Posted by Mark Brousseau
A breathtaking view of the Las Vegas strip tonight from the Eiffel Tower Experience at the Paris Hotel after hours at the NAPCP Commercial Card and Payment Conference.
Showing posts with label credit cards. Show all posts
Showing posts with label credit cards. Show all posts
Wednesday, April 13, 2011
NAPCP after hours
Posted by Mark Brousseau
A breathtaking view of the Las Vegas strip tonight from the Eiffel Tower Experience at the Paris Hotel after hours at the NAPCP Commercial Card and Payment Conference.
Monday, April 4, 2011
Top 10 reasons FIs have the advantage in payments
At NACHA’s Payments 2011 in Austin, Texas, today, Fiserv released its Top 10 reasons why financial institutions have the advantage in the battle for consumer payments, including Web and social media payments.
Those reasons are:
1. Consumers express a strong preference for a financial institution-centric new media payments system, according to Fiserv primary and sponsored research.
2. Customers already have an account relationship with their financial institution.
3. Financial institutions have payment systems that are robust, and secure.
4. Financial institutions have extensive fraud prevention, detection, and resolution operations in place.
5. Financial institutions are held to strict privacy practices which today are pervasive throughout their organizations.
6. Payment systems at financial institutions are strongly regulated, so even though banking regulations are currently in flux, consumers are best protected from fraud or abuse.
7. Financial institutions have laws, binding agreements and professional standards governing their payment-related activities.
8. Financial institutions can be held responsible, with known personnel and locations, which may contribute to a higher level of trust by consumers and businesses to handle transactions.
9. Financial institutions payment-pricing models depend on repeat business, not one-time payments, IPOs or collateral advertising revenues.
10. Financial institutions already have extensive, secure, bank-to-bank payment networks in place including ACH, credit card, check clearing and more.
There’s a lot at stake for financial institutions in the payments space. From a revenue perspective, the payments business is the most significant single line-of-business in U.S. banking. In fact, according to First Annapolis Consulting, payments in the U.S. represented more than $282 billion in total revenue.
“Now is the time for financial institutions to strongly defend the payments franchise, while the industry has the advantage,” said George Warfel, consulting director, Fiserv. “However, this will require opening up to new ways of doing business and offering new payments methods that people, merchants and corporations will want to use again and again, such as Internet or web payments, mobile phone and iPad payments, and soon, social media payments.”
What do you think?
Those reasons are:
1. Consumers express a strong preference for a financial institution-centric new media payments system, according to Fiserv primary and sponsored research.
2. Customers already have an account relationship with their financial institution.
3. Financial institutions have payment systems that are robust, and secure.
4. Financial institutions have extensive fraud prevention, detection, and resolution operations in place.
5. Financial institutions are held to strict privacy practices which today are pervasive throughout their organizations.
6. Payment systems at financial institutions are strongly regulated, so even though banking regulations are currently in flux, consumers are best protected from fraud or abuse.
7. Financial institutions have laws, binding agreements and professional standards governing their payment-related activities.
8. Financial institutions can be held responsible, with known personnel and locations, which may contribute to a higher level of trust by consumers and businesses to handle transactions.
9. Financial institutions payment-pricing models depend on repeat business, not one-time payments, IPOs or collateral advertising revenues.
10. Financial institutions already have extensive, secure, bank-to-bank payment networks in place including ACH, credit card, check clearing and more.
There’s a lot at stake for financial institutions in the payments space. From a revenue perspective, the payments business is the most significant single line-of-business in U.S. banking. In fact, according to First Annapolis Consulting, payments in the U.S. represented more than $282 billion in total revenue.
“Now is the time for financial institutions to strongly defend the payments franchise, while the industry has the advantage,” said George Warfel, consulting director, Fiserv. “However, this will require opening up to new ways of doing business and offering new payments methods that people, merchants and corporations will want to use again and again, such as Internet or web payments, mobile phone and iPad payments, and soon, social media payments.”
What do you think?
Tuesday, December 21, 2010
The Promise of Prepaid Cash Cards
Posted by Mark Brousseau
It’s estimated that the percentage of U.S. households without bank accounts may be as high as 26 percent. So what happens to the $1.1 trillion that those households take in each year? According to Turner Investments, much of that money is likely to end up on prepaid cash cards over the next five years.
Turner Investments anticipates that the market for prepaid cash cards may grow at double-digit annual rates between now and 2015. Two small prepaid-card vendors that appear to be well positioned to profit from that growth are Green Dot and NetSpend Holdings, Turner Investments says.
For the consumers averse to traditional banking, Turner Investments says prepaid cash cards may hold three benefits:
•The cards can be a cheaper alternative to checking accounts. Consumers who are prone to overspending can’t spend more than they put on the cards, so they aren’t exposed to overdraft charges. Also, the increased checking-account fees resulting from new federal financial reforms are driving some consumers to the cards.
•The cards require no background check, unlike some checking accounts.
•The cards are convenient to load and use, enabling customers to take their paycheck to a retailer where they can have the money loaded onto a card and start shopping immediately.
What do you think?
It’s estimated that the percentage of U.S. households without bank accounts may be as high as 26 percent. So what happens to the $1.1 trillion that those households take in each year? According to Turner Investments, much of that money is likely to end up on prepaid cash cards over the next five years.
Turner Investments anticipates that the market for prepaid cash cards may grow at double-digit annual rates between now and 2015. Two small prepaid-card vendors that appear to be well positioned to profit from that growth are Green Dot and NetSpend Holdings, Turner Investments says.
For the consumers averse to traditional banking, Turner Investments says prepaid cash cards may hold three benefits:
•The cards can be a cheaper alternative to checking accounts. Consumers who are prone to overspending can’t spend more than they put on the cards, so they aren’t exposed to overdraft charges. Also, the increased checking-account fees resulting from new federal financial reforms are driving some consumers to the cards.
•The cards require no background check, unlike some checking accounts.
•The cards are convenient to load and use, enabling customers to take their paycheck to a retailer where they can have the money loaded onto a card and start shopping immediately.
What do you think?
Sunday, May 9, 2010
FUSION 2010
Posted by Mark Brousseau
During an interactive networking luncheon today at FUSION 2010 at the Gaylord Texan Resort & Convention Center in Grapevine, Texas, attendees shared the best operations tips that they have implemented in the past year. Below are some of the top operations tips shared by attendees:
• Develop an AP Roadshow to visit different departments and operations sites to explain what AP does, what information it needs to do its job effectively, and how departments can work with AP.
• Implement a document imaging and retrieval system for finance documents. Having instant access to document images helped one company eliminate one full-time equivalent.
• Integrate TIN Matching with Oracle.
• Scan your invoices!
• Scan AP documents on the front-end, not the back-end, to achieve more workflow efficiencies.
• Combine your travel and entertainment (T&E) and purchasing card into one card to reduce administration and capture more rebates.
• Leverage remote deposit capture to eliminate trips to the bank.
• Automate, automate, automate!
• Do away with paper checks for T&E. Use debit cards for employees without bank accounts.
• If you have international travelers, educate them on VAT reclamation requirements.
• Trust is not a control! A “trusted employee” could be stealing from your company.
• When choosing a software solution, ask how they initiates upgrades or you might find yourself back at square one. Also understand whether the vendor will convert existing data.
• Eliminate, automate, delegate -- EAD!
• Eliminate as much paper as possible from your workflow.
• Whenever you are implementing new technologies or processes, be sure to get buy-in from line-level staff.
• Strive for open communication with your staff.
• Learn to walk away!
During an interactive networking luncheon today at FUSION 2010 at the Gaylord Texan Resort & Convention Center in Grapevine, Texas, attendees shared the best operations tips that they have implemented in the past year. Below are some of the top operations tips shared by attendees:
• Develop an AP Roadshow to visit different departments and operations sites to explain what AP does, what information it needs to do its job effectively, and how departments can work with AP.
• Implement a document imaging and retrieval system for finance documents. Having instant access to document images helped one company eliminate one full-time equivalent.
• Integrate TIN Matching with Oracle.
• Scan your invoices!
• Scan AP documents on the front-end, not the back-end, to achieve more workflow efficiencies.
• Combine your travel and entertainment (T&E) and purchasing card into one card to reduce administration and capture more rebates.
• Leverage remote deposit capture to eliminate trips to the bank.
• Automate, automate, automate!
• Do away with paper checks for T&E. Use debit cards for employees without bank accounts.
• If you have international travelers, educate them on VAT reclamation requirements.
• Trust is not a control! A “trusted employee” could be stealing from your company.
• When choosing a software solution, ask how they initiates upgrades or you might find yourself back at square one. Also understand whether the vendor will convert existing data.
• Eliminate, automate, delegate -- EAD!
• Eliminate as much paper as possible from your workflow.
• Whenever you are implementing new technologies or processes, be sure to get buy-in from line-level staff.
• Strive for open communication with your staff.
• Learn to walk away!
Monday, April 26, 2010
P-Card Conference Wrap-Up
Posted by Mark Brousseau
Steven Putney, a partner with PayTech International, provides his thoughts on the 11th Annual National Association of Purchasing Card Professionals’ (NAPCP) conference held in Orlando:
Over 600 purchasing card payment industry professionals gathered April 18-21, 2010 at the 11th Annual NAPCP Conference in Orlando. Representing a broad span of private and public-sector organizations, they convened to discuss topics that ranged from best practices and technology developments to legislative changes affecting the purchasing card industry.
For purchasing card professionals, staying current on industry changes is critical to playing an effective role in the management of their organizations. The conference provided excellent opportunities for attendees to gain insights on a wide variety of topics and network with peers, industry providers and purchasing program experts.
This year, the program offered five different tracks that focused on important aspects of purchasing card programs:
• Building the foundations of a successful program: What factors and considerations are paramount to ensuring that purchasing card programs achieve their objectives?
• Effective program management: How do you monitor your program, manage strategies and insure compliance?
• Optimization strategies: How can you increase program effectiveness and use new technologies to simplify transaction management?
• Industry overviews: What are the important trends in the technology, economics and legal arenas that are shaping purchasing card programs?
• Professional development: How can you increase your knowledge and effectiveness?
The rapid convergence of purchasing cards with the overall AP strategy at large corporations and public- sector organizations was a theme heard across many sessions. Case studies were shared in breakout sessions on how to increase control over purchases, identify opportunities for savings and ensure corporate compliance--all essential to a successful purchasing and AP strategy.
New enhanced technology platforms (originally developed to support only purchasing card transactions) were demonstrated that have added functionality to integrate deeper into the organization’s workflow processes and accounting systems and support a full range of electronic payment types. These platforms can facilitate a convergence across AP, and potentially help organizations consolidate multiple vendors down to one.
Another topic that received a great deal of attention at the conference was how to successfully expand payment programs internationally. Multi-national corporations and public-sector organizations must identify and address significant variation in key areas across different regions of the world. Areas of consideration for multi-national programs include cultural differences, commercial credit availability, legal & regulatory issues, availability of data and tax compliance challenges.
The conference provided a unique opportunity to mingle with peers and industry experts and gain a perspective on opportunities to improve existing programs and plan for the future.
Steven Putney, a partner with PayTech International, provides his thoughts on the 11th Annual National Association of Purchasing Card Professionals’ (NAPCP) conference held in Orlando:
Over 600 purchasing card payment industry professionals gathered April 18-21, 2010 at the 11th Annual NAPCP Conference in Orlando. Representing a broad span of private and public-sector organizations, they convened to discuss topics that ranged from best practices and technology developments to legislative changes affecting the purchasing card industry.
For purchasing card professionals, staying current on industry changes is critical to playing an effective role in the management of their organizations. The conference provided excellent opportunities for attendees to gain insights on a wide variety of topics and network with peers, industry providers and purchasing program experts.
This year, the program offered five different tracks that focused on important aspects of purchasing card programs:
• Building the foundations of a successful program: What factors and considerations are paramount to ensuring that purchasing card programs achieve their objectives?
• Effective program management: How do you monitor your program, manage strategies and insure compliance?
• Optimization strategies: How can you increase program effectiveness and use new technologies to simplify transaction management?
• Industry overviews: What are the important trends in the technology, economics and legal arenas that are shaping purchasing card programs?
• Professional development: How can you increase your knowledge and effectiveness?
The rapid convergence of purchasing cards with the overall AP strategy at large corporations and public- sector organizations was a theme heard across many sessions. Case studies were shared in breakout sessions on how to increase control over purchases, identify opportunities for savings and ensure corporate compliance--all essential to a successful purchasing and AP strategy.
New enhanced technology platforms (originally developed to support only purchasing card transactions) were demonstrated that have added functionality to integrate deeper into the organization’s workflow processes and accounting systems and support a full range of electronic payment types. These platforms can facilitate a convergence across AP, and potentially help organizations consolidate multiple vendors down to one.
Another topic that received a great deal of attention at the conference was how to successfully expand payment programs internationally. Multi-national corporations and public-sector organizations must identify and address significant variation in key areas across different regions of the world. Areas of consideration for multi-national programs include cultural differences, commercial credit availability, legal & regulatory issues, availability of data and tax compliance challenges.
The conference provided a unique opportunity to mingle with peers and industry experts and gain a perspective on opportunities to improve existing programs and plan for the future.
