Asians buy, South Americans browse

Almost half of internet users around the world plan to make an online purchase in the next six months, but those in Latin America are more likely to restrict themselves to browsing than buying, unlike their Asian counterparts, according to new research.

The Nielsen Global Survey of E-commerce polled more than 30,000 internet respondents in 60 countries to examine the online shopping and purchasing intentions of consumers worldwide.

Both Latin America and Asia-Pacific surpassed the global average for all 22 categories considered when it came to online browsing, but actual buying rates were among the lowest in Latin America and among the highest in Asia-Pacific.

Nielsen noted that in 14 categories buying rates in Asia had exceeded browsing rates, so comfortable were consumers there with buying online. This was particularly true of China, which Patrick Dodd, Nielsen China managing director, described as “one of the furthest along on the e-commerce maturity curve”.John Burbank, president of strategic initiatives at Nielsen, said the online retail infrastructure in Latin America had yet to catch up with offering conversion opportunities. “Other barriers to e-commerce success include internet access, shipping costs, high taxes and problematic delivery logistics,” he added.

One possibility that could encourage greater take-up of ecommerce in developing markets, he suggested, was to use mobile to attract new buyers, as this provided greater and faster access to more people.

Online browsing and buying percentages were similar in western Europe and North America, where online retailing is now simply one more channel competing for market share. The Middle East and Africa, however, were lower than average, largely because of a lack of opportunity.The categories most likely to feature in online purchase intentions over the next six months were clothing (46%), and airline (48%) and hotel (44%) reservations, and Nielsen noted a largely one-to-one correlation between browsing and buying for these.

Consumable products had lower online browse/buy intention rates than non-consumable products, but their browse-to-buy correlation rates were equally strong. Thus, 33% of global respondents said they browsed cosmetics, with 31% buying; 31% browsed personal care products, 29% bought; 30% browsed groceries, 29% bought.

The browse-to-buy spread became more significant for high-priced items, such as consumer electronics and cars.

Burbank pointed out that strong online browse-to-buy conversion rates translated to loyal repeat customers. “Now is the time to create omni-channel experiences for consumers who are actively using both digital and physical platforms to research and purchase,” he urged, “as consumers increasingly don’t make a distinction between the two.”

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What you need to know about Merchant category codes (MCC)

Accepting credit and debit cards as a payment option can be a highly profitable choice for most merchants, as it offers customers the convenience of one of the most commonly and easily used forms of payment, thereby making it simpler for them to patronize the merchant’s business and potentially spend more than they otherwise might. However, as any merchant who has applied for a payment card processing account is aware, not all merchant accounts are the same. When a business first applies to a processing institution for an account, it is assigned a merchant category code (MCC) based on the primary kind of business it offers. This four-digit code was originally implemented in 2004 as a means of simplifying tax reporting, but has since expanded to have a number of other applications.

Merchant category codes allow payment card processors to describe succinctly the type of market segment a given business occupies based on the primary form of goods or services it offers. A restaurant, a gas station, and a computer software store will each have a different MCC number that indicates the sort of merchant it is. The original purpose for these codes was to make 1099 reporting simpler for commercial customers, who needed to report payments made for the purchase of services, but not for goods, on their tax forms. Rather than having to review each individual transaction, they could simply refer to the merchant’s MCC number to indicate whether the business was listed as a seller of goods or a service provider.

Since then, merchant category codes have been put to other uses, some of which have more immediate relevance for the merchant itself. Credit card processing companies charge an interchange fee for each transaction they process. The interchange fee is separate from the markup these companies apply for their own profit, and reflects the expected risk of chargebacks and refunds for transactions of a given type. Interchange fees vary based on a combination of factors, including the type of payment card being used, whether the transaction is keyed, swiped, or online, and what kind of business is receiving the payment. This is where your merchant category code comes into play. Certain types of businesses carry a lower risk for payment processors, and thus have lower interchange fees for the merchant. By ensuring that your merchant category code is accurate, you may discover that you qualify for a different interchange rate, which could be lower than the typical rates.

