Payments and Banking Blogs

From PaymentsNews.com, they have assembled a link to several of the most recent and favorite payments and banking blogs. 

• Aneace’s Blog by Aneace Haddad
• Bankervision by James Gardner
• Banking Kismet by George Pasley
• Banking on Customers by Thad Peterson
• Banking Unwired by Ehab Bandar
• The Bankwatch by Colin Henderson
• The Digital Money Forum Blog by Dave Birch
• The FinanSer by Chris Skinner
• Forte Financial Blog by Erin McCune
• Javelin Strategy & Research Blog
• Mobile Banking by Brandon McGee
• Merchant Account Blog by Jamie Estep
• NetBanker by Jim Bruene
• OneTouch Online Purchasing Blog
• Payments Industry Thoughts by Will Burns
• Payment Systems Blog by David Bergert
• The Official PayPal Blog
• PIN Debit Blog
• WayTooHigh – The Credit Card Interchange Report

No to Clinton-McCain Gas Tax Holiday; Yes to Permanent Interchange Fee Holiday

Two of the presidential candidates jumped into the nation’s economic energy crisis today by proposing a “gas tax holiday” to save motorists money. 

Senator Barack Obama, was smart and chose not to side with Senator’s Clinton and McCain.   And, if the presidential hopeful really want to make an impact, rather than just reducing the record prices at the pumps by temporarily lowering taxes, he should demand that Visa and MasterCard immediately remove their merchant interchange fees at all service stations.  Just look at both card association’s record earnings this week [28% quarterly increase for Visa and more than doubling for MasterCard] to understand why this is a national imperative.  There is a reason Visa and MasterCard’s stocks are soaring – windfall profiteering at the pumps

The argument that American’s are entering the peak driving season, and thus will increase demand on prices is wrong.  Motorists are driving less, and getting rid of their gas guzzling vehicles in exchange for more economical automobiles.  Even at ScanMyPhotos.com, we are providing free gas cards to help soften the effects from consumers driving less. Last week, The Los Angeles Times and the Associated Press reported on our campaign for providing free gas.

So far, none of the presidential candidates have pointed fingers at Visa and MasterCard and its member banks for their windfall profiteering from charging upwards of $2.50 in credit card interchange fees every time a motorist fills-up with a credit card.

“Gas Tax Holiday is a Dumb Idea:” Robert Reich

You Have to Hand it to MasterCard’s Spokesperson, Sharon Gamsin

Today’s Associated Press story, “Charges Fly Over Shops’ Credit-Card Fees:  Retailers, Credit Card Companies Battle Over ‘Biggest Credit Card Fee You’ve Never Heard Of,'” has a new twist.

Click here to read the article.

MasterCard’s spokesperson, Sharon Gamsin explained that “The company’s interchange rate has risen less than the rate of inflation…”  Nice point if you didn’t understand that the same technology, innovations and unparalleled growth of telecommunications services that make electronic payments more efficient.  These Moore’s Law advances that should bring down costs (every 18 months costs should be reduced in half) have led to international phone calls for just pennies a minute, a trilobite of memory for a few hundred dollars and so on. 

The point is that MasterCard and Visa’s credit card cartel and its interchange fee pricing structure should not be put in the same equation as the rate of inflation.  These are not eggs and milk; it’s an electronic payment network that relies to a grater degree on the logic of Moore’s Law.  If that were the case, then lap top computers, cell phones and other technology products would be rising, not declining.

As for the price of an international phone call, could you imagine what it would be pre-phone card and back when AT&T held its anticompetitive monopoly?

 

What Does Microsoft, Google and Yahoo Have in Common With Visa and MasterCard?

Visa Inc: Olympic Torch Relay in SF

If today’s near debauchery in an American city over the Olympic torch relay is any indication of what’s to come, Visa Inc. and its Olympic sponsorship must also be in question. The International Olympic Committee and the world is watching, so too are the millions of merchants that accept Visa, along with the millions of Visa cardholders. The opposition to the Beijing Olympics is gaining attention and ferocity. The message over this summer’s Olympics is clear and if you thought Visa and MasterCard’s interchange battle was cemented in protest, just wait.

YouTube scenes from protesters in U.S. on April 9th

YouTube!

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Visa 2008 Olympic Games National Promotion

“Confusion along San Francisco Olympic torch route” (via Reuters)

 

 

 

 

 

“The Credit-Card Fee Market Isn’t Working” (via WSJ)

Click here to read the April 8th Wall Street Journal “Letter to the editor” from Rep. John Conyers (D., Mich.), Chairman House Judiciary Committee and Rep. Chris Cannon (R., Utah), Ranking Member House Judiciary Subcommittee on Commercial and Administrative Law.

