Visa, MasterCard Must Face Target, Macy’s Swipe-Fee Case

Visa Inc. (V) and MasterCard Inc. (MA) lost their bid to dismiss more than 30 lawsuits by retailers seeking potentially billions of dollars in damages over fees for processing transactions.

Merchants including Target Corp. (TGT) and Macy’s Inc. (M) pursued their cases after dropping out of an earlier $5.7 billion settlement over the charges known as swipe fees. Today, a federal judge in Brooklyn, New York, refused to throw out those lawsuits. He also rejected Visa’s request to dismiss a similar lawsuit filed by Wal-Mart Stores Inc. (WMT) seeking at least $5 billion in damages.

U.S. District Judge John Gleeson said his decision was “in large part driven by the requirement that I accept all well-pleaded factual allegations as true” because the cases were in the early stages of litigation. It isn’t a ruling on the merits of the complaints.

Gleeson in December approved the card companies’ settlement with merchants nationwide following years of antitrust litigation over the fees.

Dozens of large retailers appealed the approval of the accord. Many also dropped out of the deal and filed their own lawsuits, contending it wasn’t enough compensation for the hundreds of billions of dollars in fees paid.

‘Market Power’

In a revised complaint filed this month, Target and Macy’s said the card companies “have obtained and maintained market power in the market for merchant acceptance of credit cards” causing merchants “to pay excessive interchange fees.”

Wal-Mart alleged in its complaint that “Visa’s monopoly power has enabled it to dictate price and inhibit competition.” The Bentonville, Arkansas-based retailer announced in April that MasterCard will handle transactions for store-branded credit cards. MasterCard isn’t named in Wal-Mart’s swipe-fee complaint.

Visa and MasterCard argued that the merchants’ claims for damages should be barred by legal releases in an earlier settlement in 2003. They also said the claims should be thrown out because the merchants don’t directly pay fees to banks that issue Visa and MasterCard branded cards. The fees are deducted from payments merchants receive after processing.

Separately, Gleeson also denied requests by Wal-Mart and another group of merchants to dismiss lawsuits filed against them by the card firms seeking to stop their litigation over the fees in its tracks. The request the card firms are making in those cases is “properly invoked,” Gleeson said.

‘Tactical Advantage’

“We’re not seeking an unfair tactical advantage, we’re seeking finality,” said Michael Shuster, a lawyer for Visa, during the hearing today.
 
Paul Cohen, a spokesman for Foster City, California-based Visa, declined to comment on the judge’s rulings.

“Judge Gleeson’s ruling was at the earliest stage of the case,” Seth Eisen, a spokesman for Purchase, New York-based MasterCard, said in an e-mail. “We look forward to putting this matter behind us and continuing to work productively with the merchant community.”

The case is In Re: Payment Card Interchange Fee and Merchant Discount Antitrust Litigation -- Opt Out Cases, 1:14-md-01720, U.S. District Court, Eastern District of New York (Brooklyn).

Original article can be found here.

Russia to Let Visa, MasterCard Sidestep Security Deposit

The Russian government has officially declared the conditions that will allow international payment systems Visa and MasterCard to continue business in Russia without paying the massive security deposit that had threatened to shove them out of the country.

To avoid paying the security deposit and fines for interruption of service, the companies must find a Russian payment system deemed "of national importance" to process their transactions by Oct. 31, according to a decree signed by Prime Minister Dmitry Medvedev on July 15 and published Tuesday on the government's website.

This solution to the standoff was floated by Central Bank chief Elvira Nabiullina at a banking conference earlier this month.


Reuters reported previously that MasterCard had already begun searching for a Russian partner to help it circumvent the law.

Visa and MasterCard's problems in Russia began in March, when they abruptly cut off service to two Russian banks in an effort to comply with U.S. sanctions imposed on Russia following its annexation of Crimea.

The denial of service set off a movement spearheaded by President Vladimir Putin to end Russia's dependence on foreign payment systems, which culminated in a law signed by Putin in May that laid the groundwork for the creation of a national payment system to replace foreign players.

