Payment Card Penalty Fees Drop For The Fourth Year In A Row

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CARD PENALTY FEES DROP FOR THE FOURTH YEAR IN A ROW. Card issuers collected $12 billion in U.S. penalty fees in 2013, according to the R.K. Hammer Card Penalty Fee Index. This is the fourth year in a row that total card penalty fees dropped. In 2009, the last year when card penalty fees ticked up, fees were $22.9 billion.

Card penalty fees include consumer late fees, over the limit fees, and non-sufficient fund fees. Late fees account for the overwhelming majority of penalty fees, at an 86% share.

The downward trend in penalty fee revenue is a direct result of legislation introduced following the financial crisis. In particular, the CARD act, passed in 2009, limits the dollar amount that can be charged for late fees. It also bans the practice of allowing customers to go over their credit limit and charging a fee when they do so, unless the customer first opts-in to be able to go over their credit limit, in which case these customers do still incur a fee when they exceed their limit.

While the decline in penalty fees may continue or level off, card issuers are looking for new ways to generate revenue in place of lost penalty fees. Some banks are now charging fees for replacement cards, paper statements, and inactive accounts for example. (Credit Union Insight)

APPLE "INTRIGUED" BY MOBILE PAYMENT OPPORTUNITIES. During the Apple earnings call yesterday afternoon Cross Research's Shannon Cross asked Apple SVP and CFO Peter Oppenheimer to speak on opportunities in mobile payments. "The mobile payments area in general is one that we've been intrigued with and that was one of the thoughts behind Touch ID, but we're not limiting ourselves just to that, and so I don't have anything specific to announce today, but you can tell by looking at the demographics of our customers and the amount of commerce that goes through iOS devices versus the competition that it's a big opportunity on the platform," said Oppenheimer. Oppenheimer's comments come on the heels of a report by the Wall Street Journal that suggests that Apple has already begun work on a new payments business. (Morningstar)

FIRST DATA SETTLES WITH J.P. MORGAN OVER HIRING DISPUTE. Back in April, Frank Bisignano left his role as Co-Chief Operating Officer of J.P.Morgan for the role of CEO at legacy payments processor First Data. Soon after Bisignano's departure, First Data hired a number of additional high-level J.P. Morgan executives. Apparently the new hires upset J.P. Morgan CEO Jamie Dimon and J.P. Morgan alleged that Bisignano violated the terms of his contract by recruiting employees from J.P. Morgan less than a year after his departure. First Data's parent company and private equity firm KKR got involved and said that Bisignano was not responsible for the new hires. The whole situation has resolved with First Data agreeing to pay an undisclosed sum to J.P. Morgan in exchange for a promise that the bank would not challenge the First Data hires. Bisignano, known for his operational prowess, joined First Data in order to handle the company's $24 billion debt burden, among other things. (Wall Street Journal)

BITCOIN BIG SHOT GETS CAUGHT. Before the FBI seized contraband retailer Silk Road, it had its own Bitcoin exchange called BTCKing run by Robert Faiella. BTCKing used BitInstant as a payment processor and was allegedly selling Bitcoin to people who wanted to use the digital currency to buy illegal drugs and other contraband on Silk Road. Yesterday, both Faiella and Charles Shrem, CEO of Bitcoin payments processor BitInstant and Vice Chairman of the Bitcoin Foundation, were arrested following a criminal complaint alleging money laundering and operation of an unlicensed money transmitting business. The complaint suggests that Shrem knew that BitInstant was processing currency to Bitcoin transfers that would later be used for nefarious purposes, but continued doing business with BTCKing anyway. (Forbes)

Bitcoin already has a branding problem due to its favor with criminals; the arrest of a high-profile Bitcoin advocate like Shrem doesn't help. But just to put things in context consider that HSBC settled with the Federal government last year to end allegations that it enabled drug cartels to launder billions of dollars. A notable difference: HSBC was not criminally prosecuted, although the company was fined $1.9 billion.

YOUTUBE'S COPYRIGHT POLICY IS AN OPPORTUNITY FOR P2P AND CROWD FUNDING PAYMENT COMPANIES. There are lots of people who make a business out of producing content on YouTube. Often this content includes copyrighted material that the producer does not own, such as music or images. If a video is flagged for copyright infringement, the producer of the video cannot collect ad revenue generated by the video. A work around for producers is to use a crowdfunding platform like Patreon, which uses Stripe as a payments processor, to source donations or fees from viewers in place of ad revenue. Such a solution would allow YouTube content producers to continue to generate revenue from the content they create while remaining within the terms of YouTube's copyright policy. (Payment Source)

SIXTY PERCENT OF KENYANS USE MOBILE BANKING. In addition, 64% of Kenyans use their mobile phones to send and receive money locally and 48% of bank customers pay their utility bills using their mobile phones. The bulk of people using mobile for transactions in Kenya are most likely using the phenomenally successful digital currency M-PESA. M-PESA allows users to move money around easily using their mobile devices with very little cost. Currently over 17 million Kenyans or two-thirds of the adult population of the country use M-PESA. (Mobile Payments Today Via Kenya Bankers Association)

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