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Thursday, December 18, 2014

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Update Newsletter: Summer 2008

From the Director

Welcome to this edition of Update, a periodic publication of the Payment Cards Center highlighting recent activities. Update complements the more complete content at www.philadelphiafed.org/payment-cards-center/.

The area of consumer credit and payments continues to be characterized by rapid and dynamic change. The recently released Federal Reserve Payments Study confirmed the continued migration to electronics, finding that two-thirds of all noncash payments in 2007 were made with payment cards and other electronic means. Spurring the pace of transformation are innovations in payment technologies, which now include the use of mobile phone devices. At the same time, the very structure of the industry is changing as the previous bank-owned network associations convert to public ownership and the merchant community becomes more organized and involved in related policy debates. Reflecting both the desire to improve underwriting practices and to safely expand portfolios, a number of credit card issuers are beginning to explore the use of alternative data sources to complement traditional risk metrics and better evaluate "thin-file" applicants. Again, this period of rapid innovation and change is reflected in the rise of consumer protection legislation and regulation to the forefront of policy debate.

In this issue of Update we highlight four papers written by two of the center's industry specialists that touch on key dimensions of the issues just noted. These papers, written by Ann Kjos and Julia Cheney, examine the structure and changing dynamics in the merchant-acquiring business, discuss how research on consumer financial behaviors influenced and informed selected aspects of the current proposed changes to Regulation Z disclosure requirements, examine consumer adoption of mobile banking and payments, and outline emerging developments in the use of alternative data in credit scoring.

In this issue we also highlight several examples of collaboration and outreach as important drivers of the center's agenda. In addition to the analytical efforts of our industry specialists, the Payment Cards Center has a strong commitment to primary research and works closely with colleagues in the Bank's Research Department and in academia. As an example of this collaboration, later in this issue we highlight papers presented as part of our fourth biannual academic conference co-sponsored with the Bank's Research Department. In another collaborative effort, the center recently hosted a major conference on payment card fraud in conjunction with the Electronic Funds Transfer Association. A brief overview of this event is included in this issue, and a full summary document will soon be available on our website.

Finally, in this issue we also describe and acknowledge the important contributions made by our panel of industry advisors in helping to inform the center's agenda. These and other relationships with the varied constituents in the consumer payments arena are critical elements in achieving our goal of helping to inform policy on important issues in consumer credit and payments.

As always, I invite your thoughts, comments, and suggestions as to how we might improve the effectiveness of our efforts.