Groupon announced its first-ever quarterly profit this week, but its stock is down more than 25% on the year. The business model for Groupon — and competitor LivingSocial, among others — is flawed in so many ways. For starters, merchants that take part in a daily deal give up as much as 75% of each daily deal sale to participate. This creates a high participation cost for the merchant, which does not know whether the daily deal will result in an incremental lift in overall sales from new customers or repeat business. Groupon and LivingSocial have yet to report the … Continue Reading →

As a consumer I have always been skeptical of some of the intangible cardholder benefits associated with certain credit cards. Typical among these benefits are purchase protection plans, car rental loss and damage insurance, lost/stolen baggage insurance, and delayed trip insurance. I never perceived a real value in these services and thought I would never have the occasion to use any of the benefits. I also typically do not like paying annual membership fees on credit cards that offer these benefits. All of that changed recently. I booked a flight to Italy with my American Express card, which provides trip … Continue Reading →

After reading the recent announcement that Bottomline Technologies is buying the commercial banking business of Intuit — the company that makes Quicken and Turbo Tax — I jotted down some comments: Bottomline may be revamping its strategy of purchasing IT assets, managing them on behalf of the partner and at the same time developing further to generate market opportunities for its own business. This is one step ahead in the strategy from the foundation of Bottomline buying Bank of America’s PayMode product in 2009. If this interpretation of the partnership with Intuit is right, then we can expect Bottomline to develop an integrated … Continue Reading →

On Wednesday, February 15, Aite Group’s Wholesale Banking team will host a webinar discussion about key trends featured in our analysis of top 10 wholesale banking expectations in this Year of the Dragon. Ambition and innovation are two components often associated with the year in astrology, and Aite Group sees these as strong themes for planned wholesale banking initiatives in the year to come. Our team’s goal for this webinar is to to engage participants in a discussion about the trends and initiatives that are emerging in 2012, and to provide actionable advice on what these trends mean and how … Continue Reading →

It is well understood that the U.S. healthcare system is under tremendous pressure from all directions. Government fee reductions, declining private-sector program enrollments, provider and supplier cost and price increases, and uncertainties of impending regulatory change are simultaneously impacting healthcare economics. What is not so well understood are the repercussions of this pressure beyond the healthcare system. One relevant and glaring case in point is the significant and growing practice of cost shifting — charging the nation’s property and casualty (P&C) insurance companies, specifically the automobile insurance segment, for medical-provider services. This leakage has been masked until now by lower-than-usual … Continue Reading →

The need for interchange regulation, hotly debated by the U.S. Congress for more than a year, ended in the passage of the Durbin Amendment. Not surprisingly, this resulted in U.S. banks implementing “replacement” revenue streams in the form of fees. Price-fixing an industry has never worked and does not work now. The Durbin Amendment’s attempt to do something right for consumers has become detrimental to them. What does it all mean? Consumers will pay more for demand deposit relationships and the debit cards that access them. Some consumers will switch to credit cards. Those who can no longer afford checking … Continue Reading →

The development of payments systems and services in Europe has been subjected to diversions, distractions, and setbacks this summer. As a result of the euro crisis, the European Central Bank’s focus has moved away from oversight and implementation of the Secure European Payments Area (SEPA). Fears that the euro may fragment or totally disintegrate have turned minds to evaluating the potential impact of such an occurrence. SEPA’s objective was to improve the efficiency of cross-border payments and turn the fragmented national markets for euro payments into a single domestic one, enabling customers to make cashless euro payments in the EU … Continue Reading →

While it’s been a long time coming, it looks like EMV is finally headed for the U.S. market. In a recent Aite Group survey of 76 card security risk management executives, the majority of respondents said they believe that EMV will come to the United States sometime in the next five to 10 years.  The survey also tracked emerging bullishness relative to EMV’s prospects. When Aite Group asked a similar population the same question in 2009, 36% believed that EMV would never make it to the United States.  Today, only two years later, the portion that doubts EMV’s chances is … Continue Reading →

This is my fourth Durbin Amendment blog posting since April 2011. Since the Federal Reserve Bank posted the rules, my fury over government price fixing has reached an all-time high. The concurrent political wrangling to sort through the U.S. budget and looming deficit has only compounded my fury. It is clear that elected officials are merely posturing to get re-elected or gain majority power in congress. This is just more evidence that no elected official is truly capable of taking the higher road when it comes to the state of the U.S. economy or our society as a whole. Case … Continue Reading →

The Federal Reserve Bank (FRB) has finally and reluctantly released compliance rules for the Durbin Amendment. It would be difficult to declare anyone a winner in this long-protracted battle; merchants want to eliminate interchange, banks cling on to the old ways of making money, and the once-revered Visa and MasterCard have been stripped of many of their powers. Gone are exclusivity and transaction-routing dominance.  Visa and MasterCard are left with shrinking margins on core transaction volume. Worst off is the consumer. Merchant cost savings will be kept by the merchants, banks will increase the cost of checking relationships, and the … Continue Reading →