Kmart Sues Capital One Over its Co-Branded MasterCard

Kmart disclosed this week that it filed suit against Capital One last month in regard to its co-branded “Kmart MasterCard.” The complaint, filed in the U.S. District Court for the Eastern District of Michigan alleges breach of contract. Kmart also says Capital One failed to market and support a co-branded credit card. The “Kmart MasterCard” was launched in September 2000. The suit was filed against Capital One Bank, Capital One, F.S.B., and Capital One Services, Inc. The complaint alleges “breach of the covenant of good faith and fair dealing, unjust enrichment, promissory estoppel and tortious interference with business relationships and prospective economic advantage arising out of Capital One’s alleged failure to market and support the co-branded credit card.” Kmart says its seeking monetary damages.

Consumers Say They’ll Use Cards Less During Holiday Season

While data for the first two weeks of the holiday shopping season show a 5% increase in retail sales and a 6% increase in credit card spending, a new survey by a MA-Cambridge Consumer Credit Counseling and its affiliated Debt Relief Clearinghouse, finds that more Americans plan to use credit cards less during this year’s holiday shopping season, than in 2002. According to the monthly survey, the “Cambridge Consumer Credit Index,” 38% of all consumers plan to use less credit to purchase holiday gifts this year, compared to 31% one-year ago. Twenty-nine percent plan to use the same amount of credit as they did last year, two percentage points lower than in 2002. Another 29% plan not to use any credit cards this season, down by 7 percentage points from 2002. The Cambridge Index also asked consumers who plan to use credit cards this season whether they expect to pay them off in full when the bills arrive in January. Sixty percent say they expect to pay off their balance in full, up from 58% a year ago and 55% in 2001. Thirty-six percent expect to carry a balance on their credit cards for more than a month before they pay them off, unchanged from 2002, and down from 39% in 2001. Only 4% plan to pay off some cards and carry balances on others, down by 2% from 2002 and 2001.

Consumers Shift to Second Gear as Economy Rebounds

Further evidence of the recent economic recovery is the uptick in consumer revolving credit for September and October. During October, Americans added $2.2 billion to revolving credit at an annual growth rate of 3.6%, more than twice the rate of growth one-year ago. Revised figures, released Friday by the Federal Reserve, also show that September’s figures were better than previously reported. September’s revised growth rate is 6.5% compared to 3.0% for September 2002. For October, consumers owed $735.3 billion in revolving credit, mostly credit card debt. Bank credit card debt (excluding store and gas credit cards) at the end of the third quarter was $645.7 billion, or roughly 88% of total revolving credit, according to CardData ([www.carddata.com][1]). At the end of October, Americans were $1977.3 billion in debt, excluding home mortgages.

REVOLVING CREDIT HISTORICAL ($billions)
Oct03 Sept03 Aug03 Jul 03 Jun03 May03 Apr03
GRWTH: 3.6% 6.5 3.4 1.4 -2.4 7.7 3.4
$OWED: $735.3 733.1 729.1 726.8 725.9 727.9 722.8

Mar 03 Feb03 Jan03 Dec02 Nov02 Oct02 Sep02
GRWTH: 4.1% 5.9 5.2 -6.7 -1.4 1.6 3.0
$OWED: $720.7 718.6 715.5 712.4 716.8 717.9 721.3
Source: Federal Reserve; revised figures as of 12/05/03;
For complete historical data visit CardData (www.carddata.com).

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

Tidel Technologies Raises Cash, But Losses Mount

Houston-based ATM manufacturer Tidel Technologies has closed a $7 million financing deal with NY-based Laurus Funds and reports that continues to sustain substantial losses since the second quarter. The notes may be converted, at Laurus Funds’ option, into Tidel common stock at a conversion price of $0.40 per share. Tidel also issued seven-year warrants to Laurus Funds to purchase 4.25 million shares of Tidel common stock at an exercise price of $0.40 per share. Tidel Technologies, Inc. is a manufacturer of automated teller machines and cash security equipment designed for specialty retail marketers.

