Guy Gaeta has given up dealing with fruit merchants.
He now drives the five hours from Orange to Sydney several times a week to run his own stall in the growers shed of the Sydney Markets.
There he sells his apples and cherries direct to consumers and retailers to avoid the middle man.
"It's open slaughter (sic)," he says
The merchants "pay as little as you can to the grower, or as much as you can to keep him," he says.
"But we don't know what the thing is sold for. No government has ever been able to fix it up."
Growers want a receipt early, once their consignment of fruit and vegetables has arrived.
But meet the wholesalers at the Sydney Markets and they'll all tell you, it's just too complex to give a receipt for all the produce as it arrives in the early morning, before they have ascertained its quality, or market demand.
Bill Chalk is long running president of the Chamber of Fruit and Vegetable Industries at the Sydney Markets, where he also has a wholesale business called Southern Cross Produce.
"Now if you were to negotiate a price with all these growers before you started to sell; my staff started at 3am and the buyers are in here trying to buy, what time do we negotiate the price and how do we do it?" he asks somewhat rhetorically.
But it's more than the failure to deliver a price early.
For the growers it's also about the confusion of whether at Sydney Markets, they're dealing with agents or merchants.
Apple grower Guy Gaeta believes the biggest problem is merchants are acting as agents, but not declaring their service fee as a commission, and therefore not paying GST.
"If you're acting as a wholesaler, you should be purchasing the crop, within a certain amount of hours, you should be telling the grower what you're paying," says Mr Gaeta.
So growers should be getting a receipt.
"They're not doing that. They're telling them, a week later, they send em a fax, of what they sold them for, but when the paperwork is done they don't show the 10 per cent as if they're working as an agent," says Guy Gaeta
But if that's the case, why isn't the tax office cracking down?
"They're scared," he says.
Bill Chalk does agree with the fruit growers that the Horticultural Code, that was drawn up during the Howard Government, is a "dog's breakfast.... no one practical person sat down to work this out.
"How would you like to be on the phone at 2am negotiating a price, and you don't agree."
The produce "just sits here."
It's 5am at Sydney Markets and already wholesale merchants, have been there for up to three hours.
It's a dangerous place to walk around, as the 700 forklifts buzz around and despite laws to the contrary, presume right of way.
Bill Chalk explains this market is big and complex.
"30 per cent of the population of Australia gets its fruit and vegetables through Sydney Markets somehow.
With 5,000 workers, "Sydney is the largest market in the Southern Hemisphere, the second-largest in the world, and the largest privately owned market in the world."
Wholesale markets like this in Sydney; in Brisbane, Melbourne, Adelaide and Perth are the key distribution point for almost all Australia's horticulture.
It's where retailers large and small, processors and the food industry come to buy fruit and veg for us, the consumers.
Bill Chalk says boxes arrive from many suppliers, of varying quality and there'd be endless paperwork if receipts were to be written.
"I"ll say this - they don't understand the practicalities. In your mind, you think it's quite simple, don't you.
"Well I'll show you this, I've never thought of this, I'm running off the cuff here, there's one, two, three, four different producers on that pallet. So I've got to write four different receipts?"
But back on the farm, there's mistrust about the markets, and the pricing system.
Peter Darley has 25,000 apple trees - of the most popular varieties, on the rolling hills in the central-west NSW.
He's been lobbying for changes for 11 years.
"It doesn't matter what state you are, I think the key problem in each state is the lack of transparency, in the actual sale price.
"Now if you were to actually go and buy a motorcar, you'd ask the price you're going to get for it, or if you were selling it you wouldn't sell it without first getting a price.
"But as horticultural producers we consign produce to that market and we don't know what we're going to get for it.
"They operate under a merchants' agreement. Now a true merchant must give the grower a price, the grower agrees to that price, that's fine, the wholesaler can then go on, and make a mark up on that produce and make a profit himself.
"He's doing that now without setting a price with the grower."
He says it takes at least five days to get a price out of the wholesale merchant.
Peter Darley is on the Horticulture Taskforce, to try to modify the Horticulture code that was introduced under the last government.
He says the lack of transparency is "decimating the industry. We just can't operate anymore.
"The price we've seen in the last few weeks, the prices retailers are charging and the low price farmers are receiving, somewhere in the middle, is it price gouging by the retailer or is it price taking by the wholesaler? Because there's no transparency in there, no one knows."
Peter Darley says the problems go back eleven years, before there was any code.
"The government brought in voluntary retail grocery code, that was never very successful.
"Next the government brought in mandatory code, but it only covers wholesalers, (and it should cover everybody.) retailers, processors, exporters, wholesalers.
"That's one where we agree with the wholesalers.
"That's where we'd look for transparency."
"We've seen retailers charge high prices, pink lady apples e.g are $7.99 ...to $9.99 a kg, but if the grower is receiving $2. to $2.20/ kg, that's about the top price he's receiving. Clearly there's a huge margin that's disappearing out of the equation," says Peter Darley.
The federal independent member Bob Katter has launched his own changes to the Horticulture Code in Parliament, to try to make every transaction transparent.
"Why wouldn't you give the farmer evidence of sale?
"Every other sale that takes place in the world and in this country gets that," Mr Katter told Parliament.
"But the poor old farmer, all he gets is the rough end of the pineapple, Mr Speaker."
Now dubbed the Katter code, not only does it call for transparency and a receipt, it wants a price setting in 24 hours, a payment within 45 days, and the money to be placed in a trust account.
At the moment, the fruit merchant can go broke and the grower wears the whole risk.
It's fuelled by the likes of Makse Srhoj fruit grower in Katter's productive Far North Queensland electorate.
Makse Srhoj says he's been left unpaid for fruit and pumpkins he's sent and Sydney or Brisbane four times in the past eight years.
The worst case was a Brisbane wholesaler went bankrupt.
"It was probably about four years ago, with trading company Benays which involved half a million dollars to about 10 or 12 farmers.
"And how much were you owed?"
"I was owed around about $44,500 actually. I'd delivered pumpkins."
He says both the consumer watchdog ACCC and to ASIC (the Australian Securities and Investment Commission) concluded the amount was too small to chase.
Sydney Markets believe it has far fewer bankruptcies than the wider economy.
Within the past decade the market has run a Credit Co-op to ensure the traders get their money.
President of Chamber of Fruit and Vegetable Industries Bill Chalk says Sydney traders can limit their liability if the retailer they sell to doesn't pay.
But he doesn't see why the co-op should invite growers in.
"Just like any debtor, if for some reason one of the majors defaults, I'd have no way of getting paid either.
"That's part of a business risk. Growers need to do their research. And for the size of the industry this is, it doesn't take long for growers to work out who pays and who doesn't.
"People still get caught, but percentage wise it's whimsical on turnover of payments to growers."
Where to now?
Merchants you meet at the markets believe their relationships with growers are important, and are based on trust.
But for mango and pumpkin grower Makse Srhoj whose been burnt many times, trust is a poor excuse for a lack of transparency.
And Guy Gaeta has his own suspicions of Sydney Markets, which are not being investigated.
"I don't know of too many farmers going around with $400,000 cars.
"You're telling me they're small businesses? We're the small business supplying them.
"We're giving them the wealth and we're not getting our fair share of what truly the fruit has been sold for."
The growers are continuing to lobby the Government to get rid of the old contracts, arguing merchants have too much power.
Katter's code has taken the next step and will be investigated by the House Agriculture Committee. It's called for public submissions.
Bob Katter's trying to force fruit merchants to be more open in their dealings with growers but it's likely to be met with fierce resistance and it's what numerous Government inquiries have failed to do in the past.
2011年10月31日 星期一
2011年10月30日 星期日
Timba family accused
Timba had been the major shareholder of the bank, but it was later placed under the management of a curator.
A report compiled by BCA Forensic Audit Services - and marked "private and confidential" - reveals a trail of plunder of depositors' funds at the bank. It says the pillaging bordered on "criminality, fraud and theft".
Senior Reserve Bank of Zimbabwe officials are pushing for the police's fraud branch to take action.
Timba's looming arrest could be a throwback to 2004, when prominent bankers were arrested for corruption, following the closure of banks in the midst of hyperinflation.
RBZ officials told the Sunday Times on Friday steps were being taken to tackle the RMB situation.
"If you read the original RBZ investigation reports and now the forensic audit report, it's clear the bank was looted through criminal activities, fraud and theft. Depositors' money was simply stolen," a senior RBZ official said.
"If it was ordinary banking employees who stole, they would be in jail by now. But because this case involves men in suits, the wheels of justice tend to move slowly."
Minutes of two RBZ board meetings held on June 28 and September 27 reveal the central bank board resolved to call on the police to deal with the RMB crisis. If they do, police would rely on initial RBZ investigation reports.
The latest one is a two-volume, 1415-page forensic report dated October 11. The first volume has 706 pages while the second has 709 pages. A shorter version of the report, a 49-page summary prepared on August 15, says Timba and his partners, mainly Dunmore Kundishora, also a major shareholder and director, ran down the bank through systematic looting.
"Available evidence shows a total of $1018286.25 of depositors' funds were used to pay for Timba's expenses. The various payments adding up to this figure were done in violation of the Companies Act," the forensic report says.
It details a "Nick Leeson-type" of pillage, and the report also confirms findings of earlier reports that Timba siphoned off funds with his relatives through "related party transactions and insider loans".
"Investigations established that there was a total collapse in corporate governance structures at RMB, which resulted in Mr PF Timba, his father Mr PJ Timba, his brother Mr Stevenson Timba, his brother Mr Jameson Timba (the Minister of State in Prime Minister Morgan Tsvangirai's Office), his in-laws, George and Mary Mazhude, and other related parties accessing loans through various investment vehicles from RMB through RFHL's unfunded call-account numbers," the report says.
"The loans to the related parties have since matured but are still outstanding. The amounts have since been provided for in full. Related party borrowings, which were not approved by the board, were so rampant and to such an extent that it is appropriate to conclude that the intention was to loot the bank."
The report further states $313457.43 in depositors' funds was stolen, while $149913 was externalised. A further $100000 was suspected of being salted away.
It also says the transfer of $2-million to the Ugandan subsidiary was "criminal, amounting to theft and or fraud".
RMB, whose closure shook the market before a curator moved in, is wholly owned by RFHL, which also controls Renaissance Securities Limited and ReNaissance Capital Limited in Uganda.
In adition, RFHL owns 30.89% of Africa ReNaissance Corporation.
Timba was the chief executive of RFHL and a director of RMB.
RMB, technically insolvent, had negative capital of $16.7-million in April, against a prescribed minimum capital requirement of $10-million for merchant banks.
A report compiled by BCA Forensic Audit Services - and marked "private and confidential" - reveals a trail of plunder of depositors' funds at the bank. It says the pillaging bordered on "criminality, fraud and theft".
Senior Reserve Bank of Zimbabwe officials are pushing for the police's fraud branch to take action.
Timba's looming arrest could be a throwback to 2004, when prominent bankers were arrested for corruption, following the closure of banks in the midst of hyperinflation.
RBZ officials told the Sunday Times on Friday steps were being taken to tackle the RMB situation.
"If you read the original RBZ investigation reports and now the forensic audit report, it's clear the bank was looted through criminal activities, fraud and theft. Depositors' money was simply stolen," a senior RBZ official said.
"If it was ordinary banking employees who stole, they would be in jail by now. But because this case involves men in suits, the wheels of justice tend to move slowly."
Minutes of two RBZ board meetings held on June 28 and September 27 reveal the central bank board resolved to call on the police to deal with the RMB crisis. If they do, police would rely on initial RBZ investigation reports.
The latest one is a two-volume, 1415-page forensic report dated October 11. The first volume has 706 pages while the second has 709 pages. A shorter version of the report, a 49-page summary prepared on August 15, says Timba and his partners, mainly Dunmore Kundishora, also a major shareholder and director, ran down the bank through systematic looting.
"Available evidence shows a total of $1018286.25 of depositors' funds were used to pay for Timba's expenses. The various payments adding up to this figure were done in violation of the Companies Act," the forensic report says.
It details a "Nick Leeson-type" of pillage, and the report also confirms findings of earlier reports that Timba siphoned off funds with his relatives through "related party transactions and insider loans".
"Investigations established that there was a total collapse in corporate governance structures at RMB, which resulted in Mr PF Timba, his father Mr PJ Timba, his brother Mr Stevenson Timba, his brother Mr Jameson Timba (the Minister of State in Prime Minister Morgan Tsvangirai's Office), his in-laws, George and Mary Mazhude, and other related parties accessing loans through various investment vehicles from RMB through RFHL's unfunded call-account numbers," the report says.
"The loans to the related parties have since matured but are still outstanding. The amounts have since been provided for in full. Related party borrowings, which were not approved by the board, were so rampant and to such an extent that it is appropriate to conclude that the intention was to loot the bank."
The report further states $313457.43 in depositors' funds was stolen, while $149913 was externalised. A further $100000 was suspected of being salted away.
It also says the transfer of $2-million to the Ugandan subsidiary was "criminal, amounting to theft and or fraud".
RMB, whose closure shook the market before a curator moved in, is wholly owned by RFHL, which also controls Renaissance Securities Limited and ReNaissance Capital Limited in Uganda.
In adition, RFHL owns 30.89% of Africa ReNaissance Corporation.
Timba was the chief executive of RFHL and a director of RMB.
RMB, technically insolvent, had negative capital of $16.7-million in April, against a prescribed minimum capital requirement of $10-million for merchant banks.
2011年10月27日 星期四
Swiping Cards and Customers with Brooklyn’s SwipeFast
In the dog-eat-dog world of the credit-card processing industry, retail merchants get barraged daily by calls and in-person visits from processing firms – brokers between merchants and banks that largely make money via transaction fees – luring them to switch with promises of lower rates.
Given the volatility of the business, processing firms often cut fees and offer freebies, like credit-card swipe machines, to maintain merchant accounts. As an alternative strategy, a new processing firm in NY is focusing on technology-based services to break the cycle of transient clients and leeching competitors.
SwipeFast, a Bay Ridge, Brooklyn-based processing firm that offers swipe-card and mobile-payment services, is launching an electronic reward card next month that will replace its clients’ existing punch-or stamp-based frequent buyer cards and will allow those without a customer loyalty program to launch one. Furthermore, SwipeFast’s e-reward card, which resembles a credit card and is compatible with swipe machines, will be managed through an online account that will allow its merchants’ customers to manage purchase points and merchants to gather and analyze customer information.
The e-reward card was created via a partnership with SparkBase, a tech firm that specializes in white-label loyalty programs. A handful of SwipeFast’s 40+ clients, of which about 75 percent are based in NY and (including a day care center in Long Island and a wine store in Brooklyn), have signed on to participate for the tentative cost of $10 per month, said SwipeFast president Joe Nisanov.
“A large part of this business now is focused on e-commerce in order to build up and obtain the processing business,” said Nisanov, 35, who, along with co-founder Michael Venzke, 31, launched SwipeFast in January, employing a handful of sales agents. “That’s where the sales are going to come in, having clients happy with the rewards program and then gaining their credit-card business.”
Despite the crowded industry Nisanov and Venzke, who worked for a decade on the sales and development side of the processing business, saw an opportunity to create a niche by offering tech-driven simplicity.
“It was really looking at the industry and our competition and realizing there is a place for a company to do things different,” said Nisanov. “This is certainly an industry that is in the ‘80s and early ‘90s as far as technology.”
To capitalize, SwipeFast offers clients four tiers of services at fixed rates (ranging from $15 to $35 a month plus set fees) while putting applications and statements online via an easy-to-navigate user interface. Its tech-savvy approach includes e-commerce services such as setting up online shopping carts and features social media promotion with offers for free iPads and plug-ins for businesses that use QuickBooks.
“Focusing on tech gives an advantage,” said Nisanov, who, along with Venzke, launched the company with $10,000 of their own savings. “It’s inevitable that the industry is going that way with near-field communications coming out. We want to try and stay ahead of the game and capitalize.”
While SwipeFast is still in the red financially, it’s close to reaching profitability and is on pace break even by the end of the year, said Nisanov.
SwipeFast’s tech services and e-reward card come at a pivotal time in the industry. On Oct. 1, the Durban Amendment went into effect, adding to the Dodd-Frank financial reform legislation drawn up by Congress by dramatically lowering debit-card processing rates on swipe transactions. The Durban Amendment is expected to reshuffle merchant accounts and reshape the industry, according to processing firms and industry consultants.
Given the volatility of the business, processing firms often cut fees and offer freebies, like credit-card swipe machines, to maintain merchant accounts. As an alternative strategy, a new processing firm in NY is focusing on technology-based services to break the cycle of transient clients and leeching competitors.
SwipeFast, a Bay Ridge, Brooklyn-based processing firm that offers swipe-card and mobile-payment services, is launching an electronic reward card next month that will replace its clients’ existing punch-or stamp-based frequent buyer cards and will allow those without a customer loyalty program to launch one. Furthermore, SwipeFast’s e-reward card, which resembles a credit card and is compatible with swipe machines, will be managed through an online account that will allow its merchants’ customers to manage purchase points and merchants to gather and analyze customer information.
