Cards

A Delaware-based merchant association last week launched a Visa-branded gift card. The Downtown Newark Partnership is using the gift card to replace a paper gift certificate used since 2003.

Ingenico S.A. will end 2009 with a better-balanced revenue model of products and services because of several moves the France-based point-of-sale terminal maker made this year, says Gil Luria, an analyst with Wedbush Securities in Los Angeles. In a research report, Luria says the completion of Ingenico's $426 million (292.2 million euros) acquisition of easycash Beteiligungen GmbH, a Germany-based payment processor, alters the balance in revenue between products, such as payment terminals, and services. "The integration of easycash will immediately create a 70/30 balance between products and services," Luria says, while Ingenico will continue to look for more recurring services and software revenue "both organically and through [mergers and acquisitions]." Ingenico will see growth in the United States, Brazil, China and India, Luria forecasts.

A general approach to marketing for independent sales organizations seeking new clients is more likely to fail than would a campaign that targets specific merchant segments, according to one analyst. “A lot of ISOs fail, and they spend a lot of time and a lot of money in marketing that is ineffective,” says Philip J. Philliou, a partner at Philliou Selwanes Partners LLC, a New York-based consulting firm. “Marketing that is generic, purely price-based and scattershot in approach is rarely successful.” Such marketing tactics work to create an overall awareness of a business in a market, notes Philliou. ISOs instead should educate their sales staffs about specific merchant categories, such as health care, and target the categories with tailored marketing campaigns that address each segment’s unique payment needs, he says. “If you are an ISO that understand health care enough to a least connect with a health care provider, they often will recommend you to someone else,” says Philliou.

Debit card use in India continues to grow, according to the latest data from the country’s central bank. Consumers in October made 14.4 million debit card transactions, up 21% from 11.9 million during the same month last year, the Reserve Bank of India says. The value of the debit card transactions increased 31.1%, to 25.7 billion rupees (US$549.1 million or 383.3 million euros) from 19.6 billion rupees. Meanwhile, credit card transaction volume fell 13.6% in October, to 20.4 million from 23.6 million a year earlier. The value of those transactions decreased 12.1%, to 56.6 billion rupees from 64.4 billion rupees. Indian consumers hold at least 21.2 million credit cards and 162.8 million debit cards, the central bank says.

NCR Corp. set aside additional funds to help clean up both the lower Fox River and adjacent bay in Green Bay, Wis., after United States District Court Judge William Griesbach ruled Wednesday that NCR and Appleton Papers Inc. were solely responsible for contaminating the water. Lawyers for the Duluth, Ga.-based ATM manufacturer are studying Griesbach’s ruling and will appeal, according to a Thursday filing with the U.S. Securities and Exchange Commission. Appleton and NCR had sought clean-up contributions from 20 other companies with plants located along the Fox River. In the SEC filing, NCR said it will reserve between $100 million to $150 million for the project, an increase from $59 million the manufacturer reserved in the third quarter ended Sept. 30. NCR said it expects to pay the cost for cleaning the waterways through 2019, followed by decades of monitoring, according to the SEC filing. The case concerns the presence of polychlorinated biphenyls or PCB sediments. Congress banned production of PCBs in 1976. The Wisconsin Department of Natural Resources and the U.S. Environmental Protection Agency identified NCR as a potential responsible party for the cleanup because at one time the manufacturer owned two plants on the Fox River that manufactured carbonless paper cited as the source of PCBs. Businesses use carbonless paper for invoices. NCR sold the factories in 1978 to Appleton Papers Inc. of Appleton, Wis., which manufacturers carbonless paper sold under NCR’s brand.

If the checking account's loss has been the prepaid card's gain, new overdraft regulations could kick that trend into overdrive.

Concerns that payment networks will increase their fees to merchant acquirers in 2010 tops a recent survey published by Boston-based Aite Group LLC. In the survey of 45 merchant acquirers conducted between July and October, Aite found that 84% of respondents believe an increase in fees assessed by payment networks likely will happen in 2010. Concerns about increases in PIN-debit processing fees also were significant, with 78% saying that was likely. Overall interchange increases appeared likely in 2010 to 76% of the respondents. Seventy-one percent of respondents expected card networks to issue cards assessing higher interchange rates next year. A majority–64%–also maintained that rate increases for signature-debit transactions are likely. Sixty-nine percent of respondents said it is unlikely interchange will fall under government regulation in 2010. Most–82%–also doubted that card networks would begin to work directly with independent sales organizations instead of through acquirers in 2010.

