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Update Newsletter: Fall 2009

PCC Workshops

During the course of the year, Payment Cards Center industry specialists organize a number of workshops on topics in consumer credit and payments. These internal workshops are most often led by invited presenters and follow a rather informal format. In some cases, the content discussed will lead to written discussion papers or future collaborations with the speaker; in other cases, the workshop will simply serve to educate the audience. Since its inception in 2000, the workshop series has grown to be a focal point for the center's research agenda. From January to October 2009, the Payment Cards Center hosted a record-breaking nine workshops, with two more currently in the planning stages. Highlighted here are some of the workshops hosted during 2009.1

March 2009

Criminals and Payment Cards: Evolving Threats Posed by Criminal Use of Payment Cards and Related Regulatory Challenges

Horacio Madinaveitia and Braddock Stevenson, FinCEN

Topics discussed:

  • Roles payment cards can play in criminal activities such as money laundering, as well as the challenges facing regulators.
  • Regulations currently in place.
  • The potential expansion of the term "monetary instrument" to include stored-value programs and access instruments under the Grassley Amendment to the Combating Money Laundering and Terrorist Financing Act of 2007.
  • Red flags that have been identified by suspicious activity reports (SARs) and/or enforcement actions.
  • How criminals use payment cards and payment card processing systems, and what might be done about it.

April 2009

The Electronification of Transit Fare Payments: An Issuer's Perspective2

James Locke, Jameson Troutman, and Krista Gallagher, JPMorgan Chase

Topics discussed:

  • How the adoption of electronic payments by mass transit operators is likely to alter the course of consumer payments.
  • How one major payment card issuer (JPMorgan Chase) views the electronification of transit fare payment systems.
  • Examination of how the transition from transit fare payment systems based on paper and coin (tickets and tokens) to systems based on payment cards is likely to influence consumer payment behavior outside of transit.

Paper forthcoming.

May 2009

Moving from Rankings to Rating

Joseph Breeden, Strategic Analytics, Inc. (Jointly coordinated with the Federal Reserve Bank of Philadelphia's Supervision, Regulation & Credit Department)

Topics discussed:

  • Credit scores and the U.S. mortgage crisis.
  • Scores and their use with Basel II regulatory capital.
  • Discussion of both the theory and practical aspects of building and using these scores.

June 2009

Limited and Varying Attention in Household Finance: Evidence from Shocks to the Salience of Penalty Fees

Jonathan Zinman, Dartmouth College, and Visiting Scholar, Payment Cards Center

Topics discussed:

  • The impact of varying attention on the payment of bank account and credit card penalty fees.
  • Measurement of fee payment using unusually rich, transaction-level, administrative data that span multiple accounts, across multiple providers, for each consumer.
  • Implications for disclosure policy and firms' strategy.

August 2009

Anatomy of a Data Breach and Heartland's Response

Robert Carr, Heartland Payment Systems

Topics discussed:

  • How the Heartland breach occurred and the company's post-breach efforts to improve coordination and information sharing among merchant acquirers and processors.
  • The need for measures to improve the security of consumer payments and review of three leading technology solutions aimed at better protecting cardholder information: tokenization, EMV/chip and PIN, and end-to-end encryption.

Paper forthcoming.

Discussion Papers

Discussion papers for many of the 2009 workshops are still works in progress; other workshops have broadened our expertise on a particular topic.

One notable Payment Cards Center workshop from the past that relates to current regulatory activity is "Unlocking the Risk-Based Pricing Puzzle: Keys to Cutting Credit Card Costs." The workshop took place in June 2007. This workshop resulted not only in a discussion paper,3 but it also brought together two Federal Reserve entities: the Philadelphia Fed and the Board of Governors. Below is a summary of this workshop's discussion paper, which can be found on the center's website.

Summary: On June 29, 2007, the Payment Cards Center of the Federal Reserve Bank of Philadelphia sponsored a workshop led by Jeanne Hogarth, program manager, Consumer Education and Research Section, Division of Consumer and Community Development Studies and Education, Federal Reserve Board of Governors, to discuss the Board's proposed changes to disclosure requirements for open-end credit, in particular, credit card billing statements and solicitation materials. Hogarth tied the proposed changes to her own research that identified certain behaviors most likely to affect the interest rates consumers pay for credit card borrowing. Given these research findings, Hogarth argued that having access to easily understood information about critical credit card terms and conditions can help consumers make more financially efficient decisions.

Check back at the center's events page4 for event postings and links to associated discussion papers.

Submit Your Ideas

Do you have a research topic that you think would benefit the center's workshop series? Is there a recent topic in the news that you wish to see on the center's research agenda? In 200-500 words, submit your ideas to the Payment Cards Center at philpaymentcardcenter@ E-mail.