“Consumers Feel the Next Crisis: It’s Credit Cards” (via NY Times)

Some reward programs have also gotten stingier as lenders cut corners to save money. Card companies, for example, have taken to substituting cheaper brands for a Sony big-screen television as a way of lowering the cost of their redemption prizes.

For less creditworthy customers, issuers are pulling back on promotional offers that allowed borrowers to pay no interest for months as they try to get ahead of stiffer lending rules that have been proposed by federal banking regulators and Congress.

The regulations, while beneficial to consumers, will curb profits on card issuers’ riskiest customers. JPMorgan said that it was withdrawing some teaser-rate loans that were only marginally profitable. Discover Financial shortened the duration of its zero-balance offers.

Read more.

[source: NY Times]

MasterCard: The Most Absurd Statement in the History of the Credit Card Industry

Visa, MasterCard to pay $2.75 billion to Discover in antitrust settlement

Visa Inc. and MasterCard Inc. separately disclosed Monday a total of $2.75 billion in settlements to resolve antitrust claims filed by industry rival Discover Financial Services Inc.

From today’s MasterCard press release: 

“We believe Discovers lack of success resulted from decisions that created a business model that is not attractive to bank issuers. Nonetheless, we chose to settle this lawsuit to avoid the uncertainty and distraction of a lengthy jury trial. This result, which is in no way an admission of liability, is in the best interest of our shareholders, our customers and our company,” said MasterCard General Counsel Noah J. Hanft. “We will continue to focus on out-competing Discover in the marketplace, where real-world performance is what counts.”

Either MasterCard’s General Council is so distant from reality, or he is…. 

As a lead plaintiff suing his company, I will reserve my disdain and further characterisation of his comments.  However, as an entrepreneur who owns one of the millions of companies which are forced to pay their and Visa Inc’s unfair merchant discount fees, this is outrageous. MasterCard is paying nearly a billion dollars to Discover Financial Services, yet they are taking no responsibility?  Really, now?

If I was a MasterCard shareholder, I would want to know why they are writing this check if they claim because it is just a distraction?   When in the history of commerce have you ever heard of a multinational conglomerate sending this type of message?  I just hope the Federal bailout of the financial system isn’t backing the payment from the banks, which own nearly half of MasterCard

Fortunately, they still stand accused of the nation’s largest antitrust litigation and for me, personally, I will not let them off the hook.  I want a jury to hear the whole story.  If you ever watch the film Erin Brockovich, this litigation is sure to garner exponentially more passion and emotion.  Discover should have demanded MasterCard not only write the check, but apologize for their discretion.  Mr. Hanft and the entire MasterCard legal team are a disgrace. 

 Could you ever imagine any-sized company writing this type of check if they were not guilty?  The member banks and MasterCard are an embarrassment.  Can’t the banks do anything right?  Along with Visa International, which collectively control a giant 80% market share of the electronic payment network, both wield extraordinary power through their collusive anti-competitive price fixing.

Just how vast is Visa and MasterCard’s cash-cow cartel?  Do you know of any other business which can pay out billions followed by its stock rising?  Visa of San Francisco will pay $1.89 billion, and MasterCard of Purchase, N.Y., will pay $862.5 million.  Previously, Visa settled with American Express for a similar suit for about $2.25 billion, MasterCard agreed to pay AmEx in June $1.8 billion.

“MasterCard Settles Litigation with Discover Financial Services; Will Take a Third Quarter Net After-Tax Charge of $515.5 Million” (via PRNewswire)

PURCHASE, N.Y., Oct 27, 2008 /PRNewswire via COMTEX/ — MasterCard Incorporated today announced that final agreement has been reached to settle outstanding litigation brought against MasterCard and Visa by Discover Financial Services. As a result, MasterCard will take a net after-tax charge of $515.5 million in the third quarter of 2008.

MasterCard will pay $862.5 million of the total $2.75 billion settlement reflecting the terms of a judgment-sharing agreement with Visa that was finalized in July, 2008. In addition, in connection with the settlement, Morgan Stanley, Discover’s former parent company, agreed to pay MasterCard $35 million, resulting in a net settlement of $827.5 million. MasterCard will make its payment to Discover and receive the payment from Morgan Stanley in November.

“We believe Discover’s lack of success resulted from decisions that created a business model that is not attractive to bank issuers. Nonetheless, we chose to settle this lawsuit to avoid the uncertainty and distraction of a lengthy jury trial. This result, which is in no way an admission of liability, is in the best interest of our shareholders, our customers and our company,” said MasterCard General Counsel Noah J. Hanft. “We will continue to focus on out-competing Discover in the marketplace, where real-world performance is what counts.”

About MasterCard Incorporated

MasterCard Incorporated advances global commerce by providing a critical economic link among financial institutions, businesses, cardholders and merchant worldwide. As a franchisor, processor and advisor, MasterCard develops and markets payment solutions, processes over 18 billion transactions each year, and provides industry-leading analysis and consulting services to financial institution customers and merchants. Through its family of brands, including MasterCard(R), Maestro(R) and Cirrus(R), MasterCard serves consumers and businesses in more than 210 countries and territories. For more information go to www.mastercard.com.

[source: PRNewswire]

“‘Simultaneous’ rise in credit card fees galls merchants” (via Ottawa Business Journal)

Posted from an article in The Ottawa Business Journal – By Elizabeth Howell, Ottawa Business Journal Staff

Mon, Oct 20, 2008 12:00 AM EST

Local retailers call for regulation to halt shrinking bottom lines

A coalition of businesses fed up with rising credit card interchange fees has launched a complaint with the federal government’s independent Competition Bureau, said a representative from the Canadian Federation of Independent Business (CFIB).

Garth Whyte, executive vice-president of the Ottawa-based association, said Visa and MasterCard – who control 80 per cent of the Canada’s credit card market – sent out concurrent notices alerting merchants to fee hikes in June and then again this month.

“There’s been simultaneous increases in both Visa and MasterCard charges, (so) we lodged a formal complaint because Visa and MasterCard have a duopoly,” Mr. Whyte said.

“We think we should investigate whether these increases were an arrangement or were pure coincidence. But it’s happened again in October for both of them.”

The extent of the overall percentage rise in interchange fees – an unregulated cost paid by retailers every time a consumer uses a credit card in a store – is unclear due to the number of different types of credit cards affected, each with their own rates attached to them.

But the CFIB said its members have been paying far more to credit card companies than earlier this year – particularly for premium cards offering shopping rewards.

The Retail Council of Canada (RCC) has estimated the average interchange fee in Canada is two per cent. Australia, which regulates its fees, sits at 0.45 per cent. The U.S., which has a regulatory bill before Congress, is at 1.75 per cent.

As a result, some retailers have said they simply can’t stomach the increase – a single Quickie Convenience Stores outlet saw its fees jump from $60,000 last year to $98,000 this year, according to a company official.

