Payment processing

Australia-based energy firm AGL has decided not to charge its customers for paying by credit cards after it faced ire from the country‚s top regulator, according to the Sydney Morning Herald. The Energy and Water Ombudsman criticized AGL on its plans to charge customers an undisclosed amount for using their credit cards to pay bills. In a public filing made by the ombudsman to Independent Pricing and Regulatory Tribunal, the regulator asked whether AGL bills would be reduced for those who did not pay by credit card if the company was to start charging those who paid on credit. „As costs associated with administering credit card payments may previously have been a component of the general retail costs, can we expect to see an equivalent reduction in these costs if this fee is to be introduced?,‰ the ombudsman asked. Immediate comment from AGL was not available.

The alternative-payment processor mPayy Inc. on Thursday announced a mobile payment app for handsets that run the Android operating system from Google Inc.

A U.S. District Court in New Jersey last week rejected Heartland Payment Systems Inc.’s request for a preliminary injunction to prevent VeriFone Holdings Inc. from soliciting the payment processor's merchants who use VeriFone point-of-sale terminals, according to the terminal maker. Heartland is seeking to stop VeriFone from promoting a Web site where merchants may register for free terminal support directly through VeriFone to begin after Dec. 31, when VeriFone will stop providing Heartland with support. Heartland contends it can continue to support the terminals without VeriFone’s help. Judge Mary K. Cooper denied Heartland's request in an opinion dated Dec. 23, noting contradictory claims Heartland had made regarding its ability to provide ongoing service to clients using VeriFone systems, according to VeriFone. “The ruling means that despite Heartland’s considerable efforts, VeriFone can continue to offer direct support to Heartland merchants for VeriFone systems,” states a VeriFone spokesperson. Heartland is “disappointed” the judge denied the processor’s request for a preliminary injunction, the company said in a statement. “Heartland is considering its options with the circuit court. This opinion is a preliminary ruling, and Heartland intends to pursue damages in its state court action,” the statement said. The two companies are suing each other over a disagreement stemming from Heartland's development of an advanced encryption terminal. San Jose, Calif.-based VeriFone alleges Heartland is infringing on one of its patents; Princeton, N.J.-based Heartland claims VeriFone is engaging in unfair trade practices.

The new year may bring the long-predicted "cashless society" even closer to reality, reports Credit Union Journal, a CardLine sister publication. Several large grocery chains are piloting a "no checks policy," including Whole Foods market at certain stores in Arizona and California. Another chain, Fresh & Easy, dispensed with the pilot test and declared it would simply stop accepting checks altogether. James Neckopulos, manager of the financial services industry group with Hitachi Consulting, said that if not within five years certainly within ten paper checks will no longer be in use, replaced by debit cards and other plastic. An analyst with the American Bankers Association said he expects other retailers will follow the Whole Foods test closely and will follow suit if it appears successful. Data released by the National Retail Federation for the 2008 holiday showed paper checks made up just 4.3% of payments at store registers, a decline from 5.5% in 2007 and 6.2% in 2006.

Merchants processing from 1 million to 6 million MasterCard transactions no longer have to meet a Dec. 31, 2010, deadline to have a third-party security assessor perform an onsite assessment of their payment networks for compliance with Payment Card Industry data security standards unless they want to do so voluntarily, according to a MasterCard spokesperson. This is a reversal from a policy MasterCard contained in an Aug. 17 Site Data Protection program document that would have required such so-called Level 2 merchants to pay for a qualified security assessor to audit their compliance by Dec. 31, 2010. Now MasterCard has moved the compliance deadline to June 30, 2011, and made the onsite assessment optional. Level 2 merchants will be required annually to complete a self-assessment questionnaire and perform quarterly network-security scans of their systems. Merchant employees completing the self-assessments must have completed Payment Card Industry Security Standards Council training and pass the council’s accreditation program, according to a MasterCard Dec. 15 Global Security Bulletin. The Aug. 17 summary of changes to MasterCard’s Site Data Protection program said the earlier change was designed to aid the “consistent application and implementation of [data security-standard] requirements.”

