Tuesday, April 8, 2008
Monday, April 7, 2008
The Royal Bank of Scotland is planning to roll out a debit card payment system that will bring sophisticated technology to cut errors and fraud from debit payments. The Royal Bank of Scotland (RBS) is the first to use a system for debit card payments which automatically verifies details such as the addresses of both parties and checks whether the payments follow a usual pattern. The project aims to cut fraud and mistakes which cost businesses billions of pounds a year. Jane Barber, head of product development at RBS, said the bank is looking across its entire business to decide where to deploy the system. "Because we are a big business with a lot of core services, it is intellectually challenging to decide where to put it." RBS plans to use the Banking Wizard Absolute service from Experian Payments, formerly Eiger Systems. The system uses information from Experian's information business to check the authenticity of bank accounts and to verify that the person making a debit payment is who they say they are. The project aims to cut the costs associated with payment failures. "Business customers want to process payments quickly and easily but everytime something goes wrong it makes it difficult," said Barber. According to the UK trade association for payments, Apacs, 2% of direct debits and direct credits, equivalent to 111 million transactions, fail each year. The cost of resolving failed debit payments is estimated to be as much as £35 per transaction or £3bn annually, according to research from Experian. Traditional payment systems used by banks automatically check the bank account numbers and sort codes against databases to verify they are genuine numbers. But they do not verify the details of the individual making the payment - such as address and details of previous payment - which could make errors and fraud less likely. "This is typical across the banking sector," said Gareth Lodge, analyst at TowerGroup. "As far as I know, no UK bank has a system that can do this because none has existed before." Lodge said installing the software across the business will give RBS a single view which will help it spot frauds. "For example if somebody tries to commit fraud at its insurance division, transactions will be automatically blocked at its other divisions." The Experian system is web-based and has a single interface so the bank will only have to implement the software once. RBS will pay for the service on a transactional basis with Experian Payments receiving a payment whenever a transaction is made. Barber said the arrival of the single European payments area in January and the Faster Payments System next month means payment security is vital as payments systems will be increasingly targeted by fraudsters.
UK corporates are risking opening their doors to fraudsters by failing to upgrade anti-fraud systems to deal with payments made via the single euro payments area (Sepa), according to research from Experian. In a study of telecoms, insurance and utility corporates, Experian found that hardly any had upgraded their anti-fraud payment measures, following the introduction of Sepa. A total of 86% have not even assessed the payment fraud risk presented by Sepa. However, all the corporates interviewed said banks had a responsibility in protecting them against fraud. Jane Barber, head of product development at Royal Bank of Scotland, said corporates and banks had to improve their fraud defences to take Sepa into account. "As we go into a more global payments world we have to make sure we have got the right systems in place," Barber said.
Charlie McCREEVY European Commissioner for Internal Market and ServicesSingle Euro Payments Area 7th International EPCA Conference "Releasing the power of payments" La Hulpe, 1st April 2008 "Ladies and Gentleman, Thank you for inviting me to address you this morning on the subject of SEPA, the Single Euro Payments Area. Today is April fool's day, but believe me, SEPA is not a hoax. We already have 4000 banks in Europe adhering to the EPC credit transfer scheme and a volume of more than 100,000 transfers a day. But why is SEPA so important for Europe? Let us go back a few years. I remember Sir Leon Brittan, a former EU trade Commissioner in the early 90s, telling the story about ordering a book costing around �10 from another Member State, but when the bank charges were added in the cost, it came to �30. This is why SEPA is important for Europe: it brings concrete benefits for EU citizens! Today, a cross-border transfer can be executed at the same price as a domestic one: no more than a few Euro cents! How does SEPA release the power of payments to the benefit of the whole European economy? This distinguished audience of professionals knows it better than anybody: payments are essentially a volume-related business. The integration of national payment systems though SEPA will produce substantial economies of scale thus lowering payment processing costs.
It will also enhance competition by making cross-border competition for payments possible. Together, these will reduce the cost of payments to users. Major payment users such as corporates, public authorities, retailers and SMEs should benefit from improved business efficiency and reduced operating costs linked to payments. By facilitating cross-border payment, SEPA could have a dynamic impact allowing especially SMEs to reap the full benefits of the internal market. SEPA could also have a hugely positive impact on the integration of retail financial markets. verall, SEPA will increase the competitiveness of European business and the financial sector, as well as bringing about the integration of payments markets in the EU, which was identified in 2000 as one of the key measures to achieving the goals of the Lisbon Agenda. To quote a number: 123 billion euros in the next 6 years. These are the expected benefits of SEPA according to a study carried out by Cap Gemini for the Commission. But the story does not end here: if we can use SEPA as a platform for e-invoicing, then a further 238 billion euros of savings could be achieved. In addition, SEPA could also be used as a platform for e-lending and trade financing. In the public sector, SEPA will, I hope, be used to drive e-Government and the development of transactional services in the areas of e-procurement, taxation, and customs. Ladies and Gentlemen, The future holds great potential, but there is still a long way to travel. I would like to take this opportunity to remind you also about the challenges ahead: SEPA migration, cards, additional optional services and SEPA governance.
