Credit Card ABS Yield Continues to Remain Strong

Based on current metrics among credit card-backed securities charge-offs will likely remain elevated in the coming months based on rising delinquencies. Fitch also reports that gross yield continues to be strong relative to historical data as a result of discount options and repricing initiatives in various trusts. During October, gross yield decreased 27 bps to 19.39%. Compared to last year, gross yield is up 254 bps or 12%. During the month, Fitch’s “Credit Card Chargeoff Index” declined 77 bps to 10.75%, marking just the third month-over-month improvement. Measured by Fitch’s 60+ day delinquency index, late payments rose 16 bps to 4.22% after a 20 bp dip last month. Late stage delinquencies are running 33% higher on a year-over-year comparison. Early stage late payments increased for the month as well, with 30+ day delinquencies rising 13 bps.

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Without V/MC AmEx and Discover Have 2009 Losses

While American Express and Discover posted credit card profits for the third quarter, they were propped up by Visa and MasterCard. Discounting the antitrust litigation settlement payments, AmEx had an $81 million pre-tax loss and Discover’s pre-tax profits were $441 million for 3Q/09 in their U.S. Card segments. According to CardData, since the third quarter of last year Discover received $2.28 billion and American Express received $1.1 billion from Visa and MasterCard. Over this five quarter period Discover’s pre-tax profits were actually $75 million. Even with the V/MC payments, American Express lost $1.03 billion pre-tax for its U.S. Card business. For 2009, AmEx has lost $1.17 billion and Discover has lost $170 million. Discover’s third quarter profits were driven by lower interest expense and lower provision for loan loss. For complete details on American Express and Discover third quarter performance visit CardData (www.carddata.com).

DISCOVER U.S. CARD PROFITS
($ millions)
REPORTED V/MC PYMNTS
3Q/08: $245 0
4Q/08: $646 $846
1Q/09: $167 $475
2Q/09: $388 $473
3Q/09: $913 $472

AMERICAN EXPRESS U.S. CARD PROFITS
($ millions)
REPORTED V/MC PYMNTS
3Q/08: $364 $220
4Q/08: -$48 $220
1Q/09: -$50 $220
2Q/09: -$332 $220
3Q/09: $139 $220

Source: CardData (www.carddata.com)

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PayPal to Offer Up to 20% for Holidays

PayPal has announced that starting November 3, it will offer its 2009
holiday promotions that includes savings up to 20% off, cash-back or free shipping from online
retailers. PayPal is also working with MicroPlace to provide holiday shoppers with
a unique gift that helps the world’s working poor. Shoppers who purchase
a gift certificate on MicroPlace.com will get a free $20 gift
certificate to give to someone else on their list. These gift
certificates will provide much needed capital to organizations that
provide financial services to poor people around the world. This gift
could help someone get access to a loan to start a business, generate
income and work their way out of poverty.

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Sears Platinum MasterCard is Unveiled

Retailer Sears has introduced the “Sears Platinum MasterCard” and is offering customers free credit score access.
“Sears Platinum MasterCard” cardholders can enroll in the complimentary
Sears Choice Rewards program, which rewards customers with merchandise, travel,
dining and more. Members earn one point for every $1 spent on all purchases and have the
opportunity to enjoy exclusive bonus point events. And, all current Sears Gold
MasterCard customers will have full access to platinum card benefits. Sears
cardholderscan review their credit score at any time, understand the factors that
affect their credit score and learn how to improve their score using the innovative
“credit score simulator” tool. – Sears cardholders can take
advantage of “Monthly Cardholder-only Sales” offering special deals, including extra discounts, deferred interest financing
offers and valuable coupons in their billing statements.

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Discover Financial to Deploy Carolina

Discover Financial Services has licensed VA-based Dulles Research’s SAS-to-Java conversion solution “Carolina” for production implementation.
Carolina converts Base SAS programs to Java which can be deployed in any Java Runtime Environment Version 5.0 or higher. Business applications include
analytics, modeling, scoring, and data manipulation. The product also provides integration with web services, Business Rule Management
Systems, and other enterprise decision management tools.

