JUNE DEBT

Credit card debt continued its rebound in June, hitting a record A$44.7 billion, after stagnating for most of this year. Credit card volume remained steady in June hitting A$18.2 billion. Year-on-year credit card debt has increased 10%, compared to June 2007, while card volume is up 10% year-on-year. However, credit card volume has been slowing over the past year due to merchant surcharges imposed on consumer card transactions. Two months ago credit card volume was up 16% year-on-year. Credit card limits reached a new high at A$119.7 billion, marking the 22nd consecutive month of A$100+ billion. According to the Reserve Bank of Australia there are currently 14.2 million credit card and charge card accounts in Australia, compared to 13.5 million one-year ago.

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LifeLock Fraud Advisory Board is Formed

Identity protector LifeLock has formed “The LifeLock Fraud Advisory
Board” and developed a comprehensive group of fraud
and privacy experts who will provide insight on identity theft and fraud
trends. The Fraud Advisory Board is composed of nine board members which
include Souheil Badran, SVP AND GM of eCommerce Solutions for First
Data; Robert Blattberg, Professor of Marketing and Director of the
Center for Marketing Technology and Information at the Tepper School,
Carnegie-Mellon University; Frank Caruana, LifeLock Director of Consumer
Products; Ori Eisen, Founder and Chairman of the 41st Parameter; Tim
Grace, CEO and President of BasePoint Analytics.
Joel S. Lisker, Senior Vice-Chairman of Dudinsky Lisker &
Associates; Bruce Lowthers, Jr. – GM and SVP
of Global Software Services for Fidelity National Information Services.
Kevin Mitnick, considered the “World’s Most Famous Hacker,” and Lyn
Porter – Senior Director of Global Merchant Risk Management
for PayPal.

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Visa and Banks Test Transaction Notification

Visa and eight top banks have agreed to initiate a pilot program with
up to a total of 2,000 participants to test the delivery of real-time
notification alerts on Visa accounts. PNC Bank, SunTrust, U.S. Bank,
Wachovia, and Wells Fargo, Royal Bank of Canada, TD Bank Financial
Group, and Vancity in Canada have opted to test. Participants will
receive notification alerts from Visa through email or SMS delivered
directly to their mobile devices. Through the alert received via email
or SMS text, cardholders can verify the transaction details, and if the
transaction appears to be irregular, can immediately contact their bank
to help stop further transactions on the card. Visa began testing mobile
notifications in 2007, beginning with an internal employee pilot. Mobile
alerts are part of a suite of mobile services that are supported by the
“Visa Mobile Platform,” which was created to help financial institutions
tap into mobile technology to deliver enhanced products and services.

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Prepaid Press Expo Gets Underway in Vegas

The Prepaid Press Expo 2008 begins
August 19th at Caesars Palace in Las Vegas and runs through August 21st.
Industry leaders from all of the segments of the prepaid
calling card, wireless and gift and debit card industries will converge
and meet with retailers, distributors and others involved in the
prepaid industry. The Prepaid Press Expo 2008 has 12 corporate
sponsors, representing a
cross section of prepaid, including: Emperor – NetworkIP and CVT Prepaid
Solutions, Inc.; Senator – Direct Wholesale, Total Call International,
Futura Card Services, Transcard and Via One Technologies; Centurion –
Lunex Group, Global Service Solutions, Pactolus, InComm/First Data, and
Auris Technology.

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CARDS 2Q/08

During the second quarter there were 1.8 billion plastic card purchases made in the U.K. totalling GBP 92.6 billion. The number of purchases was 7.8% higher than 2Q/07, and spending was 7.5% higher. Debit cards accounted for 73.4% of all plastic card purchases compared with 71.6% in 2Q/07. Bank of England figures show that gross credit card lending to individuals in the second quarter amounted to GBP 32.8
billion. The sum of all monthly repayments to U.K. banks amounted to GBP 30.7 billion. During the 12 months to the end of June outstanding credit card balances have increased by GBP 1.8 billion. Bacs volumes and values grew by 3.3% and 7.9% respectively over the 12 months to June. Over the same period, the volume of CHAPS payments fell by 4.0% with a 4.2% fall in values. The “U.K. Faster Payments Service” was launched in May and by the end of June, 4.5 million payments had been processed for a value of GBP 2.5 billion. However, cheque and credit clearing volumes declined
by 10.6%, total values declined by 4.0%.

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Council Reveals PCI DSS v1.2 Details

The PCI Security Standards Council announced the summary of forthcoming
changes to “PCI DSS” as it moves from version 1.1 to the previously
announced version 1.2 in October. An overview of the summary of changes
as well as frequently asked questions an be found on the Council’s Web
site. Changes to the “PCI DSS” include clarifications and explanations
to the requirements, with these clarifications offering improved
flexibility to address today’s security challenges in the payment card
transaction environment. The new summary document on these changes
highlights the key clarifications by requirement. These clarifications
will also eliminate existing redundant sub-requirements while improving
scoping and reporting requirements. When version 1.2 is released,
incorporating existing best practices, supporting documents will also be
updated and consolidated. Most importantly, version 1.2 does not
introduce any new major requirements to the existing 12 in place since
the Council’s inception.

