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Washington puts an axe to payments industry revenue

February 9, 2011

Analysis of:Washington’s Assault on Payments | www.digitaltransactions.net

Over the last two years Washington waged a full-throated assault on the payments industry, increasing its regulatory burden, reducing revenue by tens of billions of dollars, and suppressing innovation. The damage will be lasting.  

One shoe of Fed’s implementation of the Durbin interchange amendment drops

December 21, 2010

Analysis of:Fed Debit Card Cap Roils MasterCard, Visa | online.barrons.com

The Fed’s slashing debit interchange shouldn’t have surprised anybody. The Fed was true to Congress’s intent. Its interchange caps will devastate large card issuers’ economics, and have powerful indirect effects across the payments value chain.

How real is the much hyped GPR prepay opportunity?

October 27, 2010

Analysis of:Green Dot's Wild Wal-Mart Ride | online.wsj.com

General-purpose reloadable (GPR) prepaid card specialists Green Dot Corporation and NetSpend Holdings, Inc. enjoyed successful, richly valued IPOs. Continued strong secular prepay growth, their achieving brand primacy and defending economics from their distribution networks, consumers migrating spend and banking/money management to GPR-prepay-card platforms, decelerating price erosion and a benign regulatory environment may justify the nose-bleed valuation multiples.

Amex vows to fight DOJ antitrust suit, MasterCard and Visa fold

October 7, 2010

Analysis of:U.S., AmEx in Antitrust Suit | online.wsj.com

MasterCard Inc.’s and Visa Inc.’s settlement with the DOJ removes a cloud of uncertainty, will likely have only a modest negative impact on card payment volume, and may bolster their defense in the consolidated interchange antitrust litigation. However, with more at stake and a stronger defense American Express Company is right to fight.

U.S. Calls China On Failure to Open Cards Market

September 19, 2010

Analysis of:United States Files Two WTO Cases Against China | www.ustr.gov

The U.S. WTO card-payments action against China is a long overdue step to pressure on China to open its enormous domestic card-payments market. While it will likely be years before the dispute is resolved, now there’s a glimmer of hope foreign card payment networks and processors will at some point be able to meaningfully participate in the renminbi card payments market.

Downplaying Durbin interchange amendment won't lessen its impact

August 8, 2010

Analysis of:Visa to a Digital World: Worries about financial reform have slammed the debit-card supplier's shares. Give it a little more credit. | online.barrons.com

Downplaying impending debit card network fee caps and rules changing how network markets work won't lessen their profound economic impact on Visa Inc., MasterCard, First Data's Star, Discover Financial Services, Fidelity National Information Services' NYCE, and Fiserv's Accel/Exchange.   

Durbin interchange amendment's exclusivity prohibition will gore network fees

August 4, 2010

Analysis of:Durbin Interchange Amendment Anti-Consumer, Anti-Innovation | www.americanbanker.com

Section 1075 of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act 's("the Durbin interchange amendment") prohibition on network exclusivity will result in a significant reduction in debit networks' processing fees and possibly, in the case of MasterCard's and Visa Inc.'s (V) signature debit products, in licensing fees as well.

Steve Case and Ted Leonsis throw in the towel on Revolution Money

November 23, 2009

Analysis of:Amex Tries to Buy a 'Revolution' | www.americanbanker.com

Wow! It’s a great country. American Express is paying $300 million for alternative payments venture Revolution Money. For a venture with virtually no revenue, no material clients, and, a faulty – or to be charitable unproven, business model, that’s a nice exit. Amex is acquiring an electronic payments platform, not a business. What it makes of it remains to be seen.

Network challenger uses handsets not cards, focuses on an underserved niche

November 16, 2009

Analysis of:Bling Nation Secures $20 Million in Series B Funding | www.reuters.com

Bling Nation is launching a new retail electronic payment system – a daunting challenge in a well served and intensely competitive market where scale and network effects matter enormously. However its targeted and novel approach may give it a fighting chance. Bling Nation uses mobile phone handsets rather than mag stripe cards as a payment account key and is focusing on underserved small community banks and merchants.

Star ventures online, PayPal seeks growth through Star licensees

November 12, 2009

Analysis of:First Data partners with PayPal to link debit cards to PayPal accounts | www.internetretailer.com

The Star and PayPal electronic payment networks are partnering to enable Star cardholders to use PayPal to spend online. This bolsters Star’s value proposition relative to other debit networks which in recent years have been winning market share. It also marks an initial step by the e-commerce giant to open up its proprietary payment network to other institutions to extend its reach and generate more PayPal payment volume.

