Credit

U.S. consumer bankruptcy filings jumped 30.9% in May from the same month last year, the American Bankruptcy Institute reports today, based on data from the National Bankruptcy Research Center.

French banks have expressed interest in using contactless technology, both on cards and on Near Field Communication-enabled mobile phones, to grab a larger share of cash transactions. But a major obstacle to the rollout of contactless payment in France, as in other European countries, is the almost complete lack of contactless readers at the point of sale. Among the measures banks will consider to encourage merchants to accept contactless is lowering interchange rates for low-value transactions, says Roland Entz, managing director of Visa Europe's France office. Visa banks in the United Kingdom lowered interchange for the low-value transactions for which contactless technology was designed in advance of the London launch of contactless payment last fall. MasterCard Worldwide reportedly followed suit. "It's something banks need to think about," Entz tells CardLine Global sister publication Cards&Payments. "The banks certainly need to resolve the economic model [for rolling out contactless payment]." In France, interchange remains relatively low compared with other European counties and does not vary across credit, debit or other card products. Interchange, which acquiring banks pay to issuers on card purchases, largely determines the transaction fees merchants pay. Suggesting lower interchange is a touchy subject in Europe, where the European Commission has ordered MasterCard to slash its interchange rates. Regulators also told Visa Europe it should pay heed to the MasterCard ruling. Entz says from Visa's perspective, interchange is an "indispensable" part of the card-payment system. André-Jacques Selezneff, MasterCard business leader for advanced payments in Europe, declines to say whether lowering interchange is necessary to build the infrastructure of contactless readers in France. He says, however, the opportunity for French merchants to co-brand payment cards-a relatively recent development in France-could encourage them to accept contactless payments. Banque Accord, the card-issuing arm of French hypermarket chain Auchan, is the only bank in France that has announced a rollout of contactless cards. The small rollout, which will feature MasterCard's PayPass application, is scheduled to start this year. Visa is participating in two French contactless card pilots.

The People's Bank of China is expanding the country's credit database by adding details about consumers' utility-bill payments, the central bank has announced. The database already includes information about consumers' loans and credit cards, the bank says. "The credit-record system in China is still lacking in many aspects," Fei Cao, payment analyst with Beijing-based research company Analysys International, tells CardLine Global. "Setting up a more complete credit database is something [that could] provide better card and financial services."

Consumers in the United Kingdom spent £14.7 billion (US$28.7 billion or 18.6 billion euros) on retail goods bought online in 2007, a 35% increase from the previous year, according to Verdict Research, a UK-based research firm. Online retail spending "is growing at the fastest rate" in six years, the group says in a statement released this week. Online retail spending could reach £44.9 billion by 2012 and account for nearly 14% of all spending on the Internet, the group estimates. Some 22.6 million consumers in the UK shopped online in 2007, nearly 25% more than in 2006. Those consumers shopped online an average of 19.9 times in 2007, up from 17.2 in the previous year. Verdict Research cited the spread of higher speed broadband connections and the convenience of Internet shopping as major factors for the growth.

Since 2006, the percentage of merchants switching acquirers has surged, especially among mid-size retailers, according to a report from First Annapolis Consulting, a payments consultancy based in Linthicum, Md. Historically, smaller merchants have switched merchant acquirers more often than have large-volume merchants, and that tendency continues to hold, the report notes. What has changed since 2006, the last time First Annapolis studied merchant-attrition patterns, is that more large-volume merchants are shopping around. The merchant-attrition rate among merchants with $5 million to $10 million in annual card-processing volume increased from approximately 6% in 2006 to 12% in 2008 the report states. The report does not say which months are included in the 2008 analysis. But the largest attrition-rate increase occurred among mid-volume merchants. For example, about 20% of merchants with $500,000 to $1 million in volume switched acquirers in 2008 versus about 13% that did in 2006. Other mid-size merchant categories experienced similar attrition-rate increases, First Annapolis says. More competition among merchant acquirers for accounts, fewer overall accounts because of businesses failing, or a combination of both factors may be driving the shift, First Annapolis says. "This pattern will be noteworthy if it persists because most acquirers' sweet spot–where they generate the most economic value–[falls] within these size ranges," the report states.

U.S. consumer bankruptcy filings jumped 30.9% in May from the same month last year, the American Bankruptcy Institute reports today. Using data from the National Bankruptcy Research Center, the institute says the 91,214 consumer filings in May represented a slight, 1.2% dip from the 92,291 filings recorded in April but rose from 69,684 filings in May 2007. The total number of bankruptcies filed during the first quarter increased 26.9% from the same period last year, the Administrative Office of the U.S. Courts reported earlier this week. Total filings reached 245,695 from January through March, 26.9% more than the 193,641 cases filed over the same stretch of 2007. "This ninth consecutive quarterly increase in filings since Congress attempted to restrict access to bankruptcy relief demonstrates again the influence of rising household debt," Samuel J. Giordano, the institute's executive director, said in a statement. "We expect filings to surge past 1 million cases by year-end."