The e-reward card was created via a partnership with SparkBase, a tech firm that specializes in white-label loyalty programs. A handful of SwipeFast’s 40+ clients, of which about 75 percent are based in NY and (including a day care center in Long Island and a wine store in Brooklyn), have signed on to participate for the tentative cost of $10 per month, said SwipeFast president Joe Nisanov.
“A large part of this business now is focused on e-commerce in order to build up and obtain the processing business,” said Nisanov, 35, who, along with co-founder Michael Venzke, 31, launched SwipeFast in January, employing a handful of sales agents. “That’s where the sales are going to come in, having clients happy with the rewards program and then gaining their credit-card business.”
Despite the crowded industry Nisanov and Venzke, who worked for a decade on the sales and development side of the processing business, saw an opportunity to create a niche by offering tech-driven simplicity.
“It was really looking at the industry and our competition and realizing there is a place for a company to do things different,” said Nisanov. “This is certainly an industry that is in the ‘80s and early ‘90s as far as technology.”
To capitalize, SwipeFast offers clients four tiers of services at fixed rates (ranging from $15 to $35 a month plus set fees) while putting applications and statements online via an easy-to-navigate user interface. Its tech-savvy approach includes e-commerce services such as setting up online shopping carts and features social media promotion with offers for free iPads and plug-ins for businesses that use QuickBooks.
“Focusing on tech gives an advantage,” said Nisanov, who, along with Venzke, launched the company with $10,000 of their own savings. “It’s inevitable that the industry is going that way with near-field communications coming out. We want to try and stay ahead of the game and capitalize.”
While SwipeFast is still in the red financially, it’s close to reaching profitability and is on pace break even by the end of the year, said Nisanov.
SwipeFast’s tech services and e-reward card come at a pivotal time in the industry. On Oct. 1, the Durban Amendment went into effect, adding to the Dodd-Frank financial reform legislation drawn up by Congress by dramatically lowering debit-card processing rates on swipe transactions. The Durban Amendment is expected to reshuffle merchant accounts and reshape the industry, according to processing firms and industry consultants.
2011年10月26日 星期三
Planet Payment reveals strong first half performance
Planet Payment reveals strong first half performance; shares resume trading on AIM
It explained last month that following discussions with its advisor Deloitte, the group’s interim results had been delayed as it made changes to the way it presents revenues in its accounts ahead of the groups IPO into US capital markets.
Today the group released the eagerly anticipated results for the six months ended June 30, which showed a 47 per cent uplift in net revenue to US$19.9 million.
Following the announcement, Planet Payment’s shares have resumed trading on AIM after the temporary suspension.
Planet Payment said that its interim net income had swung into positive ground, reaching US$1 million from a US$2.3 million loss in the first half of last year. Adjusted earnings (EBITDA) came in at US$2.6 million, compared to a US$400,000 loss a year ago.
The company now reports revenues net of the gross foreign currency mark-up, which is shared between the company, acquirers and their merchants.
It said that ‘consolidated gross billings’ – a financial metric that includes gross foreign currency mark-up and revenues earned and reported on payment processing services – increased by 70 per cent compared to the comparative period of last year, to US$47 million.
Meanwhile, the ‘gross foreign currency mark-up' increased 86 per cent to US$40.2 million.
Put in more straight forward terms, Planet Payment’s progress can be seen through the continued roll-out of its payment processing services which are being used by more and more merchants in an increasing number of territories.
The number of active merchants using Planet Payment’s multi-currency payment processing service increased by 66 per cent to 14,345, and just over US$1 billion was settled through the platform.
This increase in the take up of its product is the main driver behind the group’s strong revenue growth.
“Planet Payment's customers have continued to roll out our multi-currency processing solutions as reflected by a 66 per cent increase in active multi-currency merchant locations,” the company said in a stock exchange statement.
“During the first half of 2011 the total number of active merchant locations continued to grow, increasing by approximately 100 per cent during the period.
“During the first half of 2011, the company continued to expand its acquiring customer base in both existing and new markets, in particular announcing agreements with Global Payments to provide multi-currency services in the United States and Canada, complementing the existing agreements in the Asia Pacific region.”
Then in March, Planet Payment signed a deal with Vantiv – formerly known as Fifth Third Processing Solutions – to expand its offering through the future roll out of the ‘Pay in Your Currency’ service on ATMs throughout the United States.
Later, in May, Planet Payment launched the MICROS Payment Gateway, which it operates under a worldwide license from MICROS Systems, to support payment services for merchants in the hospitality and retail industries.
Additionally the company was told that two claims under its patent applications have been found to be ‘patentable’ in Singapore and Australia, and it expects patents in those countries to be granted shortly – Planet Payment already has patents in the United States and in other countries.
On a corporate from the firm has also been strengthened. In April investor holding US$9 million in convertible notes switched the debt into equity, taking just over 4 million new shares in the company.
Meanwhile the preparations continue for the group’s full listing in the United States, in which US$75 million worth of stock will be sold to new investors – from a mixture of new and existing share capital.
It explained last month that following discussions with its advisor Deloitte, the group’s interim results had been delayed as it made changes to the way it presents revenues in its accounts ahead of the groups IPO into US capital markets.
Today the group released the eagerly anticipated results for the six months ended June 30, which showed a 47 per cent uplift in net revenue to US$19.9 million.
Following the announcement, Planet Payment’s shares have resumed trading on AIM after the temporary suspension.
Planet Payment said that its interim net income had swung into positive ground, reaching US$1 million from a US$2.3 million loss in the first half of last year. Adjusted earnings (EBITDA) came in at US$2.6 million, compared to a US$400,000 loss a year ago.
The company now reports revenues net of the gross foreign currency mark-up, which is shared between the company, acquirers and their merchants.
It said that ‘consolidated gross billings’ – a financial metric that includes gross foreign currency mark-up and revenues earned and reported on payment processing services – increased by 70 per cent compared to the comparative period of last year, to US$47 million.
Meanwhile, the ‘gross foreign currency mark-up' increased 86 per cent to US$40.2 million.
Put in more straight forward terms, Planet Payment’s progress can be seen through the continued roll-out of its payment processing services which are being used by more and more merchants in an increasing number of territories.
The number of active merchants using Planet Payment’s multi-currency payment processing service increased by 66 per cent to 14,345, and just over US$1 billion was settled through the platform.
This increase in the take up of its product is the main driver behind the group’s strong revenue growth.
“Planet Payment's customers have continued to roll out our multi-currency processing solutions as reflected by a 66 per cent increase in active multi-currency merchant locations,” the company said in a stock exchange statement.
“During the first half of 2011 the total number of active merchant locations continued to grow, increasing by approximately 100 per cent during the period.
“During the first half of 2011, the company continued to expand its acquiring customer base in both existing and new markets, in particular announcing agreements with Global Payments to provide multi-currency services in the United States and Canada, complementing the existing agreements in the Asia Pacific region.”
Then in March, Planet Payment signed a deal with Vantiv – formerly known as Fifth Third Processing Solutions – to expand its offering through the future roll out of the ‘Pay in Your Currency’ service on ATMs throughout the United States.
Later, in May, Planet Payment launched the MICROS Payment Gateway, which it operates under a worldwide license from MICROS Systems, to support payment services for merchants in the hospitality and retail industries.
Additionally the company was told that two claims under its patent applications have been found to be ‘patentable’ in Singapore and Australia, and it expects patents in those countries to be granted shortly – Planet Payment already has patents in the United States and in other countries.
On a corporate from the firm has also been strengthened. In April investor holding US$9 million in convertible notes switched the debt into equity, taking just over 4 million new shares in the company.
Meanwhile the preparations continue for the group’s full listing in the United States, in which US$75 million worth of stock will be sold to new investors – from a mixture of new and existing share capital.
2011年10月25日 星期二
Questions for capitalism on Big Bang’s birthday
There was a lot to deplore in the City before Big Bang, the reforms of Britain’s stock exchange that took place 25 years ago this week. The old exchange was an oligopoly that kept prices high and competition out. The City was sexist, snobbish and not very hard working. Certain partners disappeared for lunch at 11.45 and reappeared three hours later. Staff spent a lot of time playing the stock market with their own money. Women had little choice but to accept derogatory nicknames if they wished to progress. The only black face I came across in the City before Big Bang was in a West Indian steel band at a Cazenove garden party.
Yet there was also a lot to admire. The ethical code was strong. The rules were clear and most people stuck to them. Those that didn’t were sidelined from the mainstream by word of mouth. Conflict of interest was minimised as a result of the strict separation of functions in equity markets. Dealing firms could not advise investors. Broking firms dealt for clients as agents and were not allowed to trade as principals. Corporate advice was the preserve of the merchant banks, which in turn were prevented from dealing or trading on their own account. Everyone knew where everyone else stood and there was little question of talking your own book.
All of this, the good and the bad, changed in the run up to Big Bang on 27 October 1986. The turning point was the decision to allow the Wall Street model of integrated investment banks. The U.S. firms swept into town bringing new technology, techniques and a harder work ethic. The City became more professional. The first train of the day in 1986, the 0715, left Haslemere in stockbroker belt Surrey at about the time the next generation of commuters would be starting work. British Rail arranged an extra train, the 0644; nowadays it leaves at 0521.
But behaviour changed in more sinister ways. Opening the market to competition slashed the cost of dealing and stock exchange turnover soared as investors saw opportunities to make a quick buck on the back of the lower charges. The new model gave investment banks an advantage in information that eventually led to bigger profits, higher pay and a completely different culture.
In this new world fast finance replaced patient accumulation. Long-term business relationships between banker and client, employer and employee, shareholder and management gave way to brief affairs. The permissive rules made it difficult to maintain any acceptable ethical standards. It was all very well to say the client came first but which client if you are acting for buyer and seller and putting the firm’s capital at risk? Brokers learned that their in-house book not their external clients were the top priority and that the ethical code was for public relations, not for real.
The rewards for practitioners became so great that greed wars broke out as individuals saw the chance to make life-changing sums from a year’s pay. There developed a tacit assumption that it was every man and woman for himself or herself and these values rippled out across society, changing behaviour and attitudes in unexpected ways.
None of this would have mattered if the City had remained what it was before Big Bang, namely an inward looking cottage industry with little wider significance. Instead it became an industrial-scale money machine with global reach and the potential to bring down governments and make or break economies. This occurred because the UK’s Big Bang came at a tipping point for the world’s financial services industry. Prior to Big Bang clients and sovereign jurisdictions could choose between the integrated US model and the discrete British agency version; after it, one-stop shopping investment banking carried the day.
The power of this model allied to the winds of free market economics and financial liberalisation made monsters of its institutions. Certain of their power and motivated by asymmetric rewards, they became highly leveraged and dangerously adventurous. Big Bang was not the only cause of this but it set them along the road. It helped to create a structure and a mindset that encouraged bankers to take reckless turnings at nearly every opportunity and persuaded many stakeholders to look away.
Is capitalism in crisis and was Big Bang to blame? Probably not but on its 25th anniversary it is appropriate that the question is now being asked where it all started, in the shadow of St Paul’s Cathedral on the edge of the Square Mile.
Yet there was also a lot to admire. The ethical code was strong. The rules were clear and most people stuck to them. Those that didn’t were sidelined from the mainstream by word of mouth. Conflict of interest was minimised as a result of the strict separation of functions in equity markets. Dealing firms could not advise investors. Broking firms dealt for clients as agents and were not allowed to trade as principals. Corporate advice was the preserve of the merchant banks, which in turn were prevented from dealing or trading on their own account. Everyone knew where everyone else stood and there was little question of talking your own book.
All of this, the good and the bad, changed in the run up to Big Bang on 27 October 1986. The turning point was the decision to allow the Wall Street model of integrated investment banks. The U.S. firms swept into town bringing new technology, techniques and a harder work ethic. The City became more professional. The first train of the day in 1986, the 0715, left Haslemere in stockbroker belt Surrey at about the time the next generation of commuters would be starting work. British Rail arranged an extra train, the 0644; nowadays it leaves at 0521.
But behaviour changed in more sinister ways. Opening the market to competition slashed the cost of dealing and stock exchange turnover soared as investors saw opportunities to make a quick buck on the back of the lower charges. The new model gave investment banks an advantage in information that eventually led to bigger profits, higher pay and a completely different culture.
In this new world fast finance replaced patient accumulation. Long-term business relationships between banker and client, employer and employee, shareholder and management gave way to brief affairs. The permissive rules made it difficult to maintain any acceptable ethical standards. It was all very well to say the client came first but which client if you are acting for buyer and seller and putting the firm’s capital at risk? Brokers learned that their in-house book not their external clients were the top priority and that the ethical code was for public relations, not for real.
The rewards for practitioners became so great that greed wars broke out as individuals saw the chance to make life-changing sums from a year’s pay. There developed a tacit assumption that it was every man and woman for himself or herself and these values rippled out across society, changing behaviour and attitudes in unexpected ways.
None of this would have mattered if the City had remained what it was before Big Bang, namely an inward looking cottage industry with little wider significance. Instead it became an industrial-scale money machine with global reach and the potential to bring down governments and make or break economies. This occurred because the UK’s Big Bang came at a tipping point for the world’s financial services industry. Prior to Big Bang clients and sovereign jurisdictions could choose between the integrated US model and the discrete British agency version; after it, one-stop shopping investment banking carried the day.
The power of this model allied to the winds of free market economics and financial liberalisation made monsters of its institutions. Certain of their power and motivated by asymmetric rewards, they became highly leveraged and dangerously adventurous. Big Bang was not the only cause of this but it set them along the road. It helped to create a structure and a mindset that encouraged bankers to take reckless turnings at nearly every opportunity and persuaded many stakeholders to look away.
Is capitalism in crisis and was Big Bang to blame? Probably not but on its 25th anniversary it is appropriate that the question is now being asked where it all started, in the shadow of St Paul’s Cathedral on the edge of the Square Mile.
2011年10月24日 星期一
A Libyan resistance model?
The country is in the grip of severe unrest with President Bashar Al Assad using the full of his military to quash dissent. But despite his most brutal efforts, protests continue to be a daily occurrence.
"The initial picture of the conflict in Syria, which focused on the regime's violent crackdown on peaceful protesters, is becoming more complex. Amidst reports of greater armed resistance and sectarian violence, there is also growing evidence that the number of defections from the army is increasing," notes risk consulting firm Maplecroft.
This is heartening news for the opposition as the 'Free Syrian Army (FSA) now has 15,000 defected soldiers in its midst.
"While the FSA does not represent an immediate threat to the Syrian army and the Ba'athist regime, the ongoing violent crackdown on dissent is likely to compel more soldiers to defect even if they risk execution by loyalists soldiers."
The opposition is faced with a tough reality. Should they use force to get their point across, at which point the Syrian President will go 'all-out' with wiping out the opposition, or should they resist peacefully which has seen thousands of unarmed Syrians killed?
"Despite the potentially high costs of greater armed resistance, the Libyan model of resistance could increasingly become the only viable alternative to civilian demonstrators as the limitations of peaceful protests become apparent," notes Maplecroft.
While both Tunisians and Egyptian achieved regime change without resorting toviolence, in both cases the military was on the side of the protestors. This is not the case as the military is aligned with President Al-Assad's regime.
"Although the FSA is unlikely to present an immediate threat to the regime, FSA forces may engage in a protracted insurgency against the regime. As a policy decision, it may expand its activities decisively beyond the protection of civilians to increase the number of offensive assaults against the Syrian army," notes Maplecroft.
While many anti-government activists oppose a shift towards armed resistance, the rigidity and continuous brutality of the regime is likely to increase the number of protesters willing to resort to force, notes Maplecroft. Significantly, the FSA has not been able to establish a geographical base from which an insurgency could be carried out and this constitutes a significant obstacle in its struggle against the regime.
The brutal death of Libyan leader Colonel Muammar Gaddafi must have struck terror in the hearts of Syrian President Bashar Al Assad and Yemeni President Ali Abdullah Saleh and all those who support them.
Even Syria's staunchest ally Iran is finally losing patience with Al-Assad. A day after Gaddafi was killed, Iranian President Mahmoud Ahmadinejad issued a stinging condemnation of the 'massacre' in Syria:
"We condemn killings and massacre in Syria, whether it is security forces being killed or people and the opposition," Ahmadinejad told Iranian state news agencies. "We have a clear formula for Syria and that it is for all sides to sit together and reach an understanding... therefore these killings cannot solve any problems and in the long term it will lead to a deadlock."
This must come as a huge blow for Al-Assad who is running short of political allies and needs economic support to keep the regime propped up.
Syria, which has seen more than 2,700 people killed, has paid the highest price in economic terms in the region, on account of the Arab Spring conflict, with total cost of around $27.30 billion to the economy, according to estimates by Geopolicity.
And the troubles are far from over for Bashar Al-Assad's regime.
Read Full Geopolicty report here: Arab Spring
"The Syrian economy continues to suffer as a result of the ongoing unrest, and it remains a possibility that the Sunni merchant class could question the costs of backing the ruling Ba'athist regime," notes Maplecroft.
