Credit

The ongoing pilot of a mobile-phone electronic-wallet coupon and payment system at McDonald's fast-food restaurants in Japan lends credibility to mobile payments, Red Gillen, senior analyst at United States-based Celent LLC, tells CardLine Global. McDonald's and NTT DoCoMo, Japan's largest mobile-network operator, are testing the system in 175 McDonald's restaurants in Tokyo. DoCoMo subscribers download an application and register on McDonald's Japan's mobile Web site. Subscribers receive digital vouchers on their mobile phones that consumers can redeem by tapping phones against contactless readers at the counters of participating restaurants. Customers keep track of their coupons on their phone bills. Gillen says other large Japanese merchants may start to follow McDonald's lead with this system. "If McDonald's is doing something, it will get a lot of attention," he says. Mobile payments in Japan mostly have focused on transit, but Gillen says merchants near train stations may start to take advantage of the technology. McDonald's Japan plans to expand the program to a total of 3,800 stores by 2009, according to a published report.

Consumers in Thailand spent approximately 197.3 billion baht (US$6 billion or 3.9 billion euros) with their credit cards in the first quarter ended 31 March, up 14.4% from the 172.5 billion baht spent in the same period last year, according to Bangkok-based Kasikorn Research Center, a subsidiary of Kasikornbank Group. Outstanding balances at the end of March stood at about 174.7 billion baht, up 5% from 166.4 billion baht at the same time last year. Card debts at least three months overdue totaled about 6 billion baht at the end of March, up 22.4% from about 4.9 billion baht a year earlier. "The credit card-spending rise could be attributed partly to rising prices of goods over the previous year," a Kasikorn spokesperson tells CardLine Global. "Intense competition" among issuers in Thailand also has led to aggressive marketing campaigns designed to increase card spending, the spokesperson says. Thailand had more than 11.9 million credit cards in circulation as of February.

Consumers needing their coffee fixes in South Korea can use their Visa-branded contactless devices to pay for their purchases, Visa Inc. says in a statement. The card company says it has teamed with coffee chain Starbucks to enable Korean consumers to pay for their purchases with cards or mobile phones that carry Visa's payWave contactless application. Consumers can make contactless purchases of up to 30,000 won (US$29 or 19 euros), the statement says. Twelve major financial institutions in South Korea issue cards with payWave, Visa says. Those institutions include Shinhan, Samsung, Hyundai, BC and Lotte. Such merchants as Homeplus, 7-Eleven, Lotte World, Red Mango and Kyobo Books already accept contactless payments.

American Express Co. reportedly will work with ICICI Prudential Life Insurance Co. to offer its policyholders an online-payment service. The arrangement would enable policyholders to use AmEx cards to pay premiums through the India-based insurance company's Web site. Neither ICICI nor AmEx would discuss the initiative with CardLine Global. Consumers also can continue to pay premiums with cash at insurance offices. ICICI Bank and United Kingdom-based financial services group Prudential Plc created ICICI Prudential Life in 2000 as a joint venture.

Although NTT DoCoMo, Japan's largest mobile-network operator, has put 28 million contactless wallet phones into the pockets of subscribers, only about one in five tap the phones daily to make payments or use other services, according to CardLine Global sister publication Cards&Payments. "Actual usage is not so high," Haruhiko Nomura, executive director of DoCoMo's Multimedia Services Department, tells CardLine sister publication Cards&Payments. "I don't know why, even when it's preloaded [with] the applications." Nomura outlined the challenges DoCoMo and its competing mobile telcos face in getting more consumers to use the phones. Among the biggest obstacles are worries among subscribers about the safety of putting their contactless credit and prepaid payment accounts onto the phones along with their monthly transit passes, Nomura said earlier this month at SourceMedia's CTST conference in Orlando, Fla. More fundamentally, it is difficult to introduce a technology, he said. "The mobile-wallet service is a new experience to everybody," said Nomura. "It takes [a] long time to persuade the end customers." DoCoMo and other wallet-phone backers must convince more merchants to accept payment or other services loaded on the phones and convince more service providers to put their applications on the devices. "We need to show them the actual benefit. Otherwise, they will move to the [other] new technologies," he said. But DoCoMo, which launched the wallet phones in 2004 and continues to lead the national rollout, sees progress. As of the end of March, merchants had installed 608,000 terminals that can accept payment from the phones, Nomura said. That includes vending machines and shops that take DoCoMo's own contactless credit brand, iD.

