Among credit card-backed securities, credit quality and financial performance improved markedly during 2004. While yield declined slightly as overall consumer credit slowed, the improvement in average loss rates more than offset the erosion. According to Standard & Poor’s “Credit Card Quality Index” the average loss rate for card bonds last year declined 60 basis points to 6.6%. The average 30-plus-day delinquency rate declined 70 bps to 4.6%, and the average payment rate increased 100 bps to 17.2%. S&P says the average yield dropped 20 bps to 17.4%. Over the past 12 months, revolving consumer credit debt increased a modest 4.1%, and revolving credit dropped to 9.1% of disposable income from a peak of 9.5% in May 2001. S&P says credit card ABS could reach $68 billion in 2005, a 30% increase over the issuance level for 2004, and matching issuance the market achieved in 2003.
Debit card EFTPOS volume hit a record A$6.0 billion during October, an 8.8% increase over one-year ago. Over the past five years debit card dollar volume has doubled. During October, Australians
used debit cards for A$4.6 billion in purchases among 74 million transactions. Total EFTPOS transactions were 88.6 million for October. Over the past twelve months, Australians have used debit cards for A$67.7 billion in purchases and cash transactions. There are 25.0 million debit card accounts in the country at the end of October, compared to 24.4 million one-year ago.
VISA will debut a new television commercial for the “Super Bowl” that will focus on the security protections of the “VISA Check Card”. The television spot was created by BBDO NY and will run nationally on network and cable television through summer 2005. Visa is the world’s leading payment brand and largest payment system, enabling banks to provide their consumer and business customers with a wide variety of payment alternatives.
A new study has found that VISA is now setting the pace in the $495 billion U.S. commercial card market. Over the past three years VISA’s share of commercial card transaction volume has increased from 27% to 36%, while American Express’ share has declined from 42% to 35%. The total universe of U.S. commercial expenditures is estimated to be $14.5 trillion. The new report by Packaged Facts also found that VISA increased its lead over American Express in the number of domestic commercial cards. The researcher says VISA has 16.4 million cards compared to American Express’ 11.4 million. Packaged Facts estimates the volume of transactions on all commercial credit cards increased 23% last year. Commercial card transactions are estimated to grow at a rate of 25% annually during the next five years, topping $1 trillion by 2008.
The British Competition Commission has raised concerns over the limited competitive pressure on store credit card pricing and payment protection insurance sold with such cards. The CC document, “Emerging Thinking,” suggests that consumers are insensitive to store card costs and that they lack choice for insurance services sold with the cards. The document has been delivered to store card issuers in the U.K. and the parties are being asked to respond to the “Emerging Thinking” by the end of January. The CC then plans a further round of hearings during February. The Emerging Thinking document identifies two interdependent markets: an “upstream” market for the provision of store card credit and related services to retailers by credit providers; and a “downstream” market for the provision by credit providers and retailers jointly of store card and related services to the retailer’s customers. The CC is required to investigate whether any “features” of the relevant markets prevent, restrict or distort competition. The $9 billion U.K. store card market is dominated by four players who control 90% of the market. The inquiry was referred by the Office of Fair Trading March 18, 2004. The CC is required to publish its final report by March 17, 2006.
MBNA has extended its existing seven-year relationship with TSYS for commercial-card processing services by an additional three years. TSYS serves nine of the 10 largest issuers of Visa and MasterCard commercial accounts in the United States, and 100 percent of the federal government’s “Smart Pay” accounts. TSYS brings integrity and innovation to the world of electronic payment services as the integral link between buyers and sellers in this rapidly evolving universe.
PayPal is dropping the option for sellers to block customer payments funded by a credit card when the sender has a bank account registered with PayPal. Doing so should improve the overall efficiency of the marketplace, while offering greater clarification regarding the PayPal User Agreement. Sellers should not experience any noticeable changes to the way payments are received.
AZ-based eFunds has inked an agreement to acquire ClearCommerce for $19.4 million in cash. The deal will expand eFunds’ market footprint in the retail sector with more than 140 new customers in seven countries. Privately-held ClearCommerce is a specialist in fraud prevention and payment processing solutions for card-not-present transactions, including online and mail order/telephone order sales. The combined entities will provide customers with a comprehensive perspective on fraud detection, based on data from both ClearCommerce’s “FraudDetect” database and eFunds’ “DebitBureau” database. The sale is expected to close during the current quarter.
The Acting Comptroller of the Currency said yesterday that certain credit card marketing practices are unacceptable because of the compliance, legal and reputation risks they present. Julie Williams said that even though these practices may not be prohibited – or even addressed – by “Reg Z,” the OCC believes they are not consistent with sound banking practices. She asked her audience at the Women in Housing and Finance and The Exchequer Club if they “have been dazed by the detail and fine print of a credit card agreement?” She also asked “How many could tell her under what circumstances their credit card company is allowed to change their rate and what their options are if that happens?” Williams also took on consumer advocacy groups for not berating the OCC to do consumer testing to find out what consumers really want and think is important in disclosure.
The “Peppercoin Small Transaction Suite” has become the first small payments solution to receive “Visa CISP” and “MasterCard SDP” certification. With the business model flexibility offered by Peppercoin’s Small Transaction Suite, merchants will increase revenue and profits via small payments in the digital, mobile and physical point-of-sale markets. As a result, Peppercoin will drive significant additional volume over the existing payments network. Peppercoin enables profitable new business models for low-priced digital content and physical goods. Ambiron provides data security and compliance services to businesses in the financial services vertical.
Discover Financial Services and PULSE EFT Association have completed their merger following approval by PULSE’s financial institution members. The merger joins PULSE(R) and its 4,100 member banks, credit unions and savings institutions with Discover(R) Network and its 4 million merchant and cash access locations to create a new competitor in the electronic payments field. Discover Financial Services, a business unit of Morgan Stanley, operates the Discover Card and the Discover Network for its more than 50 million Cardmembers. PULSE is one of the nation’s leading ATM/debit networks currently serving more than 4,100 banks, credit unions and savings institutions across the country.
An analysis of more than one million purchases made at vending machines shows the average purchase was $1.87 when a credit or debit card was used, compared with $1.06 for a cash purchase at the same machine. PA-based USA Technologies conducted the survey of vending machines using its “e-Port” technology. On 450,000 occasions, consumers preferred to use their credit and debit cards when making purchases from vending machines, and they made many more multi-purchases for example, buying an average 1.75 20 oz beverages with every swipe of their card. USTT says that one hotel in Phoenix reported that average transactions had also risen from $1.32 to $3.39, with 75% of all vends being multi vends. The market analysis of USA Technologies showed that the combination of cashless transaction capability and the associated data visibility to improve operations, increased sales by 140% through vending machines located in Regal cinemas, representing 30% of all sales, and by 79%, or one-third of all transactions, at a Paramount amusement park in 2004.