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INSIDE & DISCOVER ZIP

INSIDE Contactless advanced open-standard contactless chip technologies
and Discover Financial Services have inked collaborative agreements to
develop “Discover Zip” contactless payment devices. The agreements
stipulate INSIDE will support “Discover Zip” in upcoming versions of its
award-winning MicroPass contactless payment platform and is designated a
preferred vendor for card-based Zip implementations with its “MicroPass
4002” contactless payment processor. “MicroPass 4002” is the first
Discover-certified implementation on the market and is designed for
Discover Zip contactless payment applications with fast transaction
speed for an enhanced cardholder experience to enable contactless
transactions reliably complete.

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Zong+ Supports Credit/Debit/Prepaid Payments

Zong is upgrading its mobile payment platform to combine carrier billing with credit, debit and prepaid cards. “Zong+” will assist merchants who may have previously been unable to leverage the higher conversion rate of mobile payments due to accompanying fees or limited price points. They will now find themselves able to have greater transaction completion at the typical card rates. Zong is featured in top applications on Facebook, MySpace, and hi5 and integrated with popular virtual worlds and gaming sites like Gaia Online, IMVU, Mochi Media and Outspark. The Company says it converts shoppers into buyers at rates up to 10 times greater than traditional payment methods such as typical credit card purchases. Zong’s underlying transaction platform has processed payments for more than 10 million unique users in 2009 and 25 million total unique users since 2000. Zong is the mobile payments business unit of Echovox

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Wright Express Fleet Fuel MasterCard PDV Up 31%

Fleet fuel card specialist Wright Express reported revenue for the third quarter declined 20% to $86.6 million. However, higher-than-expected MasterCard purchase volumes, fuel prices and late fee income helped mitigate the impact from the weak economy. Total MasterCard purchase volume grew 31% to $876 million, compared to 3Q/08. But, average expenditure per payment processing transaction decreased 35% from the third quarter of 2008 to $52.50. Total fuel transactions processed declined 7% from the third quarter of 2008 to 67.1 million. Payment processing transactions decreased 4% to 53.0 million and transaction processing transactions decreased 17% to 14.1 million. Wright Express says new business again helped offset the contraction in transactions from its existing customer base. For complete details on Wright Express’ third quarter performance visit CardData (www.carddata.com).

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Rapadev Adds Blackberry Payment Software

Credit card processor Rapadev has expanded its software line for
Blackberry with mobile credit card processor Road Merchant.
The software works on any BlackBerry with firmware 4.2.1 or greater, and can
process transactions over a number of network connections for that device,
including MDS, WAP 2.0, Direct TCP, or Wifi. Transactions can be
processed at places such as conventions, street fairs, antique shows,
and by business
owners performing mobile detailing, on-site consultation or
construction. For accounts that require card swipe and receipt printing
capabilities, Road
Merchant can take advantage of an extremely compact Bluetooth Card
Reader/Printer, allowing the merchant to qualify for the lowest discount
rates offered.
This makes Road Merchant viable contender for a retail/high-volume
environment.

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ISIC & MASTERCARD

ISIC and MasterCard Europe have launched a new card program for
students, offering a global international student identity card with
payment card functionality. It has first been introduced in Europe by
Credit Lyonnais as part of its Zen Etudiant package for students in
France and is available across the LCL network intended for students,
who are now allowed to use email to download a photo of themselves to
integrate on the card. Discounts entitled to cardholders are available
through 8,000 partners in France and over 40,000 merchants in 120
countries around the world. OTP in Hungary is the second to test the
program, which is available through the MasterCard Online ISIC and the
MasterCard Online ISIC Junior and operates on a MasterCard unembossed
platform.

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TMG and Coopera Partner for Prepaid

IA-based Affinity Credit Union has partnered with TMG (The Members Group) and Coopera Consulting to
launch prepaid reloadable cards to serve the Hispanic market.
TMG specializes in prepaid card solutions and will work with Affinity to
implement a new card specifically to meet the needs of the Hispanic community. TMG
will work with Coopera to introduce a culturally relevant prepaid reloadable card
including Spanish-language customer service via Web and live agents, as well as Spanish-language marketing materials and disclosures.
The new product – designed in part to improve Hispanic populations’ relationship with the
financial sector – will be funded by a $40,000 Innovation Grant from the National
Credit Union Foundation.

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