Beyond SET

A global consortium of Internet commerce firms released a complete specification for the ‘Open Trading Protocol’ yesterday. The specification has been posted at for public comment and pilot implementations. The ‘OTP’ standard enables a consistent framework for multiple forms of e-commerce, ensuring an easy-to-use and consistent consumer purchasing experience regardless of the payment instrument or software and hardware product used. The protocol builds on ‘XML’ and supports ‘SET’.

Delta SkyMiles Soars

The ‘American Express Delta Airlines SkyMiles Optima’ card grew 140% last year to become the nation’s largest cobranded airline bank credit card program, according to a research report released today by Brittain Associates of Atlanta. Brittain says its annual study showed the ‘AmEx Delta’ card growing from 1.1 million cardholders to 2.8 million during the past twelve months. The next largest program is the Citibank/American Airlines AAdvantage card with 2.7 million cards-in-force. The First Chicago/United Airlines program logs in at third place with about 1.4 million cardholders. Brittain’s study, involving about 8,000 consumers, also confirms that Continental, America West and British Airways lost marketshare during the past year. Of little surprise was the finding that the majority of cobranded airline bank credit cards are purely convenience users charging $15,000 and $20,000 annually.

MoneyGram Buys Mid-America for $15 Million

MoneyGram Payment Systems, Inc. announced Friday that it has acquired all of the capital stock of Mid-America Money Order Company from Mid-America Bancorp for approximately $15 million cash pursuant to a purchase agreement reached last August.

James F. Calvano, Chairman and Chief Executive Officer of MoneyGram, said “This acquisition will enable MoneyGram Payment Systems to broaden its response to the financial needs of its customers, providing money transfer users rapid and convenient access to another of their primary payment vehicles.  It also provides our money transfer agents with another high-demand MoneyGram-branded product to sell.  A ‘MoneyGram Money Order’ is a logical extension of our portfolio of financial service products.”

Mid-America Money Order, which is based in Louisville, Kentucky and has been in business for eight years, is engaged in the issuance and sale of retail money orders and similar consumer payment instruments through a nationwide agent network.  It is licensed in all jurisdictions where licensing is required.

MoneyGram Payment Systems, Inc. is a leading non-bank provider of consumer money transfer and other financial services.  Through the MoneyGram(SM) network of more than 22,000 convenient agent locations, customers can wire cash in minutes to more than 100 countries throughout the world.  MoneyGram Express Payment(SM) service enables credit card issuers, mortgage servicers, finance companies, collections companies and others to collect good-funds payments from delinquent debtors within hours.  The company was organized in January 1996 and completed the initial public offering of its common shares on December 11, 1996.

KeyCorp Expands in CO

In a move that will significantly expand its distribution network in Colorado, KeyCorp announced that it has reached an agreement with Access Cash International, Inc., a Minneapolis- based Automated Teller Machine provider, to offer Key-branded ATMs in 71 Total convenience stores across Colorado.

The agreement brings the total number of Key-branded ATMs in Colorado to 122, more than doubling the size of Key’s ATM network and making Key Colorado’s fourth largest ATM provider.

“We are extremely pleased to be working with Access Cash and Ultramar Diamond Shamrock’s Total stores,” said Jim Peoples, president of KeyCorp’s Colorado District.  “Key sees considerable promise in the Colorado market and has been looking for ways to enhance its presence throughout the state.  This agreement to operate Key-branded ATMs in 71 Total Petroleum stores is a significant step toward expanding our distribution network and enhancing convenience for Key customers.”

“Working in partnership with distributors and customers, Access Cash has made it the company’s priority to provide cost-effective and reliable ATM solutions.  We strongly believe that KeyBank and Ultramar Diamond Shamrock are the kind of partners that will help uphold this mission in Colorado,” said Jeff Hasselman, project manager with Access Cash.

“Ultramar Diamond Shamrock is very pleased to offer this additional convenience to our Total customers,” said Bob Beadle, executive vice president for retail at Ultramar Diamond Shamrock.  “ATMs have proven very successful in the 1,400 Ultramar Diamond Shamrock stores that already feature them.”

