While credit card portfolio metrics are holding up well despite general concerns in the credit markets there are still challenges ahead. The FDIC recently reported a significant increase in both delinquencies and charge-offs during the second quarter for banks and according to CardData the latest issuer data also shows an continued uptick in both measurements. Charge-offs hit 4.89% in October, a new record for this year and the fifth consecutive month that credit card charge-offs have increased. Delinquencies came in at 4.79% for October, the highest since January 2005. TowerGroup released a report this week on asset-backed credit card securitizations, which shows that despite increases in the reserves for credit card losses, noncurrent loans are outpacing the rise in loan loss reserves. TowerGroup says it believes this trend indicates that delinquencies and loan loss reserves will continue to rise. In turn, the increased risk in credit card portfolios due to rising delinquencies will increase funding costs for ABS. For banks, the impact will be either higher funding costs or increased costs for credit enhancement in order to obtain favorable investment ratings from the rating agencies. Nevertheless, it is important not to overstate the negative effects of the subprime collapse on either the credit card business or the securitization market.
Lloyds TSB has launched its “NetService” account tool to provide
with tracking and account management. The service has been made
Lloyds TSB Corporate card customers and Purchasing card customers for funds
management. In addition to providing thorough account information, the
allows customers to update contact details, review transactions in real
review statement data covering the 12 previous months. The “Netservice”
is available for customer access 24/7 over 128-bit SSL encryption.
Denver-based PaySimple has hired Connie Howard, formerly of NextAction, as SVP/Client Services . Howard will play a key role in shaping the client services organization to manage ongoing partner and direct client relationships. Before joining PaySimple, Howard headed up Business Development and Client Services at NextAction, a leading data services organization. Prior to NextAction, she was the VP of Sales at I-Behavior and a principal engineer of its start-up. She also held various senior sales positions at Abacus Direct, driving its business growth through IPO and eventual sale to DoubleClick for $1.8B. Connie Howard attended Wayne State University and holds BA in Business Administration. PaySimple simplifies collection processes by automating the collection and deposit of payments.
Canada’s top loyalty marketing company has signed a deal to acquire the U.K.’s largest customer rewards program. According to this week’s CardFlash International, Montreal-based Aeroplan has agreed to acquire London-based LMG, the owner of the “Nectar” loyalty card program, for about US$745 million. Besides the “Nectar” program, LMG operates Insight & Communications and Loyalty International. About half of U.K. households participate in the “Nectar” loyalty program along with 15 national retail brands. Aeroplan says the two loyalty programs, “Nectar” and “Aeroplan,” will continue to be operated separately. Members’ participation in their respective program is unaffected. Rupert Duchesne will remain President and CEO of Aeroplan. Alex Moorhead and his executive team will continue the management of LMG. LMG is being acquired from Sir Keith Mills (Chairman of LMG), global private equity investor Warburg Pincus and the management team. The transaction is expected to close by the end of the year.
CA-based Fidelica Microsystems has introduced the “FSC-3012” card which is the first to offer biometrically-authenticated credential features with a fully-embedded biometric system. Fidelica’s smart card provides fingerprint imaging, enrollment and authentication contained entirely within an ISO 7810/16-format smart card. This card offers a cost-effective and easy-to-use means for security professionals to add biometric authentication to an access control or IT system by upgrading cards. In addition to smart cards, Fidelica is developing biometric security platforms for PCs, laptops, and mobile applications such as cell phones and PDAs, for release in 2008. Fidelica Microsystems is a developer of biometrics technology for electronic security, access and transaction control.
The Ukash payment method is reportedly gaining popularity as a credit
card alternative. With this method, Ukash account vouchers can be
distributed to Vodafone mobile customers through nearly 40,000 payment
terminals across the country and are valid for up to one year after
The vouchers can then be used at retail and service websites using an
number that is text messaged to the users phone to ensure security. Ukash
charges GBP1 for every GBP10 transaction payment method and does not
grant vouchers to age-restricted sites for whom it may apply. Ukash
e-commerce enables consumers to use cash for online transactions through
prepaid accounts for up to GBP500.
According to a recent survey conducted by the Network Branded Prepaid Card Association, branded gift card sales are predicted to more than double this holiday season, with the average consumer planning to purchase three to four cards. NBPCA offers tips for both the purchasers and the recipients to effectively maximize the convienance of branded gift cards. The Network Branded Prepaid Card Association is a nonprofit,inter-industry trade association that supports the growth and success of network branded prepaid cards.
MasterCard announced a quarterly cash dividend of 15 cents per share to be paid on February 11th to holders of record of its “Class A” common stock and “Class B” common stock as of January 11th. The cash dividend of 15 cents per share will be paid on February 11, 2008 to record holders.
HQ Gift Cards, a division of Stored Value Solutions, has launched “Gift Card Central” kiosks in Atlanta office buildings and residential towers planning to take the program nationwide next year. Office workers and residents in 25 of Atlanta’s class A office developments and residential condominium towers can purchase a variety of retail, dining, affinity and experiential cards at the lobby desks run by Concierge Services of Atlanta. The concept seeks to make gift card-buying even more convenient for busy corporate executives, office workers and luxury condominium residents. Stored Value Solutions provides custom gift card solutions for prepaid cards, loyalty and B2B applications and serves six of the top ten U.S. retailers, annually processing one billion transactions for 600 clients and their 580 million cardholders.
Ingenico and Sagem Securite have agreed to merge their electronic payment system businesses. Sagem will sell its payment terminal activities operated by its subsidiaries Sagem Monetel and Sagem Denmark in return for more than 10.6 million new Ingenico shares. Post transaction Sagem will become the main shareholder with a 25% stake of the combined businesses. Combined the businesses posted about 646 million euros in 2006 pro-forma revenues. During the first six months of this year, the two companies have seen a marked growth in revenue and profitability, with an operating margin of 12.6% for Sagem and 8.9% for Ingenico. A new Board of Directors of Ingenico will also be formed, comprising 13 members, of whom 7 will be chosen from those representing Ingenico’s current shareholders, 4 will be proposed by Sagem Securite and 2 will be independent. The deal is expected to close next year.
Omaha-based Planet Group has signed an agreement to acquire AZ-based Opticard Payment Services. Opticard provides end-to-end gift and loyalty solutions for retailers and merchants. Additional services include check authorization, debit, credit, ACH and electronic benefits transfer. Opticard currently supports more than 7,000 merchants. The Company processes over 20 million transactions per year at nearly 50,000 installed POS locations. Privately held Planet is a provider of IT consulting, payment-enabling technologies and transaction processing services. The acquisition is expected to close on January 1st.
First Annapolis recently examined the equipment financing strategies of 19 acquirers ranging from small ISO’s to the largest of acquirer-processors and representing 60% of the industry by volume. Almost two thirds of these acquirers utilize free terminals on the merchant level and approximately 9% of merchants receive a free terminal as opposed to a terminal that is rented, leased, or sold. Many acquirers, and especially the ISO community, have traditionally relied on the upfront revenues associated with equipment to fund their sales compensation plans and field sales organizations. The free terminal phenomenon is occurring at the same time that competition is intensifying and sales productivity is falling causing acquisition costs to increase. Though 9% doesn’t seem like much, for an average ISO, this particular form of price competition is disproportionately disruptive to cash flow precisely because it is front end loaded (as opposed to a reduction in discount rate with the same NPV). But even more fundamentally, when the net acquisition cost (cost net of upfront revenue) of a merchant becomes higher than the value of that merchant in a sale, then most ISO’s main economic premise is fundamentally altered. When the net acquisition cost of a merchant is greater than the lifetime value of that merchant, then it is “game over.”