Thursday, April 15, 2010
The Changing ISO Space
Posted by Mark Brousseau
Based on what he's heard at the Electronic Transactions Association (ETA) Annual Meeting and Expo this week in Las Vegas, independent sales organizations or ISOs are beginning to struggle in a very saturated credit card market, says Mario Villarreal, president and COO of US Dataworks, Inc. (mvillarreal@usdataworks.com, 281-504-8150). US Dataworks is exhibiting at the ETA event.
"The various ISOs that we talked to [Wednesday] are interested in other payment platforms separate and apart from credit card services," Villarreal explains. "The ISOs understand the RDC [remote deposit capture] market, but are not attracted to it due to the narrow payment focus for a complicated implementation. One ISO representative told me he was looking for more 'bang for the buck.'"
"What ISOs are really looking for is a platform that brings multiple payment types and channels together under a single solution," he says. "The payments industry and the ISO space is changing. The question is which vendor will break away from the traditional way of doing business to win."
What do you think?
Based on what he's heard at the Electronic Transactions Association (ETA) Annual Meeting and Expo this week in Las Vegas, independent sales organizations or ISOs are beginning to struggle in a very saturated credit card market, says Mario Villarreal, president and COO of US Dataworks, Inc. (mvillarreal@usdataworks.com, 281-504-8150). US Dataworks is exhibiting at the ETA event.
"The various ISOs that we talked to [Wednesday] are interested in other payment platforms separate and apart from credit card services," Villarreal explains. "The ISOs understand the RDC [remote deposit capture] market, but are not attracted to it due to the narrow payment focus for a complicated implementation. One ISO representative told me he was looking for more 'bang for the buck.'"
"What ISOs are really looking for is a platform that brings multiple payment types and channels together under a single solution," he says. "The payments industry and the ISO space is changing. The question is which vendor will break away from the traditional way of doing business to win."
What do you think?
Wednesday, January 6, 2010
New PCI Compliance Challenge
Posted by Mark Brousseau
Remittance operations face even greater challenges from new PCI compliance guidelines. Doug Myers, vice president of sales and business development for Creditron, explains:
A flurry of new regulations, guidelines and clarifications designed to improve credit card security has remittance operations that handle credit card payments -- in the back-office or via walk-up locations -- scrambling. With three new pieces of guidance on the docket for Payment Card Industry (PCI) compliance, and larger fines for non-compliance, these operations face external pressures to beat the deadlines, as well as internal pressures to meet requirements in a strategic and cost-effective manner.
PCI and RP
The PCI Standard is the result of a collaborative effort formed by the five major credit card companies (Visa International, MasterCard Worldwide, American Express, Discover Financial Services and JCB) to develop an efficient approach to safeguarding sensitive data and for the prevention of credit card fraud, hacking and various other security concerns. Any merchant, organization or software that processes, stores or disseminates credit card data must be PCI DSS compliant or they risk hefty fines and/or losing the ability to process credit cards altogether.
Remittance processors that accept credit card payments in lieu of checks must meet the standard.
Failure to comply with PCI standards exposes an organization to two types of liability: substantial penalties, and, more importantly, "charge-back" liability for damages suffered by the card issuer as a result of a data breach. The losses sustained by card issuers includes not only the fraudulent charges made on the accounts of the victims of identity theft, but also the administrative costs associated with the issuance of new cards to customers whose personal information may have been compromised. As a result, these costs can be significant. Add in the damage to reputation associated with the loss of customer card details, and the importance of PCI compliance to remittance processors becomes clear.
Conversely, in an environment where consumers are concerned about privacy and online security, there is an opportunity for businesses to improve their security posture by meeting the PCI standard.
What You Should Do
Remittance operations put their organizations at great risk if due diligence is not practiced and steps are not taken to protect cardholder and member data. Managers must take a very active approach to operational risk management, and not assume that the PCI DSS standard doesn't apply to them.
One strategy to ensure PCI compliance for remittance operations is to work with vendors that have already deployed a PCI compliance program for their entire end-to-end suite. With this approach, the onus is on the vendor to ensure that their underlying software and processes gain and maintain PCI compliance. This won't let operations off the hook for PCI, but it is a lower cost route to compliance.
To see if your vendor has a validated PCI application, visit www.pcisecuritystandards.org.
Remittance operations face even greater challenges from new PCI compliance guidelines. Doug Myers, vice president of sales and business development for Creditron, explains:
A flurry of new regulations, guidelines and clarifications designed to improve credit card security has remittance operations that handle credit card payments -- in the back-office or via walk-up locations -- scrambling. With three new pieces of guidance on the docket for Payment Card Industry (PCI) compliance, and larger fines for non-compliance, these operations face external pressures to beat the deadlines, as well as internal pressures to meet requirements in a strategic and cost-effective manner.
PCI and RP
The PCI Standard is the result of a collaborative effort formed by the five major credit card companies (Visa International, MasterCard Worldwide, American Express, Discover Financial Services and JCB) to develop an efficient approach to safeguarding sensitive data and for the prevention of credit card fraud, hacking and various other security concerns. Any merchant, organization or software that processes, stores or disseminates credit card data must be PCI DSS compliant or they risk hefty fines and/or losing the ability to process credit cards altogether.
Remittance processors that accept credit card payments in lieu of checks must meet the standard.
Failure to comply with PCI standards exposes an organization to two types of liability: substantial penalties, and, more importantly, "charge-back" liability for damages suffered by the card issuer as a result of a data breach. The losses sustained by card issuers includes not only the fraudulent charges made on the accounts of the victims of identity theft, but also the administrative costs associated with the issuance of new cards to customers whose personal information may have been compromised. As a result, these costs can be significant. Add in the damage to reputation associated with the loss of customer card details, and the importance of PCI compliance to remittance processors becomes clear.
Conversely, in an environment where consumers are concerned about privacy and online security, there is an opportunity for businesses to improve their security posture by meeting the PCI standard.
What You Should Do
Remittance operations put their organizations at great risk if due diligence is not practiced and steps are not taken to protect cardholder and member data. Managers must take a very active approach to operational risk management, and not assume that the PCI DSS standard doesn't apply to them.
One strategy to ensure PCI compliance for remittance operations is to work with vendors that have already deployed a PCI compliance program for their entire end-to-end suite. With this approach, the onus is on the vendor to ensure that their underlying software and processes gain and maintain PCI compliance. This won't let operations off the hook for PCI, but it is a lower cost route to compliance.
To see if your vendor has a validated PCI application, visit www.pcisecuritystandards.org.
Monday, June 15, 2009
Credit Card Security Problems
Posted by Mark Brousseau
An interesting article from the Associated Press on how lax requirements leave consumer data at risk of attack by hackers:
Weak security enables credit card hacks
By JORDAN ROBERTSON
AP Technology Writer
Every time you swipe your credit card and wait for the transaction to be approved, sensitive data including your name and account number are ferried from store to bank through computer networks, each step a potential opening for hackers.
And while you may take steps to protect yourself against identity theft, an Associated Press investigation has found the banks and other companies that handle your information are not being nearly as cautious as they could.
The government leaves it to card companies to design security rules that protect the nation's 50 billion annual transactions. Yet an examination of those industry requirements explains why so many breaches occur: The rules are cursory at best and all but meaningless at worst, according to the AP's analysis of data breaches dating to 2005.
It means every time you pay with plastic, companies are gambling with your personal data. If hackers intercept your numbers, you'll spend weeks straightening your mangled credit, though you can't be held liable for unauthorized charges. Even if your transaction isn't hacked, you still lose: Merchants pass to all their customers the costs they incur from fraud.
More than 70 retailers and payment processors have disclosed breaches since 2006, involving tens of millions of credit and debit card numbers, according to the Privacy Rights Clearinghouse. Meanwhile, many others likely have been breached and didn't detect it. Even the companies that had the payment industry's top rating for computer security, a seal of approval known as PCI compliance, have fallen victim to huge heists.
Companies that are not compliant with the PCI standards - including one in 10 of the medium-sized and large retailers in the United States - face fines but are left free to process credit and debit card payments. Most retailers don't have to endure security audits, but can evaluate themselves.
Credit card providers don't appear to be in a rush to tighten the rules. They see fraud as a cost of doing business and say stricter security would throw sand into the gears of the payment system, which is built on speed, convenience and low cost.
That is of little consolation to consumers who bet on the industry's payment security and lost.
It took four months for Pamela LaMotte, 46, of Colchester, Vt., to fix the damage after two of her credit card accounts were tapped by hackers in a breach traced to a Hannaford Bros. grocery store.
LaMotte, who was unemployed at the time, says she had to borrow money from her mother and boyfriend to pay $500 in overdraft and late fees - which were eventually refunded - while the banks investigated.
"Maybe somebody who doesn't live paycheck to paycheck, it wouldn't matter to them too much, but for me it screwed me up in a major way," she said. LaMotte says she pays more by cash and check now.
It all happened at a supermarket chain that met the PCI standards. Someone installed malicious software on Hannaford's servers that snatched customer data while it was being sent to the banks for approval.
Since then, hackers plundered two companies that process payments and had PCI certification. Heartland Payment Systems lost card numbers, expiration dates and other data for potentially hundreds of millions of shoppers. RBS WorldPay Inc. got taken for more than 1 million Social Security numbers - a golden ticket to hackers that enables all kinds of fraud.
In the past, each credit card company had its own security rules, a system that was chaotic for stores.
In 2006, the big card brands - Visa, MasterCard, American Express, Discover and JCB International - formed the Payment Card Industry Security Standards Council and created uniform security rules for merchants.
Avivah Litan, a Gartner Inc. analyst, says retailers and payment processors have spent more than $2 billion on security upgrades to comply with PCI. And the payment industry touts the fact that 93 percent of big retailers in the U.S., and 88 percent of medium-sized ones, are compliant with the PCI rules.
That leaves plenty of merchants out, of course, but the main threat against them is a fine: $25,000 for big retailers for each month they are not compliant, $5,000 for medium-sized ones.
Computer security experts say the PCI guidelines are superficial, including requirements that stores run antivirus software and install computer firewalls. Those steps are designed to keep hackers out and customer data in. Yet tests that simulate hacker attacks are required just once a year, and businesses can run the tests themselves.
"It's like going to a doctor and getting your blood pressure read, and if your blood pressure's good you get a clean bill of health," said Tom Kellermann, a former senior member of the World Bank's Treasury security team and now vice president of security awareness for Core Security Technologies, which audited Google's Internet payment processing system.
Merchants that decide to hire an outside auditor to check for compliance with the PCI rules need not spend much. Though some firms generally charge about $60,000 and take months to complete their inspections, others are far cheaper and faster.
"PCI compliance can cost just a couple hundred bucks," said Jeremiah Grossman, founder of WhiteHat Security Inc., a Web security firm. "If that's the case, all the incentives are in the wrong direction. The merchants are inclined to go with the cheapest certification they need."
For some inspectors, the certification course takes just one weekend and ends in an open-book exam. Applicants must have five years of computer security experience, but once they are let loose, there's little oversight of their work. Larger stores take it on themselves to provide evidence to auditors that they comply with the rules, leaving the door open for mistakes or fraud.
And retailers with fewer than 6 million annual card transactions - a group comprising more than 99 percent of all retailers - do not even need auditors. They can test and evaluate themselves.
At the same time, the card companies themselves are increasingly hands-off.
Two years ago, Visa scaled back its review of inspection records for the payment processors it works with. It now examines records only for payment processors with computer networks directly connected to Visa's.
In the U.S., that means fewer than 100 payment processors out of the 700 that Visa works with are PCI-compliant.
Visa's head of global data security, Eduardo Perez, said the company scaled back its records review because it took too much work and because the PCI standards have improved the industry's security "considerably."
"I think we've made a lot of progress," he said. "While there have been a few large compromises, there are many more compromises we feel we've helped prevent by driving these minimum requirements."
Representatives for MasterCard, American Express, Discover and JCB - which, along with Visa, steer PCI policy - either didn't return messages from the AP or directed questions to the PCI security council.
PCI's general manager, Bob Russo, said inspector certification is "rigorous." Yet he also acknowledged that inconsistent audits are a problem - and that merchants and payment processors who suffered data breaches possibly shouldn't have been PCI-certified. Those companies also might have easily fallen out of compliance after their inspection, by not installing the proper security updates, and nobody noticed.
The council is trying to crack down on shoddy work by requiring annual audits for the dozen companies that do the bulk of the PCI inspections. Smaller firms will be examined once every three years.
Those reviews merely scratch the surface, though. Only three full-time staffers are assigned to the task, and they can't visit retailers themselves. They are left to review the paperwork from the examinations.
The AP contacted eight of the biggest "acquiring banks" - the banks that retailers use as middlemen between the stores and consumers' banks. Those banks are responsible for ensuring that retailers are PCI compliant. Most didn't return calls or wouldn't comment for this story.
Mike Herman, compliance managing director for Chase Paymentech, a division of JPMorgan Chase, said his bank has five workers reviewing compliance reports from retailers. Most of the work is done by phone or e-mail.
"We have faith in the certification process, and we really haven't doubted the assessors' work," Herman said. "It's really the merchants that don't engage assessors; those get a little more scrutiny."
He defended the system: "Can you imagine how many breaches we'd have and how severe they'd be if we didn't have PCI?"