Chris Wilcox, general manager of the Ottawa-based convenience store chain, speculated merchants may have to take the radical step of not accepting credit cards.

“That’s the only way we can have any action on this: to have a protest, stop accepting these cards, to get some attention. Whether or not that happens, we’ll see,” he said. “We’re concerned, and quite worried about this. Canada is one of the few countries in the world that doesn’t regulate this sort of stuff.”

Marilyne Nahum, an official at the Competition Bureau, said she was unable to discuss the grievance.

“We actually conduct our investigations in private, so I can’t confirm whether or not we received a complaint about the issue,” she said.

MasterCard refused comment except to point to an Oct. 1 press release on its website. “The RCC and CFIB are attempting a cash grab from consumers,” the statement read. “By attempting to make merchant fees an election issue, the RCC and the CFIB are essentially calling upon politicians to intervene in commercial matters between private-sector entities.”

“It is important to note that Visa Canada’s effective interchange rates have remained flat for 35 years,” read a similar statement from Visa, dated Oct. 6.

Indeed, faced with the ongoing credit crunch, credit card companies could have to increase fees simply to maintain profits – just like any other business, pointed out Elizabeth Evans, director of the Ted Rogers School of Retail Management at Ryerson University.

At the same time, she cautioned, retailers in Canada have to be competitive with other countries. “Like many things in the Canadian business structure, our costs are higher than they are globally in many instances,” she said.

“This current economic crisis is bringing this home more than (anything else) possibly could. How we do our businesses here is not the only thing that influences our outcomes.”

RCC agreed merchants are facing “desperate times,” but added they aren’t in favour of a credit card strike. The council said it’s in discussions to persuade MPs to clamp down on fee hikes.

“The challenge is we have so many diverse retailers,” said Derek Nighbor, the council’s senior vice-president of national affairs.

“If a retailer is depending on the biggest chunk on their business from credit cards – as many are – it could be difficult financially for some merchants or retailers to (protest). . . The effectiveness of that kind of a campaign in other countries has not been successful because you need everyone to hang together.”

He added that premium cards can physically look the same but have different rates attached, all depending on the customer.

“This is a consumer issue,” he said. “This is affecting prices in Canada at a time when retailers are fighting to keep prices competitive.”

[source: Ottawa Business Journal]

StopStickingItToUs Coalition Backed by 120,000 Canadian Companies

StopStickingItToUs.Com

 Click here to listen to the StopStickingItToUs radio ad running this week in several cities across Canada.

The StopStickingItToUs Coalition is a group of Canadian associations, led by Retail Council of Canada and backed by over 120,000 businesses from coast-to-coast, that is standing up to the Big Credit Card Companies to put a stop to skyrocketing fees. Join the fight and take action by writing your MP and sounding the alarm about these fees.

The coalition will also be actively involved in the proposed re-structuring of Interac. Interac, Canada’s efficient and cost-effectve debit system has applied to the Competition Bureau to re-structure and join the Big Credit Card companies in charging higher fees. Coalition members intend to act as interveners in the process and fight to keep Interac from moving ahead with this change as it will be detrimental to merchants and all Canadians.

StopStickingItToUs Coalition Members
Retail Council of Canada, Alberta Liquor Store Association, Canadian Booksellers Association, Canadian Convenience Stores Association, Canadian Council of Grocery Distributors, Canadian Federation of Independent Grocers,

Canadian Jewellers Association, Canadian Restaurant and Foodservices Association, Hotel Association of Canada, Ontario Accommodation Association, Ontario Restaurant Hotel and Motel Association, Retail B.C, The Canadian Independent Petroleum Marketers Association, The British Columbia Restaurant and Food Services Association, The Retail Merchant’s Association of Canada (Ontario). Wine Council of Ontario, Mega Group Inc. Bicycle Trade Association of Canada.

Do you know what you pay to Big Credit Card companies in hidden fees everytime you shop?

Canadian consumers paid over $4.5 billion in hidden credit card fees last year alone – fees we all pay at the checkout to cover the cost of lavish incentive programs and corporate credit card benefits, even if you don’t have one!

Now these companies want to raise these skyrocketing hidden fees. With their plan, you pay more, your local retailer pays more and the only ones getting rich are the Big Credit Card companies. If they get their way, seniors, students and low-income Canadians will spend even more subsidizing corporate airfare points and luxury discounts every time they shop.

Retailers are at the heart of every Canadian community. There are over 227,000 retail stores in Canada – roughly 1 in 10 businesses is a retail establishment – an 95% of all retail stores in Canada are small or independent. They provide jobs for over 2.1 million Canadians and support local charities, sporting and cultural events from coast to coast.

Local retailers and businesses are taking action to stand up for consumers and put an end to these skyrocketing hidden fees.

Big Credit Card companies need to stop sticking it to us!

MEDIA

Plastic cuts both ways

Most small businesses couldn’t survive without accepting credit cards. But a new fee structure is making it difficult for merchants to predict what they’ll pay for the privilege.Read more

Hidden fees

Re: Retail council is wrong, Sept. 29.Letter-writer Tony Maraschiello of MasterCard Canada suggests a disinformation campaign by retailers, but he doesn’t dispute that Visa and MasterCard control 80 per cent of the market in Canada and they are unregulated. These foreign-owned credit card companies collected more than $4.5 billion in interchange fees from Canadians last year.

Read more

No disputing the facts over credit card fees

Tony Maraschiello of MasterCard Canada accuses retailers of a “cash grab” simply because we are asking for some control of the credit card companies’ “cash cow.”He suggests a disinformation campaign by retailers, but he doesn’t dispute the facts: Visa and MasterCard control 80 per cent of the market in Canada and they are unregulated.

These foreign-owned credit card companies collected over $4.5 billion in interchange fees from Canadians last year.

Read more

Is MasterCard circumventing the EU decision by implementing new card fees?

EuroCommerce has today strongly warned against increases in payment Card Schemes fees being introduced from 1 October 2008. From this date, card scheme MasterCard intends to significantly increase its Card Schemes fees to merchant acquirers (and therefore ultimately on to the merchant) for both MasterCard credit and Maestro debit cards across Europe. In some markets, MasterCard have indicated that the domestic card scheme fee will increase by up to 161%.

Read more

Chamber CEO slams hike on credit card transactions

The CEO of Fredericton’s Chamber of Commerce is adding his voice to leaders of other retail and business groups in condemning Visa and MasterCard for launching merchant fee hikes.

Read more

Candidates slam credit card companies

Federal Conservative candidate Keith Ashfield says he supports small-business owners in Fredericton who are upset about hikes to Visa and MasterCard merchant fees.Read more

Big Help for US Small Business: House passes Credit Cardholders’ Bill of Rights Act

The U.S. House of Representatives on Tuesday passed the Credit Cardholders’ Bill of Rights Act (H.R. 5244), legislation to rein in unfair and deceptive credit-card company practices, on a vote of 312 to 112, said the Merchants Payments Coalition (MPC), a group of retailers, including convenience stores and gas stations, fighting against unfair credit-card fees.