H&R Block has started testing mobile-banking services for its Emerald MasterCard, the company announced yesterday. Cardholders can use the service to check balances and receive account-reload alerts on their mobile phones, the company says. H&R Block plans to conduct a test through the summer and then provide the service to all its Emerald Card customers throughout the summer, says Kevin Morrison, assistant vice president of products for H&R Block. Metavante Mobile Financial Services, a division of Milwaukee-based Metavante Corp., and Monitise Americas, a joint venture of Metavante and London-based Monitise plc, is providing the service to H&R Block. Metavante provides the processing for Emerald Card transactions and Monitise provides the connection between Metavante and the telecommunications companies, says John Focht, division president of Metavante's issuing solutions group. H&R Block distributed 2.6 million cards this tax season, up from 2 million cards last tax season, Morrison says. Customers use the cards to receive tax refunds and can sign up to have payroll checks deposited to the cards, connect them to lines of credit and savings accounts, and link to funds-transfer services. H&R Block has 13,500 offices across the United States where consumers can sign up for an Emerald card, the company says.

Alliance Data Systems Corp. today announced that Bank of Montreal has renewed an agreement with the Dallas-based transaction processor's loyalty business, the Air Miles Reward Program. The terms of the renewed contract have been revised and expanded, according to Alliance Data. The processor now becomes responsible for estimating the redemption rate and maintaining an adequate reserve for each Air Miles reward mile Bank of Montreal issues. The new structure eliminates the need for Bank of Montreal to maintain its own reserve for the redemptions. The bank and processor adjusted the pricing to reflect Alliance Data's responsibility for redemption. Bank of Montreal will pay Alliance Data approximately $370 million by the end of June to cover the cost of redemptions related to outstanding Air Miles reward miles Bank of Montreal issued under the previous arrangement and will increase the balance of the account to more than $650 million. Alliance Data's deferred revenue balance also will increase to nearly $1.2 billion from $800 million, according to the company. Bank of Montreal customers earn reward miles for purchases made with the issuer's Mosaik Air Miles MasterCard credit card and Bank of Montreal debit card.

The Greater Sudbury Police Service has charged seven individuals arrested earlier this month with more than 300 crimes related to credit card forgery and theft. Greater Sudbury, Ontario, and Ontario provincial police arrested the seven May 6 for possession of forged credit cards and merchandise from stores in the area. Yesterday, the Greater Sudbury Police Service announced that its ongoing investigation found that within a four-hour period one day before they were arrested the group used forged cards to purchase $19,000 in gift cards and $1,600 in merchandise from area businesses.

Consumers and financial institutions generally will embrace mobile payments in two stages over the next few years, a new report by Javelin Strategy and Research suggests. For consumers, the first stage will continue until 2011, as younger consumers, mobile-banking users and higher-income individuals begin using the services, the report says. Those users will influence others to use person-to-person mobile payments because funds-transfer recipients will need to subscribe to collect the funds, according to the report. About one of every 10 consumers, or 20 million individuals, say they would use mobile P2P payments if service providers offer the service, and 14% of consumers say they have a neutral opinion of the services, the report says. It says that the 75% who say they are not likely to use it do not yet know the benefits mobile person-to-person payments might offer. From 2012 to 2013, the demand for P2P mobile-payment services will grow as more consumers conduct them, according to the report. In the United States, 157 million adults have mobile phones today, and by 2013, Javelin estimates 198 million U.S. adults will have cell phones, the report says. For financial institutions, the first stage for adoption of P2P payments will focus on offering the service as a tool to recruit and retain customers. In the second stage financial institutions will offer the services because of competitive pressures. Financial institutions could earn income from mobile-payments services because customers would pay a small fee for each transfer, according to the report. Financial institutions also could reduce their cash- and check-processing costs and labor expenses by encouraging the use of P2P mobile payments, the report says. "It is our belief that your old-fashioned wallet or purse will be replaced by your phone," James Van Dyke, Javelin's president, tells CardLine.

