AFP Blogs

Canadian Finance Minister Jim Flaherty has proposed a voluntary code of conduct for the credit and debit card industry in Canada amid ongoing discussions with merchant and consumer associations there. The proposed rules are meant to provide pricing flexibility and transparency for merchants who accept payment cards.

“This proposed Code is intended to promote fair business practices and ensure merchants and consumers clearly understand the costs and benefits of credit and debit cards,” Flaherty said in a release. “By making clearer information available to consumers and encouraging fairer business practices, our Government is taking unprecedented steps to protect Canadian consumers.”

Canada’s Finance Department is encouraging stakeholders in the debate to e-mail comments on the proposed code to codeconsult@fin.gc.ca. The comment window lasts 60 days.

Under the code’s “recommend policy elements,” merchants would receive at least 90 days notice before fee changes. Another provision says merchants would not be obligated to accept credit and debit cards from the same network. Merchants can accept only a network’s credit card, for example, without being required to also accept its debit card. Also, discounts will be allowed for any payment method, meaning merchants could incentivize cash payments. And issuers would only provide premium cards, which can cost more to accept, to consumers who ask for them, under the rules.

“I welcome input in the process to ensure the proposed Code ultimately meets its goals,” Flaherty said. “The Government supports efforts that encourage a competitive environment which provides for fair pricing practices, innovation, a safe and secure payment system, and high quality services for consumers and merchants.”

Read more on Canada’s proposed rules in upcoming issues of AFP’s monthly Payments newsletter.

The U.S. Government Accountability Office, the investigative arm of Congress, has released its much-anticipated report on interchange fees. Each time a customer uses a payment card to make a purchase, the card issuer takes a cut (the interchange fee), typically in the amount of 1 to 3 percent of the total purchase price. For businesses large and small, the fees have caused headaches. Accepting cards means increased sales. But the cost of those sales often outweighs the benefits. And rejecting popular cards isn’t simple. The GAO addressed those points up at the top of its report, which you can read here. (It’s a 69-page PDF.)

For merchants, the benefits of accepting credit cards include increased sales and reduced labor costs. However, representatives from some of the large merchants with whom we spoke said their increased payment costs outstripped any increased sales. These merchants also reported that their inability to refuse popular cards and network rules (which prevent charging more for credit card than for cash payments or rejecting higher-cost cards) limited their ability to negotiate payment costs. Interchange fees are not federally regulated in the United States, but concerns about card costs have prompted federal investigations and private lawsuits, and authorities in more than 30 countries have taken or are considering taking actions to address such fees and other card network practices.

We will have more on interchange fees and this GAO report in upcoming issues of our monthly Payments newsletter and Exchange magazine. Subscribe to Payments to have the bulletin - which includes features on emerging payments issues and Q&As with payments newamakers – delivered to your inbox each month.

PayItGreen – a NACHA-lead coalition promoting the environmental benefit of choosing electronic payments, bills and statements over paper – is now registering members of all sizes. The three-tiered membership program, along with a new Web site, debuted in September after a soft launch at NACHA’s Payments conference in April.

“In order for the program to really expand and grow and frankly be self sustaining a membership program was developed,” said Samantha Carrier, NACHA’s senior director for advanced payment solutions.

Membership dues range from $500 a year for entry-level memberships to $25,000 for founding members. Businesses that sign up will have exclusive access to PayItGreen’s logo, and at the premier ($6,000 a year) and founding levels, can download PayItGreen resources such as calculators and videos for use in their own outreach efforts. Founding members have access to co-branded tools and resources.

Visit PayitGreen’s Web site for more information about becoming a member. Also there you can find news, videos, statistics, case studies, a list of current members and calculators to determine the environmental benefit of eliminating paper in the payroll, payments and billing processes.

Subscribe to AFP’s Payments newsletter to receive a monthly bulletin featuring coverage of payments news and issues, such as how green-ing your payments processes can pay dividends. Read the November newsletter here.

Anita Patterson, the director of treasury services for Cox Enterprises and a board member at AFP, leads the November issue of AFP’s Payments newsletter with an article about remittance data for wires. In the fourth quarter of 2010, the Federal Reserve Banks and CHIPS will introduce a new section into wire transfer formats to allow for 9,000 characters of remittance data.

In the article, Patterson writes about the changes, how they will benefit corporates, and what corporates can do to prepare ahead of implementation. Here’s a quick excerpt:

How will we, as well as other corporations across the U.S., benefit from the new message format to be implemented next year? With the new format allowing for increased messaging, the sender will be able to provide the receiver with greater detail, virtually eliminating the need for manual research.  The increased information will allow for straight-through processing to A/R, accommodating faster posting to the accounting systems.  There will be space to allow enough information to explain the payment, thus increasing productivity with the potential for elimination of research.  The ease of posting could allow for an increased flow of wires.

