Credit

Bank Islam Malaysia Bhd will not absorb the planned service tax on credit cards that the government will impose next year, the Kuala Lumpur-based bank announced this week. In a statement, the bank said it already has offered other incentives for its credit card customers and does not see the need to absorb the tax. The Malaysian government announced in its 2010 budget it will impose a 50 ringgits (US$15 or 10 Euros) tax on primary credit cards and a 25 ringgits tax on supplementary credit cards. Previously, one other bank, Malayan Banking Bhd, had announced that it, too, will not absorb this tax. That announcement came during the same week the government announced that new credit and charge card holders next year will have to pay the service tax up front. However, existing cardholders will have to pay the tax on the anniversary date of when they received their cards. A survey from local business daily StarBiza also found that such banks as Citibank and RHB Bank were against absorbing the tax. The survey also found that banks are willing to waive annual fees or allow cardholders to use their reward points to pay for the tax.

American Express Co. has introduced an online invoicing and payment service aimed at small businesses, reports American Banker, a CardLine sister publication. The company's AcceptPay, announced Monday, enables businesses to produce, send and track invoices electronically. Clients can pay with credit and debit cards, checks, electronic debits and other methods. AcceptPay is offered through AmEx's Open unit, which targets small-business clients. AmEx said the service could help users get paid faster and comes at a time when many clients are slower in paying, resulting in cash flow problems at some small businesses. According to AmEx research, 60% of small-business owners have cash flow concerns, and many say that improving collections is an effective method to improve cash flow. Businesses need not have AmEx cards to sign up for the service. There is no setup fee for AcceptPay, and users pay $20 per month. "At a time when every dollar counts, business owners need tools and resources to help them better manage their firms' finances, and that is why we created this innovative payment collection" service, Mary Ann Fitzmaurice Reilly, a senior vice president with AmEx's Open unit, said in a press release.

Australian consumers continue to increasingly embrace debit cards, while credit card activity remains flat. Consumers made 177.2 million debit card transactions in October, up 15.2% from 153.8 million a year earlier, according to the Reserve Bank of Australia. Debit card sales volume increased 12%, to AU$12.1 billion (US$10.6 billion or 7.4 billion euros) from AU$10.8 billion. Credit and charge card holders made 127.3 million transactions in October, up 1.2% from the 125.8 million during the same month last year. Sales volume on those cards fell 1.5%, to AU$19.1 billion from AU$19.4 billion. Consumers in October repaid AU$19.6 billion in card debt, down 1% from AU$19.8 billion a year ago. Australia has at least 14.4 million credit cardholders and 31.2 million debit cardholders, the central bank says.

MasterCard Europe earlier this month said is considering taking legal action against a bill the Hungarian parliament approved Monday that would limit bankcard transaction commissions, report Dow Jones. "The legislation will affect negatively the development of electronic payment solutions in Hungary and also all players of the bankcard market, including cardholders, retailers and banks," MasterCard said in a release Tuesday. The company also questioned the parliament's decision as it came without public consultation or a preliminary study of the impact, it added. The bill limits the interchange fee on debit card transactions at 0.3% of the value paid, capped at 53 cents per transaction. For other bankcard transactions, the limit is 0.8% of the value paid. The bill also limits transaction fees related to point-of-sale terminals to 2% of the transaction value.

Advanta Corp., the small-business credit card lender that has filed for bankruptcy, said in a regulatory filing Monday that defaults fell to 34.36% in November, from 34.99% the previous month.

Relatively few consumers in the United Kingdom own a charge card, but such a product soon could begin to grow in popularity as consumers shift their spending behaviors and issuers alter their card offerings, Auriemma Consulting Group suggests in a report issued this week.

Ever wonder what your friends just bought with their credit card? What they just downloaded from iTunes? If you do, then Twitter believes its has the answer.

NCR Corp. paid $21 million in severance to laid off workers during the first nine months of the year as part of the global realignment of the company’s ATM manufacturing, according to a U.S. Securities and Exchange Commission filing. The Duluth, Ga.-based company terminated approximately 900 workers in the Americas, Europe, Middle East and Africa, Asia Pacific and Japan between Jan. 1 and Sept. 30, according to the filing. The layoffs eliminated redundancies and freed up funds to invest in growth programs such as sales, engineering and market development. NCR expects the layoffs to generate approximately $40 million in annual savings, the company says. NCR, world’s largest ATM manufacturer based on annual shipments, employs 26,000 workers worldwide, but the company has announced plans to cut its workforce by another 5% to 10% to align the size of its staff with sales.

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.

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.