CheckFreePay, a division of Fiserv Inc., announced this week that consumers can pay more than 300 bills using its next-day service, double what it previously offered. CheckFreePay enables consumers to pay utility, mobile-phone, insurance, credit card and other bills by bringing cash to a walk-in location, according to the company. CheckFreePay operates 12,000 bill-payment locations in 48 states, according to the company. Consumers pay $1.50 for two- to three-day bill processing, or $2.50 for next-day processing. CheckFreePay announced in May it began offering its bill-payment services through Ready Credit Corp.'s kiosks (CardLine 5/16). "We feel this reflects a trend toward faster payments in general," Ann Cave, a CheckFreePay spokesperson, tells CardLine. "Consumers, regardless of the channel they are paying in, have an increased expectation of speed."

Over the coming months, banking institutions will continue to face deteriorating loan quality, Federal Reserve Vice Chairman Donald L. Kohn warned the Senate Committee on Banking, Housing and Urban Affairs today during a talk on the condition of the U.S. banking system. "House prices are still declining sharply in many localities, and losses related to residential real estate, including loans to builders and developers, are bound to increase further," Kohn said. "In addition, weak economic conditions could well extend problems to other segments of lending portfolios, including consumer installment or credit card loans." Kohn emphasized that financial institutions must be prepared "for the possibility that liquidity conditions become tighter if uncertainties in the capital markets fail to subside or if credit conditions deteriorate significantly." Because of these circumstances, the Fed anticipates the number of banks with "less-than-satisfactory supervisory ratings will continue to increase from the relatively low levels that have existed in recent years."

The launch of mobile-banking services and payments in Canada was the next logical step for Monitise Americas LLC, according to CEO Lisa Stanton. "The credit-union market is very engaged in consideration of mobile banking here in the States, so we're excited to launch initially with a focus on credit unions in Canada," Stanton tells CardLine. Monitise Tuesday announced an agreement with Everlink Payment Service Inc., a Canadian provider of electronic-transaction and payment services, to distribute a suite of mobile-banking services to financial institutions, including 375 credit unions (CardLine, 6/3). Monitise has similar deals with five U.S. financial institutions to distribute the services through the NYCE electronic funds transfer network. Stanton says the suite gives mid-sized banks and credit unions the "opportunity to remain competitive and, maybe in some cases, leapfrog the big guys in terms of their product offerings, convenience and so on." With the mobile-banking and payments space changing daily, Stanton says there is urgency to expand the capabilities of mobile banking. "We focus on the traditional things, like viewing account balances and recent transactions, with the promise to introduce things to consumers that they can't do today anywhere else," Stanton says. Bill payment and person-to-person mobile payments are a start, and those services will be offered in the future, Stanton says. Monitise views mobile banking as an entrance to mobile payments, and Stanton says the company is committed to contactless Near Field Communication technology. "If done right with a financial-services focused provider, it will add revenue opportunities for banks and credit unions," she says.

Democratic Illinois Senator Dick Durban today introduced legislation to allow large and small businesses to negotiate directly with credit card companies to reduce the interchange fees that are charged on every credit card transaction.

A cobranded card agreement between a military retailer and JPMorgan Chase & Co. has raised the ire of banks and credit unions that say the deal infringes on their exclusive contracts to provide financial services on bases.

BOSTON — To expand in the business-to-business payments market, credit card issuers may have to abandon the interchange structure, an analyst has predicted.

Coop Danmark, a grocery and retail chain in Denmark, will allow customers to pay for purchases with international card brands, providing more competition for the Dankort national debit brand and cash, a spokesperson for PBS A/S, the chain's processor and acquirer, tells CardLine Global. PBS says the move represents the first time a large grocery chain in Denmark has accepted international card brands. Consumers with cards carrying such brands as American Express, MasterCard and Visa now can use those cards for purchases at Kvickly Xtra, Kvickly, SuperBrugsen, Brugsen, Dagli', LokalBrugsen and Irma stores. Consumers using cards issued in Denmark pay no fees, though merchants can charge fees for cards issued outside Denmark, PBS says. "We expect that other merchants, especially supermarkets, will soon accept international payment cards as well," the spokesperson says. Last year, the spokesperson says, consumers made at least 21 million transactions with Danish-issued cards that carry international brands. That compares with at least 737 million transactions made with Dankort debit cards. "As more international payment cards are issued and more foreigners visit Denmark, we believe that it will affect the acceptance of international payment cards in a positive direction," the spokesperson says.

