transfer cards issued by U.S. players by 2007, up from 400,000 this year. The cards will command 4.4% of the total value of outbound remittances two years from now, an increase from their current 0.7% share. Remittances of all kinds will total $70 billion in 2005, a number the report says will grow to $80 billion by 2007. At first glance, says the report, the ability of these banks to compete with Western Union (a unit of transaction-processing giant first data corp.) and MoneyGram may seem hampered by the relative paucity of ATM’s in most foreign destination markets. Of the top 10 recipient countries of workers' remittances, Brazil has the highest ATM density, at 750 machines per million inhabitants (compared to 1,295 in us). Mexico is a distant second at 186. But many of these countries still have more ATM’s than they have Western Union offices, the report says, leaving the established players with no advantage in locations. "Although Visa and MasterCard cards would likely be sufficient to fully penetrate the countries the most underserved by ATM’s, the possibility found by some new entrants to enter these markets using these cards means no Western Union or MoneyGram corridor is safe”, the report says.
Digital Transaction News – September 11, 2005
In the continual quest to reduce expenses, companies have traditionally focused on the size of the payroll. The actual cost of producing that payroll, however – which includes calculating pay, producing checks, making direct deposits and keeping track of employee information – has emerged as a new arena for savings, particularly since payroll production costs have been rising. Last year, for example, the median cost per paycheck rose 3.5% compared with 2003, according to a survey by the American Payroll Association (APA).
Forbes Magazine, September 2005
We are seeing more and more businesses implement or expand their direct deposit of payroll.
John Gruce, Senior Vice President of Prepaid Card Services, Bank of America, September 2005
A series of reports on the SVC industry by the center for financial services innovation (CFSI) finds that while still small overall, the SVC market has mushroomed in the last few years. Of the $157 billion loaded onto all prepaid products in 2003, Mercator Advisory Group estimates that general purpose SVC’s accounted for 15%, or $23.5 billion. According to the Pelorus Group, approximately 15 million prepaid debit cards have been issued, including payroll cards, and that figure is projected to rise to 34 million in 2005, with general purpose cards accounting for 35%, or 12 million cards.
Banking Strategies –May/June 2005
Consumers’ use of debit cards is skyrocketing. Use of debit cards, including automated-teller machine withdrawals, has grown 24 percent a year between 2000 and 2003. By comparison, credit card use was up less than 7 percent from 2000 to 2003, a Federal Reserve report shows. Use of checks shrank during that period by 4 percent. MasterCard International Inc. Reports that U.S. cardholders last year generated nearly $42 billion in transactions on debit cards, up 33 percent. Through the last three months of last year, Visa USA Inc. reported $346 billion in sales volume on its debit cards.
Mary Beth Mc Laughlin, The Blade – March 22, 2005
Debit cards a big hit with buyers. They offer convenience for consumers who don’t want credit balances. Because of their convenience and widespread acceptance by merchants, debit cards are rapidly becoming the new cash. In fact, for the first time last year, cash and checks account for less than half the payments for in-store purchases, according to by the American Bankers Association and Boston-based Dove Consulting Group. Just five years ago, they made up 57 percent.
Rochester Democrat & Chronicle – January 9, 2005
According to the federal reserve system, the number of payments made by check declined between 2000 and 2003 while the number of online and offline debit payments rose over the time frame. Based on two surveys, one of the depository institutions and one of the payment network operators and payment card issuers, the federal reserve system (FSR) reports that the number of payments made by check declined by a compound growth rate (4.3%) between 2000 and 2003 while the number of online debit payments grew by a CAGR of 21% and the number of offline debit payments rose by a CAGR of nearly 25%. Card payments in general – credit, debit and EBT – rose by 13.2% each year over the three year period.
eMarketer – January 7, 2005
Economists long have predicted a cashless society, where digital transactions replace paper money and coins. Now, nearly one in three in-store purchases is made with a debit card, a study by American Bankers Association and Boston-based Dove Consulting shows.
St. Louis Post-Dispatch - October 22, 2004
The massive jockeying for position that characterized much of this past year will accelerate in 2004 as stored value service providers scramble for a place in the ever-upward trajectory of the prepaid marketplace.
