ACH and Wire Transfers Need to be Merged

A new report concludes that the U.S. payments industry could save $7 billion per year if the ACH and the wire transfer systems were converged into a single electronic wholesale payments system. The study from Boston-baed Aite Group found that financial institutions typically maintain both ACH and wire transfer systems, and in many cases, they maintain multiples of these systems as a result of mergers and acquisitions. Because of this, participants throughout the entire payments industry are incurring meaningful expenses that could be reduced through the adoption of a single electronic payments system. The report outlines iterative steps and alternatives to improve the current electronic payments environment without eliminating existing systems.

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Comerica Offers Miles on New Debit Cards

Detroit-based Comerica Bank has introduced new debit cards that earn “WorldPerks” miles for signature-based purchases. The new “Comerica WorldPerks Check Card” and the “Comerica WorldPerks Business Check Card” offers two earning options. The “Standard Award” options has a $20 annual fee and earns one mile for every $2 spent. The “Enhanced Award” option has a $55 annual fee and earns one mile for every $1 spent. The business debit card has a $55 annual fee and earns 1 mile for every $1 spent. cardholders receive 1,000 “Bonus Miles” for signing up. Miles earned through the program can be redeemed for travel on Northwest Airlines, and their “SkyTeam Global Alliance Partners” and other “WorldPerks Airline Partners.” Comerica say it plans to further expand its check card rewards program in 2007.

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Constantine Joins the New York Governor

NYC-based Constantine Cannon, the lead counsel for the debit card â¨litigation, announced that Lloyd Constantine is stepping down as â¨Chairman of the firm to become Senior Advisor for New York Governor â¨Eliot Spitzer, while Stephen Cannon will become Chairman and continue to â¨serve as Managing Partner of the firm’s Washington, D.C. office. Constantine Cannon represents its clients in employment, â¨telecommunications, intellectual property, electronic payments and â¨retail industry issues.

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Bank Credit Card ROA Hits 19-Year High

In their annual card issuer industry earnings report, 2006 P/L revenue and expense streams for the credit card industry calculated by R.K. Hammer are shown below, reporting a 30 bps rise from 2005 earnings:

Card Earnings Trends/Highlights:

Revenue Streams ($145.3 Billion for ’06 vs. $144.2B in ’05) 17.30% ROA

Interest Income $90.1 Billion, representing 62% of total revenue; up from $89.4B in ’05

Fee Income of $55.2 Billion, representing 38% of total revenue; up from $54.8B in ’05

Expense Streams ($106.7 Billion for ’06 vs. $108.5B in ’05) 12.70% ROA

Operating Expense of $39.5 Billion, 37% of total revenue; up from $37.9B in ’05

Blended Cost of Funds of $33.6 Billion, 31.5% of total revenue; up from $23.9B in ’05

Net Charge Offs of $33.6 Billion, 31.5% of total revenue; down from $46.7B in ’05

Net Pre-Tax Profit (4.60% ROA net pre-tax for ’06 vs. 4.30% for ’05)

$38.6 Billion, vs. $35.7 Billion in ’05

Comments:

R.K. Hammer is a leading U.S. card portfolio sale broker, and an expert witness for portfolio valuations. Hammer has been tracking credit card portfolio profitability since 1983. The expected gain in lower charge offs for the year were mostly offset by higher funding costs during the period. Revenue was also up slightly, in a very competitive industry, leading to a 30 bp net rise in pre-tax ROA% for the year over 2005. Charge offs, unusually low for 2006 (after the rush to BK filing during 4Q05), will resume to more normal levels for 2007, rising a forecast 40 bps in the Hammer metrics.

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Wal-Mart Adds a Seamless FSA Card Solution

Wal-Mart and Sam’s Club this morning announced a new system to enable customers to pay for FSA eligible health care merchandise with their FSA debit card. The “Inventory Information Approval System” automatically identifies FSA eligible merchandise during the checkout process. Once all items have been scanned, a total is displayed for the entire transaction showing both FSA and non-FSA merchandise. The customer can then use an FSA card for payment of FSA eligible merchandise and then pay for the non-FSA merchandise with another form of payment.