Read more

Credit Card Fees on CTV Consumer Alert

Credit card costs
Pat Foran of CTV Toronto on how the rising cost to retailers of accepting major credit cards could be passed on to consumers.

Click here to view

Retail council leads charge against mounting credit card fees

A shop-owner forwarded an e-mail from the Retail Council of Canada the other day. It appears the council, which represents 40,000 storefronts across Canada, is attempting to organize opposition to ongoing increases in credit card fees, the “interchange fees” card companies charge retailers for the right to conduct business though Visa, MasterCard, American Express or any of the other major credit cards.

Read more

Retail council wants credit card fees examined

The Retail Council of Canada wants to make hidden credit card fees an election issue. The group, which represents more than 40,000 storefronts across the country and calls itself ‘the voice of retail in Canada,’ is targeting interchange fees, what card companies charge retailers for their service.

Read more

Click here to learn more.

[source: StopStickingItToUs.Com]

 

 

 
September 22nd, 2008

September 24th, 2008

September 24th, 2008

September 24th, 2008

October 1st, 2008

October 1st, 2008

October 2nd, 2008

October 3rd, 2008

October 6th, 2008

October 14th, 2008

 

“Credit Card Firms Cash in on Fees” (via TheStar.com)

[reposted from The Toronto Star, October 19, 2008, Reporter: Ellen Roseman]

Many Canadians received upgraded credit cards earlier this year.The new Visa Infinite cards caused an uproar. People said they didn’t ask for them and didn’t want the inconvenience of changing their recurring payments to a card with a different number.

“Card issuers are more than happy to help cardholders move over any pre-authorized debits, ” said Visa Canada spokesperson Tania Freedman at the time.

Why were customers getting more credit card benefits without higher annual fees? The answer soon became clear to businesses that accepted the upgraded Visa cards. They were subsidizing the cost through higher percentage fees paid to banks.

Two business groups started protest campaigns, hoping to turn this into an election issue.

“We don’t know how these increases can be sustained without sneaking into the pricing system,” says Catherine Swift, president of the Canadian Federation of Independent Business.

Charities are joining the fight, says Derek Nighbor, senior vicepresident of the Retail Council of Canada. They’re worried about higher costs cutting into their donations, since major donors tend to pay by credit card.

The Australian government took action in 2002 and capped merchants’ fees for credit cards at 0.5 per cent. In Canada, retailers pay an average fee of about 2 per cent.

Businesses are bracing for another round of increases. MasterCard Canada changed its fee structure on Oct. 1, increasing the charges for high spenders.

“High-spending cardholders are worth more to a merchant,” says Kevin Stanton, president of MasterCard Canada. “They’re usually part of a loyalty or reward program and they spend 40 per cent more than other cardholders.

“They’re very desirable and highly valuable.” MasterCard has attacked the protest campaign, saying the business groups failed to tell the whole story.

“Consumers do not pay transaction fees for merchants’ credit and debit card processing any more than consumers directly pay merchants’ rent, staff wages or other operational costs,” MasterCard says at its website.

“The CFIB and RCC have deliberately confused and combined references in their materials to merchant fees, which consumers do not pay, with fees that consumers may pay as part of their credit card agreements.” Australians were no better off than Canadians after merchant fees were capped, MasterCard says.

“The reductions were not passed on to consumers as lower prices.” While debit card fees are still low, business groups fear they could go up as well.

Debit card fees average 6 cents per transaction. Unlike credit card fees, they’re not calculated as a percentage of the sale price.

Debit transactions are processed through Interac, a nonprofit organization that sets fees based on the cost of processing them.

Interac has asked the Competition Bureau about restructuring itself as a for-profit entity to compete with Visa and MasterCard, which are trying to increase their share of the debit card market.

That’s why merchants are campaigning hard to cut things off before they start.

[source: TheStar.com]

 

 

 

Visa and MasterCard Responds to Global Recession by Maintaining High Merchant Fees

When it comes to Visa and MasterCard’s nearly $50 billion annual hidden tax on Americans, they are in a world all unto themselves.

The economic realities of a global recession and market meltdown is universal, yet retailers are not seeing any real relief from the fees we are forced to pay the banks and those “discount” fees to Visa and MasterCard.

Heck, even OPEC and its cartel-commandeering of gas prices were forced to lower their fees – and big time!  The housing industry is in turmoil, auto manufacturers and car dealers are hemoraging and gas is less than half the cost from just a few months ago, yet interchange fees are stubbornly high.

In the past few months, oil prices have dived below a (once whopping) $70 a barrel; in the past few months crude prices have lost more than half its value.

These are huge numbers. Consumers are buying less and everyone is impacted, even OPEC. Then there is Visa, MasterCard and its member banks and their unbridled greed. They have the market power and strength to collude and fix prices – Visa and MasterCard control about 80% of the credit card business.

The world is hurting and the two giant credit card associations and its thousands of member banks are doing nothing about it, or so it seems. They are artificially keeping those rates at record levels. Why exactly do merchants in the U.S. pay nearly three times other industrialized nations’ interchange fees?

The recent victory by Discover Financial Services, literally on the courthouse steps, flaunts the card associations’ impudence and disregard.  Price fixing, unfair fees and scorn for their customers are a hallmarks for Visa and MasterCard.

Oil price declines are just another example of how powerful the banks are, and just how remorseless they are by protecting their mighty credit card fee scheme.  It seems that they do not care and instead want to milk consumers and merchants for every penny, up to the last minute.

In July, when oil prices peaked, the interchange fees were still at near record levels. Technology, efficiencies and now, the global economic crisis is having no impact on the fiefdom enjoyed by the banks.  Perhaps as the Federal government nationalized the banks, they will demand that their “partners” seize upon this opportunity to review their interchange fees?

After all, the U.S. government is also a player in the merchant interchange battle – they pay millions each year in fees when people charge with credit and debit cards for services and products sold by the government.

In an earlier WayTooHigh.com posting, I quipped that a barrel of gas would more likely fall to $50 than interchange fees be lowered. {who would have known?]  Interchange fees are the cost that merchants are forced to pay to the banks, and in turn to Visa and MasterCard though a not-very “discount” fee.

“Looks Like Discover Holds The Cards” (via Forbes)

Forbes – NY,USA
It seems a nasty bit of litigation will be avoided by MasterCard and Visa, but at what cost is yet to be seen. The world’s two largest credit card … Read more

“Discover Settles Visa, MasterCard Antitrust Lawsuit ” (via Bloomberg)

Oct. 14 (Bloomberg) — Discover Financial Services, the fourth-biggest U.S. credit-card company, reached a settlement with larger competitors Visa Inc. and MasterCard Inc. of an antitrust lawsuit that was scheduled to go to trial today.

