Americans travelling abroad find credit cards blocked

       Better pack some cash on your next trip abroad. Americans are finding that their credit and bank cards aren't as convenient as they once were while travelling overseas.
       The problem: American cards lack a special chip, now commonly used in many foreign countries, causing the cards to be rejected by some merchants and kiosks.
       That's what Nancy Elkind, a lawyer from Denver, discovered in Paris when she wanted to use the popular Velib bicycle rental system on a weeklong vacation with her husband last spring. They tried to swipe various cards at the rental kiosk, which doesn't take cash, and all the cards were rejected.
       Then, thinking the problem might be with the kiosk and not their cards, they tried other Velib locations around the city. But each time, their cards were not accepted.
       "We gave up, and kept walking around Paris, commenting occasionally on how much fun it would be to do some exploring by bike," Elkind said.
       The couple's cards, which rely on magnetic-stripe technology for transactions, lacked an embedded micropro-cessor chip, which stores and processes data and is now commonly used in Europe. Such chip-based cards - commonly referred to as chip-and-PIN cards because users punch in a personal identification number instead of signing for the purchase - offer an extra layer of protection against the theft of cardholder data and counterfeiting, and they are designed to replace magnetic stripe technology and signature payments.
       The chip-and-PIN technology usually isn't much of an issue when making purchases at a store, or paying for a meal in a restaurant, as most of those merchants still have credit card terminals that can read the magnetic stripes. Likewise, ATM's typically recognise and accept many cards whether they have a chip or a magnetic stripe.
       But American cardholders have had their cards rejected by automated ticket kiosks at train stations, gas pumps, parking garages and other places where there are no cashiers.
       The alternatives aren't ideal. Carrying around a wad of cash is a throwback,not to mention a security concern, for many travellers trained over the years to use plastic for purchases abroad.
       And as more countries around the world move to chip-and-PIN cards, it's inevitable that Americans will encounter more difficulties paying for things abroad.
       Twenty-two countries, including much of Europe, Mexico, Brazil and Japan, have adopted the technology, according to the Smart Card Alliance, a nonprofit association that promotes chip cards. About 50 other countries are in various stages of migrating to the technology in the next two years, including China, India and most of Latin America,according to the association.
       In the last year, Canada began rolling out chip-and-PIN cards and plans to stop accepting magnetic stripe debit cards at ATM's after 2012 and at pointof-sale terminals after 2015.
       These governments like the cards because they reduce fraud. With an embedded microcontroller, large amounts of data can be stored on the card itself rather than in a central database, and counterfeiting such a card is difficult.
       But the US banking industry has no immediate plans to adopt the technology.Part of the reason, experts say, is that fraud issues haven't been as prevalent here as in other countries.
       The expense of converting the country to chip-and-PIN technology is also a deterrent. Javelin Strategy and Research,a consulting company for the financial services industry, has estimated the cost for the United States to migrate to the technology at US$5.5 billion, mainly for new payment terminals - an expense that neither retailers nor banks want to shoulder.
       Doug Johnson, vice president for risk management policy at the American Bankers Association, said that American banks were concerned about security but that there were no plans to move to chip-and-PIN cards."There are a lot of hurdles," he said,"both from a cost standpoint as well as a network standpoint, we need to broach."
       It should be noted that chip-and-PIN cards are different from the radio frequency chip that some American credit cards now have, which allows customers to wave their card at a check-out scanner,instead of physically swiping it. Visa's payWave cards and Expresspay cards from American Express are two examples.
       But regardless of the technology used,merchants have a certain amount of control over what kinds of cards they accept. Veilb, for example, accepts American Express cards whether they have chip-and-PIN technology or not. But it doesn't accept Visa or MasterCards unless they have the chip-and-PIN technology.
       Credit card issuers acknowledge the problems but offer few solutions at the moment. Randa Ghnaim, a spokeswoman for Visa, said the company was working with banks and merchants across Europe to ensure that they accept magnetic stripe cards in addition to chipand-PINs.
       "We have heard of limited instances where merchants have refused to accept Visa magnetic stripe cards, but by and large, the majority of Visa cards are seamlessly accepted internationally," she said."It's usually a lack of understanding that could lead to any issues rather than any issue related to the type of card a consumer may carry."
       And at least one company, Travelex,the global payment services company,says it is working on a chip-and-PIN card for Americans that could be loaded with up to 6,000 or about US$7,400 at recent exchange rates. But that solution is still at least a year away.
       "It's definitely something we've been hearing more and more of," said Tracy Hammock, a senior vice president at Travelex.
       For now, though, there is little an American traveller can do besides insisting, if a cashier refuses your card,that the merchant swipe it anyway. Despite what the cashier thinks, the terminal may be able to read the magnetic strip and approve the purchase.
       But realistically, it's not a huge problem, and there are ways to work around it. You can still buy things like train tickets and subway cards online ahead of time, carry traveler's checks or simply pack a lot of cash.
       That's what Hope Einstein, a retired financial analyst from Stamford, Conn,decided to do on a trip to Great Missenden, England, last month, after she encountered chip-and-PIN issues two years ago. Lucky she did. Einstein still wasn't able to withdraw money from ATM's.But this time, she wisely exchanged some dollars for pounds before leaving the United States.
       Recalling her first visit, she said,"It's humbling to be walking around London with five bucks in your pocket."