Another usage of merchant category codes is most relevant to your customers, but a savvy merchant may be able to exploit it to make their business a more appealing place to spend money. Many credit cards offer rewards, such as cash back or airline miles, to cardholders who use their card for transactions at certain types of businesses. Some will offer double or triple points when the card is used to buy groceries, gas, prescriptions, or similar everyday needs. Whether these bonuses apply is determined by the MCC number of the terminal where the transaction takes place. Which code a given merchant has been assigned isn’t always obvious – often, different store locations within the same franchise will have different merchant category codes. For instance, one Target store might be categorized as a grocery store, but the Target in the next town may have the MCC of a discount store. Some stores have separate MCC numbers for their pharmacy terminals. Ensuring that your MCC number is accurate and reflects a business type that offers maximal rewards to your customers can make your business a more attractive place to shop.

We have a team of experts to answer any additional questions you may have regarding MCC Codes or merchant accounts in general. Contact us at below:

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Congratulation to Raptor Team again !

British F1 side car racing took place in Brands Hatch, Kent UK last weekends 18-20 July.

Great news from Paymundo sponsored car- Raptor Race 57.

Fantastic performance by Tony Brown and Ashley Hawes to get 3rd from back of the grid !!

 

Well deserve it, mates !!

okay, we  have seen a lot of front view of the car. Ever wonder how it looks like back of the car…

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Top 10 Best Banks in the World 2014

With United States put behind the race, this Top Ten gathers the most powerful and influential banks in the world for the year of 2014. Discover which bank is ranked at top of the biggest bank in the world.

1. Malaysian Bank

The first place comes to Malaysian bank. The institution is renowned thanks to its reliable, repute and customer-friendly loan and banking services. More than that, it greatly gets involved in empowering the finance and economy of Malaysia. It is one of the reasons why the country is not developed and the paradise for investors.

2. Bayerische Landesbank Germany

Coming in the second position is the dominating banks of Germany. It is making the country’s economy strong and powerful. Bayerische Landesbank’s non-performing assets are 0.17 for this year.

3. Credit Suisse Bank of Switzerland

Credit Suisse arrives on the third position with 0.15 estimated non-performing assets. It is the most reliable and strongest bank in Switzerland. Many multinational companies from all around the world choose to keep their money saved therein.

4. Oversea Chinese Bank

With estimated non-performing assets of 0.13, China is famous for its banking solutions that even overseas investors rely on. Oversea Chinese Bank managed to empower the country during the past few decades.

5. Qatar National Bank

Fulfilling their reputation of being super powers, United Arab Emirates and Dubai are also famous thanks to Qatar National Bank. Bank loans and offers are trustworthy. It owns total non-performing assets of 0.11.

6. Toronto Dominion Bank

On the next position arrives Toronto Dominion Bank with estimated non-performing assets of 0.9. The bank is hundred percent evolved in strengthening the country’s economy and financial situation.

7. BOC Holdings Hong Kong Bank

Whether for exchanging currency or opening an international account, BOC Holdings Hong Kong Bank is the reference in this term. It is the most recommending bank in Hong Kong with a total of 0.7 non-performing assets.

8. OP Pohjola Bank

Renowned as being the most powerful bank in Finland, OP Pohjola Bank continues strengthening the nation’s economy. For several years now, it is ranked as a reputable and reliable bank from several institutions. Its total non-performing assets are 0.6.

9. Nova Scotia Bank of Canada

Enjoying its reputation with the hugest number of clients in the country and worldwide, Nova Scotia is a financial institution located in Canada. It offers a wide range of profits in return as saving accounts. This bank profits from 0.5 non-performing assets.

10. Imperial Bank of Commerce

Last but not least is the Imperial Bank of Commerce with 0.3 non-performing assets. This is surely the hugest bank in Canada after Nova Scotia Bank of Canada. Millions and even billions of customers (national and international) are saving their wealth in this bank. Even with a huge number of clients, transactions are safer than any other bank in the country. SOURCE

 

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PCI 3.0 – What You Need to Know

The PCI DSS was updated for the fourth time (1.0, 1.2, 2.0, 3.0) in November 2013. As always, the changes the PCI Council made address the latest vulnerabilities and include additional clarification and new guidance.

