Industry News

Visa USA boosted interchange rates beginning Aug. 1 on credit cards for mid- and small-sized retailers. The card association also instituted a tiered pricing scheme designed to encourage larger merchants to increase their Visa transaction volume. Visa also will enact an incentive for e-commerce merchants to adopt the Verified by Visa authentication system.

   Under the new rates, merchants that meet higher Visa transaction volumes were classified as Tier I and aren't paying higher transaction charges. The interchange rate for many retailers is 1.39% of the sale plus 10 cents for a credit card transaction. However smaller-volume Tier II pay 1.43% of the transaction plus 10 cents.
   To qualify for Tier I, a merchant must have 45 million retail credit transactions worth $1.5 billion in gross sales volume from June 2002 through May 2003. In the Supermarket category, a Tier I merchant (24 million transactions, $1 billion gross) pays 1.20%. Tier II supermarkets pay 1.20% plus 5 cents per transaction. MasterCard's consumer credit card and corporate card interchange rates increased 2 basis points in August, from 2% to 2.02%.
   For online transactions, merchants that have instituted Verified by Visa pay 1.80% plus 10 cents. Online merchants without Verified by Visa pay 1.85% plus 10 cents. Visa already raised interchange on some credit card categories last April.

Some of the terms of the "Wal-Mart suit" against Visa and MasterCard took effect Aug. 1, but many retailers are still awaiting a ruling because they opted out of the class action suit. Home Depot, Best Buy and other large retailers were among those who opted out.

Perhaps the most interesting of the individual actions is that of Best Buy. The retailer is suing not only over the signature vs. PIN-based debit difference in fees, but is also questioning the fees on check cards, prepaid cards, travel and entertainment cards and regional ATM networks.
Best Buy paid fees of at least $1.31 for MasterCard check cards and at least $1.10 for Visa check card purchases in 1996, according to the suit.

Look for the number of electronic transactions to continue to increase while check payments continue to decrease, Concord EFS executive Bond Isaacson told those attending the recent Federal Reserve Bank of Chicago's Emerging Payments Conference.

   Processors and others in the payment industry are operating on margins as small as one-eighth to one-quarter of a cent per transaction, so they need to continue to squeeze as much inefficiency as possible out of the payments system, Isaacson explained.
   One of the major focuses for processors, issuers, et al, is to covert the millions of sub-$25 transactions to electronics via prepaid cards or some other device. One method that is quickly gaining popularity, according to Isaacson, is radio frequency identification devices, like the Mobil Speedpass. These devices are small and simple and fast to use. Chicago-area McDonalds restaurants have been accepting Speedpass for payments for several months. The Chicago-area McDonalds have recently started accepting credit cards in addition to the Speedpass devices.
   Another payments industry target is recurring payments, such as monthly utility bills, which total more than 12 billion annually. Some industry experts see this as an untapped area for debit card payments.

The Houston-based Pulse EFT Association on Oct. 1 will increase by 20% the interchange merchant acquirers pay Pulse issuers for PIN-based debit card purchases.

Under the new rate, acquirers will pay issuers a flat 18 cents per transaction. Pulse previously raised its POS debit interchange rate to 15 cents per sale from 10 cents last year.

The number of checks processed by the Federal Reserve in 2002 decreased for the third consecutive year.� In its annual report to Congress, the Federal Reserve System reported that it processed 16.59 billion checks in 2002, a 1.9 percent decline from 2001.

"The Federal Reserve's annual report is additional evidence that consumers and companies are turning from checks to electronic payments," said William Nelson, Executive Vice President of NACHA � The Electronic Payments Association.
In contrast to check volume, the Fed's commercial Automated Clearing House (ACH) volume increased by 12.1 percent in 2002 to 4.99 billion items. ACH payments include Direct Deposit of payroll, Direct Payment of consumer bills, business-to-business payments, and, increasingly, e-check payments.�The Fed's commercial ACH volume has nearly doubled since 1997.

POS Payment Systems has contracted with Hypercom for up to 5,000 high-speed card payment terminals and technology. At the center of this major contract is the benchmark-setting Hypercom T7Plus with HyperSafe operating system security and POS Payment Systems new pre-paid point-of-transaction activation for cellular phones.

Merchants can then use those applications and more to offer new products and services such as prepaid, electronic benefits transfer, sports licensing and an array of other products not traditionally associated with card payment terminals.

Lipman has received Visa PED approval for its NURIT 8320 Secure Payment Terminal, the latest addition to the series of highly secure NURIT products currently on the market.

