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Welcome to this edition of Update, a periodic publication of the Payment Cards Center highlighting recent activities. Update complements the information available elsewhere on this website, including a complete list of the PCC's papers.
As we begin this year, I am reminded that it was a little over six years ago that the Philadelphia Fed created the Payment Cards Center. Looking back over this period, it seems to me that this has been an especially dynamic time and the pace of change shows little sign of abating. The rapid growth and significant innovations in consumer credit and payments have had a profound impact on consumers and the industry. At the same time, new risks and other challenges to market participants and policymakers have arisen.
From its beginning, the PCC’s goal has been to provide a forum to better understand underlying issues and help inform debate aimed at constructive solutions. As the PCC’s mission statement emphasizes, we work to achieve these goals through devising an agenda of market-driven research and by convening forums that encourage dialogue among a broad range of stakeholders. This issue of Update features several recent examples of efforts to address important concerns.
One of the more significant recent innovations in consumer payments has been the emergence of a variety of new payment applications based on the prepaid- or stored-value-card model. Over the past several years the PCC has hosted conferences focused on developments in the industry, written several frequently referenced research papers on the subject, and shared this accumulated learning on both an informal and a formal level with colleagues in the industry and policymakers.
Earlier this year, the PCC added two new prepaid card analyses to its Discussion Paper series; this issue of Update contains brief summaries of both. The first paper, “General Use Prepaid Cards: The Path to Greater Market Acceptance,” by former industry specialist James McGrath, attempts to respond to the question of why some prepaid card applications appear to be more successful than others. In developing his response, McGrath describes a number of characteristics shared by relatively more successful examples and outlines several innovations that he expects will spur new successes.
The second paper highlighted in this issue, written by the PCC’s Stan Sienkiewicz, addresses the question “Prepaid Cards: Vulnerable to Money Laundering?” This has been an especially vexing issue for many in law enforcement and the industry alike. In his analysis, Stan discusses how and why risk mitigation strategies aimed at deterring the use of prepaid cards for money laundering must necessarily be different from those used to combat traditional payment card fraud. In researching the topic, Stan spoke with colleagues in various government agencies, which have subsequently actively circulated this paper.
Among the most hotly debated subjects of late have been the well-publicized disclosures of data breaches and the resulting compromised cardholder information. To clarify the underlying issues and engage the wide range of affected stakeholders in a search for solutions, the PCC hosted a two-day conference last autumn on “Information Security, Data Breaches, and Protecting Cardholder Information.” Earlier this year, the PCC published a paper highlighting key insights developed during the conference, supplemented by additional and updated information. The paper has been well received and was recently featured as part of an industry-sponsored webinar connected to over 1,000 computers and, presumably, many more individuals.
Last, we also highlight a recent discussion paper written by another of the PCC’s industry specialists, Julia Cheney, on “Supply- and Demand-Side Developments Influencing Growth in the Debit Market.” The paper, which analyzes underlying dynamics in this fast-growing market, is based on an internal workshop hosted by the PCC and featuring Ron Congemi of First Data Corporation. In his presentation, Ron outlined results from First Data’s recently commissioned surveys examining changes in consumer demand and industry supply factors that have been affecting growth in debit transactions. The PCC regularly hosts such workshops to learn firsthand from market participants about industry trends and emerging issues.
I hope you enjoy reading this issue of Update and learning more about the Payment Cards Center’s commitment to exploring current issues and developments in the area of consumer credit and payments. As always, I welcome your thoughts and suggestions.