Credit

Visa Europe will keep its cross-border interchange rates as is, even though MasterCard Europe, facing hefty fines from European regulators, said Thursday it would "temporarily repeal" its rates while continuing its appeal of the regulators' decision. "The announcement has no impact in Visa Europe's interchange," Visa said in a statement issued Friday. "We are in ongoing talks with the European Commission about how we (will) set our interchange in the future, and these continue." The commission is investigating Visa Europe's interchange and card practices. In December, it gave MasterCard six months to lower its rates or face paying daily fines amounting to 3.5% of global revenues. Regulators say the rates are anticompetitive. On Friday, Visa Europe repeated that it hoped to reach agreement with the commission. But one analyst questioned how much negotiating power Visa has in the wake of MasterCard's interchange decision. "The way the situation is evolving, it's clear that MasterCard and Visa have little leverage over the [commission]," Gwenn Bézard, senior analyst for the Aite Group, a United States-based consultancy, tells CardLine Global. "It's not good news for Visa." Meanwhile, European retailers welcomed MasterCard's decision to repeal its rates. "This signals a major victory in the battle against this hidden taxation of purchasing, which will bring significant benefits to consumers and retailers," retail trade association EuroCommerce said in a statement issued Friday.

Rhein-Main-Verkehrsverbund GmbH, a Frankfurt, Germany-based regional transit authority also known as RMV, has expanded its pioneering Near Field Communication mobile-ticketing service that enables commuters to buy higher-value travel passes by tapping their phones at bus, tram, subway and train stops. The authority had allowed customers to use their NFC phones to buy only single-use and other low-value tickets. As first reported by CardLine Global and its sister publication Cards&Payments early last month, the authority is enabling customers to buy monthly passes, which get downloaded to a secure chip in the contactless phones. The chip, embedded in the Nokia 6131 NFC handsets customers can buy for the service, is designed to keep the tickets safe from fraud. Storing tickets on the chip also enables roving inspectors to check the passes just by tapping their own NFC phones or devices against the riders' NFC phones. Previously, the low-value tickets for the "RMV2Go" mobile-ticketing service were stored in the handsets. If requested, riders would display the tickets on the handset screen for inspectors to view. Throughout Germany's gateless transit systems, riders do not need to tap or insert cards or paper tickets into readers to board trams, trains or buses. RMV and transit operators in neighboring Austria enable customers to buy tickets by tapping their NFC phones on tiny chip tags embedded in plastic disks or in stickers posted at transit stations and stops. This automatically opens an application that enables passengers to buy the tickets with a few clicks. The customers register their bank accounts or payment cards in advance to pay for the tickets. They also can tap the tags to connect automatically to the mobile Internet for schedules, departure times, possible delays and other information. The transit authority also confirms it soon will expand the number of tags to 11 more major cities in its service area in the German state of Hesse. By 2012 it plans to have its entire region covered with 15,000 tags. The authority and other players involved in the ticketing service say customers later will be able to download the high-value tickets and applications onto SIM cards and to use other NFC mobile phones.

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Chinese consumers worry more about where they can pay bankcard bills than other factors when choosing credit cards, suggest survey data from Analysys International, a Beijing-based research company. The findings, based on 3,974 questionnaires sent in March to adult Internet users in China, show that 63% of respondents were concerned about convenient ways to pay card bills-whether at ATMs, bank branches or convenience stores. Fifty-five percent of respondents said they worried about card safety. About half of respondents said they considered the card brand when choosing a credit card, while nearly the same percentage considered annual fees. Almost 30% said they were concerned with reward points, while about 12.6% cared about gifts that come with cards.

United States-based auction Web site eBay Inc. says it is reviewing a directive from Australian competition authorities that delays company plans to mandate PayPal, eBay's payment service, as the only online-payment option on the company's Australian Web site, a spokesperson tells CardLine Global. EBay officials worked through Thursday night to "digest the information," the spokesperson says. "We will make further comment following the review process," the spokesperson says. On Thursday, the Australian Competition and Consumer Commission said it was determining if eBay's mandate is anticompetitive (CardLine Global, 13 June). The mandate was scheduled to start Tuesday.

Merchants, who have long chafed at American Express Co.'s fees and some of its policies, have not sued it as often as they have pursued antitrust claims against MasterCard Inc., Visa Inc., and their issuing banks.

Virgin Atlantic Airways Ltd. is offering an American Express Co. card issued by Bank of America Corp.

