Siemens Beetle

The newly formed Siemens Information and Communications Products LLC announced the formation of Siemens Nixdorf Retail and Banking Systems LLC, which began operations on October 1, 1998. Siemens Nixdorf develops and supplies open systems hardware and software solutions for the retail and banking industries to provide customers with expert knowledge in these markets where Siemens Nixdorf is number one in Germany, number two in Europe and fourth in global market share.

In the United States and Canada, the Retail arm of the new company focuses on providing the customer with store solutions through customer offerings such as:

— “Beetle” Point-Of-Sale Systems: This best-in-class offering combines the processing power of a PC-based Point of Sale (POS) system with the flexibility to support the widest range of retail peripherals, providing the end user with a new level of capability, compatibility and service.

— Software Applications: Powerful retail software designed to provide full-function client/server POS processing, with an open architecture that allows maximum hardware independence.

— Complementary Software Solutions for SAP Retail:     Open Store Connection System (Open SCS) – This first of its kind software allows the cost-effective integration of heterogeneous branch systems into the entire SAP R/3 Retail system.  SILOGICS – Middleware for a seamless flow of information from and to external Warehouse Management Systems to SAP R/3.

— Integration Services: Siemens’ top level integration services     combine with project management to provide solutions that offer maximum cost-efficient functionality while protecting retailers’ investments in technology.

“It’s refreshing to see a company whose total focus is on addressing and understanding the issues and challenges of the retail industry,” Said Charles Mitchell, vice president of Information Technology at Nordstrom. “Rather than being asked to adapt ourselves to existing technologies, Siemens Nixdorf worked to provide us with custom developed solutions in an open environment which will enable us to maximize our investment from the technologies implemented.”

The Banking arm of Siemens Nixdorf Retail and Banking Systems has focused on the highly successful Self Service Products which have propelled Siemens Nixdorf to a 5.2 percent market share worldwide in ATMs. (Nielson Report, May 1998) The Self Service Products line consists of:

— Hardware – Offerings include a product range of automated teller machines and automatic teller safes, information/statement printers, POI-/POS-terminals, as well as branch and ticket printer.

— Software – Software modules have been designed for both the national and international markets and can be used in a wide range of industries and market segments, such as banking, insurance, retail, tourism and local government.

In addition to the Self Service Product line, Siemens Nixdorf offers products geared toward the non-bank environment such as the ATM Pro Cash Compact, the first Windows NT-based cash dispenser designed specifically for the non-bank environment. Its Pentium processor, VGA monitor, and high quality full-motion video provide advertising capabilities that bring an added value to any ATM placement. Customers can advertise in-store daily specials as well as develop an income stream through national and regional advertisers.

“We examined other equipment and found the Siemens Nixdorf equipment to be superior in style and functionality,” said Beth Bailey Alexander, president of The Bailey Group, a leading supplier of automated teller machines for the non-banking marketplace. “Every problem and limitation we experienced with other ATMs has been successfully addressed and surpassed with their machine. The ProCash Compact provides the high visibilty, compactness and ease-of-use needed in most retail markets.”

Siemens Nixdorf Retail and banking Systems LLC is a separate legal entity and a division of Siemens Information and Communication Products LLC. The new company is headed by Jan B. Andersson, president and CEO, with Pietro Parravicini as CFO.

About Siemens Information and Communications Products

Siemens Information and Communication Products designs, manufactures, implements and supports advanced technology products for customers within Fortune 1000, medium-to large-size enterprises and consumer retail market segments. Offerings include communication devices, computer systems, retail and banking systems, communication cables and information technology service. Siemens Information and Communication Products is part of the Siemens family of companies, which in the latest fiscal year had approximately $65 billion in combined revenues and 386,000 employees in more than 190 countries. Home page: [www.siemens.com/ic/products][1].

[1]: http://www.siemens.com/ic.products

Card Marketing Online

A new report released yesterday by Atlanta-based Brittain Associates confirms First USA as the leader in credit card marketing on the Web. Based on a September survey of 1200 adult Internet users, Brittain estimates that nearly seven million new credit card accounts have been opened because of Internet marketing in the U.S.. The report says First USA is far ahead of its competitors in online account acquisition. Second place MBNA has only signed up about one third as many accounts online as First USA. Other issuers whose on-line shares registered in the Brittain measurement include Bank of America, Capital One, Chase, Citibank, First Premier Bank, First Bank, and Heritage Bank of Commerce. With over 51 million adults in the U.S. claiming to regularly access the Internet, its use as a credit card marketing channel looks promising according to Brittain. The study says over 15 million of these Web-connected consumers logged on at one time or another to search for a new credit card. Nearly three-quarters of these consumers then applied for one or more cards they found on-line. The study also measured how many consumers have bought other specific goods and services via on-line shopping and whether they used a credit card to pay for on-line orders. Brittain is also releasing two other studies including ‘e.Financial Services’ and ‘Consumer Privacy vs. Direct Marketing’. For more info call 404-636-6155.