The following covers the most important changes affecting the majority of merchants.

Requirement 0 – PCI Intro

The introduction section probably holds the biggest change for PCI 3.0. Web redirection systems are now defined as system components, which means they’re now part of scope for PCI DSS.

The principal of redirection is when a website points users to a third party that collects and processes all card data. Another form of redirection is client side redirection, in which a customer types card data into a web form generated by the merchant, and is then sent directly to a third party. Either way, card data will not pass through the original website.

In the past, these forms of redirection were validated using SAQ A, but new emphasis in PCI DSS 3.0 changes that.

The new SAQ-A EP form is designed for ecommerce merchants using client side redirection.

Review the new PCI 3.0 SAQ forms 

This new direction will affect many merchants who were previously completing an SAQ A and now must move to an SAQ A-EP, which is significantly longer and includes things such as external vulnerability scans and penetration testing.
The reason behind this requirement change? If a hacker is able to manipulate redirection code, he could direct your customers to a fake payments page that looks identical to the one you had originally outsourced.

Attacker directing customers to a fake payments page (i.e., man-in-the-middle attack)

 

Requirement 1.1.3

A cardholder data flow diagram should show how cardholder data enters your network, the systems it touches as it flows through your network, and any point it may leave your network (e.g., sent to a payment processor). You’ll want to maintain a diagram for each card flow that exists. Most businesses will have just one flow, but you might also have an additional flow if your website processes payment cards.

Simple card present flow diagram

Physically creating a document that explains the processes will help you better understand where card data lives on your network.

Requirement 2.4

This requirement involves a document that lists all in scope device types and their function (e.g., POS systems, computers). This inventory list is also a great place to document software/firmware versions. If you’re feeling a little daunted by this task, interviewing department heads is a great place to start.

Requirement 4.1

In addition to GSM (cellular) connections and wireless Internet, it is now required that any communication that includes cardholder data sent over satellite should be encrypted. Depending on your business, this may not have much impact.

SecurityMetrics has many large retail chain clients (e.g., gas stations, hospitality, restaurant chains). Many of these chains use satellite communications between chains and even as a backup connection. According to the PCI Council, it’s no longer good enough to rely on the link provider’s system security. It’s your responsibility to keep this data secure.

Requirement 5.1.2

For systems not commonly affected by viruses and don’t have anti-virus software installed, you are required to implement and document a new process that shows you periodically evaluate these systems against emerging threats.

The point of Requirement 5.1.2 is to acknowledge hackers invent new ways to hack into systems every day. It requires merchants to research and pay attention to security notices from PCI vendors. If a new attack method is deemed a threat to your system, evaluate if the threat requires anti-virus.

Requirement 5.3

This requirement states that anti-virus can’t be altered without managerial approval. Often, anti-virus needs to be turned off to do system maintenance. During maintenance, who knows what could slip past your unguarded system.

My advice is, if you are updating an application that requires disabling an anti-virus, don’t. Instead, take that system off the network or cut off its Internet connectivity for that period. As a side note, it’s not OK for system admins to just give all users admin access to get around the requirement. That’s missing the point entirely.

Requirement 6.3

Any custom software application for a cardholder environment (whether in-house or commissioned by a third party developer) is under your jurisdiction. It’s ok to outsource your software development, but it’s not OK to outsource your responsibility to ensure secure development practices are followed. If you’re planning to use the application, remember that it’ll be part of your PCI assessment…not your third party’s.

Requirement 6.5.10

This requirement to protect against broken authentication was added to fix common application vulnerabilities. You should create/add/adjust your application code to mitigate any exposure to vulnerabilities. This can be done through not exposing session IDs in URLs, using secure cookies, and enforcing appropriate session timeouts.

Requirement 7.1.1

You’re required to have a role-based access control system. That means access to card data and systems should only be granted on a need-to-know basis. PCI 3.0 requires a defined list of the roles that have access to the card data environment.