MasterCard Europe has "temporarily repealed" its interchange rates that European regulators say violate antitrust rules, the card company said Thursday. The action applies to cross-border interchange merchant acquirers pay card issuers when customers use cards carrying the MasterCard or Maestro debit brands. On 19 Dec. 2007, the European Commission ordered MasterCard to lower the rates within six months or face daily fines amounting to 3.5% of global revenues. On 1 March, MasterCard filed an appeal with the European Court of First Instance. The card organization is continuing that appeal, though MasterCard does not expect a judgment until "the second half of 2010," a MasterCard spokesperson tells CardLine Global. The interchange rates average 1% of the sale for MasterCard-branded cards and 0.5% for Maestro-branded cards, the spokesperson says. "MasterCard believes its cross-border interchange system has kept the cost of payment cards low for cardholders," Javier Perez, MasterCard Europe president, says in a statement. In March, the European Commission said it was investigating the interchange rates applied to Visa card transactions in Europe and the card organization's rule that merchants must accept all Visa-branded cards regardless of the issuer or type of transaction. Visa said it expects to reach a "negotiated settlement" with regulators (CardLine Global, 3 April).

China's Shenzhen Ping An Bank says its credit cardholders have paid more than 400 million yuan (US$57.9 million or 37.6 million euros) worth of credit card bills at convenience stores in Shanghai since the bank's service began in November. In the past month, credit cardholders paid back 160 million yuan at participating convenience stores. Cardholders can pay bills at some 2,000 convenience stores in Shanghai, a bank spokesperson tells CardLine Global. "We are a middle-sized bank and have only four branches in Shanghai, [so] the service ... at convenience stores makes up for the insufficient number of outlets in the city," the spokesperson says. The bank has issued at least 700,000 credit cards. "Multiple-channel card repayments is a new trend in the credit card market," Fei Cao, an analyst with Beijing-based research company Analysys International, tells CardLine Global. "Banks want to attract more credit card customers, and the facilitation of repayments is one of the factors that can help them." China Merchants Bank, Shanghai Pudong Development Bank and Shangzhen Development bank also provide the same service at convenience stores in Shanghai and Beijing, in association with payment network China UnionPay.

Australian authorities have told online auction company eBay Inc. to delay plans to mandate PayPal, eBay's payment service, as the only online-payment option on the company's Australian site. The Australian Competition and Consumer Commission is investigating whether the rule is anticompetitive. EBay has said that buyers and sellers are less likely to dispute transactions routed through PayPal than transactions routed through bank accounts. The commission says it will wait for a response from eBay and other interested parties before making a final decision. EBay did not return a CardLine Global request for comment. EBay has created a two-step process to enable Australian sellers to ready themselves to accept either PayPal or cash on pickup, the commission says in a statement. As of 21 May, all sellers were required to offer PayPal as one of their accepted payment methods. The second step, scheduled to start Tuesday, would require that all transactions on eBay be paid either through PayPal or cash on pickup. The regulation bans direct deposits, money orders and personal checks as payment. The new policy "will substantially reduce competition to supply online-payment services to users of online marketplaces more generally," Commission Chairman Graeme Samuel says in a statement. Last month, the commission told CardLine Global that authorities also are concerned that eBay's mandate will result in higher PayPal sellers' fees (CardLine Global, 15 May).

Malaysia-based CIMB Bank says it expects to see more customers using online banking as increasing fuel costs discourage consumers from driving to bank branches. The bank's customers made about 1 million online transactions last year, the bank says in a statement. The bank did not say how many new online customers it hopes to attract. The bank recently introduced a service with Malaysian-based mobile operator Maxis Communications that enables the bank's online customers to add value to their prepaid phones by transferring funds from bank accounts. CIMB is a subsidiary of CIMB Group, which has 366 branches, 1,252 ATMs and more than 4.5 million customers in the country, the statement says.

United Overseas Bank Malaysia would double its debit and credit card base to 1.2 million under a projection bank officials released this week. The bank, a subsidiary of Singapore-based United Overseas Bank, plans to offer new card products and expand its payment networks in Malaysia to achieve that goal, according to a statement from the bank. The bank this week began issuing MasterCard- and Visa-branded platinum cards. The Singapore-based bank has issued more than 2.5 million credit cards in Asian countries.

United Kingdom-based InterContinental Hotels Group PLC says customers now can use China-issued bankcards to make online reservations and payments. The hotel company has signed a deal with ChinaPay E-Payment Service Co. Ltd., a subsidiary of China UnionPay, to provide the service. InterContinental says it is the "only international hotel group in China" to offer this service, according to a statement. Previously, InterContinental accepted only internationally branded credit cards for online reservations, and guests had to make all payments during checkout. The new service "allows [the group] to reach out to nearly 1.5 billion holders of locally issued bankcards across China," the statement says.

