MasterCard Vision

MasterCard conducted an online forum last week to discuss lifestyle changes that will occur as smart card technology gains acceptance over the next five years. MasterCard believes multi-application smart cards will be an established technology in the payments business within the next five years. MasterCard projects that by the year 2010, all of MasterCard’s credit and debit cards and terminals will be chip-based. The forum included representatives from IBM, Hitachi, British Telecommunications, the U.S. GSA and The Tower Group.

SLICK Coming

Betting Inc. has partnered with Novtech, a Florida electronics firm, to develop the first SLICK working model. The secured-line Internet computer keyboard (SLICK) will bypass the Internet completely. Looking like a regular keyboard, the SLICK will feature a card-reader insert for ATM cards, credit cards and stored-value smart cards; a modem; and a printer. The SLICK will use the consumer’s home phone to send a data transaction toll free to the ET&T bank host for bank-card authorization. The Internet merchant will be contacted over a private network to respond back with acknowledgment of SLICK payment. No information crosses the Internet. Betting Inc. is targeting November to begin selling the SLICK to Internet consumers.

ITS Signs Delta Dental

Delta Dental Plan of California, California’s largest dental health plan, has recently contracted with Imperial Technology Solutions (ITS), a division of Los Angeles-based Imperial Bank, to incorporate ITS’ software into a multifunction online electronic payment system for use by participating Delta dentists. ITS’ Receivables Payment Manager (RPM) reduces billing and collection costs by electronically verifying insurance eligibility, benefit information and patient copayment levels online, while accepting patients’ credit cards, ATM cards and check-guarantee services for automatic direct payment into a dental practice’s account.

With more than 10.6 million California enrollees and 22,000 dental offices throughout the state participating in Delta programs, the impact for Delta patients and dentists alone offers to significantly change the insurance aspects of dental-care delivery in California.

Sub-Prime Failure

The Colorado State Bank Commissioner closed sub-prime VISA credit card issuer BestBank Thursday and appointed the FDIC as receiver. According to the Bank Commissioner, BestBank, based in Boulder, CO, was critically undercapitalized. The FDIC spent the weekend attempting to arrange a transaction under which the failed bank’s insured deposits will be assumed by a healthy bank and reopen for business this morning. In the interim the FDIC and VISA will continue to honor BestBank’s 500,000 VISA cards. The issuer specializes in sub-prime and secured credit cards on a nationwide basis. In the first six months of 1998, BestBank’s receivables surged 52%. Two weeks ago BestBank purchased $5 million of credit card loans from SD-based The Credit Store.  The Credit Store’s principal business is the acquisition of charged-off consumer debt and the conversion into new unsecured credit card accounts. With the acquisition BestBank became a MasterCard issuer too. Columbia Capital Corp. and First Independent Computers, BestBank’s processor, said it expects the closing to have little effect on their contract despite the fact that it derives a substantial portion of its revenue from the BestBank contract. This is the first bank failure in Colorado since July 1993.

Household Stumble

Attrition among Household’s U.S. bankcard and private label credit card business dampened second quarter results somewhat. Second quarter receivables declined by $167 million from the first quarter, according to figures reported to CardData Friday. Household also completed the most significant event in the history of the company June 30, the merger, with Beneficial. According to CardData, Beneficial National Bank reported 2Q receivables of $165 million; 2Q volume of $102 million; gross accounts of 292,000; active accounts of 132,000 and cards-in-force of 212,000. Household noted last week that discounting the Beneficial merger its overall delinquency and chargeoff rates declined during the second quarter.

       HOUSEHOLD  2Q  SNAPSHOT (inc. Beneficial)
                               2Q-98               1Q-98
RECEIVABLES:     $17,169,077,000     $17,336,014,000
Q VOLUME :       $ 8,508,233,000     $ 8,139,392,000
ACCOUNTS:             16,950,000          16,760,000
ACTIVES:               7,883,000           7,846,000
CARDS:                22,883,000          22,627,000
Source: CardWeb’s CardData, www.carddata.com

State Leaders

More than 40% of the nation’s bank credit card debt is owed by residents of five states and nationwide the average U.S. household owes $4,848. The statistics come from the July issue of Bankcard Barometer, published by Card Management Information Services LLC of Frederick, MD, and were released this morning. Based on EOY 97 bank credit card outstandings and the total number of households in each state: Californians owe $6,105; New Yorkers owe $5,712; Floridians owe $6,137; Texans owe $4,033 and Illinois residents owe $3,197 per household. The biggest annual growth in card debt among states with at least one million households: Iowa (+21%); South Carolina (+13%); Oregon (+12%); Washington (+12%) and New Jersey (+11%).

