Credit

Hypercom Corp. announced today the Saudi Arabian Money Agency has given Saudi Payments Network certification for the vendor's Optimum T4210 payment terminal.

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Small-business owners' confidence in the economy rebounded this month after hitting a record low last month, according to Discover Financial Services.

SEWELL CHAN; Andy Newman and Mathew R. Warren contributed reporting. New York Times

While operators of transit fare-collection systems in London, New York, Washington, D.C., and a few other places consider enabling riders to pay fares with contactless cards issued by banks, no similar push to accept open-loop payment cards exists at the pioneering Octopus Cards Ltd. scheme in Hong Kong, according to one executive. Octopus, one of the largest fare-collection systems in the world, has been building its system and brand since 1997, and more cardholders are using the cards to make retail purchases, says Brian Chambers, head of Octopus Knowledge, the consulting arm of the holding company that owns the Hong Kong transit card scheme. "What's the effect of losing your brand, losing your customer relationship?" Chambers tells CardLine Global sister publication Cards&Payments. Octopus and Citibank earlier this month announced the planned launch of the first co-branded credit card that carries the Octopus application. But that application is separate from the Citi credit feature. Octopus estimates it has 17 million cards in circulation that cardholders use more than 10 million times each day. The transactions total more than HK$85 million (US$10.9 million euros or 6.9 million euros) per day. While estimates vary on the share retail and other nontransit transactions make up, Chambers places it at 30% of the total value cardholders spend with the prepaid Octopus cards. He says about 2,500 merchant locations accept Octopus. Those are part of roughly 50,000 terminals where users can tap their cards to pay, most of them on buses and at gates of subways, ferries and other modes of transport throughout Hong Kong. All of these terminals would have to be modified to accept payment from contactless debit, credit and prepaid cards from Visa Inc. or MasterCard Worldwide. "The cost of retrofitting would be enormous," Chambers says. The transit system or its banking partners also would have to update their back-end systems to calculate the variety of fares and discounts that transit operators offer customers who use bankcards. Chambers says he does not believe banks are interested in capturing the "micropayments" that transit fare collection represents.

India's Life Insurance Corp. reportedly has dropped its proposed credit card joint venture with GE Money. Neither company would give immediate comment to CardLine Global about the report, which appeared in the India-based Business Standard newspaper. The news outlet reported that Life Insurance decided to quit the venture after GE faced problems with another joint venture, SBI Cards. In May, the State Bank of India and GE decided to split SBI Cards into two ventures. SBI recently reported its first annual loss. The troubles with SBI Cards are "definitely the main reason for the lapse ... between [Life Insurance Corp.] and GE," Prathima Rajan, an India-based analyst with Celent LLC, tells CardLine Global. She anticipates that Life Insurance Corp. either will form a card venture with another company or enter the market on its own.

The Reserve Bank of India wants credit card issuers to improve their treatment of cardholders, according to a notice the financial institution released. The notice calls on issuers to stop sending credit cards to customers unless requested, offer clear information about card interest rates, release the main reason for a rejected card application and refrain from delaying to send card statements to customers. The circular contains recommendations. The bank released the suggestions after studying banks' credit card operations and reviewing complaints from credit cardholders, a Reserve Bank spokesperson tells CardLine Global.

Tesco PLC, a supermarket chain based in the United Kingdom, said Monday it will assume full ownership of its financial-services arm by buying the 50% stake owned by the Royal Bank of Scotland. Tesco Personal Finance Group Ltd. offers credit cards, insurance and related products, and it operates a network of about 2,700 ATMs, according to a statement from Tesco. The company will spend £950 million (US$1.9 billion or 1.2 billion euros) for the stake from Royal Bank of Scotland. The bank and supermarket chain created the financial-services arm in 1997 as a joint venture. Tesco expects the arm to generate an estimated pretax profit of £240 million this year, up 16.5% from £206 million last year. The supermarket chain says assuming full ownership will enable the company to "to extend its financial-services business from a collection of popular financial products to that of a full-service retail bank offering more choice, innovation and value to customers, and better returns to shareholders," according to the statement. Tesco claims to have 6.9% of the UK credit card market.