The combined net income of the five largest credit card issuers in South Korea–BC Card Co. Ltd., Shinhan Card Co. Ltd., Samsung Card Co. Ltd., Hyundai Card Co. Ltd. and Lotte Card Co. Ltd.–dropped to 1.5 trillion won (US$1.27 billion or 890.8 million euros) for the nine-month period ended 30 Sept., down 6.3% from 1.6 trillion won during the same period last year, according to the Credit Finance Association of Korea. The trade group does not break out specific company earnings. Still, spending on credit cards issued by the five companies totaled 29.6 trillion won in November, up 18.4% from 25 trillion won during the same month last year. As of 30 Sept., South Korean consumers held 103.7 million credit cards, the trade group says. Immediate comment from the group was not available.

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.

The eBillme online payment service has instituted a program that shares revenue with banks, bill-pay portals and walk-in bill payment networks that support the service, Samer Forzley, EBILLME’S vice president of marketing, tells CardLine. EBillme enables consumers to use their own financial institution’s online banking and bill-payment services to make purchases online. Forzley says the revenue percentage is less than 2% but ultimately depends on the volume of business the partner brings in. The program encourages bill-payment partners to promote the eBillme service to their subscriber bases, he notes.

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.

Bangkok Bank plans to issue a “platinum” credit card that carries the China UnionPay brand starting in February, a bank spokesperson tells CardLine Global. The bank says this card will be the first high-end credit card in Thailand to carry the UnionPay logo, but CardLine Global was unable to confirm the claim. The card launch coincides with the bank’s “recent receipt of a license from the Chinese government to operate Bangkok Bank China, a locally incorporated bank in China, which will open” in late December, the spokesperson adds. The cards in Thailand will have contact chips, the spokesperson says.

Consumers in New Zealand are spending more this holiday season using payment cards, suggest data from Auckland-based processor Paymark. Between 7 Dec. and 13 Dec., Paymark processed approximately 34.3 million credit and debit card transactions, up 6.5% from nearly 32.2 million during the same period last year. The value of those card transactions increased 4.2%, to NZ$1.74 billion (US$1.23 billion or 862.2 million euros) during the week from NZ$1.67 billion. The increase in spending is consistent with trends over the past few years, Paymark CEO Simon Tong tells CardLine Global. Paymark, which claims it processes more than 75% of New Zealand card transactions, says its network includes 73,000 merchants.

Citing an overall slowdown in consumer spending, Discover Financial Services today reported net income of $370.7 million for its fourth fiscal quarter ended Nov. 30, down 14.2% from $432.3 million during the same period a year ago. The results included $472 million Discover received from Visa Inc. and MasterCard Worldwide as the final payments of their $2.75 billion combined antitrust litigation settlement reached last year with Discover. Discover claimed in a 2004 civil lawsuit that the card networks’ exclusionary rules hurt its growth. Revenue during the quarter net of interest expense was $1.58 billion, down 20.2% from $1.98 billion. Discover’s U.S. Card unit posted a slight decline in sales volume during the quarter, to $21.9 billion from $22 billion, which the company attributed to the ongoing effects of the recession. Managed loans fell slightly to $50.9 billion from $50.9 billion a year earlier. Discover’s managed net charge-off rate on credit card receivables rose 295 basis points, to 8.43% from 5.48%. The delinquency rate on loans at least 30 days past due was 5.31%, up 75 basis points from 4.56%. The company’s provision for loan losses fell 10%, to $989 million from $1.1 billion a year earlier. Total third-party payments segment volume fell 1.8%, to $33.4 billion from $34 billion. Volume for Discover’s Pulse PIN-debit network dropped 1.2%, to $24.7 billion from $25 billion, while volume from third-party Discover card issuers fell 1.2%, to $1.52 billion from $1.54 billion. Total transactions processed on the Pulse network rose 5%, to 677 million from 644 million. Diners Club International volume totaled $7.1 billion, down 5.3% from $7.5 billion. During a conference call today with analysts, Discover Chairman and CEO David Nelms said Discover is “not prepared to suggest that losses have peaked,” and he expected the company to report higher charge-offs early in 2010. Discover is beginning to see the first bottom-line effects of the Credit Card Accountability, Responsibility and Disclosure Act President Obama signed into law last May, as the company resets customers’ interest rates to cope with a ban on risk-based pricing, Nelms added, and as a result he expects Discover’s portfolio-yield to decline somewhat next year. “Effectively, risk-based pricing is being unwound, with pricing being pushed more toward the middle (range) of (previously higher) interest rates for a broad group of people,” Nelms said. Discover also has bumped up its advertising and marketing efforts this quarter, while heavily pushing its cash-back rewards program in TV spots, he said. “I’ve seen significant pull-backs (of some issuers) switching (rewards programs) from cash to points, but we’ve done the opposite,” Nelms said.

Asta Funding Inc., an asset-management company that buys unpaid credit card loans and tries to collect on them, Tuesday reported a net loss of $79.2 million for its fiscal fourth quarter ended Sept. 30.