First SEPA migration. As far as migration is concerned, we need a realistic timeline for the full completion of the project. By completion I mean the widespread use of SEPA products by retail customers, SME�s, corporates and the public sector. SEPA migration started last January and the intention is that by 2010 a critical mass of payment instruments should have migrated. However, more clarity is required on what constitutes a "critical mass of payments" in order to avoid different interpretations of such a concept in each of the Member States. Uncertainty about the end game for SEPA could easily become an excuse for delayed migration. But, the longer the transition period, the longer the period banks will have to bear duplicate costs, first-movers will be handicapped, and SEPA pricing as a whole will be suboptimal. This argues that a realistic timeline for phasing out old national payments products and migrating customers to the new SEPA products should be set up. Public authorities represent nearly 50% of EU GDP and around 15-20% of all payments. Given the wider benefits to society, public administrations could and should play a major role in kick-starting migration. In May of last year I hosted a major conference in Brussels to familiarise public authorities with the benefits of SEPA. Electronic payment services can enable the simple payment of various government fees, taxes and social benefits and SEPA could be used as a platform for e-Government. However, the Conference showed that while public authorities strongly support SEPA, concern about the pricing and performance of SEPA products may, sadly, create a negative climate for early migration. But SEPA is a market-driven process, and in a market driven process, suppliers should persuade customers of the merits of new products so that migration occurs naturally. Banks should espouse the non-deterioration principle, namely that the new SEPA products should have price/performance characteristics at least as good, and preferably better, than existing products. The ECOFIN, the Council of European Finance Ministers, has already highlighted its importance in its conclusions last year and the Commission will continue to monitor this issue and, at the same time, will strive to promote the role of public administrations in the timely and successful implementation of SEPA. A second issue, which concerns me, is what happens to national debit cards. Within SEPA, functionality will undoubtedly be expanded so that a card can in principle be used at any terminal in the euro zone. Unlike the comprehensive rule books for credit transfers and direct debits, the SEPA Cards Framework does not develop any detailed rules and standards, but rather describes three options for attaining SEPA compliance. There is a justifiable concern that under current market developments, this increased functionality could come at the cost of increased market concentration and the risk of a more expensive payment card for the merchant and consumer. At the heart of this issue is our concern that national card schemes should not be replaced by more expensive payment card schemes, using SEPA as some sort of pretext for increasing prices. More competition in the EU payment cards landscape should mitigate against such tendencies. A first decisive step has been taken by the Commission last December, with the prohibition decision addressed to Mastercard regarding MIF for cross-border payment card transactions with MasterCard and Maestro branded debit and consumer credit cards in the European Economic Area (EEA). The Decision found that Mastercard's MIF inflated the costs of card acceptance by retailers, since the MIF accounts for a large share of the final price companies pay for accepting Mastercard's payment cards, without leading to proven efficiencies. Let me be clear on one point Ladies and Gentlemen: the Decision did not conclude that all MIFs are illegal per se. However, Mastercard could not demonstrate that its MIF contributed to objective efficiencies, meaning technical and economic progress, or that it benefited consumers. I have, of course heard some voices who say that this Decision is jeopardizing SEPA, even killing it. I reject that. In fact, the Mastercard Decision supports the SEPA project in two ways: Firstly, it obliges Mastercard to refrain from implementing its new "SEPA" interchange fees for the euro zone. This ban will ensure that SEPA does not lead to permanent price increases linked to payment cards. Secondly, as a consequence of the Mastercard Decision, there will be better conditions for new schemes to compete with incumbents, as the current MIF practice has to change. Last week my colleague Neelie Kroes also opened an investigation into VISA's MIF.Of course, as regards the possible emergence of new schemes, I fully recognise that where market players are called upon to make fresh investment to create a new network, clarity on possible business models and a MIF that is compatible with EU competition law is crucial. The need for clear communication is obvious. In response, the exceptional step of publishing a provisional non-confidential version of the Mastercard Decision has been taken. But this is not the end of the story, as we will of course continue our dialogue with the industry in order to make sure that there is sufficient clarity and legal certainty in the market. There also needs to be further progress on standardisation to allow for a greater variety of card schemes on the European market. Therefore, I very much welcome the recent work initiated within the EPC on the development of card standards and urge its rapid completion.
