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U.S. retailers push banks to use PINs on credit cards as confusion reigns

BOSTON Some big U.S. retailers are stepping up efforts to use personal identification numbers, or PINs, with new credit cards embedded with computer chips in a bid to prevent counterfeit card fraud.

But they are being resisted by the banking industry, which sees no need to invest further in PIN technology, already used with debit cards, resulting in halting adoption and widespread confusion.

A small band of retailers with the clout to call the shots on their branded credit cards is leading the charge. Target Corp is moving ahead with a chip-and-PIN rollout, and Wal-Mart Stores Inc plans to do the same.

But Wal-Mart said it faces obstacles because its credit card partner, Synchrony Financial, is not yet able to handle PINs on credit cards. Synchrony declined comment.

Broadly, U.S. banks are unprepared or resisting the change.

The impasse comes after many consumers got their hands on new credit cards embedded with so-called EMV chips in advance of an Oct. 1 deadline that required retailers to accept chip cards or be liable for fraud losses. EMV stands for EuroPay, MasterCard and Visa.

But only about a third of merchants are actually using the chip technology, according to analyst estimates. The number may not pick up until early next year, if at all, because the retail industry typically halts upgrades during the crucial holiday shopping season.

“PIN issuance will remain a niche,” said Julie Conroy, credit-card analyst with Aite Group.

Banks favor using chip cards verified by old-school signatures, even though chip-and-PIN usage has led to lower fraud over the decade they have been used in Europe and elsewhere.

“The PIN is definitely a must,” said Lance James, chief scientist with cyber intelligence firm Flashpoint. “It’s one extra step that provides true two-factor authentication.”

But bankers say PINs provide little benefit beyond the advantage of using chips in combating the estimated $7 billion-plus in annual U.S. card fraud.

EMV chips thwart criminals who use stolen data to create counterfeit cards, a category that Aite estimates accounts for 37 percent of that fraud. Banks say that PINs only provide additional fraud protection when criminals seek to use lost or stolen cards, a situation that Aite estimates accounts for only 14 percent of fraud.

Banking groups say there are better approaches than PINs for verifying customers and have asked retailers to embrace tokenization and encryption to prevent theft of credit card numbers.

“PIN is a static data element that would not have a meaningful impact on overall payments fraud,” said Electronic Payments Coalition spokesman Sam Fabens.

PINs are also expensive to implement. Gartner analyst Avivah Litan estimates that banks would have to invest hundreds of millions of dollars in network improvements to support them.

Most retailers have yet to begin using any form of chip technology on credit cards, instead relying on the magnetic strips that are still part of the new cards, even though it now puts them on the hook for fraud losses.

But some are pushing recalcitrant banks, arguing that it is absurd to require them to spend billions of dollars to upgrade their point-of-sale terminals if they are not going to get the added security of chip-and-PIN technology.

“If they really cared about security, it would be a no-brainer,” to use PINs, said National Retail Federation General Counsel Mallory Duncan.


The issue has caused some confusion, even among experts.

A Chase credit card representative this month wrongly tweeted that the firm would soon issue chip and PIN credit cards. A company spokeswoman later said the tweet was a mistake.

The U.S. Federal Bureau of Investigation this month released a public service announcement incorrectly suggesting that all EMV credit cards use PINs, saying “Consumers should use the PIN, instead of a signature, to verify the transaction.” The agency updated the announcement to remove the error.

So far only one PIN credit card is available through a major U.S. retailer, a MasterCard that Target issues through Toronto Dominion Bank.

Target spokeswoman Molly Snyder said her company recently began distributing PIN cards through a rollout that should be completed in the spring.

“We believe that it is the most secure form of payment that is currently available,” Snyder said.

Even though demands for PIN cards are being made by groups representing large retailers, some big merchants say they have no plans to offer PINs.

“Our approach is chip and signature,” said Macy’s Inc spokesman Jim Sluzewski.

JC Penney Co Inc said it has no plans to introduce PINs and has yet to begin processing any chip transactions.

An industry executive said that some retailers have privately confided that they fear widespread PIN adoption could result in slower lines and lost sales from shoppers who forget PINs.

“They don’t want PINs because it clogs up transactions,” said the executive who declined to be named because the discussions were private.

