payworks and PAY.ON AG have partnered on mobile payment solutions. payworks develops both turnkey white-label products and modular components, making it easy for payment providers, banks and telecommunications providers to enter the emerging mobile payment market and now clients of PAY.ON’s payment processing platform ‘PaySourcing’ can now rely on a professional partner for future mobile payment projects. The ‘payworks.terminal’, for example enables payment providers to release their own mobile POS solution, allowing small retailers to accept card payments easily at the POS, the only requirement being a smartphone with internet access. An optional card reader can be plugged into the phone for faster processing.
Serious political attention is now being paid to the digitalisation of
households throughout the UK in the evolving ‘Digital Economy’. Business
& Decision’s recent report, “The Revolution in Self-Service Channels in
the Financial Services Sector,” analyzes the growth of consumer
self-service channels in key areas of the Financial Services market and
looks at who is winning and who could lose out. Examining the recent
emergence of new operating models and highlighting the transformation of
more established business models in those parts of the Financial Markets
most affected, the report investigates the drivers and inhibitors of the
market, the broad demographic spread of demand and the challenges to
established players in financial services and assesses the impact of
future changes that may occur in the digital marketplace. This includes
consumers’ testing the capability of many ‘traditional’ businesses to
communicate digitally, with businesses which do not connect digitally
increasingly left behind. The pressure grows on businesses to deliver
sites that meet their needs in design and ease of navigation with the
spread of demand for digital connectivity across all age groups and
correlation between age groups and various waves of social networking
The sub-prime mortgage fallout appears to have had little impact so far on sub-prime credit card delinquencies as the latest metrics show a steady decline in 60-day delinquency rates, well below year-ago levels. However, there is concern that sub-prime borrowers remain more sensitive to disruptions in the mortgage sector and there could be a spillover into the sub-prime credit card segment later this year. According to the latest sub-prime credit card metrics from FitchRatings, 60-day+ delinquency dropped to 5.35% in February compared to 5.60% in January and 5.88% one-year ago. The rate has declined for three consecutive months. According to Fitch charge-offs also decreased in February to 9.53% from 9.90% in January, as the delinquency bubble from the minimum payment implementation normalized in February. Monthly payment rates ticked up 112 bps to 10.58%. Gross yield increased 151 bps to 26.54% in February.
Sep 06: 5.32%
Oct 06: 5.54%
Nov 06: 5.66%
Dec 06: 5.68%
Jan 07: 5.60%
Feb 07: 5.35%
While it is very likely the Feds will raise rates by 50 basis points in the next two weeks, the impact will largely affect refinancing activity, home prices, and collateral performance in the mortgage sector. Credit card issuers, blessed with lower funding costs over the past three years, will largely have to absorb the first wave of increases, but will recoup the impact by passing the rate increases to consumers over the summer. Some issuers recently switched from fixed rates to variable rates in anticipation of the increases. Discover switched its standard purchase rate from a fixed 16.99% to prime +12.99%, effective April 1st. Effective June 1st, American Express changed its default interest rate from a fixed 23.99% to prime +21.99%. A handful of VISA and MasterCard issuers have rejiggered punitive interest rates from fixed to variable, and have adjusted the effective dates of the prime rate. MBNA recently noted in its SEC filings that a 100 basis point increase in interest rates could reduce net income by $67 million for the year. MBNA said it could offset its costs by raising interest rates for cardholders but the company noted there is a lag of about 45 days before rate hikes takes effect upon cardholders. Fitch said yesterday it remains cautious in its near-term outlook for subprime credit card ABS. Higher rates may put pressure on subprime borrowers to reload available credit lines undermining stable to improving collateral performance. Notwithstanding, Fitch believes excess spread levels in the credit card sector, can absorb higher rates, though a rate increase may cause some spread compression for some issuers in the subprime segment.
[Click Here To View The Notice of Amendment to the Discover Cardmemeber Agreement In PDF Format]
Fitch Ratings–Encouraging reports on both sides of the employment equation — job creation and jobless claims — have bolstered markets and optimism in recent weeks could provide some much needed relief for out-of-work consumers in the months to come. While it is still early to pronounce a trend, the latest results are welcome news in an area that has prompted the greatest concern for consumer credit quality and credit card asset-backed securities (ABS) performance metrics, according to Fitch’s the latest edition of ‘Credit Card Movers & Shakers.’
For the August collection period, prime chargeoffs fell for the third time in six months, as reported in Fitch’s credit card index. Delinquencies continued to stabilize which could prove positive for future chargeoffs.
Subprime issuers reported weaker performance measures for the August collection period. As measured in the Fitch subprime credit card index, chargeoffs continued to rise and remained above year ago levels.
