NFCC Calls for Card Issuer Concessions

Even though the OCC last week shot down a proposal by The Financial
Services Roundtable and the Consumer Federation of America for a pilot
project that permits major credit card issuers to forgive up to 40% of
the amount consumers owe and allow borrowers to pay back the remainder
over time, the National Foundation for Credit Counseling is not giving
up in seeking concessions from top issuers. The NFCC is asking all
creditors to: set consumers’ monthly payments at 2% of their existing
balance, except in cases of extreme hardship where the payment rate
would be further reduced to 1.75% of the balance; waive late and over
limit fees; and trim interest rates to a level that would liquidate the
entire debt in 60 months or less. The NFCC says its counselors have
discovered that many consumers are simply not eligible for debt
repayment plans, sometimes short of eligibility by less than $100 per
month. Plus, over the last several years, plan concessions, including
payment amount, interest rate and program term, have been pulled back by
many creditors. The end result is consumers are left with no other
option but to walk away from their debt or file for bankruptcy. Last
week the OCC said that while it strongly encourages national banks to
work with distressed borrowers, the agency cannot approve a plan that
defers the timely recognition of losses, since that would compromise the
transparency and integrity of a bank’s financial reports and could lead
to a loss of public confidence in the banking system.

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Credit/Debit Rewards Face Restructuring

The weak economy, which is driving down spending and driving up losses,
coupled with potential regulation on interchange fees will likely
pressure a complete revamping of credit card and debit card rewards
programs. Rewards are the key driver of card acquisition, usage, and
retention and are largely funded by interchange fees. New research from
Boston-based Mercator Advisory Group suggests that credit card issuers
need to adjust to the new market by including merchant-funded rewards
programs; seeking out premium merchants; using data analytics for better
targeted marketing; and reviewing non-transactional rewards and programs
combined with non-traditional rewards components. Mercator also found
that forty of the “Top 50” banks currently have at least one debit card
reward program in place, and nearly half of these banks offer multiple
loyalty programs to debit cardholders. Most only reward signature-based
transactions. However, the overall effectiveness of debit card reward
programs in fostering customer loyalty is less clear.
Mercator says it is questionable how much weight customers put on a
debit reward program when choosing a new checking account. Nevertheless,
banks should continue to develop more innovative reward programs to
attract loyal customers and set programs apart from their competitors.
Sometimes, the most attractive reward is not necessarily redeemable by
points or cash back, but rather an efficient and pleasant customer
service experience.

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TMG Financial Services Names a New CEO

Card issuer TMG Financial Services has elected new board members and
named Jeff Russell President and CEO. Russell, formerly Executive Vice
President for TMGFS is accountable for the overall strategic direction,
and ultimately responsible for the
portfolio performance and the growth of the company overseeing
marketing, portfolio management, finance and business development. TMGFS
also expanded its board to include Bob Hoefer, CEO of Dupaco
Community Credit Union; Paul Lensmeyer, President/CEO of Ascentra Credit
Union; T.J. Marcsisak, CEO of Nishna Valley Credit Union; Warren
Mueller, CEO of MEMBERS1st Community Credit Union; and
Patrick S.Jury, President/CEO of the Iowa Credit Union League.
TMGFS manages 13 credit card portfolio
partnerships, serving nearly 9,000 accounts and $10 million in receivables.

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Arthur Blank Realigns Management Execs

MA-based Arthur Blank & Company announced that Stuart and Eric Blank
will join its parent American Banknote to focus on Strategic Planning
and Corporate Development, resulting in key changes to the organization.
Keith Goldstein, recently SVP of Operations was promoted to
President/COO. Jake Jacobs, previously SVP of
Sales and Business Development, was promoted to EVP of Sales and
Marketing, Paul Fournier was promoted to EVP/CFO, and Bob McCormick was
promoted to VP, Secure Card Operations and was also
named a member of Arthur Blank’s Executive Management Team.

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CARD DUALITY

The Commissioner of Competition reports that duality of credit card
issuing and acquiring in Canada is competitively appropriate.
Previously, the Competition Bureau had favored non-duality, which did
not allow financial institutions to issue or acquire competing card
brands. MasterCard applauded the finding. It has experienced the highest
increase in purchase volume, card growth, and number of transactions in
Canada, in a field that includes Interac, American Express, and Visa
over the past three years. A dual market will allow MasterCard to build
on this trend by providing greater opportunities through access to new
issuers and cardholders. The move to duality will allow improved
competition and innovation in Canadian payments for consumers,
businesses, and merchants as more financial institutions and their
customers gain access to leading-edge technology from MasterCard, such
as contactless payments, mobile payments, Multi Card corporate payments,
enhanced e-commerce payments, and an industry-leading global technology
platform.

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Black Friday & Cyber Monday 08 Not So Hot

New projections shows that overall sales for “Black Friday” (Nov 28th)
will only grow 1.2% this holiday season, while online sales for “Cyber
Monday” (Dec 1st) will increase 2.4% this year. BDO Seidman syrvey of
chief marketing officers at top retailers also found that CMOs are
projecting Internet sales to grow 8% and gift card sales to grow 5% this
holiday season. More than one-third of retailers expect gift card sales
to increase this holiday season over the 2007 holiday season, while half
expect gift card sales will be flat and 13% think sales will decrease.
CMOs expect 1that gift cards will account for 12% of overall holiday
sales. About 44% of retailers say that in-store purchases will be the
biggest driver of gift card sales this holiday season, while 34% cite
online purchases and 21% think third-party vendors (such as kiosks and
grocery stores) will drive the most gift card sales. However, CMOs
expect that comparable store sales will decrease this year by 2.7% and
overall sales will decrease by 2.8%.