The expansion of Key’s Colorado ATM network comes on the heels of another recent KeyCorp announcement under which the company outlined terms of an agreement with ARCO Products Company, the marketing and refining division of Atlantic Richfield Company, to install up to 850 ATMs in ARCO am/pm convenience stores in California, Washington, Oregon, Nevada, and Arizona. This previously announced expansion of its ATM network makes Key the seventh largest ATM provider in the nation.

The Key ATMs in the Total convenience stores — which will become Diamond Shamrock outlets early in 1998 under terms of Ultramar Diamond Shamrock Corp.’s recently completed acquisition of Total Petroleum — will initially offer cash, credit-card advances, balance information, and account transfer capabilities.

According to Key, the expansion of its ATM networks both in Colorado and around the country is significant to customers because basic banking transactions handled via Key’s electronic commerce alternatives — including ATMs, telephone and home computer — have now surpassed those at its KeyCenter (the company’s term for its branch offices).

Founded in 1994, Minneapolis-based Access Cash International, Inc., is an independent ATM provider.  Currently, Access Cash deploys more than 3,500 ATMs nationwide, and plans to have more than 10,000 machines operational by the year 2000.

Ultramar Diamond Shamrock Corp. (NYSE UDS), with about $13 billion in annual revenues, is one of the largest independent petroleum refining and petroleum product and convenience merchandise marketing companies in North America.  The corporation owns seven refineries in the United States and Canada with a total throughput capacity of 650,000 barrels per day and has approximately 6,400 branded retail gasoline/convenience merchandise stores, the majority of which are branded Diamond Shamrock, Ultramar, Beacon or Total. The corporation also has growing petrochemicals, home heating oil, and convenience merchandising businesses.

KeyCorp (NYSE KEY) is one of the nation’s largest financial services companies with assets of approximately $72 billion.  Through three principal lines of business — corporate banking, consumer finance, and community banking — the Cleveland-based company provides retail and wholesale banking, investment, financing, and money management services to individuals and companies across the U.S.  Key companies have a presence in 46 states from Maine to Alaska, including its network of KeyCenters, 1,900 ATMs, affiliate offices, and four telebanking centers (1-800-KEY2YOU) that provide financial products and services 24 hours a day, every day of the year.  KeyCorp’s Web site can be found at .

Indonesian Cards Bonds Downgraded

Duff & Phelps Credit Rating Company (DCR) has downgraded the following three Indonesian structured finance transactions

1.  Diawa Asia Credit Card LTD, N.V.

— Credit card receivables-backed notes Class A to ‘BBB+’ (Triple-B-            Plus) from ‘A’ (Single-A).

— Credit card receivables-backed notes Class B to ‘BBB-‘ (Triple-B-            Minus) from ‘BBB’ (Triple-B).

2.  P.T. Citimas Capital Indonesia, Series 1995-1

— Credit card receivables-backed notes to ‘BBB-‘ (Triple-B-Minus)            from ‘BBB’ (Triple-B).

3.  P.T. Bunas Financial Indonesia Tbk Auto Loan Receivables, Series         1997-AL-1B

— Auto loan-backed trust certificates to ‘BBB-‘ (Triple-B-Minus)            from ‘BBB’ (Triple-B).

The ratings remain on Rating Watch-Down.

The rating actions reflect the deteriorating environment in which these structured finance transactions are operating.  The creditworthiness of the Republic of Indonesia has suffered in recent weeks as a result of the loss of confidence in economic policy.

The Indonesian currency (rupiah) has lost almost 75 percent of its pre- crisis value amid worries about the viability of the Suharto regime and its commitment to the IMF program signed last November.  The declining currency has raised the burden of external debt, which, at approximately $120 billion or almost 190 percent of exports, remains high by international standards.

Public-sector liabilities represent about half of that debt, a weakness not present in Korea or Thailand.  Furthermore, the crisis of confidence has made it difficult for Indonesian companies to roll over short-term debt, which is believed to represent about one-third of total external debt.  Finally, the release of the government’s 1998 budget proposal, which implies a relaxation of fiscal policy, is inconsistent with the IMF plan to rein in aggregate demand and reduce the current account deficit.