The law would also have forced international payment systems to submit a hefty security deposit to the Central Bank in order to continue operating in Russia. Morgan Stanley analysts at the time estimated that the joint deposit for Visa and MasterCard could amount to $2.9 billion, which is five times more than their annual revenues in Russia.

The law set off a flurry of negotiations and proposals on ways to keep Visa and MasterCard, who together process about 90 percent of transactions in Russia, from leaving the market altogether.
Also on Tuesday, the government published the requirements that payment systems will have to fulfill to be considered "of national importance" — a status that will exempt them from having to submit a security deposit.

At least 25 percent of the payment infrastructure, applications and software that the systems use must be developed by Russian organizations and provided under contracts lasting at least five years, among other requirements.

As of Tuesday, only one Russian payment system had received this status — the National Settlement Depositary, a part of the Moscow Stock Exchange group.

Nabiullina said at the end of June that the national payment system will be created within six months, ITAR-Tass reported.

Original article can be found here.

Visa, MasterCard lose ruling versus retailers over credit card fees

NEW YORK - A federal judge declined on Friday to dismiss antitrust lawsuits filed against Visa Inc and MasterCard Inc by retailers who opted out of an estimated $5.7 billion class action settlement in 2012 over transaction fees.


Retailers such as Target Corp and Amazon.com Inc have accused Visa and MasterCard of fixing the fees charged to merchants each time their customers used credit or debit cards. They also alleged the two companies prevented merchants from steering customers to cheaper forms of payment.

U.S. District Judge John Gleeson of Brooklyn said on Friday the lawsuits could proceed, according to Jeffrey Shinder, an attorney for some of the retailers.
Shinder declined further comment.

In December, Gleeson approved an estimated $5.7 billion settlement between the two credit card companies and a nationwide class of merchants over similar allegations.

But thousands of retailers, including some of the biggest in the United States such as Wal-Mart Stores Inc, opted out of the settlement, complaining it was not adequate.

Those companies argued the settlement offered meaningless reforms that would not help them control the costs of accepting credit cards. Many of those retailers who objected to the settlement filed their own lawsuits.

A spokesman for MasterCard said in a statement that Gleeson's ruling on Friday was at earliest stage of the case.

"We look forward to putting this matter behind us and continuing to work productively with the merchant community," he said.

A Visa spokesman had no immediate comment.

The case is Payment Card Interchange Fee and Merchant Discount Antitrust Litigation - Opt Out Cases, U.S. District Court, Eastern District of New York, No. 14-01720.

Original story can be found here.

Visa Europe considers biometric authentication for payment

In his latest blog post, Visa Europe director of new payment propositions Jonathan Vaux attributes the increase in the popularity of card-on-file payment to the growing use of biometrics.

Vaux writes in response to what he views as a recent spike in the number of announcements from major players in the technology sector relating to plans to open up access, identity authentication services, and new methods of uploading private card data to the cloud.

He makes it clear that card-on-file is not a new form of technology, and that in fact, it has been around for many years. However, he points out that what is particular intriguing about the technology is that “any developer can now take advantage of these capabilities and integrate them into their own applications.”

Vaux also points out that the increasing popularity of smart devices has led to a growing number of consumers who are using many different devices to make their online purchases.

The constant act of re-entering their credit card information every time they make an online purchase has become a frustrating ordeal for customers, writes Vaux.

This has prompted retailers and service providers to try different methods of storing this sensitive information in the cloud to make it as easily and quickly accessible as possible.

“What we’re seeing now is the advent of technology enablers (e.g. APIs) which will help card on file solutions become far easier to integrate into retailer apps. This could potentially lead to them becoming the preferred solution, since this kind of instant service minimizes friction at the critical moment of purchase,” writes Vaux.

“The addition of card scan technology – the ability to use a mobile device’s camera to ‘scan’ a card – also removes one of the key barriers for the customer: the need for card data entry at the time of enrolment and registration.”

Finally, Vaux talks a bit about biometric authentication technology and its ability to even further optimize the customer payment process on smart devices by offering a fast and secure way to pull up card data stored within an app and successfully authorize a purchase.

