Operating Expense Finally Heads South

Rising interest rates and narrowing margins are not the only issues facing credit card providers in 2006. Operating expense, driven by increased competition, is still running 100 basis points over year ago levels, but may finally be abating. After peaking at 6.04% in February, operating expenses have nudged down by two basis points in March. Operating expense is determined by dividing monthly gross operating expenses by the average managed card outstandings and then annualizing. Operating expense includes such items as credit processing, call center servicing, billing, collections, fraud management, and card issuance. According to CardData ([www.carddata.com][1]), operating expenses stood at 5.00% for March 2005 and settled at 6.02% for March 2006.

Mar 05: 5.00%
Apr 05: 4.97%
May 05: 5.03%
Jun 05: 5.09%
Jul 05: 5.15%
Aug 05: 5.17%
Sep 05: 5.24%
Oct 05: 5.64%
Nov 05: 5.89%
Dec 05: 5.99%
Jan 06: 6.00%
Feb 06: 6.04%
Mar 06: 6.02%
note: Excludes American Express and Discover
Source: CardData (www.carddata.com)

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

STAR Network Inks North Shore Bank

Wisconsin-based North Shore Bank has added “STAR Network” access at more than 40 locations throughout Wisconsin for its 50,000 ATM and debit cardholders. North Shore Bank has assets of $1.9 billion with 45 branches throughout Eastern Wisconsin and Northern Illinois. First Data is a provider of electronic commerce and payment solutions for businesses and consumers worldwide.

Debt Purchase Prices May Have Plateaued

A new report estimates that debt buyers bought an estimated $3 billion in bankruptcy receivables last year. Kaulkin Ginsberg’s “The Global Debt Buying Report” says U.S. debt buyers are now active in the purchase of an estimated $100 billion in face value of delinquent credit card debt, taking into account primary sales from credit issuers as well as subsequent reselling on the secondary market. By the end of 2005, pricing increases led many debt buyers to contract their expected returns on investments from 3X to 2.5X of purchase price or lower over five years. Kaulkin Ginsberg says the consensus is that prices have plateaued for the foreseeable future. Larger and specialized debt buyers in the U.S. have begun to search for alternative debts that allow them to diversify their portfolios. The report says healthcare debt is currently considered to be the big prize of the debt buying market.

CompuCredit’s NIM Hits All-Time High

Atlanta-based sub-prime specialist CompuCredit reported that GAAP net income returned in the first quarter to more than $30 million after a $3 million fourth quarter whipped by bankruptcies. Managed earnings for the quarter were $54.8 million, compared with $38.5 million for the first quarter of 2005. CompuCredit noted that its net interest margin reached an all-time high of 25.0% in the quarter, as compared to 20.8% for the first quarter of 2005 and 22.4% in the previous quarter. Net charge-offs, based on average credit card loans, declined to 8.5% from 13.4% in 4Q/05 and 9.2% in the first quarter of last year. Delinquency (60+ days) increased to 10.6 in 1Q/06%, compared to 9.3% in the prior quarter. One-year ago delinquency stood at 8.7%. Total managed receivables for the first quarter were $2,511,588,000, a 10% increase compared to one-year ago. As of March 31st, CompuCredit had 3,781,000 accounts, compared to 3,588,000 at the end of 2005. For complete details on CompuCredit’s first quarter performance, visit CardData ([www.carddata.com][1]).

1Q/05: $49.2 million
2Q/05: $66.5 million
3Q/05: $52.7 million
4Q/05: $ 3.0 million
1Q/06: $30.7 million
Source: CardData (www.carddata.com

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

FDC Deploys Fair Isaac’s Blaze Advisor

First Data is now using Fair Isaac’s “Blaze Advisor” business rules management system. Blaze Advisor system is part of Fair Isaac’s software and solutions for Enterprise Decision Management, which combines data analytics, modeling and policy-level control to let companies define and manage their automated business systems for improved efficiency and greater profitability. First Data can easily add additional scoring models, such as those developed with Fair Isaac Model Builder, which allows the company to deploy customized and finely segmented customer management strategies.

RMS Expands BankingBonus to Debit Cards

Dallas-based Rennhack Marketing Services has expanded its Web-based rewards platform “BankingBonus,” launched earlier this year, to more proactively drive and track debit card usage and activation. BankingBonus provides banks of all sizes access to a rewards program for customers, as well as an incentive program for frontline employees to improve customer service. With BankingBonus, banks can build a branded online presence where customers and employees can redeem points for merchandise, gift cards and personal leisure rewards using points earned or awarded for specific behaviors like debit card activation or usage.

AmSouth Doubles Debit Card Cashback

Alabama-based AmSouth Bank has launched a “Double Cash Back Program” for new bank customers opening a consumer or business checking account with a free “AmSouth CheckCard”.Customers will earn double cash back rewards for the first six months using their AmSouth consumer or business CheckCards to purchase merchandise at many retailer and online locations. AmSouth is a regional bank holding company with $53 billion in assets.

Payment Rates Hit an All-Time High

Monthly payment rates for credit card-backed bonds soared to a new industry record during March, hitting 22%. The March figure was 270 basis points above February’s 19.4% and is only the second time the payment rate has topped 20%. According to Standard & Poor’s Ratings Services, each of the trusts that compose its “Credit Card Quality Index” reported higher payment rates during March, ranging from 60 bps to 930 bps. The monthly payment rate over the past 12 months has averaged 19.5%. During this period only one month, April, posted a rate lower than 18%. The higher payment rates have been primarily driven by higher minimum payments which were phased in during the fourth quarter of 2005 and the first quarter of this year.

ABS Monthly Payment Rates
Mar 05: 17.5%
Apr 05: 17.7%
May 05: 18.9%
Jun 05: 18.9%
Jul 05: 18.7%
Aug 05: 18.6%
Sep 05: 19.2%
Oct 05: 19.0%
Nov 05: 18.8%
Dec 05: 19.7%
Jan 06: 20.6%
Feb 06: 19.4%
Mar 06: 22.1%
Source: Standard & Poor’s

Nomad and Ie Partner on Prepaid Cards

Intelligent Environments Group has signed a partnership agreement with
Nomad Software to offer iE’s “NetFinance” software to Nomad’s prepaid card
issuing clients, including Building Societies. iE has integrated its
card online apply and account servicing modules of its NetFinance platform
into “Nomad’s CORTEX” system, the outsourced prepaid and debit card
service and is expected to be live in May 2006. The cards offer a payment
solution for a broad cross-section of people and purposes from teenagers
to un-banked adults and from gift to corporate payroll without requiring
credit checks. Funds can be transferred directly to the card using a
top-up facility and spending is limited to the prepaid balance.