FINANCE CREDIT CARD FRAUD

Why your bank may not careif your credit card washackedby Robert Hackett @rhhackett JUNE 26, 2015, 1:00 PM EDT

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Some banks are putting hacked credit and debit cards on watchlists, rather than replacing the cards.

Credit and debit card fraud cost the U.S. $6.15 billion last year, up 12.4% from the previous year,according to The Nilson Report industry newsletter. So you’d think the financial services industry,which shoulders most of the cost, would be proactive about quashing the use of stolen card data. Butit may not make financial sense for your bank to replace your card—even if it knows the card has beencompromised.

That’s because hacks go down in phases. One set of cyber attackers steals the information—say, byhacking into a major retailer like Target ( TGT -1.75% ) or Home Depot ( HD -1.33% ). Thosethieves sell that purloined plastic—or, more specifically, the data behind it—on online black marketsand crime forums. There, a final set of fraudsters purchases the data to make unauthorizedtransactions. It’s an assembly line for digital iniquitousness.

If your payment card information hovers in limbo between those stages—up for sale on a balefulbazaar, but not yet in the hands of those anchor leg crooks—your bank may know it, because securityfirms trawl the “carder” underworld to compile lists of stolen data that they then sell to banks. Butfrom there, “fraud is a numbers game,” says Ricardo Villadiego, CEO of one such firm, Easy Solutionsof Sunrise, Fla. Since each reissued card costs the bank around $5, the expense of retiring a card maynot be worth incurring until somebody starts misusing it. “Just because data has been compromiseddoesn’t necessarily translate to losses,” says Villadiego.

The bigger the bank, and the closer the stolen card is to its expiration date, the less likely the bank isto replace it, experts say. Banks and payment companies Fortune spoke to—including Chase ( CCF -1.71% ), American Express ( AXP -1.99% ), and PayPal—declined to comment aboutwhether they use carder research services. But Avivah Litan, vice president at Gartner Research ( IT -2.07% ), says bigger banks often find it more cost-effective to keep watch lists—and to act onlyif things get ugly for them, and you.

A version of this article appears in the July 1, 2015 issue of Fortune magazine with the headline“Credit Card Hacked? Your Bank May Shrug.”

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INTERNATIONAL SOCCER

Will the English PremierLeague shut out Europe for

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star players?by Ian Mount @ianmount JUNE 29, 2015, 2:37 PM EDT

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Flush with TV cash, the UK’s top soccer league could soon startraiding the continent for top talent.

Here’s a familiar story: A foreign competitor grows large and begins exporting, stealing a chunk of thedomestic market from a local industry. The local companies begin to complain to their governmentabout unfairness and demand protective measures like import tariffs and quotas. The foreigncompetitor then warns the local government to resist market-distorting policies that thwart free andtransparent competition. Tension and distrust reign.

That could easily describe the steel market today, as steelmakers in the globe’s biggest producer,China, have flooded the world with exports, and struggling American and European steel companieshave begun to ask their governments for trade protection.

It could also describe what’s going on in international professional soccer, as a new television contracthas suddenly made the English Premier League (EPL) much richer than its competitors and has led tocalls from those rivals for their own modernization as well as some dubious measures to protect them.

According to a recent report from Deloitte, EPL teams had revenues of €3.9 billion for the 2013-14season, a 32% increase from the previous year. With TV revenues of some €2.1 billion/$2.9 billion,the EPL was second only to the NFL (€4.8 billion/$6.6 billion) in terms of international sports. And itputs its “Big Five” European competitors to shame: The EPL had higher revenues than the German(€2.3 billion) and French (€1.5 billion) or Spanish (€1.9 billion) and Italian (€1.7 billion) leaguescombined, and none of them had TV revenues over €860 million.

This happened because the EPL has done a much better job globalizing its revenue base—i.e. its fans—says Vanderbilt University sports economist John Vrooman.

“Over 40% of the current $1.15 billion annually drawn by the EPL from its overseas contracts comesfrom Asia,” he says, “and two-thirds of that comes from Thailand, Singapore, Hong Kong, andMalaysia. EPL is blowing away the European competition in the new pan-fanatic game of footballneo-imperialism.”

