Monthly Archives: July 2013

Court strikes down 21 cent debit card fees

A federal court on Wednesday struck down a Federal Reserve rule that placed a 21-cent cap on fees that banks charge retail stores for each debit card transaction.

The ruling is a win for retail stores who had filed the lawsuit charging that the U.S. Federal Reserve’s cap was too high on swipe fees they pay to banks each time a customer uses a debit card. It’s potentially a big loss for banks who will now have to charge lower fees.

The U.S. District Court in Washington called the Fed’s cap “arbitrary and capricious.” Judge Richard Leon also suggested in the ruling that the Fed should reconsider earlier staff proposals to lower the fee to 12 cents.

The fight over swipe fees stems from new laws enacted after the U.S. financial crisis. They required the Federal Reserve to ensure that fees to process debit card purchases were reasonable. At that time, the average fee per transaction was about 40 cents.

After initially proposing to limit fees to 12 cents, the central bank issued a final rule that capped fees at 21 cents.

The National Retail Federation, which represents retail stores, filed the lawsuit against the Fed back in November 2011.

It’s unclear whether consumers will really benefit and whether merchants will pass along lower costs. Continue reading


The Future of Retail: Paying With Your Face?

It seems like every other day we read about some far-out, new technology that makes us scratch our heads and say, “What the heck?” In this series, we’ll take a look at all types of crazy new gadgets, apps and other technologies — and the entrepreneurs dreaming them up.

Leave your pocket full of coins at home. A Finnish startup called Uniqul has created a payment system that is built on facial-recognition technology, without a need for cash or credit cards. Translation: This thing will let you pay with your face.

Yes, your face.

Customers who sign up with Uniqul will register a major credit card or information for a PayPal account. In stores that carry the Uniqul scanner, all anyone would need to do is stand next to the terminal, look into the camera and press OK. That’s it. Essentially, the technology analyzes footage of a person’s face, creates a numerical code based on its measurements, and then checks it against its database of users.

Expected to launch this fall, the service will be available to users for a monthly subscription fee. For businesses, the basic service is likely to be free. According to TechWeek Europe, Uniqul is primarily targeted at small businesses in the hospitality sector, and will “enable them to offer targeted incentives.” Continue reading

Debit cards ‘First choice for online shopping’

Debit card spending by internet shoppers overtook the use of credit cards online for the first time last year, industry figures show. Online spending using a debit card hit £35bn compared with £34bn on credit cards, the UK Cards Association said. Shoppers are also using debit cards more frequently in stores.

Each debit card holder made an average of 205 transactions with their cards last year, the data shows, an increase of 10 on the previous year. Some 91% of the UK adult population have a debit card and 61% have a credit card. Use of these cards has increased as more shops have accepted them, and as more stores use devices such as chip-and-pin machines. The association predicts that spending on cards in the next 10 years will nearly double from £477bn to £840bn. Continue reading

Banks Struggle to Keep up With Mobile Demand

Want to check your balance, transfer money between accounts, or locate the nearest bank branch? There’s an app for that.

But when it comes to making more complex banking transactions over smartphones — from depositing checks to transferring money to a friend’s account — many banks are not offering mobile technology as fast as their customers are ready to adopt it. Demands for new options are growing so quickly that by the time a bank upgrades its software, customers are already asking for the next new function.

Customers, in fact, are embracing mobile banking faster than they did ATMs after they were introduced in the 1980s, according to bank officials.

Sovereign Bank, for example, recently offered its first mobile banking app, which it designed based on surveys that showed few customers wanted to make mobile deposits. Not long after the app was released in May, customers raved about the ability to check balances and accurately find ATMs, but said they wanted more — particularly the ability to deposit checks via smartphone.

Continue reading

How Citibank Made South Dakota the Top State in the U.S. for Business

This article is part of an America 360 series on Sioux Falls. 

When the international banking giant Citibank moved its credit-card operations to Sioux Falls, S.D. in 1981, it altered the small Midwestern city overnight. With a population of barely 80,000 at the time, Sioux Falls still had an economy built on agriculture and meat-packing. But when state leaders, desperate to attract outside businesses during the economic recession of the early 1980s, changed South Dakota’s usury laws to eliminate the cap on interest rates and fees, Citibank came calling.

The company initially promised to bring 500 jobs to the area and to build a large facility in northwest Sioux Falls. Citibank now employs more than 2,900 workers in the city, and it anchors a financial sector that provides more than 16,000 jobs in a metro area with a growing population of nearly 230,000 residents. And according to the Federal Deposit Insurance Corp., South Dakota holds more bank assets—$2.5 trillion—than any other state in the country.

At the time, South Dakota was the only state with this unusually lax approach to banking laws, and Citibank was soon joined by Wells Fargo, Capital One, First Premier, and other financial institutions that were eager to relocate their credit-card operations to the Mount Rushmore State. A handful of other states, including Delaware and Nevada, have since followed suit, but other tax incentives such as the absence of personal and corporate income taxes—South Dakota eliminated both in the 1940s—provided a significant draw. (South Dakota does have higher-than-average property taxes and levies a franchise tax on financial institutions.)

