Cards

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.

ATM manufacturers’ top executives have complained quarter after dismal quarter this year that they have had difficulty persuading some financial institutions to take a look at their intelligent-deposit ATMs, let alone buy any. As ATM sales have stayed flat because of the economy and tight credit, manufacturers have started promoting outsourcing agreements in hopes of encouraging small and midsize banks and credit unions to deploy advanced-function machines.

Merchants Bank, a South Burlington, Vt.-based financial institution, Wednesday announced it has joined Allpoint’s surcharge-free ATM network in a move designed to make the bank more competitive against larger rivals. “We wanted to provide our customers with more surcharge-free ATM touch points throughout Vermont and when they travel nationally and internationally,” says Thomas S. Leavitt, Merchant Bank’s executive vice president. Before joining Bethesda, Md.-based Allpoint, Merchants’ customers had surcharge-free access to 42 ATMs in Vermont. With the new agreement, Merchant Bank customers have access to Allpoint’s 37,500 surcharge-free ATMs nationally and in the United Kingdom, Mexico and Puerto Rico. The Allpoint agreement will make Merchants Bank more competitive against TD Banknorth, KeyBank and Citizens Bank, Leavitt says. “TD Bank advertises itself as the nation’s most-convenient bank, and ATM convenience is a key driver in customer acquisition,” says Ben Psillas, Allpoint president.

NCR Corp. today announced the signing of a three-year ATM-outsourcing agreement with Co-op Financial Services that enables Co-op’s credit-union members to lease instead of buy new ATMs to reduce participating credit unions’ capital expenses. NCR will lease ATMs to the credit unions through GE Capital, a Norwalk, Conn.-based leasing company, says Bill Allen, NCR marketing director. “Leasing ATMs is a lot more attractive for some financial institutions because leasing agreements are not carried on the books as a capital expense,” he says. Co-op ATM Managed Services, a unit of Rancho Cucamonga, Calif.-based Co-op Financial Services, will manage credit-union members’ leased ATMs. NCR, which is based in Duluth, Ga., also will provide first- and second-line maintenance on all of the leased machines. “If the ATM breaks down, we fix it,” Allen says. Credit unions’ financial conditions played a key role in the two companies signing a leasing agreement, Allen says. Co-op operates a network 37,000 ATMs and nearly 3,000 credit unions are Co-op members. “This approach to ATM deployment and management will be attractive to credit unions seeking to outsource these functions as capital expenses grow with the size of the ATM fleet,” Co-op said in a statement. NCR will promote its SelfServ line of intelligent-deposit ATMs to the credit unions when the outsourcing program begins in early 2010, Allen says.

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. The companies did not disclose terms of the deal. Prepaid Solutions is Navigation Capital Partners’ first foray into the payments industry. The firm also has stakes in companies ranging from a highway-construction supplier to a car-financing company. “The play here, as far as we’re concerned, is the fact that the payments game is a pretty lucrative, go-forward industry that we want to be a part of,” says O.G. Green, Navigation Capital operating partner. Prepaid Solutions will keep any relationships it had under West Suburban Bank, according to company CEO Ken Goins, who was appointed to the position by Navigation Capital. Dan Grotto, who previously served as the head of Prepaid Solutions USA, was named the president of the new entity. Prepaid Solutions will strive to enhance existing products and to introduce new ones to the market, Goins says. Prepaid Solutions USA had just started providing payroll debit cards to the cruise line market. Such a partnership could enable Prepaid Solutions Inc. to “leverage an existing opportunity and possibly get into other areas that have to do with foreign-currency [travel cards],” Goins says. Green is determined to target the financially underserved market, particularly the U.S. Hispanic population. “We’ll focus on that and see how we can carve a niche in that area because we feel it is undeveloped,” he says. Prepaid Solutions Inc. needs to build trust within that market, Goins says. “We have to find ways to build loyalty to the cardholder and why they should trust our company,” he adds.