Vaux ultimately thinks these developments will push card-on-file solutions forward into greater mainstream use, especially as “merchants develop more proprietary apps for online and face-to-face-payments.”

He closes the entry by discussing Visa’s own digital payments objective, emphasizing that this technology can help the company to achieve that goal.

“We need to develop new standards, processes and capabilities that help enable these technologies which will, potentially, help us achieve our ambitions to be the world’s most trusted currency and displace cash and cheques,” writes Vaux. “For example, we will need to recognise other forms of authentication, such as thumbprint, in our process flows and evaluate its impact on the commercial framework. As well as driving card preference in digital payments, this will also create opportunities for our processing business and for us to extend our role as a trusted broker and facilitator in the payments to include new players such as Operating Systems.”

Original article can be found here.

VIP credit cards flaunt steel; plastic is fine

A stark black envelope for this credit card pitch has the words "By Limited Invitation" printed in silver on the back flap.


The trappings of swanky lifestyle dot the flyer that talks of VIP treatment at hotels and villas, free luxury gifts, access to VIP airport lounges and 25,000 bonus points when you spend $1,500 on eligible purchases within 90 days of opening the account.

The Visa Black Card, issued by Barclays, is made of stainless steel and has a $495 annual fee to match that luxury look. Plus you could spend $195 each year for each authorized user.

Just seeing a high-end credit card promotion hit area mailboxes should be a clue that we're no longer talking about everyone's Great Recession. Credit card issuers are making pitches in time for summer vacations, back-to-school sales and holiday spending.

During the first three months of 2014, about 992 million credit card offers were mailed to consumers, up about 7% from the same time last year, according to Mintel Group in Chicago.

We're seeing more than twice the number of card offers hitting mailboxes than we did five years ago during the meltdown. In the first three months of 2009, Mintel reported that only 456 million credit card offers were mailed to consumers.

Lately, mailings are pitching credit cards that offer travel-related rewards, and yes, some high-end annual fees that many consumers would have deemed absolutely nuts when times were crazy-tight.

"A $495 annual fee a couple of years ago would have screamed 'Don't take me,'" said John Ulzheimer, president of consumer education for CreditSesame.com in Atlanta.

For consumers who watch every penny, such a high annual fee still shouts "Don't take me."
But the Visa Black Card isn't the only premium card with a stratospheric annual fee.

The American Airlines Admirals Club card's annual fee varies with one's frequent flier status and can range from $400 to $500 a year for the first year of membership. The American Express Platinum Card has a $450 annual fee, too. The United Club Card from Chase has a $395 annual fee.

Ulzheimer said he has a Delta Reserve Credit Card from American Express that has a $450 annual fee. Perks include double miles on Delta purchases, the ability to earn 15,000 in bonus miles and 15,000 in Delta Medallion Qualification Miles if $30,000 is spent on the card during a calendar year.
An additional 15,000 in bonus and 15,000 in medallion miles are available if you spend another $30,000 in the same calendar year.

Medallion miles enable travelers to move up on the SkyMiles level, which can lead to seating upgrades and priority boarding.

The list has "rewards that are meaningful to me," Ulzheimer said. He travels two to three times a month and always flies on Delta, given that he lives in Atlanta. He benefits when he renews his card and receives a free companion certificate each year for his wife.

For most people, a high-cost card isn't worth it just for miles or rewards. One way to look at it: You'd need to spend $45,000 on a card — if that card had 1% cashback and a $450 annual fee — in order to make back the fee.

Business travelers value other perks, too, such as bonus points for buying airline tickets, a free checked bag and airport lounge access. But vanity aside, many of us don't need all these extras.
"How frequently does one really need to access a VIP lounge?" said Jelena Ewart, general manager of credit and banking for Nerdwallet.com.

Premium credit cards with very expensive annual fees of $400 or more can work for only a "very, very select group of people," said Bill Hardekopf, CEO of LowCards.com.

