December 13, 2007

Wells Fargo Chief Sees Momentum for Deals
Reuters (12/11/07) Vol. 11, No. 49, P. 1; Bartlett, Michael

The head of Wells Fargo is not ruling out the possibility of the San Francisco-based bank making a major acquisition. Chairman Dick Kovacevich says Wells Fargo has enough cash on hand to acquire smaller lenders and portfolios of bonds and loans whenever they become available. "We're buyers," Kovacevich says. "For the first time in three years, things are making sense." Wells Fargo has also avoided exposure to the subprime lending market and subprime mortgage defaults that many of its rivals have not escaped. Bank prospects would be smaller institutions with at least $10 billion in assets, Kovacevich says. "Our primary activity will continue to be acquiring smaller institutions like the two we did this year," he says. As for rivals pursuing large acquisitions, Kovacevich says he it not concerned, noting that Wells traditionally has always favored smaller banks.
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GMAC Financial Services Names Chief Risk Officer
PRNewswire (12/05/07)

GMAC Financial Services has appointed Samuel Ramsey, with his extensive finance and risk management experience, to the role of chief risk officer. He will report to COO Al de Molina. The company has also appointed David Walker to the position of treasurer; he will report to Ramsey. Ramsey, the former treasurer of GMAC, will be responsible for balance sheet management and global risk management activities, among other duties.
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E-Payments, Cards Trump Paper Checks
Wall Street Journal (12/11/07) P. B16; Reddy, Sudeep

Electronic payments, including credit and debit cards, made up over two-thirds of the 93.3 billion non-cash transactions completed in the United States in the past year, according to the Federal Reserve. Before 2003, only about 50 percent of non-cash transactions were made through debit and credit cards. The rest were with paper checks. Since 2003, the number of electronic payments has gone up 12.4 percent annually. All in all, Americans spent $75.8 trillion in non-cash transactions last year. Of those payments that were made with paper checks, 8 percent were transferred to an electronic format for clearing. The Federal Reserve also discovered that, for the first time, debit cards bested credit cards as the most common type of electronic payment.
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No 'Distress' Seen in Credit Card Report
American Banker (12/07/07) Vol. 172, No. 235, P. 7; Wade, Will

A new report by Fox-Pitt, Kelton Cochran Caronia Waller finds the credit card industry is weathering the recent economic storms well. The report measured the financial strength of the industry using credit utilization rates, the number of people making minimum monthly payments, and payment rates as benchmarks. The report found that credit utilization rates at major card issuers Citigroup, Discover Financial Services, Bank of America, and JPMorgan Chase & Co. were flat or down slightly in recent months. Depending on whether the economy slows down, analyst Howard Shapiro predicted in a recent research note that chargeoff rates might hit 6 percent to 7 percent. Bankruptcy filings, meanwhile, are below historical averages, and card account repayment rates are up slightly.
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Can Mid-Market Merchants Comply With PCI Standards in Time?
CIO (12/06/07) Jackman, Michael

Experts are skeptical that most mid-size companies will comply with the Payment Card Industry's new Data Security Standard by Jan. 1, 2008, given the complexities of the specifications merchants must meet as well as the cost of conducting thorough security audits. Up to 45 percent of merchants may have to carry out a complete revamp of their access and security systems in order to satisfy PCI standards, says Deloitte Consulting director Brian Shniderman. The push for tougher cardholder data security comes in the wake of high-profile breaches such as the one TJX suffered, which may have compromised over 100 million user accounts. TJX was blamed for not being in compliance with PCI data and computer security standards. The standards were established by the PCI Security Standards Council, which was organized by the five major credit card brands in September 2006. The council is responsible for educating companies about the standards and qualifying and managing both the auditors who certify merchants' compliance and the approved scanning vendors who test system security. Despite the threat of penalties for failing to comply with the standards, merchants are having difficulty predicting the cost of fines because they are levied by the individual card companies, which have their own rules and rates. Additionally, these penalties are charged directly to merchants' card-processing banks, which then elect to either pass them on to merchants, absorb them, or even raise them in certain instances.
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The 10 Most Pressing Issues in E-Payments
Digital Transactions (11/01/07) Vol. 4, No. 11, P. 26; Stewart, John

There are a number of critical issues and challenges in electronic payments, one issue being a lack of consensus by wireless networks and card networks on the best way to realize profits from mobile payments. Another issue is the pressure businesses face to comply with the Payment Card Industry data security standard, which merchants complain is too complex; one possible way to address the problem is to cease storing card data, or at least retain less data at fewer sites in internal networks. Merchants are also complaining about interchange, and a potential solution is having merchants add on to the price when consumers use a card. Merchants' anger over interchange in turn fuels their attraction to alternative payments such as Google Checkout and PayPal, and one area of these services' appeal lies in the fact that they do not require storage and management of customer data. The explosion of prepaid cards carries with it a heavy burden for cardholders--especially underbanked customers--in terms of reload fees, and director of the Center for Financial Services Innovation Jennifer Tescher thinks competition could help settle the issue. Observers say usage of contactless payment cards is low despite the technology's heavy push by banks, with analyst Karen Webster attributing this trend to the cards' lack of a killer application. But growing consumer awareness and the ability to use the technology at more sites may help solve this problem. Declining ATM usage is damaging the appeal of installing ATMs at off-premise locations, and one possible solution is to combine ATMs with bill-payment kiosks that accept cash payments and offer account updates in real time; another concept with potential is to vend prepaid cards.
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