Reuters says “The second largest US bank is likely to allow many customers to avoid taking the fee by taking measures such as maintaining minimum balances, having paychecks directly deposited, or using Bank of America credit cards, the person said”

The news about B of A came out after the report that JPMorgan Chase will drop its test of a similar fee and will not be imposing a debit card fee on any of its Chase customers.  Other large bank, including Citibank, US Bank, and PNC, have also stated that they do not have any plans to charge their customers a monthly fee to use their debit cards.

The fact that the banks are no longer going to impose a fee means that the charges will be coming somewhere else.  Because of the Durbin Amendment, which cut the amount the banks could charge merchants from an average of $0.44 per transaction down to no more than $0.24, banks are trying to find ways to make up for that lost revenue.

Citibank, which is one of the banks that decided not to charge a monthly debit card fee, has already raised the fee for use of their basic checking account services.  “We’re going to see more creative, stealth-like fees,” Dennis Moroney, research director at TowerGroup, told SmartMoney.  Among the possibilities:

-          A fee for not using your debit card each month

-          Fees for papers statements or speaking to a teller.  These fees are already in place at some banks

-          Higher overdraft fees

http://money.msn.com/saving-money-tips/post.aspx?post=bf841417-eddb-4a06-8911-4824e018119b

Wells Fargo and Chase are testing $3 monthly debit card fees.  Sun Trust, a large regional bank, plans to start charging $5 next month and Regions Financial plans on charging $4.

This round of charges stems from the Durbin Amendment going into effect on October 1.  Banks had been charging merchants $0.44 per debit transaction, but the Durbin Amendment will limit the amount merchants can charged to a maximum of $0.24.  While this is only pennies per swipe, there are millions of debit transactions each year and the banks are expected to lose about $6.6 billion per year, starting in 2012.  That comes on top of the $5.6 billion per year banks started losing in July 2010 with a law that restricted overdraft fees.

What the banks are essentially doing is moving the cost of using a debit card from the merchant to the customer, the opposite intention of the Durbin Amendment, which was to relieve the consumer of high costs for debit transactions.  Banks aren’t just charging customers to use their debit card.  Some banks are increasing their fees if customers use an ATM for a different bank , i.e. HSBC is now charging $2.50, up from $2, if you use a non HSBC ATM.   Some banks like Citibank have made getting a free checking account more difficult.

These new bank fees are not going over well with customers.  Some people have started moving their money over to credit unions and other banking institutions.

Banks are scrambling to make up for potentially enormous losses in an already fragile industry, big government and just about every other regulator, but to be hated by their own customers may be biting off more than they can chew. I for one, will not being paying extra fees and there will be banks that will win new customers because of these fees. This is capitalism and competition at its best and may the best banks win!

http://www.nytimes.com/2011/09/30/business/banks-to-make-customers-pay-debit-card-fee.html?_r=3

The 21 year old defenseman was looking to become the highest paid player on the Kings while the Kings were looking to get him locked up long term.  The stalemate ended on Thursday night as Doughty agreed to give up 3 years of unrestricted free agency, and Doughty will average more than the $6.8 million per year Anze Kopitar makes.

Doughty led the Kings in ice time last season.  In 2010 he won the gold medal with the Canadian national team, was the second youngest person nominated for the Norris Trophy, and had 59 points.

Users of the Nexus 4G smart phone on the Sprint Nextel network, with the help of an over-the-air update, can now use the Google Wallet to make purchases at any of the 144,00 US merchant locations that accept contactless payments.  For the time being, the Google application can hold a MasterCard credit card issued by Citigroup as well as a Google prepaid card that can be loaded with funds from any other card.  In order to entice early users, Google will load $10 into the Google prepaid card of anyone who activates the wallet by the end of the year.

NFC is a two-way, short-range communication protocol that lets users store payment and non-payment media on their phones in a secure chip.  NFC allows consumers to make payments by waving their phones near a point of sale reader.  It also allows phones to receive coupons and other promotional media from the readers .

http://www.digitaltransactions.net/news/story/3210

The survey was taken at the Direct Response Forum’s annual conference in August with the results being announced last week.  Around 41% of card-not-present merchants surveyed said they don’t intend to pass on lower debit costs to consumers.  56% responded that at this time they were not sure what they planned to do with their debit cost savings.  The results came from 169 of the executives attending the conference, each of whom has an average of 10 years experience in the payments business.

