Industry News

On April 30, MasterCard International announced that it had entered into a settlement agreement to settle claims against it in the class-action antitrust lawsuit brought against MasterCard and Visa in 1996 by merchants in the United States. In exchange for settlement of all claims, MasterCard agreed to pay ten annual installments of $100 million each into a settlement fund, however, the first year's payment will be $125 million. Under the terms of the settlement, MasterCard's prohibition of merchants from surcharging cardholders or discriminating against any MasterCard card or cardholder will be maintained for credit and charge cards and honored by merchants who continue to accept MasterCard debit cards. Merchants will have the right to choose not to accept US-issued MasterCard debit cards. Further, MasterCard will establish a separate interchange rate for MasterCard signature-based debit cards by August 1. The new interchange rate for debit will be at least one-third lower than the existing interchange rate. MasterCard will also develop rules requiring issuers to clearly and consistently identify MasterCard debit cards on their face and to make these debit cards identifiable through electronic terminals.

In a separate settlement agreement reached later that week, Visa, USA agreed to pay $2.025 billion and lower merchant interchange fees beginning August 1. The new rate charged to supermarkets will change from the current flat fee of 40 cents a transaction, to no more than 26 cents. The standard rate, which is now 1.25% plus 10 cents, will be cut 48 basis points. At press time, both settlement agreements were subject to court review and approval.
In related news, Meijer Stores Limited Partnership, Home Depot Inc., Toys "R" Us Inc and Giant Eagle Inc each opted out of the retailer class action lawsuit to pursue their own separate legal actions against the card associations and spokespeople for these companies indicate that the recent settlement agreements will help their cases.

The MidWest Acquirers Association debuted in the late spring and will have its first conference July 30 to August 1 in Chicago. The MidWest Acquirers Association, like the NorthEast and SouthEast Acquirers Associations, was formed to provide a regional opportunity for training, education and networking for the local acquiring community, according to Mark Dunn, President.

Steve Norrell, President, of the recently formed National Association of Payment Professionals, Akron, Ohio, says the organization was formed to provide "merchant level salespeople," sometimes referred to as ISOs, MSRPs or other terms, common industry standards, continuing education and to attempt to obtain insurance, discounts and other benefits that tend to be available only to groups.

"We're going to have certification that will show merchants that our members are reputable, equitable and financially vested in the industry," Norrell says. "Most [independent salespeople] who don't invest a dime in their businesses, don't join organizations like this. They sell leases then can never be found. They're the ones you need to watch out for."

As electronic transactions replace cash and other paper forms of payment at the point-of-sale, competition among new technologies to become the predominant form of electronic payment also will grow. But whether the future of payments will move beyond magnetic-stripe cards to include cellular telephones, contactless radio-frequency key-chain fobs or smart cards, largely will depend on how effectively these methods can provide clear value to the consumer, according to a TowerGroup report.

"It's not about the technology, it's about the value it brings to the consumer," says TowerGroup Senior Analyst Edward Kountz. "You need to leverage user habits."
In the U.S., Kountz believes contactless RF and RF-identification technologies, such as those used in ExxonMobil Corp.'s Speedpass transponders and MasterCard Internationals' PayPass cards, will gain the most interest in the near term.

Ingenico recently unveiled new terminals to handle EMV transactions. Based on UNICAPT 32-bit architecture, these terminals provide maximum security and power. (EMV is a global standard for the design, security, and functionality of smart card terminals and applications. EMV stands for Europay, MasterCard and Visa.)

Heavily involved in the global EMV migration process of existing point-of-sale systems, Ingenico will provide its customers with terminals and PIN pads using the new EMV standard, and with a complete range of EMV services (consulting, project management, training and more) designed to facilitate migration.

PayRight Merchant Services, LLC, one of the nation's leading merchant service providers, recently awarded Hypercom a 12-month, multi-million dollar contract for 10,000 Hypercom card payment terminals and technology with HyperSafe operating system security.� The terminals started to go to merchants at the end of the first quarter.

"Our goal is to align PayRight with the leading equipment and service providers in the electronic transaction industry, thereby providing unparalleled service, quality, and price to our thousands of merchants across the nation," said Sam Zietz, PayRight CEO.

Financial Technologies Inc. one of the 10 largest ATM network operators in the country, is changing its name to better reflect its new vision as a company.