—————————————————-

In the Journal’s March 29 editorial, “Credit-Card Wars,” you note that, “as consumers we’d like to see interchange fees come down too, but through market innovation and competition, not Congressional fiat.” We agree. That’s why we introduced the bipartisan Credit Card Fair Fee Act: It facilitates direct negotiations between merchants and the credit card industry on interchange fees.

This approach is necessary because of concerns about coordinated price fixing among issuers leading to less competition and higher rates. For example, Visa has increased the average interchange rate 17% (26 basis points) in recent years despite dramatically improved processing technology and rapidly rising card volume. As the Journal notes, “Economies of scale should be driving [interchange] fees down, as in most other service-fee industries.”

In fact, Americans pay nearly three times as much on average as Europeans in credit-card interchange fees for the same set of services — nearly 2% of every retail purchase. This amounts to nearly $36 billion imposed on consumers through higher retail prices. And the interchange fee is the largest credit-card fee of all — dwarfing credit-card late fees, over-the-limit fees, balance transfer fees, annual fees, inactivity fees, penalty interest fees, and even ATM bank fees.

Yet the editorial says the market will ride to the rescue and bring down excessive credit-card interchange fees. That is unlikely unless there are negotiations and proceedings as set forth in our legislation. In an economy in which, as the Journal notes, credit transactions are now king and cash has been dethroned, how can the vast majority of merchants turn down plastic from the two major credit-card companies, who control approximately 80% of the market?

We introduced the Credit Card Fair Fee Act to create an open and transparent environment that doesn’t exist today, one that will not only spur the major credit-card companies to negotiate fairly on interchange but also to provide the opening for lower-cost interchange credit-card brands. Our bill would lead to competitive market-based interchange rates and terms.

Rep. John Conyers (D., Mich.)
Chairman
House Judiciary Committee

Rep. Chris Cannon (R., Utah)
Ranking Member
House Judiciary Subcommittee on Commercial and Administrative Law
Washington

“Costs Are ‘Killing’ Gas-station Owners” (via Herald Ledger)

Click here to read the article reported by Jennifer Hewlett in the Herald Ledger on April 7.

Excerpt:

Credit card interchange fees are “killing” convenience stores that sell gasoline, says Roth Bullock, who owns 16 such stores in Kentucky and Indiana.  Since 2000, 12 to 14 large companies operating convenience stores in Kentucky have gone bankrupt, and credit card fees are a big part of the reason, he said.

For every dollar spent on gasoline using a credit card, about 2 cents goes to the credit card company. Credit card interchange fees have risen dramatically in the past several years, and more and more people are using credit cards, as well as debit cards, which also carry fees, to pay for gas.

“It’s the second-largest expense we have besides payroll. It is double what utilities are,” said Bullock, owner of Bullock Oil Co., which operates Cowboy’s Food Stores in Kentucky and Indiana.

“Richard Maxedon, executive director of the Kentucky Petroleum Marketers Association, said that many small gasoline retailers in Kentucky are selling out to larger operators because they can’t afford to stay in business any longer, in part because of card fees.

Two Chinese Companies [Government] Bails Out The Banks Through Visa Inc. Shell Game

If you watched 60 Minutes on Sunday evening, you heard a frightening scenario that the Chinese government might be gaining unreasonable power, influence and control of U.S. businesses, especially in the financial services sector.

According to the Teshreen Press and Publishing Foundation, two Chinese nationals now own ~$400,000,000 in Visa, Inc., which means that those two recent checks totaling nearly 1/2 billion dollars to the banks – which owned the giant credit card processing cartel – was paid off by China.  This raises so many concerns, from attention towards Visa’s Olympic sponsorship, how interchange merchant fees are structured in China, to questions of whether Visa and its member banks might gang up with China to wound the sovereignty of Taiwan?

We wonder whether Visa Inc cardholders understand these ramifications and the Chinese connection?

• China Life purchased nearly ~300 million dollars in Visa Inc.

• China’s Sovereign Wealth Fund also bought ~$100 million dollars in Visa Inc.

Click here for more information.

[NEWS UPDATE: Olympic Torch Snuffed Out In Paris]

 

“Visa Europe Says It Expects to Strike Deal With EU to End Antitrust Probe” (UPDATE via AP)

Click here to read the AP article in The Financial Times

Will the government Bail Out Visa and MasterCard Next?

We’re just saying… based on the rash of Federal Reserve and government bail outs to the financial services industry, we can’t help but wonder whether the next target for a giant handout will be Visa, MasterCard and its thousands of member banks when payment due on their merchant interchange antitrust liability comes do, as we expect it will?