Sold Out

Another indicator of the Web’s success in credit card marketing: CardWeb’s consumer channel advertising slots are sold out. Launched three years ago by RAM Research Group, CardWeb’s Internet traffic recently surpassed the one million page-views-per-week benchmark. CardWeb’s free online consumer services include CardTrak (daily news, monthly commentary and surveys); CardSearch; CardLearn; CardLocator; and CardGame. Banner advertising on CardWeb’s consumer channels continues to be limited to twelve slots with a minimum one-year term. CardWeb advertiser response rates or click-through-rates average between 9.6% and 15.9%, among the highest of all consumer Web sites. CardWeb advertisers include: First USA, Chase Manhattan, NationsBank, Capital One, NextCard, Wachovia, AFBA, Commerce Bank, Beneficial and People’s Bank. Capital One recently purchased three slots. First USA, Wachovia, Commerce and People’s are entering their third year as CardWeb advertisers. Robert McKinley, president of CardWeb, Inc., announced yesterday from Denver that CardWeb ([www.cardweb.com][1]) has now opened its monthly CardTrak ([www.cardtrak.com][2]) surveys to enable other issuers to procure hot-links to their respective Web sites. For more info call 717-338-1885.

[1]: http://www.cardweb.com
[2]: http://www.cardtrak.com

Portable Smart Card Reader

Gemplus announced from Paris, Tuesday, a new portable smart card reader specially designed for applications requiring mobility, user authentication, and data transfer, such as healthcare and social programs, loyalty, and electronic purse. The ‘GCR800-MS’ has a twin smart card interface that can handle the reading and writing of two cards at the same time, an important feature for authentication or digital signature. A docking station for the card reader has an integrated modem that allows connection if required to a central server for data transfer or the updating of an application program. The portable ‘GCR800-MS’ electronic architecture also accepts any type of memory or microprocessor card. The MS in the product name stands for ‘Multi-SAMs’ and it can be specified with 0-, 2- or 4 Security Access Modules. It can handle up to four different applications individually protected and secured.  The ‘GCR800-MS’ is available now from 1,500 French francs for the basic version.

[email protected] Expansion

Atlanta-based [email protected] announced Tuesday it will expand its product line and offer VISA and MasterCard credit cards to its online banking customers. The Internet bank recently added online brokerage accounts and mortgage lending services. [email protected], Inc., achieved profitability for the bank’s second quarter 1998, making it the first profitable Internet bank in the country. [email protected] also claims to be the world’s largest Internet bank with 15,000 accounts, offering checking, money market accounts and certificates of deposits.

Faster Returns

TeleCheck Recovery Services recently added capabilities to electronically re-present returned checks via the ACH. TeleCheck’s ‘Electronic Check Collection’ provides benefits over traditional paper re-deposits, including faster re-deposit time and greater precision in determining potential fund availability.  Electronic re-deposit resolution takes only four days, compared to ten to eleven days for paper checks. Banks process electronic transactions before processing paper re-deposits, increasing the probability of reaching the account while funds are available.  In addition, TeleCheck’s predictive systems increase accuracy in timing re-deposits for collection to maximize the probability of successful collection.

Datakey Order

Datakey, Inc., a Minneapolis-based provider of information security systems, announced receipt of a second order from a United States government agency for their SignaSURE CIP smart card-based product. SignaSURE CIP will allow authorized users to digitally sign documents for electronic distribution to appropriate legal entities with absolute confidence in signature authenticity.

The second order is for 500 SignaSURE CIP packages and complements the first order of 500 packages and 300 additional smart cards announced on August 31, 1998.  The program is expected to expand to more than 12,000 users over the next three years.

SignaSURE CIP is an information security product that adds a smart card to data security application software. Datakey smart cards provide on-card cryptographic key generation, on-card processing and storage of private cryptographic data and on-card storage of digital credentials. These features provide the benefits of truly non-repudiatable digital signatures, stronger security than software solutions and  the ability for users to digitally sign documents from multiple workstations.