   The NURIT 8320 is one of the few all-in-one terminals to receive this type of approval.
   "We are excited and proud to be one of the first companies in the world to have passed Visa International's stringent security tests and to have received the highly prestigious Visa PED approval," said Mony Zenou, President and CEO of Lipman USA Inc.
   Lipman's new secure NURIT 8320 offers the security features required to protect credit/debit transaction systems from any type of fraudulent intrusion.

Electracash, Inc., a check processor for online merchants, and TouchCredit Financial Services, Inc., a provider of web-based biometric payment solutions, recently announced an agreement for Electracash to license TouchCredit's BioApp authentication technology for real-time Account Holder-Present (AHP) verification. Under the terms of the agreement, Electracash will offer TouchCredit's biometric verification as part of its online check processing system. This new feature is available immediately to over 500 of Electracash's existing merchant customers who service several thousand web sites, it is also included in the Electracash Basic ACH payment service for new merchants.

With this new feature, powered by TouchCredit, merchants using Electracash will know that the account holder is present at the time of payment. By using existing hardware devices, such as keyboards, consumers verify their presence during a transaction based upon their unique keystroke rhythm. Standard microphones can also be used for voice verification, or finger scanners can be used for fingerprint verification.

National Processing Company, LLC, wholly owned subsidiary of National Processing, Inc. recently announced an expanded partnership with its ISOs. This expanded partnership is in line with NPC's regional growth strategy, which focuses on the ability to cost effectively manage multiple distribution channels while simultaneously strengthening relationships with existing ISOs. As part of these objectives, NPC sold its non-bank aligned regional sales offices to three key ISOs.

NPC sold 14 regional sales offices to three ISO partners - DiamondCard International of Rancho Cucamonga, California, Security Check, LLC of Oxford, Mississippi and Universal Debit & Credit of Annadale, Virginia. The remaining NPC regional sales offices are located within the six-state National City Corporation footprint, an 85 percent shareholder of National Processing, Inc.
"This is a great opportunity to cost effectively grow our business and strengthen our ties with the ISO community," stated Mark D. Pyke, Chief Operating Officer for NPC. "For these ISO partners, this transition with enable them to enhance and broaden their businesses, making them more competitive in the marketplace. For NPC, we expect to see a significant increase in applications from these spun-off offices as they grow under the leadership of their new ISO owners who can provide local management and market expertise."

NexTran Industries, Inc. has partnered with CashWorks Inc. to offer CashWorks' check-cashing solution on new NexTran ATMs, a program that started during the summer.

   The CashWorks solution authorizes the check-cashing transaction through a clerk-assisted point-of-sale terminal, and links to an existing on-site ATM for disbursement of funds, explained Dennis Kraft, CashWorks Senior Vice President of Sales and Marketing.
   The CashWorks software package was initially be offered on NexTran ComNet 4000 & ComNet 3000 models shipped after July 1, 2003. It was to be offered on other NexTran models, such as the ComNet 2000 & ComNet 1000 beginning August 1st.
   In an unrelated development, CashWorks Inc and Infonox will begin testing a multi-function financial services kiosk solution.
   The kiosk will utilize Infonox's patented ActiveVerifier technology to authenticate customers and transmit the transaction data to CashWorks' Central Decision Engine for risk analysis and approval. CashWorks' check cashing will be the latest product supported by the Infonox Active Payment Platform, which already delivers multiple financial services including standard ATM processing, POS debit, personal check cashing, Western Union money transfer and money order, credit card cash advances, bill payments and phone minutes.

The Electronic Payments Association projects that the number of e-check payments is likely to reach or exceed one billion in 2003, which would double the number of e-checks payments in 2002.

Vital Processing Services recently renewed and expanded its service agreement with Bank of America. Under the agreement, Vital remains the provider of POS authorization and capture services for Bank of America as well as the provider of clearing and settlement services.

PaySpot, Euronet's U.S. based prepaid phone recharge program, recently went live on Triton ATMs. PaySpot enables consumers to purchase wireless airtime from Triton ATMs throughout the United States.

PaySpot is the latest service to go live in the Triton Waves program completing the first bundle of Triton Waves, which includes CashWorks check cashing and Western Union @ATM money transfers. Core Data is the first processor to certify Triton Waves.
Triton's 9100 and 9700 lines began shipping with Triton Waves software in March 2003. Waves enabling kits are available for Triton's 9600 series ATMs.