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Credit Card ABS Performance Remains Okay

Overall U.S. credit card ABS performance continues to exhibit
resistance to both a weakened consumer and increasing charge-off rates.
Fitch Ratings says that year-over-year charge-offs have climbed almost
200 basis points and are increasing at a brisk pace, delinquency rates
and bankruptcy filings, the leading indicators for near-term future
chargeoffs, show signs of deceleration. In addition, excess spread
remains healthy and is still approximately 50 basis points above its
long term average. The Fitch prime charge-off index for July is 6.4%, a
level not seen since the middle of 2004, excluding the temporary spike
associated with the “Bankruptcy Reform Act of 2005.” July’s gross yield
of 17.4% is 144 bps lower than the average for 2007. However, both the
retail pricing benchmark (U.S. Prime Rate) and the funding benchmarks
(LIBOR) have decreased by about 300 and 250 basis points respectively
over the same period. On a relative basis, yield is actually higher,
which is partially offsetting the effect of the growing charge-off rates
and helping to preserve the excess spread within the ABS transactions.

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Credit Card Mail Drops 8% Sequentially

Credit card solicitations fell nearly 8% from the first quarter to the
second quarter of this year. The mail volume for the second quarter is
about 17% off the third quarter of 2007 high of more than two billion
pieces. According to Chicago-based Mintel Comperemedia, the second
quarter card mail volume dipped to 1.54 billion from 1.67
billion in the prior quarter. Discover and Citibank both cut credit card
mail by 18% and 31%, respectively. Bank of America held steady on credit
card mailings and boosted its mortgage and loan promotions by 26%.
However, Capital One and Chase maintained credit card mail volume, but
each cut lending offers (by 26% and 33%, respectively) while
increasing banking direct mail (by 80% and 60%). HSBC reduced credit
card, banking and loan mail volume across the board, sending 52% less
offers overall. Mintel says record losses from the sub-prime fallout and
rising delinquencies have squeezed issuers’ credit so tight,
they’re tapping out.

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CARDS AFRICA 2009

Johannesburg marks the spot for the Cards Africa 2009 expo to be held
March 17-20 2009 at the Sandton Convention Centre. Globalisation of
payment and card loyalty mechanisms as well as increased customer
sophistication has resulted in the need to provide stronger card
programmes. Cards Africa 2009 is designed to facilitate continuous
development of African card business processes. This year, the conference
takes place from This is your chance to implement industry best practice
and evolve with the times, from increased legislative procedures to
customer buy-in and ease of card-use.

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Target’s Q2 Credit Card Performance Okay

Target reported that its credit card profits plunged 65% to $74 million
for 2Q/08, as a result of a decline in overall portfolio yield and its
deal with Chase to take over the portfolio. The average receivables
directly funded by Target in the second quarter also
declined 19.8% to $3.6 billion from $4.5 billion a year ago. Revenues
for the quarter ending August 2nd increased more than 10% to $501
million. Finance charge revenue topped $600 million for the second
quarter, a 16% gain over last year. Late fees and other fee revenues
rose more than 10% to $121 million. During the quarter, Target and Chase
announced a deal under which Target would sell an undivided interest
in its credit card receivables to Chase for cash proceeds of
approximately $3.6 billion. This interest would represent approximately
47% of the principal amount of Target’s outstanding receivables. Under
terms of the deal, Target will continue to control all aspects of
creating and implementing its financial services strategy, provided that
future portfolio performance remains sufficiently strong. Alternatively,
in the event that substantial unanticipated portfolio deterioration were
to occur in the future, Chase would gain certain rights to direct
Target’s credit card team to implement alternative underwriting and risk
management practices, until portfolio performance improved. For complete
details on Target’s latest performance, visit CardData([www.carddata.com](http://www.carddata.com)). (CF Library 5/6/08)

TARGET CARD LOAN HISTORICAL
2Q/07: $6.906 billion
3Q/07: $7.652 billion
4Q/07: $8.624 billion
1Q/08: $8.420 billion
2Q/08: $10.22 billion
Source: CardData (www.carddata.com)

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myPHOTOcard

Customers at US-based Zions First National Bank who switched to customized
cards have been making 15% to 20% more transactions. Zions Bank, which
launched its “myPHOTOcard” card customization program is using technology
provided by card customization specialist, Serverside Group. Since the
end of May launch, approximately 88% of the photo
cards issued have been debit cards, the rest credit cards.
The popular new service, also being marketed in Spanish, is available to
both individual customers and business clients. Serverside Group is a
provider of digital card design.

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