Justice Brian Tamberlin of Australia’s Federal Court ruled Friday that the Reserve Bank of Australia’s credit card reforms are valid, thus rejecting VISA’s and MasterCard’s arguments to the contrary. The judge rejected the VISA and MasterCard claim that they are not a “designated payments system” and therefore not subject to RBA regulatory power. However, Tamberlin did not rule on whether the reforms are sound policy, that could impact bank earnings and possibly make the country less attractive for new entrants. Tamberlin did note that he was also not persuaded that the RBA failed to engage in a proper decision making process or misapplied the legislation. Last year, the RBA issued new reforms on the credit card business permitting merchants to recover from cardholders the costs of accepting credit cards. The new standard went into effect January 1st. Also under the new RBA rules, interchange fees will decrease from around 95 basis points to approximately 55-60 basis points by October 1st. The new interchange rates will cost bank credit card issuers an estimated US$300 million per year. At mid-year 2003, Australians owed a record $24.24 billion in credit card debt among 10,705,000 total credit card accounts. VISA and MasterCard are also facing possible regulation of interchange fee practices in the UK, Poland, Switzerland, and New Zealand.Details
Scotiabank has inked a deal to more than double the size of its operations in the Dominican Republic and to become the fifth largest private bank in the country. The transaction agreements provide for the purchase of 39 branches and the hiring of 460 employees of Baninter. The transaction also includes
the purchase of selected credit card, personal and commercial loans. Acquired branches will be converted into Scotiabank locations over the next three months and will supplement the Bank’s existing 20-branch Dominican network.
A new study shows that off-shoring jobs to India may cause irreparable damage to a financial service firm’s brand image. The research by Amicus found that 62% of respondents said that choosing a life or insurance product would be influenced whether or not the provider off shored or not. Nearly 90% believed that cost savings were not being transferred to the customer and an overwhelming majority believed data protection was being compromised. Amicus says that many companies have been outsourcing jobs for the last 18 months to places like Bangalore and Mumbai in India where they can make up to 40% cost savings because of low rates of pay for sophisticated IT and call center workers. Deloitte Consulting believe 2 million jobs will be exported from the West to India by 2008.Details
More than half of Americans prefer that college students use prepaid payment cards instead of debit cards or credit cards. Only 14% of consumers believe credit cards are best suited for students, while 34% favor debit cards. The results are based on an informal CardWeb.com homepage poll of more than 1,100 unique participants, which concluded this morning. Another recent survey conducted by the non-profit InCharge Institute of America, publishers of the YOUNG MONEY magazine, also found that 70% of consumers believe debit cards are a better option for college students than credit cards. The InCharge research also found that seven out of ten Americans believe it is a bad idea for credit cards to be in the hands of college students.Details
A class action lawsuit has been filed against MBNA Canada Bank in Ontario Superior Court of Justice in Toronto for damages arising from interest rates charged by MBNA on cash advance transactions on MBNA credit cards. The claim alleges that the rates of interest charged by MBNA on cash advances exceed the 60% rate allowed by the Criminal Code. The claim alleges that MBNA charged an interest rate at the rate of 94% per year. An application has benn made to the Ontario Superior Court of Justice to certify the action as a class action.Details
Oberthur Card Systems, the top supplier of VISA and MasterCards, reported Friday that it has turned in its best performance ever during the first six months of this year. For the first time since June 2001, Oberthur showed a net profit of $3.2 million as smart card shipments during the first half increased more than 24% on a year-on-year basis. The return to profitability was also due to the company’s debt reduction and a revaluation of Oberthur shares held by the company. Net debt was reduced to $87 million, and the payroll was reduced from approximately 3,500 employees to slightly less than 3,000, over the past 18 months. During the second quarter Oberthur delivered more than 28 million microprocessor cards, including 11.2 million smart payment cards. Second quarter revenues for smart payment cards increased 5.4% to $22.3 million. However, sales of banking magnetic stripe cards, loyalty cards, scratch cards and memory cards declined 29.7% to $19.9 million. Sales of SIM and ID cards for the second quarter totaled $42.9 million. For complete details on Oberthur’s latest performance visit CardData ([www.carddata.com]).
The number of individuals conducting banking transactions online has increased 79% over a two-year period, from nearly 13 million to 23.2 million individuals. On a year-over-year comparison, from the Fall of 2001 to the Fall of 2002, online banking grew 32% from 12.9 million to 17.1 million. Comparing the Fall of 2002 to Fall of 2003, the trend continued as the audience level for online banking grew 36%. The research comes from Nielsen//NetRatings, who also found that Sacramento and Salt Lake City surfers have the highest propensity for using online banking of any major markets in the country. Surfers in both markets are 54% more likely to have used online banking in the last six months than the average Internet user. Seattle and Austin followed as the second and third highest ranked major markets. San Diego rounded out the top five regions where online banking occurs.Details
VA-based Circuit City confirmed last week it has received a number of bids for its bankcard operation over the past thirty days. The company says that based on the current bid activity it now expects an after-tax loss of approximately $105 million, compared with the company’s mid-August estimate of up to $200 million. Circuit City also said they expect the sale of the bankcard operation to generate approximately $295 million in cash, compared with its previous estimate of in excess of $190 million. Overall, the company posted total sales for the second quarter ended August 31, 2003 of $2.16 billion, a 3% decline over the year-ago quarter. In August, the company said that getting out of the bankcards business would enable the company to avoid the large cyclical profit swings that are inherent in finance operations serving primarily non-prime accounts. Circuit City’s finance operation manages approximately $1.5 billion in bankcard receivables and $1.5 billion in private-label and co-branded VISA credit card outstandings. For complete details on Circuit City’s latest performance visit CardData ([www.carddata.com]).