PhotoHut launches smart purse

       PhotoHut Group (Thailand) yesterday joined with Thai Smart Card to launch the PhotoHut Smart Purse, giving customers to its shops the chance to collect points that can be redeemed for cash or premiums.
       "We expect to sell 5,000 digital cash cards by November," said Somchai Krongsomboon, president and CEO of PhotoHut Group (Thailand).
       The loyalty card programme will allow the company, which operates 213 PhotoHuts, to respond to the wide demands of customers and encourage them to buy photographic services, cameras and photo accessories at PhotoHut he said.
       The Photo Hut Smart Purse is now available for Bt500 but customers can get a card free by purchasing camera products worth at least Bt9,990.
       Chalermchai Chatchaiganan, chief commercial officer of Thai Smart Card, said the company provides digital cash card services to 32 companies in various businesses, covering 2.6 million cardholders and 1.4 million-1.5 million accounts in its database.
       "With the launch of the PhotoHut Smart Purse digital cash card. PhotoHut can benefit from the strong database of Thai Smart card and launch marketing campaigns with other partners within the Smart Purse network," he said.
       Somchai said the overall market for digital compact cameras dropped by 20 per cent in the second and third quarters of this year compared to the same periods last year.
       The decline was most apparent in upcountry stores and those located in tourist destinations such as Samui and Phuket.
       "We ourselves have felt the down-turn over the last three to four monghs, when we missed our sales target for cameras and accessories. We were able to grow by only 5-6 per cent in the first nine months due to the expansion of PhotoHut shops," he said.
       The company expects to open seven PhotoHuts by the end of the year, bringing the total to 220 from 213 currently and 109 last year.
       "We however have seen significant growth of 10-15 per cent in sales of digital single-lens reflex cameras so far this year, diriven by the sharp fall in retail prices, It encourages consumers to shift from digital compact cameras to more high-end models such as the ditigal SLR cameras," he said.
       Overall demand for digital caompact cameras is expected to pick up again this quarter as the tourist season begins. The government's economic stimulus campaigns are also expected to kick in this quarter. Political unrest is the only risk facotory for the country, he said.
       "We see great potential. The penetration of digital compact cameras is still low. Of a population of more than 60 million, only 6 million to 7 million people own digital compact cameras," he said.
       The market for digital compact cameras is estimated at nearly 1 million units this year, he added.