As As for the Visa Black Card, the $495 annual fee is a "big negative," according to Odysseas Papadimitriou, founder and CEO of the personal finance websites CardHub and WalletHub.
He'd prefer the Barclaycard Arrival Plus World Elite MasterCard or the Santander Sphere Credit Card.

Sources have said some good travel-rewards cards are Barclaycard Arrival Plus, Capital One Venture Rewards Visa Signature Card and BankAmericard Travel Rewards. The Barclaycard Arrival Plus World Elite MasterCard has an $89 annual fee that's waived the first year; the Capital One Venture Rewards card has a $59 annual fee that's waived the first year. The BankAmericard Travel Rewards card has no annual fee.

American Express has its new Amex EveryDay Credit Card, that allows holders to transfer points to 17 airline and hotel partners.

Ewart said the Amex EveryDay card could be a good card for a young couple or a family wanting to build travel rewards. She sees it as an "intro to miles" card with no annual fee.

Sure, a sleek black card might be as flattering as a little black dress. But if you really want to travel in style, study all of your options.

Original article can be found here.

Children aged eight can have their own Mastercard: Debit cards can be topped up by parents for their offspring to use

Children as young as eight are being offered celebrity-endorsed Mastercards to use in shops, online or at cash machines.

The cards, created by British company Osper, can be topped up by parents with the child’s monthly allowance so they can spend it at will.

Banks already issue debit cards to anyone over the age of 11, but it is thought this is the first time younger children will be able to use them.

TV presenter Davina McCall is endorsing the prepaid debit card on her website, after it was launched last week.

Osper, which is backed by MasterCard, said it aimed to help children learn how to manage their finances at an early age. 

But critics questioned whether the cards were simply grooming children into becoming ‘mini consumers’.

Parents can open an account for their child through the Osper app, prompting an orange chip-and-pin card to be sent under the child’s name.

They can then activate the account by making a lump sum transfer or setting up a regular direct debit from their own bank account.

Children can only spend what is already in the account, as there is no overdraft facility.

The app allows parents to review what has been spent, while children can log in to check their balance and request emergency transfers.

The card can also be locked via the app if it is lost or stolen, blocking all purchases.

The service is free for the first year and then costs £10 per year thereafter.

McCall said in a video: ‘There’s something about the app and the way it works and how simple it is that just feels safe.

‘To me, that’s really important as a mother. It’s teaching me to relax a bit when it comes to finances and my children.’

But one critic wrote on an online forum: ‘My under 12s find it very hard to grasp the value of cold hard cash. When their total stash after a birthday comes to £100, they can’t appreciate that it would take many hours’ work to earn that in a typical Saturday job.

‘I can’t think that making cash something invisible would improve things. It would be even less tangible to them.’

Another wrote: ‘Religion works on the principle of ‘get ‘em while they’re young’.

Consumerism is the new religion so I guess debit cards for children was inevitable.’

The Osper card follows another prepaid card aimed at children called goHenry, which works in a similar way and allows parents to set controls.

There are also a variety of other prepaid cards aimed at teenagers, such as the MeCard, also a Mastercard.

Many British banks require youngsters to be 11 years old to receive a debit card, with some setting a minimum age of 16.

In 2008, it emerged Lloyds was sending children as young as 11 Visa-enabled debit cards without the knowledge of their parents.

It was feared children may begin using them to buy cigarettes, drugs and X-rated videos over the internet.

But both Osper and goHenry have pre-programmed restrictions preventing youngsters from using their prepaid cards to buy adult items.

Original article can be found here.

Do Patent Filings from eBay and Western Union Pose a Threat to Bitcoin?

In recent months, there has been no shortage of potentially alarming headlines detailing how mainstream financial and tech giants such as eBay, IBM and JPMorgan may be looking to enter or impact the bitcoin space with strategic patent filings.

The most recent company to enter these ranks was Colorado-based remittance giant Western Union, which received a patent on 1st April that reports have suggested would give the company a claim to a key aspect of the bitcoin industry – the exchange of alternative currencies.