On this list, you should include each role, definition of each role, access to data resources, privilege level, and what privilege level is necessary for each person to perform normal business responsibilities. Users must fit into one of the roles you outline.

Requirement 8.4

Organizations are now required to not just document, but also train their users on how to implement password policies. This training should include guidance on how to select a strong password, how to secure it, and instructions not to reuse it.

It’s also crucial that you communicate password policy to your users. This will help them understand how to change their passwords and also not to use the same password between work and home.

Requirement 8.5.1

This new requirement is targeted specifically towards service providers who have remote access into a customer environment. This is common practice with vendors who do remote support or software training.

Any service provider with access to multiple customer systems is now required to maintain unique credentials for each customer environment. The PCI Council knows this requirement in particular will take some time to change, so they’ve given until July 2015 before this is officially required.

Requirement 8.6

The use of alternative authentication mechanisms (e.g., logical tokens, smart cards, certificates) must be tied to an individual user account and not shared among user accounts. To ensure this is met, every merchant must implement a control to enforce those authentication methods can only be used by the intended user (e.g., requiring a PIN, password, or biometric scan in addition to the token to validate the person is authorized).

Requirement 9.3

This requirement is all about controlling employee access to sensitive areas, which must be related to an individual’s job function. To meet this requirement, it’s  exactly who has access to these environments and their business need. Access must be kept up to date, especially when individuals are terminated or their job role changes.

 

Requirement 9.9

This is a huge addition to the PCI standards. Organizations that use point of sale systems, PIN pads, mobile devices etc., are required to do three new things:

1. Maintain an up-to-date list of all devices (9.9.1) including physical location, serial numbers, make/model.
2. Periodically inspect devices (9.9.2). That means looking at device surfaces to make sure they haven’t been tampered with, making sure the serial numbers match, checking that seals haven’t been broken, etc. This could be a very large task depending on the size of your organization. Whether you inspect devices every day or month is based on how at risk you are of tampering (e.g., publically accessible 24/7 gas station terminals vs. a behind-the-counter card swipe device). Make sure you document what you find.
3. Provide staff awareness training (9.9.3) for staff that interact with card present devices on a day to day basis (e.g., cashiers), and record the who, what, and when for future reference. Ideally, the training will help staff detect any suspicious activity around a payment device. Training should include how to report suspicious behavior and what to do when third parties claim they need to work on the system. For example, rather than assuming IT came in last night to install a new device on the side of her terminal, an employee should question if its supposed to be there and notify appropriate persons.

 

Requirement 10.6.2

Depending on its size and complexity, this requirement could have a large impact on your environment. In addition to the logging requirements in 10.6.1, you’re now required to review logs of all other system components periodically, based on your policies and risk management strategy.

Lots of different systems in your environment may impact your payment security. As part of your annual risk assessment, you need to identify systems that pose risk and define a process to periodically look at their logs to determine suspicious activity.

Requirement 11.1.1

Maintaining a complete list of authorized wireless access points will require extra documentation, especially in large environments. This list should include a documented business justification for each wireless access point.

It’s difficult to determine which wireless devices to remove if you don’t have an accurate list of them to begin with. That’s why the PCI Council requires you create a total list. If you’re a small ecommerce provider and all your systems fit into a single rack in your data center, this requirement should be pretty easy. If you’re a widespread organization, it will take a bit more time.

Requirement 11.3

The rewrite of section 11.3 is intended to provide additional guidance to both merchants and penetration testing organizations on penetration testing’s intended coverage.

Penetration testing organizations are now required to have documented and standardized testing methodologies that meet industry accepted standards, such as NIST 800.115. In addition, guidance is provided on how best to scope the penetration test and identify critical systems.

A penetration test Special Interest Group has been organized by the PCI Council to help merchants and penetration test organizations best interpret this new set of requirements.  Results from this SIG group are expected near the end of 2014.

The PCI Council knows this requirement in particular will take some time to change, so they’ve given until July 2015 before the changes in the penetration testing requirement become official. However, this doesn’t mean you can wait to receive a penetration test until July 2015. The guidance provided in PCI DSS 2.0 for penetration testing is still valid until then.

