Prepaid cards - US bank hacker faces long jail term. Image copyright AP A Turkish man alleged to have masterminded the theft of more than $55m (£39m) has pleaded guilty in a US court. Ercan Findikoglu is believed to have co-ordinated the attacks, which used mules to withdraw money from cash machines around the world. US prosecutors said hack attacks on three payment processing companies aided the widespread theft. The charges he faces carry a potential jail term of more than 50 years. The gang won access to computer networks let them inflate balances and remove withdrawal limits on pre-paid debit cards.
Copied cards were then used to withdraw money via cash machines in a series of co-ordinated operations carried out between 2010 and 2013. One operation by the gang went after cards issued by JP Morgan Chase that helped the American Red Cross raise money for disaster relief. Findikoglu pleaded guilty to several different charges including "computer intrusion conspiracy" for leading the hacking spree. T-Mobile wants to be a bank with new checking accounts for customers. T-Mobile today announced Mobile Money, a new program that manages personal finance and links with a prepaid Visa card that offers free checking, free ATM withdrawals, and no associated costs with overdrafts or maintaining accounts. T-Mobile has basically decided to become a bank.
Mobile Money is designed to function as any other checking account. Customers who sign up are able to deposit funds by taking a photo of a check or signing up for direct deposit. The Visa Prepaid Card given to account holders can pay for items online or anywhere that Visa is accepted, and it can also be used to withdraw cash from "partner" locations that do not have any fees (42,000 locations in US). Android and iPhone users will be able to download the Mobile Money app to handle deposits, transfers, bill pay, and finding ATM locations that will not have withdrawal fees.
There does not appear to be any BlackBerry 10 or Windows Phone 8 app on T-Mobile's website, but that might change in the future. Wal-Mart checking accounts part of a growing low-cost banking trend. Wal-Mart Stores, the nation’s retailer, is jumping into banking with the help of Green Dot, which also provides prepaid debit cards to the chain. With GoBank, Green Dot provides a low-fee checking account that comes with a debit MasterCard as well as online and mobile options. The overdraft-free accounts will be available at stores nationwide by the end of October.
While a fee of about $3 is required initially, a monthly charge of almost $9 can be avoided by having at least $500 in direct deposits made during the period, Green Dot’s website says. Wal-Mart’s long-expected move comes as some of the biggest U.S. banks have offered low-cost options to attract consumers who don’t have bank accounts, a surprisingly large group.
Surveys suggest some consumers avoid setting up a checking account out of fear they may run up overdrafts or bounce a check, incurring fees that often reach $35 or more for each instance. GoBank specifics To get started, you have to buy a kit for $2.95. Growing trend. Banks barreling into the prepaid debit card market. These efforts offer potential legitimacy to an industry that has existed in the shadows for decades with less government oversight and a reputation for high fees. Some regulators see the market shift as an opportunity to address the growing population of people who have no access to the banking system. But the industry’s explosive growth, and large banks’ push into the market, has left some consumer advocates worried that low-income consumers will be trapped outside the banking system without the protections inherit in traditional checking and savings accounts.
The industry needs more oversight to ensure that players in the market aren’t simply profiting from low-income consumers by charging exorbitant fees, advocates say. “Electronic cards are a good way to get people into the banking system, if they are low cost and operate similar to other accounts banks offer,” said Mark Pearce, director of the division of consumer protection at the Federal Deposit Insurance Corp. Younger Customers More Likely to Consider Prepaid: Survey. Can the Payday Loan Be Reinvented? There's been some speculation that payday lending is set to have a big year. And with good reason. As mentioned in American Banker's "8 Nonbanks to Watch in 2013," several tech startups have made short-term credit the sole focus of their business model. The slideshow mentions ThinkFinance, an online business that uses data collected via social media to drive down the cost of a short-term loan, and Wonga, a short-term lender based in the U.K. that is considering a trip to this side of the pond.
Other companies are targeting the space. ZestFinance, a Hollywood, Calif., company, is marketing an underwriting model to lenders that it claims has a default rate 50% better than industry average. While these companies' business models vary, their ultimate goal appears to be the same: use some form of big data to drive down the cost of a loan so underserved customers can get credit without paying an exorbitant price.
There's certainly a demand for this type of product. How a Few Simple Controls Could Have Prevented $45 Million Bank Heist. The international ATM heist that lifted $45 million two Middle Eastern banks could have been prevented had better security controls been in place at the card processors, the ATMs and the banks involved, observers say. The security lapses could lead to legal liability for many of the companies duped in the process. The banks involved, National Bank of Ras Al-Khaimah in the United Arab Emirates, known as RAKBANK, and Bank of Muscat in Oman, should have been monitoring accounts whose limits were lifted in the scam. Chip-and-pin technology could have prevented fake prepaid cards from being accepted at thousands of ATMs.
And better security at the prepaid card processors could have caught the scam, experts say. In the caper, eight people in New York allegedly used prepaid cards encoded with information stolen by hackers to drain $45 million from ATMs. The suspects are said to be part of an enterprise that stretches across 26 countries. There could have also been better security on the ATMs.
Banks Can Do Well Doing Right by Underbanked. Editor's note: A version of this post originally appeared on LinkedIn. A battle is underway for the pocketbooks of the 68 million unbanked and underbanked adults in the U.S. In one corner are bankers, stuck in slow- or no-growth markets. They're covetous of any profitable new customers they can scrounge up—but fearful that any moves to profit off the underprivileged will end badly. In the other corner is the lightly regulated shadow banking system, offering everything from payday and tax-refund anticipation loans to international remittances and rent-to-own financing. The challenge: The unbanked and underbanked population skews poor and minority. The financial products they use tend to skew expensive and poorly disclosed. Regulators and consumer advocates have long been aware of this problem, but the advent of the Consumer Financial Protection Bureau has added new impetus to their angst. There is good news.
Jumping into the mix are banking outsiders. Chase s Prepaid Card Makes Inroads with Underbanked. EMV Could Make Prepaid Cards Prohibitive to Issue, Unless. While it's hard to deny that chip cards are more secure than magnetic stripe cards, it's equally hard to deny they cost more, too. When it comes to debit and credit cards, Visa and MasterCard argue the expected fraud reduction from moving to chip-and-PIN make that extra unit cost worthwhile. However for prepaid cards, the story may be different. While the opportunities are big – a MasterCard study last year predicted the global market for prepaid would grow to $822 billion by 2017 – the margins are small. High fixed costs and a typically short card life span mean relatively low levels of profit. For example, research by the Prepaid Card Center at the Federal Reserve Bank of Philadelphia in 2012 showed that cards are typically used for six months or less, limiting the fee and interchange revenue the cards can generate.
For prepaid products like one-time-use rebate cards, that extra $1 could really cut into margins. There appear to be two possible ways out of this. McDonald s Budget Backlash Hits Visa, Payroll Cards - People Article. An online backlash over low wages at McDonald's (MCD) has drawn in Visa (NYSE:V), the processor of the payroll cards the fast-food chain uses to pay its employees. The widespread criticism comes at a time when payroll cards in general and McDonald's version in particular are drawing mounting scrutiny for the fees they charge workers to access their own wages. News outlets this week widely ridiculed a "sample budget" website that McDonald's and Visa created for the restaurant chain's employees. The budget includes several unrealistic expense assumptions, including the claims that people could pay as little as $20 per month for health insurance and nothing for heat.
The website also underscores just how little McDonald's pays its minimum-wage workers — and blasted Visa by association. In an email, a McDonald's spokesman called the sample budgets "generic examples" that "are intended to help provide a general outline of what an individual budget may look like. " Visa declined to comment.