Hostile Obama Administration Bodes Ill for the Credit-card Industry

April 21, 2009

Analysis of:White House to Put Credit-Card Rates in Cross Hairs | online.wsj.com

President Obama will sign whatever combination of the Barney Frank and Carolyn Maloney’s “Credit Cardholder Bill of Rights Act” and Chris Dodd’s “Credit Card Accountability, Responsibility and Disclosure Act” reaches his desk. It will: (1) chip away at credit-card issuers’ interest, penalty and administrative fees, (2) reduce revolving credit availability for riskier consumers, (3) cause credit-card issuers to preemptively raise interest rates and (4) increase government’s role in defining credit card products.

Retailers step up the demagoguery in anti-interchange campaign

April 14, 2009

Analysis of:Retailers, consumers squeezed | www.washingtontimes.com

Retailers are waging a no-holds barred campaign seeking government regulation of card acceptance fees and interchange. A barrage of advertising and inflammatory op-ed pieces such as “Retailers, consumers squeezed” make a revival of the “Credit Card Fair Fee Act” later this year more likely. If it or similar card payment fee regulation was enacted, card issuers, networks and acquirers would be hurt.

CompuCredit on the ropes

January 9, 2009

Analysis of:CompuCredit in $116 Million FDIC Subprime Settlement | goliath.ecnext.com

Government is moving to destroy the dominant US subprime credit card business model. Regulations curbing credit card fees mean subprime credit card specialists such as CompuCredit, First Premier and CreditOne and deep subprime product lines within full-credit spectrum issuers such as HSBC, will have to radically overhaul their business models to remain economically viable.  Subprime consumers will find unsecured revolving credit almost impossible to come by.

MasterCard removes Amex suit overhang

June 30, 2008

Analysis of:Amex to Get $1.8B in MasterCard Deal, Warns of Credit Woes | www.americanbanker.com

While MasterCard arguably will pay American Express too much, the settlement removes a troubling overhang.   It is time for MasterCard and Visa Inc. to focus their energies on fending off a potentially far more damaging threat: the “Credit Card Fair Fee Act of 2008.”

GE chose a less than optimal market in which to unload its US credit card business

June 27, 2008

Analysis of:Nobody's Snapping Up GE's Plastic: Possible Buyers of Private-Label Business Worry About Consumers' Shallow Pockets | online.wsj.com

Angst about the consumer credit environment and risk associated with GE Consumer Finance’s near-prime retail credit card portfolio, not surprisingly, have given a number of large US card issuers who otherwise should have been keen to bid, cause for pause. Nonetheless, for the right buyer – most likely a European FI such as Barclays, RBS or BNP, and the right price, GE’s US card business is a choice asset

Chicago Fed Payments Fraud: Perception versus Reality

June 26, 2008

Analysis of:Assessing the landscape of payments fraud | www.chicagofed.org

Conference take-aways:
(1) All payment systems – paper checks, truncated checks, pin and signature debit cards and credit cards and ACH are subject to fraud.
(2)  Fraud prevention systems need to take a holistic enterprise-wide rather than a point solution approach.      
(3) A huge amount of first-person fraud losses are miscategorized as credit losses. undefined·  
(4) How fraud risk is managed is affected enormously by payment system participants’ (consumers, issuers, networks, merchant processors and merchants) very different economic stakes.
(5) The payment system is very often better off addressing fraud collectively. =>> Opportunity abounds for better fraud prophylactics.

Plucky Revolution Money takes on payment giants

June 11, 2008

Analysis of:New Brand Pitches Security, Transfer Link | www.americanbanker.com

Revolution Money vies to win share away from the card payment network and money transfer establishment. It intends to compete as an open network, with lower base merchant acceptance fees, merchant-sponsored pos cardholder incentives, better fraud prophylactics and a money transfer feature. Reasonable as far as it goes. Nonetheless Revolution Money faces a daunting challenge and its $50 million in funding isn’t even table stakes.

Selander bullish on MasterCard earnings growth, but regulatory threat looms large

June 2, 2008

Analysis of:MasterCard "buy," target price raised | www.newratings.com

There’s little not to like in MasterCard’s evolving top and bottom line growth story, a story they could well – indeed should, beat, if! they can contain regulatory threats

MasterCard’s earnings growth acceleration credible if it can curb regulation

June 2, 2008

Analysis of:MasterCard on fire, again | dailybriefing.blogs.fortune.cnn.com

MasterCard’s  revamped top and bottom line growth forecasts are eminently achievable, assuming it can contain or better yet roll back regulatory restrictions.

Senators Durbin, Kohl, Specter and Snowe fish for basis to regulate interchange

June 2, 2008

Analysis of:A Senate Letter Ratchets up the Heat on Networks over Interchange | www.digitaltransactions.net

The card payment networks have been gradually stepping up their game as commercial enterprises and the markets have come to recognize the global payment networks’ immense intrinsic operating leverage, pricing power, growth prospects, and defensibility, and therefore value.  However neither MasterCard nor Visa has yet found an effective strategy to contain, much less to roll back, existential regulatory threats to their business.  If they do not, their enterprise value will be imperiled.

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