Card Network Research Articles

The Credit Card Anti-fraud Detection Model in the Context of Dynamic Integration Selection Algorithm

Because of its close relationship with information technology, every change in the field of information technology will have an important impact on the means, time and space distribution of the final fraud of the credit card network. The rapid development and popularization of artificial intelligence (AI) software based on Deepfake technology has greatly promoted the intelligent transformation of credit card network fraud. Through the use of advanced hardware and software equipment, criminals have iterated on their own fraud tools, from the use of traditional phone calls and text messages to the use of the latest AI software. Therefore, for the problem of credit card fraud detection with missing data set labels and highly unbalanced category distribution, A credit card approval anomaly detection model DES-HBOS (Dynamic Ensemble Selection based on Histogram-based Outlier Score) is proposed. Firstly, the unsupervised anomaly detection algorithm is used to construct the false label of the training set customer. Then, the customer capability area to be measured is determined, and the classifier performance is evaluated according to Pearson correlation coefficient. Finally, a set of optimal classifiers is selected to integrate the test customers. Experiments on real credit card customer data sets show that DES-HBOS has a higher Recall and can identify more fraudulent customers than other 6 classical anomaly detection models. Comparative experiments were carried out on 4 unbalanced data sets, and the experimental results showed that DES-HBOS had stronger anomaly detection ability than HBOS.

The Impact of Customer Value, Price, Brand Image and Service Quality on Customer Satisfaction on XL Prepaid Card 4G Network in Bekasi City

This study has intention to identify the impact of Customer Value, Price, Brand Image and Service Quality on Customer Satisfaction on the 4G XL Prepaid Card Network in Bekasi City. The design of this research is descriptive and causality. Purposive sampling was used with 115 respondents. The analysis method uses multiple regression and processed with IBM Statistic 20. From this research it can be concluded that from all dependent variables only Price that has no impact on Customer Satisfaction.

The Proportional Fee, Transaction Fee and Membership Fee

There are in general three types of fees used by platforms: the fixed membership fee, transaction fee and proportional fee. In real-life, all three fees are used by different platforms. Often, the fee charged by the market maker is a combination of the fixed, transaction and proportional fees. We try to offer a rationale for the usage of these fee structures. Compared with the transaction fee, the profit for the platform is higher under the proportional fee. If the consumption value is high enough, then the profit under the membership fee is the lowest. If the value is low enough, then the profit under the membership fee is the highest. If the value is in the middle, then the profit under the membership fee is in the middle as well. However, when we allow free entry of merchants, results are different. The profit of the card network could be lower under the proportional fee than the transaction fee with free entry of merchants. Equilibrium under the proportional fee and the membership fee is the same. Consumer surplus is lower under the transaction fee than the proportional fee and the membership fee. But social welfare could be higher under the transaction fee. We also consider regulation of the fee structure and the optimal fee.