Requirement 12.8.5

Not only should merchants maintain a list of a third party service providers, but now they must maintain a list of all PCI requirements their service provider meets, and a list of PCI requirements they’re required to meet.

Requirement 12.9

In conjunction with Requirement 12.8.5, service providers are now required to provide written documentation to all customers stating which PCI requirements they cover on their behalf. These two requirements attempt to avoid past mis-communication problems between service providers and merchants. SOURCE

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Americans feel EMV chip cards make their debit or credit card transactions more secure

NXP Semiconductors has announced the results of its ‘Security Matters: Americans on EMV Chip Cards’ survey.

To gain further understanding of how confident Americans are in the security of EMV chip card technology and debit/credit card purchases in general, NXP polled more than 1,000 American adults on credit card usage, behavioural trends and consumer sentiment toward the electronic and cashless movement.

Attitudes towards Breaches and Retail Hacks
Overall sentiment reveals that while consumer confidence in credit card technologies remains high, Americans continue to demand better solutions that protect identity, personal information and financial data. With recent reports of compromises in security at Target, Neiman Marcus, PF Chang’s and other retailers, Americans are more likely to pay in cash following a security breach at large retailers, with 37% of the millennial age group (18 to 34 years of age) being the most likely to convert to cash. For example, 80% of Americans are confident in their financial institution and the security of their financial accounts, as well as the security and protection of their credit/debit cards (73%).

However, once a security breach at a major store occurs, consumers automatically turn to less convenient forms of payment (64%) – such as cash – to complete a purchase.

Credit Card Protection Technology
Respondents were asked a number of questions pertaining to security, confidence in financial institutions and credit cards, purchasing habits, geographic location, gender and general understanding of current magnetic strip and EMV technology. When asked specifically about the underlying technologies of a credit or debit card, Americans responded favourably, with 69% stating that EMV chip cards are making their debit and credit card transactions more secure, with only 5% feeling chip cards make their transactions less secure. When asked about the tap and pay feature available on some EMV chip cards, the most common concern expressed was an increased risk of theft (61%), followed by 37% expressing concerns about being charged incorrectly for purchases.

Security and Personal Information

• 69% of Americans feel EMV chip cards make their debit or credit card transactions more secure
• 28% believe they are much more secure
• 31% of men believe they are much more secure compared to 24% of women

Security of finances

• 73% of Americans are confident in the security of their credit/debit cards or their financial accounts (80%) with their primary financial institution
• 33% are very confident in the security of their accounts, compared to 26% feeling very confident in the security of their credit/debit cards
• 64% of Americans say they are more likely to pay in cash after hearing about security breaches at large retailers
• 36% say they are not more likely to pay in cash
• 37% of 18 to 34 year olds say they are much more likely compared to 27% of 35 to 54 year olds and 23% of those 55+
• 5% believe chip cards make their transactions less secure

SOURCE

 

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Visa Europe: 17 million UK workers frustrated by cash payments

17 million UK workers are frustrated by the inconvenience of cash payments according to the Working Day Spend Report, released by Visa Europe. With 23% being regularly caught out by not having enough cash on them to make a particular payment and 30% having to ask a taxi to deviate from its journey in order to stop at a cash machine, workers regularly find paying with cash a nuisance.

Although cash usage has dropped overall in the last five years and cards are widely accepted, Brits still rely on cash for smaller payments. That’s despite nearly half (46%) admitting they are quick to spend the cash they have in their wallet, leading to two thirds (66%) withdrawing cash at least once a week. The report also reviewed what UK workers spend their money on, how much they spend and what payment methods they use. Brits spend an average of £10.59 on small and regular purchases throughout the day, the equivalent of £2,541.60 every year. One third of respondents admitted that they do not budget for this everyday expenditure.

“I think a lot of people still use cash for certain purchases out of habit, even though they find it annoying,”says Sandra Alzetta, Executive Director at Visa Europe. “Paying with a contactless card is faster and safer than fiddling around with coins and carrying a wad of cash, and it makes it much easier to manage your money. Every transaction appears on your statement, so you can stop asking yourself where that last twenty pounds went – the answer’s right there.”

