Payments News, Information, and Holiday Greetings from Your Trusted Advisor

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November/December 2011

As 2011 winds down, amid the hustle and bustle of the yearend and the holidays, all of us at PE Systems want to take a moment to remember our clients and friends and to let you know how much we have appreciated your business and support over the last year! We are grateful for the confidence and trust that you placed in us to help you reduce and manage your payment processing costs, and look forward to continuing to deliver our exemplary service and knowledge to you in 2012.

We wish you and yours a wonderful Holiday Season and a joyous, healthy, and prosperous New Year!

Thank you for your business ... and enjoy this issue of Payments Intelligence ... presented by PE Systems!

PE Systems, LLC is a completely independent consulting and advisory firm with a unique focus on managing the costs that an organization incurs to accept credit and debit cards. We serve as a trusted advisor to thousands of clients in every market ... including higher education, non-profit & charitable, business-to-business, sports & recreation, online retail & stores, and business-to-consumer organizations across North America.

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Senators want banks to simplify checking account fee disclosures

Emboldened by Bank of America's decision to abandon a proposed $5 monthly debit card fee, two senators in early November asked regulators to require banks to provide customers with a simple, one-page form listing all their checking account fees.

The goal is to give consumers a standardized, easy-to-understand disclosure form to make it easier to  compare fees charged by banks.

"When consumers are informed and can make choices, that's when the free market is at its best and strongest," said Sen. Dick Durbin (D-Ill.), who was joined by Sen. Jack Reed (D-R.I.) at a Capitol Hill news conference. Read More

IRS Delay Eases Burden on Credit-Card Payment Processors

The Internal Revenue Service announced a one-year delay in enforcing the most severe part of a law requiring companies that process and settle credit-card transactions to report payment amounts to the U.S. government.

The delay affects a requirement that payment processors withhold 28 percent of payments to retailers and others for whom they don’t have verified taxpayer identification numbers. Read More               Back to Top

Visa, MasterCard still fixing card fees - according to merchants

* Eight years on, stores again claim antitrust violations

* Plaintiffs say credit-card rules cost $50 billion yearly

* Card companies deny anti-competitive effects

Nearly eight years after Visa Inc and MasterCard Inc agreed to pay more than $3 billion to resolve allegations that they conspired to raise stores' fees for processing their payment cards, merchants returned to court on Wednesday to argue that the card companies still maintain a costly stranglehold on interchange networks.

U.S. District Judge John Gleeson heard oral arguments in Brooklyn federal court from a slate of lawyers representing the credit card companies, their issuing banks and the merchants over whether to proceed to trial on the latest round of antitrust allegations against the card companies' and banks' interchange networks, which process customers' credit- and debit-card payments to stores. Read More
 

Debit-Fee Retreat Complete

The banking industry's brief experiment with charging customers to use their debit cards appears to be over.

The about-face concluded on Tuesday when Bank of America Corp. dropped plans to charge customers $5 a month for using their debit cards to make purchases.

Bank of America was the last major bank to back away from the fees, representing a swift retreat in an industry that is at times known for its lumbering decision-making. Read More

With Debit Card Fees D.O.A., Expect More Checking Fees

Call it a defeat for banks, a publicity debacle, or a whole lot of hollering for no good reason. Whatever your read on the brief life of the debit card usage fee, its demise is just a prelude to more checking fees at the major banks.

Higher account maintenance fees are inevitable, because basic, relatively low-balance checking accounts are simply not profitable on their own. Despite the widely circulated allegation that banks are raking in money from regular consumer accounts, industry groups, analysts, and available data suggest that such accounts are money losers without overdraft fees or extremely high-margin interchange charges. This problem is worse for the major banks, which have higher overhead. Read More                                      Back to Top

Suit alleges banks, Visa and MasterCard colluded over ATM fees

A third lawsuit over ATM fees accuses three major banks and two payment processors of conspiring to fix fees at the expense of consumers.

The latest lawsuit, filed by a New Jersey man, seeks class-action status and alleges that Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. took part with Visa Inc. and MasterCard Inc. in a "conspiracy to fix the prices" consumers pay when they use an ATM that's not in their bank's network. Read More

U.S. Retailers Forecast 2.9% Increase in Total 2011 Holiday Sales, BDO USA Survey Finds

Soft consumer confidence and lingering unemployment have retailers looking to the 2011 holiday season with caution. According to a recent BDO USA survey, chief marketing officers at leading U.S. retailers expect a modest 2.9 percent increase in total holiday sales this year. This is a less optimistic point of view compared to the projected 3.5 percent increase in 2010 (and the actual 5.2% increase reported by the National Retail Federation).

Overall, 41 percent of CMOs expect an increase, down from 2010 (52%) and 2009 (47%). However, CMOs at the top 100 largest retailers included in the sample are more optimistic, with 67 percent expecting an increase in overall holiday sales. Read More
 

Big Retailers See No Benefit From Debit Cap

It may be too early to tally the numbers from new, lower debit-interchange rates that took effect Oct. 1, but three of the nation’s largest merchants already are sending signals that the new debit-pricing structure appears unlikely to boost their bottom lines.

