Tag Archives: banking

Target and Chip-and-PIN

23 Dec

On Friday, my wife and I canceled two debit cards and two credit cards, all four linked to two accounts which may have been compromised thanks to a point-of-sale hack that took place at all Target stores since Black Friday. Chances were that at least two – possibly three – of the cards had been swiped during the relevant time period, and especially with respect to the debit cards, I wasn’t willing to sacrifice my checking account to some thief, regardless of so-called “consumer protections” and anti-fraud measures that may exist. The hassle of reversing fraudulent charges – especially from a debit card – is exponentially higher than the hassle of canceling the cards and waiting for new ones. 

But it’s all a hassle, nonetheless. 

One debit card will be mailed in 1 – 2 weeks. The other one was issued on-the-spot at a branch in Clarence, but has yet to be activated because it takes at least 1 – 2 business days to hit the system.  The credit cards will be here in a week or so. 

Small #firstworldproblem aside, it was a fun adventure trying to pay for some last-minute Christmas gifts with a personal check. At Swarovski, it was a half-hour long process, and although we had explained why we had no debit card, the flummoxed clerks insisted on pleading with us to maybe use a credit card, or perhaps a debit card for our transaction. Or would we like to perhaps use our non-existent debit card to withdraw cash from the ATM just there? Our check was rejected at Ann Taylor. I called the bank, and they said it wasn’t they who declared the check suspect, and confirmed an ample available balance to cover $140. Old Navy simply doesn’t take checks. But they’d be happy to open up a charge account for us! JC Penney was surprisingly swift. Premier Liquor on Maple takes no checks without going through a pre-approval process. We paid cash at other places.

It was, all in all, an eye-opening experience. Until I didn’t have one handy, I hadn’t realized how reliant I had become on my Master Card branded debit card. 

In the United States, merchant points-of-sale and ATMs rely almost exclusively on the magnetic strips that we’ve been using since the 1970s. Not so in other countries, including our neighbor, Canada. Many countries now rely on what’s called a chip-and-pin system, which uses an added level of encyption and is safer than a magnetic strip (although nothing is foolproof).  It’s known in the industry as “EMV“. 

It is exceedingly easy for a resourceful and motivated thief to buy and install a cloning system, whereby a swipe of your card records every single detail contained on that card – including the security code – and produce clones of the card using any piece of plastic with a magnetic strip, including a hotel room key. The chips on chip-and-pin cards is much more expensive and difficult to duplicate. 

The Wall Street Journal reports EMV is expected to become the standard in the US in 2015, but what’s the holdup? This is not a new technology, and most of the stores that you and I frequent already have chip-and-pin capabilities (it’s the slot in the front of the reader at Wegmans). 

When we traveled to the UK in 2005, chip-and-pin was already in almost exclusive use, and when we dined in some restaurants, they would bring the credit card terminal to you at your table for payment – your card never left your possession and could not be swiped through a cloning device. This system is now commonplace in Canada. I haven’t had it happen even once in the United States. Ever

In the US, implementation will take place between 2015 and 2017 through a “liability shift” – if a merchant has not yet switched his POS system to accept EMV by a given date, he will be liable for fraudulent charges on the legacy swipe system. 

This Target fiasco, involving 40 million possible cards, has inconvenienced me to a certain degree, and in at least one instance made a potential sale not happen. It doesn’t mean I won’t go to Target anymore, or that EMV is a 100% secure alternative, but if there is a marginally more secure alternative available, we should implement it as soon as possible. 

Here is a list of American credit card issuers that offer (as of May 2013) chip-and-pin or chip-and-signature cards. Merry Christmas.

Hitting the Banking Sweet Spot?

3 Aug

I sure hope I was wrong. Could an unmitigated calamity really morph into the best of all worlds? If I could set aside my prejudicial cynicism, maybe I could see that the answer is yes. And yet . . .