NCR Corp., the world's largest ATM manufacturer based on 2007 shipments, today reported net income of $44 million for second quarter ended June 30, down 55% from $98 million for the same three-month period last year. The Dayton, Ohio-based company reported revenue of $1.3 billion, up 8.3% from $1.2 billion. "NCR's strong second-quarter results were broad-based geographically and speak to continued solid demand for self-service solutions," Bill Nuti, NCR president and CEO, said in a statement. Second-quarter income from continuing operations was $45 million, down 11.8% compared with $51 million for the same three-month period last year. NCR attributed the lower income from continuing operations to a nonrecurring $32 million after-tax charge related to arecent organizational realignment. Revenue in the Americas, which include North America, South America, Central America, Mexico and Canada, grew 11%, to $578 million, Nuti told analysts during a conference call. Revenue from Europe, the Middle East and Africa was up 16%, to $513 million, and revenue from Asia-Pacific was $241 million, up 10%. "All in all, NCR had a very good quarter," Gil Luria, an analyst with Los Angeles-based Wedbush Morgan Securities Inc., tells CardLine sister publication ATM&Debit News. "NCR's worldwide ATM business grew 13% on a constant basis, which does not include a 6% benefit from currency translations." Luria, however, was most impressed by NCR's ATM sales in the United States. "U.S. ATM sales are growing because national banks, including JPMorgan Chase & Co. and Wells Fargo & Co., are upgrading their ATM networks with bulk-check, bulk-cash deposit and envelope-free ATMs," he says. NCR did not provide specific data on U.S. sales. Second-quarter net income last year included earnings from Teradata, which NCR spun off to NCR shareholders in the third quarter. Analysts did not consider the decline in net income meaningful. In midday trading today, NCR stock was selling at $27.10 per share, up 0.63% from yesterday's $26.92 closing price.

Fifth Third Bancorp plans to ask the full 3RD U.S. Court of Appeals in Philadelphia to review a recent ruling by a three-judge panel from the court that would open the door for card issuers to seek damages from third-party processors for costs of merchant-data breaches. Pennsylvania State Employees Credit Union and Sovereign Bank both filed suit against BJ's Wholesale Club Inc. and Fifth Third seeking reimbursement for the costs of reissuing cards compromised in a data beach at BJ's in 2004. Fifth Third was the merchant acquirer for the Natick, Mass.-based chain when the breach occurred. The issuers charge Fifth Third was responsible for BJ's failure to comply with Visa USA operating rules that bar merchants from retaining credit card data after completing transactions. A Massachusetts District Court dismissed the issuers' suit against Fifth Third, but July 16 the appeals-court panel unanimously reversed the ruling and sent the case back to the district court. Fifth Third's lawyers immediately petitioned the appeals court for a review of the July 16 ruling. If accepted, all nine judges of the appeals court would review the panel's ruling. Last week, the court granted Fifth Third an extension, until Aug. 15, to file a petition for the review.

Mandatory reporting of merchant credit and debit card transactions to the Internal Revenue Service could prove time consuming and costly for acquirers and the independent sales organizations, according to Paul Martaus, president of the Mountain Home, Ark.-based consulting firm Martaus & Associates Inc. A provision of the Housing and Economic Recovery Act of 2008 would require merchant acquirers to provide annual reports listing the name, address, taxpayer identification number, and the gross amount of credit and debit card transactions for each merchant customers to the IRS (CardLine, 7/28). Acquirers and ISOs likely would have to absorb the costs ofh collecting and securely storing merchants' information, Martaus says. Depending on how the IRS handles the provision, "there is a very strong likelihood that the ISOs themselves are going to have to go to every merchant location in the country they have clients in and reprogram all the terminals," says Martaus. In the past, acquirers and ISOs have not collected some information the IRS would require under the provision, such as taxpayer identification numbers. Consumers, though, may ultimately pay for the change. "Acquirers and ISOs will have to absorb the cost of this," but they will pass those costs to merchants, who will increase prices for consumers, Martaus says.

Two law firms voluntarily withdrew a class-action lawsuit filed against TRM Corp., the nation's second-largest ATM independent sales organization, three months after taking the legal action. A U.S. District Court in Portland, Ore., where TRM is based, dismissed the case without prejudice, meaning the law firms could refile the legal action in the future. The law firms¬–Coughlin Stoia Geller Rudman & Robbins LLP and Stoll Stoll Berne Lokting & Shlachter PC–dropped the lawsuit on behalf of plaintiff, Lawrence F. Hardtke, who filed the lawsuit May 23. The law firms charged in their complaint that former TRM executive officers violated federal securities laws by issuing misleading statements concerning TRM's financial condition. Richard Stern, TRM president and CEO, referred calls from ATM&Debit News, a CardLine sister publication, to Mike Dolan, the company's chief financial officer. Dolan did not return a call for comment by CardLine's deadline. A spokesperson for one of the law firms provided ATM&Debit News with a copy of the dismissal, but he referred questions to the other law firm, which did not return calls.