GlobalPlatform Names Officers and Board

GlobalPlatform has named its new Chair, Vice Chair and Secretary/Treasurer following the elections in mid-November. Bob Beer, VP of Datacard Group and new Board Member of GlobalPlatform, has been named as Chair. Jim Lee, SVP Emerging Technologies at VISA International, retains his position as Vice Chair for a third term. Shoji Miyamoto, Deputy General Manager, Smart Card Solutions at Hitachi, takes on the role of Secretary/Treasurer. In October, the fifth GlobalPlatform Board was named. Five of the eleven Board seats were open for re-election and three of those went to incumbents: Gilles Michel of Gemplus, Richard Fletcher of MasterCard International and Yves Moulart of STMicroelectronics.

Credit.Com Gives Away Credit Reports and ID Theft Insurance

San Francisco-based Credit.Com is offering consumers free access to credit reports during December and free identity theft insurance from AIG Affinity Group Services. The one-year defense package includes identity theft and Internet fraud insurance as well as crisis resolution services for identity theft victims. Nearly 10 million Americans became victims of identity theft last year, according to the Federal Trade Commission — a 41 percent increase over the year before — making identity theft the fastest growing crime in the U.S. Credit.Com was formed to give consumers access to accurate, trustworthy credit resources. The Credit.Com network provides consumers with vital products and services to help them build, protect, and maintain healthy credit.

MasterCard OneSMART Adds M/Chip Deployment Program and Pre-Configured Packages

MasterCard International is now working on twice as many smart card projects as one-year ago. Of the more than 400 individual MasterCard smart card implementations underway around the world, half involve issuers in Europe. However, the strongest activity is in Asia-Pacific where the number of EMV smart cards has hit 14.5 million, double last year’s figure. The worldwide smart card migration is driven by decisions made by MasterCard’s regional boards in Asia/Pacific, Europe, Latin America/Caribbean, and South Asia and Middle East Africa. All of these boards have recently enacted intra-regional liability shift policies calling for the full-scale adoption of smart cards and chip terminals in the 2005 and 2006 time period. Last year, MasterCard announced “OneSMART MasterCard,” a comprehensive, global support program covering every aspect necessary to successfully launch smart cards. Expanding on this, MasterCard this week unveiled a subset of the “OneSMART MasterCard,” called the “M/Chip Deployment Program,” which provides a complete solution for MasterCard’s customers who are migrating their payment cards from the magnetic stripe platform to chip. Companies supporting the “M/Chip 4” program include: Ingenico, Austria Card, Gemplus, Giesecke & Devrient and Setec. The “OneSMART MasterCard” program was also recently expanded with a range of pre-configured smart card packages including: “OneSMART MasterCard Payment” which provides an enhanced payment application; “OneSMART MasterCard Authentication” which ensures a higher level of security for online shopping and remote banking; and “OneSMART MasterCard Web” that allows cardholders to securely store and manage a wide range of personal data (such as names, addresses, URLs, log-on passwords) on the smart card chip.

OneSMART Adds M/Chip Deployment Program and Pre-Configured Packages

MasterCard International confirmed yesterday at the Paris “Cartes 2003” conference that it is working on twice as many smart card projects as one-year ago. Of the more than 400 individual MasterCard smart card implementations underway around the world, half involve issuers in Europe. However, the strongest activity is in Asia-Pacific where the number of EMV smart cards has hit 14.5 million, double last year’s figure. The worldwide smart card migration is driven by decisions made by MasterCard’s regional boards in Asia/Pacific, Europe, Latin America/Caribbean, and South Asia and Middle East Africa. All of these boards have recently enacted intra-regional liability shift policies calling for the full-scale adoption of smart cards and chip terminals in the 2005 and 2006 time period. Last year, MasterCard announced “OneSMART MasterCard,” a comprehensive, global support program covering every aspect necessary to successfully launch smart cards. Expanding on this, MasterCard this week unveiled a subset of the “OneSMART MasterCard,” called the “M/Chip Deployment Program,” which provides a complete solution for MasterCard’s customers who are migrating their payment cards from the magnetic stripe platform to chip. Companies supporting the “M/Chip 4” program include: Ingenico, Austria Card, Gemplus, Giesecke & Devrient and Setec. The “OneSMART MasterCard” program was also recently expanded with a range of pre-configured smart card packages including: “OneSMART MasterCard Payment” which provides an enhanced payment application; “OneSMART MasterCard Authentication” which ensures a higher level of security for online shopping and remote banking; and “OneSMART MasterCard Web” that allows cardholders to securely store and manage a wide range of personal data (such as names, addresses, URLs, log-on passwords) on the smart card chip.