India's ICICI Bank says it will charge customers 100 rupees (US$2.30 or 1.50 euros) to pay credit card bills at bank branches. The bank will begin levying the charges on 1 June. "This is a charge levied by most banks on card customers paying at branches," Sachin Khandelwal, head of the bank's cards group, tells CardLine Global. "Customers can avoid this by adopting all other options" such as electronic payments, deposit boxes and debit transfers. Other banks in India already have established such charges. Standard Chartered, for instance, in 2006 began charging 99 rupees for cardholders paying bills at branches. "This is a new trend [that] has emerged in the Indian banking sector over the last couple of years," Prathima Rajan, an India-based analyst with Celent LLC, tells CardLine Global. "Banks consider this as an additional facility that they are providing to their customers and are hence charging a service fee. On the other hand, banks also want to move customers away from depositing cash and alternatively use checks and [electronic payments] to pay back their cards." ICICI has about 5 million credit card customers.

Franco-German card vendor Sagem Orga GmbH has won what it calls a follow-up order to supply Germany's Postbank with debit cards that carry contact chips. Each customer who receives a card also will get what Sagem calls a "fully personalized enclosure." In essence, the enclosure serves as a marketing tool, a Sagem spokesperson tells CardLine Global. "The enclosure can contain any kind of completely personalized printed papers with customized extra information," says Sagem spokesperson Mareike Blumentrath. "The Postbank will announce in September what exactly their content will be." Sagem declines to release how many cards the new deal involves or how many cards Sagem has delivered to Postbank since the card vendor became a supplier for the bank in 2000. The new Postbank deal represents Sagem's first involvement with the enclosures, Blumentrath says.

Planet Payment, a United States-based payments company that specializes in enabling consumers to choose the currency used in their card transactions, has signed a deal that would provide its service to merchants in India, a company spokesperson tells CardLine Global. The deal, with U.S.-based processor Global Payments Inc., follows previous deals between the two companies to offer Planet Payment's services to merchants in Malaysia, Taiwan and China. The plan to offer the services in India is "still in the formative stages," the spokesperson says, declining to disclose a launch date or specify how many merchants the deal would involve.

A partnership between Citigroup Inc., Prudential Financial Inc. and Thailand telecommunications company mPay will enable customers to make insurance-premium payments with mobile phones, the companies have announced. Prudential policyholders can make payments at any time and will receive a text message to confirm the receipt and verify the transaction, a statement says. The service, called M-Collect is free, the statement says. Citi did not offer other details about the service to CardLine Global.

By exiting from a longstanding joint venture, JPMorgan Chase & Co. is signaling its intent to expand its focus on the merchant acquiring and processing side of its cards operation.

First Data Corp. and JPMorgan Chase & Co. today announced they have agreed to end their joint venture, merchant acquirer Chase Paymentech Solutions LLC, by the end of the year. New York-based Chase will retain 51% of Chase Paymentech's assets, including most of its employees, its Canadian and European operations and the company's Dallas-based headquarters, according to the announcement. Greenwood Village, Colo.-based payments processor First Data will assume management of the ISO and Agent Bank division of Chase Paymentech and will integrate 49% of the assets, including a portion of the staff, into its established merchant acquiring business. The September buyout of First Data by Kohlberg Kravis Roberts & Co. triggered a clause in the joint-venture contract that enabled Chase to end the alliance (CardLine, 3/14). Chase and First Data formed Chase Paymentech in 2005. Observers expect fierce competition between Chase and First Data when they operate as two separate entities, according to Adil Moussa, an analyst with Boston-based Aite Group LLC. Chase "used to compete quite openly with First Data. There's no secret about that," Moussa tells CardLine sister publication ISO&Agent Weekly. "They would go after the same accounts and really outbid each other. Now it's going to be even more so." Banks and ISOs typically use differing strategies to acquire merchants, with ISOs usually acting more assertively, Moussa says, adding that First Data has no such advantage in this case. Chase "has proven it's not that type of bank. [Chase is] not going to sit back and wait for merchants to show up. They will go after them aggressively."

MasterCard Canada announced today it has launched a four-month trial of PayPass transactions using Near-Field Communications-enabled mobile phones. Some 75 participants in the closed trial are using Samsung-brand phones provided by Bell Mobility Inc., the wireless network subsidiary of Bell Canada. Nagesh Devata, vice president of acceptance development and new products for MasterCard Canada, tells CardLine the participants are employees of MasterCard Canada, Bell Mobility and financial institutions involved in the trial. Devata declined to name the financial institutions. Trial participants are able to pay anywhere PayPass is accepted by tapping their phones against PayPass readers, Devata says. He added that the trial now only draws payments from single accounts but soon will expand to offer users the choice of multiple accounts from which to pay using their NFC phones. Configuring phones using over-the-air programming instructions will be another key part of the trial, according to Devata. "Another part is bringing together the financial institution with the [mobile network] carrier, trying to explore the optimal business model," he adds. Disputes over transaction revenue-sharing between banks and telcos have stymied the spread of NFC-enabled mobile payments in much of the world. Red Gillen, senior analyst at Celent LLC, calls the trial "another proof of concept test that the payment brands are rolling out in various national markets to raise the comfort levels of those countries' issuing banks." Gillen tells CardLine such NFC tests should not be limited just to technology and ease of use. "In addition, testing should provide answers to the big mobile NFC question: Will it lead to incremental card spend?"

