Payments News, Information, and Updates from Your Trusted Advisor

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October 2011

As a result of the new debit card interchange rates mandated by the Durbin Amendment to the Dodd-Frank Financial Reform Act of 2010 which took effect at the beginning of October, much of this month's news revolves around the impact of these new rules and rates on both consumers and payment accepting organizations.

PE Systems, LLC is a completely independent consulting and advisory firm specializing in the reducing and managing of payment processing costs for its clients. Our unique focus is 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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PE Systems Granted Additional Patents on its Proprietary Analytical Processes

PE Systems, continuing to build on its leadership role in reducing and managing payment processing costs received notice from the U.S. Patent Office of the granting of THREE additional patents related to its already patented analytical processes. The new patents entitled "Altering Card-Issuer Interchange Categories" were issued in late September as U.S. Patents 8019680, 8019681, and 8024268 and bring the total number of issued patents to FOUR.

These patents augment U.S. Patent 7603312 issued in 2009 relating to the company's technology and processes for identifying, reducing, and managing payment processing costs ... especially in the area of optimizing interchange qualification and the associated fees.

Bob Skattum, Chief Operating Officer, emphasized that "These patents add to our intellectual property portfolio and form the nucleus of our proprietary processes that utilize benchmark data, in-depth knowledge of the payments industry, and unmatched experience of our team to lower our clients' costs through technology and to manage those costs over the term of our consulting engagement." He continued "In addition, we have received a Notice of Allowance for a FIFTH U.S. Patent to be granted in the next 6-8 weeks ... attesting to the uniqueness of our business model and results obtained on behalf of our clients."

Durbin Slams Bailed-Out Bank of America Over New Debit Card Fee

A top senator slammed Bank of America after the company, one of the largest recipients of U.S. taxpayer bailouts, announced it would charge customers a new $5 monthly fee for using their debit cards -- even if just to buy a $2 coffee.

Though the bank does not plan to charge customers for using the ATM, the fee would be triggered on a monthly basis if shoppers use their debit cards to make any purchase.

"It's overt, unfair and I hope their customers have the final say," Sen. Dick Durbin, D-Ill., said. Read More                                         Back to Top

Visa spent $1.44 million lobbying in 2nd quarter

Visa Inc. spent $1.44 million in the second quarter to lobby the federal government on regulation of the fees charged to process debit transactions and other issues, according to a disclosure report.

That's a 6 percent drop from the $1.53 million that the payment processing company spent in the year-ago period, and down 20 percent from the $1.84 million it spent in the first quarter of this year. Read More

Digesting The Impending Durbin-related Doom

The Durbin Amendment, which is scheduled to go into effect on this October 1, was intended to ease some of the financial burden weighing upon merchants by capping the interchange or “swipe” fees they pay to banks per debit card transaction.

Currently, the average swipe fee collected by the bank per debit card transaction is 44 cents. After the implementation of Durbin, a facet of the Dodd-Frank Financial Reform Act, customers opting to pay by debit card will cost merchants around 21 cents per swipe. Read More

DRF Survey Reveals Merchant Uncertainty on Durbin's Impact

A survey at the Direct Response Forum of 169 executives from some of the largest retailers in the world reveals continued uncertainty about how the recently passed Durbin bill will affect merchants' business practices. When questioned more about interchange fees and Durbin, 41% indicated they will not be passing on debit card fee savings to their customers, but 56% said they don't know what impact the new rules will have on their business.  Interchange fees, alternative payments, and PCI/Fraud top the list of concerns of the payment professionals. Read More

BofA Plans to Charge $5 Monthly Fee to Some Debit-Card Users

Bank of America Corp., the biggest U.S. lender by assets, plans to announce a $5 monthly charge for some debit-card users to recoup revenue lost after new federal rules capped so-called swipe fees.

Some bank customers with basic checking accounts who use debit-cards for purchases may start getting assessed the fee in January, said Anne Pace, a spokeswoman for Bank of America. Users won’t be charged for cash-machine withdrawals, and clients with premium accounts, including those linked to the Merrill Lynch brokerage, won’t be affected, she said.

