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[alzheimer@juno.com (Ronald Raygun Remailer)]

 American Banker: Thursday, October 31, 1996
 
Two Retail Giants Sue Visa Over Debit Cards 
 
By LISA FICKENSCHER
 
Two of the largest retailing companies have filed a lawsuit against Visa
U.S.A., claiming the bank card association illegally forces merchants to
accept debit cards. 
 
Wal-Mart Stores Inc. and The Limited Inc., in what they characterized as
a
class action on behalf of all retailers, accused Visa of coercing equal
treatment of Visa Check cards and credit cards. 
 
The suit, filed last Friday in U.S. District Court for the Eastern
District of
New York, alleged that the tying of debit and credit card acceptance
violates
antitrust laws. The retailers are seeking an unspecified amount in
damages. 
 
The action, a flareup of longstanding tensions between the bank card and
retailing industries, did not extend to MasterCard International, even
though
its policies are similar to Visa's. Industry sources speculated that
MasterCard
may have shielded itself through its recent cobranding agreement with
Wal-Mart, the nation's biggest retailer. 
 
But because Visa and MasterCard are owned by virtually the same banks,
the lawsuit has the same potential effect on the U.S. banking community
as if
MasterCard were named. 
 
The suit describes the approximately 2,800 banks that issue both Visa
credit
and Visa Check cards, and some 1,000 banks that are "acquiring members"
of both Visa and MasterCard, as co-conspirators. 
 
Retailers have long argued that credit cards and debit cards should be
priced

differently, and that they should have the freedom to decide what kinds
of
payments they accept. Under MasterCard and Visa rules, all their cards
must
be acceptable at any retail location that displays those logos,
regardless of
card type. 
 
Wal-Mart and The Limited, among others, have contended that debit cards
are more akin to cash and check transactions, which cost them less than
credit cards. Recent growth in the Visa Check program -- Visa said check
cards increased 49% in the second quarter -- led to Visa U.S.A.'s being
singled out in the lawsuit, said Wal-Mart spokeswoman Betsy Reithemeyer. 
 
The suit said Visa Check cards were used last year in approximately 556
million retail transactions, generating $22 billion in sales. 
 
The complaint estimated that merchants paid at least $250 million in fees
on
that activity. That total supposedly would have been less than $33
million if
processed through on-line systems such as regional automated teller
machine
networks. (Visa Check and MasterMoney payments are cleared "off-line,"
with some delay, like credit cards). 
 
If those purchases had been made with cash, checks, or travelers checks,
those same sales would have cost "well below" the $33 million estimated,
the
legal filing said. 
 
"Retailers are willing to pay fees," said Paul Martaus, an electronic
payments
consultant in Clearwater, Fla. "The issue since day one with debit is
that the
fee they pay varies with the transaction amount." 
 
The lawsuit claimed a Visa credit card transaction costs merchants 1.25%
of
the sale, or $1.25 on $100. The Visa Check fee on the same sale would be
1.04% plus six cents, or $1.10. On-line debit networks' fees go as low as
five cents. 
 
Visa officials, who saw the lawsuit for the first time Wednesday, said it
is  still cheaper for merchants to clear a Visa Check transaction than a
credit card
purchase. 
 
"The plaintiffs are wrong on the facts and the law," said Paul A. Allen,
Visa's
executive vice president and general counsel. "The rule that is being
attacked
has been a cornerstone of the Visa product and market for the past 25
years." 
 
"Visa will pursue this with all due vigor," said Mr. Martaus. "It
challenges
their livelihood." 
 
Visa has a long and successful record of turning back such legal attacks.
It
beat a 1984 price-fixing suit by Nabanco, a merchant processing company
now owned by First Data Corp. In the 1990s, Dean Witter, Discover & Co.
was unable to crack Visa's exclusive bank-membership policy. 
 
In 1983 Nordstrom Inc. of Seattle stopped accepting Visa's debit card to
protest the credit-debit tying requirement, which jeopardized its status
as a
Visa merchant. Nordstrom brought, but quickly dropped, a lawsuit against
the card association -- and later offered a cobranded Visa card. 
 
One legal observer, who did not want to be named, said the Wal-Mart and
Limited claims against Visa will be difficult to prove "because the case
does
not fit into the traditional antitrust box. Most antitrust cases fail." 
 
The lead attorney for the retailers is Lloyd Constantine of Constantine &
Partners, New York, a former antitrust chief in the New York State
attorney
general's office. 
 
 
 
American Banker: Thursday, October 31, 1996
 
Microsoft's Web Software for Merchants Wins Support 
 
By JENNIFER KINGSON BLOOM
 
Six major banks and payment processors announced support Wednesday
for Microsoft Corp. software designed to promote Internet commerce. 
 