Supporters of PCI point out nearly all big and medium-sized retailers governed by the standard now say they no longer store sensitive cardholder data. Just a few years ago they did - leaving credit card numbers in databases that were vulnerable to hackers.
So why are breaches still happening? Because criminals have sharpened their attacks and are now capturing more data as it makes its way from store to bank, when breaches are harder to stop.
Security experts say there are several steps the payment industry could take to make sure customer information doesn't leak out of networks.
Banks could scramble the data that travels over payment networks, so it would be meaningless to anyone not authorized to see it.
For example, TJX Cos., the chain that owns T.J. Maxx and Marshalls and was victimized by a breach that exposed as many as 100 million accounts, the most on record, has tightened its security but says many banks won't accept data in encrypted form.
PCI requires data transmitted across "open, public networks" to be encrypted, but that means hackers with access to a company's internal network still can get at it. Requiring encryption all the time would be expensive and slow transactions.
Another possibility: Some security professionals think the banks and credit card companies should start their own PCI inspection arms to make sure the audits are done properly. Banks say they have stepped up oversight of the inspections, doing their own checks of questionable PCI assessment jobs. But taking control of the whole process is far-fetched: nobody wants the liability.
PCI could also be optional. In its place, some experts suggest setting fines for each piece of sensitive data a retailer loses.
The U.S. might also try a system like Europe's, where shoppers need a secret PIN code and card with a chip inside to complete purchases. The system, called Chip and PIN, has cut down on fraud there (because it's harder to use counterfeit cards), but transferred it elsewhere - to places like the U.S. that don't have as many safeguards.
A key reason PCI exists is that the banks and card brands don't want the government regulating credit card security. These companies also want to be sure transactions keep humming through the system - which is why banks and card companies are willing to put up with some fraud.
"If they did mind, they have immense resources and could really change things," said Ed Skoudis, co-founder of security consultancy InGuardians Inc. and an instructor with the SANS Institute, a computer-security training organization. Skoudis investigates retail breaches in support of government investigations. "But they don't want to strangle the goose that laid the golden egg by making it too hard to accept credit cards, because that's bad for everybody."
An interesting article from the Associated Press on how lax requirements leave consumer data at risk of attack by hackers:
Weak security enables credit card hacks
By JORDAN ROBERTSON
AP Technology Writer
Every time you swipe your credit card and wait for the transaction to be approved, sensitive data including your name and account number are ferried from store to bank through computer networks, each step a potential opening for hackers.
And while you may take steps to protect yourself against identity theft, an Associated Press investigation has found the banks and other companies that handle your information are not being nearly as cautious as they could.
The government leaves it to card companies to design security rules that protect the nation's 50 billion annual transactions. Yet an examination of those industry requirements explains why so many breaches occur: The rules are cursory at best and all but meaningless at worst, according to the AP's analysis of data breaches dating to 2005.
It means every time you pay with plastic, companies are gambling with your personal data. If hackers intercept your numbers, you'll spend weeks straightening your mangled credit, though you can't be held liable for unauthorized charges. Even if your transaction isn't hacked, you still lose: Merchants pass to all their customers the costs they incur from fraud.
More than 70 retailers and payment processors have disclosed breaches since 2006, involving tens of millions of credit and debit card numbers, according to the Privacy Rights Clearinghouse. Meanwhile, many others likely have been breached and didn't detect it. Even the companies that had the payment industry's top rating for computer security, a seal of approval known as PCI compliance, have fallen victim to huge heists.
Companies that are not compliant with the PCI standards - including one in 10 of the medium-sized and large retailers in the United States - face fines but are left free to process credit and debit card payments. Most retailers don't have to endure security audits, but can evaluate themselves.
Credit card providers don't appear to be in a rush to tighten the rules. They see fraud as a cost of doing business and say stricter security would throw sand into the gears of the payment system, which is built on speed, convenience and low cost.
That is of little consolation to consumers who bet on the industry's payment security and lost.
It took four months for Pamela LaMotte, 46, of Colchester, Vt., to fix the damage after two of her credit card accounts were tapped by hackers in a breach traced to a Hannaford Bros. grocery store.
LaMotte, who was unemployed at the time, says she had to borrow money from her mother and boyfriend to pay $500 in overdraft and late fees - which were eventually refunded - while the banks investigated.
"Maybe somebody who doesn't live paycheck to paycheck, it wouldn't matter to them too much, but for me it screwed me up in a major way," she said. LaMotte says she pays more by cash and check now.
It all happened at a supermarket chain that met the PCI standards. Someone installed malicious software on Hannaford's servers that snatched customer data while it was being sent to the banks for approval.
Since then, hackers plundered two companies that process payments and had PCI certification. Heartland Payment Systems lost card numbers, expiration dates and other data for potentially hundreds of millions of shoppers. RBS WorldPay Inc. got taken for more than 1 million Social Security numbers - a golden ticket to hackers that enables all kinds of fraud.
In the past, each credit card company had its own security rules, a system that was chaotic for stores.
In 2006, the big card brands - Visa, MasterCard, American Express, Discover and JCB International - formed the Payment Card Industry Security Standards Council and created uniform security rules for merchants.
Avivah Litan, a Gartner Inc. analyst, says retailers and payment processors have spent more than $2 billion on security upgrades to comply with PCI. And the payment industry touts the fact that 93 percent of big retailers in the U.S., and 88 percent of medium-sized ones, are compliant with the PCI rules.
That leaves plenty of merchants out, of course, but the main threat against them is a fine: $25,000 for big retailers for each month they are not compliant, $5,000 for medium-sized ones.
Computer security experts say the PCI guidelines are superficial, including requirements that stores run antivirus software and install computer firewalls. Those steps are designed to keep hackers out and customer data in. Yet tests that simulate hacker attacks are required just once a year, and businesses can run the tests themselves.
"It's like going to a doctor and getting your blood pressure read, and if your blood pressure's good you get a clean bill of health," said Tom Kellermann, a former senior member of the World Bank's Treasury security team and now vice president of security awareness for Core Security Technologies, which audited Google's Internet payment processing system.
Merchants that decide to hire an outside auditor to check for compliance with the PCI rules need not spend much. Though some firms generally charge about $60,000 and take months to complete their inspections, others are far cheaper and faster.
"PCI compliance can cost just a couple hundred bucks," said Jeremiah Grossman, founder of WhiteHat Security Inc., a Web security firm. "If that's the case, all the incentives are in the wrong direction. The merchants are inclined to go with the cheapest certification they need."
For some inspectors, the certification course takes just one weekend and ends in an open-book exam. Applicants must have five years of computer security experience, but once they are let loose, there's little oversight of their work. Larger stores take it on themselves to provide evidence to auditors that they comply with the rules, leaving the door open for mistakes or fraud.
And retailers with fewer than 6 million annual card transactions - a group comprising more than 99 percent of all retailers - do not even need auditors. They can test and evaluate themselves.
At the same time, the card companies themselves are increasingly hands-off.
Two years ago, Visa scaled back its review of inspection records for the payment processors it works with. It now examines records only for payment processors with computer networks directly connected to Visa's.
In the U.S., that means fewer than 100 payment processors out of the 700 that Visa works with are PCI-compliant.
Visa's head of global data security, Eduardo Perez, said the company scaled back its records review because it took too much work and because the PCI standards have improved the industry's security "considerably."
"I think we've made a lot of progress," he said. "While there have been a few large compromises, there are many more compromises we feel we've helped prevent by driving these minimum requirements."
Representatives for MasterCard, American Express, Discover and JCB - which, along with Visa, steer PCI policy - either didn't return messages from the AP or directed questions to the PCI security council.
PCI's general manager, Bob Russo, said inspector certification is "rigorous." Yet he also acknowledged that inconsistent audits are a problem - and that merchants and payment processors who suffered data breaches possibly shouldn't have been PCI-certified. Those companies also might have easily fallen out of compliance after their inspection, by not installing the proper security updates, and nobody noticed.
The council is trying to crack down on shoddy work by requiring annual audits for the dozen companies that do the bulk of the PCI inspections. Smaller firms will be examined once every three years.
Those reviews merely scratch the surface, though. Only three full-time staffers are assigned to the task, and they can't visit retailers themselves. They are left to review the paperwork from the examinations.
The AP contacted eight of the biggest "acquiring banks" - the banks that retailers use as middlemen between the stores and consumers' banks. Those banks are responsible for ensuring that retailers are PCI compliant. Most didn't return calls or wouldn't comment for this story.
Mike Herman, compliance managing director for Chase Paymentech, a division of JPMorgan Chase, said his bank has five workers reviewing compliance reports from retailers. Most of the work is done by phone or e-mail.
"We have faith in the certification process, and we really haven't doubted the assessors' work," Herman said. "It's really the merchants that don't engage assessors; those get a little more scrutiny."
He defended the system: "Can you imagine how many breaches we'd have and how severe they'd be if we didn't have PCI?"
Supporters of PCI point out nearly all big and medium-sized retailers governed by the standard now say they no longer store sensitive cardholder data. Just a few years ago they did - leaving credit card numbers in databases that were vulnerable to hackers.
So why are breaches still happening? Because criminals have sharpened their attacks and are now capturing more data as it makes its way from store to bank, when breaches are harder to stop.
Security experts say there are several steps the payment industry could take to make sure customer information doesn't leak out of networks.
Banks could scramble the data that travels over payment networks, so it would be meaningless to anyone not authorized to see it.
For example, TJX Cos., the chain that owns T.J. Maxx and Marshalls and was victimized by a breach that exposed as many as 100 million accounts, the most on record, has tightened its security but says many banks won't accept data in encrypted form.
PCI requires data transmitted across "open, public networks" to be encrypted, but that means hackers with access to a company's internal network still can get at it. Requiring encryption all the time would be expensive and slow transactions.
Another possibility: Some security professionals think the banks and credit card companies should start their own PCI inspection arms to make sure the audits are done properly. Banks say they have stepped up oversight of the inspections, doing their own checks of questionable PCI assessment jobs. But taking control of the whole process is far-fetched: nobody wants the liability.
PCI could also be optional. In its place, some experts suggest setting fines for each piece of sensitive data a retailer loses.
The U.S. might also try a system like Europe's, where shoppers need a secret PIN code and card with a chip inside to complete purchases. The system, called Chip and PIN, has cut down on fraud there (because it's harder to use counterfeit cards), but transferred it elsewhere - to places like the U.S. that don't have as many safeguards.
A key reason PCI exists is that the banks and card brands don't want the government regulating credit card security. These companies also want to be sure transactions keep humming through the system - which is why banks and card companies are willing to put up with some fraud.
"If they did mind, they have immense resources and could really change things," said Ed Skoudis, co-founder of security consultancy InGuardians Inc. and an instructor with the SANS Institute, a computer-security training organization. Skoudis investigates retail breaches in support of government investigations. "But they don't want to strangle the goose that laid the golden egg by making it too hard to accept credit cards, because that's bad for everybody."
Tuesday, April 14, 2009
NACHA Payments 2009 Highlights
Posted by Mark Brousseau
On the Glenbrook Payments Views Web site, Erin McCune, a partner with Glenbrook (415-441-4840), provides the following highlights, observations, and recurring themes from last week’s NACHA Payments 2009 Conference in Orlando.
The exhibit hall was approximately one half the size of last year and many of the vendors opted for smaller booths than they’ve had in the past. There were relatively few bankers in attendance - travel budgets are tight, as is scrutiny of how TARP funds are spent ("Disney World Boondoggle!" would be bad PR indeed). This was disappointing for the vendors but great from my perspective; they had lots of time to talk to curious consultants from Glenbrook.
Here at Glenbrook we recently coined the term Payments as a Service (PaaS) to describe a growing interest among businesses (billers as well as ecommerce merchants) to outsource their payment processing (incoming and outgoing) and related functions, such as fraud analysis. At Payments 2009 we observed vendors offering PaaS services to billers as well as new capabilities that will enable banks themselves to offer more comprehensive payments support for their corporate customers. For example:
... Fiserv announced a new "convergent" payments solution that enables banks to process ACH and check payments on a common platform, streamlining and combining customer facing capabilities. This has the potential to significantly improve the silo’d product specific interfaces that consumers and businesses face when they interact with their bank. Eventually the solution will support wires, credit/debit, and CHIPS. The potential to streamline and enhance treasury services to businesses, by allowing them access to their bank’s own cross-payment portal is huge.
... The combined forces of 3i Infotech, J&B Software, and Regulus offer a comprehensive lockbox solution to banks and billers, regardless of whether they want to install software locally or utilize a hosted solution (or some combination). The solution allows billers to use one platform to generate and deliver bills (paper or electronic) and receive payments via IVR/telephone, web, walk-in, kiosk, or call centers. A new feature enables remote check capture via cell phones, which may be particularly appealing for brokerage and insurance customers.
Those of you who know me, know that I have spent much of my career toiling to increase the number of native electronic B2B transactions. At NACHA this year there are signs of hope for B2B payments on a variety of fronts:
... The investment and financial planning company Raymond James presented a case study with Bottomline Technologies. Raymond James generates one million outgoing payments per year and utilizes Bottomline to manage its interface with SWIFT and route payment approvals across its 2200+ broker offices and 700 bank accounts. Key benefits include: improved customer service; increased audit/control; format standardization; and, most importantly as stressed by Raymond James, the solution is bank agnostic.
