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News Scan May 2013

Credit Card News, Economy News, Banking Industry News - May 2013
May 2013
  • Composite index of 20 metropolitan areas climbed 10.9 percent year over year, beating expectations for 10.2 percent. This was the biggest increase since April 2006, just before prices peaked in the summer of that year.
  • Prices in the 20 cities gained 1.1 percent in March compared to the month before on a seasonally adjusted basis, topping economists' forecasts for a 1 percent rise.
  • The housing market turned a corner in 2012, several years after its far-reaching collapse.
  • Separate data showed consumer confidence picked up in May to its highest in more than five years in the midst of a stock market rally and lower gasoline prices.
  • Home prices in Phoenix continued their sharp ascent, rising 22.5 percent from a year earlier. Other standouts included San Francisco, up 22.2 percent, and hard-hit Las Vegas, up 20.6 percent.
May 2013
  • The survey polled bankers whose institutions offer mobile services on the mobile banking features they offer.
  • Almost all (99%) provide the ability to check account balances or transactions and a vast majority (88%) offer ATM search using location-based services, rates that reflect the relative maturity of these applications.
  • Mobile bill payment also featured prominently among respondents 76% said they offer the service. Sixty-seven percent said they offered mobile check deposit.
  • Generally, all our mobile and Internet channels are seeing very high and fast adoption.
  • Monthly readings of the MBI index will be presented as a time series that can be used to monitor the prevailing rate of change in mobile banking adoption.
  • Respondents on balance were bullish on the rate of expected growth in activity over the mobile channel.
May 2013
  • Visa announced that U.S. Visa card "issuers have put what averages out to over 5,000 new chip-enabled cards in the hands of U.S. cardholders every day.
  • As of March 31, the total number of Visa chip cards in market was at 3.5 million and growing.
  • With each new card, the U.S. payments ecosystem gets one step closer to achieving the improved security that EMV technology affords to consumers, merchants and issuers.
  • That's because when a chip is inserted into the payment terminal, the chip generates a code that is unique to that transaction.
  • This code renders stolen payment information useless at the point of sale, reducing its value to criminals and shrinking counterfeit fraud.
  • The opportunity that chip presents goes beyond security, and will enable new and emerging forms of electronic payment, such as NFC-based mobile payments.
May 2013
  • Home resales rose in April to the highest level in nearly 3-1/2 years and prices surged.
  • Existing home sales advanced 0.6 percent to an annual rate of 4.97 million units, the highest level since November 2009.
  • The data underscored the housing market's improving fortunes as it starts to regain its footing. Resales were 9.7 percent higher than in the same period last year.
  • Manufacturing, in particular, has been showing strains. But housing has held up surprisingly well, with the gains in home values helping to boost consumer confidence and retail sales.
  • In April, the median home sales price increased 11 percent from a year ago to $192,800, the highest level since August 2008. It was the fifth consecutive month of double-digit gains.
  • With prices rising, more sellers put their properties on the market. The inventory of homes on the market rose 11.9 percent from March to 2.16 million.
May 2013