That inequality will only get worse, Vrooman says, because under the upcoming TV deal for 2016-2019, TV money for the EPL will explode to $4.7 billion per season. And since last season, the eurohas weakened against the British pound by about 12%, making the continental European teams evenpoorer. (Vrooman compares their situation to that of Canadian NHL teams when the Canadian dollaris weak.)

“European football now has a TV rights problem that has become seriously complicated by its foreignexchange rate problem,” he says.

This raises the interesting question of how this inequality will affect competition between the Big Fiveleagues: Now that the European soccer market is more highly concentrated in terms of revenues, willtalent inexorably flow to the bigger paydays of the EPL, thereby draining other leagues of stars andleading to a golden age for England in the Champions League, the pan-European soccerchampionship?

There’s no simple answer. While the big new TV contracts are a huge advantage for English teams,several issues blunt their benefit. First, while the new TV money means that all EPL teams are richerthan in the past, each of the other leagues has a few “super teams”—PSG in France, Bayern Munich inGermany, and Barcelona and Real Madrid in Spain—that can compete with the richest teams inEngland.

“Though the Premier is the one that generates the most revenue … the soccer superstars are not in thePremier but in the big Spanish teams (Messi, Neymar, Suarez, Ronaldo, Bale, James) and in Germanywith Bayern Munich (Ribery, Robben),” says Plácido Rodríguez, president of the InternationalAssociation of Sports Economists and former president of Spain’s Sporting de Gijon soccer team.

Factors as simple as weather, culture, and language preferences also matter when players decide

Factors as simple as weather, culture, and language preferences also matter when players decidewhere they want to work. “Many South Americans won’t be keen on wet and windy Manchester vs.warmer and culturally closer locations such as Rome,” says Rob Simmons, a sports economist atEngland’s Lancaster University Management School.

What is more likely to happen is that instead of draining all the superstars to top English clubs, theEPL’s sudden revenue boom may enable its newly rich mid-tier teams to poach talent from mid-levelcontinental teams, further exacerbating the lack of competition in those leagues and turning off fans.

In the EPL, foreign TV money and half of domestic TV money are shared evenly among the teams.(The rest is divided by performance.) This even share means that, while Real Madrid is still the richestsoccer team in the world according to Deloitte, eight of the richest 20 are from the EPL, comparedwith four from Italy, three from Spain and Germany, and one from France. All 20 EPL teams are alsoin the top 40.

This disparity is forcing other leagues to look for bigger TV paydays—and distribute them moreevenly. Spain’s government recently passed a new law that stops Real Madrid and Barcelona fromnegotiating their own TV deals. The league will now negotiate collectively, and the money will bedistributed more equally once it passes a threshold.

Continental teams still have a long way to go on the inequality front. In Spain, the ratio of richest topoorest in terms of TV pay distribution is 7:1, while in the UK it’s less than 2:1. Because of this, thepoorest EPL team in the 2013-14 season, Cardiff City, earned twice as much from TV as the team thatwon the Spanish La Liga league that year, Atlético de Madrid, which was Spain’s fourth-richest.

“The division here is utterly in-egalitarian, in favor of the haves. It’s just gotten to the point thatthere’s not enough competition within Spain to optimize fan interest,” says Pankaj Ghemawat, aprofessor of global strategy at IESE Business School in Barcelona.

For now, though, some continental league officials are falling back on the kind of dubious protectivemeasures that steel industry and other industrialists call for when threatened. At a recent event inMadrid, Spanish La Liga president Javier Tebas said that if the other leagues didn’t modernizequickly, the EPL would become the NBA of soccer, and the rest would become uncompetitive feedersto it.

His solution? Along with Portuguese league president João Martins, Tebas called for the

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His solution? Along with Portuguese league president João Martins, Tebas called for thereinstatement of Third Party Ownership (TPO), a practice banned in Europe as of May. Under TPO,investors own a player’s transfer rights—they own the players, in a sense—and profit when he is soldfrom one team to another.

Tebas and other proponents say bringing in investors allows small clubs to buy players they otherwisecould not afford, while opponents say it is not transparent and could lead to match-fixing as playersare told to throw games by their “owners.” Michael Platini, the head of Europe’s soccer governingbody, has even called it “a type of slavery.”

Now that Spain and the rest of the European leagues are facing soccer’s equivalent of Chinese steel—the Premier League—the question today is whether they’ll find the ability and the desire to modernize… or slip into minor league irrelevance.

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