BANKS' NET PROFITS JUMP IN Q3

       Most banks delivered stunning net profits in the third quarter due mainly to decline in funding and operating costs and increase in fee income.
       Bank of Ayudhya was the best performer in the third quarter. Its consolidated quarterly net profit jumped 114 per cent year-on-year to Bt2.18 billion, thanks to a 135per cent surge in non-interest income.
       "Although loan portfolio remained flat as a result of the weak economy, net interest and dividend income increased 2 per cent while noninterest expenses grew only 7 per cent. The bank's costtoincome ratio thus improved markedly from 61 per cent down to 52 per cent," the bank's president and chief executive officer, Tan Kong Khoon, said in a statement.
       For the ninemonth period ended September 30, the bank recorded a consolidated net profit of Bt4.96 billion, a 22-per-cent year-on-year increase.
       The improved ninemonth earnings could be ascribed to a 55-per-cent increase in noninterest income, and a 2percent increase in net interest and dividend income.
       The thirdquarter earnings of four small-sized banks - ACL Bank, Thanachart Capital, Tisco Financial Group, and Kiatnakin Bank - grew more than 10 per cent.
       ACL Bank showed an 80.94-per-cent year-on-year increase in its third-quarter financial results to Bt234.58 million while its ninemonth net profit soared 39.71 per cent from the same period last year to Bt448.66 million.
       Siam Commercial Bank (SCB) reported unaudited consolidated third-quarter net profit of Bt5.2 bilฌlion, up 7.7 per cent from the same period last year, because its noninterest income shot up 30.1 per cent, mainly from fee income and investment profit. The slight increase of 1.4 per cent yearonyear in its expenditures also gave the bank's quarterly earnings a boost.
       Non-performing loan (NPL) decreased to 4.7 per cent of outstanding credit as at the end of September from 5.2 per cent at the end of last year.
       However, the bank's net profit during the first nine months this year was down by 8.3 per cent to Bt15.98 billion from Bt17.43 billion during the same period last year.
       Vichit Suraphongchai, chief executive officer of SCB, said the main factor boosting the net profits of the bank was fee income, especially from the creditcard business, bancassurance, and mutual funds.
       Fee income in the third quarter was Bt4.85 billion, up 12.8 per cent on year.
       State-owned Krung Thai Bank (KTB)'s thirdquarter net profit was Bt4.25 billion, up 9.5 per cent from Bt3.88 billion in the third quarter of last year. The net profit in the first nine months of this year was at Bt9.47 billion, decreasing by 4.7 per cent from Bt9.94 billion from the same period of last year.
       CIMB Thai Bank's quarterly net profit amounted to Bt461 million, down 54.3 per cent from the same period last year to Bt10.09 billion. However, the bank had a net loss of Bt40 billion for the first nine months this year, compared with a net loss of Bt974 million in the same period last year.
       Subhak Siwaraksa, president and CEO of CIMB Thai Bank, said yesterday that the bank's netinterest margin (NIM) widened from 2 per cent to 2.4 per cent in the third quarter this year because the bank's deposits fell to Bt97 billion from Bt160 billion at the end of last year.
       The bank expected to restructure its deposits by increasing current and savings accounts to 50 per cent of total from the current 25 per cent. As a result, the bank's NIM was expected to widen further.
       He said the bank was expected to record net profit in hundreds of millions of baht and be able to pay dividend from this year's earnings.
       The country's largest bank by assets, Bangkok Bank (BBL) announced that its third quarter net profit of Bt5.07 billion was up 17.45 per cent on year from Bt4.32 billion in the same period last year.
       Higher fee income and lower operating costs were the main reasons for the improved earnings.
       For the first nine months, BBL reported net profits of Bt14.8 billion, marginally down by 1.2 per cent from the same period of last year.
       Kasikornbank recorded net profit of Bt3.72 billion in the third quarter, down 3 per cent from the same period of last year at Bt3.84 billion.
       Meanwhile, its net profit for the first nine months dropped 10.5 per cent yearonyear to Bt11.22 billion.
       TMB Bank reported net profit of Bt526 million in the third quarter of this year, down 68 per cent from Bt1.66 billion in the third quarter of last year.
       For the first nine months of this year, the bank's net profit was Bt1.36 billion, down 69 per cent from Bt4.41 billion in the same period last year.