In this environment, the Indonesian economy can be expected to slow dramatically, inflation could rise to double digits, and Indonesian debtors could experience increasing financial stress.  Repayment of principal and interest on the three rated transactions requires that payments on rupiah- denominated receivables be sufficient to cover the associated rupiah obligations, which in turn will service the rated dollar-denominated notes by means of currency swaps.  The weakening macroeconomic conditions will likely lead to higher default rates on the receivables.  Furthermore, increased interest rates on the rupiah obligations for the credit card receivables- backed transactions could reduce their excess cash flow by shrinking the net interest margin.  Despite these downward trends, the transactions have considerable strengths that warrant maintaining the ratings at investment grade.  First, swap agreements mitigate exchange control risk.  Therefore, the transactions are not capped by Indonesia’s foreign currency rating.  Second, credit enhancements, including limited guarantees, escrow accounts and subordination add substantial cushion to offset losses in the event of severe obligor defaults.  Third, excess spread (net interest margin less defaults less expenses), while declining, provides a cushion that can serve to absorb further deterioration.  Fourth, the structures are supported by financial covenants and various early amortization and other triggers for the benefit of investors.  Finally, the auto loan receivables do not adjust to higher domestic interest rates.  Given Indonesia’s uncertain economic outlook, DCR will monitor the transactions closely and take any further action as it deems appropriate.

ASA Picks up Funding

[][1] CEO Venture Fund announced Friday the completion of a venture capital financing in [Advanced Software Applications Corporation][2] (A.S.A).

A.S.A’s products address the expanding need for improved enterprise-wide data analysis and decision support in the growing areas of data mining and fraud detection.

Gary Glausser, a general partner of the CEO Venture Fund, who will join A.S.A’s board of directors, stated that A.S.A fills a technology gap in the rapidly growing data management and fraud detection markets.

In the direct marketing arena, A.S.A’s ModelMAX precisely predicts customer behavior by quickly and accurately analyzing vast amounts of data to identify patterns. Generally, companies have the raw data in their databases, but are unable to efficiently transform it into actionable information. ModelMAX narrows the target audience to only those most likely to exhibit the desired behavior, such as making a purchase, greatly reducing direct marketing costs like printing and postage.

In fraud prevention and risk management, A.S.A helps credit card issuers and retailers to take a bite out of the more than $1.5 billion lost annually to credit card fraud. A.S.A’s product, ScorXPRESS(R), prevents credit card fraud in a number of ways, starting the moment an application is filed. The software is easily customized to each lenders specific needs to thwart identity fraud, the fastest growing segment of credit card fraud, as well as the use of lost or stolen cards. In seconds, ScorXPRESS assigns a score that indicates to the lender the probability that a credit card application, or use of a card is fraudulent.

“In both data mining and fraud detection, our software is designed to help customers make better informed business decisions more quickly, and has proven consistently successful in creating immediate improvement to our customer’s bottom line,” said Bill Gossman, A.S.A’s founder and president. “With our software, and enterprise-wide integration capabilities, we expect to significantly penetrate the growing data mining and fraud detection markets.”

The CEO Venture Fund is a private venture capital firm focused on building successful Western Pennsylvania growth-oriented technology companies. The CEO Venture Fund has raised $85 million and has invested in 25 companies since its inception in 1985. Similar to earlier CEO Venture Funds, CEO Venture Fund III, a recently formed fund from which an investment in A.S.A was made, will invest in start-up and early stage companies in a variety of industries including software, specialized manufacturing, industrial automation, biotech and telecommunications.

Advanced Software Applications is a leader in packaging advanced technologies for enterprise-wide data mining, automated data analysis and on-demand decision support. The company’s award-winning products are highly regarded as breakthrough, “best-of-breed” solutions. By combining neural networks, fuzzy logic, and genetic algorithms with traditional statistics, A.S.A has created affordable, off-the-shelf business solutions for fraud detection and prevention, risk management, and database marketing. Founded in 1992, A.S.A is a privately held company headquartered in Pittsburgh, Pennsylvania and distributes its products throughout North America, Europe, Australia, New Zealand, and Asia.