Assessing the Competitive Effects of Surcharging the Use of Payment Mechanisms

The Department of Justice’s theory of liability in its case attacking the non-discrimination provisions in American Express’s merchant acceptance contends that point-of-sale competition on the price of making a purchase with a credit card is an instrument creating economic efficiency. That is, the economy would run more efficiently, and consumers would be better off, if merchants were free to charge variable prices for different types of credit cards. After all, charging different prices for using different types of payment mechanisms appears to be just another form of presumptively positive price competition. The Second Circuit rejected that conclusion, recognizing that in credit card markets competition already occurs at multiple points. American Express must compete to: • convince cardholders to apply for and use its cards; and • convince merchants to accept its cards. The question, the Second Circuit correctly recognized, is whether adding a third type of competition – for cardholders to use the card when merchants pass through their card acceptance fees – would make American Express’s card network more efficient? By prohibiting merchants who accept American Express cards from discriminating against the brand, the card company imposed a unilateral vertical restraint. Such restraints are often deemed to be reasonable under the antitrust laws because they may “stimulate inter-brand competition.” This is because an upstream provider, like American Express, has little interest in reducing its downstream sales. It would only impose a vertical restraint if that restraint efficiently helped it to sell more products. Only when an upstream or downstream provider has market power enabling it to impose restraints that harm consumers by raising price or lowering quality does a vertical restraint violate the antitrust laws. The Department of Justice’s theory postulated that the non-discrimination provisions in American Express’s merchant agreements harmed consumers by effectively requiring merchants to increase their prices to cover higher credit card fees for all customers because merchants could not pass the cost of accepting American Express directly to American Express’s own customers. The Second Circuit acknowledged the potential for consumer harm would exist if American Express charged merchants supra-competitive prices and pocketed the excess as rents. But the court held that the government failed to prove that rivalry on the price consumers pay to use a credit card at the point of sale would increase efficiency in credit card markets. As the Second Circuit explained, credit card markets are two-sided. In order to prove harm to consumer welfare in a two-sided market, an antitrust plaintiff needs to show that a restraint makes the overall system less efficient. That is, do consumers overall pay more for less because of the restraint. A card network like American Express must compete for both cardholders and merchants. One therefore cannot demonstrate that price increases on one side of the market are inefficient without examining how those prices impact competition on the other side of the market. American Express argued that it used increased revenue from the merchant side to offer a better card product to its cardholders and compete more effectively with other card networks, like Visa, for cardholder loyalty. The Second Circuit did not definitively decide whether American Express’s non-discrimination provisions were pro- or anticompetitive. It simple concluded that two-sided market economics made the question more complex than the government plaintiffs acknowledged in trying the case. And based on the record evidence, the court couldn’t tell whether the non-discrimination provisions made the market more or less efficient. Since the plaintiff bears the burden of proving harm to competition, i.e. a reduction in efficiency to the overall market, the government plaintiffs had failed to prove their case. Part I reviews the economics of two-sided markets and provides reasons to conclude that non-discrimination provisions in credit card markets are efficient. Part II explains that two-sided market economics do not guarantee against supra-competitive merchant fees that would make the market less efficient. It then contrasts Visa’s and MasterCard’s fees in the 1990s and early 2000s – which were challenged by merchants in a class action – with American Express’s current fees. It concludes that the factors giving the merchants a plausible case against Visa and MasterCard do not support the government plaintiffs in their case against American Express. Part III addresses a systemic concern expressed in a recent New York Times editorial about how a decision in American Express’s favor might impact the future enforcement of antitrust claims against dominant firms. This Part concludes that those concerns are unfounded because truly dominant firms would be subject to scrutiny under Section 2 of the Sherman Act, and Section 1 vertical restraint cases already require proof of consumer harm no different from what the Second Circuit required in its decision favoring American Express.

Pandora's Digital Box: Digital Wallets and the Honor All Wallets Rules

Digital wallets are poised to transform the world of retailing. These digital wallets, such as ApplePay and Android Pay, are “smart” payment devices that can integrate payments with two-way, real-time communications of any type of data. Integration of payments with real-time communications holds out tremendous promise for retailers: the combination in a single platform of search, advertising, payment, shipping, customer service, and loyalty programs. Such an integrated retail platform offers brick-and-mortar retailers a potentially superior ability to identify, attract, and retain customers, bringing eCommerce-type platforms into the brick-and-mortar environment. At the same time, however, digital wallets present materially different risks for merchants than traditional plastic card payments precisely because of their “smart” nature. Digital wallets can reallocate flows of consumer data from merchants to financial institutions, depriving merchants of valuable customer information used for anti-fraud, advertising, loyalty, and customer service purposes. Digital wallets can also facilitate poaching of customers by competitors, impair merchants’ customer relationship management, deprive merchants of influence over tender choice and payment routing, increase fraud risk, subject merchants to patent infringement liability, and ultimately increase the costs of accepting payments. All of this suggests that merchants would accept digital wallets only selectively, based on the overall package of risks and rewards offered by any particular wallet. Merchants, however, are highly constrained in their ability to refuse or condition payments from digital wallets because of “Honor All Wallets” rules promulgated by American Express, MasterCard, and Visa for merchants that accept payments with their network brands. The Honor All Wallets rules require merchants to accept all network-branded payments from any device that uses a communications technology accepted by the merchant — magnetic stripe, Near Field Communications, QR codes, Internet, etc. The Honor All Wallets rules thus tie acceptance of a card network’s payments via digital wallets to the acceptance of traditional plastic cards that use the same communications technologies. The Honor All Wallets rules force merchants to accept payments from all digital wallets utilizing a card network brand, irrespective of the wallet’s risks. Honor All Wallets presents merchants with a digital Pandora’s Box. The Honor All Wallets rules also skew the competitive landscape for digital wallets. By preventing merchants from accepting only certain brands of payments from digital wallets, the Honor All Wallets rules foreclose entry to digital wallets that offer the most attractive valuation proposition for merchants — those that make low-cost PIN-debit and ACH payments. The Honor All Wallets rules thus artificially increase the market shares of the high-cost credit and signature debt products of American Express, MasterCard, and Visa in the payment card network services market. By facilitating consumer use of high-cost wallets, the Honor All Wallets rules ironically impede the adoption of digital wallets altogether. Accordingly, this Article argues that the Honor All Wallets rules should invite serious antitrust scrutiny.

