Last update - 00:00 13/06/2007
Visa CAL gambling and pornography, revenues: NIS 40m
By Ram Dagan
The Visa CAL credit card company continues to clear pornography and gambling transactions over the Internet. Two competing credit card companies, Leumi Card and Isracard, have decided to refrain from clearing such transactions for ethical reasons, following U.S. legislation last year prohibiting credit card companies from doing business with gambling firms.
Visa CAL financial reports show that in 2006 the company cleared Internet business conducted by credit cards totaling NIS 1.5 billion, most of it apparently conducted on pornography and gambling sites.
Fees charged in the transactions yielded the company revenues of about NIS 40 million - around 6.5 percent of the company's total revenues in 2006. Sources in the sector say that Visa CAL increased its activities in this area during the first quarter of 2007, and can be expected to clear about NIS 4 billion worth of pornography and gambling transactions in 2007, recording revenues of NIS 100 million.
Credit card companies are involved in two distinct activities - issuing credit cards to customers, and clearing transactions from businesses. The companies charge membership and other fees (usually fees of 0.5 shekels for every credit payment) for the issue of credit cards, and 1.2 percent of the value of every transaction for clearing business transactions.
The bulk of credit card companies' revenues in Israel comes from clearing activity, and clearing fees for Internet transactions are higher than average, reaching about 2.5 percent of the value of the transaction.
The U.S. prohibition on the use of credit cards for Internet gambling has caused many Israeli credit card companies, including Visa CAL, to block issued credit cards to prevent their use in such transactions. Identification of prohibited transactions is made possible through the use of pornography and gambling sites' unique code which is relayed to credit card companies.
The basis for blocking such transactions has been ethical for the most part, resulting from concerns that some pornography sites finance child pornography. But while Leumi Card and Isracard made the decision to avoid all such types of activity, Visa CAL continues to clear transactions on pornography and gambling sites which are conducted with credit cards issued overseas and have not yet been blocked by foreign credit card companies.
Visa CAL responded that "without referring to figures, a substantial part of all clearing fees are paid to foreign issuers of the card and to international organizations such as Visa and Mastercard. Operational expenses and taxes should be deducted from high fees (the Interchange Rate). In other words, the statement that tens of millions of shekels in revenues are supposedly transferred directly to net profits, is incorrect."
Visa CAL said that all international clearing activity conducted by CAL is approved and supported by the international organizations Visa and Mastercard, while adhering to Israeli and international laws.
"These are foreign transactions conducted in a wide variety of sectors, some of which are even traded on international stock exchanges, are unrelated to Israel and have been approved by banks worldwide," Visa CAL said.