Javelin’s âReg E and Overdrafts: How Financial Institutions Can Use Mobile to Increase Profits Post Reg Eâ report has concluded, because Regulation E is compromising bank revenue with overdraft fee regulation, banks are either trying to preserve those fees or adapt. One way is offering customers mobile banking, offering immediate alerts when an overdraft occurs. The report concluded m-banking allows banks to communicate more effectively with their customers through real time updates; consumers most want a warning that an overdraft is about to occur; the young and ‘newly banked’ are most likely to incur overdraft fees; and consumers cite âtoo many feesâ as the No. 1 reason they leave their financial institution.
Fitch expects revenue to increase in the low single-digits in 2010, limited by a continuing soft global economic environment and job market as well as continued pricing pressure in the U.S. and Mexico markets. EBITDA margins to remain relatively constant near 30% as cost cutting actions taken by the company serve to offset regional pricing pressure. Free cash flow is projected to decline significantly in 2010 reflecting a $250 million refundable deposit against a disputed tax liability, a full year of higher dividend payments (approximately $160 million per year versus $41 million in 2009) and modestly higher capital spending. Fitch does expect free cash flow to return to historical levels in 2011 of approximately $800 million to $900 million. Working for WU is its extensive domestic and growing international agent network with a strong worldwide brand and revenue stability from strong global diversification and consumer exposure.
USA Technologies wireless non-cash transactions reported 1Q/10 increased the installed base by 52%, with approximately 73,000 devices connected to its “USALive” network, compared to the 48,000 devices for the year-ago period. Revenue from license and transaction fees was a record $2.4 million for the three months ended March 31, 2010, a 69% increase compared with $1.4 million in the year-ago quarter; total revenues increased 60% to $3.7 million, compared with $2.3 million for the year-ago quarter; and gross profit for the period totaled $1.3 million, compared with $591,184 for the year-ago period. Meanwhile, the number of transactions processed increased 67% to 9.7 million transactions, compared with 5.8 million transactions processed a year ago, the dollar volume of transactions processed increased by 51% to $17.2 million, compared with $11.4 million for the corresponding quarter in 2009; and the new ePort Jump Start Program accounted for approximately 79% of ePort unit shipments.
Fiserv inancial services technology posted total 1Q/10 GAAP revenue of $1.01 billion, compared with $1.02
billion the year ago period, while total adjusted revenue decreased 1% to $954 million, compared with $968
million in 2009. A slight decline in operating margin and an increase in free cash flow increased 15% over
the prior year to $225 million, thanks in part to decreases in higher margin revenue and continued expansion in consumer payments. With this, Fiserv signed 93 electronic bill payment clients and 46 debit clients. Among its new clients are the Charles Schwab co; the Coastal Federal Credit Union which now makes available the Fiserv “CheckFree RXP” online bill payment and presentment solution to its 195,000 members; First National Bank Alaska, which integrates Fiservâs debit solutions with the “Premier” account processing platform; and SunTrust Bank, which implemented Fiserv’s “Mobile Money.”
1Q/09 $968 million
3Q/09 $992 million
4Q/09 $1.01 billion
Source: CardData (www.carddata.com)
ePayment provider sQuid has launched a new contactless smartcard-based loyalty schemes. Through a scheme of their choice retailers can now appeal to new customers and reward their frequent customers. Loyalty schemes could
include cash back or a loyalty reward after a certain value of spend
or number of transactions. A unique benefit of sQuid is that business
owners can personalise the scheme to their needs with own-branded sQuid
cards, and communicate with customers via a branded portal.
sQuid uses leading-edge contactless smart card technology, providing
customers with an online account where they can view their transactions,
as well as keep track of their loyalty funds. The funds on the card are
protected with a central host system, far better than flimsy ‘stamp
cards’ common with some loyalty schemes and which are open to abuse.
sQuid’s unique pre-pay system enables multi-functional
smart cards, combining eMoney retail payments, ITSO (Transit) schemes and council smart card initiatives.
According to a recent report by Fitch Ratings, U.S.credit card ABS
trusts will weather the changes brought about by the enactment of the
CARD Act on February 22. However, Fitch says credit card companies
are set to face more acute pressures. Many issuers proactively altered
their business models and implemented
portfolio-wide pricing changes over the last 12-18 months. In light of
the changes, consumers can expect improved disclosure, a more
favorable payment allocation, elimination of double cycle billing, and
more predictable due dates. Also expected is gross yield to decrease
by 100-200 basis points (bps) over the coming months. Gross yield is
comprised of interest, fee, and interchange income expressed as a
percentage of principal receivables. Although it will be more difficult
to change APRs going forward, the pricing on many accounts has already
been increased in anticipation of these changes and many
accounts with fixed APRs have been converted to
variable APRs indexed to Prime Rate and will trend higher as prevailing
interest rates rise.