Earnings for business credit card issuer Advanta Corp. declined 83.1% in the second quarter ended June 30, to $4 million from $23.7 million in the same period last year. The company attributed the decrease to a massive increase in provisions for credit losses, which rose 157%, to $30.3 million from $11.8 million in the second quarter of 2007. Advanta reported a net credit loss rate of 8.38% of managed receivables, a 30-day delinquency rate of 5.67% and a 90-day delinquency rate of 2.81%. "We take no comfort from it, but our losses and delinquencies are below the average of other small-business issuers," Dennis Alter, Advanta chairman and CEO, said this morning during a conference call with securities analysts. Operating expenses during the quarter increased 19%, to $81.6 million from $68.6 million a year earlier. Net interest income from its Business Cards segment increased slightly, to $25.5 million from $25.4 million. "The quarter's results are obviously not what we would like to see," Alter said. "All of us at the company are focused on returning to robust earnings and returns for our shareholders." Advanta added an estimated 26,000 customers during the quarter, and cardholder transaction volume during the quarter totaled $3.5 billion, of which almost 90% related to merchandise sales activity. Last week, Advanta said it expects to incur $6 million to $6.5 million in expenses for severance and other costs related to the outsourcing of jobs. The issuer in May said that with profits from small-business credit card issuance down sharply because of credit woes, it would join the ranks of its larger competitors in shipping some jobs overseas to India. It will use Genpact, a former General Electric Co. subsidiary that is now its own publicly traded company, in shipping jobs offshore. Operations affected most by the job cuts include information technology, customer service, collections, and accounting and finance. Advanta expects the move to save $15 million annually, beginning in 2010.

RocketBux Inc. has signed an agreement with Thanks Again LLC to enable consumers to register for Thanks Again products and receive promotions using mobile phones, RocketBux says. The phones of consumers who register their credit cards with Thanks Again will receive images of coupons with bar codes that merchants can scan at the point of sale, the company says. Consumers can begin to use mobile phones to register their credit cards with Thanks Again, which is based in Tyrone, Ga., and receive coupons starting Sept. 1, Walt Granville, RocketBux vice president of sales, tells CardLine. RocketBux and Thanks Again plan to place ads in the Continental Airlines Inc. in-flight magazine to promote the initiative to members of the OnePass frequent-flyer program, Granville says. In October, RocketBux plans to promote the service to members of US Airways Inc.'s frequent-flyer program, Granville says. Bend, Ore.-based RocketBux operates a dedicated Web site that mobile-phone users can use to register their cards, Granville says. Once consumers register, they can begin to receive discount coupons on their mobile phones based on what they purchase with their credit cards, Granville says. Consumers do not need to pay to register, and merchants pay fees to have their businesses included in the promotions, he says.

Seventy-three percent of respondents surveyed as part of Visa Inc.'s 2008 U.S. International Travel Outlook study cited credit and debit cards as their preferred payment method while traveling. Western Wats conducted the telephone interviews with 1,000 adult credit or debit cardholders in May. Cash was second-highest preference, cited by 18% of respondents, followed by 7% who preferred using travelers' checks. Visa cardholders spent $2.9 billion in Canada and 1.8 billion in Mexico in 2007, according to the study.

Heartland Payment Systems today announced a partnership with Identification Systems Group to deliver Heartland's campus card services to an expanded network of colleges and universities.

Moneris Solutions Inc. today announced it is acquiring Alabama National BanCorp.'s merchant-payment business in an agreement that expands the payment processor's presence in the Southeast. Moneris, whose U.S. headquarters is in Schaumburg, Ill., will service 103 Alabama National banking centers in the Southeast and the bank holding company's established merchant-processing portfolio, according to Moneris. Additionally, Moneris will handle all credit card processing sales-and-servicing functions. The companies did not disclose the financial details of the transaction. The companies did not state when they expect the deal to close. The acquisition increases Moneris' portfolio size, bank network and brand presence in the Southeast, the company says. "Moneris has very aggressive growth plans," Greg Cohen, president of Moneris U.S., said in a statement. A Moneris representative was unavailable to comment by CardLine deadline. http://www.cardforum.com http://www.sourcemedia.com

The Canadian PressBUSINESS