The latest edition of ‘Credit Card Movers & Shakers,’ which covers the latest trends in the credit card ABS market, is available on Fitch’s web site at ‘www.fitchratings.com’ in the ‘newsletters’ section corresponding with the ‘ABS sector’ or by contacting the Ratings Desk at 1-800-893-4824.
Credit card asset-backed securities posted charge-offs of 6.78% for the July collection period. This is the first time that charge-offs increased in three months. However, delinquency (60+ day) declined for the fifth consecutive month, falling four bps to 3.40%. But, the delinquency index remains 21 bps above the level one year prior. The stats come from Fitch’s monthly report on card bond performance. Fitch says performance metrics are expected to remain under pressure through year end as consumer credit quality deterioration will continue. Fitch noted that key factors contributing to the deterioration of consumer credit quality are rising unemployment and mounting bankruptcy trends. On the positive side, lingering effects of mortgage refinancings and tax rebates and the persistent low interest rate environment, should help maintain robust consumer spending patterns in the near term.
Charge-offs among credit card-backed securities declined for the third consecutive month to 6.60%. However, there is concern that consumer credit quality might resume its worsening trends in late summer and into the fourth quarter. According to the Fitch Credit Card Index, charge-offs fell 19 bps in July to 6.6%. But, chargeoffs remains 43 bps above year-ago levels. As consumers remain under pressure due to the economic landscape, performance is expected to remain challenged over the near term and worsen later in the second half of 2003. Bankruptcy filings reported for the month of July totaled 138,400, an increase of 6.3% from June. Year-to-date bankruptcy filings for 2003 registered up 9.7% from year-ago levels. Fitch expects bankruptcies to increase by roughly 8.0% in 2003 to a level of 1.65 million. Excess spread which measures the profitability of credit card securitizations, edged up 3 bps to 5.89%, yet remains 28bps below year-ago levels. The softness in excess spread can be attributed to the low interest rate environment which has cause many issuers to re-price cards downward coupled with higher charge-offs.
Concordia University announced a new Royal Bank affinity credit card partnership. The university’s new affinity cards – offered in Visa Classic and Gold cards – provide the institution’s supporters with a simple, convenient way to link buying power with philanthropic habits. Each time the new card is used, the Concordia University Alumni Association receives funds through a marketing agreement that contributes to the growth of its programs and services.
“Many Canadians like Royal Bank’s affinity cards because they are a simple way to enhance revenues for the non-profit sector,” said Pierre Giroux, Royal Bank’s senior manager, affinity cards. “The cards provide organizations with a payment each time a new card is issued and every time it is used for a purchase. Affinity cards are an easy way for Canadians to supplement their support of some favorite causes.”
With its name drawn from the City of MontrÃ©al’s civic motto, “Concordia Salus,” Concordia University was formed in 1974, with the merger of Sir George Williams University and Loyola College. Both founding institutions are steeped in history. Originally part of CollÃ¨ge Ste-Marie, which was founded in 1848, Loyola College became a separate institution in 1896, moving to its present site in 1916. The origins of Sir George Williams University are tied to the founder of the YMCA and the evening classes it offered in 1873.
Today, Concordia has a school of graduate studies and four faculties in downtown Montreal. The university is celebrating its 25th anniversary in 1999-2000, building on the commitment of its founding institutions to open, accessible and innovative education.
Royal Bank of Canada (RY) is a diversified global financial services group and a leading provider of personal and commercial banking, investment and trust services, insurance, corporate and investment banking, online banking and transaction-based services including custody. The group’s main business units include Royal Bank, RBC Dominion Securities, Royal Investment Services, RBC Insurance and Global Integrated Solutions. The group has 49,000 employees who serve 10 million personal, business and public sector customers in 30 countries. For more information, visit Royal Bank’s Web site at [www.royalbank.com].
The Elvis Presley credit card has returned. Elvis Presley Enterprises Inc. announced yesterday that it has signed an affinity card deal with MBNA America to issue the official ‘Elvis Presley’ credit card. The new cards feature two images of Elvis and will benefit the Elvis Presley Charitable Foundation’s Presley Place, a transitional-housing project that will provide homeless families up to one year of rent-free housing, child day care, job training and counseling, and financial guidance. The Elvis Presley program is the newest affinity program in MBNA’s ‘Alliance Sector’, which has now established credit-card programs with 300 organizations and groups including the Frank Sinatra program. MBNA has nearly 4,000 affinity programs worldwide. According to CardTrak ([www.cardtrak.com]), the ‘Elvis Presley MasterCard’ was formerly issued, since the late 1980’s, by Memphis-based Leader Federal Bank. Last year Bank of Scotland introduced an ‘Elvis MasterCard’ for British fans.