The Processor and the Contractual Matrix in a Card Scheme: How Privity Fell and Resurrected in Aldo V. Moneris

Participants in a typical interbank payment card transaction are a cardholder, a merchant, an issuing bank and an acquirer (the merchant's bank). The issuer incurs a payment obligation, which benefits either the payee-merchant or the acquirer. The issuer and acquirer are member banks in a card network asscoiation that establishes rules and standards governing the issuance and use of the cards.

THE ROLE OF NEW INFORMATION AND COMMUNICATION TECHNOLOGIES IN THE PERFORMANCE OF PUBLIC RELATIONS (CASE STUDY: ELECTRONIC PAYMENT CARD NETWORK "SHAPARAK")

The main objective of this study is the role of new information and communication technologies in the performance of public relations (case study of Shaparak network). This survey method is scrolling and measuring tool is a questionnaire. The statistical society of present research is shaparak's staffs that are 90 peoples based on Statistics. Sampling in this study were all counting. The results showed that the use of new information technologies and communication and information gathering is a significant relationship in public relations. This means that the use of new information technologies and communication, and public relations increases collecting information on public relations is also increasing. Also, between the use of new information technologies and communication and planning in public relations, there is a significant relationship. The use of new information technologies and communication and public relations there is a significant relationship, this means that the use of new information technologies and communication is increasing the communication in public relations is also increases. The results of this research also showed that the use of new information technologies and communication and public relations measurement and evaluation is a significant relationship. Today enabling information technology is raised as a tool for managers and employees. The electronic public relations can have played a key role as the information communication units in optimizing the information architecture process of organizations and this is true to Shaparak electronic payment card network.

Cybersecurity, Data Breaches, and the Economic Loss Doctrine

Data breaches are pervasive and costly. Recent civil data breach cases have centered on the consumer credit card payment chain in the retail industry. An important issue in such cases is whether the economic loss doctrine should bar negligence claims for purely pecuniary losses suffered by a non-negligent party, such as an issuing bank or a federal credit union that must incur costs to reimburse cardholders for fraudulent use of stolen card numbers. The economic loss doctrine should not bar these claims. Large scale data networks, such as the consumer credit card network, often entail significant network externalities. These include externalities relating to market concentration as well as to the weakest link nature of security in these networks. Although the primary players in these networks are tied together in a complex web of contractual relationships, there are significant transaction costs involved with any effort to change or monitor another party’s security measures. Moreover, outside entities such as third party payment processors, which are not in contractual privity with all other parties in the network, have become ubiquitous. Under these circumstances, a negligence rule should help improve cybersecurity hygiene and promote a more robust cyber risk insurance market.

Innovation Governance Competition: Payment Modernization Strategies in India and China

After decades of trade liberalization and ever greater integration of domestic economies into global markets, actors in both public and private sectors recognize the importance of innovation as a source of global comparative advantage. At the same time that governments in advanced market economies compete to foster innovation ecosystems within their domestic economies, private enterprises are complicating governments’ calculations by spawning new private global governance institutions. Payment card networks such as Visa and MasterCard are examples of global private regulators that can leverage their power in global markets to challenge the authority of local regulators. Public regulators in advanced market economies have used a variety of policy instruments to try to reassert their control over card networks, with only modest results. Both China and India have recently launched aggressive payment system modernization strategies as part of their national economic development plans. As part of those payment system modernization strategies, China launched China UnionPay in 2002, and by 2014, China UnionPay had become the second largest card network in the world, ahead of MasterCard and behind Visa. India is pursuing a more complex, standards-based payment system modernization strategy, and launched the RuPay card network in 2010 as part of its financial inclusion strategy. China and India have simply sidestepped the problem of how to control platform operators with de facto regulatory powers by launching competing national card networks to promote local economic development and block the local influence of global card networks at the same time.

