ABS 3Q/07

Charge-offs amongst credit card-backed bonds in the U.K. retreated for the second consecutive quarter, after peaking in the first quarter. For the third quarter charge-offs dropped 70 basis points to 6.6%, representing a 16-month low. Charge-offs for the first quarter hit 7.8% before dropping to 7.3% in the second quarter. Delinquencies, among asset-backed credit card securities, also improved dropping 50 basis points to 3.3% for the third quarter, compared to the June level. According to FitchRatings, its “Yield Index” ended the quarter at 18.8%, which represented a decrease of 120 basis points versus June 2007. The quarter also witnessed a decline in the “Monthly Payment Rate” which declined to 16.2% in 3Q/07 from 17.2% in the prior quarter. Fitch noted that this is a possible indicator of the increasing financial stress of U.K. credit card borrowers following the recent interest rate rises by the Bank of England which pushed short-term rates to 5.75%.

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Acquirers & ISOs Face Margin Compression

A new report from Aite Group titled “The State of the Merchant Acquiring Industry” looks at the impact of discount rates and interchange in the merchant acquiring space, reviews vendors, samples acquirers’ portfolios and PCI DSS compliance. The report also considers the future of acquiring revealing that margin compression is the most important challenge facing merchant acquirers and ISOs today, being a leading concern for 73% of those surveyed. As the industry enters a commoditization phase, more and more acquirers and ISOs feel that they have to engage in a price war in order to acquire potential customers or retain current ones. Further, the change will force acquirers and ISOs to focus on other revenue-generating factors, such as products and administrative fees. Aite Group is an independent research and advisory firm focused on business, technology and regulatory issues and their impact on the financial services industry.

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DIGIPASS 270

VASCO Data Security has introduced its “Digipass 270” client
authentication device for the banking and e-commerce sectors. The
device implements AES-algorithm for the calculation of e-signatures,
hosts authentication codes and generates one-time passwords. In
addition, the “Digipass 270” is compact enough to fit in a wallet, is PIN-protected and is compatible with VASCO’s “VACMAN” authentication.
VASCO provides authentication and e-signature solutions to its
customer base of nearly 6,000 companies throughout over 100 countries.

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HOLIDAY SHOPPERS

MasterCard Canada has rationalized Canadian shopper classifications with
its “MasterCard Canada Holiday Shopper Classification”. To examine the
different kinds of shoppers, the “Holiday Shopper Classification” divides
these consumers into 4 different categories; “stressed for the season”
accounts
for 19% of the consumers, 30% are “pragmatic shoppers”, 24% are
“shop-aholics” and 27% of consumers are “super shoppers”. MasterCard
defines the pragmatic shoppers as the most sensible, shop-aholics as the
least rational, stressed shoppers as the most procrastinating and super
shoppers as the most budget-minded. These categories have been further
dissected to examine consumer behaviors and attitudes showing that 48%
of Canadians have at least 10 people for whom to shop with 61% Atlantic
Canadians, 65% Manitobans/Saskatchewans and 60% of Albertans.
Additionally, 10% will spend over $2,000 this season while 34% will spend
less than $500. MasterCard processes over 16 billion transactions annually
offering services in over 210 countries.

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OTI Third Quarter Revenues Jump 23% Y/Y

NJ-based On Track Innovations reported that revenues in the third quarter was $9.9 million, an increase of 23%. In the quarter GAAP gross profit was $3.6 million, an increase of 5% compared to 3Q/06. However, the non-GAAP net loss for the third quarter was $6.0 million, an increase of 263% compared to the third quarter last year. OTI says its revenues have grown slower than expected and its loss was bigger than expected. The increase in operating expenses included a $2.5 million provision for doubtful accounts. The Company is also involved in large scale projects that are characterized by long implementation cycles. During the quarter, OTI was selected to provide Garanti Payment Systems with its “Saturn 6000” contactless reader for security-enhanced EMV transactions for Garanti’s “Tap & Go” program. OTI updated its forecast for 2007 to reflect revenue growth of about 10% compared to 2006. For more information on OTI’s third quarter performance visit CardData ([www.carddata.com][1]).

[1]: http://www.carddata.com

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OTI 3Q/07

Rosh Pina-based On Track Innovations reported that revenues in the third quarter was US$9.9 million, an increase of 23%. In the quarter GAAP gross profit was US$3.6 million, an increase of 5% compared to 3Q/06. However, the non-GAAP net loss for the third quarter was US$6.0 million, an increase of 263% compared to the third quarter last year. OTI says its revenues have grown slower than expected and its loss was bigger than expected. The increase in operating expenses included a US$2.5 million provision for doubtful accounts. The Company is also involved in large scale projects that are characterized by long implementation cycles. During the quarter, OTI was selected to provide Garanti Payment Systems with its “Saturn 6000” contactless reader for security-enhanced EMV transactions for Garanti’s “Tap & Go” program. OTI updated its forecast for 2007 to reflect revenue growth of about 10% compared to 2006. For more information on OTI’s third quarter performance visit CardData (www.carddata.com).