The accord, reported over the telephone by a clerk to U.S. District Judge Barbara Jones in Manhattan, came as jury selection was to begin in a trial over alleged efforts by Visa and MasterCard to stifle competition. Discover sought as much as $18 billion in damages from its rivals. The clerk, who declined to be identified, said she was unaware of the settlement amount.

Jones had ordered Visa and MasterCard in 2001 to stop forcing banks to choose between their cards and ones from Discover and American Express Co. Her order came after the Justice Department sued the credit card giants for antitrust violations. The U.S. Supreme Court refused to review the decision on Oct. 4, 2004. Discover sued the same day.

Discover, based in Riverwoods, Illinois, wasn’t to be the sole beneficiary of the settlement. As part of a spinoff from New York-based Morgan Stanley in June 2007, the card company agreed to pay its former parent the first $700 million recovered, or 22 percent of the bank’s net income of $3.2 billion last year.

Declined to Comment

MasterCard spokeswoman Sharon Gamsin declined to immediately comment. Discover spokeswoman Leslie Sutton declined to comment. Visa spokeswoman Denise Dunkel didn’t immediately return a call. Discover rose $1.20 to $11.80 at 10:10 a.m. in New York Stock Exchange composite trading. MasterCard rose 81 cents to $174.41. Visa fells 61 cents to $58.26.

Morgan Stanley was also to receive half of any settlement proceeds above $1.5 billion, up to a maximum of $1.5 billion, according to regulatory filings.

Pretrial rulings in Discover’s favor and the potential size of the final award may have prodded Visa and MasterCard into settling.

Jones had said she would tell the jury that Visa’s and MasterCard’s rules were illegal restraints on trade. Jurors were then to decide whether Discover was harmed by the practices and by how much.

Visa, based in San Francisco, is the largest credit-card company, with 51 percent of the U.S. credit- and debit-card market last year, according to the Nilson Report, which tracks the card industry from Carpinteria, California.

28 Percent

MasterCard, based in Purchase, New York, accounted for 28 percent, the report said. It’s the second-largest. New York-based American Express is third with 17 percent, according to the newsletter. Discover’s share was 3.8 percent.

The value of U.S. credit card purchases was $2.17 trillion in 2007, up from $426 billion in 1993.

Visa has agreed to pay the bigger share of any verdict of settlement, primarily based on relevant business volumes, MasterCard and Visa said in second-quarter filings.

American Express, which sued separately, settled for $1.8 billion from MasterCard in June and $2.25 billion from Visa and its bank partners last year.

[source: Bloomberg]

Is TicketMaster Violating Visa and MasterCard’s Merchant Agreement

With all the added “fees” that Ticketmaster charges, I wonder whether this monopoly is also violating their agreements with Visa and MasterCard.  Merchants are precluded from added extra fees to cover their interchange charges, but based on this Consumerist article, it seems that Ticketmaster is in violation.  So, what will Visa and MasterCard do?

Related article: The Diva Cher and Ticketmaster Should Take Lessons From ScanMyPhotos.com: a Study in Customer Service

Visa and MasterCard’s Roadmap to Bankruptcy?

A strange event played out after Visa and MasterCard collectively warned in their respective SEC IPO filings that if the merchant interchange litigation was successful, both credit card associations risked “insolvency.”Who would have thought?To protect themselves from bankruptcy, banks are facing shotgun mergers with other named defendants. The financial institutions spent millions, not just on lavish parties, but in protecting their credit card pricing schemes (with today’s ultra tech-advanced efficiencies, these fees are largely unnecessary). Law firms are making millions representing the banks. Some are growing their entire operation, hiring staff and enjoying the benefits of their representation. Are their shareholders watching?  During the past year, $8.3 trillion in shareholder wealth has been lost, so the once huge interchange fee boondoggle isn’t looking nearly as grand as before.  However, it is still something that much be addressed, especially now as we face a global crisis of confidence in the banking system. 

The rational for merchant credit card fees is mostly obsolete today.  It was designed to be cost-based – to cover the four-party electronic payment network back when we had manual charge card receipts.  The fees keep growing, even though efficiencies keep declining.  Many other nations understand that whether the forced merchant credit card fees are .50% or .70 %, the rates are unfair and too high; the average merchant interchange credit card fee in the U.S. stands at about 1.70 percent.

This nearly $50 billion annual credit card fee scheme seemed like a hefty chuck of change. But, now that banks are facing billions in lost market capitalization and disdain from American consumers, they have even larger worries.The public’s unrestrained infuriation with the banks is just as vast as are the nation’s retailers. The approval ratings for the banks, and by proxy, Visa and MasterCard’s market power and alleged price fixing are getting as low as are their plunging Moody’s ratings. It is even getting to the point that the scorn against the banks and credit card companies are more humiliatingly low then even the anemic approval rating for outgoing President Bush.  Presidential candidate John McCain and his cozy relationship with the banks and call to support them at the expense of consumers will be no better.

Back in 2005, which I was among the first to file a Federal antitrust complaint against Visa, MasterCard and its member banks, the battle was much simpler. Today, the banks are fighting for their future. They are at risk of being seized by a Federal nationalization of their operations. Visa and MasterCard are facing their own profound disgust for their business model, control of Washington legislators and lead cause for harming American families facing financial disaster.

It is turning out that what appeared like an ocean-sized legal challenge for the banks, Visa and MasterCard, has become diminutive in comparison to their larger hurdle and fiscal afflictions brought on by gross mismanagement, greed and un-American pursuits. Maybe Visa and MasterCard’s lawyers knew something when they cautioned that if the merchant interchange antitrust class-action litigation is successful their clients will also face bankruptcy.

—————————

News Alert: Paulson gives new detail of bank ownership plan

WASHINGTON (MarketWatch) — Treasury Secretary Henry Paulson on Friday gave some new details of the emerging plans by the federal government to inject capital directly into a “broad array” of financial firms. In a statement after the G7 meeting, Paulson said that officials are working on a “standardized program that is open to a broad array of financial institutions.” The plan is to attract private capital to complement the government’s funds, he said. Paulson went out of his way to say existing shareholders would be protected, saying the government would only make the purchases through a “broadly available equity program” without any voting power, “except with the market standard terms to protect our rights as investors.

 

 

Along the way, thousandsof its member banks reaped millions. They glamorized 

their balance sheets, which is now spiraling downwards.  They tried to dodge legal liabilities as they unloaded part of their Visa and MasterCard vault. These member banks mutually controlled the giant credit card networks, some are now facing their own insolvency and government intervention.

