Payment processing

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.

Merchants Bank, a South Burlington, Vt.-based financial institution, Wednesday announced it has joined Allpoint’s surcharge-free ATM network in a move designed to make the bank more competitive against larger rivals. “We wanted to provide our customers with more surcharge-free ATM touch points throughout Vermont and when they travel nationally and internationally,” says Thomas S. Leavitt, Merchant Bank’s executive vice president. Before joining Bethesda, Md.-based Allpoint, Merchants’ customers had surcharge-free access to 42 ATMs in Vermont. With the new agreement, Merchant Bank customers have access to Allpoint’s 37,500 surcharge-free ATMs nationally and in the United Kingdom, Mexico and Puerto Rico. The Allpoint agreement will make Merchants Bank more competitive against TD Banknorth, KeyBank and Citizens Bank, Leavitt says. “TD Bank advertises itself as the nation’s most-convenient bank, and ATM convenience is a key driver in customer acquisition,” says Ben Psillas, Allpoint president.

NCR Corp. today announced the signing of a three-year ATM-outsourcing agreement with Co-op Financial Services that enables Co-op’s credit-union members to lease instead of buy new ATMs to reduce participating credit unions’ capital expenses. NCR will lease ATMs to the credit unions through GE Capital, a Norwalk, Conn.-based leasing company, says Bill Allen, NCR marketing director. “Leasing ATMs is a lot more attractive for some financial institutions because leasing agreements are not carried on the books as a capital expense,” he says. Co-op ATM Managed Services, a unit of Rancho Cucamonga, Calif.-based Co-op Financial Services, will manage credit-union members’ leased ATMs. NCR, which is based in Duluth, Ga., also will provide first- and second-line maintenance on all of the leased machines. “If the ATM breaks down, we fix it,” Allen says. Credit unions’ financial conditions played a key role in the two companies signing a leasing agreement, Allen says. Co-op operates a network 37,000 ATMs and nearly 3,000 credit unions are Co-op members. “This approach to ATM deployment and management will be attractive to credit unions seeking to outsource these functions as capital expenses grow with the size of the ATM fleet,” Co-op said in a statement. NCR will promote its SelfServ line of intelligent-deposit ATMs to the credit unions when the outsourcing program begins in early 2010, Allen says.

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