... Corporate adoption of ISO20022 within SEPA/Europe and beyond; top 10-15 corporate customers at each global bank are in the process of implementing.
... At last year’s Payments Conference NACHA presented the results of research on small to medium sized business’ payment capabilities and needs. This year, NACHA’s B2B initiative showcased a pilot of electronic invoice delivery, payment creation, and auto-cash application integrated into QuickBooks. The solution, from BankServ and ipCommerce demonstrates a seamless solution for SMB.
... 3Delta Systems enables merchants to send L2 & L3 data to buyers using PCards and is working to reduce friction for businesses accepting card transactions. Those that provide L2 and L3 data benefit from significantly reduced Interchange.
Western Union is an example of a payments company that has proactively adapted its product offering to changing consumer needs. News from Western Union at this year’s conference:
Western Union is offering expedited, same day payments - primarily in-person payments, but also via the Internet and IVR (telephone) systems.
... Did you know that if you are a Google AdSense publisher you can collect your advertising income in cash via Western Union worldwide?
... Western Union sends data to billers real time (or hourly, or daily depending on the capabilities of the biller’s A/R system). RPPS and other bill payment consolidators do, too. Is it too much to ask for B2B transactions to have similar timely data delivery?
Additional biller testimonials from Comcast and Liberty Mutual:
... Bill suppression is key, electronic payment accelerates receipt of funds by 7 days, but billers need to suppress paper bills in order to achieve their cost saving goals.
... Liberty Mutual: reduced internal lockbox resources from 29 FTE in 205 to 13 this year.
... Comcast: payroll cards, bank by card products are reducing walk in traffic, incorporate incoming transactions through eLockbox solution.
... Each new payment process requires extensive training to address customer concerns/questions about payment at each of Comcast’s 70 call centers.
... Comcast: Don’t forget, it’s all about the exception processing!
... Scalability is key, Comcast has 24 million customers.
Interest in Web 2.0 demonstrated by a handful of well attended sessions. One on financial institution marketing that I attended had audience members frantically taking notes; low point was when one banker asked "What’s LinkedIn?"
... BofA research reveals that customers very much prefer widgets, they are perceived as more conversational than websites
... BofA paying attention to iPhone, iGoogle, Adobe Flex, Silverlight
... Half of BofA’s 2 million mobile banking customers are using iPhones.
... Four key components of bank new media strategy: mobile/SMS, blogging, social media, Internet marketing (TDG Phenix)
... Quote: "If I think my bank is doing something great I tell 3 people, if they are doing something terrible I tell 25 people AND blog about it."- Larry De Palma, TDG Phenix
Web 2.0 has the potential to transform corporate treasury solutions. Where is the Mint for corporate payments? Ideally a light weight treasury workstation + payment hub. Best quote about today’s cash management offerings: "Treasury is the Atari of banking" - Milton Santiago, BofA
... Smart alerts have potential to help resolve B2B transaction issues more quickly, i.e. alert supplier that buyer attempted payment but had an issue, supplier A/R should contact buyer A/P (BofA session)
... FedEx analogy - demystifying treasury and payments - don’t care how it gets there (plane, truck, train) as long as it gets there (BofA session)
On the Glenbrook Payments Views Web site, Erin McCune, a partner with Glenbrook (415-441-4840), provides the following highlights, observations, and recurring themes from last week’s NACHA Payments 2009 Conference in Orlando.
The exhibit hall was approximately one half the size of last year and many of the vendors opted for smaller booths than they’ve had in the past. There were relatively few bankers in attendance - travel budgets are tight, as is scrutiny of how TARP funds are spent ("Disney World Boondoggle!" would be bad PR indeed). This was disappointing for the vendors but great from my perspective; they had lots of time to talk to curious consultants from Glenbrook.
Here at Glenbrook we recently coined the term Payments as a Service (PaaS) to describe a growing interest among businesses (billers as well as ecommerce merchants) to outsource their payment processing (incoming and outgoing) and related functions, such as fraud analysis. At Payments 2009 we observed vendors offering PaaS services to billers as well as new capabilities that will enable banks themselves to offer more comprehensive payments support for their corporate customers. For example:
... Fiserv announced a new "convergent" payments solution that enables banks to process ACH and check payments on a common platform, streamlining and combining customer facing capabilities. This has the potential to significantly improve the silo’d product specific interfaces that consumers and businesses face when they interact with their bank. Eventually the solution will support wires, credit/debit, and CHIPS. The potential to streamline and enhance treasury services to businesses, by allowing them access to their bank’s own cross-payment portal is huge.
... The combined forces of 3i Infotech, J&B Software, and Regulus offer a comprehensive lockbox solution to banks and billers, regardless of whether they want to install software locally or utilize a hosted solution (or some combination). The solution allows billers to use one platform to generate and deliver bills (paper or electronic) and receive payments via IVR/telephone, web, walk-in, kiosk, or call centers. A new feature enables remote check capture via cell phones, which may be particularly appealing for brokerage and insurance customers.
Those of you who know me, know that I have spent much of my career toiling to increase the number of native electronic B2B transactions. At NACHA this year there are signs of hope for B2B payments on a variety of fronts:
... The investment and financial planning company Raymond James presented a case study with Bottomline Technologies. Raymond James generates one million outgoing payments per year and utilizes Bottomline to manage its interface with SWIFT and route payment approvals across its 2200+ broker offices and 700 bank accounts. Key benefits include: improved customer service; increased audit/control; format standardization; and, most importantly as stressed by Raymond James, the solution is bank agnostic.
... Corporate adoption of ISO20022 within SEPA/Europe and beyond; top 10-15 corporate customers at each global bank are in the process of implementing.
... At last year’s Payments Conference NACHA presented the results of research on small to medium sized business’ payment capabilities and needs. This year, NACHA’s B2B initiative showcased a pilot of electronic invoice delivery, payment creation, and auto-cash application integrated into QuickBooks. The solution, from BankServ and ipCommerce demonstrates a seamless solution for SMB.
... 3Delta Systems enables merchants to send L2 & L3 data to buyers using PCards and is working to reduce friction for businesses accepting card transactions. Those that provide L2 and L3 data benefit from significantly reduced Interchange.
Western Union is an example of a payments company that has proactively adapted its product offering to changing consumer needs. News from Western Union at this year’s conference:
Western Union is offering expedited, same day payments - primarily in-person payments, but also via the Internet and IVR (telephone) systems.
... Did you know that if you are a Google AdSense publisher you can collect your advertising income in cash via Western Union worldwide?
... Western Union sends data to billers real time (or hourly, or daily depending on the capabilities of the biller’s A/R system). RPPS and other bill payment consolidators do, too. Is it too much to ask for B2B transactions to have similar timely data delivery?
Additional biller testimonials from Comcast and Liberty Mutual:
... Bill suppression is key, electronic payment accelerates receipt of funds by 7 days, but billers need to suppress paper bills in order to achieve their cost saving goals.
... Liberty Mutual: reduced internal lockbox resources from 29 FTE in 205 to 13 this year.
... Comcast: payroll cards, bank by card products are reducing walk in traffic, incorporate incoming transactions through eLockbox solution.
... Each new payment process requires extensive training to address customer concerns/questions about payment at each of Comcast’s 70 call centers.
... Comcast: Don’t forget, it’s all about the exception processing!
... Scalability is key, Comcast has 24 million customers.
Interest in Web 2.0 demonstrated by a handful of well attended sessions. One on financial institution marketing that I attended had audience members frantically taking notes; low point was when one banker asked "What’s LinkedIn?"
... BofA research reveals that customers very much prefer widgets, they are perceived as more conversational than websites
... BofA paying attention to iPhone, iGoogle, Adobe Flex, Silverlight
... Half of BofA’s 2 million mobile banking customers are using iPhones.
... Four key components of bank new media strategy: mobile/SMS, blogging, social media, Internet marketing (TDG Phenix)
... Quote: "If I think my bank is doing something great I tell 3 people, if they are doing something terrible I tell 25 people AND blog about it."- Larry De Palma, TDG Phenix
Web 2.0 has the potential to transform corporate treasury solutions. Where is the Mint for corporate payments? Ideally a light weight treasury workstation + payment hub. Best quote about today’s cash management offerings: "Treasury is the Atari of banking" - Milton Santiago, BofA
... Smart alerts have potential to help resolve B2B transaction issues more quickly, i.e. alert supplier that buyer attempted payment but had an issue, supplier A/R should contact buyer A/P (BofA session)
... FedEx analogy - demystifying treasury and payments - don’t care how it gets there (plane, truck, train) as long as it gets there (BofA session)
Fidavante-Merger Musings
Posted by Mark Brousseau
Vijay Balakrishnan, president of StratEx, LLC (770-598-5747) passes along the following blog entry with his musings on the recent merger between Fidelity National Information Services and Metavante. For more insights from Balakrishnan, visit his Web site at www.stratexllc.blogspot.com.
In an era characterized by synthesized monikers a la "Brangelina" for famous couples, "Fidavante" is perhaps warranted for the entity to be created by Fidelity National Information Services' acquisition of Metavante. The combination promises to be a powerhouse to rival Metavante's cross-town rival Fiserv. With over 2200 core banking customers and 220 million cards processed, Fidavante's potential operating leverage is nothing short of phenomenal. The road to fruition, however, is dependent on the successful integration of two complex organizations.
At the core. The greatest payoff, arguably, is in the rationalization and rejuvenation of the combined core banking base. As the oft repeated watchword argues, "Core is King!" It is also the most difficult integration challenge ahead. Both companies have large customer bases with legacy systems. The Fidelity repertoire includes customers on systems as disparate as Systematics, Horizon, Mercury and Miser. The Metavante stable includes the Integrated Banking Suite (IBS) platform, as well as the Bankway products that came by way of the Kirchman acquisition- the latter marketed through both outsourced and in-house license models. In addition, Metavante has entered into an agreement with Temenos to produce a next-generation core banking solution for large U.S. banks. The Fidelity equivalent is its Profile product.
There are myriad strategy alternatives. Does it make sense to focus the new technology from either Temenos or Profile on effecting a technology turn within the existing small-to-medium sized institution base? Notwithstanding the daunting number of conversions, it can be argued that this option is easier than the heart surgery of core replacement in a large bank. Or is it better to leave the legacy base as is for now, and use the next-generation platform to go after larger institutions? How does one pick a winner between Temenos and Profile, given the shots across the bow already being fired with the recent statement from Temenos that its agreement with Metavante is binding on post acquisition successor parties? If large banks are the target market, exactly how big is big?
Whale hunting perils. I suggest the foremost prerequisite for success is to get a clearly articulated strategy for each core banking market segment. It can be argued that both companies have a predominantly small-to-medium financial institution footprint. Thus, execution of a strategy for that segment, regardless of what that ends up being, is likely to come naturally to the combined entity. Scaling the heights of large institutions, on the other hand, is a different matter. Selling to, and serving large, whale-like institutions is an art by itself, considering the long selling cycles, significant customization, and the volatility that large deals bring to the P&L lines. That said, there are elements within both companies that have come by way of acquisition that have a large-institution history. The trick will be to identify those skill sets, and allow them to succeed within an operating mileu that has long been used to the relative predictability of smaller institutions.
Switch hitting. The payments side of the business offers major synergies. The NYCE network from Metavante and the debit switching operation from Fidelity's eFunds acquisition are natural fits. The synergies between these two entities stretch back in history to when eFunds was part of Deluxe Corporation. If memory serves me right, Deluxe Data Systems provided debit switching processing services for NYCE based on the flagship CONNEX product. NYCE later took the processing in-house, based on a licensed version of CONNEX. Even today, CONNEX is a leader when it comes to very high volume switches like NYCE, and the synergy analysis should be straightforward. Looking ahead, the gap that has endured the Deluxe-eFunds-Fidelity chapters, is for a product that could compete effectively with ACI's Base 24 at smaller networks for switching and peripheral functions like ATM driving... another acquisition down the road?
It's in the cards. Fidelity brings with it a strong card processing base aimed at predominantly issuance processing for credit unions. This business has preserved its dominance in the credit union space right from its inception as Telecredit, through its acquisition by Equifax, spin-off as Certegy, and subsequent purchase by Fidelity. This is a net plus, as there is nothing on the Metavante side that enjoys a leadership position in this segment.
Striking the right image. Both companies moved into image based check, remittance and document processing through acquisitions. Metavante has a comprehensive offering from its purchases of AFS, Vectorsgi, Endpoint Exchange,Vicor and Treev. Its strategy has been to grow the medium sized institution AFS business base, while taking its image work-flow expertise up market to large institutions, leveraging account relationships and IBM CPCS based product knowledge from Vectorsgi. The Fidelity offering is primarily based on its acquisition of Bankware. There will likely be a need to rationalize offerings between the erstwhile Bankware and AFS product lines.