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Gift Cards to Capture 25% of Holiday Spend

A new survey shows that Americans plan to spend 25% of their total gift spending on gift cards, up from 18% last year and 13% in 2005. Shoppers will buy six gift cards on average. The most popular gift categories this year, according to the American express survey, are apparel, cited by 69% of consumers, followed by music CDs and DVDs at 62% and gift cards at 61%. Shoppers say they are likely to give them to friends or acquaintances (75%, up from 56% in 2006); aunts, uncles, cousins or other relatives (75%, up from 58% in 2006); service workers such as a babysitter, teacher, housekeeper, or postal worker (71%, up from 43%); a child or friend’s child (69%, up from 54%); parents (57%, up from 40%); coworkers (49%, up from 39%); and girlfriends or boyfriends (35%, up from 23%). Nearly a third of spouses (32%, up from 23%) may receive a gift card this year. Nearly half (45%) of those who might be getting a gift card asked for one.

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XIRING CL WATCHER

To provide for secure contactless payments, XIRING has introduced its
“CL Watcher” solution, which protects the card using metal shielding. This
shielding blocks card functionality when not in use to protect from
unintentional transactions and “modern pick-pockets”. “Modern pick-pockets”
can electronically access information from un-protected contactless cards.
When the cardholder does choose to use his/her contactless device, however,
“CL Watcher” can be deactivated voluntarily. In addition to providing
physical
protection of contactless devices, “CL Watcher” also provides the consumer
with a small LCD screen when the contactless card is in use to
verify the
amount of the transaction. The new XIRING solution has been designed to
give contactless card carriers more control over the security of their
accounts.

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GE Money to Issue Joe’s Sports & Outdoor Card

GE Money and retailer Joe’s Sports & Outdoor have announced a five-year agreement to provide the “Joe’s Sports & Outdoor credit card.” The private label credit program enables sports and fitness enthusiasts to take advantage of special financing offers, advanced sales notifications and exclusive discounts. Joe’s Sports & Outdoor customers can use the card to purchase products and services, including sports and fitness apparel, team items, gear, game room supplies, winter and summer sports equipment repairs, as well as roof racks and other accessories for cars, trucks and SUVs. The Sport Finance Program will be available as a payment option at the sporting goods retailer’s 29 locations throughout Oregon, Washington and Idaho.Joe’s Sports & Outdoor operates 29 stores in Oregon, Washington and Idaho. Revenues for this fiscal year are expected to exceed $275 million.

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SHELL CITIBANK CARD

Citibank and Shell Oil have collaborated to launch the “Shell
Citibank Credit Card” providing up to 5% discounts on gas. The
new card has been designed to lessen the cardholder’s monthly fuel
expense and other everyday expenses by offering rebates through
purchases at any of Shell’s 900 outlets and the 27,120,000 VISA
outlets around the world. Given these incentives, the partner companies
project 100,000 new customers by 2009. Citibank currently holds a
20% market share in Malaysia and has over 145 million cards in 40
countries. Citi currently has nearly 200 million customer accounts
throughout 100 countries while Shell operates its fuel retail business
through more than 46,000 retail stations in over 90 countries.

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E-Tailers Experience Black Friday Slowdowns

Nearly one-third of thirty major retail sites experienced significant slow-downs on Friday that impacted the product search and check-out processes that will likely affect online sales. Also, popular items such as the “Nintendo Wii” and “Zune” mp3 players sold out quickly on “Black Friday.” Keynote reports that its monitoring of retail site performance showed a definite slow-down in site performance over the course of “Black Friday.” The worst performing sites on “Black Friday” were showing up to a 400% slow down and well-known brands such as Buy.com and Lowes experienced significant slow downs. However, Keynote noted that none of the leading sites it monitors appeared to go completely dark on Friday, whereas several leading sites experienced periods with complete outages last holiday season. Meanwhile, eBay companies, including Shopping.com and PayPal, reported that Shopping.com traffic to merchants in the “Gifts/Flowers” and “Clothing/Accessories” categories throughout the “Thanksgiving” holiday grew by 57% and 52% respectively year-over-year. Overall, Shopping.com’s traffic to merchants increased 61% over last year’s “Black Friday,” November 24, 2006. eBay noted that, based on the previous five years of PayPal’s online shopping research, data show that Mondays are the busiest day of the week for online shopping and the second Monday in December is solidifying its place as the actual busiest online shopping day of the season. In 2006, online shopping activity on PayPal was 96% higher on the second Monday in December than on “Thanksgiving Day.”

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