Even the Oil Cartel Lowers Prices

Crude-oil futures plunge nearly $7 to trade below $80 a barrel

During this global financial crisis, even gas prices are plunging. In an earlier WayTooHigh.com posting, I quipped that a barrel of gas would more likely fall to $50 than interchange fees be lowered.  Interchange fees is the cost that merchants are forced to pay to the banks, and in turn to Visa and MasterCard though a not-very “discount” fee. 

Now oil is nearly $80 from its high of about $150, yet the global economy still has record interchange fees.  When you operate a collusive, monopoly that is the way things work.  I wonder whether the government’s intervention into nationalizing the banking system will speed up more attention to these unfair rates?

Tulips, Silver, Housing Market and Oil Speculators Have Nothing on MasterCard and Visa

As millions of businesses and consumers are impacted by the dismal performance and unbridled greed from the failed banking industry and financial institutions, now is the opportunity and perfect storm to finally demand that the unfair interchange fee scheme be terminated.

“Battle Cry Against Credit-Card Fees” (via CSP)

Industry making progress in interchange fight, said Armour; Oneslager on advocacy

CHICAGO — “There has been no bigger battle and no more important one than our fight to reduce the outrageous credit-card fees that we pay,” said NACS president and CEO Hank Armour during the NACS Show 2008’s Opening General Session. And, based on the progress made and the pressure the industry continues to put on the issue, “2009 looks to be the watershed year in which we may finally get significant relief,” he added. “This is the biggest issue that our industry has faced in decades, and we’ve taken it head on,” said Armour. “With the tremendous help and support of many of you, we made a lot of progress this year.” The Credit Card Fair Fee Act was successfully passed out of the House Judiciary Committee (H.R. 5546), and the legislation was also introduced in the Senate (S. 3086), he said.  “We obviously have the credit-card companies’ attention,” said Armour, referencing some of the public relations stunts that Visa and MasterCard attempted this summer to deflect attention away from the issue of interchange. “While Visa and MasterCard claim they have fixed the problem, they haven’t. The only thing they fix—and they continue to do so—is the price.”  “Honestly, advocacy was never one of my passions,” confessed Balmar Petroleum president and NACS 2007-08 NACS chairman Richard Oneslager during his NACS Show Opening General Session address. “But advocacy is one of my passions today, and for one simple reason: Credit-card fees are destroying our industry.”  Oneslager introduced attendees to a credit-card fee “ticker” that will run throughout the NACS Show, a physical manifestation of what the industry’s $7.6 billion paid in credit-card fees in 2007 looks like per second. Just a few minutes into his presentation, the ticker already topped $100,000.  Despite challenges over low gas margins and high credit-card fees, Oneslager said that the convenience and petroleum industry is poised for continued success because it delivers what consumers want. “We offer them convenience. We save them time. We simplify their lives. We offer them comfort,” said Oneslager. “That is why we are well positioned, in good times and bad.”  Two areas, in particular, present retailers with opportunity, said Oneslager. Foodservice, when executed well, can help many retailers make up for poor motor fuel margins and redefining why people come to our stores. And there is a growing importance of what he called the “refreshment shopping occasion.” Today, nearly 40% of the industry’s gross margin dollars come from beverages—whether packaged beverages, beer or dispensed beverages, particularly coffee.  “I joined NACS because of the value I saw in gaining knowledge—such as what the hot growth categories are—and making connections with other retailers experiencing the same challenges I face,” said Oneslager.  But, he stressed that advocacy is essential. “I would be letting you down, not fulfilling my duty as chairman, if I let you walk out of here today with the belief that running a good business, paying NACS dues, and attending the NACS show is enough. It’s not,” he said. “We are in a battle for our future [with credit-card fees], and it requires all of you to rise up and take action,” he added.  Changing the existing situation with the credit-card companies “will require you to take action,” he stressed. “We are not going to be able to outspend the credit-card companies, so we are going to have to outwork them. Like many of you, I always came to the NACS Show to take things—to take a look at new products and services, and take home ideas that can grow,” added Oneslager. But as more retailers get engaged in advocacy, “you will allow us to take control of our own destinies. And that is the most important takeaway of all.”  The National Association of Convenience Stores (NACS) is the international association for convenience and petroleum retailing, representing more than 2,200 retail and 1,800 supplier member companies. The U.S. convenience store industry, with more than146,000 stores across the country, posted $577 billion in total sales in 2007, with $408 billion in motor fuels sales.

[source: CSP]

ScanMyPhotos.com Adds “WallStreetScanning.com” Name to Parody Washington’s Bailout

Click here to view News Releaes

IRVINE, Calif., Oct 06, 2008 (BUSINESS WIRE) — “Why should Wall Street bankers be the only ones collecting more than $800 billion in government bailouts?” questioned Mitch Goldstone, president and CEO of ScanMyPhotos.com.

Along with millions of hard-working entrepreneurial Americans, ScanMyPhotos.com said it is fed up with the banks’ irresponsible, blinding greed and windfall payoffs caused by their ghastly mismanagement. “The financial industry’s executives were so reckless,” said Goldstone, “that I am spoofing them by adding the ‘Wall Street’ moniker to demonstrate how absurd this bailout is.”

According to Goldstone, “Washington and Wall Street bankers have overlooked the real engine that powers our economy. To make sure that the flawed bailout is not engineered just to help Wall Street, but instead stabilize the economy, the capital should be redirected to families and businesses.”

ScanMyPhotos.com International, the Ecommerce photo imaging pioneer, said it is adding the domain name “WallStreetScanning.com” to reflect the absurdity of this unfair corporate welfare lifeline that seems designed to help companies on Wall Street rather than Main Street.

“If Washington is providing billions to ‘Wall Street,’ we want to be in line too. Proceeds would be used to expand our international high-speed photo scanning business, hire more employees, invest in added infrastructure and expand our menu of photo imaging services,” said Goldstone.

Goldstone is not holding his breath and explained that “if the stimulus money does not trickle its way to WallStreetScanning.com, the company will also retain its principal website identification, ScanMyPhotos.com.”

Separately, Goldstone’s company is a lead plaintiff in the multibillion dollar merchant interchange antitrust litigation against Visa, MasterCard and major member banks. News and commentary updates on this price-fixing complaint are available at WayTooHigh.com – The Credit Card Interchange Report.

Mitch Goldstone is a well-known leader in the photo imaging industry and past speaker at international photo industry conferences and at the Consumer Electronics Show.  ScanMyPhotos.com has digitally preserved more than 9-million pictures, operates an international Ecommerce photo imaging company and retail photo center, based in Irvine, Calif. The company, founded in 1990, is regularly profiled by the national media for its innovations and entrepreneurial creativity. Recently, ScanMyPhotos.com was profiled in The New York Times by “Personal Tech” columnist, David Pogue and publishes Tales from the World of Photo Scanning

[blog.ScanMyPhotos.com].