The International Monetary Fund expects the Syrian economy to contract 2% this year as the European Union sanctions on Syrian oil imports dry up the country's revenue streams. Turkey is also planning to impose trade sanctions against its neighbour which could account for another $1.5-billion in lost trade.
Tourism, which accounts for $8.3-billion, or 8% of the country's GDP, has also taken a major hit as tourists stay away due to disturbing images of Syrian tanks on the streets of Damascus.
To make up for some of the shortfall, the Syrian government is imposing a 5% tax on public sector workers to generate revenues, but that is hardly a clever political move in times of great public dissent.
Also in doubt is the reported Iranian aid of $6-billion especially in light of Ahmedinajd's recent comments.
Maplecroft argues that while the FSA is unlikely to present an immediate threat to the regime, it may engage in a protracted insurgency against the regime, although there is serious opposition among anti-government activists to arm themselves and the fact that the FSA does not have a geographical launch pad to launch the insurgency.
"Although stronger armed resistance may ultimately be required to defeat the Ba'athist regime, the effects of seven months of largely peaceful protests on Bashar al-Assad's support base should not be discounted. Given the failure to contain protests and the lack of viable strategies to restore control, important figures within the ruling elite may eventually consider jumping ship," notes Maplecroft.
However, it must be noted that Libyan rebels benefited immensely from NATO's military and financial support. Intervention by western forces seems unlikely for now, given that a NATO-led confrontation with Damascus could also draw in Tehran.
With Europe nursing its own economic wounds and the United States rolling back its international war campaign after its announcement of withdrawing its troops from Iraq, there appears little appetite for western intervention in the country.
"The initial picture of the conflict in Syria, which focused on the regime's violent crackdown on peaceful protesters, is becoming more complex. Amidst reports of greater armed resistance and sectarian violence, there is also growing evidence that the number of defections from the army is increasing," notes risk consulting firm Maplecroft.
This is heartening news for the opposition as the 'Free Syrian Army (FSA) now has 15,000 defected soldiers in its midst.
"While the FSA does not represent an immediate threat to the Syrian army and the Ba'athist regime, the ongoing violent crackdown on dissent is likely to compel more soldiers to defect even if they risk execution by loyalists soldiers."
The opposition is faced with a tough reality. Should they use force to get their point across, at which point the Syrian President will go 'all-out' with wiping out the opposition, or should they resist peacefully which has seen thousands of unarmed Syrians killed?
"Despite the potentially high costs of greater armed resistance, the Libyan model of resistance could increasingly become the only viable alternative to civilian demonstrators as the limitations of peaceful protests become apparent," notes Maplecroft.
While both Tunisians and Egyptian achieved regime change without resorting toviolence, in both cases the military was on the side of the protestors. This is not the case as the military is aligned with President Al-Assad's regime.
"Although the FSA is unlikely to present an immediate threat to the regime, FSA forces may engage in a protracted insurgency against the regime. As a policy decision, it may expand its activities decisively beyond the protection of civilians to increase the number of offensive assaults against the Syrian army," notes Maplecroft.
While many anti-government activists oppose a shift towards armed resistance, the rigidity and continuous brutality of the regime is likely to increase the number of protesters willing to resort to force, notes Maplecroft. Significantly, the FSA has not been able to establish a geographical base from which an insurgency could be carried out and this constitutes a significant obstacle in its struggle against the regime.
The brutal death of Libyan leader Colonel Muammar Gaddafi must have struck terror in the hearts of Syrian President Bashar Al Assad and Yemeni President Ali Abdullah Saleh and all those who support them.
Even Syria's staunchest ally Iran is finally losing patience with Al-Assad. A day after Gaddafi was killed, Iranian President Mahmoud Ahmadinejad issued a stinging condemnation of the 'massacre' in Syria:
"We condemn killings and massacre in Syria, whether it is security forces being killed or people and the opposition," Ahmadinejad told Iranian state news agencies. "We have a clear formula for Syria and that it is for all sides to sit together and reach an understanding... therefore these killings cannot solve any problems and in the long term it will lead to a deadlock."
This must come as a huge blow for Al-Assad who is running short of political allies and needs economic support to keep the regime propped up.
Syria, which has seen more than 2,700 people killed, has paid the highest price in economic terms in the region, on account of the Arab Spring conflict, with total cost of around $27.30 billion to the economy, according to estimates by Geopolicity.
And the troubles are far from over for Bashar Al-Assad's regime.
Read Full Geopolicty report here: Arab Spring
"The Syrian economy continues to suffer as a result of the ongoing unrest, and it remains a possibility that the Sunni merchant class could question the costs of backing the ruling Ba'athist regime," notes Maplecroft.
The International Monetary Fund expects the Syrian economy to contract 2% this year as the European Union sanctions on Syrian oil imports dry up the country's revenue streams. Turkey is also planning to impose trade sanctions against its neighbour which could account for another $1.5-billion in lost trade.
Tourism, which accounts for $8.3-billion, or 8% of the country's GDP, has also taken a major hit as tourists stay away due to disturbing images of Syrian tanks on the streets of Damascus.
To make up for some of the shortfall, the Syrian government is imposing a 5% tax on public sector workers to generate revenues, but that is hardly a clever political move in times of great public dissent.
Also in doubt is the reported Iranian aid of $6-billion especially in light of Ahmedinajd's recent comments.
Maplecroft argues that while the FSA is unlikely to present an immediate threat to the regime, it may engage in a protracted insurgency against the regime, although there is serious opposition among anti-government activists to arm themselves and the fact that the FSA does not have a geographical launch pad to launch the insurgency.
"Although stronger armed resistance may ultimately be required to defeat the Ba'athist regime, the effects of seven months of largely peaceful protests on Bashar al-Assad's support base should not be discounted. Given the failure to contain protests and the lack of viable strategies to restore control, important figures within the ruling elite may eventually consider jumping ship," notes Maplecroft.
However, it must be noted that Libyan rebels benefited immensely from NATO's military and financial support. Intervention by western forces seems unlikely for now, given that a NATO-led confrontation with Damascus could also draw in Tehran.
With Europe nursing its own economic wounds and the United States rolling back its international war campaign after its announcement of withdrawing its troops from Iraq, there appears little appetite for western intervention in the country.
2011年10月23日 星期日
As Lagosians Gear Up For Cashless Economy
In less than two months, Lagos will join few other Nigerian states to test-run one of CBN’s latest policies meant to engender a more cashless economy in the country. However, one question one is wont to ask is whether Lagosians are sufficiently educated on what the cashless economy is all about and what benefits it offers?
The first time the CBN governor, Lamido Sanusi Lamido, announced the new guidelines on cash withdrawals and deposits was at the monthly bankers’ committee meeting held on April 28, 2011.
A circular titled: ‘Industry Policy on Retail Cash Collection and Lodgement’, and signed by Mohammed Nda, CBN director, Currency Operations Department, stated that private persons could only withdraw or lodge a maximum of N150,000 cash per day. The limit for companies according to the circular would be N1 million per day.
The circular revealed that individuals who sought to lodge or withdraw more than the approved limit would bear the penalty of being surcharged N100 per every N1,000 while it will be N200 surcharge for corporate organisations.
Part of the new guidelines included CBN’s directive to banks to stop cash-in-transit lodgement services rendered to merchant customers. They are, instead, to engage the services of cash-in-transit companies that have been licensed by the apex bank. Any bank that flouts this directive will pay a penalty of N1 million per specie movement.
To achieve effective inter-operation ability of local currency point of sales, (PoS) transactions, the CBN has removed the exclusivity clause by any financial services providers.
What this implies is that no card scheme, whether foreign or local, shall be permitted to operate exclusive acquirer agreement or contract in Nigeria with effect from the stipulated implementation date.
Furthermore, third party cheques above N150,000 shall not be eligible for encashment over the counter as from June 1, 2012 as the value for such cheques shall be received through the clearing house. The policy says where any bank allows third party cheque encashment above the limit, shall be liable to a sanction of whichever is higher of 10 per cent of the face value of the cheque or N100,000.
Under the implementation guidelines, the pilot phase of the policy shall be in force in Lagos, Port Harcourt, Kano, Aba and the Federal Capital Territory before its extension to other parts of the country.
According to the CBN, the policy is aimed at reducing high usage of cash, moderate its cost management and encourage the use of electronic channels. It explained that the new policy was premised on the increasing dominance of cash in the economy with its implication for cost of cash management to the banking industry, security and money laundering.
Expectedly, the new CBN policy is currently generating sharp reactions from Nigerians. Businessmen, private and public servants see the new policy as a bitter pill to swallow. Chinedu Ozor, who deals in electronics in Alaba market, Lagos feels the new policy would hurt traders because their businesses are on a cash-and-carry basis.
“My brother, on a daily basis we need lots of cash to transact our business and so, that means I cannot withdraw more than N150, 000 when, in some occasions, I need up to N5 million to take delivery of my products”, he said.
Managing Director of Esaco Ventures, Edwin Asemota, is equally worried about the new policy. He said his staff emolument alone took more than N4 million and in most cases, he needed up to N10 million to transact business. With the new policy on cash withdrawal, he laments that doing business would be difficult since he would be surcharged for any time he withdraws more than the stipulated amount.
A trader at Ladipo market, Lagos, Joseph Chibundu, has also found the policy unrealistic. His quarrel is not really with the merit of the policy but with the stipulated limits for individuals and corporate account holders which he described as too low. He would want the CBN to raise the limit for individual from N150,000 to N500,000 and corporate account from N1million to N2 million.
Another area of concern to many Nigerians is the electronic money transfer scheme that was introduced into the country almost a decade ago. Bamidele Olusegun, a former bank examiner, foresees a problem in the area of money transfer. He argues that even though the CBN stated that the policy is aimed at checking money laundering and also to add value to Naira in the face of the growing two digit inflation ratio in the country, the policy could be abused as was the case with beneficiaries of Western Union who ended up being short-changed by operating banks.
Those who have also frowned at the policy argue that the high level of illiteracy in the country, low level of banking population and porous e-banking system are factors that would work against the success of the scheme. For instance, many have argued that if the idea is to promote e-banking by encouraging the use of e-payment channels like Automated Teller Machines, ATM, the wide-scale fraud associated with its use would make the policy counter productive.
President, Renaissance Shareholders’ Association, Olufemi Timothy, said the policy could further dampen the savings culture in the country.
However, the managing director of Financial Derivatives Company Limited, Bismark Rewane, prefers a more gradual transition while the supporting infrastructure is improved. He says that Sanusi should tread with caution because if the policy is implemented without due planning, it would turn out to be counter productive. He noted that the transformation from a cash-centric to a plastic economy, which is the intention of CBN, would need a longer period than one year.
A businessman, Godwin Iheanacho while airing his opinion, said that he is not in agreement with such law. He reasoned that he makes daily sale of above N150,000 from at least a customer. “Sometimes, I sell goods worth more than N150,000 to a customer and I also buy goods worth more than that amount too. So, as a business man, I do not have that time to start going to the bank and waiting for my customers to transfer the money into my account. I want my money in cash and not in cheque because nowadays people issue fake cheques”, said Godwin.
CBN assurance
Already, the CBN has tried to allay skeptics on the workability of the plan, as it is geared to make transactions more efficient and transparent. “CBN is also working with the banks and Nigeria InterBank Settlement System (NIBSS) to put in place a comprehensive fraud monitoring tool, which will enable the industry to identify trends and be proactive in mitigating electronic fraud”, said Tunde Lemo, CBN deputy governor, operations.
He assured that the introduction of the chip and pin ATM card over the stripe cards was to guide against fraud. Taking cognizance of Nigeria’s power challenges, he said the point of sale (PoS) machines that would drive the cashless economy come with specifications that are peculiar to Nigeria. “All PoS terminals will have a minimum battery life span of 24 hours, while many will do 48 hours with no charge. They also come with backup batteries and car chargers as appropriate to address the power challenge.”
Lemo said that the Central Bank was working closely with the Nigerian Communications Commission (NCC) to ensure that interconnectivity issues are addressed. “Dedicated connectivity will be provided by MTN and Globacom for all PoS traffic going forward. This should greatly increase the terminal uptime. Also, most terminals will be dual-SIM or roaming SIM, which will ensure fail-over options and guarantee a higher uptime.
As the commencement date approaches, it is important for the regulators and promoters to step up on enlightenment and awareness campaigns in order to drive the message home. Given the rising cost of cash management, the attendant risk and the fraud that comes with it, there is no doubt that a cashless economy will go a long way in checking these disadvantages. Also, for a country that aims to be among the top 20 economies by 2020, only a cashless economy provides an easier route rather than rely on the cumbersomeness of the current cash-based system.
The first time the CBN governor, Lamido Sanusi Lamido, announced the new guidelines on cash withdrawals and deposits was at the monthly bankers’ committee meeting held on April 28, 2011.
A circular titled: ‘Industry Policy on Retail Cash Collection and Lodgement’, and signed by Mohammed Nda, CBN director, Currency Operations Department, stated that private persons could only withdraw or lodge a maximum of N150,000 cash per day. The limit for companies according to the circular would be N1 million per day.
The circular revealed that individuals who sought to lodge or withdraw more than the approved limit would bear the penalty of being surcharged N100 per every N1,000 while it will be N200 surcharge for corporate organisations.
Part of the new guidelines included CBN’s directive to banks to stop cash-in-transit lodgement services rendered to merchant customers. They are, instead, to engage the services of cash-in-transit companies that have been licensed by the apex bank. Any bank that flouts this directive will pay a penalty of N1 million per specie movement.
To achieve effective inter-operation ability of local currency point of sales, (PoS) transactions, the CBN has removed the exclusivity clause by any financial services providers.
What this implies is that no card scheme, whether foreign or local, shall be permitted to operate exclusive acquirer agreement or contract in Nigeria with effect from the stipulated implementation date.
Furthermore, third party cheques above N150,000 shall not be eligible for encashment over the counter as from June 1, 2012 as the value for such cheques shall be received through the clearing house. The policy says where any bank allows third party cheque encashment above the limit, shall be liable to a sanction of whichever is higher of 10 per cent of the face value of the cheque or N100,000.
Under the implementation guidelines, the pilot phase of the policy shall be in force in Lagos, Port Harcourt, Kano, Aba and the Federal Capital Territory before its extension to other parts of the country.
According to the CBN, the policy is aimed at reducing high usage of cash, moderate its cost management and encourage the use of electronic channels. It explained that the new policy was premised on the increasing dominance of cash in the economy with its implication for cost of cash management to the banking industry, security and money laundering.
Expectedly, the new CBN policy is currently generating sharp reactions from Nigerians. Businessmen, private and public servants see the new policy as a bitter pill to swallow. Chinedu Ozor, who deals in electronics in Alaba market, Lagos feels the new policy would hurt traders because their businesses are on a cash-and-carry basis.
“My brother, on a daily basis we need lots of cash to transact our business and so, that means I cannot withdraw more than N150, 000 when, in some occasions, I need up to N5 million to take delivery of my products”, he said.
Managing Director of Esaco Ventures, Edwin Asemota, is equally worried about the new policy. He said his staff emolument alone took more than N4 million and in most cases, he needed up to N10 million to transact business. With the new policy on cash withdrawal, he laments that doing business would be difficult since he would be surcharged for any time he withdraws more than the stipulated amount.
A trader at Ladipo market, Lagos, Joseph Chibundu, has also found the policy unrealistic. His quarrel is not really with the merit of the policy but with the stipulated limits for individuals and corporate account holders which he described as too low. He would want the CBN to raise the limit for individual from N150,000 to N500,000 and corporate account from N1million to N2 million.
Another area of concern to many Nigerians is the electronic money transfer scheme that was introduced into the country almost a decade ago. Bamidele Olusegun, a former bank examiner, foresees a problem in the area of money transfer. He argues that even though the CBN stated that the policy is aimed at checking money laundering and also to add value to Naira in the face of the growing two digit inflation ratio in the country, the policy could be abused as was the case with beneficiaries of Western Union who ended up being short-changed by operating banks.
Those who have also frowned at the policy argue that the high level of illiteracy in the country, low level of banking population and porous e-banking system are factors that would work against the success of the scheme. For instance, many have argued that if the idea is to promote e-banking by encouraging the use of e-payment channels like Automated Teller Machines, ATM, the wide-scale fraud associated with its use would make the policy counter productive.
President, Renaissance Shareholders’ Association, Olufemi Timothy, said the policy could further dampen the savings culture in the country.
However, the managing director of Financial Derivatives Company Limited, Bismark Rewane, prefers a more gradual transition while the supporting infrastructure is improved. He says that Sanusi should tread with caution because if the policy is implemented without due planning, it would turn out to be counter productive. He noted that the transformation from a cash-centric to a plastic economy, which is the intention of CBN, would need a longer period than one year.
A businessman, Godwin Iheanacho while airing his opinion, said that he is not in agreement with such law. He reasoned that he makes daily sale of above N150,000 from at least a customer. “Sometimes, I sell goods worth more than N150,000 to a customer and I also buy goods worth more than that amount too. So, as a business man, I do not have that time to start going to the bank and waiting for my customers to transfer the money into my account. I want my money in cash and not in cheque because nowadays people issue fake cheques”, said Godwin.