(Reporting by Jim Finkle; Additional reporting by Sruthi Ramakrishnan, John Tilak and David Henry; Editing by Jonathan Weber and Bill Rigby)

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Exclusive: France’s Sephora to open shops in Iran next year

PARIS France’s Sephora plans to open several shops in Iran starting next year, becoming one of the first major European specialist cosmetics retailers to directly invest in the country as it emerges from years of economic sanctions.

Sephora, part of luxury industry leader LVMH (LVMH.PA), running around 2,000 outlets worldwide, is keen to build its presence in Iran where there is a huge appetite for cosmetics and especially make-up.

With a population of nearly 80 million, Iran is the Middle East’s second biggest market for beauty products after Saudi Arabia with annual sales reaching more than 3.5 billion euros($3.86 billion) in 2014, according to market research company Euromonitor.

And the beauty and personal care market is expected to nearly treble in the next five years to more than 10 billion euros, Euromonitor forecasts.

“Sephora is currently finalizing talks with its partner in Iran,” one of the sources close to the matter said.

“Talks are already quite advanced with their distributors,” another source said, declining to be named. One source said Sephora was hoping to open up to seven boutiques.

LVMH and Sephora declined to comment.

The Joint Comprehensive Plan of Action signed in Vienna in July between Iran and six world powers is to end years economic sanctions on Iran in 2016 in exchange for restrictions on its nuclear program.

While Western beauty products have long been sold in Iran in various perfume shops, the July deal is expected to bring an economic boom to the country which has been suffering from years of under-investment.

“We estimate that women, whatever their revenue level, spend as much as a third of their income on beauty,” Reza Miremadi, who distributes L’Oreal’s mass market brands such as Maybelline and Garnier in Iran.

Several managers from LVMH have been making trips to Iran in Sept. and Oct. and executives from Dior, Louis Vuitton and Bulgari are preparing to go there next month to examine investment opportunities, the sources said.

And the French trade group Comité Colbert, which represents 80 luxury brands, said it was planning to organize a trip in the spring.

Iran, once dominated by bazaars and tiny shops, has seen an explosion in shopping malls in recent years.

“Many people do not know that Iranians’ relationship to luxury and refinement is really quite close to that of the French or the Italians,” said Sara Yalda, a Franco-Iranian writer who is organizing a series of 14 conferences on Iran at a big theater in Paris next year.

“I think luxury brands are going to be very successful there.”

Many luxury brands such as jewelers Cartier, part of Richemont (CFR.VX), and Bulgari are sold in Iran through multi-brand shops.

Iran, whose economy is largely dependent on oil and gas revenues, has more than 3 million high net worth individuals who are major and regular buyers of luxury goods, analysts estimate.

But several luxury groups including Chanel, Gucci owner Kering (PRTP.PA) and LVMH’s Dior and Louis Vuitton said they were adopting a “wait and see” attitude for now until the evolution of Iran’s international relations became clearer.

“We have to see how things evolve from a political standpoint and see if there is a suitable retail infrastructure,” Dior Chief Executive Sidney Toledano said. “This is not short term but things can evolve quite quickly.”

Key political milestones will be Iran’s legislative elections in February and the outcome of the U.S. presidential campaign in November as there is concern president Barack Obama’s successor could re-impose sanctions.

Also, as part of the July Vienna agreement, there is a “snap back” provision which would re-instate the sanctions if Iran failed to fulfill its commitments.

(Additional reporting by Sam Wilkins in Dubai. Editing by Jane Merriman)

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UniCredit’s new business plan envisages 12,000 layoffs: source

MILAN UniCredit’s (CRDI.MI) new business plan envisages 12,000 job cuts worldwide, a source close to the matter said on Friday, indicating a larger reduction compared with 10,000 layoffs that had been expected.

UniCredit will reduce its Italian workforce by 3,500 jobs, including 2,700 cuts already planned but not fully implemented, according to two other sources.

Those sources added that along with Italy, cuts would be significant in Austria and Germany.

UniCredit declined to comment.

Italy’s biggest bank by assets is due to present an updated plan to shareholders on Nov. 11 as its Chief Executive Federico Ghizzoni lays out his strategy to bolster shareholder confidence in the face of the lender’s underperformance.

(Reporting by Gianluca Semeraro; writing by Francesca Landini; editing by Philip Pullella)

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Weak U.S. data clouds December rate hike possibility

WASHINGTON U.S. consumer spending in September recorded its smallest gain in eight months as personal income barely rose, suggesting some cooling in domestic demand after recent hefty increases.