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STUDENT DEBT

According to the recent “TD Canada Trust Young Adult Money Poll”, 42% of
Canadian students and recent graduates would
invest or save some of a hypothetical $10,000 windfall and 37% would use
it to pay off debt. Living with debt is a fact of life for many
students and recent graduates, with 22% of those surveyed have more than
$15,000 in debt, 18% have between $6,000 and $15,000 in debt and 23%
have less than $5,000 in debt with 37% of current Canadian students and
recent graduates having no debt. The current level of debt affects the
amount of money people are saving with 64% of those without debt
currently saving, versus 38% of those with $15,000 or more debt setting
aside funds. On a daily basis, 45% of students and recent graduates are
spending the bulk of their money on groceries. Entertainment and car
follow at 15% and 12% of money spent respectively. Those with less than
$5,000 in debt or no debt at all, are more likely to spend money on
entertainment.

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FiCentive and Encompass Team for a MC

Prepaid card solution provider FiCentive has signed a
multi-year agreement with Encompass Communications to deliver
instant issue “Encompass Prepaid MasterCard”. Encompass Communications
is a retail distributor of
prepaid calling cards, brand recognized wireless top-up PINs and gift
cards by placing card kiosks in these retail outlets. The cards that are
represented by the kiosks include Radio Shack, Sears, iTunes,
Blockbuster, Home Depot, and many more well known brands. It is
anticipated the cards will be available for distribution in 1,000
retail stores by the end of the fourth quarter of this year.

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BRAC & MC

The MasterCard Foundation and BRAC announced a $19.6 million program
to expand financial services to the poor
across Uganda, benefiting approximately 2 million people. This
initiative will demonstrate for the first time the full potential of
BRAC’s holistic microfinance approach to reduce poverty and improve
livelihoods in Africa. Insights generated from this program will enable
BRAC to accelerate its long-term plan to adapt this approach for other
African countries. Based in Bangladesh, BRAC’s approach, which it
calls “microfinance multiplied,” increases the ability of poor clients
to productively use their loans to augment their incomes and build their
assets, as well as stimulate economic and social development within
their communities. Working with the MasterCard Foundation, BRAC is
poised to become one of Uganda’s most effective institutions serving
significant numbers of rural households. BRAC recognizes the need of
poor people to have a secure place to save their money and the role of
savings in sustainable microfinance.

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i2c Hires a Marketing/Communications Exec

Payment platform provider i2c has tapped Monika Jerabek as
Manager of Marketing and Communications and will direct i2c’s marketing
and communications strategies and programs to promote i2c as a leading
provider of prepaid payment solutions. Most recently, she managed
marketing and sales support activities for the Czech consulting and
training company Expertis Praha, where she contributed to a 40% increase
in revenues and a 190% increase in training program attendees over four
years. In the Czech Republic, she also ran her own business as a
communications, brand, and design consultant, and she directed Internet
marketing for Internet start-up Globopolis.com. Earlier in her career in
the Silicon Valley, over eight years she drove successful marketing,
design, and production projects for the software-engineering company
Rational Software.

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SMART STICKERS

Contactless solution provider On Track
Innovations has supplied Air New Zealand with
OTI’s smart stickers to help frequent travelers on New Zealand domestic
flights check-in and board faster. Air New Zealand distributed
approximately 100,000 customized OTI smart
stickers to be attached to the back of their mobile phones, which will
serve as a permanent and reusable boarding pass, making the boarding
process paperless. OTI’s smart sticker is an entirely self-contained,
contactless payment device that adheres to multiple surfaces including
mobile phones, PDAs and more. The OTI smart sticker serves to upgrade
products already in circulation, providing a quick time-to-market, cost
effective solution, which is expected to assist issuers in increasing
market share.

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CREDIT EDUCATION WEEK

Credit Canada and Capital One Canada launched Credit Education Week
2008. According
to a recent survey by Credit Canada, 97% of teens are interested in
learning about money management, yet only 13% indicated that they know a
lot about the subject. Credit Education Week 2008 seeks to address this
knowledge gap by teaching teens to save properly and budget
consistently. The event introduced a new interactive budget tracker
called “PiggyPal.ca” that can be downloaded onto a mobile phone to help
keep spending under control. The students also played an on-line trivia
game developed to help teenagers learn the basics of money management in
a fun, competitive way. According to the Credit
Canada survey, ‘How to save money’ is the most important topic for
teens, but only 14% of parents are actually providing an in-depth
explanation of ways to save money to their teenagers and 70% of parents
are willing to top up their teenagers’ allowances on command, preventing
their teens from learning the value of money. Teenagers indicate that
the top three preferences to learning about money and finances are:
taking a class in school; using an interactive tool with parents and
using an interactive tool with friends.

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