Boku Inc., which enables consumers to charge so-called micropayments to mobile-phone bills, has begun offering its services in Estonia and Venezuela, according to Ron Hirson, co-founder and senior vice president of product at the San Francisco-based firm. The company operates in 58 countries, though the United States remains among the top three markets for Boku, he says, declining to be more specific. Consumers use Boku to purchase such digital goods and services as virtual currency for online games and pay fees for online dating sites. For instance, a consumer who wants to buy virtual currency to buy extra “lives” or other goods useful in online games would, after registering for the service, make the purchase through the game provider’s Web site. The consumer would confirm the purchase through a text message, and the charge would appear on the consumer’s mobile-phone bill, eliminating the need to use a payment card, which could reduce or eliminate a merchant’s profit because of relatively high interchange fees for such small purchases. The average transaction processed by Boku is between US$8 and US$9, Hirson says. Boku serves more than 1,000 merchants and processes payments for three of the top five game applications offered on social networking site Facebook, Hirson says. A Facebook spokesperson declined to comment. Hirson would not disclose the number of transactions processed by Boku, which begun full operations during this year’s first quarter. However, he says, Boku has experienced “double-digit [transaction] growth every month since the first quarter.”

Heartland Payment Systems Inc. Thursday announced a settlement agreement with American Express Co. related to the 2008 breach of Heartland’s system, according to the Princeton, N.J.-based processor. Under the agreement, Heartland will pay American Express $3.6 million, resolving all intrusion-related issues between the two parties. The processor did not reveal additional settlement details. “This settlement marks the first agreement with a card brand related to the intrusion,” Bob Carr, Heartland chairman and CEO, said in a statement. Heartland disclosed the breach in January that affected an undetermined number of cards (CardLine, 1/20). Albert Gonzalez, the Miami man who pleaded guilty in September to charges related to the 2007 data breach at TJX Cos. Inc., pleaded guilty early this month to charges he breached the payment networks of Heartland Payment Systems Inc., Hannaford Bros. Co., 7-Eleven Inc. and two unnamed retailers (CardLine, 12/9). A Heartland representative did not return requests for comment by CardLine’s deadline. An AmEx representative declined to provide agreement details.

Hypercom Corp. today announced it has signed a letter of intent to form a joint venture with The McDonnell Group LLC that will provide payment processors, financial institutions and retailers globally with data-communication services for transaction-based applications. The venture, known as Phoenix Managed Networks LLC, will acquire and operate Hypercom’s HBNet transaction-transport business, according to the Scottsdale, Ariz.-based point-of-sale terminal provider. The Marietta, Ga.-based McDonnell Group is a technology-focused investment fund managed by Jack McDonnell, who will serve as CEO of Phoenix Managed Networks. McDonnell also is the founder and former chairman and CEO of Transaction Network Services Inc., a Reston, Va.-based provider of data-communication services. “HBNet is directly competitive with TNS,” notes McDonnell. “TNS was fortunate to become a dominant player at the time, but the market is looking for an additional provider.” Customers do not want to be locked into a single vendor relationship, he adds. Phoenix Managed Networks will be operational on Jan. 1 with a staff of 20 workers, including former TNS executives Mathew Mudd and Trevor Fall. McDonnell plans to grow the company over three years to roughly 100 workers domestically and another 30 to 40 in Europe, he says. “This joint venture will not only allow us to provide the hardware but additionally the [transaction] transport to all of our key customers,” says Philippe Tartavull, Hypercom CEO and president, noting the HBNet name will disappear.

Specialty store gift card redemptions increased 12.3% during the week ended Dec. 13 compared with the same period last year, according to a report from First Data Corp. The Atlanta-based processor based the report on aggregate transaction data from the company’s gift card-processing business. First Data’s specialty retail category includes merchants that sell clothing, electronics, books and sporting goods. First Data suggests the numbers indicate consumers already are redeeming gift cards they received as part of incentive shopping deals. The company did not release specific numbers. The first three weeks of the holiday season have seen the dollar amount of gift card activations increase 1.7% compared with the same period last year. Last week, however, the total dollar value of gift cards activated decreased 1.6% compared with a year ago. The number of gift cards activated also decreased 5.7%. The average gift card amount increased to $30.86 compared with $30.53 last year.