SOURCE: ScanMyPhotos.com

“NACS’ CEO Details Progress in Interchange Fee Fight” (via NACS)

CHICAGO — Calling outrageous credit card fees the most important battle faced by the industry, NACS President and CEO Hank Armour said the industry continues to put pressure on the issue, “2009 looks to be the watershed year in which we may finally get significant relief,” he said during the Opening General Session at the NACS Show 2008 on Oct. 5, 2008.

“This is the biggest issue that our industry has faced in decades, and we’ve taken it head on,” said Armour. “With the tremendous help and support of many of you, we made a lot of progress this year.” The Credit Card Fair Fee Act was successfully passed out of the House Judiciary Committee (H.R. 5546), and the legislation was also introduced in the Senate (S. 3086), he noted.

“We obviously have the credit card companies’ attention,” said Armour, referencing what he described as public relations stunts that Visa and MasterCard attempted this summer to deflect attention away from the issue of interchange. “While Visa and MasterCard claim they have fixed the problem, they haven’t. The only thing they fix — and they continue to do so — is the price,” said Armour to applause.

[Source: NACS – CS News, click here to read more]

MasterCard Contest Slams PIN-Based & International Transactions

Over the years, we have reported on many MasterCard and Visa sweepstakes that promote huge rewards with tiny odds of benefiting, but preclude PIN-Based and International transactions from participating in automatic entry.  This is the latest gimmick. The odds of winning are so fractional as it stands, so why is MasterCard being so unfair? They want cardholders to force merchants to process their debit cards at the much higher percent of sale credit card rate. 

Read the official MasterCard rules.

MasterCard contact: “You could win $1,000 a Month for the Next Ten Years”  [Just don’t use your debit card to entry!  Read more.

The Really Price-less MasterCard Holiday Promotion Debit Card Holder’s Can’t Enter

Fact: Visa USA Continues Its Legacy of Discriminating Against Its Cardholders

MasterCard’s Most Disingenuous Ad Campaign Yet?

MasterCard Worldwide® Sweepstakes More Like “Cheap”-stakes (commentary WayTooHigh.com)
Your PIN-based Cards Are Not Always Welcomed

MasterCard Worldwide® Sweepstakes Scheme Impacts Merchants (WayTooHigh.com)

“Obama to Hit McCain on Keating Five” (via Politico.com)

Sen. Barack Obama (D-Il) on Monday is launching a multimedia campaign to draw attention to the involvement of Sen. John McCain (R-Ariz.) in the “Keating Five” savings-and-loan scandal of 1989-91, which blemished McCain’s public image and set him on his course as a self-styled reformer.

Pushing back against what it calls McCain’s “guilt-by-association” tactics, the Obama campaign overnight began e-mailing millions of supporters a link to a website, KeatingEconomics.com, which will have a 13-minute documentary on the scandal beginning at noon Eastern time on Monday. The e-mails urge recipients to pass the link on to friends.

Excerpty from “Keating Economics” 

The current economic crisis demands that we understand John McCain’s attitudes about economic oversight and corporate influence in federal regulation. Nothing illustrates the danger of his approach more clearly than his central role in the savings and loan scandal of the late ’80s and early ’90s.

John McCain was accused of improperly aiding his political patron, Charles Keating, chairman of the Lincoln Savings and Loan Association. The bipartisan Senate Ethics Committee launched investigations and formally reprimanded Senator McCain for his role in the scandal — the first such Senator to receive a major party nomination for president.

At the heart of the scandal was Keating’s Lincoln Savings and Loan Association, which took advantage of deregulation in the 1980s to make risky investments with its depositors’ money. McCain intervened on behalf of Charles Keating with federal regulators tasked with preventing banking fraud, and championed legislation to delay regulation of the savings and loan industry — actions that allowed Keating to continue his fraud at an incredible cost to taxpayers.

When the savings and loan industry collapsed, Keating’s failed company put taxpayers on the hook for $3.4 billion and more than 20,000 Americans lost their savings. John McCain was reprimanded by the bipartisan Senate Ethics Committee, but the ultimate cost of the crisis to American taxpayers reached more than $120 billion.

The Keating scandal is eerily similar to today’s credit crisis, where a lack of regulation and cozy relationships between the financial industry and Congress has allowed banks to make risky loans and profit by bending the rules. And in both cases, John McCain’s judgment and values have placed him on the wrong side of history.

Read more.

Watch video: “Keating Economics – John McCain and the Making of and Financial Crisis”

[source: Politico.com]

“Coalition of Retailers Seeks Action” (via El Paso Times)

Article posted from El Paso Times – By Vic Kolenc

Pharmacist Greg Matthews uses a sign to inform customers about payments at Workers Choice Pharmacy.

Greg Matthews tries to discourage customers at his East Side pharmacy from using credit cards to pay for prescriptions because transaction fees on cards cuts into his already slim profit margin.

Private “insurance reimbursements are so bad, then you add the credit card (fee) to it, and they’re is just no profit at all,” said Matthews, owner of Workers Choice Pharmacy at 10501 Gateway West.

A lady the other day paid her $80 co-pay” on a $120 prescription with a credit card. “I was going to make $3.48,” but the credit-card fee took $1.98 so Matthews only made $1.50 on the transaction, he said. The other day a customer was going to pay a $1.05 prescription payment with a credit card, and “I said, ‘Forget it.’ I just gave it to him” because of the credit-card fee, he said.

Robert Barron, co-owner of Barron’s Superette, a small grocery store at 7555 Acapulco on the East Side, has a different view. He said he doesn’t mind paying the fees for credit cards and debit cards because those cost his store less than handling checks.

“It’s better to pay the fees than have to worry about insufficient fund checks, or checks you can never collect on,” Barron said. Barron estimated 90 percent of his customers now pay for their groceries with a debit or credit card, or food-stamp card.

In August, Barron’s paid $1,072 for debit- and credit- card fees, which includes fees by a company which processes the electronic payments for his store, Barron said.

Matthews said he pays an estimated $2,000 to $2,500 a year in credit-card fees for his small business.  Credit-card transaction fees, specifically the interchange fee set by credit- card companies and collected by banks that issue the cards, have become a hot issue with retailers in recent years.

The Merchants Payments Coalition, a national group of retailers, including supermarkets, drug stores, convenience stores and others, has been campaigning to lower the fees. The coalition is pushing for legislation in the U.S. Congress to set up a mechanism to let retailers negotiate card transaction fees with the credit-card companies. Some members of the coalition also are part of pending lawsuits consolidated into one case in a New York federal court alleging price-fixing of fees by MasterCard, Visa and several banks.

“What we want them to do is negotiate with us (merchants) a price fair for their service,” said John Motley, senior vice president for the Food and Marketing Institute in Washington, D.C., a member of the coalition. “The reason the issue is so big for us (grocery stores) is the average profit within the food retailing industry in the U.S. is about 1.2 percent.” The credit-card fees increase product costs to consumers, he said.

