Payments News, Information, and Updates from Your Trusted Advisor

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August 2011

Much of this issue's updates revolve around the aftermath of the Federal Reserve Board's announcement of the pending changes in interchange rates and routing rules for debit cards ... scheduled to take effect in mid-October, 2011.

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Reviews Are in on Fed’s Final Debit Rule: Thumbs Down from Both Retailers And Banks

The Federal Reserve’s final rule governing debit cards, released on Wednesday [June 29th], seems to have pleased neither merchants nor banks. Retailer organizations almost universally denounce the Fed’s final rule as “irresponsible” and a departure from the intent of Congress, whose Durbin Amendment to the 2010 Dodd-Frank Act the Fed is implementing.

Bank executives, meanwhile, express some relief at an interchange allowance higher than originally proposed by the Fed but criticize the rule’s price controls and warn its exemption for small banks won’t work in practice. Read More

The Truth About Credit Card Swipe Fees

We all know that when we go to a local mall, convenience store, restaurant or movie theater, we're paying for much more than just the product or service. When we purchase food at the grocery store, we're not just paying for that bag of chips, we're paying for the cost of getting it to the store, a portion of the electric bill of that grocery store, a small portion of the health insurance for the full time employees and even a portion of the high priced liability insurance that covers the store if you would slip after hitting a puddle and decide to sue.

These are well-known by most consumers but that bag of chips has a lot more fees built in to it than that. One of these fees took center stage again in late June of 2010. It's called the interchange fee, but politicians changed the name to the swipe fee. Read More

Is the final Durbin Amendment rule an impetus for EMV in the United States?

On June 29, the Federal Reserve Board released its much-anticipated final rule, Regulation II, to the Durbin Amendment. The Board's final rule significantly differs from its interim rule on this amendment, resulting in ample commentary from the payments industry, financial institutions, and the merchant community.

However, there has been little commentary provided about the potential impact the final rule may have on encouraging the migration of debit cards away from mag stripe to the EMV standard. Upon closer examination of the Board's lengthy final rule, it appears that issuers might have the ability to recoup a portion of EMV-related costs should they opt to migrate away from magnetic-stripe technology in the years ahead. Read More                                                               [Back to Top]

Visa CEO: Bulk Of Durbin Impact On Profits Comes In Fiscal 2012

Payment processor Visa said Wednesday afternoon it expects the bulk of the impact from new limits on debit swipe fees to hit in its 2012 fiscal year.

In an 8-K filing with the SEC, Visa affirmed its fiscal 2011 outlook for net revenue growth of 11-15% and earnings per share growth of 20%, but said it expects slightly slower growth in 2012 with revenue up high single to low double digits and EPS growth in the mid to high teens. Read More

Visa rolls out new fee program

Visa Inc's quarterly profit rose by 40 percent, and the world's largest payment processor said it would introduce a new fee structure for U.S. merchants.

Visa Chief Executive Joseph Saunders, in a conference call with analysts, said the payment processor would introduce a network participation fee in the United States for all of its debit, credit and prepaid card services. As part of the new policy, Visa also will lower the variable rate charged for transactions.

Visa's shift away from per-transaction fees is a large departure for the San Francisco-based company. It is being done in advance of new fee caps that take effect later this year as part of the 2010 Dodd-Frank financial reform law. Read More

Mobile Payments Seen As 'Mainstream' for Consumers Within Four Years

As companies race to take advantage of the mass adoption of smartphones and rapid development of new technologies to offer mobile payment services, executives believe the use of a mobile phone or device to make payments or conduct banking transactions will require four years to become widely accepted by consumers, according to a global survey of business executives by KPMG International. Read More

Economy in U.S. Grows Less Than Forecast

The U.S. economy grew less than forecast in the second quarter, after almost stalling at the start of the year, as consumers retrenched.