There has always been a gap in the old AFS line at the very low end (institutions of less than $100 million in assets). There may be a case for looking at the Fidelity (Bankware) line as an alternative. I suspect, however, that both companies will look at addressing the low end through outsourced item processing services. The choice of the right platform will depend on multi-institution capability. Both Bankware and AFS originally built products for in-house licensed use. It is often the case with products initially built for in-house licensed use that functions like partitioned databases and multi-customer billing (as opposed to operating a different instance of the product to serve each customer), are part of later redesign efforts. Both companies have been at the multi-institution outsourcing business for a while, and it is entirely possible that both platforms lend themselves adequately to the needs today. Metavante's Vicor acquisition brings a high end wholesale remittance product line which doesn't have an equivalent on the Fidelity side. The Endpoint Exchange check image exchange network is unique with the many thousand routing and transit points served, although it is still challenged in its ability to offer a convincing alternative to the Federal Reserve.
Check it out. Fidelity has a check verification and guarantee business that includes the well known SCAN check verification system, courtesy eFunds. There could be interesting synergies between these check services, and Metavante's merchant capture products and services. Being able to assess payment risk at the point of check image capture can be a powerful combination, particularly if there are thoughts of launching "bank agnostic" merchant capture services. A broader approach to assessing debit risk- a debit bureau if you will- can also include Chex Systems from the erstwhile eFunds stable which is easily the most well established new account risk management system in the country.
Across the oceans. While the two companies together will operate in 27 countries and serve customers in 90, the international presence comes mostly from Fidelity. The expansion overseas has its roots in a strategy on the part of what was then Equifax Card Services to take its card processing expertise beyond U.S. shores. This has grown into a viable global presence. Fidelity's eFunds acquisition also brought with it a large presence in India, which provides a base of lower cost, high quality technology development expertise. This operation has its roots in the joint venture established between Deluxe Corporation and India's HCL Corporation in the mid-1990s to tap into India's growing technology base (eFunds was later spun off from Deluxe). Metavante's international presence is more modest, comprising mostly of distributor based product sales and recent agreements with Temenos and Monitise. The future augurs well for Fidavante's international expansion, as it is not beset with the same scale of integration challenge as the home base.
Cultural Exchange. In most mergers, getting different cultures to work together is more difficult than rationalizing products and technologies. At first glance, Fidelity and Metavante are similar in that they are both providers of banking and payment processing services to mostly mid-sized institutions. Processors tend to have a culture that is unique in that there is great emphasis on operational efficiency to keep pushing those "clicks" through. A closer examination yields a few differences. Metavante had its origins as the captive data processing center of the Marshall and Ilsley bank. Until the spin-off of a year or so ago, the company grew dramatically under the ownership of the large mid-western bank. The company prides itself on customer service, and was able to develop its culture in a relatively stable atmosphere. The Florida based Fidelity has grown through the acquisition and absorption of sizeable businesses with varied histories. As discussed previously, Fidelity is also more global in its footprint. While I don't see any "show-stoppers", it should be recognized that there will be varied perspectives at the table.
A third pole? Almost more interesting than the Fidavante saga is the potential shift in the competitive landscape. The combined entity presents a formidable challenge to Fiserv. With the exception of not being able to match Fiserv's dominance in the ACH arena with its PEP+ product, it is arguably set to becoming the second pole in this business. Does this signal a rush for scale on the part of others? Like nascent planetary systems, there is the need for a center of mass around which alternate poles develop. Will it be First Data, privatized now, and debit payment-centric in posture? Can an SAP or an Oracle morph from being horizontal players to slugging it out in this vertical market? Where does Intuit go, post the Digital Insight acquisition- was that just a toe in the water or a harbinger of a more purposeful move into banking and payments? Where does this leave the many niche players in the marketplace?
It is possible that nimbleness and innovation will serve niche players while the big players sort out the integration challenges. They will do well, however, to heed the adage that the grass gets trampled when elephants quarrel. To take on the dominant players on their terms- especially those who can leverage their core banking business base- is suicide. The niche players only have two choices: Become a bigger fish, or find a smaller pond.
Predicting course and speed in choppy waters is difficult at best. Nevertheless, the observations offered here, as well as insights from those with other perspectives, makes this a fascinating development to watch.
What do you think? Post you comment below.
Vijay Balakrishnan, president of StratEx, LLC (770-598-5747) passes along the following blog entry with his musings on the recent merger between Fidelity National Information Services and Metavante. For more insights from Balakrishnan, visit his Web site at www.stratexllc.blogspot.com.
In an era characterized by synthesized monikers a la "Brangelina" for famous couples, "Fidavante" is perhaps warranted for the entity to be created by Fidelity National Information Services' acquisition of Metavante. The combination promises to be a powerhouse to rival Metavante's cross-town rival Fiserv. With over 2200 core banking customers and 220 million cards processed, Fidavante's potential operating leverage is nothing short of phenomenal. The road to fruition, however, is dependent on the successful integration of two complex organizations.
At the core. The greatest payoff, arguably, is in the rationalization and rejuvenation of the combined core banking base. As the oft repeated watchword argues, "Core is King!" It is also the most difficult integration challenge ahead. Both companies have large customer bases with legacy systems. The Fidelity repertoire includes customers on systems as disparate as Systematics, Horizon, Mercury and Miser. The Metavante stable includes the Integrated Banking Suite (IBS) platform, as well as the Bankway products that came by way of the Kirchman acquisition- the latter marketed through both outsourced and in-house license models. In addition, Metavante has entered into an agreement with Temenos to produce a next-generation core banking solution for large U.S. banks. The Fidelity equivalent is its Profile product.
There are myriad strategy alternatives. Does it make sense to focus the new technology from either Temenos or Profile on effecting a technology turn within the existing small-to-medium sized institution base? Notwithstanding the daunting number of conversions, it can be argued that this option is easier than the heart surgery of core replacement in a large bank. Or is it better to leave the legacy base as is for now, and use the next-generation platform to go after larger institutions? How does one pick a winner between Temenos and Profile, given the shots across the bow already being fired with the recent statement from Temenos that its agreement with Metavante is binding on post acquisition successor parties? If large banks are the target market, exactly how big is big?
Whale hunting perils. I suggest the foremost prerequisite for success is to get a clearly articulated strategy for each core banking market segment. It can be argued that both companies have a predominantly small-to-medium financial institution footprint. Thus, execution of a strategy for that segment, regardless of what that ends up being, is likely to come naturally to the combined entity. Scaling the heights of large institutions, on the other hand, is a different matter. Selling to, and serving large, whale-like institutions is an art by itself, considering the long selling cycles, significant customization, and the volatility that large deals bring to the P&L lines. That said, there are elements within both companies that have come by way of acquisition that have a large-institution history. The trick will be to identify those skill sets, and allow them to succeed within an operating mileu that has long been used to the relative predictability of smaller institutions.
Switch hitting. The payments side of the business offers major synergies. The NYCE network from Metavante and the debit switching operation from Fidelity's eFunds acquisition are natural fits. The synergies between these two entities stretch back in history to when eFunds was part of Deluxe Corporation. If memory serves me right, Deluxe Data Systems provided debit switching processing services for NYCE based on the flagship CONNEX product. NYCE later took the processing in-house, based on a licensed version of CONNEX. Even today, CONNEX is a leader when it comes to very high volume switches like NYCE, and the synergy analysis should be straightforward. Looking ahead, the gap that has endured the Deluxe-eFunds-Fidelity chapters, is for a product that could compete effectively with ACI's Base 24 at smaller networks for switching and peripheral functions like ATM driving... another acquisition down the road?
It's in the cards. Fidelity brings with it a strong card processing base aimed at predominantly issuance processing for credit unions. This business has preserved its dominance in the credit union space right from its inception as Telecredit, through its acquisition by Equifax, spin-off as Certegy, and subsequent purchase by Fidelity. This is a net plus, as there is nothing on the Metavante side that enjoys a leadership position in this segment.
Striking the right image. Both companies moved into image based check, remittance and document processing through acquisitions. Metavante has a comprehensive offering from its purchases of AFS, Vectorsgi, Endpoint Exchange,Vicor and Treev. Its strategy has been to grow the medium sized institution AFS business base, while taking its image work-flow expertise up market to large institutions, leveraging account relationships and IBM CPCS based product knowledge from Vectorsgi. The Fidelity offering is primarily based on its acquisition of Bankware. There will likely be a need to rationalize offerings between the erstwhile Bankware and AFS product lines.
There has always been a gap in the old AFS line at the very low end (institutions of less than $100 million in assets). There may be a case for looking at the Fidelity (Bankware) line as an alternative. I suspect, however, that both companies will look at addressing the low end through outsourced item processing services. The choice of the right platform will depend on multi-institution capability. Both Bankware and AFS originally built products for in-house licensed use. It is often the case with products initially built for in-house licensed use that functions like partitioned databases and multi-customer billing (as opposed to operating a different instance of the product to serve each customer), are part of later redesign efforts. Both companies have been at the multi-institution outsourcing business for a while, and it is entirely possible that both platforms lend themselves adequately to the needs today. Metavante's Vicor acquisition brings a high end wholesale remittance product line which doesn't have an equivalent on the Fidelity side. The Endpoint Exchange check image exchange network is unique with the many thousand routing and transit points served, although it is still challenged in its ability to offer a convincing alternative to the Federal Reserve.
Check it out. Fidelity has a check verification and guarantee business that includes the well known SCAN check verification system, courtesy eFunds. There could be interesting synergies between these check services, and Metavante's merchant capture products and services. Being able to assess payment risk at the point of check image capture can be a powerful combination, particularly if there are thoughts of launching "bank agnostic" merchant capture services. A broader approach to assessing debit risk- a debit bureau if you will- can also include Chex Systems from the erstwhile eFunds stable which is easily the most well established new account risk management system in the country.
Across the oceans. While the two companies together will operate in 27 countries and serve customers in 90, the international presence comes mostly from Fidelity. The expansion overseas has its roots in a strategy on the part of what was then Equifax Card Services to take its card processing expertise beyond U.S. shores. This has grown into a viable global presence. Fidelity's eFunds acquisition also brought with it a large presence in India, which provides a base of lower cost, high quality technology development expertise. This operation has its roots in the joint venture established between Deluxe Corporation and India's HCL Corporation in the mid-1990s to tap into India's growing technology base (eFunds was later spun off from Deluxe). Metavante's international presence is more modest, comprising mostly of distributor based product sales and recent agreements with Temenos and Monitise. The future augurs well for Fidavante's international expansion, as it is not beset with the same scale of integration challenge as the home base.
Cultural Exchange. In most mergers, getting different cultures to work together is more difficult than rationalizing products and technologies. At first glance, Fidelity and Metavante are similar in that they are both providers of banking and payment processing services to mostly mid-sized institutions. Processors tend to have a culture that is unique in that there is great emphasis on operational efficiency to keep pushing those "clicks" through. A closer examination yields a few differences. Metavante had its origins as the captive data processing center of the Marshall and Ilsley bank. Until the spin-off of a year or so ago, the company grew dramatically under the ownership of the large mid-western bank. The company prides itself on customer service, and was able to develop its culture in a relatively stable atmosphere. The Florida based Fidelity has grown through the acquisition and absorption of sizeable businesses with varied histories. As discussed previously, Fidelity is also more global in its footprint. While I don't see any "show-stoppers", it should be recognized that there will be varied perspectives at the table.
A third pole? Almost more interesting than the Fidavante saga is the potential shift in the competitive landscape. The combined entity presents a formidable challenge to Fiserv. With the exception of not being able to match Fiserv's dominance in the ACH arena with its PEP+ product, it is arguably set to becoming the second pole in this business. Does this signal a rush for scale on the part of others? Like nascent planetary systems, there is the need for a center of mass around which alternate poles develop. Will it be First Data, privatized now, and debit payment-centric in posture? Can an SAP or an Oracle morph from being horizontal players to slugging it out in this vertical market? Where does Intuit go, post the Digital Insight acquisition- was that just a toe in the water or a harbinger of a more purposeful move into banking and payments? Where does this leave the many niche players in the marketplace?
It is possible that nimbleness and innovation will serve niche players while the big players sort out the integration challenges. They will do well, however, to heed the adage that the grass gets trampled when elephants quarrel. To take on the dominant players on their terms- especially those who can leverage their core banking business base- is suicide. The niche players only have two choices: Become a bigger fish, or find a smaller pond.
Predicting course and speed in choppy waters is difficult at best. Nevertheless, the observations offered here, as well as insights from those with other perspectives, makes this a fascinating development to watch.
What do you think? Post you comment below.
Sunday, April 12, 2009
Economy Fuels Prepaid Card Demand
Posted by Mark Brousseau
Global economic downturns appear to be weighing heavily on the growth of credit and debit card markets worldwide, while simultaneously fueling an increasing demand for prepaid cards.
Prepaid industry participants however, will discover unique challenges in growing their business in the international markets, according to Mercator Advisory Group.
"Going after prepaid opportunities in the international market requires more than just understanding of the macro-economies and regulatory environments in each markets," comments Terry Xie, Director of Mercator Advisory Group's International Payments Advisory Service. "Fully understanding targeted customers, knowing where they are, and what financial help they need, among others critical factors, are pre-requisites for designing and implementing creative product plans to best serve these customers. In addition, selecting the right sales, marketing, and distribution channels while aligning the interests of different parties involved in a prepaid business ecosystem are often key success factors in serving prepaid customers around the world."
Key findings on the prepaid card market from Mercator Advisory Group:
... Legal, regulatory, and cultural differences in international markets are significant and represent challenges for international players.
... Out-of-the-box thinking is crucial as prepaid business is a non-traditional market for the banks. This gives specialized program managers the edge in competition.