Will Wall Street and regulators explain away that the banks again will need financial support to cover their multi billion dollar antitrust liability, should they be found guilty of illegal price-fixing? 

Visa and MasterCard’s Interchangee Fee “Adjustments”

[UPDATE, original post on April 1st]

Based on the letter sent to Chase Paymentech customers, we were advised that the announced Visa and MasterCard interchange fee “adjustments” would take place on April 1 and be posted on their website.  Well, it’s April 1st and Visa still has the old rates listed. 

[Editors note, (April 3) We just checked back today and noticed that Visa’s new fee schedule is now online, but try to figure out what each individual payment transaction charge is and why is Visa’s only five pages when the MasterCard schedule is more than one-hundred?]

At least MasterCard complied and has the new 103 page rate schedule posted, but click here to see if you can guess what the heck is going on.  

For us, the best part of MasterCard’s [April Fool’s Day] posting was this gem: “… MasterCard has no involvement in acquirer and merchant pricing policies or agreements.”  Good stuff, except when you understand that those that did were the thousands of banks, and with representation  on MasterCard’s board of directors which owned MasterCard, prior to the IPO and still maintains a nearly 50% investment.

MasterCard U.S. and Interregional Interchange Rate Programs

Assault on Visa and MasterCard’s Merchant Fees Escalates in the WSJ

The magnifying attention to what we assert is illegal price-fixing by Visa, MasterCard and its member banks is gaining concentrated global attention.

After a recent Wall Street Journal commentary (Credit-Card Wars,” Review & Outlook, March 29) that was favorable to one of the publication’s largest advertising categories – financial services – we anticipated a monstrously loud examination from retailers and the public. Today it happened.

There were four letters published in Thursday’s WSJ “Letters to the Editor” section.  Our guess is that many more did not make the cut either, including ours (see below).  Then again, we already had one published on Jan 10th. See link.  For an overview of today’s response and our letters, see below.

• Merchants Must Submit To MasterCard’s Power
  WSJ, January 10, 2008; Page A13

  The European Union has found, again, that interchange fees charged by MasterCard to merchants are fixed at anticompetitive levels. Instead of recognizing that the nearly $40 billion annual hidden tax on merchants and consumers is based on illegal price-fixing, Joshua Peirez of MasterCard Worldwide hauls out the usual replies (“EU Killing of Interchange Fees Won’t Help Customers,” Letters, Dec. 28).

  The fact is that consumers, the marketplace and technology, not interchange fees, are what force innovations within the electronic-payment network. The actual cost of an electronic payment is a tiny fraction of the total fees collected, yet Mr. Peirez suggests that “interchange fees are necessary to fairly share the cost of an electronic payment system.”

  Merchants are unable to pay a fair price for using MasterCard’s (and Visa’s) payment network; we are all forced to submit to their market power and their member banks’ ability to collectively fix interchange fees at noncompetitive levels. MasterCard’s long history of anticompetitive price-fixing corrupts its understanding of Economics 101, where the marketplace controls competition, not a board of directors who stand accused of illegal price-fixing.

  Mitch Goldstone
  President and Chief Executive
  ScanMyPhotos.com
  Irvine, Calif.

  (Mr. Goldstone is the lead plaintiff in merchant-interchange litigation against Visa, MasterCard and leading member banks.)
  

“Are Credit-Card Fees Fair, to Whom, and How Best to Set Them?”  LETTERS/EXCERPT:

• Interchange fees in the U.S. are far higher than those in other western countries. Unfortunately, a market solution is not currently possible because of the credit-card network rules that insulate interchange fees from market discipline. Some credit cards (those with lots of rewards points) cost merchants twice as much as others.

  In a normal, free market, we would expect to see these cards priced differently. Credit-card networks, however, forbid merchants to charge more for credit cards than for other, cheaper payment methods, to charge different prices for different card brands or cards within a brand, to accept only certain cards within a brand, or to accept cards only at certain locations and for certain transactions.

  Innovation and competition cannot push down interchange rates until the card networks’ artificial constraints on the market are banned.

  Adam J. Levitin
  Associate Professor of Law
  Georgetown University Law Center
  Washington
  ————————————————-

• Your editorial comes to the conclusion that soaring Visa and MasterCard “interchange” fees that cost merchants and consumers more than $35 billion each year are no big deal because “retailers have options to avoid the fees.”

  You say merchants can offer a cash discount. In fact, Visa and MasterCard rules make it almost impossible for anyone but gas stations to post both cash and credit prices. And even if they didn’t, the card companies’ systems don’t tell the merchant how much interchange is being charged at the time of purchase, making it impossible to calculate how much of a discount to offer.