The research also found that the way workers spend varies across the UK. London workers use cash the least with just over half (55%) using it to buy lunch, showing that faster payment methods are being embraced more quickly in the capital. In contrast 81% of Glasgow workers use cash to buy lunch, leading to over half (55%) often getting frustrated by having to wait to pay in store. Manchester workers struggled worst with cash machines with 40% noting it was a challenge to find a cash machine nearby and nearly a third (32%) finding having to queue for a cash machine a frustration.

“There’s no need for people to be frustrated by cash,” adds Alzetta. “You can already make contactless payments at more than 300,000 places in the UK – not just in retailers but also on London buses and taxis. That means workers don’t have to worry about being caught out without cash any longer.” SOURCE

Visit us to know more about options for branded payment and reward cards for your business here

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Official Media release from RKB-F1Motorsport & Eastern Airways British Sidecar Championship

 

 

Double Eastern Airways Scotch, for Hegarty and Neave at Knockhill 27-29^th June

With the promise of live TV on Sunday, and a mid-afternoon slot Saturday, combined with the tight nature of the Knockhill circuit, round three was always going to be spectacular. Whilst on paper, another double victory for the Felixtowe based Sean Hegarty might look a yawn, nothing could be further from the truth.

Race One – Pre-race rain gave many crews a dilemma with tyres. As it happened, a wet tyre choice wasthe wrong one, and several teams paid the price. From his first-ever Eastern Airways pole position, Tony Brown/Ashley Hawes slotted into third behind Hegarty and Roger Lovelock/Aki Alto. It then became a two-horse race at the front with several passing moves from each. The run down to the hairpin had the crowd on its toes, each and every lap, with Sean Hegarty hanging on for the tightest of victories at the flag. There was frantic action all down the field, and a great scrap between Craig Chaplow/Patrick Farrance and the Ben Bygrave/Justin Sharpe combination. Andy Peach, despite a back-row start and problems mid-race, recovered the L&W BMW eighth ahead of Grabmuller. Ben Holland/Lee Watson (Finning Cat Kawasaki) fell victim to a wrong tyre choice but claimed a few points behind Ricky Stevens/Ryan Charlwood (AOS Kawasaki).

Race Two – Hegarty was fired up, and starting from pole, was in determined mood for this one. After early laps pressure, he was never headed, and made it a comfortable win by eleven seconds. Lovelock again showed his class and consistency with another podium in second, and Tony Brown retired on lap six when his front mudguard came adrift. The story of the race however, and thrilling for the live TV audience, was the charge of Andy Peach through the field from eighth on the grid. What looked like a certain podium for Ben Bygrave, was snatched from under his nose by a whisker at the flag, just ahead of Craig Chaplow. Again, this was an action packed affair, and met with complete appreciation of hugely enthusiastic Scottish sidecar fans. Ben Holland salvaged some points from the back of the grid and the Austrian Grabmuller again recorded a solid result to maintain his consistency in the standings.

Race One Result -1/Hegarty/Neave (Hegarty Suzuki) 2/Lovelock/Alto (Driverwolf Laxton BMW)3/Brown/Hawes (Paymundo.com Yamaha) 4/Bygrave/Sharpe (Blue Machinery Suzuki) 5/Chaplow/Farrance (E-Aide Motorsport Kawasaki) 6/BarryJames/Sam Christie (James Racing) 7/Mark Edwards/Lee Barrett (AOS Kawasaki) 8/ Peach Richardson (L&W BMW)

Race Two Result – 1/ Hegarty/Neave 2/ Lovelock Alto 3/ Peach/Richardson 4/ Bygrave/Sharpe 5/ChaplowFarrance 6/James/Christie 7/Edwards/Barrett 8/Holland/Watson 9/ Kershaw/Wilson 10/Grabmuller/Lawson

Standings – Hegarty 170, Lovelock 132, Peach 95, Edwards 81, Chaplow 76, Brown 56, Holland 52Grabmuller 49, Bygrave 46, Stevens 45, Kershaw 36, Holden 29, James 26.