Datakey, Inc. is an international supplier of electronic products and services.  The Company provides product, subsystem and system solutions to record, store, and transmit electronic information. Datakey provides products and systems directed to the information security markets that enable user authentication, secure data exchange, and information validation.  The Company also provides OEM products, consisting of proprietary memory keys, cards and other custom-shaped tokens, that serve as a convenient way to carry electronic information and are packaged to survive in portable environments.

Diebold Demo

Diebold, Incorporated participated in a demonstration announcing the latest developments in Windows Distributed interNet Applications architecture for Financial Services (Windows DNA FS).  This demonstration supports Microsoft’s initiative to promote the development of standards that will allow systems from participating vendors to interoperate in the financial services industry.

The demonstration, which took place Monday, shows the integration of Diebold automated teller machines (ATMs) into a Windows DNA FS environment. By utilizing Diebold’s newest software solutions, OPTinet and OPTix, financial institutions are able to make use of existing investments in technology by reusing development tools and programming resources. Applications become less dependent on the delivery channel and the operating system, allowing quicker introduction into numerous environments.

Diebold’s OPTinet application and OPTix software platform provide the basis for integrating an ATM with a financial services infrastructure provided within DNA FS.  OPTinet utilizes the power and flexibility of Internet technologies to leverage solutions developed for other delivery channels onto Diebold ATMs.

The demonstration integrates Crestar Bank’s ATM delivery channel with its home banking, teller and IVR platforms.  This allows for the use of common data and consistent presentation regardless of delivery channel and provides increased customer satisfaction, more opportunities to market to customers and lower cost of ownership.

“Financial institutions need to create brand awareness by servicing their customers in a more consistent manner across all points of interaction including self-service terminals, call centers, home banking, Internet access and direct interaction,” said Tripp Johnson, senior vice president, electronic commerce manager at Crestar Bank.  “Diebold’s OPTinet software allows Crestar to quickly integrate the Internet banking and ATM delivery channels, adding transactions currently not available through the traditional ATM delivery channel.”

“Diebold’s OPTinet software and Microsoft’s DNA FS strategy both have the same common goal, to protect a customer’s investment,” said Roy Shirah, director, product planning and management for self-service systems at Diebold. “With OPTinet, a customer can leverage the transactions currently available through their existing ATM delivery channel while developing new transactions and services so they can be deployed across many delivery channels.”

Crestar Financial Corporation is the $26.2 billion-asset holding company for Crestar Bank with 396 banking offices and 700 ATMs in Virginia, Maryland and the District of Columbia.  Other subsidiaries provide insurance, equipment and automobile leasing, mortgage banking and full-service securities and investment advisory services.

Diebold, Incorporated (pronounced DEE-bold), headquartered in Canton, Ohio, USA, is a global leader in providing card-based transaction systems, security and service solutions to the financial, education, healthcare, utility and retail industries.  Founded in 1859, the company develops, manufactures, sells and services automated teller machines, campus and smart card systems, electronic and physical security equipment, automated medication and supplies dispensing systems, integrated systems solutions, software and banking supplies.  For more information about Diebold, Incorporated, visit the company’s Web site at .

Diebold Mid-East

Diebold, Incorporated has appointed Kishan Reddy to the position of systems engineer. Based in Dubai, Reddy is responsible for providing technical support to Diebold Middle East customers and distributors.

“Kishan’s establishment in Dubai is a sign of Diebold’s commitment to the Middle East,” said Reinoud G. J. Drenth, Diebold’s vice president and managing director, Europe, Middle East and Africa.  “His knowledge of the financial industry and his experience in the Middle East are pertinent to Diebold’s business development in Middle East markets.”

Prior to joining Diebold in September, Reddy was employed with Gulf Business Machines, Dubai, UAE, an IBM business partner, as an industry specialist for the Middle East in self-service banking solutions.  Prior to that position, Reddy was employed with Philips Information Systems, located in the Middle East office, where he supported banking solutions for seven years. Reddy holds a master’s degree in computer science from Jawaharal Nehru University, New Delhi, India.

Diebold, Incorporated (pronounced DEE-bold), headquartered in Canton, Ohio, USA, is a global leader in providing card-based transaction systems, security and service solutions to the financial, education, healthcare, utility and retail industries.  Founded in 1859, the company develops, manufactures, sells and services automated teller machines, campus and card systems, electronic and physical security equipment, automated medication and supplies dispensing systems, integrated systems solutions, software and banking supplies.  For more information about Diebold, Incorporated, visit the company’s Web site at .