CBN assurance
Already, the CBN has tried to allay skeptics on the workability of the plan, as it is geared to make transactions more efficient and transparent. “CBN is also working with the banks and Nigeria InterBank Settlement System (NIBSS) to put in place a comprehensive fraud monitoring tool, which will enable the industry to identify trends and be proactive in mitigating electronic fraud”, said Tunde Lemo, CBN deputy governor, operations.
He assured that the introduction of the chip and pin ATM card over the stripe cards was to guide against fraud. Taking cognizance of Nigeria’s power challenges, he said the point of sale (PoS) machines that would drive the cashless economy come with specifications that are peculiar to Nigeria. “All PoS terminals will have a minimum battery life span of 24 hours, while many will do 48 hours with no charge. They also come with backup batteries and car chargers as appropriate to address the power challenge.”
Lemo said that the Central Bank was working closely with the Nigerian Communications Commission (NCC) to ensure that interconnectivity issues are addressed. “Dedicated connectivity will be provided by MTN and Globacom for all PoS traffic going forward. This should greatly increase the terminal uptime. Also, most terminals will be dual-SIM or roaming SIM, which will ensure fail-over options and guarantee a higher uptime.
As the commencement date approaches, it is important for the regulators and promoters to step up on enlightenment and awareness campaigns in order to drive the message home. Given the rising cost of cash management, the attendant risk and the fraud that comes with it, there is no doubt that a cashless economy will go a long way in checking these disadvantages. Also, for a country that aims to be among the top 20 economies by 2020, only a cashless economy provides an easier route rather than rely on the cumbersomeness of the current cash-based system.
2011年10月20日 星期四
Ten Things You Can't (Easily) Buy With Credit Cards
Thanks to new technology and mobile card readers, you can use your credit card to buy just about everything these days, from candy in a vending machine to goods at a garage sale. But there are still a few types of transactions you can't use your credit card for, either because they're high-risk, they attract a lot of fraud or they simply tend to give customers a bad case of buyer's remorse, leading to disputes and charge-backs that are expensive for the credit card companies. Here are 10 things you can't buy (or that are difficult to buy) with plastic:
1. Chips in a casino. Even though casinos are legal, make sure you bring cash if you're planning to play the roulette table. Most states have gaming regulations that prohibit casinos from accepting a credit card for gambling chips, says Gary Thompson, a spokesman for Caesars Entertainment, which owns 52 casino resorts in seven countries.
Even without those rules, however, the industry's own Responsible Gaming Program bars the practice. Of course, you can always use your credit card to get a cash advance, for a sizeable fee, at a casino ATM. Still, Thompson believes that extra step creates a psychological barrier. "If you run out of chips when you're gambling, this forces you to get up, walk away from the table, apply for the cash advance, and then go the casino cage to get your chips," he says. "What that does is give you time to think about whether you're going over your cash-imposed limit. We believe it stops some people from doing something impulsive."
2. Mutual funds and stocks. While there are reports of a few firms offering their best customers the option to buy shares with a credit card, most brokerage firms, even online ones, won't allow it. "They want people to have skin in the game, to have real money at risk," says Michael Thomsett, author of "Getting Started in Stock Investing and Trading. "If you really want to borrow money to buy shares, consider a margin account over a cash advance," Thomsett says. In that type of account, usually available only to established investors, the securities you hold are collateral for a line of credit from the brokerage that you can use to buy more stock. The interest rate on a margin account is likely lower than the one on your credit card, and there are no ongoing payments to make. However, it does expose you to a higher level of risk, Thomsett says, so it's an option best used only by experienced investors.
3. Money orders. This is another no-no, basically because you'd be borrowing money to buy cash. Most merchants, including the U.S. Postal Service and check-cashing locations, require you to use cash or a debit card to buy a money order. That restriction cuts down on fraud and makes it more likely that issuers will get their money. The occasional supermarket may allow you to buy a money order with a credit card, but be warned: Your bank will likely process the transaction as a cash advance, subject to a fee, higher interest rates than what you pay for purchases and no interest-free grace period.
4. Lap dances. Heading to a gentleman's club for a bachelor party? Hit the ATM before you go. While your credit card will certainly be accepted for food and beverages, many adult clubs take only cash for lap dances or other services from the dancers, says Angelina Spencer, a former club owner and executive director of the Association of Club Executives, a trade association for the adult club industry. For one thing, Spencer jokes, it's not easy to tuck a credit card receipt into a dancer's G-string. But the real reason, she says, are customers with next-day regrets. "Too often we get someone having a really good time, and then later they say, 'Oops, I didn't really mean to do that,'" Spencer says. "When that happens, there's not a lot of recourse." A few clubs do take cards for services, but they may require a thumbprint as well as a signature to help prove the customer was actually there and authorized the charge.
5. Donation to WikiLeaks. Visa, MasterCard, Bank of America and PayPal have said that they will not process donations intended for the whistle-blowing website WikiLeaks, citing violations of their terms of service. (American Express and Discover were never accepted by WikiLeaks.) Beth Robertson, director of payments research at Javelin Strategy & Research, says card companies have long had a black list of groups associated with terrorists or other illegal activity. WikiLeaks was added to Visa and MasterCard's lists after it released confidential State Department documents late last year; a series of attacks by WikiLeaks supporters that shut down the Visa and MasterCard websites further damaged its credibility. Critics say the card companies' decision to block payments to a legal entity amounts to censorship. They note that you can still use your card to make donations to other controversial groups, including anti-abortion activists and the Ku Klux Klan.
6. Online pornography. While other card companies allow the purchase of legal adult material on the Internet, American Express has made online pornography off-limits to its customers since 2000. American Express spokeswoman Diana Postemsky says that the company has a policy of not doing business with illegal or high-risk industries. "Digital adult content just has unacceptably high levels of customer disputes," Postemsky says, "and that raises our administrative costs because we have to bear the expense of handling those disputes."
7. Medical marijuana. Again, American Express is more conservative than the other card networks on this issue. Although medical marijuana is legal in 16 states, you can't buy it with an AmEx card. "Our decision was to adhere to federal law," which prohibits any purchase of marijuana, even for medical reasons, Postemsky says. MasterCard, Visa and Discover do allow the purchase of medical marijuana with their cards, but MasterCard spokesman Jim Issokson said that as of Oct. 3, the company was evaluating its policy. "The issue of purchasing medical marijuana is an emerging issue, and we're continuing to look into it," he said. In a statement, he noted that "MasterCard does not permit its brand to be associated with anything illegal."
8. Mortgage payment. Despite all the credit card rewards you could earn by putting your mortgage on your card every month, lenders simply won't let you do this. That's partly because they don't want to pay credit card company merchant fees and partly because it's risky. "They don't want people to keep rolling balances and building up debt and never paying it off," says Robertson of Javelin. American Express launched a program in 2007 to allow its more affluent customers to pay their mortgages with plastic, but the program died after the two lenders offering the service failed as part of the subprime mortgage crisis. San Francisco-based ChargeSmart will let you pay your mortgage with your card for a fee, typically 2% of the transaction amount.
9. Online gambling. Though there is a federal ban on online wagering, hundreds of overseas-based sites are operating and thousands of Americans play, making it a multi-billion-dollar industry. A 2006 law prohibits banks and credit card companies from transferring payments between gambling companies and individuals, so most of the sites don't allow you to pay with credit cards. Instead, you can send a check or wire money. Efforts are being made at both the federal and the state level to overturn the law banning online gambling, but even if it changes, players may still be barred from using plastic to make payments, simply because of the high-risk nature of the transactions.
10. Lottery tickets. Many states prohibit the sale of lottery tickets with a credit card, but a few, including New York and Louisiana, allow it. Even in those states, however, many retailers do not offer you the option or if they do, your card company may charge you a hefty cash advance fee. If you do live in a state that allows it and want to pay with credit, you won't be able to use American Express. The company does not allow its cards to be used to play the lottery, Postemsky says. As with other forms of gambling and online pornography, the company considers the practice too susceptible to disputes and other problems.
1. Chips in a casino. Even though casinos are legal, make sure you bring cash if you're planning to play the roulette table. Most states have gaming regulations that prohibit casinos from accepting a credit card for gambling chips, says Gary Thompson, a spokesman for Caesars Entertainment, which owns 52 casino resorts in seven countries.
Even without those rules, however, the industry's own Responsible Gaming Program bars the practice. Of course, you can always use your credit card to get a cash advance, for a sizeable fee, at a casino ATM. Still, Thompson believes that extra step creates a psychological barrier. "If you run out of chips when you're gambling, this forces you to get up, walk away from the table, apply for the cash advance, and then go the casino cage to get your chips," he says. "What that does is give you time to think about whether you're going over your cash-imposed limit. We believe it stops some people from doing something impulsive."
2. Mutual funds and stocks. While there are reports of a few firms offering their best customers the option to buy shares with a credit card, most brokerage firms, even online ones, won't allow it. "They want people to have skin in the game, to have real money at risk," says Michael Thomsett, author of "Getting Started in Stock Investing and Trading. "If you really want to borrow money to buy shares, consider a margin account over a cash advance," Thomsett says. In that type of account, usually available only to established investors, the securities you hold are collateral for a line of credit from the brokerage that you can use to buy more stock. The interest rate on a margin account is likely lower than the one on your credit card, and there are no ongoing payments to make. However, it does expose you to a higher level of risk, Thomsett says, so it's an option best used only by experienced investors.
3. Money orders. This is another no-no, basically because you'd be borrowing money to buy cash. Most merchants, including the U.S. Postal Service and check-cashing locations, require you to use cash or a debit card to buy a money order. That restriction cuts down on fraud and makes it more likely that issuers will get their money. The occasional supermarket may allow you to buy a money order with a credit card, but be warned: Your bank will likely process the transaction as a cash advance, subject to a fee, higher interest rates than what you pay for purchases and no interest-free grace period.
4. Lap dances. Heading to a gentleman's club for a bachelor party? Hit the ATM before you go. While your credit card will certainly be accepted for food and beverages, many adult clubs take only cash for lap dances or other services from the dancers, says Angelina Spencer, a former club owner and executive director of the Association of Club Executives, a trade association for the adult club industry. For one thing, Spencer jokes, it's not easy to tuck a credit card receipt into a dancer's G-string. But the real reason, she says, are customers with next-day regrets. "Too often we get someone having a really good time, and then later they say, 'Oops, I didn't really mean to do that,'" Spencer says. "When that happens, there's not a lot of recourse." A few clubs do take cards for services, but they may require a thumbprint as well as a signature to help prove the customer was actually there and authorized the charge.
5. Donation to WikiLeaks. Visa, MasterCard, Bank of America and PayPal have said that they will not process donations intended for the whistle-blowing website WikiLeaks, citing violations of their terms of service. (American Express and Discover were never accepted by WikiLeaks.) Beth Robertson, director of payments research at Javelin Strategy & Research, says card companies have long had a black list of groups associated with terrorists or other illegal activity. WikiLeaks was added to Visa and MasterCard's lists after it released confidential State Department documents late last year; a series of attacks by WikiLeaks supporters that shut down the Visa and MasterCard websites further damaged its credibility. Critics say the card companies' decision to block payments to a legal entity amounts to censorship. They note that you can still use your card to make donations to other controversial groups, including anti-abortion activists and the Ku Klux Klan.
6. Online pornography. While other card companies allow the purchase of legal adult material on the Internet, American Express has made online pornography off-limits to its customers since 2000. American Express spokeswoman Diana Postemsky says that the company has a policy of not doing business with illegal or high-risk industries. "Digital adult content just has unacceptably high levels of customer disputes," Postemsky says, "and that raises our administrative costs because we have to bear the expense of handling those disputes."
7. Medical marijuana. Again, American Express is more conservative than the other card networks on this issue. Although medical marijuana is legal in 16 states, you can't buy it with an AmEx card. "Our decision was to adhere to federal law," which prohibits any purchase of marijuana, even for medical reasons, Postemsky says. MasterCard, Visa and Discover do allow the purchase of medical marijuana with their cards, but MasterCard spokesman Jim Issokson said that as of Oct. 3, the company was evaluating its policy. "The issue of purchasing medical marijuana is an emerging issue, and we're continuing to look into it," he said. In a statement, he noted that "MasterCard does not permit its brand to be associated with anything illegal."
8. Mortgage payment. Despite all the credit card rewards you could earn by putting your mortgage on your card every month, lenders simply won't let you do this. That's partly because they don't want to pay credit card company merchant fees and partly because it's risky. "They don't want people to keep rolling balances and building up debt and never paying it off," says Robertson of Javelin. American Express launched a program in 2007 to allow its more affluent customers to pay their mortgages with plastic, but the program died after the two lenders offering the service failed as part of the subprime mortgage crisis. San Francisco-based ChargeSmart will let you pay your mortgage with your card for a fee, typically 2% of the transaction amount.
9. Online gambling. Though there is a federal ban on online wagering, hundreds of overseas-based sites are operating and thousands of Americans play, making it a multi-billion-dollar industry. A 2006 law prohibits banks and credit card companies from transferring payments between gambling companies and individuals, so most of the sites don't allow you to pay with credit cards. Instead, you can send a check or wire money. Efforts are being made at both the federal and the state level to overturn the law banning online gambling, but even if it changes, players may still be barred from using plastic to make payments, simply because of the high-risk nature of the transactions.
10. Lottery tickets. Many states prohibit the sale of lottery tickets with a credit card, but a few, including New York and Louisiana, allow it. Even in those states, however, many retailers do not offer you the option or if they do, your card company may charge you a hefty cash advance fee. If you do live in a state that allows it and want to pay with credit, you won't be able to use American Express. The company does not allow its cards to be used to play the lottery, Postemsky says. As with other forms of gambling and online pornography, the company considers the practice too susceptible to disputes and other problems.
2011年10月19日 星期三
Cases of credit/debit card fraud on DI slow
As the old slogan for a popular credit card goes, "it’s everywhere you want to be." But that also means the risks are everywhere as well. Even on Daniel Island.
About one in three consumers in the United States have reported credit card fraud in the last year, according to a National Public Radio report. Last summer, Daniel Island residents Lora and Pat Connelly were reluctantly added to those statistics when they joined a growing list of island residents to be impacted by the crime.
"We have had that account for over two decades and never had any trouble," said Lora. "Our son noted the irony that he lives in the inner city of Baltimore and we live in a nicer, overall safer area. We had credit card troubles and he has not."
Jeanette Henderson, another Daniel Island resident, had two cards breached, one in March and another in September.
"There is still a risk," said Henderson. "…Even if this data was stolen four months ago, they could just be getting around to printing the cards….Because I did a little research on it, I think I’m a lot more aware of ways my credit card numbers can be stolen….And there is really no way you can completely protect yourself against it."
When the investigation into the Daniel Island cases began last April, reports initially were filed with the City of Charleston Police Department. About 24 cases of credit or debit card fraud on Daniel Island were reported to police, and another six were reported in other parts of the city, according to Sgt. Donald Daquigan of the department’s white collar crimes division. Later, the Charleston office of the U.S. Secret Service (USSS) took over the cases, but continued to work with police and other authorities. A "point of compromise" was identified on Daniel Island, said USSS Resident Agent-in-Charge John Kenney, and steps were immediately taken to shut down the breach.
"We feel that the cyber breach that occurred was closed and if people are still getting their credit cards compromised at this time, that’s a separate occurrence," said Kenney, who did not disclose the business impacted. "…That merchant has taken very specific steps that the industry demands…and they are costly steps, to repair that breach."
According to Sgt. Daquigan, the cases on Daniel Island are similar to others that have been reported in Columbia, S.C., as well as in Alabama and other states. He believes the breach, not your typical credit or debit card theft, may have taken place in another location altogether.
"With the time period we’re talking about, we’re not even sure if the compromised cases were on Daniel Island or in Charleston or anywhere else," he said. "It could be happening at a place where all of this information is stored…I know people (on Daniel Island) are worried, but I don’t believe it’s going to be a restaurant or a grocery store doing this. It’s a little bit more sophisticated than that."
While Agent Kenney didn’t feel it would further the investigation to comment on the specific nature of the breach, he did report that there are several fraudulent tactics they have ruled out.
"It is not a skimming case, where an individual employee has a device that takes credit card numbers…It’s not dumpster diving. This is high-tech cyber stealing and they utilize faults in the software that companies use to process their payments. This is one of the many ways that people are stealing credit card numbers in cyber world and it so happens that this particular case happened on Daniel Island, but every community that has access to the cyber world can be impacted."
That’s where folks like Daniel Island resident Dana Vosburgh come in. Vosburgh is the senior vice president of sales for Merchants United, LLC, a company that helps businesses with secure payment processing solutions. He estimates that as many as half of all businesses on Daniel Island may not be fully protected against credit or debit card fraud.
"Credit card industry compliance is fairly new, and a lot of merchants don’t realize it," said Vosburgh, who had his own personal credit card compromised back in May. "…You have to be compliant with rules, and the rules vary depending on the volume of transactions you do and the type of system you use."