Despite the sensational headlines, however, it has remained unclear as to what potential effect, if any, such a patent would have on the ability of bitcoin businesses to provide similar services or offerings.
The question remained, how worried should bitcoiners be about these high-profile patent filings?

Community concern

One patent analyst and bitcoin enthusiast believes the threat of such actions is not only real, but that it’s one that the bitcoin industry needs to actively defend against.

To this end, Reed Jessen, founder of the Cryptocurrency Defense Foundation (CDF), is seeking to protect the bitcoin space from such intrusion through the strategic filing of patents.

“Our goal will be to protect the fledgling cryptocurrencies of the world from the repressive pressures of the patent system and allow them to compete based on the merits of their use, not on government-granted monopolies,” said Jessen in the CDF’s launch statement.

The service would be offered royalty-free to companies that agree not to assert their patents against others in the industry.

More broadly, the CDF would seek to build a patent portfolio to promote and defend the community’s interests and business ambitions, especially given that its research suggests 65 patents related to cryptography have been filed by companies such as QUALCOMM and Visa.

With this in mind, CoinDesk asked Jessen to analyze three recent digital currency related patents – filed by eBay, Gemalto and Western Union – to illustrate their potential impact on the bitcoin space.
Though he notes his assessments represent his opinion and not any legal judgement or advice, Jessen provides a look at how the claims – both those pending and those approved – could impact digital currency businesses.

Western Union

In Jessen’s view, the Western Union patent does give the company exclusive rights to an exchange that allows users to trade digital currency for fiat currency, though the actual system to which Western Union is entitled these rights is far more narrow.

For example, the system protected by Western Union’s patent would provide users with a list of people looking to sell fiat for digital currency and allow these individuals to select the person with whom they would like to trade.

Western Union’s patent also notably calls for an “assessor” that would analyze the offer and score them based on their value. The assessor would then award both individuals proposed trade scores, and both parties would decide whether to execute the trade based on such information.

Jessen concluded that due to these specifications, any effect on the bitcoin space as a result of the patent is likely to be limited, explaining:

“This patent only grants Western Union the right to stop someone from using the ‘assessor’ functionality for 20 years, not the right to exclude people from using exchanges to trade money. If your exchange does not have an ‘assessor’, it does not apply to you.”

Western Union provided comment on its filing to CoinDesk, though the statement did not provide clarity as to its goal for the patent:

“Western Union generally does not comment on specific intellectual property assets. That said, we have, and will continue to explore opportunities that build on our experience and expertise in the various facets of the money transfer market.”

eBay

Unlike Western Union’s filing, which was recently granted, eBay’s patent for a “System and method for managing transactions in a digital marketplace” is currently pending approval. However, it has grabbed headlines due to eBay’s past statements about its active interest in the digital currency space.

This patent, filed in December 2011, describes a system that determines whether a customer is buying unique digital goods and makes adjustments to avoid this overlap.


According to Jessen, the process would work like this:

“If you are attempting to buy the album ‘Abbey Road’ by the Beatles on iTunes (or some other music service), but have previously purchased ‘Maxwell’s Silver Hammer’, this program will identify that you already own the song and instead sell you ‘Abbey Road’ minus ‘Maxwell’s Silver Hammer’ at a reduced costs.”

Bitcoin, however, could still be affected by the system, he said:

“This patent relates to cryptocurrencies only tangentially in that [it describes] doing this process with a privately issued currency like airline miles or bitcoin.”

Gemalto

Of the three patents, the implications of software developer Gemalto‘s pending patent application for a “Transaction method between two entities providing anonymity revocation for tree-based schemes without trusted party” may be perhaps the most related to digital currency.

Filed in April 2008, Jessen described the patent application as “very closely related to the concept of the block chain”. He noted it uses public key encryption, but adds additional anonymity features.
Overall, Jessen suggests the patent could have implications for alternate uses of the block chain, saying:

“They are proposing a cryptocurrency scheme without the need for access to the Internet.”

As with eBay’s filing, however, the patent has not been approve and may never be granted.

Original article can be found here.