... Innovations in providing prepaid solutions to identify and serve un-meet financial needs in developing markets bring lots of potentials.
... The value chains of the prepaid card industry in different markets tend to be complicated and demand careful considerations in the designing of a prepaid business model. Getting different parties involved and building a business ecosystem requires creative thinking and a willingness to cooperate.
... The design of prepaid card products need to be based in-depth understanding of the market opportunities and consumer behavior. A successful prepaid program will have features and functions that resonate with a large group of targeted users with very specific needs.
What do you think? Post your comments below.
Global economic downturns appear to be weighing heavily on the growth of credit and debit card markets worldwide, while simultaneously fueling an increasing demand for prepaid cards.
Prepaid industry participants however, will discover unique challenges in growing their business in the international markets, according to Mercator Advisory Group.
"Going after prepaid opportunities in the international market requires more than just understanding of the macro-economies and regulatory environments in each markets," comments Terry Xie, Director of Mercator Advisory Group's International Payments Advisory Service. "Fully understanding targeted customers, knowing where they are, and what financial help they need, among others critical factors, are pre-requisites for designing and implementing creative product plans to best serve these customers. In addition, selecting the right sales, marketing, and distribution channels while aligning the interests of different parties involved in a prepaid business ecosystem are often key success factors in serving prepaid customers around the world."
Key findings on the prepaid card market from Mercator Advisory Group:
... Legal, regulatory, and cultural differences in international markets are significant and represent challenges for international players.
... Out-of-the-box thinking is crucial as prepaid business is a non-traditional market for the banks. This gives specialized program managers the edge in competition.
... Innovations in providing prepaid solutions to identify and serve un-meet financial needs in developing markets bring lots of potentials.
... The value chains of the prepaid card industry in different markets tend to be complicated and demand careful considerations in the designing of a prepaid business model. Getting different parties involved and building a business ecosystem requires creative thinking and a willingness to cooperate.
... The design of prepaid card products need to be based in-depth understanding of the market opportunities and consumer behavior. A successful prepaid program will have features and functions that resonate with a large group of targeted users with very specific needs.
What do you think? Post your comments below.
Monday, February 9, 2009
Identity Theft Up, Costs Down
Posted by Mark Brousseau
An interesting article from The Washington Post on identity theft:
Survey: Identity theft up, but costs fall sharply
By CANDICE CHOI
The Associated Press
Monday, February 9, 2009; 7:54 AM
NEW YORK -- The number of Americans ensnared by identity theft is on the rise, but victims are striking back more quickly and limiting how much is stolen.
In 2008, the number of identity theft cases jumped 22 percent to 9.9 million, according to a study released Monday by Javelin Strategy & Research. The good news is that the cost per incident _ including unrecovered losses and legal fees _ fell 31 percent to $496.
One reason for the spike in cases is likely the worsening economy. Just last month, 598,000 jobs were slashed across the country and unemployment jumped to 7.6 percent.
"The short story is that criminals are getting more desperate," said Jim Van Dyke, spokesman for Javelin, which started tracking identity theft cases in 2003. Last year marked the first time the number of cases rose.
Crimes of opportunity, such as stolen wallets, were linked to 43 percent of cases last year, up from 33 percent in 2007. That might be why women were 26 percent more likely to be victims of identity theft; they reported more cases of lost or stolen information during in-store purchases.
Online access accounted for only 11 percent of cases, according to the survey.
Despite the growing number of victims, the total fraud amount edged up just 7 percent to $48 billion over the previous year. That's because victims are uncovering cases faster to limit losses. Another reason is that financial institutions are taking more steps to thwart thieves, according to the Javelin study.
For instance, more banks now send change of address confirmations to the original address, Van Dyke said.
This prevents identity thieves from rerouting mail to different addresses and delaying victims' awareness that their accounts are siphoned off.
The Javelin study also found identity theft went undetected longer and cost twice as much when victims knew their attackers. More than 10 percent of victims knew their identity thieves.
Despite the rise in cases, there are simple steps people can take to prevent becoming a victim.
To start, leave personal checks and Social Security cards at home and be aware of who's around when giving personal information in public.
Some types of ID theft aren't preventable, however. Someone could get your personal information by hacking into a retailer's database, for instance.
So even if you're careful about protecting your information, monitor financial accounts regularly.
"Identity fraud is all about prevention and detection," Van Dyke said.
An interesting article from The Washington Post on identity theft:
Survey: Identity theft up, but costs fall sharply
By CANDICE CHOI
The Associated Press
Monday, February 9, 2009; 7:54 AM
NEW YORK -- The number of Americans ensnared by identity theft is on the rise, but victims are striking back more quickly and limiting how much is stolen.
In 2008, the number of identity theft cases jumped 22 percent to 9.9 million, according to a study released Monday by Javelin Strategy & Research. The good news is that the cost per incident _ including unrecovered losses and legal fees _ fell 31 percent to $496.
One reason for the spike in cases is likely the worsening economy. Just last month, 598,000 jobs were slashed across the country and unemployment jumped to 7.6 percent.
"The short story is that criminals are getting more desperate," said Jim Van Dyke, spokesman for Javelin, which started tracking identity theft cases in 2003. Last year marked the first time the number of cases rose.
Crimes of opportunity, such as stolen wallets, were linked to 43 percent of cases last year, up from 33 percent in 2007. That might be why women were 26 percent more likely to be victims of identity theft; they reported more cases of lost or stolen information during in-store purchases.
Online access accounted for only 11 percent of cases, according to the survey.
Despite the growing number of victims, the total fraud amount edged up just 7 percent to $48 billion over the previous year. That's because victims are uncovering cases faster to limit losses. Another reason is that financial institutions are taking more steps to thwart thieves, according to the Javelin study.
For instance, more banks now send change of address confirmations to the original address, Van Dyke said.
This prevents identity thieves from rerouting mail to different addresses and delaying victims' awareness that their accounts are siphoned off.
The Javelin study also found identity theft went undetected longer and cost twice as much when victims knew their attackers. More than 10 percent of victims knew their identity thieves.
Despite the rise in cases, there are simple steps people can take to prevent becoming a victim.
To start, leave personal checks and Social Security cards at home and be aware of who's around when giving personal information in public.
Some types of ID theft aren't preventable, however. Someone could get your personal information by hacking into a retailer's database, for instance.
So even if you're careful about protecting your information, monitor financial accounts regularly.
"Identity fraud is all about prevention and detection," Van Dyke said.
Wednesday, February 4, 2009
Phones As Credit Cards?
Posted by Mark Brousseau
An interesting article from the New York Times on using phones as credit cards.
"Phones as Credit Cards? Americans Must Wait"
By Berlin, Leslie
New York Times (01/25/09) P. 4
Cell phone-based payment transactions are widely used in Japan, but the technology's adoption in the United States faces a number of hurdles. The various companies playing a role in the technology's rollout have yet to define standards and agree on a revenue-sharing model.
Also required is a mediator that both the financial institutions and the carriers can trust to activate the virtual credit cards inside the handhelds.
For retailers, the adoption of mobile-phone payments means a faster checkout process, while credit card companies would gain a new tool for attracting and retaining customers as well as save money otherwise spent mailing cards.
Equipping cell phones with virtual credit cards is a source of worry for some, given the propensity for phones to get lost or stolen. However, MasterCard Worldwide's Simon Pugh says one solution is for the consumer to call the bank to report the phone's loss and disable the account.
University of Massachusetts professor Kevin Fu is less concerned about the risk of account fraud from mobile payments than he is about privacy infringement. However, he is optimistic that in time virtual credit cards "will become one of the best ways to do mobile payments."
An interesting article from the New York Times on using phones as credit cards.
"Phones as Credit Cards? Americans Must Wait"
By Berlin, Leslie
New York Times (01/25/09) P. 4
Cell phone-based payment transactions are widely used in Japan, but the technology's adoption in the United States faces a number of hurdles. The various companies playing a role in the technology's rollout have yet to define standards and agree on a revenue-sharing model.
Also required is a mediator that both the financial institutions and the carriers can trust to activate the virtual credit cards inside the handhelds.
For retailers, the adoption of mobile-phone payments means a faster checkout process, while credit card companies would gain a new tool for attracting and retaining customers as well as save money otherwise spent mailing cards.
Equipping cell phones with virtual credit cards is a source of worry for some, given the propensity for phones to get lost or stolen. However, MasterCard Worldwide's Simon Pugh says one solution is for the consumer to call the bank to report the phone's loss and disable the account.
University of Massachusetts professor Kevin Fu is less concerned about the risk of account fraud from mobile payments than he is about privacy infringement. However, he is optimistic that in time virtual credit cards "will become one of the best ways to do mobile payments."
Thursday, January 1, 2009
Recession Impacts Gift Card Sales
By Mark Brousseau
Gift card sales haven't been spared from the global recession.
Store gift cards are expected to generate $61 billion in sales in the fourth quarter of 2008, down from $70 billion in 2007, according to Brian Riley, senior analyst at research firm TowerGroup.
The silver lining: those from financial institutions, like Visa gift cards, are expected to edge up to $28 billion in sales from $27 billion in last year's fourth quarter.
Consumers snapped up gift cards in prior years, USA Today reports. Last December, market research firm NPD Group said about 61 percent of Americans bought at least one holiday gift card in 2007, up from 31 percent the year before and just 16 percent in 2005.
What do you think? Post your comment below.
Gift card sales haven't been spared from the global recession.
Store gift cards are expected to generate $61 billion in sales in the fourth quarter of 2008, down from $70 billion in 2007, according to Brian Riley, senior analyst at research firm TowerGroup.
The silver lining: those from financial institutions, like Visa gift cards, are expected to edge up to $28 billion in sales from $27 billion in last year's fourth quarter.
Consumers snapped up gift cards in prior years, USA Today reports. Last December, market research firm NPD Group said about 61 percent of Americans bought at least one holiday gift card in 2007, up from 31 percent the year before and just 16 percent in 2005.
What do you think? Post your comment below.
Wednesday, November 19, 2008
Alternative Payments Going Strong
Posted by Mark Brousseau
Online buyers turn to alternative payments
An interesting item from the Pacific Business News:
A growing number of online shoppers are turning away from traditional credit and debit cards and moving toward cash-based alternative payment options, according to a retail forecast survey released this week by Javelin Strategy & Research.
Alternative payments — such as PayPal, Google Checkout, Nacha SVP and Revolution Money — will become preferred choices for online consumers and will continue to grow over the next five years, increasing to one-third of online retail transaction volume by 2013, the survey said.
This year, alternative payments will reach $148 billion and rise to $268 billion by 2013.
The growth will be strong for companies that build brand awareness, said the survey.
As the trend grows, the survey urges banks and traditional card brands to expand their own prepaid card products and partner with alternative providers.
This holiday season, alternative payments will comprise $7.8 billion in purchases compared to $35 billion in traditional online payment methods.
What do you think? Post your comment below.
Online buyers turn to alternative payments
An interesting item from the Pacific Business News:
A growing number of online shoppers are turning away from traditional credit and debit cards and moving toward cash-based alternative payment options, according to a retail forecast survey released this week by Javelin Strategy & Research.
Alternative payments — such as PayPal, Google Checkout, Nacha SVP and Revolution Money — will become preferred choices for online consumers and will continue to grow over the next five years, increasing to one-third of online retail transaction volume by 2013, the survey said.
This year, alternative payments will reach $148 billion and rise to $268 billion by 2013.
The growth will be strong for companies that build brand awareness, said the survey.
As the trend grows, the survey urges banks and traditional card brands to expand their own prepaid card products and partner with alternative providers.
This holiday season, alternative payments will comprise $7.8 billion in purchases compared to $35 billion in traditional online payment methods.
What do you think? Post your comment below.
Saturday, October 25, 2008
The Evolution of Swipe
Posted by Mark Brousseau
A great slideshow from Fortune magazine on the evolution of credit cards.
http://money.cnn.com/galleries/2008/fortune/0810/gallery.mastercard.fortune/index.html
A great slideshow from Fortune magazine on the evolution of credit cards.
http://money.cnn.com/galleries/2008/fortune/0810/gallery.mastercard.fortune/index.html
Thursday, October 23, 2008
China Embraces Credit Cards
Posted by Mark Brousseau
An interesting article from this week's LA Times:
China charges into credit cards
Banks are stepping up their marketing of plastic, but the penalties are harsh on delinquent payers.
By Don Lee
reporting from Shanghai
October 22, 2008
Imagine there was a law that said if you missed two credit card payments in a row, you had to pay the full balance immediately, with heavy penalties. And if you didn't, your bank would take out an ad in your local newspaper, calling you a deadbeat. Or worse, thugs in suits might show up at your office, haul you down to the bank and keep you there for hours until you signed a promise to pay.
Welcome to the world of plastic -- Chinese style.
Chinese banks don't have national credit bureaus and sophisticated scoring models that allow them to churn out approvals in minutes. Instead, armies of young workers pore over paper applications, manually verifying one piece of information at a time.
Yet banks in China have issued tens of millions of credit cards in recent years. Today, more than 100 million are in circulation among China's 1.3 billion people, up from just 3 million in 2003, according to analysts and bankers.