The uptick of credit card delinquencies for U.S. credit card asset-backed securities is setting the stage for record charge-offs for 2010. However, gross yield, the measure of interest, fees and interchange revenue collected on outstanding balances, continued to increase reaching 20.21%. Fitch’s latest “Credit Card Performance Indexes,” which tracks the performance among most of the U.S. credit card-backed bonds, shows late payments rising to their highest levels in six months. Measured by Fitch’s 60+ day delinquency index, late payments rose 13 basis points in November to 4.54% following a similar increase last month. Charge-offs crept up to 10.68% from 10.09% in the prior month but remained inside of the record high of 11.52% set in September 2009. From 4Q/08 through 2Q/09, Fitch’s delinquency index rose 42% as the economic environment and employment situation worsened. Charge-offs subsequently peaked in 3Q/09 with Fitch’s index reaching 11.52% in September 2009 before receding in recent months. Monthly payment rates, a measure of how quickly consumers are paying off their card balances, fell to 17.64% from 18.57% last month. These MPRs are low compared to 2006 and 2007 when the MPR index routinely topped 20%, but are still strong compared to the average MPR of 16.00% since the inception of the index in 1991.
ABS 60+ DAY DELINQUENCY
Jan 09: 4.04%
Feb 09: 4.33%
Mar 09: 4.44%
Apr 09: 4.37%
May 09: 4.45%
Jun 09: 4.31%
Jul 09: 4.26%
Aug 09: 4.06%
Sep 09: 4.22%
Oct 09: 4.41%
Nov 09: 4.54%
The economy is projected to gradually improve as the recovery will
continue into 2010 while the Federal Reserve is expected to keep
interest rates at an historic low for the first half of the year.
Continuation of the expansion will hinge on increased job growth and
business investment, as government stimulus fades and spending and
hiring grow. Employment gains will average 70,700 jobs per month in the
first six months of 2010, accelerating to 135,300 jobs per month in the
second half as the unemployment rate will hover around 10% throughout
the year, averaging 10.2% in the first half and 9.9% in the second half.
Inflation is expected to remain tame, especially core inflation, as the
central bank’s emergency lending programs will end. Global output is
expected to grow just over 3% in 2010, following the worst
worldwide downturn in decades, while Europe and Japan will lag the U.S.
recovery and Asia will remain the strongest region.
The number of small business owners who see conditions for their own businesses getting better in the next six months increased for the first time since August. However, small business owners are entering 2010 on a cautious note. The Discover “Small Business Watch” index rose slightly from 76.5 in November to 77.0 in December. The number of small business owners who think the economy is getting worse was down to 49% from 53% in November; while 24% of small business owners see the economy staying the same, up from 16% in November; 25% see the economy getting better, down from 28% in November; and 2% are not sure. Slightly more than half of owners have experienced cash flow issues in the past 90 days, down 1 percentage point from last month; 45% of owners have not experienced cash flow issues, and 4% arenât sure. Additionally, 18% of owners say they will increase spending on business development activities such as advertising, inventories and capital expenditures in the next six months, 26% will make no changes, 51% plan to decrease spending, and 5% are not sure.
Discover reported fourth quarter pretax income for its U.S. card business of $575.5 million, an 11% decline. The results were impacted by rising charge-offs and delinquency coupled with lower volume and balance transfer activity. Managed loans of $51 billion were essentially flat compared to the prior year. Sales volume declined 1% compared to the prior year and balance transfer volume declined 66% from 4Q/08. Discover says it reduced its marketing of promotional rate balance transfer offers. The managed net charge-off rate increased to 8.43% for the fourth quarter, up 295 basis points and four basis points from the prior year and the prior quarter, respectively. The over 30 days delinquency rate on managed loans was 5.31%, up 75 basis points from the prior year and 21 basis points from the prior quarter. However, the net yield on loan receivables was 9.37%, an increase of 82 basis points from the prior year and a decrease of 53 basis points from the prior quarter. The net yield increased from the prior year as the rate on credit card balances declined less than the cost of funds, primarily due to higher interest rates on standard balances and a reduction in promotional rate balances. The net yield decreased from the prior quarter reflecting the impact of a decline in higher rate balances related to the implementation of the “CARD Act,” an increase in lower rate student loan balances and an increase in the liquidity reserve. For complete details on Discover’s latest performance visit CardData (www.carddata.com).
U.S. CARD PRE-TAX PROFITS
4Q/08: $646.4 million
1Q/09: $167.0 million
2Q/09: $387.9 million
3Q/09: $912.8 million
4Q/09: $575.5 million
Source: CardData (www.carddata.com)
Despite efforts to promote them as a solution to payment card fraud, only 33% of UK consumers don’t know what a pre-paid card is while 23% know what they are but don’t understand how they work. With over 25 types of pre-paid cards on the market in Britain, only 12% of people have actually purchased one, half of which purchased it more than six months ago and 45% acquired the card to make online purchases. This, according to research released by TNS and VRL, also shows the cards are being used by 24% to budget more easily; 20% are using them to spend money abroad; and 8% are using them to manage money they give to their children. Meanwhile, among those who hadn’t purchased a pre-paid card, 46% did not know about initial or monthly fees; 26% assumed there were no monthly fees and 40% weren’t aware of paying any monthly fees.
Despite efforts to promote them as a solution to payment card fraud,
only 33% of UK consumers don’t know what a pre-paid card is while 23%
know what they are but don’t understand how they work. With over 25
types of pre-paid cards on the market in Britain, only 12% of people
have actually purchased one, half of which purchased it more than six
months ago and 45% acquired the card to make online purchases. This,
according to research released by TNS and VRL, also shows the cards are
being used by 24% to budget more easily; 20% are using them to spend
money abroad; and 8% are using them to manage money they give to their
children. Meanwhile, among those who hadn’t purchased a pre-paid card,
46% did not know about initial or monthly fees; 26% assumed there were
no monthly fees; and 40% weren’t aware of paying any monthly fees.