Matt Mott – Intelecard News Online – August 2004
Plastic paycheck is catching on. Employers like the savings offered by crediting pay to a card. Employees appreciate getting cash quickly. The payroll cards are an outgrowth of stored value cards that contain consumer rebates and gift certificates that carry a company logo. They can be spent or used to obtain cash and can be recharged. The potential market is huge. About $11 billion in payroll payments and $4 billion in benefit payments such as commissions and incentives were loaded onto prepaid cards in 2003, according to a study by the Mercator Advisory Group in Shrewsbuy,Mass. Such payments are growing at more than 11 percent a year, said Tom Sloane, Mercator’s director of debit advisory service. If cards replaced checks issued each year to 130 million employees who lack bank account, are temporary employees, or work at remote locations, such payments could reach an annual $108.8 billion.
Associated Press - June 19, 2004
Debit card transactions eclipsed credit cards in 2003. By 2006, there will be more debit card accountholders and cards than credit card equivalents. And by 2007, debit card spending will double from today’s levels, according to the Nilson reports.
Steve Mott, Banking Strategies – May 7, 2004
In November 2003, Nilson upped its 2007 forecast to $146 billion.
Matt Mott – Intelecard News Online – May 2004
The U.S. prepaid card market has potential to exceed USD 2 trillion and to include business-to-business, consumer-to-consumer and government-to-consumer transactions, according to MasterCard and Visa.
epaynews.com – March 9, 2004
It costs employers between $1 and $2 for every paycheck it processes (and between $8 and $10 to replace a lost or stolen paycheck) compared with 20 cents per transaction for direct deposit.
American Payroll Association – February 2004
Payroll cards are also a way for businesses and financial-services firms to target the “unbanked” population that includes students, part-time or low –income workers. At least 14.2 million households fall into this category. Within that category, about 12.4% are expected to have payroll cards by the end of 2004, up from about 8.5% last year.
Celent Communications – February 2004
Employers are rolling out a variety of “stored value” or prepaid cards that employees can use to spend their paychecks, cash bonuses, flexible spending accounts and other fixed allowances. Workers can conveniently access their funds. Employers, meanwhile, cut their processing, distribution and administrative costs. Payroll, incentive and flexible-spending cards represent the fastest-growing opportunities, but issuers say they are also seeing interest in prepaid cards for general business expenses, such as relocation, travel and other project costs. U-haul international, Inc. estimates that it saves half a million dollars a year by moving away from paper paychecks. If the prepaid cards are lost or stolen, the card issuer can immediately cancel or reissue a new card. So workers have better protections with a prepaid card than if they were to lose a paper paycheck, proponents say. Prepaid cards are also being tapped for general business expenditures. Instead of requesting a cash advance, employees who travel infrequently could use prepaid cards to pay for hotel rooms, or meeting planners could use the cards to reserve conference facilities.
Wall Street Journal – February 12, 2004
Credit, debit and stored value card transactions will surpass cash and checks combined in 2009.
Nilson Report - 2004
Debit, credit, prepaid & commercial transactions are processed at a rate of $32,000 per second. Personal consumption expenditure is about $17 trillion and card programs are roughly 24%. So if you look at that, we’re just scratching the surface.
Carl Pascarella, President, Visa USA – August 25, 2003
Shannon Phelps, Vice President of Card Products for First Banks, says many corporations want to shift more of their employees to automatic deposit in order to cut administrative costs, but are hindered by the fact that many employees lack bank accounts. Such workers include teens, part-time staff, temporary employees and immigrants. Stored-value cards provide the employer with the same cost savings as electronic payments while making it easy for employees to access their cash.
Lauri Giesen, Banking Strategies – July/August 2003
The number of prepaid debit cards in the United States will surge from 6.2 million issued in 2002 to over 40 million by 2007. The growth will come from an estimated 50 million U.S. Adults that do not possess credit cards and the 10 million unbanked households.
Pelorus Group – June 19, 2003
The big debate in the debit world is whether pin-based debit, which is typically processed over regional debit networks, will overtake signature-based debit. Glenbrook believes that pin-based debit usage will continue its strong growth.
Glenbrook Partners – January 9, 2003
For the past several years, U.S. corporations and financial institutions have focused on converting America’s payrolls from check to direct deposit. The motivation has been simple: money. Converting to an electronic system can result in cost savings as high as 75 percent. Today, over 55 percent of Americans are paid via direct deposit. However, many employees, especially those without transactional bank accounts, are unable to use direct deposit. They represent a missed opportunity for financial institutions and corporations. Providers of stored value products have leveraged their platforms to develop payroll cards, which capture this missed opportunity. Stored value programs can deliver funds electronically to employees, commonly referred to as the “unbanked”, who do not have a transactional bank account. Payrolls may be loaded onto these cards, which are then used to access payroll funds through ATM withdrawals, debit-card purchases and card drafts (checks written on card funds).
Celent Communications – December 19, 2002