Round Four comes from Brands Hatch 18-20^th July

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2014 Eastern Airways British F1 Sidecars with Paymundo

 Paymundo – official sponsor for Raptor Racers (Tony Brown & Ashley Hawes).

Interview with Paymundo’s director-Dominic starting from 10.20 covered by

Barry Nutley from Eastern Airways British F1 at Snetterton !

 Full coverage here

Catch us at round three at Knockhill, Scotland 27-28th June

 

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New Role for Credit Card Payments in Credit Scores

Up until now, it’s not been hard for those with credit cards to understand how to avoid their plastic having a negative effect on their credit scores. All they had to remember was:

1. Make every payment (at least the minimum due) every month on time.
2. Keep balances below 30% of the cards’ credit limits. The lower that percentage the better, but the difference 10 and 20% make to your score compared with 30% is minimal.
3. Apply for new credit cards only when you need them. Having lots of recently opened accounts of any sort may be harmful.

Observe those three rules, and you’d have every reason to expect your cards to help rather than hinder your achievement of a good or great credit score.

Credit Cards and Scores: New Factor

But now a new factor might soon affect your score, according to a recent report from The New York Times. It suggested that at least one of the Big Three credit bureaus was already using the amount by which you pay down your cards each month to help calculate your score. Other bureaus and scoring companies may well follow suit.

The purpose of this is to differentiate between “transactors,” who pay down their balances in full each month, and “revolvers,” who routinely carry forward (“revolve”) balances from one month to the next. The theory is that transactors are likely to be more creditworthy, and so deserving of higher scores, though a FICO spokesperson told the Times that it was still studying the data, and was yet to change its systems. FICO is the company whose credit-scoring technologies are used in over 90% of lending decisions in this country.

If FICO and others in the credit-reference industry do in future begin to differentiate between transactors and revolvers, it could see the latter’s scores being downgraded even if they always make minimum or higher credit card payments on time every month. And that could see a significant change in how people view their plastic.

Credit Card Companies Likely Want Status Quo

This could be bad news for credit card companies because it could result in fewer revolvers. After all, would you use your credit cards to borrow if you knew that was likely to make your home, auto and other loans more expensive?

And the interest those who roll forward balances pay represents an important revenue stream for these purveyors of plastic. Indeed, within the card industry, transactors are known, unflattering, as “deadbeats,” because those who never borrow generate little profit.

Credit Scores Like Ketchup and Ice Cream

People talk about “your credit score,” but in fact pretty much everyone who has one has many. There may not be quite as many varieties of these as Heinz has, nor flavors as Baskin-Robbins, but it’s perfectly normal for an individual to have a couple dozen.

There are three main reasons for that:

1. Some lenders prefer to use older versions of FICO and other scoring applications, sparing themselves the expense of upgrading their systems. So they may use scores calculated slightly differently.
2. Scores are often often customized so that they’re especially good indicators for particular types of borrowing. So the score auto loan lenders see for a particular consumer may be different from the ones supplied to credit card companies, which may be different again from the ones viewed by mortgage lenders.
3. There are three main consumer credit bureaus (Equifax, Experian and TransUnion), and, although they all use FICO and probably VantageScore technology, they each tweak calculations to provide their own proprietary versions of your score.

Of course, the factors that create a good or great credit score remain the same, and whichever of your score or scores a lender views, it’s likely to reflect your past behavior. But it is worth being aware that, when you access your own score, the one you see may be different from the one used to decide whether to lend to you — and, if so, at what interest rate.

More to Come?

Using your status as a transactor or revolver to help calculate your score may be just the beginning. Although the companies behind scoring systems are likely to be conservative about change, so as to maintain the credibility and predictability of their products, they are also constantly looking out for ways to better satisfy the credit card companies and other lenders who pay them.

Already, FICO is working on so-called big data concepts, though these are currently intended to help clients with marketing rather than credit scoring. But, over the medium and long term, we might see all sorts of new factors affecting our perceived creditworthiness. SOURCE

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