The Commerce Department data and another report from the Labor Department on Friday also showed weak inflationary pressures, which would argue against the Federal Reserve raising interest rates at the end of the year.

U.S. central bank policymakers this week put a rate hike in December on the table with a direct reference to their final meeting of the year. The Fed has kept benchmark overnight interest rates near zero since December 2008.

“It will be difficult for the Fed to justify a rate hike at a time when income, consumption, and inflation are trending lower, leaving a December rate hike less likely than prior to the data,” said Jay Morelock, an economist at FTN Financial in New York.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, edged up 0.1 percent last month after rising 0.4 percent rise in August. September’s consumer spending data was included in Thursday’s third-quarter gross domestic product report.

Consumer spending rose at a brisk 3.2 percent annual pace in the third quarter, helping to lift GDP growth to a 1.5 percent rate. Consumption has increased at a rate of more than 3 percent in each of the last two quarters.

Third-quarter growth was constrained by business efforts to whittle down an inventory bloat, a strong dollar and ongoing spending cuts by energy companies.

Stocks on Wall Street were trading marginally lower, while prices for longer-dated U.S. government debt rose. The dollar fell against a basket of currencies.


When adjusted for inflation, consumer spending rose 0.2 percent in September after increasing 0.4 percent in August, suggesting consumption will continue to support the economy through the rest of the year.

That view also was bolstered by a separate report showing the University of Michigan’s consumer sentiment index rebounded in October from September. Consumer spending growth, however, is unlikely to maintain the brisk pace witnessed in the second and third quarters in the absence of a significant rise in income.

Income ticked up 0.1 percent as wages and salaries fell last month, especially in manufacturing, after rising 0.4 percent in August.

“Stronger income growth is needed to support stronger consumer spending,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.

With spending sluggish, inflation was weak last month. A price index for consumer spending slipped 0.1 percent, the first decline since January, after being flat in August.

In the 12 months through September, the personal consumption expenditures (PCE) price index rose 0.2 percent, the smallest increase since April, after increasing 0.3 percent in August.

Excluding food and energy, prices rose 0.1 percent for a fifth straight month. The so-called core PCE price index rose 1.3 percent in the 12 months through September after a similar gain in August.

Inflation has persistently run below the Fed’s 2 percent target. A report from the Labor Department showed the Employment Cost Index, the broadest measure of labor costs, increased 0.6 percent after a 0.2 percent gain in the second quarter.

In the 12 months through September, labor costs held steady at 2.0 percent, below the 3 percent threshold that economists say is needed to bring inflation closer to the Fed’s target.

“We are still in a modest compensation-gain environment and that implies inflation is not likely to accelerate sharply soon,” said Joel Naroff, chief economist at Naroff Economic Advisers in Holland, Pennsylvania.

“The labor market may be tight but firms appear to be in no great hurry to raise compensation.”

(Reporting by Lucia Mutikani; Editing by Paul Simao)

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Ackman: Valeant’s main problem is PR, not fraud

BOSTON Hedge fund mogul William Ackman told his investors on Friday that he was confident in his bet on Valeant Pharmaceuticals (VRX.N)(VRX.TO) but faulted the company for a weak response to fraud allegations that have sunk its stock.

He said during a teleconference that Valeant had made a “meaningful mistake” of underinvesting in its public relations and offered an insufficient response when short-seller Citron accused it this month of using phantom sales to boost its bottom line.

Valeant shares were last down 4.3 percent at $106.74 in New York trading.

The stock has lost a quarter of its value since Citron released its report last week accusing the Canadian company of improperly using its relationship with specialty pharmacies like Philidor to book revenue.

Valeant denied any wrongdoing in a conference call on Monday.

Valeant will sever all ties with pharmacy business Philidor Rx Services in the wake of criticism over the relationship between the two companies. CVS Health Corp and Express Scripts dropped Philidor from their networks on Thursday.

Ackman’s Pershing Square Capital Management hedge fund is one of Valeant’s top investors, and has lost around $2 billion on the bet since the start of the year.

Ackman said he believes Valeant’s business is sound and that the share price will recover, possibly slowly due to the “complexity of the story.” He said it should reach over $400 within three years.