Sub-Prime Card Bonds

The Credit Store, Inc. announced that on Oct. 14, 1998, it completed its first securitization of credit card receivables. The transaction involved the sale of approximately $6.2 million of seasoned, fully performing credit card receivables to a wholly-owned qualified special-purpose corporation, TSC Funding I, Inc. This transaction was funded by the special-purpose corporation in part through a $4 million, 39 month term loan from a Midwest financial institution. The Company has agreed to service the credit cards for TCS Funding I, Inc.

Martin J. Burke, Chairman and Chief Executive Officer, commented: “This securitization is a milestone for us and for the industry we are helping to create. It opens up an important source of capital for the Company.”

The Company also announced that, to improve its balance sheet, $10 million of currently outstanding subordinated debt has been converted into 10,000 shares of a newly-issued Series E of convertible preferred stock, in a dollar-for-dollar exchange. The Series E Preferred Stock carries no voting rights and can be converted into common shares of the Company at any time, and from time to time, prior to August 31, 2001, at a ratio of 285 common shares per share of Series E Preferred. The Company, at its option, may redeem all or part of the Series E Preferred Stock at par plus accrued dividends. The newly-issued Series E Preferred Stock is to pay a dividend of eight percent per annum, payable on Dec. 31 annually, and prorated from the date of issuance for 1998. The subordinated debt being retired carried an annual interest rate of twelve percent. The transaction was completed August 31, 1998.

Separately, the Company said that it expects to release its financial results for the fiscal year 1998, which ended May 31,1998, within the next several weeks. “The release of our financial statements is later than we had hoped,” commented Burke. “However, we made an important decision for the Company’s future by moving from a small regional accounting firm to a nationally recognized firm with a strong background in financial services and in our specific industry niche. Unfortunately, the new engagement did not take place until mid-July and the field work for the audit would typically have begun 60 days earlier.”

“In addition,” continued Burke, “after careful consideration, we have decided to adopt a new accounting method related to the recognition of portfolio acquisition costs which required a restatement of these revenues and costs back to our inception date in October, 1996. This adjustment is in keeping with the more conservative trends we are seeing in the business. The combination of a new firm and the change in accounting methods has caused us to require more time to complete the fiscal year audit.”

Under the newly adopted method, the Company will not recognize revenue from a newly acquired portfolio of non-performing debt until it has fully recovered the acquisition price of that portfolio through collections and through monthly payments from credit cards originated from the portfolio. The accounting change will cause the Company to report significantly lower revenues than would have been reported using the prior accounting method. The Company said that it will restate FY 1997 results to reflect this new accounting method. The Company emphasized that the accounting change has no impact on its cash flow. The accounting change only impacts the timing of revenue recognition and portfolio acquisition costs.

The Credit Store, Inc. is a nationwide financial services company engaged in the acquisition and collection of non-performing consumer receivables and the origination and servicing of credit cards. The Company acquires portfolios of non-performing consumer debt at substantial discounts, and then uses its direct marketing expertise to contact and negotiate settlements with consumers, most of the time placing settlement on new unsecured credit cards offered through an unaffiliated bank.

Brand Support

The four major payment card brands spent $143 million during the second quarter in ad expenses according to figures released yesterday by NY-based Competitive Media Research. While overall ad spending grew less than 6% compared to second quarter 1997, American Express boosted its second quarter spending by 40% offsetting Discover’s 60% reduction in ad spending.

       Brand          2Q-1998              2Q-1997
       VISA             $49.3 million     $46.9 million
       AmEx          $46.1 million      $32.8 million
       MasterCard    $37.3 million         $29.4 million
       Discover       $10.3 million          $26.3 million
       Total          $143 million          $135.4 million
         Source: Competitive Media Research

CU-3Q 1998

Mid-sized credit union card portfolios posted mixed results for the third quarter. According to CardWeb’s CardData service ([www.carddata.com][1]) the University of Colorado credit union, with an average balance of $1757 per card, outpaced its peers for the third quarter. The data are from CardData’s ‘Third Quarter 1998 Portfolio Survey’ now underway. CardData provides current and historical quarterly financials on more than 350 issuers in real-time.

CREDIT UNION         3Q-98 RECV CHNG CARDS

Tinker CU (OK)      $34,991,209     (-10%)    50,006
Provident Central CU (CA)  $33,459,156     (-63%)    32,232
NWA FCU (MN)              $30,900,302    (+3%)   49,819
University of CO (CO)     $28,958,350 (+21%)   16,485
Tenn Valley FCU (TN)      $25,131,547    (-6%)   15,604
Source: CardData (www.carddata.com)     
CHNG-percentage of change since 2Q-97

[1]: http://www.carddata.com