Target Card 3Q Profits Up 23%, Slows from 2Q

Target reported this morning that its credit card operations produced 34% of its total pre-tax profit of $481 million for the third quarter ending November 1st. The retailer’s “smart VISA” portfolio posted 3Q/03 outstandings of $3.81 billion, a 23% increase over 3Q/02. Meanwhile, Target’s private label “Guest Card” credit card posted another drop as it migrates its best customers to the “smart VISA” program. At the end of the third quarter, Target’s private label outstandings were $721 million, compared to $733 million for the second quarter, and $779 million one year ago. Target’s net charge-off rate for its VISA program was 9.7%, compared to 9.3% in the second quarter, and, compared to 6.9% one year ago. Net write-offs for its store credit card program were flat at 8.0% for the third and second quarter, compared to 7.9% for 3Q/02. The 90-day+ delinquency rate for “smart VISA” was 3.8% for 3Q/03, compared to 3.5% for the second quarter, and, 3.0% for 3Q/02. For its “Guest Card” program the figure was also flat at 5.2% for 3Q/03 and 2Q/03, and down from 5.6% one-year ago. Target’s pre-tax profits from its credit card operations were $162 million, compared $160 million for the second quarter, and well above the $138 million recorded one year ago. For complete details on Target’s 3Q/03 performance visit CardData (www.carddata.com).

InterCept is Barely Profitable in the Third Quarter

Atlanta-based InterCept reported third quarter revenues of $64.1 million, a 3.4% decrease compared with 3Q/02. Net Income for the quarter totaled $18,000, compared with net income of $2.8 million, for the three months ended September 30, 2002. Two weeks ago the Company confirmed there is talk of taking the firm private. InterCept reported that revenues from financial institution services grew to $49.5 million, or 7.8% over one-year ago. Total revenues from merchant services in the third quarter were $14.6 million, a 28.5% decrease from the third quarter of 2002. The Company says that revenue from financial institution services increased entirely from internal growth, while revenue from merchant services was lower due to customer attrition in the merchant base. InterCept says it experienced greater than expected conversion costs in Sovereign’s item processing in the third quarter. The Company also experienced difficulties in combining two of its item processing centers, which resulted in expense overruns and a loss of expected savings from the combination of these two centers. These issues caused a shortfall in earnings expectations of approximately $1.2 million in the third quarter. Merchant results were below expectations due to an $0.8 million charge arising from a contract dispute, $0.4 million related to bank assessment charges and a $1.0 million shortfall due to customer attrition. For complete details on InterCept’s performance visit CardData (www.carddata.com).

iPayment Revenues Double in the Third Quarter

Nashville-based iPayment reported third quarter revenues of of $59,847,000, a 105% increase over one-year ago. Net income for the third quarter increased to $5,086,000, from $820,000 for the third quarter last year. Charge volume for the quarter was $1.729 billion compared to $736 million in the third quarter of 2002. For fiscal 2003, the Company projects annual revenues of $220 million to $225 million and for fiscal 2004, between $255 million and $265 million. iPayment is a provider of credit and debit card-based payment processing services to over 70,000 small U.S. merchants. At the end of October, the firm purchased a merchant portfolio of approximately 1,500 retail merchants with annualized charge volume of over $300 million. For complete details on iPayment’s performance visit CardData (www.carddata.com).