FTI, as the company is now known, has worked directly with the country's top processors, equipment manufacturers and service providers for credit/debit processing services and prepaid services to develop state of the art applications which will enable FTI to provide retailers with a host of services never offered through a single source. The services currently include ATMs, check cashing, credit/debit processing, electronic check conversion with check guarantee, prepaid cellular & long distance, money orders, money transfers and gift/loyalty cards.

First Data Corp. agreed in early April to acquire electronic transaction processor Concord EFS, Inc. for $7 billion in First Data stock.

Upon completion of the transaction, the combined company will provide banks, merchants and their customers with more options to conveniently and securely conduct a full range of electronic payment transactions. The combined company will have approximately $10 billion in annual revenues with more than 31,000 employees worldwide.
First Data will exchange 0.40 First Data common shares for every Concord common share. To complete the transaction, First Data will issue approximately 200 million common shares to Concord shareholders. Upon completion of the transaction, based on the current shares outstanding, Concord shareholders will own approximately 21 percent of the outstanding shares of First Data.

Hypercom Corp. recently announced that it's is significantly expanding its resources devoted to independent sales organizations, ISO agents and other merchant sales representatives.�

"We have created and are deploying a technology and sales juggernaut in favor of the nation's ISOs, ISAs and their customers.� We are moving forward with an elite team of highly experienced sales executives and payment technology, service and support that can help this important channel build business and generate new revenues," said Hypercom Senior Vice President for ISO Sales, Lisa Shipley.

During income tax season BVIG Financial, a Houston, Tex.-based financial services company, launched an ATM-based, check-cashing solution in 59 Jackson Hewitt Tax Service and independent tax preparation locations across the country.

Each tax season, billions of dollars of checks are issued in tax preparation locations across the country. The BVIG solution enables the taxpayer to cash his or her check at the tax preparation site for the ultimate in convenience.
BVIG's solution combines CashWorks' patent-pending, check-cashing technology with an ATM from Tidel Technologies, Inc. BVIG has signed a multi-year, exclusive agreement with CashWorks.

Global Payments Inc., a provider of electronic payment card and check processing solutions, is participating in the Visa POS Check Service program as an acquiring processor and as a third-party check authorization source for Visa.

Credit-card association Visa USA will require merchants that take Visa payments to display only the last four digits of a card number on receipts in an effort to thwart a surge in financial identity theft.

"The first phase of this [Visa's new policy] goes into effect July 1, 2003 for all new terminals," said Carl Pascarella, Visa USA CEO. " I would like to add, however, that even before this policy goes into effect, many merchants have already voluntarily begun truncating receipts, thanks to ground work that we began together several years ago.
"Visa's new receipt truncation measure builds upon our other security measures -- zero liability cardholder protection, Verified by Visa, neural networks and the Cardholder Information Security Program," Pascarella added.

CardSystems, a Chantilly, Va.-based full-service electronic payment processor, recently secured $23.6 million in a private funding. The company will use the funds to continue improving and expanding its full-service payment processing services in support of its' ISO and bank clients.

"To attract an investment of this size in the current challenging economic environment is a testament to our team, outstanding technology and the market opportunity we are well positioned to take advantage of," says CardSystems CEO, John Cramp. "Completing this funding is a key step in setting up CardSystems for accelerated growth."

Cardtronics, the nation's largest independent owner/operator of ATMs, recently signed an agreement with EFMARK Service Company to provide ATM maintenance service for 5,000 ATM machines in Cardtronics' portfolio. "By teaming with EFMARK, we can assure our customers that any ATM problems they encounter will be handled in a few hours, not days," said Mike Clinard, Cardtronics Chief Operating Officer.

"We are very excited about expanding our service relationship with Cardtronics to provide a national solution for the Cardtronics ATM network," said Robert Malik, EFMARK Senior Vice President. "Integrating the advanced technology capabilities of Cardtronics and EFMARK give us the ability to provide a cost-effective, high quality service solution."

VeriFone Inc. recently teamed up with Texas Digital Systems, Inc. a provider of electronic display solutions for the quick service restaurant industry, to launch an advanced POS solution for fast food restaurants.

The solution integrates TDS' order confirmation displays with VeriFone's electronic payment terminals to enable customers to complete transactions using credit or debit cards at the point-of-order in the drive-thru lane.
With more than 100,000 locations providing drive-thru services in the U.S. alone, electronic payment technology will transform the way business is done in the drive-thru, according to VeriFone officials. In addition, new technology initiatives will further accelerate QSR payment acceptance, they predicted.