Dunkin’ Donuts has given its approval for Access to Money Inc. and Jarrett For Ca$h, two New Jersey-based ATM independent sales organizations, to deploy ATMs in Dunkin’ Donut franchise locations in New York, New Jersey and Connecticut, according to a Dunkin’ Donuts spokesperson. The business case for installing ATMs is “proprietary,” the spokesperson says. Richard Stern, Access To Money president and CEO, says Canton, Mass.-based Dunkin’ Donuts may expand the ATM deployment to other markets in 2010. Dunkin’ Donuts has 8,835 franchise locations nationwide and 1,500 in the New York Tri-State area. Cherry Hill-based Access To Money is one of the nation’s largest ATM ISOs with 12,000 machines under contract. Executives at Piscataway-based Jarrett For Ca$h could not be reached for comment.

The British financial industry wants to eliminate paper checks by 2018. The board of the UK Payments Council voted Wednesday to set Oct. 31, 2018, as the target date to end centralized check clearing. The strategy-setting council, which includes major British banks such as HSBC Bank PLC and Lloyds TSB Bank PLC, the British arms of U.S. companies including Bank of America Corp. and JPMorgan Chase & Co., the Bank of England and eBay Inc.'s PayPal Inc. unit, cited the "long-term, terminal decline" of the paper-payment instrument. Check use has been declining in the United Kingdom since 1990 and has fallen by 40% in the past five years, the council says. It set a goal to ensure there is "no scenario where customers, individuals or businesses still need to use a check" by its target phaseout date. The council said it would focus on the needs of elderly and vulnerable consumers, who may be less likely to use debit cards or online payments. It said it will conduct a review in 2016 before making a final decision. Check use is also declining rapidly in the U.S., and though the Federal Reserve banks have eliminated all but one clearing facility, in Cleveland, there are no plans to do away with paper checks altogether.

Independent sales organizations and bank acquirers predict the price merchants pay for debit card transactions likely will increase in 2010, survey data from Boston-based Aite Group LLC suggest. In the survey of 17 bank acquirers and 28 independent sales organizations, 69% of acquirers predicted PIN-debit rates would increase next year compared with 79% of ISOs who thought so. “This event, if it happens, would mean a lot in terms of potential income selling or cross-selling PIN pads or setting up merchants to accept PIN-debit transactions,” says Adil Moussa, the Aite analyst who conducted the survey. Many respondents also believed signature-debit rates also will increase, cited by 75% of participating ISOs and 62% of acquirers. Signature-debit price increases would mean ISOs and acquirers could adjust their qualifying rates, assuming the transaction meets conditions such as card present with full magnetic stripe data. ISO and acquirer debit rates often encompass signature and PIN debit as a way for the companies to build profit margin into such transactions, Moussa says. And because many merchants often buy based on the qualifying rates, rate changes could factor in which service provider the merchant chooses, he says.

Consumers are initiating more transactions online this holiday season, but the average ticket size is down, according to payment processor Chase Paymentech Solutions LLC. The Chase Paymentech Pulse Index, which samples a portion of the daily settlement activity of 50 of Internet Retailer’s Top 500 online merchants, reports that total online transactions from Nov. 5 through Dec. 13 were up 25.3% compared with the same period last year, while total purchase volume was up 14.7%. But the average ticket size was down 8.3%, to $53.74 this year from $58.62 last year. “We’re encouraged to see that overall e-commerce continues to grow,” Aaron Press, director of market analysis at Dallas-based Chase Paymentech, tells CardLine, adding that “a variety of forces” helped to drive down the average ticket size. “Promotional activity was very heavy in November, with discounts, free shipping and other deals. That, combined with economic conditions and the fact that consumer confidence is still tracking fairly low, is contributing to somewhat smaller transaction amounts,” Press says. Chase Paymentech, which estimates it processes some 50% of all online transactions, bases its findings on a fraction of the total number of transactions it processes.

