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News Scan Jan 2013

Credit Card News, Economy News, Banking Industry News - Jan 2013
Jan 2013
  • Private-sector employers added 192,000 jobs in January. December's private payrolls were revised down to an increase of 185,000 from the previously reported 215,000.
  • Small businesses with less than 50 employees did the most hiring this month, adding 115,000 jobs. But large businesses of more than 500 workers cut 2,000 jobs.
  • By industry, professional and business services firms led gains with 40,000 jobs, while the manufacturing sector fared the worst, cutting 3,000 positions.
  • The government release is expected to show hiring held steady in January with 160,000 jobs created.
  • Economists often refer to the ADP report to fine-tune their expectations for the payrolls numbers, though it is not always accurate in predicting the outcome.
Jan 2013
  • Fraud losses on U.S. credit and debit cards, after years of decline, now appear to be on the rise again. And one key culprit, according to experts, is this country's slow adoption of technology that will improve security.
  • Discover Financial Services (DFS) disclosed in its annual report that its fraud losses in fiscal 2012 totaled $93 million or 70% higher than they were two years earlier, even after adjusting for rising transaction volumes.
  • While industry-wide data is scarce, there are signs that other card issuers are seeing similar trends. Capital One Financial (COF), for example, reported a 20% increase in volume-adjusted fraud losses, between 2010 and 2011. It has yet to release fraud data for 2012.
  • EMV stands for Europay, MasterCard and Visa, the networks that set the global standard for security chips embedded in payment cards.
  • The major U.S. card brands have all announced that they will require most U.S. merchants to use terminals that can handle EMV cards by October 2015.
  • Those cards are more secure than their predecessors. But the United States lags far behind the rest of the world in making the switch.
  • Firms in the card industry are often reluctant to speak publicly about fraudulent transactions, the costs of which they generally cover.
Jan 2013
  • Community banks' growing urgency to book commercial loans has provided a timely lift to companies that play matchmaker with borrowers.
  • Working with a lending service is "a viable niche for community banks looking to expand their reach. Potential borrowers do a lot of the work themselves, which also cuts costs for lenders.
  • Turning to matchmakers has gained popularity as traditional bankers' banks diversify into new business lines, such as evaluating loan books.
  • It's purely a reflection of economic conditions. An alternate means of finding borrowers isn't for everyone. Some small banks have no interest in using matchmakers, largely because of concerns about the potential risk.
Jan 2013
  • Big banks are bringing their fight for new customers from street-corner branches to mobile phones where they're getting a cheaper fix.
  • In recent months, they have increasingly found one solution to all of those problems: the smartphones that can let customers deposit checks, pay bills and check their balances without ever stepping into a bank branch.
  • Banks can potentially reach almost half of their customers with mobile banking: 45% of Americans own a smartphone like an iPhone or an Android, and 25% own a tablet like a Kindle or an iPad, according to Pew Research Centers.
  • These potential customers tend to be young, and less wedded to sprawling bank branches with expensive tellers and empty lobbies.
  • Banks are also trying to win the intensifying war for desirable customers, as the economy sluggishly recovers and appetite for new loans remains small.
  • The biggest banks, including JPMorgan Chase (JPM), Bank of America, Citigroup and Wells Fargo (WFC), have all spent years developing mobile banking applications, in the hopes that their investment in that technology will eventually pay off.
Jan 2013
  • New York Governor proposed a $136.5 billion state budget for fiscal 2014 that boosts education spending and closes a $1.3 billion gap without raising taxes.
  • The spending plan, which would be a 1.9 percent increase, or $2.5 billion, from the current fiscal year, must be approved by state lawmakers.
  • To close the gap, the state would save some money by keeping total spending increases below 2 percent for a third straight year, while tax collections are projected to increase by $3.5 billion, or 5.4 percent from fiscal 2013 estimates.
  • New York could save nearly $974 million because of government cost control efforts, including by shrinking planned spending increases for some programs and agencies.