CVS Caremark Corp., Rite Aid Corp. and Walgreen Co. this week filed a lawsuit against American Express Co. in U.S. District Court for the Eastern District of New York. The suit alleges that the contracts AmEx requires merchants to sign to accept its cards prevent them from steering customers to competing products. While Visa and MasterCard set the interchange rates as part of the fees retailers ultimately pay issuers to accept their cards, AmEx and Discover Financial Services negotiate their card fees directly with retailers. AmEx has said its credit cards attract "premium customers," so it sets the transaction fees it charges retailers higher than other brands charge. Attempts to reach attorneys for the retailers were unsuccessful. An AmEx spokesperson tells CardLine that, "based on our preliminary read, we do not believe there is any merit to their argument. We intend to vigorously defend our position."

Capital One Financial Corp.'s chief financial officer links delinquencies in the bank's credit card portfolio to the cardholders' job situations. Gary L. Perlin, CFO and executive vice president, told investors at the Keefe, Bruyette & Woods Diversified Financial Services conference last week that the bank went back 20 years to study the cycles in delinquencies. "Employment is the critical variable for understanding how any unsecured loan book is going to play out over time, since we are talking about people's ability to pay," Perlin says. The bank underwrites unsecured card loans entirely on ability to pay, he notes, adding that credit card delinquencies have been a leading indicator of challenges in the employment market. "I can't say where we are in the employment cycle, so I can't tell you that we have finished with the increase in card delinquencies," Perlin says. "There are lots of good reasons not to assume that." Looking at past trends, Perlin calls credit card delinquencies a leading indicator that the job market may remain weak for some time. On the other side of the cycle, he said, "we should see credit card delinquencies curing faster, or at least ahead of the actual trend in employment." Cap One says that occurs because cardholders "sense what's going on" in the marketplace and with their employers "and start to change their behavior before the actual changes take place around them." The bank has built allowances to cover 12 months of loan losses and expects loss rates to reflect economic, employment and other negative trends, says Perlin.

The latest Moody's Investors Services report on the performance of credit card debt provides a roundup of gloomy spring news. In April, card-loan performance deteriorated in four of the five categories Moody's Credit Card Indices track. The indices cover more than $445 billion in U.S. bank credit card loans that back the securities Moody's rates. Annualized credit card charge-off rates in April were 6.27% of outstanding loans, up 150 basis points from 4.77% in April 2007 and the highest charge-off rate since December 2005 when charge-offs spiked before changes in personal bankruptcy laws. The delinquency rate in April was 4.5%, up 80 basis points from 3.7% the same time last year. Cardholders paid back 17.49% of their card debts in April, about 114 basis points less than the 18.63% of balances they repaid the same time last year. The yield on card loans (the annualized percentage of income, mostly finance charges and fees, collected during the month as a percent of total loans) fell in April to 18.14% from 18.64% a year earlier.

Nine million U.S. mobile-phone subscribers say they used their mobile devices to pay for goods or services in the first quarter ended March 31, according to a report by the Nielsen Co. Nielsen surveys 30,000 wireless subscribers monthly. Some 6.5 million consumers used text messaging to make purchases as of the end of April, according to the report. About 5 million used mobile shopping and auction sites in April, up 72.4% from 2.9 million in April 2007, the report says. "As more mobile-commerce services become available and consumers develop a greater trust for phone-based transactions, we expect commerce to be an increasingly important part of the mobile experience next year and beyond," Nic Covey, director of insights at Nielsen Mobile, told attendees Thursday at the Internet Retailer Conference and Exhibition in Chicago. Security remains the primary concern among mobile-phone users who do not participate in mobile commerce, the study says. "U.S. consumers need proof that mobile transactions will be a safe, affordable and efficient complement to other modes of shopping," Covey says.

Prepaid Card Holdings Inc. announced this week it has hired John W. Weber Jr. as vice president of finance and principal financial officer..

First Data Corp. has extended an agreement to provide merchant processing services for customers of Webster Financial Corp. of Waterbury, Conn.

Softening of consumer lending demand has persisted over the past eight weeks and delinquencies on consumer loans has increased in some areas, according to the Beige Book, the Federal Reserve Board's summary of economic activity reports from all 12 central bank districts, which was released Wednesday.