Bankers Hiring Hagglers to Negotiate IT Contracts

Source: americanbanker Category: Banking Industry News
  • Community banks are spending a little bit of money now in hopes of saving more on core processing and IT-service contracts.
  • A growing number of lenders are hiring consultants to negotiate technology contracts, which are typically among a bank's biggest expenses.
  • Hiring experienced hagglers can lead to more favorable terms and better equip banks for future growth, industry observers say.
  • Bankers are at a disadvantage because they don't know how the game is played. Bankers really have no idea what they should be paying for their contracts.
  • Roughly 60% of bank and credit union executives who participated in a study listed lowering noninterest expense as a top priority for the next 12 to 18 months.
  • In comparison, a small bank would need to book $5.6 million in loans, on day one, to generate the equivalent of $1 million in net interest revenue; BPI estimated using the average net interest margin for the fourth quarter.
  • Core processors use certain tactics, such as contacting a bank about renewing its contract when it's too late for the bank to switch to a new company, in an attempt to tilt negotiations, industry experts say.
May 2013
  • Nineteen U.S. retailers, including Wal-Mart Stores Inc and Gap Inc, said they would ask a federal judge to reject a proposed $7.2 billion settlement between merchants and credit card giants Visa Inc and MasterCard Inc over credit card fees.
  • Visa and MasterCard have said they are confident the deal will receive Gleeson's support. They have the option of terminating the settlement if merchants generating 25 percent or more of credit card volume opt not to participate.
  • If this settlement is approved, it would allow credit card companies and big banks to perpetuate an unfair and broken system that costs all consumers, including those who don't even have a credit or debit card.
  • Other retailers announcing their objections included Costco, Starbucks Corp, J. Crew Group Inc, Nike Inc, 7-Eleven Inc and Panera Bread.
  • The National Retail Federation, a trade group that represents retailers, said it also would object to the settlement and urged its members to consider doing the same.
May 2013
  • The surprise gain in retail sales, which account for about 30 percent of consumer spending, was the latest sign of resilience in an economy that has been hit by belt-tightening in Washington as the government tries to cut its budget deficit
  • Retail sales edged up 0.1 percent after a 0.5 percent drop in March as households bought automobiles, building materials and a range of other goods.
  • So-called core sales, which strip out automobiles, gasoline and building materials and correspond most closely with the consumer spending component of the government's measure of gross domestic product, increased 0.5 percent after an upwardly revised 0.1 percent gain in March. February's core sales were revised higher as well.
  • But declining gasoline prices, which fell 14 cents in April, are helping to offset some of the drag on household income, freeing up money for discretionary spending.
  • The tone of the retail sales report was mostly firm. Receipts at auto dealerships rose 1.0 percent after falling 0.6 percent in March.
  • Though falling gasoline prices pushed down receipts at gasoline stations, sales excluding gasoline recorded their largest increase since December.
May 2013

Bank Lending to Small Businesses Rose in April

Source: americanbanker Category: Banking Industry News
  • Lending by banks to small businesses is on the rise. Institutions with at least $10 billion of assets approved 16.8% of loans between $25,000 and $3 million in April, up from 15.7% in March and 10.6% a year earlier.
  • The loan approval by small banks, which Biz2Credit defines as institutions with less than $10 billion of assets, rose to 50.9% in April, compared with 50.8% in March and 45.9% a year earlier.
  • Higher credit-quality customers are electing to apply to loans from big banks first now that they are more willing to lend and the service has improved.
  • The approval rate by community development financial institutions and other nonbank lenders fell two-tenths of a percentage point, to 63.4%, in April, from a month earlier.
  • The loan approval rate by credit unions fell to 45.2% in April, down from 45.5% in March and 57.4% a year earlier.
May 2013

Consumers still don't understand credit scores

Source: Creditcards Category: Credit Card News
  • 40 percent of Americans still do not know that credit card companies and mortgage lenders use credit scores to help determine if applicants are eligible for credit and what the interest rate will be.
  • Women tend to be better informed about credit scores than men, and young adults of 18 to 34 are about as knowledgeable about credit scores as the rest of the adult population.
  • Many people underestimate the cost of a low credit score. Only 21 percent of respondents knew that a typical five-year $20,000 auto loan would cost a borrower with a low credit score more than $5,000 more in interest than the cost paid by someone with a high credit score.
  • Only about one in five consumers knows that they can obtain their credit scores from all of these sources: The three main credit bureaus -- Experian, Equifax and TransUnion. Many individual lenders. Some independent websites.
  • Only 7 percent of Americans know that multiple inquiries within a week or two about obtaining a mortgage or car loan will not lower their credit score.
  • Forty-three percent of American consumers erroneously believe that age affects a credit score and 40 percent believe that marital status influences the calculation.
  • In reality, the most important factors in determining a credit score are credit card balances, whether personal bankruptcies have been filed, and missed credit card or other debt payments.
May 2013

Job openings decline modestly in March

Source: Reuters Category: Economy News
  • The number of job openings fell slightly in March; a fresh sign the labor market recovery has shifted into a lower gear.
  • Job openings, a measure of labor demand, fell to 3.844 million during the month, just below the revised reading of 3.899 million for February.
  • Hiring also slowed, with the hiring rate dropping to 3.2 percent from 3.3 percent.
  • The department said that employment growth picked up in April, although recent data has suggested the U.S. labor market recovery has lost momentum since the end of the first quarter.
  • The percentage of workers quitting their jobs fell to 1.6 percent in March from 1.7 percent in February, potentially a sign of faltering confidence in the labor market
May 2013