Through Oct. 27, the Pershing Square Holdings portfolio was off 15.9 percent, a dramatic reversal after last year’s 40 percent gain which ranked Ackman among the industry’s best performers.

Valeant stock was trading as high as $260 per share in August. The next month, U.S. Democratic politicians singled out Valeant for hiking drug prices on consumers, and a federal subpoena followed. With the stock under pressure, the Citron report last week sent it into a tailspin.

(Reporting by Svea Herbst-Bayliss; Editing by Richard Valdmanis and Nick Zieminski)

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CVS 2016 profit forecast hurt by healthcare plans, Target deal

CVS Health Corp (CVS.N) gave a disappointing profit forecast for 2016, hurt by costs related to the acquisition of Target Corp’s pharmacies and as its own pharmacy benefits management (PBM) business expands in low-margin Medicare and Medicaid plans.

The drugstore operator’s profit missed analysts’ estimates for the first time in six quarters, as its $10-billion Omnicare acquisition failed to offset pressure from lower reimbursement rates and new low-margin generic drugs.

CVS shares were down 4.6 percent at $98.98 in heavy trading on Friday, among the top decliners on the SP 500 .SPX. They fell as much as 7 percent earlier.

The weak forecast from CVS, the No.2 U.S. drugstore chain by store count, comes in the same week that larger rival Walgreens Boots Alliance Inc (WBA.O) said it would buy No.3 Rite Aid Corp (RAD.N) for $9.4 billion.

CVS forecast 2016 adjusted earnings of $5.68-$5.88 per share, including a $4 billion stock buyback plan and a 6 cents per share impact related to the acquisition of Target’s (TGT.N) pharmacies in June.

Analysts on average were expecting a profit of $6.02 per share, according to Thomson Reuters I/B/E/S.

“While no one can complain about a $100 billion behemoth growing EPS 10-14 percent in a challenging environment, expects were clearly somewhat higher given the MA activity in 2015,” Evercore ISI analyst Ross Muken wrote in a note.

CVS said sales at its drugstores were hurt in the third quarter by the introduction of low-margin generic drugs, lower reimbursement rates and its move to stop selling tobacco products last year.

“Reimbursement pressure has not changed but … Medicare and Medicaid are big areas of growth in this (PBM) business. And they carry a lower margin rate,” Chief Executive Larry Merlo said on a conference call.

Rising generic drug prices are hurting drugstore operators as insurers and PBMs have been slow in raising reimbursement rates for those drugs.

Margins in CVS’s PBM business, which accounted for 66 percent of net revenue in the quarter ended Sept. 30, fell 45 basis points.

Net income attributable to CVS rose 31.4 percent to $1.25 billion, or $1.11 per share. Excluding items, it earned $1.28 per share. Net revenue rose 10.3 percent to $38.64 billion.

Analysts had expected earnings of $1.29 per share on revenue of $37.89 billion.

About 9.2 million CVS shares were traded by 11 a.m ET, with the stock’ turnover topping $900 million, the third highest among SP 500 companies.

(Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Savio D’Souza)

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Crude oil set for weekly gain despite global surplus

LONDON Crude futures held steady around $49 in early Friday trading, poised to post the first weekly gain in three weeks despite a supply glut that has tested storage capacity and hammered company results.

The potential gain, driven by smaller-than-expected builds in U.S. oil stocks, was widely viewed as a temporary boost in a market that is awash with oil and staring down sluggish economic growth in key markets such as the United States and China.

Brent crude traded 10 cents higher at $48.90 a barrel at 0940 GMT, set for a nearly 2 percent weekly increase.

U.S. crude was down 10 cents at $45.96 a barrel, on track to post a gain of nearly 3 percent on the week.

“Looking at the bigger picture, there is still lots of oil in the United States,” PVM Oil Associates analyst Tamas Varga said. “We should see a softer market in the coming days.”

Traders said a rally earlier in the week sparked by a 3.4-million-barrel crude build reported by the U.S. Energy Information Administration provided the sole support for the weekly increase. [EIA/S]

The build fell short of some analysts’ expectations and sparked a nearly $3 rally in U.S. crude.

But bearish data quickly followed, tempering the gains. U.S. economic growth braked sharply in the third quarter as businesses cut back on restocking warehouses to work off an inventory glut. Weak home sales soured the mood further.

