Hurricane Downs Payment, ATM Activity

  With entire cities flooded or leveled and no electricity or phone service for miles, Hurricane Katrina crippled the electronic-payments infrastructure along the Gulf Coast.
  First Data Corp. Chairman and CEO Charles Fote told financial analysts in Denver Sept. 15 that Katrina shut down about 1% of the merchants for which First Data processes debit card and credit card transactions, and about 3% of U.S. Western Union agent locations.
  M. Troy Woods, president and chief operating officer of Total System Services Inc., or TSYS, said Sept. 8 that the Columbus, Ga.-based processor had not looked into the regional impact of the storm but said there had been no apparent drop in its North American volume.
  However, "common sense tells you" that transactions were down by at least 80% in the hurricane zone, Woods said. "No one is going to restaurants in New Orleans, and no one is gambling in Biloxi (Miss.)," he said.
  Atlanta-based RBS Lynk, which provides processing services for some 400 ATMs in southern Louisiana, including about 200 in New Orleans, was unable to dial up machines to check their functionality a week after the hurricane hit because phone lines were down. Mike Cowart, the company's ATM operations director, says that while cash in the machines was insured, many of the ATMs themselves might not be covered against damage or theft.
  Brookfield, Wis.-based Fiserv Inc. reported that at one point about 114 of the 250 ATMs it drives in Louisiana, Alabama and Mississippi were not functioning after the storm. And North Canton, Ohio-based ATM manufacturer Diebold Inc. reported that it could not get into many areas to check on the machines it maintains.
  "We have suspended service in the area, and maintenance people are not going in until they are given the okay," a Diebold spokesperson said. "Once we get in we will start assessing the damage." The spokesperson said that Diebold planned to call on maintenance technicians from across the country to assist local technicians.
  ATM independent sales organization Cardtronics LP said on Sept. 8 that 300 of its ATMs had been affected by the hurricane, and 269 were not working. Of those, 90 were still under water. The fully insured machines carry a $500 deductible plus a $2,500 deductible per machine for the cash inside, Mike Clinard, Cardtronics chief operating officer, said during an investors' conference call.
  Transaction volumes in Alabama, Texas and Florida had begun to rise a week after Katrina. "This is helping to offset lost transaction volumes in Louisiana and Mississippi," Clinard said.
  Meanwhile, the Houston-based ISO deployed ATMs in places such as the Houston Astrodome so refugees could use their payment cards for cash. Other members of the payments industry did what they could to help by making donations to the American Red Cross and other relief organizations, by waiving transaction fees, by increasing card-spending limits and by delaying minimum-payment requirements on credit cards.
  On Sept. 7, the U.S. Department of Homeland Security, under scrutiny for how its Federal Emergency Management Agency handled the hurricane's aftermath, announced that it would distribute stored-value cards worth $2,000 each to adults displaced by the storm.
  But on September 9, the agency halted the program after only 10,183 cards, worth $20.4 million, had been issued. A FEMA spokesperson says that the card program was designed to be short. "It was for a limited period of time for evacuees in Houston, Dallas and San Antonio," the spokesperson says.
  But payment card executives, who asked that their names not be used, cite other reasons. One says the agency wanted to eliminate any program that was started under Michael Brown, FEMA's former director who resigned under widespread criticism. "Everything he did now is considered bad," the executive says.
  Another executive says FEMA axed the program because of difficulties implementing it.
  J.P. Morgan Chase & Co. issued the MasterCard-branded "FEMA Cards" and is not charging cardholders fees for cash withdrawn from any of Chase's 6,950 ATMs.
  FEMA is now issuing funds to victims via checks and direct bank deposits.
  The American Red Cross has distributed thousands of its own MasterCard-branded stored-value cards worth $850 each to individuals from the affected areas. The Red Cross is expected to reload many of the cards because victims may not be able to return to their homes for months, if ever, and will need ongoing help.
  The Red Cross started issuing prepaid cards instead of relief checks to some victims of disasters three years ago at the advice of MasterCard International and Chase. A Chase spokesperson says the switch makes sense because the cards are accepted at any merchant that accepts MasterCard.
  "Checks are no good because the banking system in New Orleans and parts of Mississippi has been upended," the spokesperson says. "We also wouldn't know where to mail checks because we don't know people's addresses."
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