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VeriFone’s Bergeron to Stay Through 2009

VeriFone’s Chairman and CEO, Douglas Bergeron, has agreed to an extension of his employment agreement through the end of the Company’s fiscal year ending October 31, 2009. Bergeron has been Chairman and CEO of VeriFone since he led the acquisition of the company from Hewlett-Packard. In April 2005, Bergeron led VeriFone’s IPO on the New York Stock Exchange, which valued VeriFone with an equity market capitalization of $650 million. As of December 31, 2006, VeriFone’s equity market capitalization was approximately $2.9 billion. Bergeron remains the single largest private shareholder of the company.

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November Credit Card Debt Rebounds Slightly

Credit card outstandings grew during November by GBP 200 million. However, the GBP 55.6 billion figure remains well below December’s peak of GBP 59.0 billion. Year-on-year credit card outstandings (not seasonally adjusted) are running about 4% lower than one-year ago. According to the The Bank of England, the increase in total net lending to individuals in November (GBP 10.9 billion) was higher than the increase in October and the previous six month average.
The increase in consumer credit (GBP 1.0 billion) was slightly lower than in October. While net credit card lending grew by GBP 200 million in November, net other loans and advances rose by GBP 900 million. The annual growth rate of consumer credit was unchanged from October at 6.2% and the three-month annualized growth rate increased by 40 basis points to 6.0%.

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NASDAQ Puts TSAI on Delisting Notice

NASDAQ has notified Transaction Systems Architects of a possible delisting due to a delayed 10-K which was delayed due to a voluntary review of its historical stock option grants. The review and related audit procedures to be performed by the company’s outside auditors are not yet complete. The company will request a hearing before a NASDAQ Listing Qualifications Panel to review the Staff Determination. Pending a decision by the hearing panel, the common stock will continue to be traded on The NASDAQ Global Select Market.

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INTERAC Reaches a New Holiday Record

For the first time the busiest shopping day of the year for Canadians came on December 22nd instead of December 23rd. Toronto-based INTERAC Direct Payment, the country’s national debit card service, also reported that the combination of the two shopping days produced the largest two-day total in its history, hitting 31.2 million transactions. The two busiest days in 2005 totaled 30.0 million. Last year, INTERAC posted 15.5 million transactions for December 23rd. The figure for the same day in 2004 was 13.1 million and for 2003 is was 12.5 million. There are more than 35 million debit cards in circulation in Canada, accounting for more than three billion IDP transactions in 2005.

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Contactless Payments Near Tipping Point

A new study has found that within the next 24 months, 58% of all survey respondents indicated they will have a contactless payment system in place. The Aberdeen research also found that of this group, 28% of respondents have said that they will adopt the solutions within one year. The top risks of contactless payment systems were identified by respondents as the rate of customer adoption and performance of contactless payment devices. However, Aberdeen also notes that just as in the case of RFID technology, RF-based contactless payment technology will cross the tipping point of adoption in retail only when enterprises start measuring and using contactless transactional data in their internal processes and systems to attain the real ROI.

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Global Payments Revenue Jumps 19% in Q4

Atlanta-based Global Payments reported that revenues for the quarter ended November 30th increased 19% to $260.7 million. Net income for the quarter jumped 11% to $34.0 million. GPN says the growth was driven by expansion in its merchant services segment and the new Asia-Pacific joint venture with HSBC. Merchant services also benefited from a favorable Canadian currency exchange rate compared to the prior year. During the quarter, GPN named Ruth Ann Marshall, former President of the Americas for MasterCard, to its Board of Directors; signed a deal with Payment Alliance International to provide PAI with end-to-end processing services including authorization, capture, settlement, and BIN sponsorship; and, inked a referral agreement with Ruesch International, a premier provider of business-to-business payment solutions. The Company reaffirmed the low end of its annual fiscal 2007 revenue guidance of $1,057 million, and reduced the high end of this guidance to $1,069 million. For complete details on Global Payments latest results, visit CardData ([www.carddata.com][1]). (CF Library 9/18/06; 10/12/06; 11/1/06)

GPN HISTORICAL
PERIOD REVENUES NET INCOME
4Q/05: $219.7mm $30.6mm
1Q/06: $225.2mm $30.1mm
2Q/06: $238.8mm $34.1mm
3Q/06: $260.3mm $44.2mm
4Q/06: $260.7mm $34.0mm
Source: CardData (www.carddata.com)

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

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