Subscribe to AFP’s monthly Payments newsletter.

We recently caught up with Ken Isaacson, vice president in the wholesale product office at the Federal Reserve Bank of New York, to talk about impending Fedwire format changes to support remittance data. This is an issue AFP’s Payments Advisory Group has really led the way on in the last several years.

Isaacson said that hopefully by November of next year, the Fedwire message format will be updated to include 9,000 characters of payments invoice data. This should allow corporates to automate the posting process and reduce costs associated with manually posting wires. You can find more information from the Fed here. In November’s issue of AFP’s Payments newsletter, you can also read a Q&A with Isaacson. Here’s a bit from that interview:

AFP: We’re at least a year out of implementation, how should corporates be preparing at this point?

KI: They should be looking at their wire process on the origination and the receipt side and they should be looking at which systems that they use would need to know about these new remittance information data elements in order to post straight through. A general ledger system may not need to know this detail. The accounts receivables system may need to know. What I’ve learned from working with corporations is there are a lot of ways corporations originate and receive wires. Each corporation needs to look at their process and make a judgment.

In October’s Payments newsletter, we have a brief about Bank of America’s new cash management portal, CashPro, which BofA launched at AFP’s Annual Conference in San Francisco earlier this month. Down in the middle of the second paragraph, we gave only quick mention to something that really is pretty interesting — a planned convergent payments system. In fact, we probably gave it too little play the first time around. Hence the revisitation.

Bank of America has signed a deal with Fundtech to build an all-in-one payments hub that they will roll into CashPro once it’s ready sometime next year. Users will have convenient and secure access to all payments types through this single point of access within a broader cash management system. Jacob Jegher, an analyst over at Celent who also pens a blog, is impressed and writes that banks will have to invest in such innovations to remain competitive going forward. This is something we’re going to keep an eye on in upcoming issues of Payments.

In the meantime, though, writing as a contributor at Bank Systems and Technology’s Web site, Fiserv’s George Warfel makes a pretty good, analagous, case for single point of access payments hubs:

The benefit of a convergent payments system is best described by the analogy of a single hallway. Think of the hallway as the place where all payment types are managed by one unified workflow. The rooms along the hallway are where processing tasks are performed by one software platform and administered by a cross-trained staff. Due to its simplicity, the single hallway approach reduces errors and is also inherently better at detecting and stopping fraud since one platform monitors all payments transactions. Having a single hallway not only reduces the requirements for computing resources and personnel, but it is also more efficient and facilitates the reuse of software modules in support of multiple payment types.

On Friday, new NACHA rules governing International ACH Transactions take effect. Identifying each payment that enters or exits the U.S. as an IAT will offer a much clearer view of the amount of international traffic in the system. However, complying with the new rules could mean more work for corporate practitioners and bankers alike. (more…)

Wal-Mart announced plans earlier this month to take its payroll paperless by urging its more than 1.4 million U.S. workers to accept direct deposit into a bank account or take pay via MasterCard-branded debit cards. About half of its employees still receive paper checks. Paperless payrolls aren’t new, but coming from the nation’s largest private employer, the move could hold sway, persuading many more companies to follow suit, experts have been predicting. (more…)

U.S. corporations prefer ACH and card payments to checks when making or receiving B2B transactions, according to new research from the Federal Reserve and comments from AFP’s Payments Advisory Group and senior executives with the Fed’s Financial Services Support Office. That’s a notable change in their views since the two groups held a similar meeting held in 2004. (more…)

Technology is advancing at a dizzying pace and plays a critical role in every treasury department. This year’s conference features over 15 sessions that highlight the innovative leveraging of technology to increase the strategic value of the treasury function. Sessions include:

Randall Durling, Director of International Finance for Boeing, will share practical tips and lessons learned from his experiences implementing technology models. Hear how to increase efficiency, reduce procurement and maintenance costs, and best practices to adopt when evaluating and implementing technological tools for your treasury department. (“Deploying Today’s Technology Models in a Treasury Environment” – session # 51 – Treasury Operations track)

Attendees will learn about the potential of cutting-edge cloud technology to advance payments capabilities from Gary Hagmueller, Chief Financial Officer of Zuora, Inc. He will discuss existing uses of cloud technology in payments, and outline possible benefits to come including payment tagging, payment status tracking, and links from payments to remittance information. (“Payments: Are They Ready for the Cloud?” – session #120 – Payments track)

Vorapong Sutanont and Jeremy Dane from PricewaterhouseCoopers will educate their audience in the use of Transaction Risk Identification and Analysis to prevent and detect fraud. They will provide an overview of common vulnerabilities, outline data-mining strategies that can be employed to identify the potential for or existence of fraud, and discuss how corporates can address weaknesses in various areas of their operations. (“Emerging Trends and Techniques to Combat and Detect Fraud Risk with Today’s Technology” – session #101 – Risk Management track)

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