CARD ACT IMPACT

The Credit Card Accountability Responsibility and Disclosure Act of 2009
(CARD Act) is designed to change how credit card issuers do business
using limits and constraints on existing business practices. Signed into
law in mid-summer, the CARD Act especially focuses on eliminating such
business practices as risk-based pricing, grace periods, and repayment
hierarchy. With a typical 1-3 year lapse before the UK adopts US laws,
with the severity of the credit crisis and the scrutiny of the lending
industry, the UK is likely to see an implementation of a similar law by
the end of 2010, according to the Auriemma Consulting Group. This is
likely to eliminate introductory offers on credit cards, increase annual
fees and lead to less issuance to sub-prime consumers.

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Web.com and First Data Partner

Payment processor First Data has teamed with online marketer Web.com to
offer small and medium-sized businesses with secure payment processing
and online marketing and eCommerce solutions. The partnership will provide a wide array of tools to help small
and medium-sized businesses find, connect and transact with new or
existing customers online. Businesses can work with Web.com’s team of
experts to create and strengthen their Web sites through the effective
use of search engine marketing, search engine optimization tools and
eCommerce solutions. First Data’s suite of payment processing products
and services gives merchants the ability to transact payments securely
both online and at the point of sale.

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FAPS Empowers Agents with Pricing Model

Payment processor First American Payment Systems has released “Pricing Model” for ISO and agents.
The payment processor released its proprietary, web-based Pricing Model,
designed to help forecast the amount an independent sales organization
and its agents can expect to make in revenue each month.
The tool, developed in-house, was created in response to ISO partners
who wanted to simplify their sales agents’ ability to estimate their
profitability before signing merchants with First American. First American
offers a complete line of proprietary electronic/credit card
processing products and services including Secur-Chex check services,
FirstAdvantage gift cards, FirstPay.Net e-commerce solutions,
FirstFund ACH software, Govolution government e-payments, national ATM
sales and Merimac Capital point-of-sale equipment and ATM leasing.

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Regions Overhauls its Credit Approval

Regions Financial has realigned its credit approval process, separating it from the
process for assessing risk in the company’s loan portfolio and shifted key personnel for the restructuring process.
As part of this effort, the company has already created a Risk
Analytics function which includes: Credit MIS including quantitative modeling and loan loss
allowance methodology; appraisal and environmental review; Special Assets, and
Loan Disposition, including the unit dedicated to identifying
strategic buyers and selling problem assets at the best possible prices.
Tim Laney, currently senior executive vice president and head of
Business Services at Regions, will serve as the interim Chief Credit
Officer effective immediately as the company begins a national search to
fill the post. Michael J. Willoughby, previously the Chief Credit
Officer, has been named Director of Credit Risk, reporting to Chief Risk
Officer Bill Wells. Regions Financial Corporation holds $143 billion in assets.

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INTERIM DEVICES

A new analysis forecasts that the application of NFC as a mobile retail marketing tool via coupons and smart posters will support the growth of global NFC mobile payment transaction values from $8 billion this year to $30 billion within three years. Juniper Research says vendors are developing and launching a variety of interim solutions such as stickers and SD cards to get NFC to market faster on existing phones rather than new NFC enabled phones. The first NFC devices will be shipped commercially later in 2009 and the market will ramp up from 2011. Juniper also notes that NFC “Felica” payments are already established in Japan, but by 2014 North America and Western Europe will be experiencing high growth.

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VeriFone Returns to Profitability in 2Q/09

VeriFone reported an 18.5% decline in second calendar quarter revenues to $211.2 million, compared to the year ago quarter. However, the terminal manufacturer posted $21.9 million in net income for the quarter, compared to a net loss of $7.2 million one-year ago. VeriFone noted that its sequential non-GAAP EPS growth of 53% was driven by a solid revenue performance and a sequential expansion of gross margins.
Non-GAAP gross margins were 36.8%, for the three months ended July 31st, compared to 33.8% in the prior quarter and 37.6% for the comparable period of 2008. During the most recent quarter, VeriFone and RBS WorldPay agreed to jointly market “VeriShield Protect” and VeriFone Transportation Systems announced it has installed more than 1,000 payment monitors in Boston-area taxis. VeriFone also rolled out “PAYware CMS 8.0” and introduced the “QX1000” plug-and-play solution for POS contactless acceptance. For the third calendar quarter ending October 31st, VeriFone now expects to report net revenues in the range of $208 million to $215 million. For complete details on VeriFone’s latest performance visit CardData (www.carddata.com). (CF Library 5/26/09; 8/6/09; 8/26/09; 8/11/09)

REVENUE HISTORICAL
2Q/06: $147.6 million
3Q/06: $156.6 million
4Q/06: $216.6 million
1Q/07: $217.2 million
2Q/07: $231.7 million
3Q/07: $237.9 million
4Q/07: $185.5 million
1Q/08: $233.0 million
2Q/08: $258.7 million
3Q/08: $244.7 million
4Q/08: $214.0 million
1Q/09: $201.6 million
2Q/09: $211.2 million
Source: CardData (www.carddata.com)

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Faulty Business Models Impede Proximity Payments

A new report estimates a cash universe of about $225 billion in the U.S. is available for proximity payments. However, last year only about $4 billion was captured of the cash universe. Celent says in its report that estimates of $70 billion to $80 billion by 2013 are way too
optimistic. Celent estimates that a 30% cash displacement ratio, or
an incremental $151 per card account, per year is reasonable, with an
average revenue increase of $1.83 per debit card account per year. Celent says that unfortunately, a number of business model issues have prevented players across differing industries from crossing the finish line to widespread mobile NFC adoption. Many of these issues are tied to
hesitation about the uncertainties of mobile NFC adoption. Mobile
carriers and merchants do not want to make infrastructure investments
until there is proven demand; banks do not want to issue virtual cards
until the infrastructure is in place. A classic payments “chicken and egg” scenario has stagnated mobile NFC roll-out.

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Credit Card Limits Cut 17% to $3.1 Trillion

A new report confirms a significant migration of consumer balances to well below “prime” credit scoring levels. The study also reveals a growing number of “strategic defaulters,” or those borrowers who default on their mortgages only because the value of their home has declined well below their mortgage balance. According to the new Experian–Oliver Wyman “Market Intelligence Reports,” sub-prime and deep sub-prime outstanding balances have grown by more than 33% in the past three years. Also, during the last 12 months, bankcard credit lines have declined by 17% to $3.1 trillion. In studying the distressed borrower population Experian and Oliver Wyman uncovered a segment of borrowers it calls “cash-flow managers,” that closely mimics “strategic defaulters.”
Unlike “strategic defaulters,” these borrowers continue to make occasional payments on their mortgage, indicating their intention to get out of delinquency. While 60% of “strategic defaulters” are charged-off within six months after serious delinquency, one-third of cash-flow managers cure on their mortgage within six months after serious delinquency and another third remain less than 90 days past due.

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NFC Stickers May Drive M-Payments Next Year

A new analysis forecasts that the application of NFC as a mobile retail marketing tool via coupons and smart posters will support the growth of global NFC mobile payment transaction values from $8 billion this year to $30 billion within three years. Juniper Research says vendors are developing and launching a variety of interim solutions such as stickers and SD cards to get NFC to market faster on existing phones rather than new NFC enabled phones. The first NFC devices will be shipped commercially later in 2009 and the market will ramp up from 2011. Juniper also notes that NFC “Felica” payments are already established in Japan, but by 2014 North America and Western Europe will be experiencing high growth.

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