In May I discussed a number of bad options for HSBC’s sale of their retail banking network in Upstate New York. Option one, which I offered as the most negative, was a division of the 195 branches among local players and the elimination of the backoffice, support and leadership functions in the main HSBC tower and associated atrium. Option two, the preferred option to me, was for a banking giant new to Buffalo to sweep in and buy the lot, necessitating the establishment of a regional headquarters and the support jobs that go with it. My hoped for suitor was Toronto Dominion (TD), as it would both connect their US East Coast network with the home base in Toronto, and continue the local strategy of encouraging Canadian business investment in Buffalo. Such a local footprint, by TD or other new player, would be smaller than HSBC’s currently but preferable to piecemeal dissolution. As a side benefit, it would also remove a potential suitor from swallowing the acquisition-ready First Niagara.

The comments from that May article, from several local banking types, former and current HSBC employees, and knowledgeable laymen, ranged from optimism that HSBC would retail its global banking operations in Buffalo (despite the sale of the retail network) to vented frustration that much of HSBC’s leased space is empty already, and its just a matter of time before Buffalo’s jobs are in Chicago or New York.

It was not that long ago that Buffalo was near the center of the banking universe, albeit briefly, as HSBC, M&T and First Niagara all made international financial news simultaneously. Both of my options indicated that run was at a quick end.

Flash forward to Sunday’s headline news that seemed to present a Goldilocks Option Three that I did not consider. First Niagara will buy HSBC’s retail bank network in upstate New York and Connecticut and retain “most” jobs. HSBC Holdings will cut 30,000 internationally but none locally. The 3400-ish workers in the HSBC tower and atrium will continue to support worldwide finance for an international banking power. Control and profits of 195 retail branches will shift to local good news story First Niagara. Jobs will be retained. In fact, the situation is arguably better than the status quo, as a local company grows and becomes more difficult to acquire. The politicians gushed at the news.

Governor Cuomo:

Given the possible losses from the HSBC divestment in New York, this is the best possible outcome for HSBC’s employees and branches across the state. In addition, this purchase is good news for New York, because First Niagara is a New York company that has a record of growth and creating jobs in upstate New York and with this deal it is showing that it is poised to continue and expand this important commitment to our state and our work force.

County Executive Collins:

I don’t want to put words in his mouth, but what he [First Niagara CEO Koelmel] said to me is we don’t need to worry about those jobs in the branches. From my perspective, it’s as good as it can be for Western New York with a locally owned bank acquiring those branches.

Everything worked out as good as it possible can, right? It’s not too good to be true, is it?

Hang on a minute.

It did not take long for fine print to be read, logic to take over, and reality to set in. There was no way First Niagara could keep the entire HSBC branch network. Regulators would snatch off pieces for anti-trust reasons, and simple logistics and geography would force the closing of more. On Grand Island, HSBC and First Niagara are nearly across the street from one another; on Transit Road they share a parking lot. Such a scene will be played out across WNY. So, out of those 195 branches bought, how many will First Niagara actually keep?

“Half” is the answer we got Tuesday. In fact, First Niagara may resell more branches than it keeps. Suddenly Goldilocks Option Three looks a lot more like my Option One. Evans, Warsaw, and other smaller banks will each get their chance after all. If the branch jobs are going to be retained, it won’t be by First Niagara. Such platitudes turned out to be a wish, not a plan.

What are we left with? HSBC stays in its tower, but more tenuously – it now has no more tie to the area than GEICO and Citi. First Niagara has grown but pledged to stay in Larkinville. Such a move is good for restoration and revitalization efforts, but perhaps it also indicates how much they plan to grow at the uppermost level – there is limited space in those relatively full offices, even after the U Building is restored and occupied. First Niagara’s growth may reduce the chance of outside acquisition; the number of banks that can afford them has shrunk. At the same time, they may now be large enough to appear on the radar of the biggest threats. The financial markets are not impressed with First Niagara’s plan to dilute share values further (to be fair, the markets aren’t happy with anything now during the debt ceiling mess). If the share price drops, First Niagara may look more tempting to take over, not less.

Hopes Dashed

26 May

And so may end 161 years of waterside Buffalo banking. It was apropos that HSBC’s much anticipated big announcement on the Webster block was a surprise reorganization, potential sell-off and withdrawal from Buffalo all together. Here in Buffalo our eventual, seemingly mandated, disappointment is only matched by our brief fiery optimism before the fall. Before we hoped for a mixed retail/business Canalside anchor, a new ten story building filling an empty parking lot. That dream has tumbled to a new reality of thousands of jobs in jeopardy. Sounds about right for Buffalo. The Chicago architect designing the HSBC Webster options can file their drawings next to Ciminelli’s waterfront hotel.