  • Proposed budget would reduce spending for public safety agencies by 10 percent in fiscal 2014.
  • The state also hopes to save an estimated $755 million over five years as it continues consolidating back-office operations, like business services, into a central location.
Jan 2013

The Dangers of Mining Consumers' Transaction Data

Source: Americanbanker Category: Banking Industry News
  • Personal financial management technology is evolving to include cash flow estimates and deeper transaction insights to guide consumers during their shopping decisions.
  • Banks and alternative financial services providers are offering these emerging services to help consumers become quickly informed about their financial picture before they buy something they may not need, and thus stay on track to meet financial goals. But skeptics point out flaws inherent in such financial modeling.
  • One issue of modeling is what is known as a feedback loop, which occurs when a model gives a person the illusion of control; thus potentially making the data a self-fulfilling prophecy.
  • It doesn't mean the models are right, but they become more right if they've engendered trust.
  • Another red flag could be raised by account aggregation services designed to help people manage their money. When consumers provide their transaction data to a third party, they might risk predatory marketing.
Jan 2013
  • Regional banks have the best news to share to start a year in a long time but they can't enjoy it.
  • Lending is still on the rise, but momentum is dwindling in some places. Profits are strong but threaten to narrow along with margins.
  • Mortgage refinancings can't thrive forever, and economic and political uncertainty is said to restrain the business borrowing that could take its place.
  • What's left then? Cost-cutting, stealing market share from rivals, finding commercial niches and resisting the urge to gamble.
  • Caution underlay the near-term forecasts of several companies as they released quarterly results, with optimism reserved for vague points later in the year.
Jan 2013
  • Legislators to welfare recipients: If you want to buy alcohol, tobacco, lottery tickets, tattoos or adult movies, that's your business.
  • But if you pay for them with a debit card funded by taxpayers, that's our business and we're cutting you off.
  • Prodded by the federal government, fueled by ever-intensifying competition for precious tax dollars, dozens of states throughout the country are imposing new limitations on the debit cards now used virtually everywhere to distribute public financial assistance to presumably needy recipients.
  • The devices are called Electronic Benefit Transfer or EBT cards. They are reloaded monthly with funds from the two most common forms of public assistance the food stamp program and the more general and less-focused program commonly known as welfare.
  • Like most debit cards, EBT cards can be used to pay directly for goods and services and, in many cases; they can be used to withdraw cash from ATMs.
  • Most at risk are funds from (TANF) program, the general welfare benefits. About $30 billion in cash assistance was distributed to 4.4 million people by this program in fiscal 2011 and a significant portion of that money several billion dollars every year was diverted to a variety of illicit purposes.
  • As part of the national crackdown, President Barack Obama in 2012 signed a measure that requires states to ban the use of TANF funds at casinos, liquor stores and strip clubs by 2014.
  • Partially as a consequence, at least 12 states already have passed laws restricting the use of EBT cards and imposing punishments on those who abuse the system.
  • Similar laws are in various stages of consideration in at least 22 states at the moment, according to the NCSL.
Jan 2013
  • A study Engineers says the cost in terms of lost jobs would be 3.5 million by 2020. It also projected a cumulative loss of $3.1 trillion in economic output over the same period without $1.1 trillion in additional funding for infrastructure projects.
  • The study estimated the United States needs to spend $2.75 trillion to maintain and improve its infrastructure by 2020, or roughly 66 percent more than the $1.66 trillion in currently expected funding over that period.
  • Overall, if the investment gap is not addressed throughout the nation's infrastructure sectors by 2020, the economy is expected to lose almost $1 trillion in business sales, resulting in a loss of almost 3.5 million jobs.
  • Moreover, if current trends are not reversed, the cumulative cost to the U.S. economy from 2012 to 2020 will be more than $3.1 trillion in GDP and $1.1 trillion in total trade.
  • The study projected the biggest funding gap, $877 billion, for highway and other surface transportation projects needed by 2020.