The Dodd-Frank Act, which includes the Durbin Amendment, was proposed last December and called for “reasonable and proportional” limits on debit card interchange.  In June the Fed announced it will cap debit card interchange at $0.21 plus 0.05% per transaction, down more than 40% from the $0.44 average interchange fee on debit.

The bottom line: The consumer may never experience any savings, but the merchant has the ability to make that choice. And under the current economic conditions, businesses are able to earn a little more revenue, which will hopefully lead to stronger employment and a stronger economic. The effects of the amendment are yet to be seen, but you can be sure that new data will be available shortly as the amendment takes effect on October 1, 2011.

Several banks and processors approached Leah about switching over and using their services as opposed to Square.  However, after taking a look at the rates she received from Square they admitted that she had a great deal and left.

Two representatives didn’t go so quietly.

A rep with Key Bank came in with an offer that would give merchants money if they cannot beat their current rates.  After seeing that Leah was only paying 2.75% + no additional fees, the rep fled immediately.

A First Data Rep gave Leah a bunch of misinformation about Square in order to try and get her business.  The rep tried to freak out Leah enough so she would switch over by using this misinformation:

• Square is unencrypted
• Square was storing credit card info resident in the native iPad app she uses
• Square is not PCI compliant
• Leah could be caught in legal action for using it

While none of the 4 points above is true, does the rep’s actions show a bit of panic on the part of credit card companies?  Square is currently doing $4 million in transactions per day, but Chase Paymentech reported $137 billion in transaction in Q2 2011 which is about $1.5 billion per day.

The threat Square possesses is not to the big processors like Paymentech and First Data, but to the ISOs that are selling to Mom and Pop shops.  The big processors do not get involved in setting up smaller businesses because it is too expensive to go directly to them, but the smaller businesses go through ISOs that are affiliated with those processors.   Square is disrupting this sales model and causing the ISOs to take notice and become much more competitive.

http://techcrunch.com/2011/08/22/a-woman-a-cupcake-a-bank-and-a-square-why-credit-card-companies-are-scared-of-change/

http://techcrunch.com/2011/08/22/a-woman-a-cupcake-a-bank-and-a-square-why-credit-card-companies-are-scared-of-change/

Historically the back-to-school season represents one of the largest shopping surges in the US, and 2011 looks to be no different.  According to the National Retail Federation, this back-to-school season will produce approximately $68 billion by consumer spending on books, apparel, paper, pencils, backpacks, and other school supplies.

Internet Retailer cites that 31.7% of consumers are buying supplies through the internet for K-12 students, as opposed to 30.8% last year.  For college purchases, the number of consumers buying online will be even greater that the K-12 crowd at 33.4%, up from 28.6% in 2010.

Five Channels of Online Fraud for the Back-to-School Season

1. Online Purchases
2. Online Book Rentals
3. Banking
4. Social Media
5. Gaming

Online merchants across a plethora of industries can address these issues of fraud in preparation for one of the busiest buying seasons of the year.  “Merchants must leverage smarter fraud prevention technology in order to differentiate between the good and bad buyers,” said Alisdair Faulkner, Chief Products Officer of Threat Metrix.

http://threatmetrix.com/threatmetrix-addresses-five-channels-of-online-fraud-for-the-back-to-school-season/

The chip technology aims to accelerate mobile payments but also secure payments into the future through the use of dynamic authentication. Chip technology reduces a criminal’s ability to use stolen payment card data by introducing dynamic values for each transaction. Even if payment card data were compromised, a counterfeit card would be unusable at the point of sale without the presence of the card’s unique elements.