About one in three consumers in the United States have reported credit card fraud in the last year, according to a National Public Radio report. Last summer, Daniel Island residents Lora and Pat Connelly were reluctantly added to those statistics when they joined a growing list of island residents to be impacted by the crime.
"We have had that account for over two decades and never had any trouble," said Lora. "Our son noted the irony that he lives in the inner city of Baltimore and we live in a nicer, overall safer area. We had credit card troubles and he has not."
Jeanette Henderson, another Daniel Island resident, had two cards breached, one in March and another in September.
"There is still a risk," said Henderson. "…Even if this data was stolen four months ago, they could just be getting around to printing the cards….Because I did a little research on it, I think I’m a lot more aware of ways my credit card numbers can be stolen….And there is really no way you can completely protect yourself against it."
When the investigation into the Daniel Island cases began last April, reports initially were filed with the City of Charleston Police Department. About 24 cases of credit or debit card fraud on Daniel Island were reported to police, and another six were reported in other parts of the city, according to Sgt. Donald Daquigan of the department’s white collar crimes division. Later, the Charleston office of the U.S. Secret Service (USSS) took over the cases, but continued to work with police and other authorities. A "point of compromise" was identified on Daniel Island, said USSS Resident Agent-in-Charge John Kenney, and steps were immediately taken to shut down the breach.
"We feel that the cyber breach that occurred was closed and if people are still getting their credit cards compromised at this time, that’s a separate occurrence," said Kenney, who did not disclose the business impacted. "…That merchant has taken very specific steps that the industry demands…and they are costly steps, to repair that breach."
According to Sgt. Daquigan, the cases on Daniel Island are similar to others that have been reported in Columbia, S.C., as well as in Alabama and other states. He believes the breach, not your typical credit or debit card theft, may have taken place in another location altogether.
"With the time period we’re talking about, we’re not even sure if the compromised cases were on Daniel Island or in Charleston or anywhere else," he said. "It could be happening at a place where all of this information is stored…I know people (on Daniel Island) are worried, but I don’t believe it’s going to be a restaurant or a grocery store doing this. It’s a little bit more sophisticated than that."
While Agent Kenney didn’t feel it would further the investigation to comment on the specific nature of the breach, he did report that there are several fraudulent tactics they have ruled out.
"It is not a skimming case, where an individual employee has a device that takes credit card numbers…It’s not dumpster diving. This is high-tech cyber stealing and they utilize faults in the software that companies use to process their payments. This is one of the many ways that people are stealing credit card numbers in cyber world and it so happens that this particular case happened on Daniel Island, but every community that has access to the cyber world can be impacted."
That’s where folks like Daniel Island resident Dana Vosburgh come in. Vosburgh is the senior vice president of sales for Merchants United, LLC, a company that helps businesses with secure payment processing solutions. He estimates that as many as half of all businesses on Daniel Island may not be fully protected against credit or debit card fraud.
"Credit card industry compliance is fairly new, and a lot of merchants don’t realize it," said Vosburgh, who had his own personal credit card compromised back in May. "…You have to be compliant with rules, and the rules vary depending on the volume of transactions you do and the type of system you use."
2011年10月18日 星期二
There’s no such thing as a free lunch
Here’s something that readers born after 1980 will find hard to believe: Before that, if you wanted access to your money, you basically had two choices. You could keep all your cash in a coffee can hidden behind the couch, or you could drive your covered wagon to the bank and write a check for cash, assuming you had enough money in your account.
In those days, it wasn’t that easy to get a checking account, but my mother helped me get one in my teens and spent a lot of time showing me how to keep track of my money, and balance my account to the penny when the monthly statement came in the mail. She thought that was a skill that would serve me well as an adult, and it did.
But those checking accounts had their limitations. Say you had plans for Saturday night, and figured you’d need $40 for dinner and a movie (things were much less expensive then). The bank wasn’t open on Saturday, so you had to think ahead and stop by the bank on Friday to cash a check. If you forgot, you were pretty much out of luck, unless a merchant, or Mom and Dad, trusted you enough to honor a check.
When my wife and I were young parents living paycheck to paycheck, we were delighted when our bank came out with ATM cards so you could get money from their machine 24/7. It was convenient. It simplified life. We called it the Magic Money Machine because you put the card in and bucks came out.
The Magic Money Machine at our bank had one other wonderful feature. The technology was in its infancy, and for some reason, every time we made a withdrawal, it added the amount to our account instead of subtracting it. It took a while for us to notice this (statements only came once a month), but when we deduced the pattern and saw that our withdrawals had put an extra $250 in our account, we went to the bank to tell them what was happening.
They took a look and told us nothing was wrong. When it got to $500, we went to the bank, spoke to an officer and asked her to audit our account. She did, and told us nothing was wrong. When it got to $1,200 about a year later, we went back to the bank again, and asked for another audit. They told us nothing was wrong.
“Then what should we do?” we asked.
“We don’t know; it’s your money,” they said .
What would you do? The guy who writes the ethics column for the New York Times would say that if you withdraw the money, you should donate it to charity. We spent it on rent.
There were never any repercussions, although the glitch stopped enriching us shortly after we took the money out. I don’t know if what we did was even legal, but I’ve never felt particularly guilty about it.
In the years since, banks have added a lot of other services to make our lives simpler. Debit cards meant that not only could we get our money whenever we wanted, we didn’t have to write checks for most purchases anymore. Online bill paying meant we had the option of making payments we chose immediately. The ability to link accounts meant we could tie our account to those of our kids — which was great when they were in school. We could put an extra 50 bucks in their account in the blink of an eye (it also gave us a way to keep an eye on what they were spending their money on, but don’t tell them we did it).
The beauty was that most of these services were free, or close to it. And we came to expect that it would always remain so, until the end of time. It’s sort of like online news content. People are used to getting it
for free, and news providers have a devil of a time getting them to pay even a nominal fee — even though deep down most of us believe there is a value to the products.
That’s why I’ve been so perplexed over all the outrage over the news that Bank of America will soon start charging customers $5 a month to use their debit cards. Lots of customers have threatened to close their accounts and move to another bank, but before too long, those banks will start charging fees as well. Just look at what’s happened in the airline industry.
With some companies we purchase products and services from, it’s relatively easy to disengage if they do something we don’t like. When Netflix announced last summer that it was raising its monthly fee dramatically and would charge for video streaming instead of giving it away, over a million customers closed their accounts and moved elsewhere.
But it’s not as easy to switch banks. In our family, all of the money coming into our accounts arrives via direct deposit. If we change banks, there’s paperwork involved in changing those direct deposits. I’m not even sure how to contact some of these payers, and the process of switching is a mystery. Not only that, but it takes time, and the potential for screw-ups is extreme. Every company we’ve established online payment accounts with would need to be contacted. More time spent on administration.
Then there’s the line of credit we’ve got with our bank, and the linked accounts we still maintain. What about those? Thankfully, our bank doesn’t hold our mortgage, or the switchover would be even more time consuming. It would be like getting a divorce.
In those days, it wasn’t that easy to get a checking account, but my mother helped me get one in my teens and spent a lot of time showing me how to keep track of my money, and balance my account to the penny when the monthly statement came in the mail. She thought that was a skill that would serve me well as an adult, and it did.
But those checking accounts had their limitations. Say you had plans for Saturday night, and figured you’d need $40 for dinner and a movie (things were much less expensive then). The bank wasn’t open on Saturday, so you had to think ahead and stop by the bank on Friday to cash a check. If you forgot, you were pretty much out of luck, unless a merchant, or Mom and Dad, trusted you enough to honor a check.
When my wife and I were young parents living paycheck to paycheck, we were delighted when our bank came out with ATM cards so you could get money from their machine 24/7. It was convenient. It simplified life. We called it the Magic Money Machine because you put the card in and bucks came out.
The Magic Money Machine at our bank had one other wonderful feature. The technology was in its infancy, and for some reason, every time we made a withdrawal, it added the amount to our account instead of subtracting it. It took a while for us to notice this (statements only came once a month), but when we deduced the pattern and saw that our withdrawals had put an extra $250 in our account, we went to the bank to tell them what was happening.
They took a look and told us nothing was wrong. When it got to $500, we went to the bank, spoke to an officer and asked her to audit our account. She did, and told us nothing was wrong. When it got to $1,200 about a year later, we went back to the bank again, and asked for another audit. They told us nothing was wrong.
“Then what should we do?” we asked.
“We don’t know; it’s your money,” they said .
What would you do? The guy who writes the ethics column for the New York Times would say that if you withdraw the money, you should donate it to charity. We spent it on rent.
There were never any repercussions, although the glitch stopped enriching us shortly after we took the money out. I don’t know if what we did was even legal, but I’ve never felt particularly guilty about it.
In the years since, banks have added a lot of other services to make our lives simpler. Debit cards meant that not only could we get our money whenever we wanted, we didn’t have to write checks for most purchases anymore. Online bill paying meant we had the option of making payments we chose immediately. The ability to link accounts meant we could tie our account to those of our kids — which was great when they were in school. We could put an extra 50 bucks in their account in the blink of an eye (it also gave us a way to keep an eye on what they were spending their money on, but don’t tell them we did it).
The beauty was that most of these services were free, or close to it. And we came to expect that it would always remain so, until the end of time. It’s sort of like online news content. People are used to getting it
for free, and news providers have a devil of a time getting them to pay even a nominal fee — even though deep down most of us believe there is a value to the products.
That’s why I’ve been so perplexed over all the outrage over the news that Bank of America will soon start charging customers $5 a month to use their debit cards. Lots of customers have threatened to close their accounts and move to another bank, but before too long, those banks will start charging fees as well. Just look at what’s happened in the airline industry.
With some companies we purchase products and services from, it’s relatively easy to disengage if they do something we don’t like. When Netflix announced last summer that it was raising its monthly fee dramatically and would charge for video streaming instead of giving it away, over a million customers closed their accounts and moved elsewhere.
But it’s not as easy to switch banks. In our family, all of the money coming into our accounts arrives via direct deposit. If we change banks, there’s paperwork involved in changing those direct deposits. I’m not even sure how to contact some of these payers, and the process of switching is a mystery. Not only that, but it takes time, and the potential for screw-ups is extreme. Every company we’ve established online payment accounts with would need to be contacted. More time spent on administration.
Then there’s the line of credit we’ve got with our bank, and the linked accounts we still maintain. What about those? Thankfully, our bank doesn’t hold our mortgage, or the switchover would be even more time consuming. It would be like getting a divorce.
2011年10月17日 星期一
4 Steps to Getting the Right High-Risk Merchant Account
Happy Guest Blogger Monday! This week our guest talks about establishing the high-risk merchant account that’s right for your ecommerce solution. Without this knowledge, you might be at risk yourself–for winding up without a merchant account. VP of PayNetSecure.net Tina Brandon guides you through four steps to ensure your business stays safe and your accounts stay open.
Has Your Ecommerce Business Been Labeled “High Risk”?
4 Steps to Getting the Right High-Risk Merchant Account
The lifeblood of your ecommerce business is the ability to accept payments from your online customers. In the last 9 months, banks have been shutting down merchant accounts for many ecommerce businesses because the banks are mitigating their risk. Even if the merchant has good processing history, low charge-backs and fraud, you can find yourself cut off.
There are a lot of sharks lurking in murky waters of high-risk merchant processing that take advantage of unwary business owners. Here are 4 ways to protect yourself.
Establish a Direct Account. Any business with high-risk credit card processing volumes of $50,000 or more should establish an account directly with an acquiring bank. It takes a little more paperwork to set up a high-risk merchant account with a bank compared to using a third-party payment processor but the benefits are worth the extra effort.
A direct high-risk merchant account eliminates the middleman and protects your cash flow. With a direct account, all settlement money is sent directly to you from the bank, providing faster and safer deposits.
Avoid Application or Setup Fees. Stay away from high-risk merchant account providers who charge setup or application fees. Typically the “middlemen”/third-party processors are those that charge setup fees.
Reputable firms that establish high-risk accounts are registered agents and get paid by the acquiring banks. Although there may be some fees associated with establishing high-risk merchant accounts, those fees are assessed by the banks or card brands and should be paid directly to them, not to an agent.
Establish More Than One Merchant Account. Any high-risk merchant processing more than $100,000 per month is wise to establish more than one account. Redundancy and backup is critical for any business but especially so for high-risk merchants. Companies should consider setting up more than one high-risk account, perhaps in different jurisdictions, to safeguard cash flow from card payments.
We all know the saying “Don’t put all your eggs in one basket,” and this is especially true for ecommerce businesses. Diversifying your processing with multiple banks creates an environment where banks are competing for your business. This drives your fees down and profits up.
Interview the High-Risk Merchant Account Provider.
It’s amazing how many companies don’t answer their phones and don’t respond to voicemail or emails. Take your time to call the companies and interview them as you would a new hire. Judge the level of customer service and responsiveness.
Has Your Ecommerce Business Been Labeled “High Risk”?
4 Steps to Getting the Right High-Risk Merchant Account
The lifeblood of your ecommerce business is the ability to accept payments from your online customers. In the last 9 months, banks have been shutting down merchant accounts for many ecommerce businesses because the banks are mitigating their risk. Even if the merchant has good processing history, low charge-backs and fraud, you can find yourself cut off.
There are a lot of sharks lurking in murky waters of high-risk merchant processing that take advantage of unwary business owners. Here are 4 ways to protect yourself.
Establish a Direct Account. Any business with high-risk credit card processing volumes of $50,000 or more should establish an account directly with an acquiring bank. It takes a little more paperwork to set up a high-risk merchant account with a bank compared to using a third-party payment processor but the benefits are worth the extra effort.
A direct high-risk merchant account eliminates the middleman and protects your cash flow. With a direct account, all settlement money is sent directly to you from the bank, providing faster and safer deposits.
Avoid Application or Setup Fees. Stay away from high-risk merchant account providers who charge setup or application fees. Typically the “middlemen”/third-party processors are those that charge setup fees.
Reputable firms that establish high-risk accounts are registered agents and get paid by the acquiring banks. Although there may be some fees associated with establishing high-risk merchant accounts, those fees are assessed by the banks or card brands and should be paid directly to them, not to an agent.
Establish More Than One Merchant Account. Any high-risk merchant processing more than $100,000 per month is wise to establish more than one account. Redundancy and backup is critical for any business but especially so for high-risk merchants. Companies should consider setting up more than one high-risk account, perhaps in different jurisdictions, to safeguard cash flow from card payments.
We all know the saying “Don’t put all your eggs in one basket,” and this is especially true for ecommerce businesses. Diversifying your processing with multiple banks creates an environment where banks are competing for your business. This drives your fees down and profits up.
Interview the High-Risk Merchant Account Provider.
It’s amazing how many companies don’t answer their phones and don’t respond to voicemail or emails. Take your time to call the companies and interview them as you would a new hire. Judge the level of customer service and responsiveness.
2011年10月16日 星期日
Vacation Rental Payments Just Got Easier with DepositGuard
The vacation rental industry is about to get a major boost with a new secure payment process introduced by DepositGuard, a company steeped in real estate best practices, with executives who have transacted and protected more than $150 million.
Designed to deliver confidence for renters, homeowners and companies serving the vacation rental industry, DepositGuard is expected to fuel rental bookings and attract new customers with customizable options that will work across any sales platform or site.
DepositGuard is a patent-pending, web-based service that securely collects, holds and administers the deposits and pre-paid rents for vacation and residential property transactions, benefitting both renters and homeowners (including landlords, property managers and rental agents). No matter where homeowners or renters search and find accommodations, DepositGuard’s protected payment process can be integrated with calendar, compliance, travel insurance and other ancillary revenue or business needs of the homeowner, property manager or listing site.
“DepositGuard aims to standardize the way money is handled for online vacation and home rentals,” said Alan Lane, DepositGuard’s Co-Founder and Director of Business Development.
According to DepositGuard, the 13% expected growth in the industry is grossly underestimated for 2011 and the $85 billion that changed hands for vacation rentals in 2010 represents only a portion of potential revenue based on new consumer data from a DepositGuard study. Seventy Eight percent of consumers polled indicate they would rent properties more often (or for the first time) if better payment security was offered.
“We’re positioned to help the industry gain back ‘lost revenues’ from the customer set who is uncertain or prefers more control over the payment process,” Lane said. “And we are dedicated to applying our existing expertise and success to this burgeoning niche in the vacation and tourism industries.”
If each homeowner loses one rental per year because of a “fearful consumer,” DepositGuard estimates an industry loss of $10.5 billion annually … at minimum.
Because there is no standard way of handling money for vacation rental payments, the disparate procedures make it more difficult for both homeowners and renters when making decisions and securing their investments. For homeowners, putting renters at ease while satisfying business needs, allows for greater reach and customer satisfaction.
“Renters' confidence in how their money is handled is key to the vacation rental business,” said Matt Neal, DepositGuard’s Co-Founder and Director of Operations. “By giving renters peace of mind, DepositGuard leads to increased occupancy and ROI for homeowners,” Neal continued.
Unlike other payment methods, a merchant account is not required to accept Visa/MasterCard payments and there are no fees for homeowners to use DepositGuard. Homeowners can simplify their rental business with DepositGuard’s automated and easy-to-use system for managing, tracking, and accounting for rental payments and deposits.