THE  TOP  FIVE  STATES  IN  BANK  CARD  OUTSTANDINGS

    STATE             EOY 97          EOY 96 CHANGE
    California      $63.5 billion     $57.9 billion  +10%
    New York     $37.7 billion     $34.5 billion     +9%
    Florida         $31.3 billion     $28.6 billion     +9%
    Texas          $24.2 billion     $22.6 billion     +7%
    Illinois        $22.7 billion     $21.0 billion     +8%
Source: Bankcard Barometer, July Issue, 301-695-4897

Debit Card Woes

The recent explosion of POS debit cards, especially VISA and MasterCard branded off-line debit cards, is creating a bookkeeping nightmare for some consumers and product confusion for others. The findings come from recent studies conducted by BAIGlobal which found many cardholders struggling to keep track of cash flow and balances in their accounts. As a result, cardholders are trying to track their funds in a variety of creative ways, including “back-of-the-envelope” ledger systems and daily calls to issuers’ 800-number customer service lines. The study also uncovered consumer confusion where issuers had converted private label ATM cards to branded debit cards using the VISA or MasterCard logo. BAIGlobal says the VISA and MasterCard brand are synonymous with credit cards, and cardholders have an adjustment to make when they see these brands now on debit cards.  In some cases the company found cardholders who thought they had a hybrid credit/debit card. The study concludes that despite problems within the debit card marketplace there is significant opportunity for growth. BAIGlobal says while debit cards penetrated nearly two of three households, cards are linked to only one third of all the household’s financial accounts, meaning debit cards have the potential to be linked to other accounts. The firm estimates most consumers have 2.7 financial relationships on average.

Security Seminar

VISA announced Friday it will co-sponsor a seminar on Internet commerce security at its world headquarters in Foster City, CA. The half-day seminar on September 17, 1998 will cover over 200 specific control measures which can protect Internet merchant systems. The seminar is based on the research report ‘Best Practices in Internet Commerce Security’, a white paper to be published by CommerceNet and Baseline Software this week. The report examines the controls employed by merchants, hosting firms, Internet Service Providers, third party security service providers, and Internet payment systems. The event is open to all organizations.

GZS & Intl Software Partners Team

Programmer’s Paradise, Inc. announced last week that it’s wholly owned German subsidiary, International Software Partners, GmbH , has formed a strategic alliance with GZS, the largest German credit card processor. Under terms of the alliance, ISP*D will be a preferred supplier of the Internet/Intranet front-end platform of GZS’s Corporate Automated Purchasing System (CAPS), a purchasing card back-office electronic solution for corporates. eCAPS, as the front-end platform will be called, is a subset of ISP*D’s Electronic Commerce Ordering System, (e COS) which was introduced this past March.

SCIA  Update

The Smart Card Industry’s Association’s Standards and Specifications Committee recently served as a forum for advancing the use of smart cards across a range of applications and multiple environments. The Committee showcased such progress at its last meeting by hosting three smart card consortiums Open Card Forum, PC/SC and the new Open Card Consortium. Representatives of Open Card Forum and PC/SC reported that their groups are adapting their respective systems so they will work compatibly. The Open Card Forum, with its application programmers perspective, is adapting its design and interface to work with the PC/SC structure. The PC/SC, for its part, is adapting its interfaces to those of the Forum’s application orientation. Open CardConsortium, formed during CardTech/SecurTech ’98 in Washington, D.C., will extend and promote Open Card Forum specifications and harmonize its work with the PC/SC. Founding members include IBM, Netscape, Sun, SCM, Bull, Schlumberger and Visa.

Exec TeleCard Acquires ConnectSoft

Executive TeleCard, Ltd. and Connectsoft Communications Corporation, announced last week that they have signed an Asset Purchase Agreement under which Executive TeleCard will acquire substantially all of the operating assets of Connectsoft for the assumption of $4,500,000 of liabilities, consisting primarily of capitalized lease obligations and the agreement, subject to valuation targets and performance formulae, wherein AUGI may receive up to a 7.5% ownership interest in the new subsidiary of Executive TeleCard, which has been formed to acquire the operating assets, or like value in cash or Executive TeleCard stock, at the option of Executive TeleCard.

First Data Gaming

First Data Financial Services, BA Merchant Services, Inc. and USA Processing formed a gaming funds transfer joint venture Friday. The joint venture, which has yet to be named, will provide a full range of electronic funds transfer and other services to more than 1,200 gaming properties nationwide.  Services offered through the joint venture will include credit card, debit card, ATM, Western Union Money Transfer services, and TeleCheck check cashing services.