Executives from Wal-Mart Stores Inc., 7-Eleven Inc. and McDonald’s Corp. who participated in a panel discussion on debit card trends here at the recent ATM, Debit & Prepaid Forum told attendees legislation to cut debit interchange did not go far enough. Read More          Back to Top

B2B Payments Innovation: Back in the Spotlight?

There was a time not that long ago, when B2B payments innovation was perceived by many to be “out of vogue.” Back in the late 90s and early 2000s, B2B payments innovation was synonymous with an exuberant group of innovative B2B payment exchanges, marketplaces and hubs that failed spectacularly.

Moreover, even the secular trends in payments over the last decade have made little impact in the dominance of paper-based payments, which still account for more than 80% of all payment transactions and over 70% of total payments volume in the B2B space. Read More

Despite Global Economic Uncertainty, Nonprofits Are Optimistic Heading into 2012

Blackbaud, Inc. today announced the release of the 2011 Global State of the Nonprofit Industry report, featuring survey results from 2200 international respondents covering nonprofit general operations, fundraising, technology and Internet usage, and impact reporting and board performance. The results were also released today at the International Fundraising Congress (IFC) in the Netherlands.

There is a growing sense of optimism in the global nonprofit sector regarding growth in staffing and earned and charitable income in 2012. Organizations also anticipate an increased demand for services and increased expenditures. ... "Rising giving levels are what is driving the sense of optimism and, in turn, anticipated growth in staffing. Part of that optimism is the nature of our missions--nonprofits work to create change and inspire the public. We tend to be optimists, but with a healthy dose of realism." Read More

The State of EMV (aka Chip and PIN)

What will the future of payments look like in the United States? According to Visa, it'll look a lot like the current scheme in many other countries around the world, complete with EMV-based cards and payment terminals. EMV, the global standard for credit and debit card payments named after its original developers -- Europay, MasterCard and Visa -- features cards with embedded microprocessor chips that store and protect encrypted account user data. Read More                              Back to Top

Mobile Wallets, Contactless Payments Overhyped: Analysts

Established payment card networks are well-positioned to continue generating profits over the long haul, as long as they continue adapting to changing payments technology, a panel of investment industry analysts told attendees Nov. 3 at the ATM, Debit & Prepaid Forum. But Near Field Communication-based mobile payments and mobile wallets might fall short of expectations, the analysts suggested.

"I think mobile wallet and NFC is getting way too much hype," Tien-tsin Huang, managing director and senior analyst with New York-based J.P. Morgan Securities LLC, said. Read More

The End of the Credit Card?

Paying for stuff with your phone sounds awesome until you stop to think about it. It seems like every major tech company, including Google, is touting the fact that we’ll soon be able to buy anything and everything by waving our phones against a pay pad.

Wait a second: Why is this supposed to be any better than pulling out a credit card? It’s not faster, it’s not more convenient, and it’s not any safer. Plus, many phones—and most stores’ pay pads—don’t yet have the necessary “near-field communication” chips required for these sorts of transactions, so the whole idea is kind of a fantasy anyway.              Read More

Consumers Will Switch Banks Over Debit Fees, Survey Finds

About 30 percent of U.S. consumers said they’d leave their banks over fees for using their debit cards, according to a survey by the Research Intelligence Group.

About 43 percent said they’d switch to paying with cash or credit cards if their bank implemented charges, while 13 percent said they’d pay the fee if it was “reasonable,” according to the survey released yesterday by the Fort Washington, Pennsylvania-based consulting and market-strategy firm. Read More                                                       Back to Top

New Visa PCI Compliance Stats: Level 1s Up, Level 3s Down Slightly, Level 2s Down Sharply

Level 3 merchants, whose compliance Visa only started making public this summer, have seen their relatively weak compliance numbers drop further, according to new figures the card brand released Monday (Oct. 31). Level 2 chains saw an even stronger drop, while Level 1s continued their improvement trend.

Level 1 chains process more than six million Visa transactions a year, Level 2s process from one to six million and Level 4s process fewer than one million such transactions, while Level 3s handle 20,000 to one million online Visa transactions a year. The initial Visa stats covered activity ending June 30 and showed 60 percent Level 3 compliance. The new stats, ending September 30, report 57 percent compliance among these merchants. Read More

PayPal Seeks to Cut Out Card Companies with New Plastic

Although it looks like a familiar payment card, its magnetic stripe stores encrypted data that lets consumers access a variety of accounts through PayPal. The card will not carry the customer's name or an account number but only the PayPal logo.

"It is another step in PayPal's march to disintermediate" the traditional card companies, says Andy Schmidt, research director for commercial banking and payments at TowerGroup. Read More