Algorithm Implementation and Method of Virtual Meshing Division of Complex Blade

This paper uses the ORACLE database system and Ballista testing tools to set up the virtual simulation platform of computer network, and to establish the mathematical model and algorithm of network virtual reality. In order to validate the validity and reliability of the designed model and algorithm in this paper, we carry out the numerical simulated experiment with NI cDAQ chassis, four channels data acquisition card and B-PLC network card and other hardware equipments, which has successfully divided the virtual grid of the complex blade, and from the system test, we can find that the hardware system has improved the performance of network transmission, and the quality of network video transmission. Finally, we apply the computer simulation system to the practice platform of network democracy, and introduces the democratic politics video conference and the network democratic political opinion box system in the platform.

The Future Requires Collaboration, and the Future is Now

AbstractDisruptions and unexpected shifts are bound to happen to you and your organization, causing pain, according to Leavitt and McKeown, that can best be alleviated by teaming with others who are also feeling pain. This means forming what they call a “value alliance,” a “group of participants with aligned interests pursuing an outcome with value for each of them.” These collaborators are brought together by a distinguished individual known as a “convenor of stature.” Examples include such disparate cases as the forming of the Visa credit card network, and even the formation of the United States of America more than 200 years ago.

Why do Payment Card Networks Charge Proportional Fees?

I extend Shy and Wang's (2011) model and study the problem of successive monopoly when complementarity is imperfect. In my model, consumers value the good no matter they pay in cash or by card. However, they are willing to pay a higher price if they can enjoy additional card service. Since merchants can sell at a lower price without providing card service, their outside option imposes a participation constraint on the card network's maximization. I show that double marginalization does not arise as long as the constraint is binding, and the constraint is binding if and only if the degree of complementarity is smaller than a critical value. If double marginalization does not arise, the effects of proportional fees found in the S-W model become ambiguous.

Open Network Recharge System Architecture for Public Transportation Card

In this paper, we propose an open network recharge system for public transportation smart card user to complete recharge. The network recharge system is mainly to cater the urgent need of providing convenient smart card recharge services. The proposed system is consisted of smart card secure reader, network platform and operator system. In order to take advantages of these three components, this paper will pay attention to security scheme and data transmission protocols of the proposed system. The security scheme promises the safety of transactions and data transmission. And the data transmissions protocols help complete the interactions among these three components.

Research on the Campus Card's Network Depositing Platform Construction - As Nanchang University for Example

As an information carrier, campus card has the functions of campus consumption, identity authentication, library management, and seeing the doctor in school hospital etc.. At present, there are three representative campus card depositing mechanism namely cash recharge, recharge and depositing through depositing machine and the recharge and depositing by the Bank deducting, all of which have the shortcomings of cumbersome process, information disclosure, the limit of the deposit amount and so on. For these, we put forward the web-based campus card's deposit programs - network recharge and depositing as well as the improvement program for the terminal POS. What's more, we came up with the agreed function dynamically password to ensure the user's financial and service security.

Interchange fee rate, merchant discount rate, and retail price in a credit card network: A game‐theoretic analysis