KTC sees personal loan approvals rising

       Krungthai Card Plc (KTC), the country's largest card issuer, expects its approval rate of personal loans might return to its normal 35% of applications in the fourth quarter with an improving economy and its tighter lending criteria.
       Sudaporn Janwatanagool, executive vice-president for the personal loan business, said approvals had dropped to 15%-20% in the second quarter this year from 30-35% in normal economic times.
       The rate improved in the third quarter to 25% on signs of economic recovery.
       "We'll watch the economy the last quarter to make sure it is recovering,then we might ease up our approving rate to the same as last year," Ms Suda-porn said."We might consider easing approval criteria for sectors such as automobiles that have appeared to pick up."
       Since the beginning of this year, the company has focused on building quality customers who have stable income sin order to reduce its loan default risk.
       For KTC Cash Revolve personal loans,it raised the minimum monthly income requirement to 10,000 baht from 8,000.Minimum income for a KTC fixed income loan is 15,000 baht, up from 10,000.
       Non-performing loans decreased from 2.5% of outstanding personal loans in June to 2.3% in September. The company expects the NPL rate to remain between 2% and 2.5% at the end of the year.
       In the first nine months of the year,KTC lent 1.181 billion baht with 33,500 customer accounts. It has a 5% share of the total personal loan market worth 250 billion baht.
       The company aims to have 519,600 personal loan accounts at the end of 2009, up from 503,000 currently.
       At the end of June, KTC had 35 billion baht in net credit card receivables and 10.9 billion in KTC Cash personal loan receivables. Total assets stood at 48.87 billion baht.
       The Krung Thai Bank affiliate earned a net profit in the first half of 201.67 million baht, down from 317.68 million a year earlier. Revenue rose 7% to 6.21 billion baht.
       KTC shares closed yesterday on the SET at 12.50 baht, down 70 satang, in trade worth 38.6 million baht.

US CONSUMERS REDUCE BORROWING BY $12 BN

       US consumers reduced their borrowing for the seventh straight month in August, as households worked to pay off debt and banks reduced credit card limits.
       Americans are saving more and borrowing less as widespred job losses, stagnant wages and dwindling home values have spureed a move to greater frugality. While that's a positive trend in the long run, economists say, it can weaken the fledgling recovery as consumer spending powers about 70 per cent of the economy.
       The Federal Reserve said on Wednesday that total outstanding consumer debt fell in August by $12 billion (Bt400 billion), a 5.8-per-cent annual rate. Wall Street economist expected a $10 billion decline.
       That follows a downwardly revised drop of $19 billion, or 9.1 per cent, in July, the largest decline in dollar terms on records dating from 1943. July's decrease was the steepest percentage drop since a 16.3-per-cent decline in June 1975.
       "Consumers are clearly becoming much more conservative about their spending habits [and] paying down debts," said Zach Pandl, an economist at Nomura Securities. "This is likely to continue."
       The declines reflect both a drop in demand for credit by consumers, as well as tighter standards among banks and other lenders.
       Total outstanding consumer credit is now $2.46 trillion, down about 4.6 per cent from its peak in July. The Fed's report covers credit cards, store cards, auto and other personal loans. It doesn't include mortgages or other real-estate-related debt.
       The retrenchment in August occurred even as consumer spending increased 1.3 per cent, according to a report last week from the Commerce Department. That suggests consumers are increasingly buying with cash rather than credit, Pandl said.
       The Cash for Clunkers auto rebate programme helped boost personal spending in August. Economists noted that auto loans and other non-revolving debt dropped only 1.6 per cent that month, according to the Fed, compared with a 12.6-per-cent fall in July.
       Credit card debt, meanwhile, fell 13.1 per cent, its steepest drop since February.
       That may also reflect cuts in card limits. A report earlier this year by FICO, which produces the most widely known credit scores, found that companies slashed limits for an estimated 58 million card holders in the 12 months ended in April.
       Consumers also are likely to restrain spending as long as jobs remain scares. The Labour Department reported last week that the unemployment rate rose to 9.8 per cent in September, the highest in 26 years. Many economists believe the rate will peak above 10 per cent sometime next year.
       Retailers already are bracing for another meager holiday season. The National Retail Federation (NRF) said that it expects sales during November and December to fall 1 per clent from last year. While that's not as steep a drop as in 2008, last year's holiday sales saw the worst annual drop on record dating to 1967.
       The NRF also expects retail sales for all of 2009 to fall 3 per cent.
       AT A GLANCE
       Americans are saving more and borrowing less as wide-spread job losses, stagnant wages and dwindling home values have spurred a move to greater frugality.
       The Federal Reserve said on Wednesday that total outstanding consumer debt fell in August by $12 billion (Bt400 billion), a 5.8-per-cent annual rate. Wall Street economists expected a $10 billion decline.
       The Labour Department reported last week that the unemployment rate rose to 9.8 per cent in September, the highest in 26 years. Many economists believe the rate will peak above 10 per cent sometime next year.