Unlike American credit card firms, which are cutting back because of rising delinquencies, Chinese banks are stepping up their marketing of plastic. In the next five to 10 years, analysts say, China could issue 1 billion new cards, largely to a mass market that has little experience with credit.
Chi Wei Joong, a former American Express Co. executive, runs the credit card operations for China Merchants Bank. He has more than 9,000 workers nationwide. In every major city, Joong's sales force researches office buildings, their occupancy rates, average rents and other statistics. A report is then sent to the bank's credit department, which assigns a credit score for the building before salespeople target folks who work there.
"This is to control risk," Joong said. But if borrowers default, he doesn't hesitate to turn the accounts over to more than 100 collection agencies.
Joong says fewer than 10% of his bad loans end up in court, but some people have gone to jail. Under Chinese law, a credit card user who intentionally defaults on a sum as little as $3,000 can be sentenced to as much as five years in prison.
The tough regulations haven't stopped the steady increase in troubled credit card debts at China Merchants and other lenders. Analysts estimate that banks in China this year were writing off 2% to 3% of their credit card loans, less than half of the July charge-off rate of 6.6% in the U.S., according to Fitch Ratings.
"In the U.S., all the credit card companies are chasing subprime borrowers" because most customers with good credit already have multiple cards, said Darwin Tu, chairman of Sino Credit Corp., an industry research and marketing firm. In China, he says, banks haven't saturated the prime market yet.
On average, a Chinese credit card holder has no more than two cards, compared with five for Americans, said Tu, a Stanford University graduate who cut his teeth at Fair Isaac Corp. in California, which pioneered credit scoring.
At China Merchants Bank, which has about 23 million credit cards outstanding, Joong says his department's loan-loss ratio has climbed from 0.67% in 2005 to at least 1.5% this year. Such numbers are likely to rise as more cards are issued to young adults, who belong to China's one-child generation, seen as more spendthrift than older Chinese.
Among Chinese credit card users, more than 70% pay the entire balance every month, says Nie Junfeng, a manager in the Bank of China's personal finance department. "This may be related with the tradition that Chinese people, as the saying goes, don't like eating next year's food this year," he said.
But the young generation is different, he said. "They're more comfortable spending tomorrow's money today."
Deng Jialing, 27, got his first credit card from China Merchants Bank in 2006 when he was working for a cellphone parts manufacturer in Shenzhen, making a little more than $500 a month. His card's limit started at about $400, and like all Chinese credit cards, his had an 18.25% annual interest rate, set by the government.
Deng bought a cellphone. The card was tapped out, and two months later, Deng got a second credit card, from China Construction Bank, the country's largest issuer of plastic.
Said Sino Credit's Tu: "Once you get a card, you show that one to another bank and they give it to you. [The data's] not linked."
After hitting the ceiling on the second card, Deng easily secured a higher credit limit. He applied for more cards, building up a balance of $17,000 at nine banks. His charges included electronic gadgets, food and a $4,000 hospital bill when he got pneumonia.
For a while, he played a cash-advance game, taking out money from one card to pay the minimum monthly payment on another.
Then, on a June evening, three big men in black turned up at his workplace in Shenzhen. Deng thought about slipping out the back door. But he met the men and followed them into a black sedan.
Sandwiched between two of them in the back seat, Deng was taken to China Minsheng Bank's credit card center across town. There, he said, the grilling began: Where did you spend all the money? Why can't you pay it back?
"I told them that I was at the end of my rope," said Deng, who owed about $2,000 to China Minsheng, which declined to comment. Five hours later, after being fingerprinted and signing an agreement to pay off the balance in three days, Deng stepped out of the bank and into the night. "I walked slowly to my home, thinking how had I come to this situation."
Analysts say cases such as Deng's aren't common in China. To keep it that way, China's central bank is developing a national credit resource system, something like Experian, Equifax and TransUnion in the U.S. As of March, the People's Bank of China said, its database contained information on nearly 600 million individuals. Of those, about 3% are noted for failing to pay bills or defaulting on loans or credit cards, says Joong of China Merchants.
Joong and other bankers use the database to screen out applicants who have been blacklisted, but the central bank's system doesn't contain a complete profile to assess the creditworthiness of the remaining 97%. Some banks don't share or make timely updates on consumer data, so lenders often don't know how much debt cardholders really have.
To discourage defaults, Guangdong Development Bank has taken out ads in newspapers, publicizing the identities of delinquent borrowers. Some banks frown on the tactic, but it isn't illegal.
Other card providers try to reduce risks upfront. State-owned China Construction Bank, for example, markets cards in Shenzhen through a cable TV company. When the cable installers make a service call to a home, they offer credit card applications and at the same time verify where residents live. Joong is considering a similar tie-up with water delivery companies.
But countervailing forces threaten to increase the risk of card abuse and defaults. Cash advances usually aren't supposed to be more than a small share of a card's credit limit, but consumers say merchants and finance firms ring up bogus or inflated purchases on credit, giving the cardholder cash, less a fee. Chinese lenders have started to offer balance transfers and other sweeteners to encourage customers to revolve debt.
Chinese bankers dismiss concerns that they could one day see the kinds of heavy losses that have plagued U.S. lenders during downturns or the sort of plastic debacle that hit South Korea earlier this decade when rules on credit were eased and consumers went wild with charges.
But others aren't so sure. "That depends on how banks control the cards," said Yan Yiming, a Shanghai attorney who specializes in economics and consumer law. "I can see that many are issuing cards very aggressively these days.
"They're also going after bad debts very aggressively, as Deng learned. After that desperate June evening when he was taken to the bank, Deng called his aunt and borrowed $13,000, promising to pay her back, $370 a month. Since then, he has pared his overall credit card debt to $2,900.
An interesting article from this week's LA Times:
China charges into credit cards
Banks are stepping up their marketing of plastic, but the penalties are harsh on delinquent payers.
By Don Lee
reporting from Shanghai
October 22, 2008
Imagine there was a law that said if you missed two credit card payments in a row, you had to pay the full balance immediately, with heavy penalties. And if you didn't, your bank would take out an ad in your local newspaper, calling you a deadbeat. Or worse, thugs in suits might show up at your office, haul you down to the bank and keep you there for hours until you signed a promise to pay.
Welcome to the world of plastic -- Chinese style.
Chinese banks don't have national credit bureaus and sophisticated scoring models that allow them to churn out approvals in minutes. Instead, armies of young workers pore over paper applications, manually verifying one piece of information at a time.
Yet banks in China have issued tens of millions of credit cards in recent years. Today, more than 100 million are in circulation among China's 1.3 billion people, up from just 3 million in 2003, according to analysts and bankers.
Unlike American credit card firms, which are cutting back because of rising delinquencies, Chinese banks are stepping up their marketing of plastic. In the next five to 10 years, analysts say, China could issue 1 billion new cards, largely to a mass market that has little experience with credit.
Chi Wei Joong, a former American Express Co. executive, runs the credit card operations for China Merchants Bank. He has more than 9,000 workers nationwide. In every major city, Joong's sales force researches office buildings, their occupancy rates, average rents and other statistics. A report is then sent to the bank's credit department, which assigns a credit score for the building before salespeople target folks who work there.
"This is to control risk," Joong said. But if borrowers default, he doesn't hesitate to turn the accounts over to more than 100 collection agencies.
Joong says fewer than 10% of his bad loans end up in court, but some people have gone to jail. Under Chinese law, a credit card user who intentionally defaults on a sum as little as $3,000 can be sentenced to as much as five years in prison.
The tough regulations haven't stopped the steady increase in troubled credit card debts at China Merchants and other lenders. Analysts estimate that banks in China this year were writing off 2% to 3% of their credit card loans, less than half of the July charge-off rate of 6.6% in the U.S., according to Fitch Ratings.
"In the U.S., all the credit card companies are chasing subprime borrowers" because most customers with good credit already have multiple cards, said Darwin Tu, chairman of Sino Credit Corp., an industry research and marketing firm. In China, he says, banks haven't saturated the prime market yet.
On average, a Chinese credit card holder has no more than two cards, compared with five for Americans, said Tu, a Stanford University graduate who cut his teeth at Fair Isaac Corp. in California, which pioneered credit scoring.
At China Merchants Bank, which has about 23 million credit cards outstanding, Joong says his department's loan-loss ratio has climbed from 0.67% in 2005 to at least 1.5% this year. Such numbers are likely to rise as more cards are issued to young adults, who belong to China's one-child generation, seen as more spendthrift than older Chinese.
Among Chinese credit card users, more than 70% pay the entire balance every month, says Nie Junfeng, a manager in the Bank of China's personal finance department. "This may be related with the tradition that Chinese people, as the saying goes, don't like eating next year's food this year," he said.
But the young generation is different, he said. "They're more comfortable spending tomorrow's money today."
Deng Jialing, 27, got his first credit card from China Merchants Bank in 2006 when he was working for a cellphone parts manufacturer in Shenzhen, making a little more than $500 a month. His card's limit started at about $400, and like all Chinese credit cards, his had an 18.25% annual interest rate, set by the government.
Deng bought a cellphone. The card was tapped out, and two months later, Deng got a second credit card, from China Construction Bank, the country's largest issuer of plastic.
Said Sino Credit's Tu: "Once you get a card, you show that one to another bank and they give it to you. [The data's] not linked."
After hitting the ceiling on the second card, Deng easily secured a higher credit limit. He applied for more cards, building up a balance of $17,000 at nine banks. His charges included electronic gadgets, food and a $4,000 hospital bill when he got pneumonia.
For a while, he played a cash-advance game, taking out money from one card to pay the minimum monthly payment on another.
Then, on a June evening, three big men in black turned up at his workplace in Shenzhen. Deng thought about slipping out the back door. But he met the men and followed them into a black sedan.
Sandwiched between two of them in the back seat, Deng was taken to China Minsheng Bank's credit card center across town. There, he said, the grilling began: Where did you spend all the money? Why can't you pay it back?
"I told them that I was at the end of my rope," said Deng, who owed about $2,000 to China Minsheng, which declined to comment. Five hours later, after being fingerprinted and signing an agreement to pay off the balance in three days, Deng stepped out of the bank and into the night. "I walked slowly to my home, thinking how had I come to this situation."
Analysts say cases such as Deng's aren't common in China. To keep it that way, China's central bank is developing a national credit resource system, something like Experian, Equifax and TransUnion in the U.S. As of March, the People's Bank of China said, its database contained information on nearly 600 million individuals. Of those, about 3% are noted for failing to pay bills or defaulting on loans or credit cards, says Joong of China Merchants.
Joong and other bankers use the database to screen out applicants who have been blacklisted, but the central bank's system doesn't contain a complete profile to assess the creditworthiness of the remaining 97%. Some banks don't share or make timely updates on consumer data, so lenders often don't know how much debt cardholders really have.
To discourage defaults, Guangdong Development Bank has taken out ads in newspapers, publicizing the identities of delinquent borrowers. Some banks frown on the tactic, but it isn't illegal.
Other card providers try to reduce risks upfront. State-owned China Construction Bank, for example, markets cards in Shenzhen through a cable TV company. When the cable installers make a service call to a home, they offer credit card applications and at the same time verify where residents live. Joong is considering a similar tie-up with water delivery companies.
But countervailing forces threaten to increase the risk of card abuse and defaults. Cash advances usually aren't supposed to be more than a small share of a card's credit limit, but consumers say merchants and finance firms ring up bogus or inflated purchases on credit, giving the cardholder cash, less a fee. Chinese lenders have started to offer balance transfers and other sweeteners to encourage customers to revolve debt.
Chinese bankers dismiss concerns that they could one day see the kinds of heavy losses that have plagued U.S. lenders during downturns or the sort of plastic debacle that hit South Korea earlier this decade when rules on credit were eased and consumers went wild with charges.
But others aren't so sure. "That depends on how banks control the cards," said Yan Yiming, a Shanghai attorney who specializes in economics and consumer law. "I can see that many are issuing cards very aggressively these days.
"They're also going after bad debts very aggressively, as Deng learned. After that desperate June evening when he was taken to the bank, Deng called his aunt and borrowed $13,000, promising to pay her back, $370 a month. Since then, he has pared his overall credit card debt to $2,900.
Tuesday, October 14, 2008
Identity Theft: Not Dead Yet
Posted by Mark Brousseau
An interesting article from Fairfax Connection on the resiliency of identity theft crooks:
What’s in a Name?
Though national statistics are trending downward, millions of Americans still at risk for identity theft.
By Derek B. Johnson/The Connection
Wednesday, October 08, 2008
In nature, the early bird gets the worm.
Residents going through their bills one day and finding thousands of dollars worth of mystery purchases would be wise to follow a similar mantra: the early bird gets his identity back.
That is, at least, according to retired investigator Tom Polhemus of the financial crimes section of the Fairfax County Police Department. The sooner you act once you know your identity has been stolen, the more hours you save down the road dealing with police, banks, credit unions and bill collectors.
"The main thing that we advocate is you have a personal responsibility to keep on top of your own identity," said Polhemus. "You can’t expect the government, police or financial institutions to help you. If you don’t know, you don’t know."