Read More                                                                  Back to Top

Citi to Raise Monthly Fees on Checking Accounts

Citi is raising the monthly fee on its basic checking account. The new fee will be $10, up from the previous $8.

At the same time, the bank said Friday that it will waive fees and offer bigger rewards if customers sign up for more services. The changes reflect a broader industry push to deepen relationships with customers and capture more of their business.

For example, Citi also said it will no longer give rewards points for debit card purchases. But customers will be able to earn more points each month by opening a Citi savings account or setting up a feature that automatically transfers money into a savings account. Read More

Visa, MasterCard Risk ‘Mom and Pop’ Ire With Debit-Fee Increase

Visa Inc. (V) and MasterCard Inc. (MA), the world’s biggest payments networks, may face a merchant backlash by raising debit-card swipe fees on the smallest purchases to the maximum allowed under U.S. caps that took effect earlier this month.

MasterCard will impose the highest fees permitted on all debit transactions, including so-called small-ticket purchases, for cards issued by the biggest U.S. banks, said a person with direct knowledge of the matter. Visa will do the same. Read More

Marketing Credit Cards to College Students: How the CARD Act Changed the Game

It’s fall and students are back at college soaking up vast amounts of knowledge. At least that’s what the parents think, right? One thing we can be sure of, though, thanks to the Credit CARD Act of 2009, is that students now enjoy more consumer protections. The Act restricts credit card issuers from giving a credit card to anyone under the age of 21 unless they can prove they have enough income to repay credit card debt. If not, a credit card can’t be obtained without a co-signer. Read More                                                                    Back to Top

Dwindling Money for Nonprofits in FY2012 Budget Appropriations

It’s appropriations season, when Congress funds federal agencies—including those important to the nonprofit sector—for the coming fiscal year which actually starts, in theory, a couple of weeks from now. Are the Congressional deliberations on FY2012 spending really important, or is this all a charade? After all, these appropriations decisions can be undone when the Super Committee makes its recommendations for north of a trillion dollars in cuts over 10 years. Read More

Interchange Fees Cost Retailers on Returns

Debit card interchange fees will decrease Oct. 1. This is good news for merchants who have long complained that the interchange fee, also known as a swipe fee, was too high and cut into their profits. The new regulations are helpful, but the interchange fee will continue to be a complicated and costly issue between retailers, banks and credit card processors.  Read More

Report Predicts How the U.S. Terminal Base Will Migrate to EMV and Mobile Payments

The gradual spread of point-of-sale terminals capable of handling so-called EMV and near-field communication (NFC) transactions will result in slightly more than half of U.S. POS locations supporting such technology in 2015 and 13% actually using it through hosted POS systems that take advantage of its capabilities, according to a new research report.

The predictions come in a report from Boston-based Aite Group LLC about how centrally hosted POS systems that enable chip-based mobile marketing and payments are poised to displace the limited-function POS terminals the vast majority of merchants currently use to accept magnetic-stripe credit and debit cards.
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LexisNexis® Study Finds Fraud Rates and Data Breaches Could Increase for Retailers Next Year

For every $100 in fraudulent transactions, retailers incurred a "true" cost of $230, according to a new study released by LexisNexis® Risk Solutions. According to the study, retail merchants and financial institutions reported an overall decline in fraud rates and transactions while total retail sales rose.

However, the research suggests that this is not the time to lose focus on fraud mitigation, as fraudsters’ techniques continue to evolve as retailers enter new markets through international and mobile channels. Consumers also experienced a decline in fraud losses overall but the average time it took to resolve fraud issues rose by 57% and the out-of-pocket costs of fraud rose by $244. Read More

A First Look at PayPal’s Strategy for Challenging Visa and MasterCard at the Register

PayPal demonstrated in September, for the first time, how it intends to provide payments to physical retailers as the race heats up to make wallets and clunky metal registers obsolete.  

PayPal had said it was going to launch pilot projects later this year, but this is the first time it is discussing how it will approach the digital market and how it will defend itself against incumbent payment providers like Visa, MasterCard and American Express, and new entrants like Google and San Francisco-based Square.  Read More