DepositGuard establishes a neutral third-party account where the rental funds are parked for safekeeping. Both the renter and landlord have full visibility into the account and must be in agreement before the account can be created, changed, closed or any money released. DepositGuard maintains a Fidelity policy through Travelers and a Professional Errors and Omissions policy with Lloyds of London to guarantee the safety and liquidity of all funds.
Designed to deliver confidence for renters, homeowners and companies serving the vacation rental industry, DepositGuard is expected to fuel rental bookings and attract new customers with customizable options that will work across any sales platform or site.
DepositGuard is a patent-pending, web-based service that securely collects, holds and administers the deposits and pre-paid rents for vacation and residential property transactions, benefitting both renters and homeowners (including landlords, property managers and rental agents). No matter where homeowners or renters search and find accommodations, DepositGuard’s protected payment process can be integrated with calendar, compliance, travel insurance and other ancillary revenue or business needs of the homeowner, property manager or listing site.
“DepositGuard aims to standardize the way money is handled for online vacation and home rentals,” said Alan Lane, DepositGuard’s Co-Founder and Director of Business Development.
According to DepositGuard, the 13% expected growth in the industry is grossly underestimated for 2011 and the $85 billion that changed hands for vacation rentals in 2010 represents only a portion of potential revenue based on new consumer data from a DepositGuard study. Seventy Eight percent of consumers polled indicate they would rent properties more often (or for the first time) if better payment security was offered.
“We’re positioned to help the industry gain back ‘lost revenues’ from the customer set who is uncertain or prefers more control over the payment process,” Lane said. “And we are dedicated to applying our existing expertise and success to this burgeoning niche in the vacation and tourism industries.”
If each homeowner loses one rental per year because of a “fearful consumer,” DepositGuard estimates an industry loss of $10.5 billion annually … at minimum.
Because there is no standard way of handling money for vacation rental payments, the disparate procedures make it more difficult for both homeowners and renters when making decisions and securing their investments. For homeowners, putting renters at ease while satisfying business needs, allows for greater reach and customer satisfaction.
“Renters' confidence in how their money is handled is key to the vacation rental business,” said Matt Neal, DepositGuard’s Co-Founder and Director of Operations. “By giving renters peace of mind, DepositGuard leads to increased occupancy and ROI for homeowners,” Neal continued.
Unlike other payment methods, a merchant account is not required to accept Visa/MasterCard payments and there are no fees for homeowners to use DepositGuard. Homeowners can simplify their rental business with DepositGuard’s automated and easy-to-use system for managing, tracking, and accounting for rental payments and deposits.
DepositGuard establishes a neutral third-party account where the rental funds are parked for safekeeping. Both the renter and landlord have full visibility into the account and must be in agreement before the account can be created, changed, closed or any money released. DepositGuard maintains a Fidelity policy through Travelers and a Professional Errors and Omissions policy with Lloyds of London to guarantee the safety and liquidity of all funds.
2011年10月13日 星期四
DaCast Introduces Streaming as a Service
DaCast announced today the release of "Streaming as a Service," a totally automated, integrated and flexible solution for professional online broadcasting.
"Broadcasters no longer need to focus on the technical or resource heavy-aspects of streaming, but rather on their business", said Stephane Roulland, CEO of DaCast. "Using the DaCast cloud, users can access all the services they need to start streaming and to begin making money immediately. Through Streaming as a Service, we are bringing high-quality broadcasting to a broader population where thousands of professionals can stream and monetize their content with minimal investment, thereby engineering a solution that does for streaming what Salesforce and Adwords did for their respective markets".
With the Streaming as a Service approach, charges are linear to the broadcaster's requirements, enabling a cost-effective solution where content creators only pay for what they need in a one-size-fits-all model that gives access to all the same tools and features.
The scalable and self-serve nature of the platform drastically reduces the cost of customer acquisition and management for broadcasters. It also gives them complete control of their environment, allowing them to substantially increase their performance.
DaCast offers a complete range of instantaneous broadcasting services all available through a cloud with no downloads required. This includes live streaming, playlists, a Flash player, Facebook embedding, multi-devices capability, transcoding, deep analytics, merchant account, and Pay-Per-View system.
Content owners also have the ability to develop their own paywalls with a completely automated and interconnected service without any license fees. Transactions are handled from an integrated merchant account and payment system called Pay-in-Play™, which registers purchases from inside a media player.
DaCast has launched its public API for live streaming into beta for interested partners. The public API lets media service providers offer DaCast technology to their own clients through a pure white label interface.
"Broadcasters no longer need to focus on the technical or resource heavy-aspects of streaming, but rather on their business", said Stephane Roulland, CEO of DaCast. "Using the DaCast cloud, users can access all the services they need to start streaming and to begin making money immediately. Through Streaming as a Service, we are bringing high-quality broadcasting to a broader population where thousands of professionals can stream and monetize their content with minimal investment, thereby engineering a solution that does for streaming what Salesforce and Adwords did for their respective markets".
With the Streaming as a Service approach, charges are linear to the broadcaster's requirements, enabling a cost-effective solution where content creators only pay for what they need in a one-size-fits-all model that gives access to all the same tools and features.
The scalable and self-serve nature of the platform drastically reduces the cost of customer acquisition and management for broadcasters. It also gives them complete control of their environment, allowing them to substantially increase their performance.
DaCast offers a complete range of instantaneous broadcasting services all available through a cloud with no downloads required. This includes live streaming, playlists, a Flash player, Facebook embedding, multi-devices capability, transcoding, deep analytics, merchant account, and Pay-Per-View system.
Content owners also have the ability to develop their own paywalls with a completely automated and interconnected service without any license fees. Transactions are handled from an integrated merchant account and payment system called Pay-in-Play™, which registers purchases from inside a media player.
DaCast has launched its public API for live streaming into beta for interested partners. The public API lets media service providers offer DaCast technology to their own clients through a pure white label interface.
2011年10月12日 星期三
So Where Are Those Post-Durbin Price Reductions for Consumers?
The debit card has become one of the most convenient forms of payment , delivering widespread benefits for consumers and merchants alike. Debit cards are now universally accepted; no longer must we carry large amounts of cash to shop; check-out lines move more quickly and purchases are processed electronically with pinpoint accuracy.
Banks earn debit card revenues from transaction processing fees paid by merchants. Most consumers pay scant attention to this bank/merchant relationship, because it has had no effect on their debit card usage…until now. So, what happened?
The merchant community decided that the processing fees were too high and lobbied Congress to pass legislation to set pricing. In return, merchants promised to pass on their savings to consumers in the form of lower prices for their products. (More on that promise later…).
The merchants were successful in persuading Congress to legislate pricing for debit transactions. As predicted, debit card revenues are declining rapidly. Since the infrastructure costs for product support have remained intact, banks have been forced to re-evaluate their consumer offerings and pricing structures. When faced with similar burdensome regulations, any prudent business would do likewise.
As a consequence, debit card reward programs have been revised or eliminated, and new fees are being implemented for debit card usage. Free checking was a viable product when debit card revenues partially subsidized the cost of offering the freeaccount . Now, as those revenues evaporate and operational costs remain constant, free checking may no longer make economic sense for financial institutions.
Interestingly, the merchant community's promise of lower prices has conveniently been forgotten. Recall that retailers told Congress that if these "swipe fees" were reduced, they would pass the savings along to consumers. Yet, there's no evidence that the merchant community is following through on its promise. Furthermore, there's no indication that lawmakers will hold them accountable to their original commitment.
What is abundantly clear is that consumers are furious with their financial institutions and merchants are at their financial institutions and merchants are enjoying significant reductions in processing costs. While banks are losing billions in revenue, merchants are quietly pocketing a financial windfall. Adding to the misinformation, the president and some members of Congress have recently made pompous and emotional comments about the new fees; unfortunately, these statements have rarely, if ever, been fact based.
Much has been written about the banking industry's mistakes during the financial crisis. The banks have acknowledged that major internal changes are necessary and substantial resources have been dedicated to address the deficiencies. There's still a lot of work to do, but the industry is making steady progress.
The outcry about new fees is a separate and distinct issue from the banking industry's errors uncovered during the recession. Meddling with the free market economy through government price setting is an abuse of power that has established a dangerous precedent. In this instance, government interference in private sector commerce has significantly devalued one of the most popular and effective consumer financial products ever created.
Banks earn debit card revenues from transaction processing fees paid by merchants. Most consumers pay scant attention to this bank/merchant relationship, because it has had no effect on their debit card usage…until now. So, what happened?
The merchant community decided that the processing fees were too high and lobbied Congress to pass legislation to set pricing. In return, merchants promised to pass on their savings to consumers in the form of lower prices for their products. (More on that promise later…).
The merchants were successful in persuading Congress to legislate pricing for debit transactions. As predicted, debit card revenues are declining rapidly. Since the infrastructure costs for product support have remained intact, banks have been forced to re-evaluate their consumer offerings and pricing structures. When faced with similar burdensome regulations, any prudent business would do likewise.
As a consequence, debit card reward programs have been revised or eliminated, and new fees are being implemented for debit card usage. Free checking was a viable product when debit card revenues partially subsidized the cost of offering the free
Interestingly, the merchant community's promise of lower prices has conveniently been forgotten. Recall that retailers told Congress that if these "swipe fees" were reduced, they would pass the savings along to consumers. Yet, there's no evidence that the merchant community is following through on its promise. Furthermore, there's no indication that lawmakers will hold them accountable to their original commitment.
What is abundantly clear is that consumers are furious with their financial institutions and merchants are at their financial institutions and merchants are enjoying significant reductions in processing costs. While banks are losing billions in revenue, merchants are quietly pocketing a financial windfall. Adding to the misinformation, the president and some members of Congress have recently made pompous and emotional comments about the new fees; unfortunately, these statements have rarely, if ever, been fact based.
Much has been written about the banking industry's mistakes during the financial crisis. The banks have acknowledged that major internal changes are necessary and substantial resources have been dedicated to address the deficiencies. There's still a lot of work to do, but the industry is making steady progress.
The outcry about new fees is a separate and distinct issue from the banking industry's errors uncovered during the recession. Meddling with the free market economy through government price setting is an abuse of power that has established a dangerous precedent. In this instance, government interference in private sector commerce has significantly devalued one of the most popular and effective consumer financial products ever created.
2011年10月11日 星期二
Five Ways to Hang on to Debit Card Rewards
Travel discounts. The perks of using your debit card had seemed endless. Now, your card's ability to earn points for your everyday spending is shrinking fast.
As institutions around the country notify account holders that using their debit cards will no longer deliver any kind of payoff, account holders are struggling to cope with a new era of less rewarding money management.
If your debit card rewards program already has fallen victim to recent industry changes in rules governing banking, consider these five
Big banks may be slamming the door on their debit card rewards programs, but your check card can still pay you back at many community banks and credit unions.
Jane Lundquist, executive vice president at Rockland Trust in Rockland, Mass., describes Rockland Trust's debit rewards program as a win-win situation for the bank and its customers. Account holders who receive paperless statements can earn up to $300 in cash back each year, and the checking account comes with no minimum balance requirements or monthly fees.
A credit union also may provide the solution for your rewards searching.
David Small, spokesman for the National Credit Union Administration in Washington, D.C., says some credit unions operate debit card rewards programs at a loss because of the demand from their members.
Because credit unions are not-for-profit institutions, consumers may find that these outlets will continue to offer debit rewards because they're not as limited by their bottom line, Small says.
Financial institutions recognize your frustration with rising bank fees and shrinking rewards, and they still need your business. As the banking industry settles in to the new norm under recently enacted laws, you may want to hold out for a few months as banks determine how to attract your business.
In some cases, attracting your business may mean passing the buck -- literally.
"We are seeing a shift toward merchant-funded programs," says Greg McBride, CFA, Bankrate's senior financial analyst.
Many of these programs give account holders cash back or points for spending with certain retailers. Outside of new programs, be sure to keep your eyes open for promotional incentives.
Lundquist says the bank sees the ability to continue offering a debit card rewards program as a window of opportunity to attract new customers. In fact, the bank recently launched a marketing initiative offering double cash rewards for debit transactions through the end of 2011.
Many banks are altering their debit card rewards programs to implement monthly or annual fees in order to earn points. While a few bucks may not sound like much to keep racking up your prized rewards points, fees typically add up more quickly than points or cash back.
"The fees on a debit rewards program can be a very high hurdle to clear," McBride says.
Consider McBride's example of a consumer paying a $5 monthly debit card fee with a rewards payout of 0.5%. In this case, the first $1,000 of spending each month would go toward offsetting the $5 fee.
If an account holder is spending a large amount each month on a debit card, using a credit card instead may make more sense. The higher rewards ratio will prove to be more rewarding. There also may be more incentive to enroll in a credit card rewards program and to pay off any existing credit card debt, McBride says.
While rewards options and account incentives are appealing, it's crucial for consumers to look at their banking needs from multiple angles.
For consumers who are considering switching banks in pursuit of another debit rewards program, McBride recommends weighing additional factors such as free checking, ATM convenience and the range of products and services that each bank offers.
As fees continue to pile up at some of the nation's biggest banks, finding an account without any additional hurdles or costs may prove to be especially rewarding for your personal finances.
As institutions around the country notify account holders that using their debit cards will no longer deliver any kind of payoff, account holders are struggling to cope with a new era of less rewarding money management.
If your debit card rewards program already has fallen victim to recent industry changes in rules governing banking, consider these five
Big banks may be slamming the door on their debit card rewards programs, but your check card can still pay you back at many community banks and credit unions.
Jane Lundquist, executive vice president at Rockland Trust in Rockland, Mass., describes Rockland Trust's debit rewards program as a win-win situation for the bank and its customers. Account holders who receive paperless statements can earn up to $300 in cash back each year, and the checking account comes with no minimum balance requirements or monthly fees.
A credit union also may provide the solution for your rewards searching.
David Small, spokesman for the National Credit Union Administration in Washington, D.C., says some credit unions operate debit card rewards programs at a loss because of the demand from their members.
Because credit unions are not-for-profit institutions, consumers may find that these outlets will continue to offer debit rewards because they're not as limited by their bottom line, Small says.
Financial institutions recognize your frustration with rising bank fees and shrinking rewards, and they still need your business. As the banking industry settles in to the new norm under recently enacted laws, you may want to hold out for a few months as banks determine how to attract your business.
In some cases, attracting your business may mean passing the buck -- literally.
"We are seeing a shift toward merchant-funded programs," says Greg McBride, CFA, Bankrate's senior financial analyst.
Many of these programs give account holders cash back or points for spending with certain retailers. Outside of new programs, be sure to keep your eyes open for promotional incentives.
Lundquist says the bank sees the ability to continue offering a debit card rewards program as a window of opportunity to attract new customers. In fact, the bank recently launched a marketing initiative offering double cash rewards for debit transactions through the end of 2011.
Many banks are altering their debit card rewards programs to implement monthly or annual fees in order to earn points. While a few bucks may not sound like much to keep racking up your prized rewards points, fees typically add up more quickly than points or cash back.
"The fees on a debit rewards program can be a very high hurdle to clear," McBride says.
Consider McBride's example of a consumer paying a $5 monthly debit card fee with a rewards payout of 0.5%. In this case, the first $1,000 of spending each month would go toward offsetting the $5 fee.
If an account holder is spending a large amount each month on a debit card, using a credit card instead may make more sense. The higher rewards ratio will prove to be more rewarding. There also may be more incentive to enroll in a credit card rewards program and to pay off any existing credit card debt, McBride says.
While rewards options and account incentives are appealing, it's crucial for consumers to look at their banking needs from multiple angles.
For consumers who are considering switching banks in pursuit of another debit rewards program, McBride recommends weighing additional factors such as free checking, ATM convenience and the range of products and services that each bank offers.
As fees continue to pile up at some of the nation's biggest banks, finding an account without any additional hurdles or costs may prove to be especially rewarding for your personal finances.
2011年10月10日 星期一
Sore throat? No doctor? Run out to the store
As the health reform law takes effect, 30 million uninsured people will gain coverage, creating unprecedented demand for services from an already overburdened system. Indeed, a new report from Medicare estimates that health care expenditures will increase more than $2 trillion by 2020, consuming 20 percent of the U.S. economy.
To meet that demand, we must ramp up the supply of medical services. Retail health clinics and pharmacies are one of the best ways to do this. Treatments delivered in this setting can provide quality care at low cost and benefit patients, physicians, employers, taxpayers and the government.
In 2009, more than 1,000 retail clinics were operating in the U.S. According to clinic tracker Merchant Medicine, the number could almost triple by 2015. These clinics provide treatment for many common ailments, like sore throats and earaches. They also provide preventive care, including vaccinations and cholesterol screenings.
These clinics aren't designed to replace primary care physicians; they're designed to complement them. They offer a unique combination of low prices, convenience and accessibility. That set-up is extremely attractive, particularly for Americans who don't have a regular doctor.
It's no wonder that use has nearly doubled over the past three years, according to PricewaterhouseCoopers. A 2009 study in the Journal of the American Academy of Nurse Practitioners found that 96 percent of retail-clinic users were satisfied or very satisfied with their care.