Steven A. Rathgaber, who will become the new CEO of Cardtronics Inc. Feb. 1 (see story), will receive a $200,000 one-time signing bonus to lead the world’s largest ATM independent sales organization, according to a U.S. Securities and Exchange Commission filing.

Vesta Corp., a Portland, Ore.-based prepaid technology provider, Monday announced that NetSpend Corp. will use its online reload service for prepaid cards. The service enables NetSpend cardholders to load up to $250 using a debit card.

HSBC Merchant Services, a United Kingdom-based subsidiary of Atlanta-based Global Payments Inc., announced today that the BHF-BSSA Group Trade Association will refer its 7,000 small and midsize independent retailers to HSBC for their payment card processing. The British Shops & Stores Association, a 3,300-member group that merged in September with the 3,700-member British Hardware Federation to form the trade group, previously had referred its members to HSBC Merchant Services. The UK-based trade group says on its Web site that merchants using HSBC Merchant Services will get a processing rate of 1.195%. Merchants that switch to HSBC Merchant Services also receive three months of free payment terminal rental, according to the trade group.

The Bangko Sentral ng Pilipinas is strongly advising banks in the Philippines to conduct ATM maintenance late at night or before dawn, according to an official from the central bank. Government officials do not want the machines to be unavailable during the busy holiday season while consumers are shopping, according to the official, noting the central bank expects higher than average cash withdrawals during the holidays. “The central bank will coordinate with the banks where necessary to make sure that routine maintenance is undertaken during off hours,” he adds. The central bank also advised financial institutions to keep their ATMs well stocked to avoid cash shortages.

Cardtronics Inc. today named Steven A. Rathgaber as its new CEO, replacing Jack M. Antonini, who left the Houston-based company in March.

Heartland Payment Systems Inc. today announced it will pay up to $2.4 million to settle consolidated consumer class-action lawsuits stemming from the 2008 data breach of the Princeton, N.J.-based payments processor.

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.

Residents of Bangalore, India, soon will be able to pay their water bills online or with their mobile phones under a pilot the Bangalore Water Supply and Sewerage Board is overseeing, a spokesperson for the agency tells CardLine.

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.

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.

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.

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.

Independent sales organizations and bank acquirers predict the price merchants pay for debit card transactions likely will increase in 2010, survey data from Boston-based Aite Group LLC suggest. In the survey of 17 bank acquirers and 28 independent sales organizations, 69% of acquirers predicted PIN-debit rates would increase next year compared with 79% of ISOs who thought so. “This event, if it happens, would mean a lot in terms of potential income selling or cross-selling PIN pads or setting up merchants to accept PIN-debit transactions,” says Adil Moussa, the Aite analyst who conducted the survey. Many respondents also believed signature-debit rates also will increase, cited by 75% of participating ISOs and 62% of acquirers. Signature-debit price increases would mean ISOs and acquirers could adjust their qualifying rates, assuming the transaction meets conditions such as card present with full magnetic stripe data. ISO and acquirer debit rates often encompass signature and PIN debit as a way for the companies to build profit margin into such transactions, Moussa says. And because many merchants often buy based on the qualifying rates, rate changes could factor in which service provider the merchant chooses, he says.

VeriFone Holdings Inc.’s efforts to drive payment card acceptance in taxis and at the gas pump appear to be paying off, VeriFone CEO Douglas G. Bergeron told analysts during a conference call this week discussing the point-of-sale terminal makers fourth quarter earnings.

As more consumers go online to make holiday purchases in November and December, so-called cybercriminals also increase their efforts to obtain consumer information fraudulently, observers say. The potential for data theft and increased attacks by fraudsters, however, does not deter many consumers from completing online transactions, according to recent survey data.