Credit Card Blog | UniBul - Part 2

Posted by Uni Bul on Monday, April 7th, 2014, 5:00 am

What Americans Are Doing with Their Credit Cards Is Simply Extraordinary. Chart #2 Says It All.

What Americans Are Doing with Their Credit Cards Is Simply Extraordinary. Chart #2 Says It All.

Americans are now using their credit cards much more for their transactional convenience than as a form of debt, the latest Credit Card Market Monitor report from the American Bankers Association tells us. To put it another way, we see credit cards today more as a plastic form of cash than we see them as a source of credit to be tapped now and repaid sometime in the future, if and when we can get around to it.

To be more precise, and as we will see in the charts that follow, the report’s data for this year’s first quarter show that, even as the monthly credit card purchase volumes have increased, the average ending balances have fallen by close to 5 percent. And as we have been paying back an ever larger share of our credit card debt for several years now, our credit card delinquency and default rates have consequently fallen to their lowest levels on record.

But here is the thing. Even though all the data have been telling an unambiguous story of Americans managing credit card debt a great deal more responsibly than we have done in a very long time, card issuers still don’t seem to trust us. For while the super-prime borrowers’ credit limits keep rising, those of everyone else are still falling. And it’s not as though only the super-prime accounts’ delinquency and default rates have vastly improved over the past few years — that has been true across all risk categories.

Perhaps the issuers are seeing in the data something I don’t? Or perhaps they are expecting Americans to revert to their free spending habits of old any day now? Well, I can’t read the card issuers’ collective minds and I certainly cannot divine what Americans’ attitude toward credit card debt will be, say, one year from now. What I can say, however, is that there is absolutely no clue that I can see in the data pointing toward a return to some kind of a wastefully extravagant pattern of credit card use anytime soon. But don’t take my word for it, here are the latest data...

Posted by Uni Bul on Friday, April 4th, 2014, 5:00 am

A Credit Card Payment Is So Incredibly Simple… Until You Take A Closer Look.

How Your Credit Card Payments Are Processed

Every now and then I will come across a new description of the credit card transaction process. These take various shapes, some are supported by visual representations of the various interactions that take place after a card payment is initiated and, as you would expect, some are better than others. But I’m always grateful to the authors for giving me the opportunity to refresh my own knowledge.

Well, the latest such description to come my way is an infographic produced by Singapore’s iMoney and It is a good effort to get at the heart of the issue, visually pleasing and, I think, straightforward enough for everyone to understand. However, straightforwardness and simplicity usually come at the cost of accuracy and this graph is no exception. For, whereas the transaction process is correctly presented (albeit there is something to be desired in the authors’ choice of terms), that is not the case in the offered explanation of “how banks & credit card companies make money”, as I will explain in a bit.

I also felt like comparing the iMoney graph to the ones produced by the credit card networks themselves. After all, Visa and MasterCard should know best how their transaction processes work. Whether they also know best how to present these processes to the lay public will be up to you to decide...

Posted by Uni Bul on Thursday, April 3rd, 2014, 5:00 am

These Hackers Are So Sophisticated, It’s Scary… And Yes, They’re Out To Get Your Credit Card

On Mules, Experts, Administrators and the Inevitability of Data Hacking

If you can get scammed, you will be, a new report on cybercrime and stolen data just published by the RAND Corporation, a think tank, informs us. The cost to enter the black market of hacked data is already low and falling, even as the level of sophistication of the participants is increasing, we learn. Law enforcement is trying to keep up with the criminals and the number of takedowns is indeed increasing, the authors note, yet the black market is growing at an accelerating rate, the players are continually getting more creative and innovative and seem to be winning the struggle.

The paper’s bottom line: the black market for stolen data will keep growing, continue to innovate and adapt and continue to mature. Yes, the criminals will suffer a setback every now and then along the way and some of them will end up serving jail time, but such events, highly publicized though they will be, will do little to change the long-term trend.