The popularity of these clinics shouldn't be surprising. Prices are low and publicly advertised. Nearly all accept insurance, and patients can visit at their convenience. But not everyone is a fan. This summer, the American Medical Association came out against retail clinics, saying it would lobby insurers not to provide incentives for patients to visit retail outlets.
The AMA claims that it is solely concerned with quality and continuity of care. But research shows that care provided by retail clinics is consistently comparable, and in some cases superior, to that provided by conventional medical clinics.
In 2009, independent researchers at the Rand Corp. compared cost, quality, and accessibility at retail clinics, urgent-care centers and emergency rooms. On a quality scale, with 100 percent being perfect, the clinics finished first with 63.6 percent. Urgent-care centers and physicians' offices followed closely. Overburdened ERs finished last, at 55.1 percent.
Furthermore, a 2010 Rand study of three common illnesses found that the average visit to a retail clinic cost $110, compared with $156 for urgent-care centers, $166 at a physician's office and $570 at an ER. At the retail clinics of Target, my employer - which has two in Palm Beach County - minor illness exams run as low as $59, while a wellness visit is $25 to $64.
Across clinics, young adults in general good health account for a third of users. This makes sense; evidence suggests that about 30 percent of clinic patients don't have a source of primary care, and about 25 percent of patients who show up at clinics would have gone to an ER if not for the retail clinic.
To meet that demand, we must ramp up the supply of medical services. Retail health clinics and pharmacies are one of the best ways to do this. Treatments delivered in this setting can provide quality care at low cost and benefit patients, physicians, employers, taxpayers and the government.
In 2009, more than 1,000 retail clinics were operating in the U.S. According to clinic tracker Merchant Medicine, the number could almost triple by 2015. These clinics provide treatment for many common ailments, like sore throats and earaches. They also provide preventive care, including vaccinations and cholesterol screenings.
These clinics aren't designed to replace primary care physicians; they're designed to complement them. They offer a unique combination of low prices, convenience and accessibility. That set-up is extremely attractive, particularly for Americans who don't have a regular doctor.
It's no wonder that use has nearly doubled over the past three years, according to PricewaterhouseCoopers. A 2009 study in the Journal of the American Academy of Nurse Practitioners found that 96 percent of retail-clinic users were satisfied or very satisfied with their care.
The popularity of these clinics shouldn't be surprising. Prices are low and publicly advertised. Nearly all accept insurance, and patients can visit at their convenience. But not everyone is a fan. This summer, the American Medical Association came out against retail clinics, saying it would lobby insurers not to provide incentives for patients to visit retail outlets.
The AMA claims that it is solely concerned with quality and continuity of care. But research shows that care provided by retail clinics is consistently comparable, and in some cases superior, to that provided by conventional medical clinics.
In 2009, independent researchers at the Rand Corp. compared cost, quality, and accessibility at retail clinics, urgent-care centers and emergency rooms. On a quality scale, with 100 percent being perfect, the clinics finished first with 63.6 percent. Urgent-care centers and physicians' offices followed closely. Overburdened ERs finished last, at 55.1 percent.
Furthermore, a 2010 Rand study of three common illnesses found that the average visit to a retail clinic cost $110, compared with $156 for urgent-care centers, $166 at a physician's office and $570 at an ER. At the retail clinics of Target, my employer - which has two in Palm Beach County - minor illness exams run as low as $59, while a wellness visit is $25 to $64.
Across clinics, young adults in general good health account for a third of users. This makes sense; evidence suggests that about 30 percent of clinic patients don't have a source of primary care, and about 25 percent of patients who show up at clinics would have gone to an ER if not for the retail clinic.
2011年10月9日 星期日
UseMyServices Partners with SafetyPay for Mutual Network Expansion
A new co-operative agreement was announced today between two global payment technology firms, Toronto-based UseMyServices, and Miami-based SafetyPay. The new venture will significantly expand the international reach of both firms, giving each company access to more than 100 banks and financial institutions, across 20 countries. The agreement will make real time bank payment services available to more than half a billion online banking customers worldwide
“Partnering with UseMyServices makes total strategic sense in SafetyPay’s continual international expansion efforts,” said Manuel Montero, Founder and Chief Executive Officer of SafetyPay. “We look forward to expanding our global footprint and utilizing the natural synergy between our two companies.”
Both SafetyPay and UseMyServices are recognized leaders in the "alternative" payments sector. Although each company utilizes their own proprietary technology, both platforms provide a secure e-payment solution that enables online banking customers to make Internet purchases from merchants worldwide and pay directly through their bank account. Customers are never required to disclose any financial information to the merchants or to the payment processor. All payment transactions are done from within the bank’s online environment.
According to UseMyServices CEO and Founder, Joseph Iuso, "This is exactly the type of partnership that will bring all the banks into one network."
"With this co-operative venture, both companies’ Merchants will reap huge benefits. In today’s competitive marketplace, businesses need to have a global web presence - but it can be expensive and risky to expand into new markets," said Melody Wigdahl, Vice President of UseMyServices. "Real time bank payments minimize the risk and now our Merchants have the opportunity to greatly expand their current market reach, with minimal risk, very quickly. This is a win-win deal for everyone involved."
The expanded services will be available to merchants and customers of UseMyServices and SafetyPay early Q1, 2012.
Launched in 2002, Toronto-based UseMyServices is a pioneer in real-time bank payments. Using UMS’s flagship product, UseMyFunds, Consumers can pay for their web purchases using their online bank account, without revealing their financial data to the Merchant.
SafetyPayTM is a safe and secure e-payment solution that enables online banking customers to make Internet purchases from merchants worldwide and pay directly through their bank account.
“Partnering with UseMyServices makes total strategic sense in SafetyPay’s continual international expansion efforts,” said Manuel Montero, Founder and Chief Executive Officer of SafetyPay. “We look forward to expanding our global footprint and utilizing the natural synergy between our two companies.”
Both SafetyPay and UseMyServices are recognized leaders in the "alternative" payments sector. Although each company utilizes their own proprietary technology, both platforms provide a secure e-payment solution that enables online banking customers to make Internet purchases from merchants worldwide and pay directly through their bank account. Customers are never required to disclose any financial information to the merchants or to the payment processor. All payment transactions are done from within the bank’s online environment.
According to UseMyServices CEO and Founder, Joseph Iuso, "This is exactly the type of partnership that will bring all the banks into one network."
"With this co-operative venture, both companies’ Merchants will reap huge benefits. In today’s competitive marketplace, businesses need to have a global web presence - but it can be expensive and risky to expand into new markets," said Melody Wigdahl, Vice President of UseMyServices. "Real time bank payments minimize the risk and now our Merchants have the opportunity to greatly expand their current market reach, with minimal risk, very quickly. This is a win-win deal for everyone involved."
The expanded services will be available to merchants and customers of UseMyServices and SafetyPay early Q1, 2012.
Launched in 2002, Toronto-based UseMyServices is a pioneer in real-time bank payments. Using UMS’s flagship product, UseMyFunds, Consumers can pay for their web purchases using their online bank account, without revealing their financial data to the Merchant.
SafetyPayTM is a safe and secure e-payment solution that enables online banking customers to make Internet purchases from merchants worldwide and pay directly through their bank account.
2011年10月8日 星期六
Nickel and dimed
When Bank of America announced recently it would begin charging most of its customers a $5 monthly fee for using their debit cards, banks everywhere saw opportunity.A cashier swipes a debit card at Shakespeare’s Pizza in Columbia.
“Let’s just put it this way: When the news went out about Bank of America, our call center lit up,” said Mary Wilkerson, Boone County National Bank’s director of marketing. “Switching a bank account can be cumbersome, so you’ve got to be pretty mad to go to all that trouble.”
That’s just one example of how new rules capping the fees big banks can charge merchants when a customer swipes a debit card are shaking up markets across the country. Largely unnoticed by consumers, businesses that take payment via debit card are charged a fee by the bank that issued it. New rules, which took effect Oct. 1, cap the fees big banks can charge merchants at 21 cents, plus a few more pennies for some fraud-prevention costs. That’s nearly half the industry average of 44 cents per swipe that banks charged businesses before.
“Twenty cents doesn’t seem like a lot, but you multiply that by millions, and it’s a lot of money,” said Bill Ratliff of the Missouri Bankers Association.
As a result, large institutions such as Bank of America and Regions Financial Corp. announced they planned new monthly debit card fees to offset the nearly $7 billion the industry says it will lose because of the new regulations. Large retail chains, which fought a long lobbying battle with the banks over the rules created by the Dodd-Frank financial reform law passed last year, expect a boost to their revenue stream, and smaller merchants hope to see lower costs as well.
And although the rules were written to only affect banks with $10 billion or more in assets, local community banks say that eventually they will have to lower the debit fees they charge merchants to stay competitive.
“If Wal-Mart cuts off our cards, we’ll be adjusting our rates,” said Dave Putnam, First State Community Bank’s Columbia president. “We can’t have our customers not being able to use our cards.”
As debit card use has soared over the past several years, the banking industry has seen merchant swipe fees rise to more than $20 billion, the Wall Street Journal reported. That’s up from about $11 billion in 2006. The merchant fees associated with debit card use gave banks a hefty revenue stream to offset the costs of checking accounts, and banks big and small have cashed in.
“It has become an increasingly larger portion of our income because of the increasing acceptance and use of debit cards,” Putnam said. “That’s really what has allowed us to offer free checking.”
The rules were added into the Dodd-Frank bill by Illinois Democratic Sen. Dick Durbin. Proponents of the measure argued that the merchant charges were well above the banks’ costs to provide the service. But the banks fought the rules with some success. The rules originally were scheduled to take effect this summer and cap fees at 12 cents per swipe, but the Federal Reserve, in charge of writing the regulations, raised the cap to 21 cents and pushed back the start date.
Still, banks aren’t happy about the new rules. Commerce Bank, which is large enough to be affected immediately, will lose about 50 percent of the revenue associated with its debit cards and will have to make up for it somewhere, said Chief Financial Officer Charles Kim.
In the second quarter of 2011, Commerce Bank’s holding company, Commerce Bancshares Inc., reported $15.7 million in revenue from all debit card fees in its quarterly filing with the Securities and Exchange Commission. It anticipated the new rules would shave $7 million off debit card revenue in the last quarter of 2011.
“Typically, when the government gets involved in setting prices, it’s not a very productive situation,” Kim said. “This particular fee and the amendment to the Dodd-Frank Act has nothing to do with subprime lending; it has nothing to do with the financial crisis at all. It’s just retailers taking advantage of the fact that the banks were down and no one in Washington was thinking very favorably of them.”
Commerce Bank has no plans for a new debit card fee charged to account holders, and it is still evaluating how to cut costs and find other sources of revenue, Kim said. But Kim said the rules have put the bank “under a lot of pressure,” and it, like the rest of the industry, will be re-evaluating services that customers have become accustomed to getting for free.
“There is no question that the economics of the free checking account that you saw in the late ’90s and the last decade, those economics are dramatically changed,” he said. “And it’s unlikely that accounts will be free the same way that they were there for a number of years.”
Whether consumers will look to dodge any new fees associated with debit and checking services is up in the air. Ratliff referenced an American Bankers Association survey from this summer that found 71 percent of bank customers avoid any sort of account fees at all.
Tengda Chin, a University of Missouri student and a Bank of America customer for three years, said he plans to try to avoid the planned $5 monthly fee by not using his debit card for purchases. But the benefits of banking with a large national chain will keep him with the bank.
“I don’t want to switch banks because” Bank of America “has the most ATMs in the country,” Chin said. “If I switch to a local bank here, that’s a lot of inconvenience.”
In the short term, smaller banks hope to pick up a few customers disgruntled with new fees. While Boone County National Bank sees an opportunity with the new rules, Wilkerson said that eventually it, too, might have to change its account fee structure if it is forced to lower its fees to par with big banks.
“While we can be excited about the fact that these big guys are charging fees, we can’t get too excited about it because we don’t know what’s in our future,” she said.
First State Community Bank plans to keep its fees down as long as possible and try to pick up market share, Putnam said. But he estimated that small banks could begin to see pressure to lower their debit card fees within 12 to 18 months, and that will make them look for other ways to make up for that money.
“I’m hoping we don’t get to that point where community banks aren’t able to offer free or reduced checking accounts for consumers with smaller balances, but it might get to that point,” he said.
For their part, merchants aren’t even sure whether they will see the intended benefit. Jackie Maxwell, the general manager of MFA Oil’s Break Time convenience store chain, said in an email that other fees associated with cards have already started rising. Fees paid to banks and credit card companies for payment processing cost the chain almost as much as the salaries of its hourly sales clerks, she said.
If new bank fees change consumer behavior more to credit or cash payment, it could be harder to predict the effect on retailers. But Maxwell said Break Time is expecting some savings from the new card rules. For instance, she wrote, a $1 cup of coffee purchased with a debit card costs the store 35 cents in fees, which sometimes results in a net loss on the transaction.
In gasoline sales, where margins are lower for retailers, companies are already making pump equipment with two pricing screens — one for cash and one for credit, Maxwell said.
“If” Mastercard “and Visa raise their costs significantly as a result of the loss in debit card revenue, it would be more likely that customers will see two-tiered pricing in the marketplace,” she wrote.
Smaller merchants are happy with the rules change, but Osama Yanis, who owns the Coffee Zone on Ninth Street, said the main beneficiaries will be big chains such as Wal-Mart and McDonald’s.
“It may make a difference, a little difference,” he said. “It depends on what bank” customers “route their money to.”
Harry Patel, a co-owner of Eagle Liquor on Business Loop 70 and Columbia Liquor on Providence Road, said he pays $700 to $800 a month in debit and credit card fees. In 2006 and 2007, he was paying around $500 to $600 a month in such fees. The new debit card fees still are too high, he said, because banks are just taking money directly from a customer’s bank account rather than advancing the money like a credit card. “You’re not taking any risk on debit cards,” Patel said.
Although the debit rule change might help, it’s the credit card fees that are highest and hit his business the hardest. That’s the form of payment his customers are increasingly using, and he expects fees for credit card processing to go up soon.
“It’s become one of the highest costs a retailer has to deal with — credit card processing,” said David Overfelt, president of the Missouri Retailers Association. “Consumers think they aren’t paying for it. Yeah, they are paying for it.”
Although Overfelt pushed for the debit rules along with other retailing associations, he thinks the money that was flowing to the banks will just be made up somewhere else.
“These are major profit centers,” Overfelt said. “And it’s a major profit center the public’s going to pay for one way or another.”
“Let’s just put it this way: When the news went out about Bank of America, our call center lit up,” said Mary Wilkerson, Boone County National Bank’s director of marketing. “Switching a bank account can be cumbersome, so you’ve got to be pretty mad to go to all that trouble.”
That’s just one example of how new rules capping the fees big banks can charge merchants when a customer swipes a debit card are shaking up markets across the country. Largely unnoticed by consumers, businesses that take payment via debit card are charged a fee by the bank that issued it. New rules, which took effect Oct. 1, cap the fees big banks can charge merchants at 21 cents, plus a few more pennies for some fraud-prevention costs. That’s nearly half the industry average of 44 cents per swipe that banks charged businesses before.
“Twenty cents doesn’t seem like a lot, but you multiply that by millions, and it’s a lot of money,” said Bill Ratliff of the Missouri Bankers Association.
As a result, large institutions such as Bank of America and Regions Financial Corp. announced they planned new monthly debit card fees to offset the nearly $7 billion the industry says it will lose because of the new regulations. Large retail chains, which fought a long lobbying battle with the banks over the rules created by the Dodd-Frank financial reform law passed last year, expect a boost to their revenue stream, and smaller merchants hope to see lower costs as well.
And although the rules were written to only affect banks with $10 billion or more in assets, local community banks say that eventually they will have to lower the debit fees they charge merchants to stay competitive.
“If Wal-Mart cuts off our cards, we’ll be adjusting our rates,” said Dave Putnam, First State Community Bank’s Columbia president. “We can’t have our customers not being able to use our cards.”
As debit card use has soared over the past several years, the banking industry has seen merchant swipe fees rise to more than $20 billion, the Wall Street Journal reported. That’s up from about $11 billion in 2006. The merchant fees associated with debit card use gave banks a hefty revenue stream to offset the costs of checking accounts, and banks big and small have cashed in.
“It has become an increasingly larger portion of our income because of the increasing acceptance and use of debit cards,” Putnam said. “That’s really what has allowed us to offer free checking.”
The rules were added into the Dodd-Frank bill by Illinois Democratic Sen. Dick Durbin. Proponents of the measure argued that the merchant charges were well above the banks’ costs to provide the service. But the banks fought the rules with some success. The rules originally were scheduled to take effect this summer and cap fees at 12 cents per swipe, but the Federal Reserve, in charge of writing the regulations, raised the cap to 21 cents and pushed back the start date.
Still, banks aren’t happy about the new rules. Commerce Bank, which is large enough to be affected immediately, will lose about 50 percent of the revenue associated with its debit cards and will have to make up for it somewhere, said Chief Financial Officer Charles Kim.