Continue reading

Camera-to-Credit Card the Next Mobile Trend?

—Point, click and get paid?

That could be the next step in the evolution of mobile payments, as a new trend is allowing businesses to process payments by capturing a credit and debit card’s information with a phone camera. While this technology eliminates the need for awkward dongles or additional credit card-swiping hardware, it also may bring up a fundamental consumer security question: is it safe to let someone take a picture of your credit card?

“Our process just allows for it to read the card,” said Greg Goldfarb, co-founder and chief executive of Flint Mobile, a Bay Area startup developing such payment technology. “The information is uploaded through the phone and sent to the cloud. It is never stored in the phone.”

Flint’s mobile app — which uses the camera on an iPhone to “scan” credit or debit cards — launched in November of last year. Since then it has more than 100,000 downloads and business has increased tenfold since January, according to Goldfarb. In March, the company — which has nearly $3 million in funding — announced a partnership with NXGEN’s subsidiary Fidano.

“People have to be more and more self-sufficient in this world, and with this you just need a phone in your pocket,” Goldfarb said.

Flint is not the only player when it comes to no-swipe technology. Less than a year ago, PayPal bought one-year-old, which had developed a mobile payment process initiated by a smartphone capturing an image of a card and requiring no additional attachments. PayPal integrated the technology in its PayPal Here offering. Palo Alto-based Jumio also offers camera-to-card payment technology for businesses.

“My concern is consumer perception of someone using a camera phone to take a picture of their credit card,” said David Kaminsky, a senior analyst with Mercator Advisory Group. “I’m not saying it’s not secure, but rather what are people’s perceptions? That’s what’s going to matter.”

Rick Oglesby, senior analyst with Aite Group, said he agrees providers of such payment technology will have to eliminate consumer concern in order to find a niche.

“There is consumer sensitivity to this type of mobile transaction,” Oglesby said. “While the technology itself is secure, consumers don’t necessarily know that, so they get concerned about having their card numbers used in inappropriate ways.”

Goldfarb said while he understands the concerns, security is one of Flint’s top concerns. He said he knows continued growth in the industry will rely on consumers and service providers feeling it is safe to use.

“We’re in a pretty exciting stage,” Goldfarb said.

Goldfarb said Flint’s targeting non-countertop businesses — those run by the likes of accountants or photographers who normally go to their customers and are unlikely to have the technology handy to swipe cards.

“We are all about driving and enabling small business,” he added.

Still, not everyone sees a long life for such technology even beyond security concerns.

“I’m just not sure there is a market out there for it now,” said Kaminsky, adding the company’s hardware-free mobile payment technology doesn’t provide a huge benefit to businesses since merchants typically do not have to pay for such add-ons.

“While the technology does have some advantages, it does have some downside,” Oglesby said. “Transactions processed in this way are more expensive than transactions that are swiped, which makes it a deal breaker for larger merchants and large transaction merchants who will feel the pain from higher fees.”

Oglesby said such technology has proved better suited for smaller merchants, but that also provides a problem.

“It’s been very difficult to make any money in this micro merchant segment — not enough transaction volume to bring much revenue,” said Oglesby.

Camera-to-Credit Card the next mobile trend? Written by Chris Metinko. 2013, July 8. Retrieved from

Tommy Takes His Talents to Gloucestershire Polo


Tommy Kato’s life has been a bit of a whirlwind over the past few years. In that time, he has transitioned from developing commercial properties for retailers and Fortune 100 companies to founding and becoming the CEO of Merchant Hub; a multi national payment processing company with offices throughout the United States, Brazil, Milan and London. When asked what his main priority for Merchant Hub was, Tommy replied, “My number one priority is being able to offer our customers something that’s going to be the most beneficial to them and something they can offer to their customers that’ll be really beneficial to both of them.” This has indeed been the case because in Merchant Hub’s fifth year it has continued to grow 200% annually with plans of expansion across South America and Europe.

If this wasn’t an already lengthy resume, Tommy also finds time to play professional polo in major events such as the Gloucestershire Festival of Polo and being involved in several note worthy charities like the No Child Hungry in Miami, Florida. Being a young entrepreneur isn’t always easy, “I’m typically on the plane once or twice a week”, Tommy explains, when describing how he juggles business and fatherhood. When asked about his experience of being invited to play alongside his Royal Highness Prince William and Prince Harry on Fathers Day in England, Tommy replied, “It was a nice friendly game; great experience to be around the guys.” Although, Tommy makes it look easy we should note that getting your pony to gallop in line with the ball, pass it to a teammate and finally attempting to make a goal is one of the reasons why the sport is arguably one of the most challenging. We’re excited to see what Tommy has in store for the future of Merchant Hub as well as his future as a professional polo player.