The third issue I wish to touch on is Additional Optional Services. These will play an important role in the future European payments market and are vital for the SEPA �business case� of many institutions. Payment services will become increasingly commoditized and banks will need to develop new sources of revenue by the provision of add-on-services, such as e-invoicing. But, the risk is that the provision of these services may lead to new, national fragmentation and the economies of scale and the massive productivity gains that could be achieved by their development at EU level may not be attained. Additional Optional Services are not described at length in the EPC Rulebooks as they are considered part of the competitive space. However, I think the EPC could consider providing the industry with clear ideas for the development of AOS (beyond the core SEPA services), addressing the need for interoperability and preventing fragmentation. The fourth and final issue is SEPA governance. The Commission attaches great importance to the governance arrangements for the European payments market. If users cannot participate effectively in the SEPA governance arrangements, then it becomes doubtful whether the current and future needs of users will be adequately met on a timely basis. This is vital for a complex project such as SEPA, which involves so many different end-user groups in various countries. The creation of the stakeholders' forum by the EPC is clearly a move in the right direction, but how this user consultation is incorporated into EPC decision-making may need further reflection. Ladies and Gentlemen, You have already achieved much but more remains to be accomplished if SEPA is to become the world-class payment system that Europe's citizens and businesses deserve. As regulators, we can only try to provide a level playing field and a framework for competition. I am sure you have the capacity, skills and determination to make this opportunity a reality. Thank you for your attention.
London - 3 April 2008 Experian®, the global information services company, today announced the re-branding of Eiger Systems, a leading developer of strategic payment solutions, to Experian Payments. As Experian Payments, the business will leverage the data and international presence of Experian to develop international corporate payments services to help both corporates and banks to make their payments correctly and efficiently. Experian Payments will build on the prominent status that it has built up in the UK payments market to further its international growth plans. As national payments landscapes become increasingly international in nature, particularly in the light of the Single Euro Payments Area, Experian Payments believes it will be well placed to respond to market and customer demands through Experian’s global reach. The acquisition of Eiger Systems by Experian in 2006 opened up access to a wealth of data from within Experian with which the division plans to continually enhance its services. Jonathan Williams, Director of Communications and Product Strategy at Experian Payments, says: “We have a long history of supporting developments in the corporate payments market, such as the industry migration to BACSTEL-IP, support for the Euro Payments Council resolution on BIC and IBAN and Bacs’ new ETS Service. This has enabled us to successfully anticipate and meet the evolving needs of our clients. As part of Experian, we are collaborating with other parts of the group to ensure that clients benefit from the products and services we provide.” Phil Cotter, Managing Director of Experian’s Information Solutions division, comments: “Since our acquisition of the newly-branded Experian Payments, the business has quickly become integrated into Experian and is a valuable addition with its strong data validation and submission services for bulk payments. We are now looking to build on its successes by expanding its international reach to reflect the global nature and demands of our clients’ businesses.”
" Visa and EU may reach deal over charges BRUSSELS: Visa Europe said Wednesday it expects to strike a deal with the European Commission that would settle an antitrust investigation into EU charges of price-fixing. The payments card network - which is separate from the Visa based in the United States - said it is trying to convince regulators that the amount it charges for using a card in another country are justified. The EU opened a formal investigation into Visa's fee system last month, saying it may unfairly inflate retailers' costs and raise prices for customers at the cash register. In December it ordered Visa's rival MasterCard to drop cross-border card fees within six months or face huge daily fines. Europeans make more than 23 billion card payments every year worth over 1.35 trillion, or $2.1 trillion. Yet they face extra costs using their cards in another European nation, something EU officials say holds back efforts to create a single market out of the EU's 27 member countries. The chief executive of Visa Europe, Peter Ayliffe, said EU officials had told him they were keen to negotiate a binding agreement with the card industry to end the case, something Visa also favors as the 4,600 banks it represents gear up to make major investments to simplify banking payments across Europe. "We believe a negotiated settlement is the right way forward," he told reporters. "The earlier it happens, the better for everybody. That way we get certainty." But he said Visa was adamant that it would stick to the average 0.7 percent interchange fee it charges for processing credit and debit card payments outside the cardholder's country, claiming it benefited shops and shoppers and helped provide banks with a good business case for dealing with foreign payments. Visa insists that card payments are cheaper than handling cash and more of them would save Europeans close to 1 billion euro. It also opposed any changes to the "honor-all-cards" rule which forces retailers to accept all Visa-branded cards, including debit cards, even if they carry a higher interchange fee. Large European retailers like Ikea, Carrefour and Tesco have called on the EU to take action against what they claim to be unfairly high fees they and consumers must pay to card companies such as MasterCard and Visa. Ikea, the furniture chain, pays fees of about 90 million, or $141 million, annually, while the British supermarket chain Tesco pays around 128 million to the banks for processing credit and debit cards.