Microsoft developed the software, Merchant Server 1.0, with Verifone Inc.
It conforms to the Secure Electronic Transactions protocol for credit
card
payments and is said to make it easy for merchants to set up shop on the
World Wide Web in as little as a month. 

 
The financial institutions and processors that have signed on are
BankAmerica Corp., Citicorp, Wells Fargo & Co., Royal Bank of Canada,
First USA Inc., and Dean Witter, Discover & Co.'s Novus unit. They plan
to
handle a variety of on-line payments functions for merchants. 
 
Microsoft chairman Bill Gates conceded that Merchant Server addresses "an
area that today is very, very small," but added, "We believe there will
be
explosive growth." 
 
Bankers said their business customers are hankering for sales outlets on
the
Web.
 
"You have to fight them off with a stick," said Adrian Horsefield, senior
manager of alternative delivery products at Royal Bank of Canada. The
bank, Canada's largest, plans to use the Microsoft software to open a
"virtual
mall" in March. 
 
Citicorp is planning a pilot program in Germany. Wells Fargo,
BankAmerica,
First USA's Paymentech unit, and Novus have agreed to recommend
Merchant Server to customers. 
 
For the banks, the software serves as "virtual bricks and mortar," said
Hatim
A. Tyabji, chairman and chief executive officer of Verifone. "A lot of
the talk
(about on-line commerce) is about to be translated into reality." 
 
Michael Dusche, Microsoft's banking industry manager, said "a huge
banking
opportunity" beckons. 
 
"There's so much apprehension whenever Microsoft does anything in the
banking community," he said. "We will let the banks remarket the product,
offering it directly to their merchants." 
 
With the banks in control of the payment system, Mr. Dusche said, a
participating institution could decide to offer incentives to merchants
and
consumers who used the bank's credit cards for on-line payments. 
 
Microsoft, of Redmond, Wash., and Verifone, of Redwood City., Calif.,
said
last summer they were collaborating on a system to ensure secure
electronic
payments, built on the bank card industry's SET standard. 
 
Verifone, the leading supplier of point of sale terminals, contributed
its VGate
and VPos systems, which securely whisk payment information between
Internet buyers and sellers. 
 
Other companies have come forward with similar offerings for merchants,
including Netscape Communications Corp., Oracle Corp., and Open Market
Inc. But several observers said the Microsoft-Verifone program appears to
be the most comprehensive and has the advantage of being backed by
companies merchants know and trust. 
 
"A whole host of people are delivering merchant server technology," said
Ray
McArdle, group executive for technology at First USA Paymentech in
Dallas, adding that the combination of Microsoft and Verifone "is
potent." 
 
"It's a more powerful product to the merchant community, and it's simple
and
inexpensive to use," he said. "Almost any merchant can afford to become
involved in this new channel." 
 
Scott Smith, an electronic commerce analyst at Jupiter Communications in
New York City, said that while other companies are providing
"components," Microsoft's software is "the most comprehensive so far."
 
"We see the merchant server as a breakthrough product," said Cathy
Medich, Verifone's marketing director. "It's really targeted to helping a
merchant run his store."
 
One drawback, Mr. Smith said, is that the software works only on
Microsoft's Windows NT operating system. "Like most of their offerings,
it
looks great, sounds great, but there are lots of hidden strings
attached," Mr.
Smith said. 
 
To date, most merchants have had to rely on a patchwork of software tools
and payment techniques to do business on-line. 
 
"It's been tough for businesses to set these sites up," Mr. Gates said.
"Many
companies have spent over a million dollars setting up an Internet
commerce
site, and many of those just aren't so compelling." 
 
Mr. Dusche said small merchants will be able to set up a virtual store
for as
little as $3,500. At more sophisticated on-line stores, shoppers will be
able
to see more than just a flat image of each product. 
 
"If you're looking at a handbag, you'll be able to turn it around, open
it up
and look inside," Mr. Dusche said. "It has to be a compelling experience
for
the user - they have to be able to see more than text." 
 
Among the first merchants using the product will be the bookstore of the
University of California at Los Angeles. The system will allow students
to
enter a course number and order books directly, without waiting in line.
The
Tower Records site will allow browsers to listen to snippets of music.
 
About 50 merchants have said they will use the technology to open such
stores by yearend. 
 
Jane Moy, vice president and general manager of electronic commerce at
Novus Services, called the Microsoft-Verifone merchant server "the first
step" toward ubiquitous Internet commerce.
 