“Interchange fees for credit-card transactions average around 2 percent of each transaction dollar amount,” Motley said. Supermarkets were offered a low interchange fee years ago to encourage supermarkets to accept cards, but that “rate is now disappearing” because premium credit cards are becoming more prevalent and have a higher fee, he said. Fees on debit cards used with a PIN number average around one-half percent, which is not as much of a problem, he said.

Gasoline retailers earlier this year began complaining about being hurt by rising credit-card fee costs because customers were charging larger amounts due to rising fuel prices. MasterCard and Visa made adjustments in fee charges for fuel retailers, the companies said in statements issued this year.  Last year, $42 billion in interchange fees were collected, and this year that number is projected to grow to almost $49 billion, Motley said. That is a 16.7-percent increase. Only a small portion of the fees go for transaction costs, he said.

Visa and MasterCard, the nation’s two largest credit-card companies, said the companies each set their own card interchange rates, but they receive no revenue from interchange fees.  The interchange rate is what the merchant’s bank pays to the cardholder’s bank for taking on the risk, said Denise Dunckel, a Washington, D.C.-based spokeswoman for Visa. “Visa makes its money from contracts with banks,” she said.

Sharon Gamsin, a spokeswoman for MasterCard’s headquarters in the New York City areas, told the El Paso Times in May that MasterCard makes its money from fees it charges banks that issue cards.

The interchange fee is part of a merchant discount fee, which is negotiated between the merchant and its bank for credit-card and debit-card transactions, according to information from MasterCard.  The interchange rate is set high enough for banks to have an incentive to issue credit cards and low enough to encourage businesses to accept the cards, the credit-card companies said.

“I think merchants are getting a good value for what they pay for. The alternative (cash or checks) costs more” to handle,” said Linda Echard, president and CEO of ICBA Bancard in Washington, D.C., an Independent Community Bankers of America subsidiary that provides credit-card services to community banks. The interchange and merchant fees are important revenue sources that allow banks to stay in the credit-card business, she said.

In Australia, where the government stepped in and reduced interchange rates, the number of cards being issued has decreased, Echard said. A MasterCard statement said Australian credit- cardholders are now also paying higher interest rates and fees because of the decrease in interchange rates.

For more information: www.unfaircreditcardfees.com; www.electronicpaymentscoalition.org

Credit fee facts
Interchange fees average 2 percent of the dollar amount of each transaction and are paid by a merchant’s bank to the cardholder’s bank to compensate the bank for risks and costs of maintaining credit- card accounts.

Merchants pay for interchange fees and other fees attached to credit- and debit-card transactions through a merchant discount fee. That fee goes to the merchant’s bank.

Visa and MasterCard said they make no revenue directly from interchange fees, but get their money through charges to banks that issue credit cards in their systems.

Banking Bailout Devastates Consumers – Boondoggle for Banks

The Washington bailout is packed full of pork – with every shade of lipstick on a behemoth pig – The pig is represented by our nation’s banks.

The U.S. Chamber of Commerce and the Business Round Table have seen that Washington pays attention to them. Accoding to CNN, the two organizations have contributed $40 million and $11 million, respectively, during the past year to lobby Washington.

While the banks are getting much of the help from the massive $850 billion dollar bailout, consumers are left with little protection. The massive relief is helping the banks and harming the consumers.

For instance, the recent Credit Card Bill of Rights was designed to curb credit card abuses. But, as the Senate took on the new bailout legislation, they rushed to help Wall Street and not consumers.

The fact is that the bailout will buy not just securitized bad debt from banks, but also their bad credit card debt.

The banks are having Washington cover their exposure to credit card losses, yet they are charging upwards of $50 billion each year in merchant interchange fees to help also cover its expenses. The bailout bill is helping many banks, who were responsible for the abusive tactics and unfair fees.

Now, the government is responding to the lobbyists’ calls for helping not just cover their clients mismanagement and bad mortgage debt, but also the banks’ bad credit card debt too.

The banks are also pressuring congress not to impose regulations because the cash flow from credit card fees and interchange fees are crucial for maintaining financial stability from its other divisions’ losing streak. The consumer credit card cash cow generated $177 billion last year in new revenues to help subsidize its other receding business divisions.

RBA press release

The banks and the credit card industry constantly cited Australia as an example of how dangerous it might be to let Americans control a bit more of their own money as well as do something tangible for small merchants especially those on the margins who sell food and gas.   

The below RBA press release is powerful and certainly refutes, in particular, a MasterCard financed study claiming the sky was falling due to interchange reforms.   This is one of the biggest reports yet challenging what the banks claim. 

Australians pay now a ¼ of what we pay in the States.   The incidence of credit card use there is actually higher than in the US, even though the credit card industry says that Australia is a disaster, dangerous to the card networks, businesses, and consumers.  Yet, that nation spends so much money and effort to stay in the marketplace.   Why not walk if interchange reform has destroyed the business model?   

From the below news release: “In the Board’s view, the reforms have significantly improved competition in the Australian payments system. The reforms have liberalised access and removed restrictions on merchants that had weakened competition in the system. They have also increased transparency and have led to more appropriate price signals to consumers.”

Reserve Bank of Australia, press release, September 29, 2008

  

---

 

This is the press release by Reserve Bank of Australia

Published September 29, 2008
https://www.theasianbanker.com/A556C5/Update.nsf/0/1DF7ED6A2DD68CF5482574D30006AEE5?Opendocument

Reform of Australia’s payments system: 2007/08 review

The Reserve Bank has released the conclusions of the extensive review of the payments system reforms undertaken by the Payments System Board.

In the Board’s view, the reforms have significantly improved competition in the Australian payments system. The reforms have liberalised access and removed restrictions on merchants that had weakened competition in the system. They have also increased transparency and have led to more appropriate price signals to consumers.

These improvements in competition have allowed the Board to consider stepping back from the regulation of interchange fees. However, the Board is only prepared to do so if industry participants take further steps to reduce the risk that deregulated interchange fees in the credit card systems would increase from current levels. This reflects the Board’s ongoing concern that, despite the improvements over recent years, the competitive forces acting on interchange fees remain relatively weak.

As outlined in the Board’s Preliminary Conclusions released in April, the competitive environment would be further improved by: changes to the EFTPOS system to improve its ability to compete effectively with the international card schemes; further modifications to the honour-all-cards rules to allow merchants to make separate acceptance decisions for any card for which there is a separate interchange fee; and greater transparency regarding the various fees levied by the card schemes.

