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Credit Card Processing — News
China to allow CitiBank to Issue Credit Cards
China has given permission to Citigroup Inc. to issue credit cards within the communist country, a move which comes amid a probe by the World Trade Organization on the legality of Chinese restrictions on allowing foreign companies to process transactions. Citigroup will be the first western bank to infiltrate China, and only the second along side Hong Kong based Bank of East Asia which first entered the Chinese market in 2008. Currently, banks that wish to process within the country must co-brand with operators in the country and issue the cards in yuan. Instead of being processed through American companies like Visa or Mastercard, all transactions will go through UnionPay, which is based in Beijing.
Credit Card Processing via Photographing a Credit Card
There are many hardware swipers available these days to turn your cell phone or iPad into a mobile credit card processing machine – but Card.io have developed a “visual swipe” technology that lets users take a photo of a credit card to process a payment. In June, Card.io launched and allowed developers to accept payments with a photo of the customer’s credit card. Recent updates to the technology will allow consumers to send and receive payments from a credit card photo and deposit funds directly into their checking, savings or PayPal accounts. Between the June launch date and January 2012, Card.io has over 160 developers using the visual swipe technology app. A user enters the total amount of money they need to charge their customer, and then takes a photograph of their customer’s credit card with their cell phone camera. The Card.io app sends the encrypted card date via 128-bit … Continue reading
Consumers Reverting to Cash for Small Purchases
According to research done by Javelin Strategy & Research, consumers are reverting back to cash for small purchases, despite aggressive incentivization by credit card companies to charge. The research shows that 79 percent of consumers utilized paper money in the last week. In contrast, only 65 percent used a debit or credit card. This comes as a relief for vendors that specialize in small purchase items like coffee shops that have weathered the unintended consequences of the Durbin Amendment to the Dodd-Frank Act, which capped debit swipe fees at 21 cents. Previously, merchants would pay a small percentage of the total cost in swipe fees where a $1 cup of coffee would incur a transaction fee of a few cents. But after the Durbin Amendment took effect, banks decided to charge the entire 21 cents for any transaction, including that $1 cup of coffee, which ate into profits. Since merchant … Continue reading
San Francisco Taxi Drivers Upset About Processing Fees
If you thought your credit card processing fees were high, be thankful you’re not a taxi driver in San Francisco — they’re currently paying 5 percent which is taken out of their profits. Under a 2010 city ordinance, taxi drivers are required to accept debit and credit cards in their vehicles, which isn’t necessarily a game-changing requirement. Their grievance arises from a new policy allowing the taxi companies to pass off the processing fee on the driver instead of covering it as they had in the past. This has some taxi drivers telling riders that they don’t accept cards or the machine is broken, even offering to stop at an ATM so they can pay in cash if the riders don’t have any. Taxi drivers already pay out relatively large sums of money to actually do their job — paying an average of $92 a shift just to use the … Continue reading
Antitrust Litigation May Result in Lower Credit Card Transaction Fees
The large antitrust litigation being brought against Visa, MasterCard and a slew of large banks on the behalf of millions of merchants may end in a settlement that one analyst is projecting could also cause a reduction in credit card processing fees by as much as 33 percent for up to one year. Jason Kupferberg of Jefferies Group Inc. is expecting a settlement before the case is to be taken before the U.S. District Court for the Eastern District of New York later September of this year. Kepferberg estimates the settlement to be between $5 billion to $15 billion of which Visa will be responsible for 67 percent and MasterCard the remaining 33 percent. The litigation is being drawn on the behalf of larger retailers including Kroger Co. and Safeway, Inc. among many others for alleged price fixing on transaction fees between the two processing giants. Visa has already set … Continue reading
Antitrust Litigation Brought Against Visa, MasterCard for Alleged Price Fixing
Visa, MasterCard and a plethora of large banks are the subject of a new antitrust litigation drawn on the behalf of five million retailers in the country, with potential settlement costs in the tens of billions of dollars. Central to the lawsuit are claims that these institutions have been setting prices on credit card transactions that fall outside of what would be expected in a truly open and competitive market. Average interchange fees incurred by credit card transactions hover around 2 percent, but could be dropped as low as half of a percent, which would result is losses projected also in the billions annually. The Durbin Amendment of the Dodd-Frank Act effectively capped debit card swipe fees as 24 cents per transaction, which caused banks to increase credit card transaction costs to recoup their losses.
Retailers Taking Legal Action Against Federal Reserve over Durbin Amendment
The Durbin Amendment was created to “protect” retailers and gave the Federal Reserve the power to set interchange fees for debit card transaction processing. The idea is lower debit card fees would improve economic growth, since retailers could lower prices on items when they pay lower fees to banks for accepting debit cards, and lower prices would result in more consumers buying. The debit card transaction fee was 44 cents per transaction before the amendment, and has been capped at 21 cents as a result of the Durbin Amendment. Plaintiffs Arguing Against the Durbin Amendment The following are among the plantiffs in the legal action against the Federal Reserve over the failings of the Durbin Amendment: National Retail Federation National Association of Convenience Stores (NACS) Boscov’s Department Stores Miller Oil Co Food Marketing Institute Their argument is that the interchange fees for debit cards do not
Durbin Amendment has Unintended Consequences for Some Businesses
Though debit card swipe fees were capped at 21 cents on Oct. 1 per the Durbin amendment of the Frank-Dodd act, some business owners conducting small transactions are experiencing an increase in costs from Visa and MasterCard. Before the new law, businesses were being charged approximately six to seven cents for a $1 transaction on say, a cup of coffee. But now, in an effort to recoup substantial losses from capping larger transactions, Visa and MasterCard are charging the full 21 cents on that same cup of Joe, which has business owners scrambling to recoup their own losses through incentivizing cash purchases through discounts, raising prices or backing off debit transactions all together and installing ATMs. Estimated losses for banks hovers around $6 billion annually, while repercussions for businesses that frequently conduct small transactions goes largely unaccounted for. Some banks initially attempted to charge a monthly debit card fee for … Continue reading
New IRS Requirement Passes Fees on to Merchants
In 2008, the Housing and Economic Recovery Act included a reporting requirement outlined in 6050W of the Internal Revenue Code which goes into effect this year. Credit card processors are now required to report income that comes from credit card payments to the IRS; and with this change, many credit card processors are charging their customers new fees. Are You Being Charged a Fee for the IRS Reporting Requirement? The intent of the IRS reporting requirement was not to cost consumers more money; but there have been a number of processors adding a new fee to their customer’s statements in an effort to offset their new expenses. Take a look at your credit card processing statement to see whether you are being charged – you may see a new fee called “reporting fee” or “reg. comp fee” or “regulatory fee” or “monthly IRS fee”. Because credit card processors are all
Online Credit Card Usage on the Rise
According to Javelin Strategy & Research’s Nov. 2011 report entitled “Online Retail Payments Forecast,” ecommerce credit card usage is on the rise, up 16 percent in 2011 to $309 billion and projected to rise to $444 billion by 2016. Many consumers are taking advantage of various rewards programs that credit card issuers are using to incentivize charging in the wake of the Durbin amendment to the Frank-Dodd act that capped debt card transactions at 21 cents, costing the banking industry billions. “After several years of declining use, credit cards are poised for resurgence,” Director of Payments Research at Javelin Beth Robertson said. “Despite the nation’s very rocky economic recovery, consumers appear to have halted their belt-tightening and bank incentives to use credit cards rather than debit are gaining appeal.”