AbstractWe consider two game‐theoretic settings to determine the optimal values of an issuer's interchange fee rate, an acquirer's merchant discount rate, and a merchant's retail price in a credit card network. In the first setting, we investigate a two‐stage game problem in which the issuer and the acquirer first negotiate the interchange fee rate, and the acquirer and the retailer then determine their merchant discount rate and retail price, respectively. In the second setting, motivated by the recent US bill “H.R. 2695,” we develop a three‐player cooperative game in which the issuer, the acquirer, and the merchant form a grand coalition and bargain over the interchange fee rate and the merchant discount rate. Following the cooperative game, the retailer makes its retail pricing decision. We derive both the Shapley value‐ and the nucleolus‐characterized, and globally‐optimal unique rates for the grand coalition. Comparing the two game settings, we find that the participation of the merchant in the negotiation process can result in the reduction of both rates. Moreover, the stability of the grand coalition in the cooperative game setting may require that the merchant should delegate the credit card business only to the issuer and the acquirer with sufficiently low operation costs. We also show that the grand coalition is more likely to be stable and the U.S. bill “H.R. 2695” is thus more effective, if the degree of division of labor in the credit card network is higher as the merchant, acquirer, and issuer are more specialized in the retailing, acquiring, and issuing operations, respectively. © 2012 Wiley Periodicals, Inc. Naval Research Logistics, 2012

The Economics of Two-Sided Payment Card Markets: Pricing, Adoption and Usage

This paper provides a new theory for two-sided payment card markets by positing better microfoundations. Adopting payment cards by consumers and merchants requires a fixed cost, but yields lower marginal costs of making payments. Considering this together with the heterogeneity of consumer income and merchant size, our theory derives card adoption and usage pattern consistent with cross-section and time-series evidence. Our analyses also help explain the observed card pricing pattern, particularly the rising merchant (interchange) fees over time. This is because a private card network, besides internalizing the two-sided market externality, has the incentive to inflate the card transaction value. We show that privately determined card pricing, adoption and usage tend to deviate from the social optimum, and imposing a ceiling on interchange fees may improve consumer welfare. ; Also issued as a Payments System Research Working Paper.

Competition is Bad for Consumers: Analysis of an Artificial Payment Card Market

This paper investigates the competition between payment card network platforms in an artificial payment card market. In the market, we model the interactions between consumers, merchants, and competing card schemes and obtain their optimal pricing structure. We allow platform operators to charge consumers and merchants with fixed fees, provide net benefits from card usage/acceptance, and engage in marketing activities. We assume that the consumer side exhibits lower demand elasticity. With these settings, we establish that consumers benefit from a reduction of the numbers of competing payment cards through lower fees and higher net benefits, while merchants remain largely unaffected. The two-sided nature of the market leads to the result that having more competitors actually reduces prosperity for customers.

Merchant Fee Determination in Unitary Networks with Price Competition Among Merchants

This paper investigates the determination of the merchant usage fee of a monopolistic unitary payment card network based on characteristics of the downstream market. Merchants engage in Bertrand price competition that allows for an observation of heterogeneous products. We find that the payment card network extracts a part of the economic rent that merchants obtain. The higher this rent, the higher the corresponding merchant usage fee. The rent, and consequently the merchant usage fee, is increasing in the downstream market size but decreasing in the price elasticity of consumer demand, as well as in the substitutability of products, and, interestingly, in the fraction of consumers preferring card payments.

Credit card interchange fees

We build a model of credit card pricing that explicitly takes into account credit functionality. In the model a monopoly card network always selects an interchange fee that exceeds the level that maximizes consumer surplus. If regulators only care about consumer surplus, a conservative regulatory approach is to cap interchange fees based on retailers’ net avoided costs from not having to provide credit themselves. This always raises consumer surplus compared to the unregulated outcome, sometimes to the point of maximizing consumer surplus.

Multi-Party Payment Card Network Pricing Determination of Merchant and Interchange Fee

In this study, a multi-party payment card network model is constructed to explore the determination of merchant and interchange fees, thereby extending Langlet’s (2009) observation of unitary payment systems. The focus of this analysis was on the impact of consumer price elasticity, the relative frequency of card usage, and the competitive condition of merchants in the determination of network fee payments. To accomplish this, two scenarios are analyzed; first, a network with homogeneous banks that serve both sides of the payment market, therefore acquiring and issuing cards in an equal manner and second, financial institutions that exclusively serve as either issuers or acquirers. The model yielded two significant results. First, similar to the Langlet (2009) case of unitary payment networks, the consumer price elasticity, the relative frequency of card usage, and the competitive condition of merchants were found to determine the prices of the multi-party payment system. Second, limiting the interchange fee is found to be efficient in regulating the inefficiently high merchant usage fees.A summarized version of this working paper is forthcoming in Lydian Payments Journal.