Two-thirds of U.S. consumers have cut their credit card spending, closed a credit card account or switched credit card brands in response to changes within the last year in their credit cards’ terms and conditions, according to a new report comScore Inc. released this week. And some 60% of respondents said they would switch cards for a better rewards deal. ComScore in October conducted an online survey of more than 2,000 U.S. Internet users, comparing some of its latest findings with a similar survey conducted a year earlier. Some 66% of respondents said that because of economic conditions they are cutting their spending back from a year ago. Some 42% said economic conditions are making them more likely to use cash this year for routine purchases compared with 50% who said so last year. Some 40% said they are more likely to use a debit card for purchases, up from 34%, while 23% said they are more likely to use a credit card this year, up from 18%. Economic pressure and new credit card-industry regulations forced changes in many cardholders’ accounts this year, ComScore notes. Among respondents who noted credit card-account changes within the past year, 54% said their terms and conditions changed; 53% said their interest rate increased, 26% said their credit limit shrank, and 21% noticed new fees. Some 17% said their rewards programs had changed, 14% were hit by higher annual fees, and 10% said issuers closed their accounts. Some 55% said they are spending less with their credit cards following recent changes, while 27% said they no longer use the affected card, 12% said they closed the account, and 9% said they applied for a new card with a different issuer. Some 60% of respondents said they would consider switching to a new credit card to get a lower interest rate, while 59% would switch to get better rewards, and 15% would switch to get better customer service elsewhere. Eighty-three percent of those seeking better rewards would switch to a new credit card to receive cash-back rewards, while 41% would switch to get merchant rewards, 33% would switch for a flexible-rewards program, 30% would switch for gasoline rewards, 20% would switch for air-travel rewards, and 4% would switch to earn charitable-donation rewards. “Card issuers that can provide additional value to consumers while complying with changing credit card regulations may encourage customers to continue spending on their credit cards,” ComScore concluded.

CardinalCommerce Corp., a Cleveland-based payment-security company, Monday announced it will begin offering SafeDebit, an Internet-debit product from NYCE Payments Network LLC, to merchants as part of its Centinel service. The service enables merchants to accept payment-authentication programs and alternative-payment brands independent of online payment gateways, shopping-cart software and processors. Merchants also can choose between such payment methods as Verified by Visa, MasterCard SecureCode, Amazon Payments, RevolutionCard and Moneta. CardinalCommerce “is a critical piece of infrastructure that compliments what we’ve already built,” Steve Rathgaber, NYCE president, tells CardLine sister publication ATM&Debit News. “This [partnership] allows us to fire up a group of merchants to enable a rollout in a materially significant commercial fashion.” SafeDebit creates virtual debit card information for one-time use and automatically fills in the required payment fields on the merchant’s checkout screen. No PIN is required, but the consumer still must use a user name and password similar to online banking login credentials. “This is an opportunity to bring what we feel is a very high-quality debit product to the market,” says CardinalCommerce CEO Michael Keresman. CardinalCommerce is discussing SafeDebit with its merchant partners but would not say whether any are accepting the payment form. The company provides services for 30,000 merchants including Continental Airlines Inc., RitzCamera.com, and online travel agency Travelocity. Rathgaber expects SafeDebit transactions to flow by the end of the month. Keresman believes demand exists for an Internet-debit product because consumers increasingly want to use brick-and-mortar payment methods in an online environment. Consumers are saying “if I can use [debit] at the grocery store or dry cleaner, then why can’t I use this payment method online?” he says.

First Data Corp. recently signed an agreement with Turk Ekonomi Bankasi–BNP Paribas to deploy off-premise ATMs throughout Turkey. The deal highlights First Data’s strategy to grow its role in ATM servicing outside the United States and a need for more ATMs in Turkey to reduce cardholders’ wait times at bank branches, where the majority of financial transactions occur.

NYCE Payments Network LLC Monday officially joined the alternative-payments space when it announced a partnership with CardinalCommerce Corp. to offer its SafeDebit Internet-debit product to online merchants. NYCE believes SafeDebit addresses consumers’ concerns about the safety of purchasing goods and services online, though some observers say the companies still face the difficult task of marketing the product.

In a move designed to gain entry into a rapidly growing prepaid-payments market, an Atlanta-based middle market private equity firm last week acquired Prepaid Solutions USA from West Suburban Bank Bancorp Inc. of Illinois and renamed it Prepaid Solutions Inc.