Small Business Owners Big on Mobile Technology

Source: Americanbanker Category: Banking Industry News
  • For banks that are on the fence about offering mobile banking to small business owners, could nudge them to take that step.
  • A survey of 1,305 small business owners conducted in March found that 66% currently use a mobile device such as a smartphone or tablet in their work.
  • Of the non-mobile users, 65% have no plans to use a mobile device in the future, many citing a lack of demand for mobile access from their customers.
  • This segment is partial to Apple devices, according to the survey 66% use iPhones, while 39% use Android phones. About 49% use iPads; only 15% use Android tablets.
  • Among the general public, according to comScore, Android subscribers account for 52% of all subscribers, while iOS subscribers account for 38%.
  • Mobile apps are playing a growing role in the way small businesses manage operations: 82% use a calendar/time management app; 74% use a customer communications app;
  • 52% use a GPS and mapping app; 44% use an accounting/invoicing app; 44% use an app for industry news/information consumption; and 29% use a travel planning app.
  • Chase, which has offered mobile apps to small business owners for two years, yesterday rolled out a feature that lets these customers image their receipts and attach them to specific credit card transactions.
  • The bank already offered the ability to tag specific transactions with an identifier, such as the name of a client or project.
May 2013

Credit card balances fall in March

Source: Creditcards Category: Credit Card News
  • Credit card balances ended two months of modest upward movement in March, falling despite an improving job climate and expanding paychecks.
  • Revolving debt, which is mainly made up of credit card balances, fell $1.7 billion in March, following February’s revised $400,000 increase?
  • The amount of outstanding revolving debt was $846.2 billion, compared with a revised $847.9 billion in February.
  • The drop in revolving credit ran counter to the rise in total consumer debt, which has seen car loans and student loans outpace the riskier, unsecured category of credit card debt.
  • The pullback from credit card debt came as consumers slowed the pace of spending increases.
  • Consumer spending raised $21 billion in March, down from February's $81.6 billion increase. Personal income was up $30.9 billion, or a scant 0.2 percent for the month.
  • Indeed, consumer demand for plastic is outpacing lenders' willingness to give it. 18 percent of banks saw stronger demand for credit cards during the first quarter, while only about 7 percent said they had eased their standards for granting new cards.
  • The survey results suggest that the weak rise in credit card balances has more to do with tight lending practices at banks than wariness by shell-shocked consumers.
May 2013

Productivity growth modest in first quarter

Source: Reuters Category: Economy News
  • Nonfarm productivity rose modestly in the first quarter as growth in output accelerated sharply and employer’s throttled back gains in the hours that their staffs worked.
  • Productivity increased at a 0.7 percent annual rate. Productivity fell at a 1.7 percent rate in the fourth quarter, according to revised figures.
  • Output rose at a 2.5 percent rate in the first quarter after weak government spending held the economy to marginal growth in the last three months of 2012.
  • The growth rate for the number of hours worked, however, slowed to 1.8 percent in the first quarter.
May 2013
  • The US’s second-largest payments network reported net income of $766 million, a 12% increase from a year earlier.
  • US consumers spent less in the quarter, hurt by higher payroll taxes and overal uncertainty.
  • The company is working to get the edge on rival Visa, which reports after the market close, in the expanding US debit card industry.
  • Since the mid-1990s, debit card usage has grown almost 20% a year, overtaking credit card usage in 2006. MasterCard makes money from fees it charges card issuers like banks for both debit and credit cards.
  • MasterCard’s biggest shot at growth may be in China and other regions where demand for payment systems is growing, like the Middle East and Africa.
  • The volume of transactions on the MasterCard network grew 20% in Asia, Africa, and the Middle East but only 4% in the US. Earlier in the month, MasterCard inked a deal with China CITIC bank to issue cards in China and elsewhere in Asia.
  • MasterCard has also signed deals with Alibaba Group, best known for its massive e-commerce operation, to allow cross-border payments.