First Data Corp.’s recently announced ATM-deployment agreement with Turk Ekonomi Bankasi–BNP Paribas, a Turkey-based bank, illustrates how Turkish banks are trying to encourage more customers not to use branch teller windows. Over the next three years, First Data and Turk Ekonomi Bankasi plan to create a network of 1,250 ATMs deployed in retail and other convenient locations in major cities across Turkey, including Istanbul. Both companies announced the agreement in November. Consumers will be able to withdraw cash and conduct other, undisclosed services at the machines, a First Data spokesperson says in a news release. “This initiative is significant in terms of size and scale and will deliver value to our customers across the country,” Cemal Kismir, Turk Ekonomi Bankasi head of retail banking, said in a statement. “Historically, [Turkey] has been a branch-based culture, where customers stood in line for a long time because everything was done at the branch,” including making loan and utility payments, says Nicole Sturgill, research director for TowerGroup, a Needham, Mass.-based consultancy. “In the last few years, banks in Turkey have done a [180-degree turn] and have invested heavily in all channels. This has resulted in move of all of the typical branch transactions to ATMs and online banking.” The deal will add to the number of ATMs U.S.-based First Data services worldwide. Currently, First Data services more than 400,000 machines by supplying cash and providing maintenance and processing.

Russia and Poland are leading Central and Eastern Europe in the number of payment cards issued, according to a report prepared by London-based Retail Banking Research Ltd. At the end of 2008, financial institutions in 14 Central and Eastern Europe nations had issued 264 million debit and credit cards, up 10.5% from 239 million a year earlier, according to the report “Payment Cards: Central and Eastern Europe 2010.” By comparison, Retail Banking Research says the growth in cards issued in Western Europe between 2008 and 2007 was 5%. Retail Banking Research says 16 million of the additional cards issued in 2008 were in Russia, where banks routinely enroll businesses in corporate accounts so companies can pay employees’ salaries through credit transfers. Employees were asked to open bank accounts with debit cards tied to them. Financial institutions in Poland issued 4 million new payment cards in 2008. Of all the cards issued in the region last year 83% were debit cards, 2% were charge cards, and 15% were credit cards, Retail Banking Research says. Debit cards are so dominate that only in four nations—Czech Republic, Poland, Slovakia and Slovenia—do credit and charge cards account for more than 30% of each nation’s total, Retail Banking Research says. Cardholders in the 14 nations initiated 2.3 billion card payments in 2008, up 21.1% from 1.9 billion in 2007. As consumers become “accustomed to using cards more frequently for payment, and as card-acceptance networks expand, transaction volumes are growing significantly faster than card numbers,” Retail Banking Research says. In related research, merchants deployed 1.1 million point-of-sale terminals in the region, a 26% increase from the previous year, the company says.

Ukash, a United Kingdom-based firm that sells prepaid vouchers for online shopping, announced Monday it has introduced its products in China. Consumers in China can order the vouchers online Ukash says in a statement. Consumers then can use the vouchers for online transactions. The vouchers have unique 19-digit codes consumers enter on Web sites during online transactions. Ukash and other firms offering similar vouchers sell them to consumers who prefer not to use cards for online purchases or who cannot use cards. Ukash already distributes its vouchers in such Asia-Pacific countries as Australia and New Zealand (CardLine Global, 22 July). Consumers in 26 countries now can purchase Ukash vouchers, the firm says.

Consumers in the Australian state of Queensland now can use prepaid Go Cards for travel on the TransLink network, the Queensland state transport minister has announced. The Go Card is a contactless card consumers can use to pay for bus, train and ferry rides. Consumers can store up to AU$250 (US$230 or 156 euros) on the cards. Consumers can buy the cards at various merchant locations in Queensland, and they can choose to have automatic top-ups on the cards via credit card payments. The Queensland Government formed the TransLink Transit Authority to improve and expand public-transport services across Southeast Queensland.

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