If such a conclusion sounds defeatist to you, I guess the authors’ reply might be that this is simply where their analysis leads them and if the outlook looks bleak, well, that’s not their fault. For my part, I am inclined to accept the paper’s conclusions. We’ve been fighting hackers for about two decades now, employing all kinds of data security measures, devising rules, guidelines and best practices and yet, if anything, data heists seem to be increasing in frequency, becoming ever more sophisticated and are pulled off on an ever larger scale. Helpfully, RAND’s paper features a nice chart, which lends support to this observation. Let’s take a look at the research...

Posted by Uni Bul on Wednesday, April 2nd, 2014, 5:00 am

You Will Never Realize What Makes Mobile Payments So Fascinating… Til You Take A Closer Look.

Mobile Payments Continue to Fail in Taking over the World

There is a huge divergence in the way and speed with which mobile payments are taken up in the developed and developing world. Just last week, we reviewed Tanzania where in September 2013 mobile financial services were adopted by 90 percent of the adult population — up from zero just five years earlier — and are actively used by about half of them. Of course Tanzania was following in the footsteps of Kenya, whose example is also being followed by other developing countries.

In developed countries, however, the story has been very different, even though mobile payments technologies are much more abundant there than they are in emerging markets. Yes, there have been some notable success stories and perhaps the stand-out m-payments technology in the rich world is the direct billing, which allows consumers to charge small-amount payments to their monthly cell phone bill. Of course, Square also comes to mind here in the U.S., as well as its countless clones on both sides of the Atlantic. Yet, none of these, or any other, rich-world m-payments services can boast anything close to M-Pesa’s success in Kenya, where the company is facilitating transactions worth 43 percent of the country’s GDP.

Well, the latest Federal Reserve Consumers and Mobile Financial Services survey and report is helping us figure out why we treat m-payments the way we do in the U.S. and is giving us the most current data. I, for one, wasn’t surprised to learn that the biggest reason for the relatively slow adoption of both mobile banking and mobile payments is that for many consumers these new technologies aren’t needed: their needs are already being met perfectly well by non-mobile options and they don’t see any clear benefits from using the new alternatives.

Still, albeit slowly, mobile payments are taking hold, helped by the ever increasing number of smartphones and the Fed researchers reasonably expect that the use of both mobile banking and mobile payments will continue to increase. Let’s take a closer look at their findings...

Posted by Uni Bul on Tuesday, April 1st, 2014, 5:00 am

Authorization, Clearing and Settlement: How MasterCard Works

Authorization, Clearing and Settlement: How MasterCard Works

The credit card companies are proud with the reliability of their payment processing systems. The big ones are processing millions of transactions every hour and yet, MasterCard, for example, claims that its own payment network is up 99.9 percent of the time. Not to be undone, Visa boasts that its system has been functioning uninterruptedly 100 percent of the time for 18 consecutive “peak seasons”.

Now, before we get too excited, we should note that the huge complexity of both Visa’s and MasterCard’s ecosystems makes it possible, indeed inevitable, that at any given time many merchants would not be able to connect to their networks, even though they may be up and running perfectly smoothly. The reason, of course, is that merchants connect to Visa and MasterCard through their payment processors’ systems, which are beyond the two networks’ control.

Nevertheless, the leading card networks have built two amazingly robust payment processing infrastructures, each processing astonishingly large amounts of data at an incredible speed. Card transactions — whether debit or credit, online or in-person — are processed in seconds, during which time a long series of interactions takes place. Once the payment information is collected by the merchant, it is sent to the payment processor and from there to the card network (Visa or MasterCard), then on to the card issuer for transaction approval and then back through the same channel to the merchant.

And now think about that: MasterCard says that it is facilitating more than 65,000 such transactions every minute and without a hitch! How does it do it? Well, this is the process that I will examine today. Before I get started, I should say that I’ve written on this subject many times before, but today I will delve much deeper than I’ve ever done before. Many readers may find that, say, this post covers the topic well enough for you, but I am certain that many others, especially those of you running larger operations, will benefit from a more complete understanding of the way your transactions are processed. Let’s get going...