Market Scan

Market Scan Expands Coverage

Market Scan has expanded coverage to 40 banks, 141 vendors, 18 regulators and 5 professional associations.  For more information contact Charles Sherrill.

FRB Announces Reg E Exception for Transactions Under $15

From the FRB:

"The Federal Reserve Board on Thursday announced its approval of a final rule to create an exception for transactions of $15 or less from Regulation E's requirement that receipts be made available to consumers for transactions initiated at an electronic terminal.

Regulation E implements the Electronic Fund Transfer Act. The rule is intended to facilitate the ability of consumers to use debit cards in retail environments where making receipts available may not be practical or cost effective.

The effective date of the final rule is thirty days from the date of publication in the Federal Register, which is expected shortly."

Commentary

This is good news for credit card issuers, merchant acquirers, and contactless and mobile payment vendors as it should encourage more payment options at the point of sale, particularly in high traffic locations where minimizing time-in-queue is critical and the average ticket amount is low (e.g. fast food and convenience stores).

Wells Fargo and Visa Expand Mobile Payments Pilot

Wells Fargo and Visa will expand their pilot of mobile payments to 30 or more employees that will field test the technology with various merchants.  Wells Fargo and Visa plan a public trial in the forth quarter of 2007 to include 300 to 500 Wells Fargo Visa cardholders.

Some of the options that will be tested include the delivery of secure, wireless payment account information, the acceptance of mobile payments in stores and restaurants that accept Visa payWave technology, receiving and redeeming mobile coupons and other account management services.

Visa payWave is a form of contactless payment technology.  With contactless payments, the consumer simply waves his or her card in front of a secure payment terminal to effect payment.  The Wells Fargo and Visa pilot moves contactless payment technology from credit cards to wireless devices.

     http://biz.yahoo.com/bizj/070627/1483376.html?.v=1 

Visa payWave

     http://usa.visa.com/personal/cards/paywave/index.html

Commentary

Will the combination of contactless technology, ubiquitous mobile devices, and signature not required for purchase under $25 give rise to the next distruptive banking innovation?  Its too soon to tell, but the signs are starting to look favorable.

Fidelity National Information Services Buys eFunds

Mortgage processor Fidelity National Information Services Inc. said on Wednesday it would acquire eFunds Corp., which processes financial transactions, for $1.8 billion, expanding its distribution capabilities and boosting its product offerings.

http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070627:MTFH15768_2007-06-27_14-19-20_N27405751&type=comktNews&rpc=44

ATM Machine Celebrate 40th Birthday!

The ATM Machine, one of the great disruptive banking innovations, turned 40 today.  Where was the first ATM and which bank deployed it?  Click here to find out:

     http://biz.yahoo.com/ap/070627/atm_anniversary.html?.v=3

Commentary

It was well into the late 1980s before ATMs became commonplace.  The long ramp-up for ATMs, caused in part by the networked nature of the industry, illustrates the difficulty of creating disruptive innovations for banking.  Many innovations only become valuable once the entire network of banks is connected.  By comparison, the regulatory backing provided by Check 21 has allowed to banks to innovate with image technology at a much faster pace.

Cash owes much of its continued popularity to the ATM machine, which delivers it closer to point of sale than most bank branches, thereby maintaining the utility of cash relative to card payments.

FRB Selects Regional Check Processing Sites, Announces Scale Back of Other Sites

From the Federal Reserve Banks:

"As part of a longer-range strategy, the Federal Reserve Banks have selected Philadelphia, Cleveland, Atlanta and Dallas as regional check processing sites that are expected to provide the full range of check processing services through at least mid-2011. Other remaining sites will have their operations scaled back. These scaled-back sites will all print substitute checks, but some will also capture paper checks. The regional sites will provide a full range of check processing services and receive processing volumes from the other sites in a phased transition."  For information about the timing and transitioning of each site, click here:

     http://www.bos.frb.org/news/press/2007/pr062607.htm

Innovation in Card Payments Podcast

William Reid, Vice President of Visa Commercial at Visa International, discusses the use of card networks for buyer-initiated, high-value payments in the financial supply chain.  The podcast is approximately twenty minutes long.

     http://www.paymentspodcast.com/

Commentary

This podcast is a good, high-level introduction to the use of card networks for high-dollar trade payments.  Now that the growth of procurement cards for low-dollar purchasing activity is beginning to level off, innovative money center banks are looking for ways to leverage the card infrastructure for high-dollar trade payments (i.e. supply-chain finance). JPMorgan Chase recently acquired Xign to add capability in this area. 

If banks can leverage the card networks for supply chain finance, it will create operational efficiency and new financing opportunities for buyers and sellers.  To date, the interchange fees charged by the card networks have frustrated efforts to leverage them in this context.  Banks that operate large-scale card-issuing and merchant-acquiring businesses will have a distinct advantage, as they may be able to leverage the card infrastructure for information exchange while settling payments outside the network, thereby avoiding interchange fees.

Supply chain finance will be one of the hot cash management issues for years to come.

City National Launches Nevada Cash Management

City National, a $15 billion asset bank based in Los Angeles, announced that it has formed a cash management group in Nevada.  City National is starting with two bankers, one based in Reno and the other in Las Vegas.  City National will offer Nevada customers remote deposit capture, information reporting, positive pay with payee verification and business bill pay.  City National entered Nevada in 2006 with the acquisition of $500 million asset Business Bank Corporation.

     http://biz.yahoo.com/pz/070626/121983.html

Commentary

City National should be able to compete for professional, real estate, construction and title business in Nevada, but large manufacturers, retailers, healthcare, and gaming businesses will likely remain beyond its reach.

PayPal by the Numbers

An AP Article by Josh Funk provides some interesting insight into PayPal, e-Bay's alternative payment processor:

• PayPal accounts for approximately 25% of e-Bay's revenue
• PayPal had 143 million accounts in March
• PayPal processed 177 million transactions worth $11.36 billion in the second quarter (average transaction size = $64.18)
• PayPal charges $0.30 plus up to 4.9% of the payment amount

    http://biz.yahoo.com/ap/070626/paypal_power.html?.v=1

Commentary

PayPal is used primarily for person-to-person (P2P) payments and payments to micro-businesses in an e-commerce context.  It facilitates e-commerce by acting as a trusted third party for transactions between strangers.  Rather than threatening the banking industry's payments franchise, PayPal adds value to it by increasing the total number account transfers and card payments in the economy.

Second Installment of Intuit "Future of Small Business" Report Released

Intuit and The Institute for the Future released the second part of three part study forecasting the prospects, influences, and profiles of small businesses in 2017.

Press Release:  http://biz.yahoo.com/bw/070626/20070626005442.html?.v=1

Report:  http://www.intuit.com/futureofsmallbusiness/