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News scan Jun 2014

Credit Card News, Economy News, Banking Industry News - Jun 2014
  • U.S. consumers, whose use of revolving debt fell by more than 15% once the Great Recession hit, are finally re-embracing the credit card.
  • The thaw appears to be in its early stages, but the trend line is now clear: borrowing with plastic is picking up steam.
  • April data from the Federal Reserve Board showed that revolving consumer credit jumped at a 12.3% annual rate, after accounting for seasonal differences.
  • But even if that report overstated the magnitude of the rebound, as some observers suspect, other estimates also show that plastic-fueled debt is growing at rates unseen in several years.
  • Household credit on bank credit cards grew by 2.1% in May, which was the highest growth rate since the height of the financial crisis.
  • The rebound is being driven in part by a loosening of credit standards at card issuers, which clamped down on risky borrowers during the recession.
  • In the fourth quarter of 2013, 22% of loan originations went to borrowers with credit scores of below 660.
  • Industry observers also point to improving consumer confidence as a key factor in the card market's renewed loan growth.
  • Some consumers who got rejected for credit cards when standards tightened have since sworn off plastic.
  • Young adults are also rejecting credit cards, he wrote in a report last year, arguing that the generational shift is likely to be enduring.
  • For many others, the credit card has gradually morphed into a tool for earning rewards points.
  • Applications for U.S. home mortgages fell last week as both purchase and refinancing applications dipped.
  • Seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 1.0 percent in the week ended June 20.
  • The MBA's seasonally adjusted index of refinancing applications fell 0.9 percent, while the gauge of loan requests for home purchases, a leading indicator of home sales, fell 1.2 percent.
  • Fixed 30-year mortgage rates averaged 4.33 percent in the week, down 3 basis points from 4.36 percent the week before.
  • The survey covers over 75 percent of U.S. retail residential mortgage applications, according to MBA.

ATM Industry Faces Mounting Cost Pressures: Report

Source: Americanbanker Category: Banking Industry News
  • The ATM industry has spent an estimated $5.5 billion over the past decade and will have to foot several billion dollars more in operational costs every year.
  • It finds that during the past four years the percentage of turnkey "placements" by independent ATM providers in the U.S. increased by 10%, while their aggregate net interchange income declined more than 25%.
  • Total expense as a percentage of transaction revenue has increased for all business models, according to the report.
  • Changes also include regional redistributions of ATMs over the past few years, showing movement from Northeastern and Western states to Midwestern and Southern.
  • Data confirm that despite being under pressure from increased costs, the ATM industry continues to improve various aspects of existing business models.
  • New data about investments made to facilitate Windows 7 and EMV migrations this year will give an even clearer picture of ongoing industry changes.
  • U.S. consumer prices recorded their largest increase in more than a year in May as costs for a range of goods and services rose, likely easing the Federal Reserve's concerns that inflation was running too low.
  • Consumer Price Index increased 0.4 percent last month, with food prices posting their biggest rise since August 2011.
  • The broadening rise in prices should reassure Fed officials who have expressed concerns that inflation was too low, and it led some investors to raise bets the central bank would hike interest rates before the middle of 2015.
  • The housing market, however, remains a weak spot. Groundbreaking for homes fell 6.5 percent to a seasonally adjusted annual pace of 1 million units in May. Construction permits declined 6.4 percent to a 991,000-unit rate.
  • May's rise in consumer prices built on a 0.3 percent advance in April. With tensions escalating in Iraq, a major world oil producer, inflation is likely to push higher in the coming months.
  • A new report shows up to 70 percent of U.S. credit cards will have EMV chips by 2015. But merchants must convert POS terminals and train staff to use them.
  • The good news for companies that accept credit cards is that most banks will be issuing credit cards with EMV chips well before the coming liability shift in October 2015.
  • The bad news is that merchants that don't accept EMV (Europay, Mastercard and Visa) chips will have to absorb the cost of fraudulent transactions due to counterfeit or stolen credit cards themselves, otherwise known as the liability shift.
  • Previously, banks had absorbed those costs. EMV chips are microprocessors embedded in cards that make counterfeiting the cards virtually impossible.
  • That means that companies that accept credit cards at point-of-sale (POS) terminals will have to either buy new terminals or they'll have to enable the EMV chip readers on the terminals they already have.
  • The surprising news is that the majority of card issuers will use chip-and-signature cards rather than chip-and-PIN cards. Chip and signature cards protect against counterfeit credit and debit cards, but not against fraudulent use of lost or stolen cards.
  • The worse news is that the fraudsters are well aware of the coming use of cards with EMV chips, and will change their focus to online merchants and to financial institutions that have not made the change to the new cards.

First Major Mobile Banking Security Threat Hits the U.S.

Source: Reuters Category: Banking Industry News
  • With roughly 102 million Americans using mobile banking, the potential for hackers, phishers and other types of cyberattacks to prey on mobile banking users is vast.
  • A Lab discovered that a breed of malware targeting mobile devices called Svpeng had made its way from Russia to the U.S.
  • The malware, which targets Android devices, looks for specific mobile banking apps on the phone, then locks the phone and demands money to unlock it. So begins a mobile banking security moment of truth.
  • Banks cannot cleanse their customers' smartphones and have no control over this type of Trojan.
  • All they can control is customer interactions with their bank applications. Even securing mobile bank applications and strengthening authentication processes for mobile users won't stop this type of Trojan from operating.
  • Some variants detected when users opened a targeted mobile banking app and displayed a fake login screen to capture log-in credentials.
  • A similar technique was used to collect credit card details when users opened Google Play.
  • Once it's wormed its way into a device, the malware looks for apps from a specific set of financial institutions: USAA, Citigroup, American Express, Wells Fargo, Bank of America, TD Bank, JPMorgan Chase, BB&T and Regions Bank.
  • For now, Svpeng does not steal mobile or online banking credentials. But it is only a matter of time before it does, according to Kaspersky Lab researchers.
  • The only hope for unlocking the device is if it was already rooted before it was infected, then it could be unlocked without deleting the data.
  • Banks can, of course, monitor transactions for signs of account takeover activity stemming from the mobile malware.
  • U.S. banks have done nothing to educate U.S. consumers about malware that targets mobile devices, nor have telecom carriers.
  • U.S. companies hired 179,000 workers in May, marking the lowest monthly increase since January and missing market expectations.
  • Private Job gains in April were revised down to 215,000 from 220,000.
  • Economists surveyed by Reuters had forecast that the ADP National Employment Report would show a gain of 210,000 jobs in May.

U.S. bank regulators launch decennial rules check-up

Source: Reuters Category: Banking Industry News
  • The three main U.S. bank regulators embarked on a once-a-decade check-up of their rules, asking the industry to comment on whether they are outdated or unduly burdensome.
  • The review is required by a 1996 law, and the three regulators - The Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation - need to report their findings back to Congress.
  • The exercise, which last took place in 2003, will take two years, during which the regulators will put out groups of rules for comment, the three agencies said.
  • The 2007-09 financial crisis has lead to a proliferation of tight new rules for banks such as the Dodd-Frank law.