Gross domestic product climbed at a 1.3 percent annual rate following a 0.4 percent gain in the prior quarter that was less than earlier estimated, Commerce Department figures showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 1.8 percent increase. Household purchases, about 70 percent of the economy, rose 0.1 percent. Read More

Exploring the New Face of Retail Payments

At the Chicago Fed’s 2011 Payments Conference, held on May 19–20, participants discussed how changes in consumers’ behavior in the wake of the financial crisis and recession can translate into opportunities and challenges for both traditional and nascent payment providers. They also focused on the impact of payment innovations and new consumer protection regulations. Read More

Rewards cards: Consumers love 'em, retailers don't

Consumers love the free flights, gadgets and cash back they get when they pay with their rewards credit cards. But mom and pop stores cringe when they do.

It costs a merchant more each time a consumer pays with -- or "swipes" -- a rewards card than when a consumer pays with a basic credit card.

Forty percent to 70% of credit card transactions are made with rewards cards ... Read More

Merchants Shred Costs of Payments by Plastic

Merchants are racing to lower their costs when customers pay with plastic.

While a new federal law will shrink debit-card fees charged to merchants starting in July, some are cracking down on how much cash customers can get back at the counter.

Drugstore chain Walgreen Co. recently cut to $20 from $40 the amount of cash that customers can get back when making a debit-card purchase at some stores. Other stores are setting minimum purchase amounts for credit-card transactions.

And some restaurants, dentists and other small-business owners are offering discounts to customers who pay in cash. Read More

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PayPal Will Process POS Payments for up to 20 Merchants in 2012, eBay Chief Says

PayPal Inc. will roll out mobile payments at the point of sale with as many as 20 retailers next year following a pilot set to start later in 2011, the chief executive of eBay Inc., PayPal’s parent company, said late on Wednesday.

Speaking to stock analysts as part of eBay’s quarterly earnings release, John Donahoe called processing for brick-and-mortar merchants an “incremental” opportunity for PayPal but gave no further details of the e-commerce processor’s plans. “There are going to be a lot of announcements,” Donahoe said, adding that PayPal is moving into the POS market at the request of merchants. “We’ve had merchants reach out to us quite aggressively to say they want us to bring PayPal to the point of sale,” he said, without naming any retail companies. Read More

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Charge It! Here Comes the Google Credit Card

The Google (GOOG) credit card has arrived. No joke, this is the real deal people! So what’s the catch, right? The Google AdWords Credit Card has been designed for small-to-medium size businesses that already advertise on Google.

The firm is now capitalizing on the fact that many of its advertising clients in one form or another are often cash flow constrained and lack a “formal” credit line. While we can’t say we were expecting to ever see a credit card from Google this just goes to show you how innovative and bold the firm remains after so long. Read More

As Plastic Reigns, the Treasury Slows Its Printing Presses

The number of dollar bills rolling off the great government presses here and in Fort Worth fell to a modern low in the last fiscal year. Production of $5 bills also dropped to the lowest level in 30 years. And for the first time in that period, the Treasury Department did not print any $10 bills.

The meaning seems clear. The future is here. Cash is in decline.

You can’t use it for online purchases, nor on many airplanes to buy snacks or duty-free goods. Last year, 36 percent of taxi fares in New York were paid with plastic. At Commerce, a restaurant in the West Village in Manhattan, the bar menus read, “Credit cards only. No cash please. Thank you.” Read More

Square raises $100 million for mobile payment service

Payment startup Square just landed a massive cash infusion: The company raised $100 million in a financing round led by Kleiner Perkins Caufield & Byers.

Square is the high-profile second venture of Twitter co-founder Jack Dorsey, who created the company in 2009 and serves as its CEO. Dorsey works two jobs right now, commuting several blocks between Square and Twitter, where he guides product development. Square used Twitter to announce its funding round early Wednesday.

The latest funding values the company at $1 billion, according to the Wall Street Journal. It takes the total venture capital investment in the company to at least $140 million, including a "strategic investment" from Visa. Read More