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.

ARKSYS Drives Euronet

Euronet Services, Inc.’s network processes approximately one million transactions per month with a growth rate of 15 percent per month. Powered by ARKSYS’ Gold-Net product, Euronet’s network at June 24, 1998, consisted of 942 ATMs in 5 countries, with 371 in Hungary; 349 in Poland; 145 in Germany; 61 in Croatia; and 16 in the Czech Republic, including 45 ATMs owned by a bank in Hungary. Euronet currently owns five IBM AS/400s, two model 53s, one S30, one 310 and a 300. To further promote card growth throughout the region, Euronet has partnered with ARKSYS and IBM to offer a comprehensive card management and authorization system named Blue Diamond. Blue Diamond software assists banks in managing cardholder databases and gives the ability to offer the additional services and conveniences of sophisticated electronic banking via debit cards. Blue Diamond not only provides comprehensive card management functions, it also delivers a built-in, on-line interface to Euronet’s host system.

Singapore Platinum

The ‘Platinum MasterCard’ has entered Singapore as DBS Card Centre launched the ‘DBS Platinum MasterCard’ this week. This is the first platinum card launched in the Asia-Pacific region. DBS Card Centre is owned by DBS Bank and is the leading card issuer in Singapore with more than 120 affinity, private label, club membership and other cards.

Sears Card Stumble

Second quarter operating profit for Sears, Roebuck and Co.’s credit card portfolio dropped 13.6% compared to 2Q/97.  Meanwhile, the percentage of Sears goods and services charged to the ‘Sears Card’ has declined to 52% from 55% one year ago. However, managed credit card receivable balances grew 3.3% from the second quarter of 1997, while decreasing 4.2% from 1997 year-end levels. Since 40% of Sears’ profits flow from its credit card operations, Wall Street reacted to yesterday’s earnings report by pushing Sears shares down by 9.5% to close at $51.31. The decline in the ‘Sears Card’ is driven primarily by the intense pricing competition in the bank credit card business whereby offered interest rates have plummeted to their lowest level ever. Sears says the decrease in card receivables is due to the seasonal nature of Sears retail business while growth over the comparable prior-year quarter has been driven by balance growth in existing accounts. For 2Q/98 managed credit card receivables logged $27.7 billion compared to $28.9 billion at EOY 97. Credit card chargeoffs declined to 7.37% from 8.12% for the first quarter. Sears’ 2Q/98 full earnings report is available via [www.carddata.com][1].

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

Paymentech Up 27%

Paymentech, Inc. reported Thursday that net income for the fourth quarter ending June 30, was $5.0 million, a 27% increase year-over-year.  This compares with earnings of $3.9 million for the fourth quarter ended June 30, 1997. During the June 1998 quarter Paymentech processed approximately $12.7 billion in sales volume and approximately 519 million bankcard and third-party authorization and capture transactions.  For the fiscal year 1998, sales volume processed increased by 19% to $49.3 billion from the previous fiscal year.  Total transactions processed increased 41% to 1.9 billion.

ATM Fever

A study released this morning by Mentis Corp. reveals that banks continue to aggressively pursue the deployment of ATMs in their retail delivery strategies.  In 1997, the number of installed ATMs owned by banks increased to just over 125,000; up from just over 105,000 in 1996.  Mentis research indicates that this increase has been driven by rising off-premise placements which in turn has been driven by potential surcharging revenues. Nevertheless, while surcharging is a major driver for ATM deployment, Mentis research shows that banks are attempting to accomplish other goals through ATM deployment.  Large banks see ATMs as a way to increase their contact with existing customers, enhancing opportunities for cross-selling and improving customer service.  Small banks, on the other hand, see ATM deployment as a defensive strategy. Mentis also studied the deployment of limited-function cash dispensers. Since 1995, the installed base of cash dispensers more than doubled; from just over 18,000 to more than 37,000 in 1997, representing 30% of the total installed base. Although the actual number of ATMs acquired by large banks in 1997 is larger than that of 1996, ATMs owned by large banks represented 60% of all bank-owned ATMs in 1997, compared to 64% in 1996. Mentis concludes this decline may be the first sign that the installed base of ATMs among these banks is beginning to reach saturation.

GlobeSet in Turkey

GlobeSet Inc.  announced a new partnership agreement with Info Otomasyon & Entegrasyon A.S. of Turkey to license the GlobeSet Payment System. The GlobeSet Payment System is a SET software solution that allows consumers, merchants and financial institutions to conduct secure payment card transactions over the Internet. Info, the latest OEM channel partner to sign an agreement with GlobeSet Inc., provides the company with an entry into the Turkish IT, financial and retail markets. Since 1981 Info has been a leading systems integrator in the Turkish IT marketplace, completing large-scale electronic commerce and banking projects for customers in the finance, telecommunications and public sectors. A full SET e-commerce implementation with Yapi ve Kredi Bank has already been completed. Info will integrate GlobeSet products into their customer’s existing payment infrastructure.

Providian’s Record Earnings

The nation’s largest secured card  and sub-prime issuer posted second quarter net income of $62.9 million, a 38% increase over net income of $45.7 million for the second quarter of 1997. Providian Financial said rapid growth in the company marketing to unbanked customers is driving profits. During the second quarter Providian signed-up 1.3 million new customer relationships and now has over six million total accounts, representing a 50% increase over the same period in 1997.  The company has $11.5 billion in total managed loans as of June 30, a 24% increase over the second quarter of 1997.The total managed net credit loss rate and the managed 31+ day delinquency rate, including the acquired portfolios, were better than expected at 7.56% and 4.90%, respectively. Providian’s 2Q/98 full earnings report is available via [www.carddata.com][1].

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

First Data Slips

First Data Corp.’s total revenues fell 1% for the first half of 98 to $2.5 billion compared to the first half of 97. The company said the decline is due to FDC’s significant divestiture activity. FDC also posted an after-tax charge of $120.8 million resulting from delays in the conversion of Hong Kong-based credit card accounts and the general outlook for Asia. Meanwhile, second quarter merchant card volume increased 14% to $61 billion and transactions processed were up 12% to 1.1 billion. Merchant card revenues were up 1% for the quarter after being down 3% in the first quarter. Total domestic card accounts on file increased 23% to 174 million. International card services revenues were up 13% for the quarter to $70 million.  International accounts on file grew 32% from the prior year to 25 million. Payment instruments revenues were up 20% to $409 million. FDC’s 2Q/98 full earnings report is available via [www.carddata.com][1].

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