Heartland Uncovers a Security Breach

NJ-based Heartland Payment Systems reports it was the victim of a
security breach within its processing system last year. The intrusion
was discovered last week, but the processor believes it is contained.
After being alerted by Visa and MasterCard of suspicious activity
surrounding processed card transactions, Heartland uncovered malicious
software that compromised data that crossed its network. However, no
merchant data or cardholder SSNs, unencrypted PIN, addresses or
telephone numbers were involved in the breach. Nor were any of
Heartland’s check management systems; Canadian, payroll, campus
solutions or micropayments operations; “Give Something Back Network”; or
the recently acquired Network Services and Chockstone processing
platforms. Heartland says it plans to implement a next-generation
program designed to flag network anomalies in real-time.

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Q4 Volume Drops 13% for the Big 3 Issuers

Volume among the nation’s top three credit card issuers sank nearly 13%
in the fourth quarter, compared to 4Q/07 and dropped nearly 7%, compared
to the prior quarter. Bank of America posted a 17.3% decrease, Chase
reported a 7.6% decline and Citibank showed a 15.2% decline in fourth
quarter volume, compared to the year ago quarter. According to CardData
(www.carddata.com), the nation’s top three issuers posted $220.5 billion
in fourth quarter volume, compared to $236.4 billion in the prior
quarter and $253.2 billion for 4Q/07. BofA’s purchase volume for global
credit cards was $56.6 billion for 4Q/08, compared to $62.7 billion for
3Q/08 and $68.4 billion for 4Q/07. Chase reported fourth quarter charge
volume of $88.2 billion, compared to $93.9 billion for 3Q/08 and $95.5
billion for 4Q/07. Including WaMu Chase’s volume was $96.0 billion for
4Q/08. Citi’s purchase volume for North American cards was $75.7 billion
for 4Q/08, compared to $89.3 billion for 4Q/07 and $80.3 billion for
3Q/08. For complete details on fourth quarter performance visit CardData ([www.carddata.com](http://www.carddata.com)).

VOLUME HISTORICAL
(year-on-year growth)
BofA Chase Citi
1Q/08: +7.7% +5.0% +4.2%
2Q/08: +5.2% +6.4% +0.3%
3Q/08: -1.3% +4.6% -3.4%
4Q/08: -17.3% -7.6% -15.2%
Source: CardData (www.carddata.com)

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Fees Continue to Carry the Day for Banks

While overall bank fee income, as a percentage of total revenue, has
increased from 49% in 2000 to 53% in 2008, credit card-related fee
income has grown from 28% to 40% during the same period. It is now
projected that credit card fee income will surpass interest income
within five years, the first time in history this will have occurred.
According to research by payment card industry expert R.K. Hammer,
credit card interest from revolving loan balances, while the larger
proportion of revenue at present, is falling each year in significance
to total income compared to fee income, which while proportionally
smaller at present is rising in significance each year. Those lines are
seen to intersect by 2014, with fee income on cards being a greater
portion of revenue than interest income at that time. Hammer noted that
banks have certain fees which prime and super prime credit cards
typically do not charge, such as loan origination fees, up front
mortgage points, investment banking fees, stop payments fees, checking
and savings account fees, ATM fees, among others, which help account for
the higher percentage of total revenue attributable for bank fees than
for cards.

FEE INCOME HISTORICAL
Year Bank Credit Card
2000: 49% 28%
2001: 50% 31%
2002: 50% 32%
2003: 50% 33%
2004: 51% 37%
2005: 51% 38%
2006: 52% 38%
2007: 52% 39%
2008: 53% 40%
Source: R.K. Hammer

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BOT & OGA

Payment solution provider Clear2Pay and its Thai business partner OGA
have signed a contract with Bank of Thailand for the
implementation of an image cheque clearing solution, based on its
service-oriented Open Payment Framework. One of the goals of BOT is to
build one clearing house, one cheque clearing system and one-day
clearing for the entire country, which means a gradual overhaul of the
underlying
technology in order to create one stable, future based and flexible
solution. The bank made it clear from the outset that it wants to take
advantage of recent technological advances and thus redesign the entire
cheque processing system based on the interbank exchange of cheque
images rather than paper cheques. OGA and its payments technology
partner Clear2Pay were
appointed to supply and implement this image cheque clearing solution.

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PCI Transparent M-Solution Introed

Mobile VPN provider Columbitech has introduced a mobile solution to
retailers that simplifies wireless retail security while complying with
PCI DSS standards. The “Columbitech Mobile VPN” enables retailers to
secure the
entire wireless environment for all users, mobile devices and
applications. With one single software-based solution, retailers
increase productivity and ensure security with the only TLS-based
software solution to secure both WiFi (WLAN) and
3G (WWAN) environments. The Columbitech mobile VPN provides retailers
with a more cost-effective alternative to WPA2 to secure all wireless
networks.

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Card Delinquency Exceeds 4% in the U.K.

