The rise in short-term interest rates is expected to quickly translate into increases in rates charged by variable interest rate credit cards, and a slowdown in consumer spending, according to Les Reidl, Executive Vice President with Speer & Associates, Atlanta, Ga.
   Spending already slowed slightly in June, according to Reidl. But slower spending in the summer wasn’t expected to have much of an effect on ISOs because most merchants have slower summer sales anyway.
   The real effect will be felt during the holiday shopping season, particularly if rates continue to rise. However, if the rising rates are joined by a strong economy, the holiday shopping season won’t suffer, Reidl says, adding that there are about the same percentage of economists calling for slower spending as there are calling for increased spending.
   Therefore, Reidl recommends that ISOs look for a good mix of merchants – those who sell discretionary items (luxury goods, high-end restaurants) and those who sell non-discretionary items (consumer staples, mid-range to low-range restaurants). Those who sell non-discretionary items are rarely affected by economic swings while those that offer non-discretionary items can benefit if the economy doesn’t slow. An ISO’s own business will reflect that of the merchants in his portfolio, Reidl says.

   The Fed said its strategy entails launching new products and services to support the implementation of the Check 21 Act in October 2004, as well as streamlining its check-processing infrastructure by discontinuing check processing at locations to be announced later this year. Even with these changes, the Federal Reserve Banks will continue to provide check-processing services on a national basis.
   In this effort, Reserve Banks will provide opportunities through their Check 21 products and services for financial institutions to make use of electronic check services as a means of reducing their overall check operating costs. These steps should also reduce the time during which industry participants and the Reserve Banks must support significant investments in dual processing platforms.
   "These steps are part of a forward-looking strategy that acknowledges the financial services industry's ongoing evolution from paper to electronic processing," said Gary Stern, President of the Federal Reserve Bank of Minneapolis and chairman of the Reserve Banks' Financial Services Policy Committee. "This shift is good for consumers and good for the financial services industry, and the Fed has encouraged this evolution for a number of years. As the payments system moves to accommodate more electronic options, the Fed will embrace a strategy that will respond to the marketplace as necessary."
   As part of this strategy, the Reserve Banks also will undertake a thorough annual review of their existing check processing infrastructure, including potentially discontinuing paper check processing at some locations as the market evolves. Currently, the Reserve Banks are examining their existing check facilities and within the next few months will announce the discontinuation of some additional check-processing facilities through 2005.
   In 2003, Federal Reserve check volume declined at a 5 percent rate, according to a spokesman. For 2004 the first half of 2004, check volumes declined at even a faster pace.
   The Federal Reserve isn’t the only entity to change its operations as a result of fewer checks being written. Two of the nation’s largest check printers, Deluxe and Harland, have also reduced their check operations.

   Instead of issuing a paper check, companies can deposit an employee’s pay into a personal card account, using Automated Clearing House (ACH) direct deposit. Employees still receive a pay statement from the company for their records. Once the pay amount is deposited, employees have immediate access to cash via ATMs or bank teller windows, or they can use the card to pay for purchases at grocery stores, gas stations, restaurants, hardware stores and other retailers.
   Each payday, the card can be reloaded with the employee’s net pay. As an added convenience, the employee also can use the card for Personal Identification Number (PIN) or signature-based transactions.
   The payroll card is supported by phone- and web-based customer service. Employers can’t view employee transaction activity, ensuring account privacy.

   Identity theft has been the No. 1 consumer complaint for four consecutive years, according to the Federal Trade Commission.
   The partnership represents a fundamental shift in the way the financial services industry is dealing with the rising tide of payment fraud. MasterCard and NameProtect officials say their companies will take a more aggressive approach to the wave of cyber scams attacking online consumers and companies.
   Under the partnership, MasterCard will leverage NameProtect’s technology to detect online scams in real-time. Working in cooperation with law enforcement, the partnership will seek to combat identity thieves before they can steal personal information.
   NameProtect also will help protect MasterCard’s own identity from being stolen by seeking out fraudsters attempting to spoof MasterCard’s logo and other branding insignia to use for phishing attacks.

   Visa's growth in e-commerce is outpacing last year's gains, which company officials credit in part to the company’s efforts to deter online fraud. In 2003, Visa debit and credit card e-commerce volume increased by 53.2 percent to a total of more than $60.4 billion. At the same time, the number of transactions grew 44.5 percent, to more than 722 million.

   The Remote Re-Key solution uses TSS’ A98-R technology to automatically create and distribute ATM master keys, eliminating manual on-site key loading. All cryptography and protocol management is performed by the A98-R technology that now interfaces with eFunds’ CONNEX software platform.

   American Capital's investment takes the form of senior subordinated debt and supports GTCR Golder Rauner LLC's recapitalization of Retriever. Merrill Lynch Capital is providing a revolving credit facility and senior term loans. Retriever management is also invested in the transaction.