China’s Ministry of Commerce announced on Friday a doubling in the country’s crude oil import quota for 2016, but concerns about shaky growth in the world’s largest energy consumer lingered.

Trading is likely to be muted in advance of China’s closely watched Purchasing Manager Indexes (PMIs) next week, analysts said.

“Clearly China demand is a key question for energy markets at the moment. With the manufacturing PMI due Monday I wouldn’t expect anyone to get too carried away,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

Oil executives, smarting from a 50 percent slide in prices since last year, saw little relief. Oil companies reported a dramatic drop in third-quarter income, with some falling to a loss, and said the pressure could persist through 2016.

(Additional reporting by Aaron Sheldrick in Tokyo; Editing by Dale Hudson)

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Fiat Chrysler recalls about 900,000 SUVs to fix airbags, brakes

Fiat Chrysler Automobiles NV (FCAU.N) said it is recalling about 284,089 older-model SUVs in the United States due to inadvertent airbag deployment.

Fiat said the affected vehicles – certain model-year 2003 Jeep Liberty SUVs and 2004 Jeep Grand Cherokees – are not equipped with Takata Corp (7312.T) airbags.

Fiat Chrysler said it will replace faulty occupant restraint control (ORC) modules, which determine the deployment of airbags, and front and side-impact sensors.

The company said it was aware of seven injuries related to the problem but no accidents. (

The car maker also said it will recall about 13,411 vehicles in Canada, 6,277 in Mexico and 48,212 outside the NAFTA region, due to the same problem.

(Reporting by Arunima Banerjee and Ankit Ajmera in Bengaluru; Editing by Don Sebastian)

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Valeant severs ties with controversial pharmacy distributor

Valeant Pharmaceuticals International (VRX.TO) is to sever all ties with pharmacy business Philidor Rx Services in the wake of criticism over the relationship between the two closely associated companies.

Valeant also said Philidor had informed it that it would shut down operations as soon as possible.

Valeant and Philidor, which has helped to drive sales for the Canadian drugmaker, have come under fire after influential short-seller Citron Research said Philidor was being used to create “phantom accounts” and inflate Valeant’s revenue. Valeant has denied any wrongdoing.

The drugmaker’s move on Friday comes a day after the three top U.S. drug benefit managers, who administer prescription medicine supplies for health plans, said they had stopped working with the pharmacy.

“We have lost confidence in Philidor’s ability to continue to operate in a manner that is acceptable to Valeant,” Chief Executive Michael Pearson said in a statement.

Valeant said this week that it would set up an ad hoc committee to look into the allegations related to the company’s association with Philidor. It announced on Friday that former U.S. Deputy Attorney General Mark Filip had been appointed to advise the committee.

“We understand that patients, doctors and business partners have been disturbed by the reports of improper behavior at Philidor, just as we have been,” Pearson said.

“We know the allegations have also led them to question Valeant and our integrity, and for that I take complete responsibility. Operating honestly and ethically is our first priority, and you have my absolute commitment that we will make it right.”

Philidor accounted for 6.8 percent of Valeant’s total revenue in the third quarter and the drugmaker said it intended to develop a plan to ensure minimal disruption to patients’ access to drugs.

Express Scripts (ESRX.O), CVS Health (CVS.N) and UnitedHealth’s (UNH.N) OptumRx all said on Thursday that they would stop using drugs dispensed by Philidor due to concerns about its business conduct.

Shares in Valeant fell heavily in after-hours trading on that news, reflecting worries about Valeant’s future sales growth.

Valeant shares have lost more than half their value since September as the company has come under attack on several fronts. U.S. prosecutors are also investigating the company over drug pricing, a hot issue in the U.S. presidential campaign.

Pearson told investors this week that if Valeant decided to cut links to Philidor it “would slow our growth but not dramatically”.

Mizuho Securities analyst Irina Koffler said Valeant had taken “a dramatic, albeit unsurprising” decision in ditching Philidor and the company would now need to provide updated financial guidance to stabilize the stock.

Valeant was until recently one of the most popular healthcare stocks among investors, with its model of rapid acquisition-driven growth. Its abrupt slide from market darling to a company under fire has weighed heavily on ValueAct Partners and Pershing Square, two well known U.S. activist funds.

(Reporting by Ben Hirschler in London and Shivam Srivastavain Bengaluru; Editing by David Goodman)

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