When considering HSBC’s realignment options, I think the stakes for Buffalo, and our overall powerlessness to affect the situation, have actually been under-reported and under-stated. Following a now familiar Buffalo path, Marine Midland Bank rose to prominence long enough to build an iconic albatross, and then sold out to oversees interests. Bethlehem Steel dwindled to ArcelorMittal too before finally expiring and leaving millions of square feet of rust on our waterfront. HSBC was Buffalo’s window to a global financial world. It helped make us an international city on the top playing field. HSBC’s acquisition of Marine Midland in some ways looked like a validation of our financial strength – we produced something desirable by a banking giant. Now, slow and steady for 20 years, even through the Great Recession, is not enough to be worth the bother. Detroit is still mentioned as an HSBC hub. Buffalo is labeled an “under-performer.”

Seven months ago, when considering HSBC’s potential move of back office operations to Chicago, I made the following prediction:

Buffalo is so far out of its league in this competition, it is merely the pawn in a larger game. . . When HSBC moves 4000 jobs to suburban Chicago, it will be a surprise ambush on the front page of the paper, with no foresight of the bomb possible. . . . All of the sound and fury of the Mayor and Common Council, Erie Canal Development and the Webster Block, may in the end signify nothing.

The bomb dropped, and it was unexpected. Mayor Brown drips goodwill about working well with HSBC. County Executive Collins is “on pins and needles.” Neither are Big Time enough for the HSBC leaders who will make this decision to even know their names. What will happen, will happen.

And what is that? HSBC is Buffalo biggest deposit holder, a relic of its Marine Midland history, with 71 local branches, and 184 throughout Upstate. The worst case scenario for Buffalo is that HSBC’s upstate holdings are liquefied piecemeal. First Niagara will fill in its footprint in several communities. Key Bank will do the same in a few targeted locales. M&T likely buys zero. Evans, Financial Institutions, and Warsaw each buy a couple. Local Albany and Syracuse banks pick up the rest. But in a shrinking community and a saturated banking market, 71 local branches become 40, and 184 upstate branches become 120. Of the 5000 local HSBC jobs, the 3200 in back-office operations largely disappear (First Niagara doesn’t need to hire many more to handle ten more sites), and the 1800 at local branches become 1000. Four thousand jobs lost.

If Buffalo is lucky, we get the New Haven deal. Seven months ago I also noted TD Bank as a possible snatcher of First Niagara, if John Koelmel didn’t get FNFG’s stock price up quick enough. Jon Epstein in the Buffalo News also lists TD Bank as a possible suitor, and we could do far worse. TD has offices along the East Coast and across Canada, but no footprint to connect the two. The Canadian dollar is strong, and Canadian companies are taking advantage of buying American assets. Buffalo is recruiting Canadian companies aggressively, and TD could find a worse place to put significant US back-office operations. It was only a couple weeks ago David Robinson was crowing HSBC wouldn’t move their jobs because our low labor costs are so favorable. If TD snatched up the upstate HSBC network, we could see the retention of most branch jobs, and perhaps half the back-office ones as well. TD becomes the largest bank in WNY, and First Niagara’s head is off the chopping block for at least one possible acquirer.

1600 jobs lost and a more stable First Niagara – that is Buffalo’s best day.

The News from New Haven

1 Oct

New Haven, Connecticut, metro population a compact 850,000, is an unlikely victim of Buffalo’s growth. A college town, in the oldest sense of the word, New Haven is not just home of Yale, Quinnipiac, and other universities. The universities are the town; downtown New Haven blends into rather than borders Yale, and the main towers of the central business district evoke, at least in a small way, the eighteenth and nineteenth century Yale collegiate architecture – spectacular stone and glass towers, long halls and quadrangles. New Haven’s central green, Protestant churches, rows of brownstones, shops and restaurants, narrow walkable streets, incredible density, and vibrant student life are far closer to Oxford than most of America.