This announcement is very similar to the one made to encourage use of EMV in other countries.  Visa’s plan to encourage the U.S. adoption of dynamic chip authentication technology includes the following three initiatives:

• Expand the Technology Innovation Program to Merchant’s in the U.S.- Effective October 1, 2012, Visa will expand its Technology Innovation Program to the U.S. TIP will eliminate the requirement for eligible merchants to annually validate their compliance with the PCI Data Security Standard for any year in which at least 75% of the merchant’s Visa transactions originate from chip-enabled terminals.
• Build Processing Infrastructure for Chip Acceptance — Visa will require U.S. acquirer processors and sub-processor service providers to be able to support merchant acceptance of chip transactions no later than April 1, 2013. Chip acceptance will require service providers to be able to carry and process additional data that is included in chip transactions, including the cryptographic message that makes each transaction unique.
• Establish a Counterfeit Fraud Liability Shift — Visa intends to institute a U.S. liability shift for domestic and cross-border counterfeit card-present point-of-sale (POS) transactions, effective October 1, 2015. Fuel-selling merchants will have an additional two years, until October 1, 2017 before a liability shift takes effect for transactions generated from automated fuel dispensers. Currently, card issuers largely absorb POS counterfeit fraud. With the liability shift, if a contact chip card is presented to a merchant that has not adopted, at minimum, contact chip terminals, liability for counterfeit fraud may shift to the merchant’s acquirer. The liability shift encourages chip adoption since any chip-on-chip transaction – chip card read by a chip terminal – provides the dynamic authentication data that helps to better protect all parties.

http://www.contactlessnews.com/2011/08/09/visa-unveils-u-s-emv-plans?issue=contactlessnews_20110809

The three companies also recently teamed up to complete the first fingerprint enabled NFC mobile transaction in the US.  They used the Motorola ATRIX 4G smartphone which is equipped with AuthenTec’s AES1750 smart fingerprint sensor and DeviceFidelity’s In2Pay microSD card based on NXP’s secure NFC solution.  The quick, convenient and secure mobile payment was conducted when the demonstrator swiped a finger over the smartphone’s fingerprint sensor, authenticating him as the pre-enrolled account owner and quickly launching a credit card app. Following authentication the user simply tapped the ATRIX smartphone against a payment terminal to complete the first fingerprint-enabled, secure NFC transaction in the U.S.

“AuthenTec has helped to make NFC-based mobile payment transactions more secure, yet easier to execute since 2004, and we are very pleased to collaborate with NFC and mobile payment leaders NXP and DeviceFidelity to create designs that will help bring a new generation of fingerprint-enabled mobile wallets to the U.S. and other regions,” said AuthenTec CEO Larry Ciaccia. “Security is often cited as the biggest impediment to the broad adoption of mobile wallets, and we believe our jointly developed NFC reference designs will give consumers greater confidence that mobile wallets are not only an easier way to pay but are much more secure than other means.”

The companies are fully committed to developing highly secure and easy to use mobile commerce subsystems to help ease design integration for mobile phone OEMs. Field upgradeable solutions and integrated reference designs will provide a variety of options to mobile phone OEMs for fielding mobile commerce transaction-ready platforms.

http://www.businesswire.com/news/home/20110802005150/en/NXP-AuthenTec-DeviceFidelity-Complete-Fingerprint-enabled-NFC-Payment

Anderson also compared the current state of NFC (Near Field Communications) to that of the internet accessing smart phones back in 2001.  “Back in 2001 futurists were talking about the coming power of mobile devices accessing the Internet, but the actual user experience was a long way from the vision. Now in 2011, with the launch of the iPhone and the rapid adoption of the Android Operating System, the dreams are turning into a an everyday reality and people are used to the idea of being able to do almost everything on their mobile devices. That creates a very healthy environment to introduce mobile payments, because there is a ready consumer appetite for doing more on the mobile device.”

Anderson cited data from Juniper Research estimating $50 million in NFC payments by 2014 as well as a recent survey done by MasterCard that found that 63% of respondents between the ages of 18-34 were ready to make payments on their phones.

When Anderson was asked to name the major factors slowing down the spread of NFC payments, a couple of things came to mind.  The main issue is the lack of NFC enabled phones.  That problem should be solved in the coming years with the addition of more NFC enabled handsets from RIM and Samsung.  Two smaller issues that been brought up are a concern over security and the “dead battery issue”.

Based on the interview it is clear that MasterCard has gone all in on NFC payments revolution.  That and the fact they have teamed up with Google to create what might be the biggest momentum shifter- the Google Wallet.

http://www.nfcnews.com/2011/07/22/only-a-matter-of-time-for-nfc-payments-says-mastercard?issue=nfcnews_20110725