Positive Outlook

Fitch IBCA gave Citibank high marks for its announced purchase of AT&T Universal’s credit card business in the January issue of ‘Credit Card Movers and Shakers’. Fitch says the deal could create customer appeal, activating some currently inactive accounts and increasing card use overall. The report says Citibank will hold a 16.2% marketshare, a $20 billion advantage over its nearest competitor, after the acquisition is finalized.

Timely Corx

In an interview with RAM Research president Robert McKinley, this week’s issue of Time magazine incorrectly reported the sale price of the AT&T Universal portfolio as $3.5 million instead of $3.5 billion. The error was apparently a typo and is the sole responsibility of Time magazine.

APEC Biz Travel Card

Starting next Monday frequent business travelers who reside in the five Asia Pacific Economic Cooperation partner countries will be able to get applications for a new travel pass card permitting express immigration clearance in Hong Kong. Applications will be accepted beginning January 26. The card will cost about US$65 and is available only to nationals of the 170 countries that do not require a visa to visit Hong Kong. The HKSAR government will issue a maximum of 10,000 APEC ‘Business Travel Cards’.

Revolving Credit Declines

For the first time since May 1993 overall consumer credit has declined, according to figures released by the Federal Reserve Friday. Consumer credit outstanding fell at a 4% seasonally adjusted rate in November, following an 11.25% rate of increase in October. Total consumer credit dropped from $1,235.2 billion in October to $1,231.0 billion in November. Revolving credit is growing at an annual rate of -4.1% versus +10.7% one year ago. In terms of actual dollars, total revolving credit has risen from $495 billion to $528.1 billion over the past twelve months. Between October and November revolving credit actually dropped $1.8 billion, the largest single month drop since the stock market crash of November 1987.

                                 REVOLVING CREDIT HISTORICAL
       Nov 97  Oct97  Sep97  Aug97 Jul97  Jun97  May97  Apr97  Mar97 Nov96     
%GRWTH -4.1    8.0    6.2    8.0  9.4    4.2    4.6    6.9    0.5   10.7
$OWED 528.1   529.9  526.4  523.7 520.2  516.2  514.3  512.4 509.5  495.0
Source Federal Reserve; revised figures as of 1/09/98

Advanced ECO 5000

New application areas are being discovered for the smart card almost every day, bringing a growth in demand for universal card readers which allow for fast card data access. With its ECO 5000 smart card reader, ORGA is now marketing an advanced device suitable for a wide variety of applications, especially in the end user area.

Prevailing standards for various smart card applications were taken into account when the ECO 5000 was still in the development phase, in order to ensure the reader’s optimum versatility. The card reader thus conforms to ISO 7816, complies with the HBCI specification for home banking as well as the relevant specifications for electronic purse systems.

ECO 5000 is available either as a desktop unit or as an integrated card reader for PCs, and is particularly suitable for flexible use in modern smart card solutions. It provides for communications conforming to Home Banking Computer Interface (HBCI) security level 1, based on a uniform API (Application Programming Interface), which standardizes access to all devices of the ECO product family.

The device, which runs under Windows 95/Windows NT, is simply connected to the parallel port of a PC, without interfering with printer operation. A version for connection to the USB port is currently being developed.

The basic configuration of the ECO 5000 supports protocols for processor cards and memory chipcards.

ORGA USA is the North American subsidiary of ORGA Kartensysteme GmbH Germany, one of the world’s leading developers of microprocessor-based smart card technology, with more than 550 employees worldwide. ORGA offers turnkey solutions for health care, banking, telecommunications and other emerging markets. ORGA has subsidiaries and affiliated companies in Great Britain, France, USA, CIS, China and South Africa as well as an agency in Singapore. Visit ORGA’s Web site at [][1]


Checkmate Eckerd Deal

Checkmate Electronics received a $3 million order from Eckerd Drug Stores yesterday for Checkmate’s ‘CM 2001’ EBT/credit/debit terminal. Eckerd will immediately deploy the terminals throughout its 2,000 stores. The deal also includes warranty purchases of more than $300,000. Eckerd has already deployed Checkmate’s ‘CMR 430’ check readers throughout its chain. JC Penney, Eckerd’s parent company, has installed about 50,000 ‘CMR 430s’.