Though national statistics are trending downward, identity theft remains one of the most prevalent crimes in the country. According to surveys conducted by the Federal Trade Commission and Javelin Strategy and Research, 8.4 million Americans reported being a victim of identity theft in 2007, with just over $50 billion being stolen. Those numbers were down significantly from previous years, with 10.1 million Americans in 2003 and 9.3 million Americans in 2005 reporting the same crime. However those statistics do not take into account victims who are unaware their identity has been stolen, and many cases may go unreported for months or even years until a victim hears from an out-of-state bill collector or a business looking for payment. Tammy Nealy is the director of public affairs for Lifelock, an Arizona-based personal fraud protection company. For those people still carrying their Social Security card in their wallet or purse, she has a message.
"Stop. You’re going to get pick-pocketed," said Nealy. "You never think your wallet or your purse is going to be stolen, but it happens."
In addition to providing information and education on keeping personal information safe, her company charges a monthly fee to contact each of the three major credit bureaus and put a fraud alert on a client’s account. Nealy said a victim of identity theft could spend up to hundreds of hours talking with police, creditors and other institutions in order to restore their credit back to its original state. The mean resolution time per victim, according to the 2007 FTC/Javelin survey, was 40 hours.
THE PROBLEM has become so prevalent because thieves have so many ways that they can use just a few pieces of personal information to impersonate their victim. Polhemus named writing personal checks was as one of the worst practices a person can do if they want to protect their identity.
"Paper checks are terrible. It’s too easy once you write a paper check, now I’ve got your routing and account number," he said.
Those numbers combined with a cellular phone number or other pieces of information are usually enough to rack up thousands of dollars in online gaming or purchases. Seniors and children are at a higher risk for fraud or identity theft than others, according to Nealy. Because most young children lack any pre-existing forms of identification and parents rarely check up on their children’s credit report, their identities are ripe for use. A child’s age does not matter, she said, because most children have no previously established credit.
As long as a thief uses the information to beat them to it, most children won’t discover they were victims until years later, while they’re applying for their first loan or checking account. If parents begin receiving catalogs or magazines in their child’s name, that’s usually a red flag signaling that identity is being used by someone else.
"It may be cute, but it can be damaging. That means there’s a credit report for that child and bank has sold that information to a marketing company," Nealy said.
Seniors, she said, tend to be more susceptible to phone or e-mail scams, giving out personal information to people impersonating police or government officials. While she called a person’s Social Security number the "key" to all other information pertaining to a person, the truth is very little information is required to steal an identity. E. Hunt Burke, president of Burke and Herbert Bank and Trust Company, said his bank deals regularly with such cases.
"The thing we see the most is people taking advantage of the elderly customers" Burke said. He also cited phone and e-mail scams as the preferred method thieves use when dealing with seniors.
In the case of a customer who has become a recent victim of identity theft, Burke and Herbert Bank has a 24-hour phone line to call into and will immediately freeze an account when identity theft is reported. The bank also provides secure e-mail accounts to their customers for sensitive information.
There is very little in the way of "too much" when it comes to protecting your identity, said Burke.
"Every week there’s a new technology or scam. I saw stainless steel wallets the other day and thought that was silly, but people really do have devices in their pockets that can read the [credit] cards in your wallet," he said.
Polhemus said as long as a victim is diligent in keeping track of their credit reports and notify the police and creditors within 60 days of the theft, the amount of damage and liability will be drastically curbed. Wait too long, and a person may double or triple the amount of time spent clearing his or her name. Victims may even be on the hook for some of the costs.
"If you open up a bank statement, look at it and see fraud, call the bank. They will take care of you," said Polhemus. "If you know you’re busy or the statement is depressing you and you throw it in the drawer, you are responsible for paying for it. You’re on the hook for that money."
Because fraud and identity crimes rely heavily on rapidly changing technology, state and federal laws are still catching up to the practices being put in place by the criminals they’re hunting.
Using information taken from a mailbox in Virginia, a thief can run up bills in Georgia, Wisconsin, California or any other state. That severely hampers the ability of investigators at the county level, like Polhemus, from pursuing all but the most serious and costly identity crimes.
"Our criteria, the things that we look at before we investigate a case of identity theft, is, first off, do we have a Fairfax County resident without money? Then we look at likelihood of successful prosecution," he said. "We could subpoena records and find out who was making those calls, but we’re not going to extradite him from Georgia."
Nealy said credit agencies should face tougher fines and regulations when their databanks of personal information are lost or stolen. "If there was a requirement for third-parties to have certain protocols in place, that’s really going to hold these companies accountable for information," she said.
An interesting article from Fairfax Connection on the resiliency of identity theft crooks:
What’s in a Name?
Though national statistics are trending downward, millions of Americans still at risk for identity theft.
By Derek B. Johnson/The Connection
Wednesday, October 08, 2008
In nature, the early bird gets the worm.
Residents going through their bills one day and finding thousands of dollars worth of mystery purchases would be wise to follow a similar mantra: the early bird gets his identity back.
That is, at least, according to retired investigator Tom Polhemus of the financial crimes section of the Fairfax County Police Department. The sooner you act once you know your identity has been stolen, the more hours you save down the road dealing with police, banks, credit unions and bill collectors.
"The main thing that we advocate is you have a personal responsibility to keep on top of your own identity," said Polhemus. "You can’t expect the government, police or financial institutions to help you. If you don’t know, you don’t know."
Though national statistics are trending downward, identity theft remains one of the most prevalent crimes in the country. According to surveys conducted by the Federal Trade Commission and Javelin Strategy and Research, 8.4 million Americans reported being a victim of identity theft in 2007, with just over $50 billion being stolen. Those numbers were down significantly from previous years, with 10.1 million Americans in 2003 and 9.3 million Americans in 2005 reporting the same crime. However those statistics do not take into account victims who are unaware their identity has been stolen, and many cases may go unreported for months or even years until a victim hears from an out-of-state bill collector or a business looking for payment. Tammy Nealy is the director of public affairs for Lifelock, an Arizona-based personal fraud protection company. For those people still carrying their Social Security card in their wallet or purse, she has a message.
"Stop. You’re going to get pick-pocketed," said Nealy. "You never think your wallet or your purse is going to be stolen, but it happens."
In addition to providing information and education on keeping personal information safe, her company charges a monthly fee to contact each of the three major credit bureaus and put a fraud alert on a client’s account. Nealy said a victim of identity theft could spend up to hundreds of hours talking with police, creditors and other institutions in order to restore their credit back to its original state. The mean resolution time per victim, according to the 2007 FTC/Javelin survey, was 40 hours.
THE PROBLEM has become so prevalent because thieves have so many ways that they can use just a few pieces of personal information to impersonate their victim. Polhemus named writing personal checks was as one of the worst practices a person can do if they want to protect their identity.
"Paper checks are terrible. It’s too easy once you write a paper check, now I’ve got your routing and account number," he said.
Those numbers combined with a cellular phone number or other pieces of information are usually enough to rack up thousands of dollars in online gaming or purchases. Seniors and children are at a higher risk for fraud or identity theft than others, according to Nealy. Because most young children lack any pre-existing forms of identification and parents rarely check up on their children’s credit report, their identities are ripe for use. A child’s age does not matter, she said, because most children have no previously established credit.
As long as a thief uses the information to beat them to it, most children won’t discover they were victims until years later, while they’re applying for their first loan or checking account. If parents begin receiving catalogs or magazines in their child’s name, that’s usually a red flag signaling that identity is being used by someone else.
"It may be cute, but it can be damaging. That means there’s a credit report for that child and bank has sold that information to a marketing company," Nealy said.
Seniors, she said, tend to be more susceptible to phone or e-mail scams, giving out personal information to people impersonating police or government officials. While she called a person’s Social Security number the "key" to all other information pertaining to a person, the truth is very little information is required to steal an identity. E. Hunt Burke, president of Burke and Herbert Bank and Trust Company, said his bank deals regularly with such cases.
"The thing we see the most is people taking advantage of the elderly customers" Burke said. He also cited phone and e-mail scams as the preferred method thieves use when dealing with seniors.
In the case of a customer who has become a recent victim of identity theft, Burke and Herbert Bank has a 24-hour phone line to call into and will immediately freeze an account when identity theft is reported. The bank also provides secure e-mail accounts to their customers for sensitive information.
There is very little in the way of "too much" when it comes to protecting your identity, said Burke.
"Every week there’s a new technology or scam. I saw stainless steel wallets the other day and thought that was silly, but people really do have devices in their pockets that can read the [credit] cards in your wallet," he said.
Polhemus said as long as a victim is diligent in keeping track of their credit reports and notify the police and creditors within 60 days of the theft, the amount of damage and liability will be drastically curbed. Wait too long, and a person may double or triple the amount of time spent clearing his or her name. Victims may even be on the hook for some of the costs.
"If you open up a bank statement, look at it and see fraud, call the bank. They will take care of you," said Polhemus. "If you know you’re busy or the statement is depressing you and you throw it in the drawer, you are responsible for paying for it. You’re on the hook for that money."
Because fraud and identity crimes rely heavily on rapidly changing technology, state and federal laws are still catching up to the practices being put in place by the criminals they’re hunting.
Using information taken from a mailbox in Virginia, a thief can run up bills in Georgia, Wisconsin, California or any other state. That severely hampers the ability of investigators at the county level, like Polhemus, from pursuing all but the most serious and costly identity crimes.
"Our criteria, the things that we look at before we investigate a case of identity theft, is, first off, do we have a Fairfax County resident without money? Then we look at likelihood of successful prosecution," he said. "We could subpoena records and find out who was making those calls, but we’re not going to extradite him from Georgia."
Nealy said credit agencies should face tougher fines and regulations when their databanks of personal information are lost or stolen. "If there was a requirement for third-parties to have certain protocols in place, that’s really going to hold these companies accountable for information," she said.
Tuesday, September 9, 2008
Gift Cards and the Economy
Posted by Mark Brousseau
Interesting article from Kiplinger's Personal Finance on gift cards:
Got a Gift Card? Use It or Lose It
Some bankrupt retailers honor them, but don't count on it.
By Joan Goldwasser From Kiplinger's Personal Finance magazine, September 2008
Gift cards totaling about $66 billion will be tucked into birthday, wedding and holiday cards this year. According to Brian Riley, TowerGroup's research director for bank cards, roughly one-third will be spent within 90 days and another third within six months. Some $20 billion worth will linger in drawers for months.
Delayed gratification in this case could be a mistake. Retailers are struggling in the current economy, and if a gift-card issuer files for bankruptcy, there's a good chance your card will become worthless.
Although bankrupt companies have assets, which are distributed to the firm's creditors, your status as an unsecured creditor puts you in line behind banks and other secured creditors. They will receive 100% of their investment before you get a dime. If you get anything at all, it's likely to be small, perhaps 5 cents on the dollar.
Sometimes a firm will ask a bankruptcy judge to let it honor gift cards. But don't count on that happening.
Several retailers have filed for bankruptcy recently or appear dangerously close. Gift cards from The Sharper Image are worthless; ditto for those of The Bombay Company.
Lillian Vernon, the once-popular catalog and online retailer, was sold to Current USA, which markets address labels, scrapbooking supplies and other stationery products. Current is accepting Lillian Vernon certificates at face value.
Linens 'n Things is also honoring cards for the full amount. So are Movie Gallery and Hollywood Video, just emerged from bankruptcy.
Bankruptcy rumors are swirling around Circuit City. Customers should redeem its cards pronto.
Interesting article from Kiplinger's Personal Finance on gift cards:
Got a Gift Card? Use It or Lose It
Some bankrupt retailers honor them, but don't count on it.
By Joan Goldwasser From Kiplinger's Personal Finance magazine, September 2008
Gift cards totaling about $66 billion will be tucked into birthday, wedding and holiday cards this year. According to Brian Riley, TowerGroup's research director for bank cards, roughly one-third will be spent within 90 days and another third within six months. Some $20 billion worth will linger in drawers for months.
Delayed gratification in this case could be a mistake. Retailers are struggling in the current economy, and if a gift-card issuer files for bankruptcy, there's a good chance your card will become worthless.
Although bankrupt companies have assets, which are distributed to the firm's creditors, your status as an unsecured creditor puts you in line behind banks and other secured creditors. They will receive 100% of their investment before you get a dime. If you get anything at all, it's likely to be small, perhaps 5 cents on the dollar.
Sometimes a firm will ask a bankruptcy judge to let it honor gift cards. But don't count on that happening.
Several retailers have filed for bankruptcy recently or appear dangerously close. Gift cards from The Sharper Image are worthless; ditto for those of The Bombay Company.
Lillian Vernon, the once-popular catalog and online retailer, was sold to Current USA, which markets address labels, scrapbooking supplies and other stationery products. Current is accepting Lillian Vernon certificates at face value.
Linens 'n Things is also honoring cards for the full amount. So are Movie Gallery and Hollywood Video, just emerged from bankruptcy.
Bankruptcy rumors are swirling around Circuit City. Customers should redeem its cards pronto.
Thursday, August 28, 2008
How Telcos Can Replace Banks
Posted by Mark Brousseau
Extremely interesting 5-minute video on how telcos can replace banks.
http://www.youtube.com/watch?v=JRa86nqUCgM&feature=related
Hat tip to Les Lorenzo at Metavante for passing this along.
Extremely interesting 5-minute video on how telcos can replace banks.
http://www.youtube.com/watch?v=JRa86nqUCgM&feature=related
Hat tip to Les Lorenzo at Metavante for passing this along.
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