In the second quarter of 2011, Commerce Bank’s holding company, Commerce Bancshares Inc., reported $15.7 million in revenue from all debit card fees in its quarterly filing with the Securities and Exchange Commission. It anticipated the new rules would shave $7 million off debit card revenue in the last quarter of 2011.
“Typically, when the government gets involved in setting prices, it’s not a very productive situation,” Kim said. “This particular fee and the amendment to the Dodd-Frank Act has nothing to do with subprime lending; it has nothing to do with the financial crisis at all. It’s just retailers taking advantage of the fact that the banks were down and no one in Washington was thinking very favorably of them.”
Commerce Bank has no plans for a new debit card fee charged to account holders, and it is still evaluating how to cut costs and find other sources of revenue, Kim said. But Kim said the rules have put the bank “under a lot of pressure,” and it, like the rest of the industry, will be re-evaluating services that customers have become accustomed to getting for free.
“There is no question that the economics of the free checking account that you saw in the late ’90s and the last decade, those economics are dramatically changed,” he said. “And it’s unlikely that accounts will be free the same way that they were there for a number of years.”
Whether consumers will look to dodge any new fees associated with debit and checking services is up in the air. Ratliff referenced an American Bankers Association survey from this summer that found 71 percent of bank customers avoid any sort of account fees at all.
Tengda Chin, a University of Missouri student and a Bank of America customer for three years, said he plans to try to avoid the planned $5 monthly fee by not using his debit card for purchases. But the benefits of banking with a large national chain will keep him with the bank.
“I don’t want to switch banks because” Bank of America “has the most ATMs in the country,” Chin said. “If I switch to a local bank here, that’s a lot of inconvenience.”
In the short term, smaller banks hope to pick up a few customers disgruntled with new fees. While Boone County National Bank sees an opportunity with the new rules, Wilkerson said that eventually it, too, might have to change its account fee structure if it is forced to lower its fees to par with big banks.
“While we can be excited about the fact that these big guys are charging fees, we can’t get too excited about it because we don’t know what’s in our future,” she said.
First State Community Bank plans to keep its fees down as long as possible and try to pick up market share, Putnam said. But he estimated that small banks could begin to see pressure to lower their debit card fees within 12 to 18 months, and that will make them look for other ways to make up for that money.
“I’m hoping we don’t get to that point where community banks aren’t able to offer free or reduced checking accounts for consumers with smaller balances, but it might get to that point,” he said.
For their part, merchants aren’t even sure whether they will see the intended benefit. Jackie Maxwell, the general manager of MFA Oil’s Break Time convenience store chain, said in an email that other fees associated with cards have already started rising. Fees paid to banks and credit card companies for payment processing cost the chain almost as much as the salaries of its hourly sales clerks, she said.
If new bank fees change consumer behavior more to credit or cash payment, it could be harder to predict the effect on retailers. But Maxwell said Break Time is expecting some savings from the new card rules. For instance, she wrote, a $1 cup of coffee purchased with a debit card costs the store 35 cents in fees, which sometimes results in a net loss on the transaction.
In gasoline sales, where margins are lower for retailers, companies are already making pump equipment with two pricing screens — one for cash and one for credit, Maxwell said.
“If” Mastercard “and Visa raise their costs significantly as a result of the loss in debit card revenue, it would be more likely that customers will see two-tiered pricing in the marketplace,” she wrote.
Smaller merchants are happy with the rules change, but Osama Yanis, who owns the Coffee Zone on Ninth Street, said the main beneficiaries will be big chains such as Wal-Mart and McDonald’s.
“It may make a difference, a little difference,” he said. “It depends on what bank” customers “route their money to.”
Harry Patel, a co-owner of Eagle Liquor on Business Loop 70 and Columbia Liquor on Providence Road, said he pays $700 to $800 a month in debit and credit card fees. In 2006 and 2007, he was paying around $500 to $600 a month in such fees. The new debit card fees still are too high, he said, because banks are just taking money directly from a customer’s bank account rather than advancing the money like a credit card. “You’re not taking any risk on debit cards,” Patel said.
Although the debit rule change might help, it’s the credit card fees that are highest and hit his business the hardest. That’s the form of payment his customers are increasingly using, and he expects fees for credit card processing to go up soon.
“It’s become one of the highest costs a retailer has to deal with — credit card processing,” said David Overfelt, president of the Missouri Retailers Association. “Consumers think they aren’t paying for it. Yeah, they are paying for it.”
Although Overfelt pushed for the debit rules along with other retailing associations, he thinks the money that was flowing to the banks will just be made up somewhere else.
“These are major profit centers,” Overfelt said. “And it’s a major profit center the public’s going to pay for one way or another.”
2011年10月7日 星期五
Risk South Africa rankings 2011
Newton's cradle demonstrates how energy travels through a row of touching metal spheres. Once the end ball is lifted and released, the energy of its impact travels through the row, kicking the last one away. A similar dynamic can be witnessed in the current financial crisis, with subprime mortgage defaults translating into structured credit defaults, then bank collapses, sovereign bailouts and – over the last 18 months – fears about the sovereigns themselves.
The spread of the crisis can also be measured geographically, leaping from one country to the next, with the vector for contagion often being the banking system, and the trigger for the latest bout of risk aversion being political squabbling in both Europe and the US. Despite being relatively remote from both markets, South African dealers are seeing the impact.
"Liquidity has become a scarce resource, bid/offer spreads have widened, interbank appetite has diminished significantly, and it's all being driven by offshore factors," says Stephen van Coller, chief executive of Absa Capital in Johannesburg. "There has been a huge sell-off in rates due to extreme risk aversion which has given us a very steep yield curve. The interbank market has been affected, which has impacted liquidity and the markets ability to de-risk. Bid/offer spreads have moved from two to four basis points at the beginning of the year to around 10bp in the last six weeks. In many markets we are now finding one-directional flow that has been very difficult to manage. It's a tough environment."
Absa Capital retained the top spot in this year’s Risk South Africa rankings 2011 with 16.5% of the overall vote, edging ahead of second-placed Standard Bank – just 0.3 percentage points separated the two institutions. In a close race, Rand Merchant Bank (RMB) finished third with 15.9% of the vote.
Absa Capital took first place in the currency products category, while finishing second in interest rates and third in the equity derivatives categories. It also claimed first place in structured products, while finishing second in both credit default swaps and commodities. The bank performed particularly well in the currency categories, coming first in both the foreign exchange options and forwards categories for US dollar/rand. Underlining its overall performance, the bank also came top of the risk management category.
The current woes of European banks is also filtering into the South African market. French banks, in particular, have been feeling the heat as a result of funding concerns and holdings of peripheral sovereign debt. Spreads on Société Générale blew out from 248bp at close of play on August 9 to 364bp on October 5, while its share price fell from €26 to €19.6. And with banks still under pressure, Markit’s iTraxx CDS index of European financials has been climbing steadily from 176bp on July 30 to 283bp on October 5.
With US investors shying away, the resulting shortage of dollar funding in Europe has meant the continent’s banks have attempted to secure funding via emerging markets, including South Africa.
“The cross-currency basis swap market used to trade at around +5 to +15 during the first half of the year but has since moved as low as -55 in recent weeks. That’s a result of European banks utilising the South African market - and certain other emerging markets, like Hungary and Poland, to obtain synthetic term dollar funding. The move has been considerable, but actual volumes were small,” says Eli Tyshynski, head of interest rate swaps trading at Standard Bank in Johannesburg.
Standard Bank performed particularly well in equity derivatives, coming top overall and winning first places in South African single stock options, exotic equity options and warrants. It also finished third overall in currency products and interest rates, coming first in interest rate swaps and US dollar/rand cross-currency swaps. It also topped the CDS and commodities categories.
Local dealers say the South African banks that have engaged in cross-currency basis trades with European banks have in place credit support annexes (CSAs) with low thresholds - meaning they are collateralised daily, and therefore have not taken material counterparty exposures to those foreign banks.
"We always trade interbank under a CSA, we wouldn't involve ourselves on a non-collateralised basis," says Andy Hall, head of global markets at Standard Bank in Johannesburg.
Banks in South Africa are starting to pay a lot more attention to collateral especially in the context of swaps pricing. Many banks now agree the overnight indexed swap (OIS) rate should be used to discount collateralised trades, rather than Libor – with the correct OIS rate determined by the currency of the collateral being posted. But this becomes hugely complex when a trade is backed by a CSA that allows the counterparties to choose from a list of eligible collateral. However, in South Africa, the absence of a local OIS market means all of the banks tend to use the Johannesburg interbank agreed rate to discount trades, and dealers recognise this has to change.
“Collateral is an issue that is high on everyone’s agenda, and there are many questions around what type of collateral is eligible under our CSAs and what discount rate should be used to discount swaps. It’s a complex problem. We know that collateralised trades should be discounted at OIS, but the South African market doesn’t have a local OIS rate, so the onus is on the industry to try to develop a solution. At the moment, there is a working group involving regulatory authorities and the treasuries of the various banks, and hopefully we’ll have something concrete by next year,” says Henry Collins, head of fixed income, currencies and commodities trading at RMB in Johannesburg.
RMB performed well across the board, topping the interest rate category while finishing second in currency products and – through its joint venture with Morgan Stanley – the equity derivatives category, with 16.8% of the vote. The bank performed particularly well in interest rates, topping three category: inflation, forward rate agreements and repurchase agreements. It also came second in a further three: interest rate swaps, options and exotics.
While offshore turmoil has affected South Africa, so too has the radically evolving derivatives regulatory landscape. South Africa, as one of the Group of 20 nations, agreed in 2009 to clear all standardised trades by the beginning of 2013. But, while the move towards central clearing is in full swing in the US and Europe, regulators in South Africa are still debating how central clearing will work.
A working group has been set up at the behest of the Financial Services Board, which oversees the country’s non-banking financial services industry. The group has been charged with proposing an appropriate clearing and settlement structure for the country. No formal proposal has yet been made, but dealers say it is a complex issue and many areas need addressing.
"It is being debated with local regulators how the main aspects of Basel III will be applied in South Africa while ensuring the domestic market adopts best practice. For example, we need to determine the benefits of a move to central clearing given the small number of sizeable local banks, and the extent to which a central clearer will reduce systemic risks," says Standard Bank's Hall.
"If you look at the International Organization of Securities Commissions' principles, a CCP should be able to withstand the default of its two largest clearing members. That may require significant individual contributions if shared among too small a membership. Also in South Africa, a high percentage of derivatives activity is with the corporate sector. Corporates rarely use clearing services due to their treasury structures and access to short-term liquidity, so it will be interesting to see how practice evolves between the price advances of centrally cleared derivatives against the convenience and bespoke characteristics of the OTC market," he adds.
Bankers are also urging regulators to take into account the liquidity and depth of the local swaps market. “There are a number of issues around the idea of central clearing that need to be ironed out first. One of the main concerns is figuring out if the liquidity and depth of the South African derivatives market actually warrants having a CCP and whether those volumes can be effectively risk-managed. It is likely that only the most liquid swaps markets will move to central clearing,” says Absa Capital’s van Coller.
The spread of the crisis can also be measured geographically, leaping from one country to the next, with the vector for contagion often being the banking system, and the trigger for the latest bout of risk aversion being political squabbling in both Europe and the US. Despite being relatively remote from both markets, South African dealers are seeing the impact.
"Liquidity has become a scarce resource, bid/offer spreads have widened, interbank appetite has diminished significantly, and it's all being driven by offshore factors," says Stephen van Coller, chief executive of Absa Capital in Johannesburg. "There has been a huge sell-off in rates due to extreme risk aversion which has given us a very steep yield curve. The interbank market has been affected, which has impacted liquidity and the markets ability to de-risk. Bid/offer spreads have moved from two to four basis points at the beginning of the year to around 10bp in the last six weeks. In many markets we are now finding one-directional flow that has been very difficult to manage. It's a tough environment."
Absa Capital retained the top spot in this year’s Risk South Africa rankings 2011 with 16.5% of the overall vote, edging ahead of second-placed Standard Bank – just 0.3 percentage points separated the two institutions. In a close race, Rand Merchant Bank (RMB) finished third with 15.9% of the vote.
Absa Capital took first place in the currency products category, while finishing second in interest rates and third in the equity derivatives categories. It also claimed first place in structured products, while finishing second in both credit default swaps and commodities. The bank performed particularly well in the currency categories, coming first in both the foreign exchange options and forwards categories for US dollar/rand. Underlining its overall performance, the bank also came top of the risk management category.
The current woes of European banks is also filtering into the South African market. French banks, in particular, have been feeling the heat as a result of funding concerns and holdings of peripheral sovereign debt. Spreads on Société Générale blew out from 248bp at close of play on August 9 to 364bp on October 5, while its share price fell from €26 to €19.6. And with banks still under pressure, Markit’s iTraxx CDS index of European financials has been climbing steadily from 176bp on July 30 to 283bp on October 5.
With US investors shying away, the resulting shortage of dollar funding in Europe has meant the continent’s banks have attempted to secure funding via emerging markets, including South Africa.
“The cross-currency basis swap market used to trade at around +5 to +15 during the first half of the year but has since moved as low as -55 in recent weeks. That’s a result of European banks utilising the South African market - and certain other emerging markets, like Hungary and Poland, to obtain synthetic term dollar funding. The move has been considerable, but actual volumes were small,” says Eli Tyshynski, head of interest rate swaps trading at Standard Bank in Johannesburg.
Standard Bank performed particularly well in equity derivatives, coming top overall and winning first places in South African single stock options, exotic equity options and warrants. It also finished third overall in currency products and interest rates, coming first in interest rate swaps and US dollar/rand cross-currency swaps. It also topped the CDS and commodities categories.
Local dealers say the South African banks that have engaged in cross-currency basis trades with European banks have in place credit support annexes (CSAs) with low thresholds - meaning they are collateralised daily, and therefore have not taken material counterparty exposures to those foreign banks.
"We always trade interbank under a CSA, we wouldn't involve ourselves on a non-collateralised basis," says Andy Hall, head of global markets at Standard Bank in Johannesburg.
Banks in South Africa are starting to pay a lot more attention to collateral especially in the context of swaps pricing. Many banks now agree the overnight indexed swap (OIS) rate should be used to discount collateralised trades, rather than Libor – with the correct OIS rate determined by the currency of the collateral being posted. But this becomes hugely complex when a trade is backed by a CSA that allows the counterparties to choose from a list of eligible collateral. However, in South Africa, the absence of a local OIS market means all of the banks tend to use the Johannesburg interbank agreed rate to discount trades, and dealers recognise this has to change.
“Collateral is an issue that is high on everyone’s agenda, and there are many questions around what type of collateral is eligible under our CSAs and what discount rate should be used to discount swaps. It’s a complex problem. We know that collateralised trades should be discounted at OIS, but the South African market doesn’t have a local OIS rate, so the onus is on the industry to try to develop a solution. At the moment, there is a working group involving regulatory authorities and the treasuries of the various banks, and hopefully we’ll have something concrete by next year,” says Henry Collins, head of fixed income, currencies and commodities trading at RMB in Johannesburg.
RMB performed well across the board, topping the interest rate category while finishing second in currency products and – through its joint venture with Morgan Stanley – the equity derivatives category, with 16.8% of the vote. The bank performed particularly well in interest rates, topping three category: inflation, forward rate agreements and repurchase agreements. It also came second in a further three: interest rate swaps, options and exotics.
While offshore turmoil has affected South Africa, so too has the radically evolving derivatives regulatory landscape. South Africa, as one of the Group of 20 nations, agreed in 2009 to clear all standardised trades by the beginning of 2013. But, while the move towards central clearing is in full swing in the US and Europe, regulators in South Africa are still debating how central clearing will work.
A working group has been set up at the behest of the Financial Services Board, which oversees the country’s non-banking financial services industry. The group has been charged with proposing an appropriate clearing and settlement structure for the country. No formal proposal has yet been made, but dealers say it is a complex issue and many areas need addressing.
"It is being debated with local regulators how the main aspects of Basel III will be applied in South Africa while ensuring the domestic market adopts best practice. For example, we need to determine the benefits of a move to central clearing given the small number of sizeable local banks, and the extent to which a central clearer will reduce systemic risks," says Standard Bank's Hall.
"If you look at the International Organization of Securities Commissions' principles, a CCP should be able to withstand the default of its two largest clearing members. That may require significant individual contributions if shared among too small a membership. Also in South Africa, a high percentage of derivatives activity is with the corporate sector. Corporates rarely use clearing services due to their treasury structures and access to short-term liquidity, so it will be interesting to see how practice evolves between the price advances of centrally cleared derivatives against the convenience and bespoke characteristics of the OTC market," he adds.
Bankers are also urging regulators to take into account the liquidity and depth of the local swaps market. “There are a number of issues around the idea of central clearing that need to be ironed out first. One of the main concerns is figuring out if the liquidity and depth of the South African derivatives market actually warrants having a CCP and whether those volumes can be effectively risk-managed. It is likely that only the most liquid swaps markets will move to central clearing,” says Absa Capital’s van Coller.
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