 
InfoWorld: October 28, 1996
 
Lucent, Visa Strike Phone Banking Deal 
 
By Kristi Essick 
 
Lucent Technologies Inc. this month announced that Visa Interactive will
use
its phone-based voice-recognition banking software as an extension of the
Visa electronic banking and bill-paying network. Under terms of the
agreement, Lucent will provide its Intuity Conversant voice-response
system,
which recognizes and processes natural language requests via telephone,
to
Visa-member financial institutions in the United States. 
 
The technology, already being used by many banks in the United States for
their own networks, will now be connected to Visa Interactive's vast
electronic banking network to enable financial institutions to offer
bill-paying
services via voice-recognition phone calls, according to Ry Schwark, a
Lucent spokesman. 
 
Using the service, customers will be able to make electronic payments to
businesses and individuals, receive notification of low funds, and access
their
accounts after entering a personal passcode. A request such as "Can I
find
out my balance?" or "Write check to Aunt Ethel" will be recognized by the
Intuity Conversant system and electronically processed via the Visa
bill-paying network without users ever having to write a check, said Ken
Pilecek, bank offers manager for Lucent.
 
To be eligible for the service, users must submit to Visa in writing a
list of
individuals and institutions. Once the service is activated, users need
only 
call
the voice system and enter a password to authorize money transfers to and
from any account, Pilecek said. 
 
The first financial institution to sign up for the bill-payment service
is 
Kansas
City, Mo.-based UMB Financial Corp., which will make the services

available to its 130 member banks in the Midwest, Schwark said. The
Intuity
Conversant software complies with Visa Interactive's Access Device
Messaging Specification, an open protocol for bill-payment services. 
 
The starting price for the software is $6,700 for small and medium-size
banks
with an Intuity Conversant hardware system already installed. For banks
that
need both software and hardware, pricing starts at $18,000. Large bank
applications start at $30,000. The service is available now in the United
States, but it won't be offered internationally until next year. 
 
Users can expect to see services in Canada, the United Kingdom, and
Australia by midyear, but non-English speakers will need to wait until
Lucent
releases foreign language versions of the voice-recognition software,
which
may take as long as a year, Pilecek said. In addition to language
considerations, Lucent and Visa must also alter the service to comply
with
differing international banking regulations, Pilecek said. 
 
Lucent, based in Murray Hill, N.J., can be reached at (908) 582-8500 or
at
http://www.lucent.com.
 
 
Bank Automation News: October 30, 1996
 
Technology Provides Internet Connection 
 
Banks will be able to provide customers with better service and improve
productivity levels in their call centers as Internet technology software
improves, say consultants.
 
"A year ago, people said [the Internet] was a phase, now it doesn't
matter if
it is a fad, you need to be there," says Sheila McGee-Smith, director of
analysis and forecasting at the Pelorus Group in Raritan, N.J. 
 
Security First Network Bank [SFNB], of Atlanta, is implementing an
Internet
call center in three phases over the next several months to consolidate
customer inquiries received through various communication channels,
including the voice response unit and E-mail. 
 
The software will be implemented by Quintus, of Freemont, Calif., into
the
data center of Atlanta-based Five Paces Inc., a wholly owned subsidiary
of
SFNB. The center will use tracking software to identify the caller when
they
dial into the center from another line or E-mail the bank and transfer
the
inquiry to an agent. The system also will allow the initial servicing
agent to
track the request to place any follow up calls, says Lisa Green a
spokeswoman for Quintus. 
 
The service model was designed in conjunction with Palo Alto,
Calif.-based
Hewlett-Packard, which will supply the middleware, Cambridge Technology
Partners, of Cambridge, Mass., which will help with the integration
process,
and Little Rock, Ark.-based Alltel, which will manage the call center. 
 
Banks can establish Internet links to their call centers to give
customers
access to account information and have an agent return their call.
Internet
telephony systems let consumers speak with an agent while viewing the
banks
World Wide Web page over a single line, but require both the agent and
the
customer to have an Internet connection, sound card, Internet phone
software, a microphone and speakers, says McGee-Smith. 
 
Consider Customer Demographics First 
 
Before you implement Internet call centers or Internet telephony systems,
consider the regional and geographic differences of your customer base,
say
analysts. Customers at Citibank, of New York, for example, may be more
comfortable using Internet applications than those at a rural bank, says
McGee-Smith. 
 
Other equipment providers are incorporating these capabilities into their
systems. Lucent Technologies, of Basking Ridge, N.J., is planning to
offer
Internet telephony functions to its Intuity Messaging Solutions and
Rockwell
Switching Systems Division, of Downers, Grove, Ill., also produced an
Internet telephony system with Netspeak, of Boca Raton, a telephone
software company. San Jose, Calif.-based Aspect Telecommunications
Corp. also has Internet telephony functions. Santa Fe, Calif.-based Edify
and
AT&T , of Parsippney, N.J., also are working on an Internet application.