As consolidation ratchets up in the prepaid market, one company is taking a fast track to outmaneuvering other market rivals: Payments solutions provider TSYS has agreed to acquire prepaid card provider NetSpend for US$1.4 billion, pre-empting other prepaid market players with a strategic move that could put it squarely on top of the prepaid industry. The NetSpend acquisition will provide fantastic strategic advantage by: Augmenting TSYS’s prepaid infrastructure, giving TSYS a top tier-provider status that will enable its bank issuers and program managers to offer a fully featured white-label product set Placing TSYS among industry leaders in the payroll card … Continue Reading →

The daily deal business — long thought to be an unsustainable business model because of the cost to merchants — is officially losing steam: The purchase of Bloomspot by JPMorgan Chase signals the end to daily deal programs as we know them. While daily deal companies developed an elegant, effective mass-marketing technique that attracts consumers and has created brand equity for the likes of Groupon and Living Social, the merchant-funded incentive model, with its relevant consumer offers and laser-focused targeting, wins out over the daily deal shotgun approach of providing random consumer offers. As a result, we will now see … Continue Reading →

The PR machine pumps out stories daily about all kinds of innovation in the payments world. We hear new news and new terminology about digital wallets and mobile payments acceptance. Yet the names of the companies promoting all of this innovation are not the names of the original payments innovators; they are not banks or card networks, but companies like PayPal, Square, and Google — companies that did not exist when Visa and MasterCard were launched in the 1960s. Can banks get on board before the opportunity slips away? Banks that issue cards and accounts can still drive innovation if … Continue Reading →

Since July 13, when announcements of the proposed Visa and MasterCard US$7.25 billion lawsuit settlement first started to appear over news wires, there has been significant market and press discussion about the implications of such a settlement. Numerous articles have been written on how the settlement may affect businesses and consumers making purchases at the point of sale. Analysts, including myself, have been quoted in articles about the likelihood of merchants to surcharge (or not) on transactions paid for with a credit card. While all this talk is still just speculation, the current legal situation is not. It is fact … Continue Reading →

The long-fought battle over credit card swipe-fee price fixing may be coming to an end as a settlement was proposed in federal court on Friday, July 13, 2012. Visa and MasterCard have agreed to a US$7.25 billion settlement (the largest anti-trust settlement in U.S. history), which comes, according to Visa’s chairman, Joe Saunders, as a result of “being in the best interest for all parties.” Will large merchants really start surcharging consumers who use plastic? No. Large merchants will continue to use the surcharging threat as a political hammer to get networks to lower credit card interchange rates. Smaller merchants … Continue Reading →

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 →

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 →