Still, the fading industrial forces that so affect Buffalo echo here as well. Rusting factories and grain elevators along the Quinnipiac River and ocean front. Boarded up churches hard against interstates running through the center of the city. Row upon row of small boxy World War II era homes, neat and tidy, white siding and darker trim, in first ring suburbs between the meager (2 gate!) airport and the city centre.

And now actions in suddenly boogey-manned Buffalo directly affect New Haven, which is home to not just Yale, but also NewAlliance Bank, future acquisition of shopping-spree-mad First Niagara. New Haven is as far from Manhattan (80 miles) as Niagara Falls, New York is from Toronto. The difference in affect and influence is striking, and can’t be explained away by a simple reference to the international border. I am sure when New Haven foresaw interference in its local banking affairs, it looked to the proximate largest city in New York, not the second most.

So when the news broke a month ago, that First Niagara would purchase NewAlliance, snag its newish CBD tower for its New England regional headquarters, and create the 24th largest bank (depending on what measure you use to count) in the United States in the process, the initial reaction of most of New Haven was “Huh? Never heard of it.”

Voter anger is a national phenomenon. In the coffee shops and pizza parlors of New Haven this week, politics was on the lips of many locals I met. And not just the fashionably politically active college students, but working class CTer’s as well. The Senator’s race between liar Blumenthal and WWE Superstar Linda McMahon appears to be a choice of the lesser of two evils, and the mayor of a nearby town, that has a son-in-trouble scandal that would put Byron Brown to shame, has a ten point lead for governor.

And the anger is not reserved for the politicians – the Mayor of New Haven and many citizens are hot their bank is being acquired. The local news paper, the New Haven Register, set up a forum for citizens to vote their displeasure. Most bemoaned the loss of local control, or indicated they would move their money to a more local community bank or credit union. Such comments are typical now, but fail to play out later. First Niagara has an excellent track record of keeping deposits and business at its new branches in Pittsburgh and Philadelphia.

But other comments ring true here. The Editorial board of the local paper is pushing a money grab, and wants First Niagara’s foundation endowment to the local community bumped up. A powerless plea for cash from rich out of state (or downstate) interests sounds positively Buffalonian. There is similar concern that a new local bank, forced into creation by a local settlement when NewAlliance was formed a couple years ago, would no longer be stood up. It will go ahead, and First Niagara pledges to continue to listen to the local community here. But John DeStefano, the local mayor, is having none of it.

Mayor DeStefano, a politically ambitious and outspoken politician, fought the creation of NewAlliance from the start, when it emerged from the combination of New Haven Savings Bank and two other smaller local institutions in 2004. Then, he said it would forget its roots and would be sold off, for a big cash out for the board of directors and CEO, and at the expense of New Haven. At the time he demanded, and received, concessions (like the start up bank mentioned above). Now he wants more. A prescient politician, or a guy just looking for a handout? The citizens of New Haven can’t agree either, but many of them did see this eventually coming. The citizens of Lockport can surely sympathize, while in Buffalo the mayor and local officials are happy to ride the good times wave. As so few of them come by, I don’t blame them.

The New Haven Register’s comment forum contains many dismissive, frustrated and negative remarks, as one would expect. But note the following positive comment, from “E”:

First Niagara bought out a local bank in my area (philly). They have done nothing that would hurt the community. I have since bought stock in their company after doing biz with them. They don’t operate out of a central area..they have regional headqtrs and let the regional leaders of the bank make most decisions for the bank. A larger bank with more resources would only help the area.

Will Buffalo be so generous when First Niagara, shooting to the moon, is inevitably bought itself? Or will we wish First Niagara had put down stronger roots, with more backoffice functions moved back to Buffalo (read: more jobs poached from Penn and NE) while they could, and didn’t put so many resources in its new territory. A quick eyeball test says the new New England regional HQ of First Niagara is much bigger (and at least shinier) than First Niagara’s space in the Larkin Building. Will First Niagara build its own shiny new tower downtown before it burns out? Or is the Larkin set to be the Upstate New York HQ of TD in the near future? Because not to be conspiratorial, but has anyone else noticed the number of new TD ads (and manned kiosk) in the Buffalo airport?