Delinquency among credit card-backed securities in the U.K. for
November hit it highest level since April 2007, however charge-offs fell
slightly. Following pressure from the government, credit card companies
in the U.K. have recently agreed to not increase interest rates in the
first 12 months of a card holder’s contract and also not to do so more
frequently than every six months after this initial period. On January
8th, the Bank of England’s Monetary Policy Committee voted to cut the
bank base rate to 1.5%; a 50 basis point fall from the previous base
rate value of 2.0%, set on December 4th, and an all time low since the
bank was founded. The “Fitch Delinquency Index” (60 to 180 days)
increased 20 basis points for November to 4.1%. Only the Cumbernauld
trust reported a month-on-month fall in delinquencies. Having increased
by 30 basis points from August through October, the “Fitch Chargeoff
Index” declined 20 basis points in November to 6.4%. However, three of
the trusts included in the “Index” registered an uptick in charge-offs
from October. Fitch noted that the increasing delinquencies are a
reflection of the more difficult economic environment and expects this
to filter through to increases in charge-offs through 2009.

U.K. CREDIT CARD ABS
Delinquency Charge-Offs
Nov 07: 3.3% 6.3%
Dec 07: 3.4% 6.2%
Jan 08: 3.4% 6.2%
Feb 08: 3.5% 5.6%
Mar 08: 3.6% 6.6%
Apr 08: 3.6% 6.5%
May 08: 3.7% 6.4%
Jun 08: 3.7% 6.9%
Jul 08: 3.7% 6.5%
Aug 08: 3.7% 6.3%
Sep 08: 3.8% 6.6%
Oct 08: 3.9% 6.6%
Nov 08: 4.1% 6.4%
Source: FitchRatings

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Wireless Payment Awards Go Green

International CTIA WIRELESS 2009 is accepting submissions for the 4th
Annual “E-Tech” awards with a new “Green” category. The E-Tech Awards
will be judged online based on their innovation,
functionality, creativity, and vision. The judging process will be
handled by a panel of industry analysts, journalists and technology
experts. Categories for the 4th Annual E-Tech Awards include: 4G;
Enterprise & Vertical Market Solutions; Green; Mobile Applications &
Widgets; Mobile Consumer Electronics; Network Infrastructure;
In-Building/Local Area Network Solution and Wide Area Network. The
application deadline is February 20. Winners will be announced onsite
at the International CTIA WIRELESS at the Las Vegas Convention Center
on April 2, 2009.

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NXP & VDV

Semiconductor producer NXP’s SmartMX, a secure contactless
microcontroller chip has been selected by
the VDV-Kernapplikations GmbH & Co. KG to partner with card and
inlay-manufacturer Cardag to produce eight
million contactless cards to be issued throughout Germany by 2012.
NXP’s contactless microcontroller technology will be integrated in smart
cards created and personalized by Cardag, and is fully compliant with
the VDV-Kernapplikation (Core Application), the national data and
interface standard defined for contactless ticketing and automatic fare
collection in Germany. The development of the standard was driven by the
German Federal Ministry of Transport, Building and Urban Affairs to
ensure standardized electronic tickets in a range of formats such as
smart cards, bank cards and mobile devices would be fully interoperable
for use within public transport schemes throughout the country and
internationally. The SmartMX-powered electronic ticketing platform will
now be deployed
by transport companies throughout the country. The
aim of the scheme is to provide a single ticketing solution that will be
used across all nationwide transport networks.

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Mobile E-Wallets Get Waterproofed

Identity solution provider AuthenTec and partner NTT DOCOMO has released
the “Fujitsu F-01A” a fingerprint-enabled waterproof cell phone.
AuthenTec’s TouchStone is a durable, thin profile fingerprint sensor
packaging technology which expands aesthetic and product integration
options for makers of cell phones, laptop computers, and other consumer
electronics. “The F-01A” is based on a
Symbian operating system and features a 3.5-inch widescreen VGA
touchscreen display, 5.2 megapixel camera with Autofocus, built-in GPS
using Mobile Google Maps with Street View, e-Wallet mobile payment
capability, and a 1Seg mobile TV tuner. More than 9 million mobile
phones today include an AuthenTec sensor to enhance privacy by securing
the device’s personal and corporate data such as email and provide
advanced navigation and personalization functions and
support secure m-commerce.

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Sinking Economy Drives Malware Threats

New research points to continued exploitation of the financial crisis to scam users with fake financial transactions services. However, McAfee says spam traffic took a tremendous dive in volume last year when ISPs pulled the plug on spam host McColo, the source of up to 60% of worldwide spam. This year McAfee sees a continued shift in organizations, from passive support of law enforcement to an active role of working collaboratively with ISPs and global Internet entities such as ICANN. McAfee also says threats will continue to take evasive action against security measures. One example is the existence of single-use binary files, which are an attacker’s equivalent of a single-use credit card number used by consumers when shopping online. These binaries help to create a vast sea of threats, which will make it harder for victims to describe their assailants, and make it harder for defenders to catch them. Additionally, McAfee expects to see the continued expansion of malware in languages other than English.

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TranZfinity Hires a New Tech Chief

CA-based transaction solution provider TranZfinity has hired Senthil
Kanagaratnam, previously with Symbol, as its CTO. Kanagaratnam has had
progressive responsibility
managing engineering teams at companies such as Symbol, Motorola and
Hypercom, where he was the VP of Technology Architecture. At Symbol, he
managed the technical marketing group for Symbol’s POS and Kiosk
division, and was instrumental in growing the division’s revenue from
US$ 10 million to over US$ 35 million in one year. Most recently,
Kanagaratnam served in an engineering leadership role at Yahoo, where he
was responsible for managing advertising platforms. He holds a Bachelors
degree in Computer Science from the University of London.

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