NationalACH

Archive for November, 2009

Research firm Javelin Strategy and Research says financial institutions in the United States still have a ways to go to protect consumers against fraud. The biggest improvements need to be made in providing real time fraud alerts to customers. Alerts are a powerful way to detect fraud. Alerts are most effective when sent by text message to consumers’ cell phones. Financial institutions currently offer alerts about balances, card-not-present transactions, transaction size, and online transfers. But, few bands send alerts about statement notices, new-account setups, and changes in online bill payments. Cybercriminals change online bill payments to payments to take money from accounts. Banks are slow to fully utilize new technologies and are lagging behind in implementing mobile alerts. A few high-profile cases resulting in big losses for banks are inevitable and may be the impetus for banks to offer real protections for consumers. Until then, keep a close eye on all changes made to your account, even if it means logging on daily. Better safe than sorry.

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The economic downturn continues to affect the merchant account payment processing business. Payment processors and card issuers make the most money on when consumers use credit cards to pay for purchases. Debit cards are somewhat less profitable. And, of course, no money is made when consumers pay by cash.

This holiday season, 71% of consumers will pay for purchases using cash or debit cards, according to the National Retail Federation. A survey conduct by USAA reports that two-thirds of holiday shoppers plan to use cash more often than in 2008.

People tend to spend more money when using credit cards to make purchases. Therefore, shoppers using debit cards or cash will spend less because it’s “real money” as opposed to credit to be paid at some future date. Debit card spenders will buy more than those paying cash, but it’s still significantly less than if the buyer uses a credit card.

Paper checks will continue to drop off as debit cards overtake check payments for most retail purchases. For online purchase, the trend towards paying for cash will help increase payments by echecks. Since cash is not an online payment method, people will authorize and electronic check payment.

The shift away from credit cards is good for shoppers in that future debt is avoided. But, it’s bad for credit card payment processors who are already experiencing serious margin squeezes eroding profitability.

Bank of America has an estimated 35% share of the mobile banking market. By the end of 3^rd quarter 2009, the bank had 3.5 million active mobile banking users, a small portion of the overall number of customers.

The bank promotes mobile banking online and in branch locations. More than 85% of mobile banking customers access the service through a smart phone. More than 80% of the users are between the ages of 18-44.

Almost all of the users use the service to check account balances and 90% use it to view transaction details. Others use the service to pay bills and do electronic money transfers. Users also use the service to find local bank locations.

In marketing the service, the bank says there are 2 main reasons customers are not signing up. First, customers don’t see a use for it. Secondly, customers are still concerned about the security of using a mobile phone for banking. As the bank figures how to convince customers that mobile banking is safe, the number of users will increase.

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Bank of America has an estimated 35% share of the mobile banking market. By the end of 3^rd quarter 2009, the bank had 3.5 million active mobile banking users, a small portion of the overall number of customers.

The bank promotes mobile banking online and in branch locations. More than 85% of mobile banking customers access the service through a smart phone. More than 80% of the users are between the ages of 18-44.

Almost all of the users use the service to check account balances and 90% use it to view transaction details. Others use the service to pay bills and do electronic money transfers. Users also use the service to find local bank locations.

In marketing the service, the bank says there are 2 main reasons customers are not signing up. First, customers don’t see a use for it. Secondly, customers are still concerned about the security of using a mobile phone for banking. As the bank figures how to convince customers that mobile banking is safe, the number of users will increase.

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The US Social Security Administration is has been offering a prepaid card called Direct Express since last year. The target market is 4 million social security recipients that do not use direct deposit, although any one entitled to social security benefits can get a card.

Issuing paper checks has been becoming increasingly difficult and expensive. Every year, the U.S. Treasury receives 1.4 million complaints from Social Security and SSI recipients.

There are some fees tied to the cards. Recipients have one free ATM withdrawal per month. After that, it costs 90 cents per withdrawal, in addition to surcharges that may be charged by the ATM location. It also costs extra to receive a paper statement.

Since the program started early last year, about 500,000 Americans have signed up for Direct Express debit cards. According to the Treasury’s recent survey, roughly 95 percent of those surveyed said they’re very satisfied, and the vast majority said they would recommend them to friends and family.

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Unlike some other prepaid cards, the card issued by the Social Security Administration has the same consumer protection as bank issued debit cards. Recipients have liability of only $50 on lost or stolen cards reported in a timely manner.

Check 21 Remote deposit capture, a technology that paper checks to be deposited electronically via image transfer, is going mobile. Instead of scanning check through a scanner, pictures of the check can be taken on the iPhone and sent to the bank.

The customer snaps pictures of the front and back of a check, and then uses an application on the phone to send the images to the bank. This eliminates the need to buy a scanner and brings Check21 technology to the masses.

In the first week that USAA Bank offered remote deposit capture by iPhone, more than $7 million deposits were made. Bank of America is planning to launch later this year with its own mobile service for remote capture.

Banks have limited consumer-based remote capture to customers known to be low risk, and will probably do the same with mobile remote deposit capture. But, mobile phones are for all kinds of financial trading already and banks may make the service more broadly available.

Remote deposit capture was touted as the fastest-growing form of electronic payments ever introduced. But, the economic downturn has taken its toll. Still the number of banks offering remote capture still experienced saw strong growth this year, up 52%.

Research on payment processing was recently released from Goldman Sachs. The investment bank expects growth from sources other than credit cards to power growth of electronic payments to 42.3% of worldwide personal consumption expenditures in 2012, up from 35% this year.

Growth in credit card processing will be slow due to the economy. Goldman predicts that U.S. credit card volume will fall to $1.225 trillion this year, down 11% from 2008’s $1.372 trillion. A further decline, to $1.211 trillion, is forecast for next year.

Debit card transactions will rise. In the U.S. debit volume will be $1.187 trillion this year and will exceed credit card volume in 2010, at $1.284 trillion, including signature and PIN debit payment processing transactions.

E-commerce volume globally will grown from $736 billion this year to about $1 trillion in 2012, the firm forecasts. Volume on prepaid cards will grow from $279 billion to $335 billion. And mobile payments will see volume climb rapidly, from $26 billion to $135 billion.

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Check 21 remote deposit capture is a no brainer for any merchant that receives paper checks. No trips to the bank. Save money and time.

One sticking for wide-spread adoption of remote deposit capture has been the cost of scanning equipment. Even though scanner prices have come down significantly, the need to buy or lease a piece of equipment gave many small business owners pause.

Mitek System has technology that will make remote deposit capture for small business as common as, well, a mobile phone. Software allows users to create check images with their camera phones and then use the handsets to send the images to banks for deposit.

The mobile phone user logs on to a mobile-banking program and enters the deposit amount. The user snaps a photo of the front and back of the check and sends the image through Mitek’s software to his bank for deposit under Check 21 rules. The software runs checks for image quality and corrects distortions. It sends a message to the user if poor lighting, blurriness, or other problems make a re-take necessary.

The company recently signed Fiserv, a payment processor who has more than 1100 financial institutions as customers. Other Mitek customers planning to use the mobile remote deposit capture technology are J&B Software , NCR Corp , and RDM Cor.