  • The biggest job losses were seen in retail, construction, medical, business services and the food and drink industry.
  • The study projected the funding gap for infrastructure projects to swell to $4.7 trillion by 2040, resulting in nearly 7 million lost jobs.
Jan 2013
  • Consumers are going to be eating up more of their credit and asking lenders for more, according to a survey for FICO.
  • This may be promising news for an economy hit hard by consumers' credit shyness over the past five years.
  • These results indicate that 2013 could be the year that Americans begin to embrace credit again.
  • For the survey, FICO and PRMIA polled bank risk management professionals and asked for their predictions for the next six months regarding consumer' and lenders' behavior.
  • More than half of the bankers surveyed predict an increase in the volume of credit applications, the average balance on credit card accounts and the amount of credit requested by consumers.
  • The approval criteria and approval rate for credit applications, meanwhile, are expected to remain roughly the same.
Jan 2013
  • In 2012 alone, bankruptcy filings plunged by 14 percent in the 50 states and District of Columbia, falling to fewer than 1.2 million.
  • While the numbers still are high, it marks a steep decline from 2010, when almost 1.55 million consumer bankruptcies were filed.
  • The amount of consumer debt also has plummeted. As of November 2012, consumers had $858 billion in revolving debt, which is mainly comprised of credit card debt.
  • In Nevada, which in recent years has had staggering numbers of filings, they fell 28 percent compared to 2011. It was the biggest drop among all states.
  • South Carolina had the poorest showing, with filings down just 1 percent compared to 2011 bankruptcy figures.
  • In raw numbers, California still led with the most filings, topping 180,000 for 2012. But that's much improved from 2010, when the state had more than 255,000 filings.
  • Florida continued in second place, with nearly 80,000 filings. Georgia and Illinois both recorded more than 60,000 filings.
  • In terms of per-capita filings, Tennessee led the list, with 6.88 filings per 1,000 residents, while Nevada and Georgia both had 6.43 filings per 1,000 residents.
  • Yet for Nevada that's a huge improvement compared to 2010, when there were more than 11 filings per 1,000 residents.
Jan 2013
  • Retail sales rose 2.5 percent during the 2012 holiday season, helped by a late surge in shopping trips right before Christmas. Foot traffic also rose 2.5 percent in November and December.
  • Retail sales rose 18 percent in the week that ended December 29 compared to a year earlier.
  • Trends show individuals proved willing to visit more stores in search of deals, a behavior that can also help retailers since it can lead to more impulse buying.
  • Excluding car sales, but including gasoline, groceries and restaurants, U.S. retail spending rose 2.4 percent in December, a slower pace than the 4.5 percent rise in November.
Jan 2013
  • More than one billion mobile phone users are expected to have used their devices for banking purposes by 2017's end, which compares to less than 600 million in 2013.
  • The one billion estimates represents more than 15% of the global mobile subscriber bases, of which many of whom are unbanked, and therefore have limited access to traditional financial services.
  • North America and Western Europe will have the highest penetration of users in four years.
  • To date, the firm finds that most banks have at least one mobile banking offering (messaging, mobile browser or app-based service), while many larger banks are deploying several of these mobile methods.
  • While messaging remains highly popular and relevant in the financial sector, apps will be the dominant access mode in developed markets with banks reporting an increased number of visits per month on their mobile apps.
Jan 2013
  • When it comes to the most-joined rewards and loyalty programs, grocery rewards programs eat everyone else's lunch.
  • American Express' survey asked 1,500 consumers whether they belonged to rewards programs. Most (86 percent) belonged to some type of loyalty scheme. More than half (57 percent) belonged to a debit or credit cards reward program.
  • The most popular rewards scheme categories were grocery (66 percent), pharmacy (46 percent) and hotel (32 percent).
  • Still, consumers who join loyalty programs don't always use them. While 44 percent of those surveyed said they used their grocery rewards program most often, just 7 percent and 3 percent said the same about their pharmacy and hotel programs, respectively.