  You also claim that large chains negotiate lower fees. There are lower-rate categories for a few large merchants based on dollar volume, but Visa and MasterCard refuse to negotiate these rates and impose them on a take-it-or-leave-it basis just as they do for smaller merchants.

  Finally, with Visa and MasterCard controlling more than 80% of the market, the question of competition isn’t about other cards or PayPal. The issue is that the thousands of banks issuing Visa and MasterCard cards won’t compete to lower interchange rates. Instead, they have historically come together and agreed to all charge the same high fee for each specific type of card. As we have testified before the House and Senate Judiciary Committees, that is a blatant violation of federal antitrust law.

  Visa/MasterCard rules effectively require that billions of dollars in interchange costs be passed along to consumers — a hidden credit-card fee of more than $350 a year — yet most families don’t even realize their pockets are being picked. During the shaky financial times you note, what better way to help the economy than to bring the greed of the card companies under control?

  Tracy Mullin
  President and CEO
  National Retail Federation
  Washington
  ——————————————–

• One important point to merchants that was not developed in the article: It is not the “basic” set of fees for accepting charge cards that many of us take issue with. What aggravates so many merchants and service providers is the fee surcharges that are unilaterally imposed upon merchants for accepting certain types of credit cards most often associated with the multitude of rewards programs so widely advertised.

  How do the likes of Capital One so generously offer the merchandise, discounts, and cash back without losing money? They attach a surcharge to these cards over and above what the merchant expects to pay for accepting these credit cards. The merchant must pay the extra fee. Merchants have no control over the surcharge amount which they are charged, so the card issuers can be ever more generous to the card holder at the expense of the merchant.

  Bill Gardella, Jr.
  Norwalk, Conn.
  ——————————————-

• Credit-card fees are an ever growing expense for all retailers. Credit-card fraud is rampant. Consumers are now starting to default on their credit-card debt the same way they’ve defaulted on mortgages. Your argument that if it ain’t broke, don’t fix it, doesn’t hold here. Would you have said the same thing about subprime mortgages two years ago? Government should be monitoring this ever expensive and important industry.

  Stuart Burke
  Hopkinton, Mass.

Our prevous letter to the WSJ didn’t make the cut, but, here’s a copy in response to a WSJ article.

Dear Editor (drafted, Feb 29), There’s more to Eric Felten’s “the burden of gratuitous gratuities” (Weekend Journal, Feb 29) than just that flaunty tipping jar at Starbucks.  Most consumers don’t know that when they use a credit or debit card to fund their daily fix of java, it adds to a very hefty tip for Visa, MasterCard and its thousands of member banks that make up their cartel.  As Starbucks attunes away from its financial miscues, a giant cost savings would be to return to cash to save consumers from the merchant interchange fees.  Each year, electronic payment interchange fees – including those micro-payments of a buck or two bestow nearly $40 billion in cash to the banks.  These rich fees were once cost-based and designed for clearing those manual credit card imprinter carbon copy transactions on the Visa and MasterCard network.  Today, the lack of competition (Visa and MasterCard own nearly 80% of the market) and the unbridled collusion forces the question: why are these obsolete fees still in force? 

Technology and innovations enable instant, automated and efficient settlements that no longer warrant these tips to the banks

Mitch Goldstone
Co-Editor – WayTooHigh.com – The Credit Card Interchange Report Excerpts from The Wall Street Journal, April 3, 2008

Visa Settlement! Win One for EU Competiton Commissioner Neelie Kroes

According to an April 2nd article published by Thomson Financial, Peter Ayliffe, chief executive of Visa Europe Ltd. “wants a ‘negotiated settlement’ with the European Commission over its cross-border interchange fees, adding that the payments card group seeks an agreement as soon as possible.”

While Mr. Ayliffe said “a settlement is the ‘right way forward,'” the larger question we have is why a localize an agreement?  Interchange fees are interchange fees and the rates in the EU are less than half the fees charged in the U.S.  Why are those rates “justified” in countries with sub-par technology and securities issues, when compared with the much higher fees in the U.S.?

“Congress Grills Oil Execs on High Prices” (via AP)

The joke was on American consumers today – April Fool’s Day – in Washington, D.C.

Congress heard from oil industry executives to discuss the record-setting economic energy crisis and profiteering at the pumps.  The group that was not there were MasterCard, Visa and the major banks.  And, the question to them that was not asked was why they are able to demand a percent from every fill-up when electronic payment cards are used?  The banks reap about $2.00 in interchange fees from every fill-up when you use plastic to pay at the pumps.

[news via AP]