China UnionPay reportedly has started discussions about expanding its payment network into Taiwan. Expansion could start as early as July with stores and hotels accepting UnionPay-branded cards, according to the China Knowledge newspaper. The expansion also would enable UnionPay cardholders to withdraw money from ATMs in Taiwan. UnionPay would not comment. "I am unable to confirm the deal, as we don't have an official stand on this issue yet," a UnionPay spokesperson tells CardLine Global. Taiwan represents a huge market for UnionPay, Hua Zhang, a banking analyst with the China office of United States-based Celent LLC, tells CardLine Global. "Taiwan is the sixth-largest trade partner of Mainland China, and around 1.1 million visitors from the country will visit Taiwan this year," Zhang says.

While the U.S. economy is weak, American Express Co. leaders are closely monitoring U.S. billings growth and the credit market overall.

The Discover U.S. Spending Monitor rose 1.4 points in May to 86.8 as consumers braced for higher spending in the wake of record gas and food prices. The card issuer released its report Wednesday.

The Mortgage Bankers Association's Market Composite Index for the week ended May 30 was 502.3, down 15.3% on a seasonally adjusted basis from 593.3 one week earlier. The results were adjusted to account for the Memorial Day holiday.

President Bush yesterday signed into law a bill prohibiting class-action lawsuits against merchants that once put payment card expiration dates on customer receipts. The U.S. House and Senate approved the legislation last month (CardLine, 5/15 and 5/21). The Credit and Debit Card Receipt Clarification Act of 2007 does not exempt merchants that fail to truncate credit or debit card numbers on receipts. Moreover, merchants that print expiration dates on receipts after June 3 also are not exempt, according to Bart Murphy, a partner at Ice Miller LLP, an Indianapolis-based law firm that represents several merchants facing lawsuits for including expiration dates on receipts. Penalties in those cases range from $100 to $1,000 per violation. The Fair and Accurate Credit Transactions Act, itself an amendment to the Fair Credit Reporting Act, prohibits businesses from printing expiration dates and requires them to truncate credit and debit card numbers so electronic receipts show no more than five digits. The act represents a "get-out-of-jail-free card" for merchants facing lawsuits filed before June 3, Murphy says. Merchants still are prohibited from printing expiration dates on receipts following June 3. The act does not remove the threat of a lawsuit if they do, Murphy explains. The new law also does not remove the legal liability for merchants that failed to truncate card numbers on receipts. The act means pending lawsuits related only to printing expiration dates on receipts before June 3 likely will be dismissed, Murphy says. This law is a "fix" to prevent plaintiff class-action attorneys from cashing in on technical violations of the act, known as FACTA, Murphy previously told CardLine. About a year ago, some law firms filed a series of lawsuits in which they alleged violations of the act and sought class-action status in Illinois and Chicago.

Teaching merchant-level sales agents about interchange takes a continuous process, not a one-shot event, experts say. "There is no fast or easy way to learn or teach interchange," Tyler Hurley, senior sales executive for Group ISO, an Irvine, Calif.-based independent sales organization, tells CardLine sister publication ISO&Agent Weekly. "When we work with our agents, it is not just an introductory, one-time training [course]. It is a consistent learning experience for our agents." When merchant-level sales agents understand the complexities of interchange, they are ready to pass that knowledge on to their merchant clients. However, many merchants do not care to learn about interchange, which is not a bad thing, experts say. "We're happy to educate them but, because of time and interest, they don't necessarily want to know," says Jim Hilber, western regional manager for International CyberTrans, an ISO based in Albuquerque, N.M. Merchants generally do not fully understand their processing and interchange rates, but if they are getting what they expect out of them, then they feel "it is a good deal," he says.

Starbucks Coffee Co. yesterday began offering free wireless Internet access in its stores to customers who load at least $5 onto a Starbucks prepaid gift card and register it on the Starbucks Web site, Alisa Martinez, a company spokesperson, tells CardLine. Seattle-based Starbucks also is offering a free beverage to customers who register their cards through July 14. Providing free wireless Internet access and a free beverage to customers who register their gift cards represent the latest perks Starbucks started offering this year as part of a "Tranformation Agenda" to build customer loyalty, Martinez tells CardLine. Earlier this year, Starbucks began giving registered cardholders complimentary flavor syrups and milk alternatives in their drinks, complimentary tall beverages when they buy a pound of whole-bean coffee, and free refills of brewed coffee on the same visit (CardLine, 3/25). Customers must use their Starbucks card to get the benefits, according to the company. Starbucks plans to add other rewards to the cards, Martinez says.