United Technologies Corp., which made an unsolicited $2.66 billion bid for Diebold Inc., may withdraw its offer if it does not receive more financial information from Diebold. "We'll not buy that property without appropriate due diligence," Louis Chenevert, Hartford, Conn.-based United Technologies' new CEO, told analysts last week. Diebold, which is based in North Canton, Ohio, rejected United Technologies' offer, complaining that it was too low. Diebold is the world's second-largest ATM maker based on machines shipped in 2006.

Rewards are important to about a third of credit card customers, while more than half appear unlikely to participate actively in rewards schemes. That suggests many issuers are blanketing the wrong customers with rewards marketing offers, according to a new report by Boston-based Aite Group. In "Segmenting Rewards Program Members," Aite Group said card issuers could get better results from segmenting customers and sending rewards offers only to those most likely to respond. Aite Group surveyed 500 U.S. consumers online in January, and when asked to name the most important reasons for selecting their most recent credit card, consumers cited no annual fee (64%), a lower interest rate than their previous card (39%), rewards (35%), a 0% balance-transfer offer (33%), credit card company reputation (23%), clearly explained policies (15%), and dissatisfaction with a previous card company's customer service (11%). Rewards are most important to customers with the most cards in their wallets. Among survey respondents with six or more credit cards, 53% said rewards are the most important factor in selecting a new credit card. "Many issuers are wasting resources by pursuing customers who are unlikely to ever participate in rewards programs," Ron Shevlin, senior analyst for Aite Group, tells CardLine. He suggests issuers gauge potential participation in rewards offers by asking cardholders how many loyalty cards they already have; measuring customers' use of online account access, redemption activity and marketing response and segmenting their customer base annually to determine loyalty program participation status. As card issuers seek efficiency, they should craft rewards offers to engage the customers most likely to respond and then leverage those groups to improve their merchant-partnership efforts, Shevlin says.

Financial services companies are sending fewer direct-mail offers to consumers, according to Mintel Comperemedia, a division of Mintel International Group Ltd. The Chicago-based market research company estimates total financial services direct mail volume at 4.2 billion pieces in the first quarter, down 13% from 4.8 billion estimated mailings in the first quarter of 2007. Credit card issuers cut back the most, as Mintel estimates credit card mailings fell 14%, from 3 billion offers to 2.6 billion. Chase, Bank of America and HSBC reduced their direct mail by more than 15%, according to Mintel. Mortgage and Loan companies had a 6% decline in direct mail offers, Mintel says. "With credit lines tapped and people struggling to make ends meet, both consumer spending and savings are down," Chris Zagorski, senior analyst at Mintel Comperemedia, says in a statement. "Banks, card issuers and lenders have to look at today's consumers in a new light and find innovative ways to secure and maintain their business." In April, Mintel reported that credit card companies increased their mailings to consumers by 18% in 2007 compared with 2006, but changed their focus to cross-selling products to current customers from winning new customers

MoneyPass has signed a series of new agreements that the company's top executive says partly reflects banks' and credit union members' cardholders' nail biting about the worsening economy. Since April, the Minneapolis-based surcharge-free ATM network has made deals with South Valley Bank & Trust, a Klamath Falls, Ore.-based community commercial bank (CardLine, 5/23); Bellingham, Wash.-based Horizon Bank; and Vienna, Va.-based Navy Federal Credit Union. Those agreements represent only the surface of the problem, Doug Miraglia, president of MoneyPass, tells ATM&Debit News, a CardLine sister publication, in an e-mail message. Since January, MoneyPass has signed 100 financial institutions, and as a result the company anticipates a busy second half, Miraglia says. "It may have something to do with the economy because consumers seem particularly cost- and fee-conscious right now," he says. MoneyPass's surcharge-free ATM network has 12,000 to 15,000 surcharge-fee ATMs nationwide.