The Board’s concerns regarding the potential for credit card interchange fees to rise in the absence of regulation could also be addressed by the schemes providing a commitment to limit their average interchange fees to current levels (0.5 per cent of the transaction value). This possibility was raised during the consultation process and the Board is prepared to consider this approach. If such a commitment were forthcoming, the benefits from the above modification to the honour-all-cards rules would be reduced, and accordingly the Board would not see a need for this change to be made.

A final decision will be made in August 2009. If at that time the Board judges that insufficient progress has been made, interchange regulation will be retained. As discussed in the Preliminary Conclusions, if this were the outcome, the Board’s current thinking is that the benchmark for credit card interchange fees would be reduced from its current level of 0.5 per cent to 0.3 per cent. In the EFTPOS and scheme debit systems, the Board is proposing that the weighted average of interchange fees be constrained to be between 5 cents paid to the issuer and 5 cents paid to the acquirer. This would provide the systems with additional flexibility to that in the original proposal, while ensuring that the same regulatory framework applies to all debit card systems. If regulation of interchange fees were to continue, the Board would not require further modifications to the honour-all-cards rules to allow separate acceptance decisions for any card with a separate interchange fee.

In addition to its conclusions on the regulation of interchange fees, the Board has also concluded that:

• there is no case for allowing the schemes to reimpose no-surcharge rules on merchants;
• the current modification to the honour-all-cards rules, allowing separate acceptance decisions for scheme debit and credit cards, will remain. In addition, the Board encourages the schemes to permit merchants to make separate acceptance decisions on pre-paid cards and to ensure that interchange arrangements do not discriminate against merchants who do not accept all cards. The Board would consider regulation in these areas if this were necessary; and,
• further transparency of scheme fees and average interchange fees will be required. The Bank will continue to discuss with industry participants how this might best be achieved.

Visa and MasterCard’s Perfect Storm

If you didn’t trust Visa and MasterCard’s member banks before, just wait. 

I wonder whether anyone can score a lower approval rating than Congress – hovering at a paltry 10 percent?    The banks, along with Visa and MasterCard must be among the most despised entities in the nation. 

Poll anyone whether they trust the banks now.  

How about asking American’s how they feel about the credit card associations’ merchant interchange fee pricing schemes? 

WayTooHigh.com has more than 1,100 prior postings, spanning more than three-and-a-half years.  We will continue the battle and draw attention to this issue.

“MasterCard’s Martina Hund-Mejean” (via CFO Magazine)

Reposted from CFO Magazine:

Though awash in cash, the company is determined to avoid complacency and places an ultra-high priority on forward-looking strategy, the CFO says.
Avital Louria Hahn, CFO Magazine
October 1, 2008

At first glance, MasterCard’s core business model would seem enviable: it collects a fee on every payment it processes. But while Martina Hund-Mejean, who became CFO last year, appreciates “the high profitability of this sector,” she’s quick to add a cautionary note: “We can never put our head in the sand.” Hund-Mejean is constantly scanning the horizon for signs of what’s ahead, in terms of both technology and competition. What market segment will attract new rivals and where will they spring from? What device is likely to replace traditional credit cards? (Hint: you’re probably carrying one right now.) And with the economy forcing consumers to cut back on discretionary spending, how long will it be before MasterCard holders hesitate to plop down their cards so freely? Hund-Mejean doesn’t have the answers, but she’s well trained to look for them. A product of General Motors’s rigorous treasury program, she assumed increasingly demanding finance positions at GM before serving as treasurer and senior vice president at Tyco International. That broad experience will no doubt come in handy at MasterCard, as economic uncertainties pile up as steadily as, well, credit-card solicitations from banks.

You have said that you are constantly thinking about strategy and ways to stay on the leading edge. Is that a new focus?
We are focusing on strategic planning in a renewed way now that the company is two years out of an initial public offering. We have a nine-person executive committee that consists of our CEO, Bob Selander; business partners; unit leaders; and myself. We meet every week for an hour and a half, and one full day a month. It’s a great team.

MasterCard faces some interesting challenges. For instance, the House Judiciary Committee recently approved a bill that would require credit-card companies to negotiate fees with merchants, rather than letting the banks set those rates. How would the Credit Card Fair Fee Act affect MasterCard?
If the bill passes, it will harm consumers. Australia passed regulations slashing these “interchange fees” about five years ago, and it is clear that consumers have been hurt through higher fees and fewer rewards. Merchants are paying lower fees, but there is no evidence that they have lowered the prices they charge consumers. The result was completely contrary to what the legislators wanted to accomplish.

What about the technological hurdles ahead? Will cell phones ever replace plastic cards in the United States?
MasterCard’s [tap-and-go wireless] PayPass technology has enabled us to lead the development of the communication standard around contactless payments for the industry, which ensures that cards and terminals supporting all contactless-payment brands are globally interoperable. This has led to the transformation of mobile phones into secure contactless-payment devices. We have been working with telecom providers and industry organizations to ensure that standards are met as mobile phones move to the center of commerce [see “Cash, Credit, or Cell Phone?“]. As of today, we have announced about 17 mobile pilots across all major regions.

What else is MasterCard doing to differentiate itself from its competitors?
We differentiate ourselves in three main areas. One, we can custom-tailor our products to fit a partner’s particular need. For example, Lufthansa wants to make sure its frequent flyers are really using their credit cards and are having a unique experience, like going faster through security. We made a card for them to do that. We placed a PayPass feature on the cards so that users can make last-minute purchases at the airport. Number two, we are truly global, with about 50 percent of our revenues generated outside the United States. If we develop a new product in one part of the world, we can deploy it in other parts of the world. Our third unique competency is our professional-services arm, MasterCard Advisors. Through that group we provide information, consulting, and outsourcing services to our customers, the banks.

Will MasterCard’s future business model look entirely different?
Unlike many other industries, the global payments industry is still in its infancy. Cash and checks are still the predominant forms of payment in many global economies, and this translates into tremendous opportunities for us to grow.

Given all the areas you have to be involved in at MasterCard, is there one that you find especially exciting?
I have a passion for strategy. Whichever proposition we’re looking at, I put it in the context of “What does it mean for MasterCard?” — not only today, but years from now. I’m constantly focused on, What are we missing? What are we not thinking about? What is it that we don’t know and how do we learn about it?

How do you figure out what you don’t know?
From a finance perspective, you have to do a number of things. First, be very connected to the businesspeople in the company and be on top of where the business is moving or can move to. Having a finance group that is well connected and embedded in the business is key to this. Second, be connected to other external sources that provide objective input to shape the company’s strategy. And third, engage in a constant debate on possible scenarios and prepare the company to either take advantage of those or make defensive moves.

 

What skills do you think an aspiring CFO needs most?
CFOs can come from various backgrounds. They’ll need to develop expertise in areas like financial planning and analysis. It helps if you have been the controller of a unit, run a subsidiary, and have M&A, tax, and audit experience. By growing up through the General Motors treasurer’s office, I was fortunate to get experience in most of those areas.