MasterCard’s IPO Opens Below Expectations

A watershed event is unfolding this morning in the payment card industry as MasterCard, the world’s second largest payment card network, is going public. Last night, MasterCard announced that its IPO of 61.5 million shares of its “Class A” common stock has been priced at $39 per share. The pricing was below the anticipated range of $40 to $43 per share. The Company will open trading today on the New York Stock Exchange under the trading symbol “MA.” The IPO raised $2.4 billion, the largest since 2004, surpassing Google’s IPO of $1.7 billion. The IPO represents a 46% stake in the company. MasterCard will use most of the proceeds to redeem shares held by current shareholders, mostly bank/issuers. About $650 million will be retained for business and litigation purposes. Despite the lower start, Morningstar places MasterCard’s fair market value at $80 per share.

MASTERCARD HISTORICAL ($ millions)
1Q/05 2Q/05 3Q/05 4Q/05 1Q/06
G&A: $306.6 $319.2 $350.1 $376.1 $347.8
A&M: $171.7 $231.6 $219.2 $385.5 $182.7
Net Income: $ 93.3 $120.2 $106.1 ($ 53.0) $126.7
Note: G&A: General & Administrative Expenses; A&M:
Advertising & Market Development Expenses.
Source: CardData (www.carddata.com)

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Omaha Steaks to Distribute InComm Cards

Atlanta-based InComm has teamed with Omaha Steaks to distribute its gift cards. The Omaha Steaks gift cards will be available in $25 and $50 denominations. The gift cards can be redeemed in Omaha Steaks’ 75 retail locations nationwide or through its web site. InComm offers more than 46 different gift cards that include major retailers, casual and fine dining, entertainment, electronics, office supplies, sports and recreation.

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Banco Rio Selects Diebold Opteva ATMS

Banco Rio has selected Diebold’s “Opteva” ATMs and will install 300
terminals throughout 2006. The deal also includes a contract to
service Banco Rio’s entire multi-vendor, self-service network through
August 2007. The “Opteva” terminals are powered by “Agilis” software,
capable of interfacing with multi-vendor products, reducing the need for
back-end support and protecting investments in legacy systems and allows
for ATM customization.

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Half of Consumers Express Online Concerns

A new survey has found that 44% of consumers feel their information is safe when engaging in e-commerce and 50% avoid making purchases online because they are afraid their financial information will be stolen. The Cyber Security Industry Alliance survey also found that 34% of Americans feel that banking online is as safe as banking in person, however, 94% of Americans feel that identity theft is a serious problem and only 24% of Americans say that businesses are placing the right emphasis on protecting information systems and networks.

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Rahaxi Receives MasterCard SecureCode Certification

FreeStar Technology subsidiary Rahaxi Processing Oy. achieved
successful completion of certification for the “MasterCard SecureCode”
online payment card security service. “SecureCode” is a payment
authentication technology that enable MasterCard issuer banks to
authenticate a cardholder prior to cardholder consummating a transaction
over the Internet at participating merchants. “SecureCode” is initiated
on a retailer’s Web site and interacts with both the cardholder and their
card issuer. When a customer checks out from an e-commerce merchant, an
in-line window appears asking them to enter a unique, personal code that
has been registered with their bank.

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Wachovia’s Card Processing Goes to TSYS

After exiting the card business more than five years ago, East coast-based Wachovia is moving quickly into the card business. This morning the issuer inked a long term agreement for TSYS to provide core-processing and other related services in support of its consumer credit-card line of business. The initial product launch is scheduled for early summer and will use TSYS’ “TS2” system. Until recently, Wachovia had processed its consumer-credit card portfolio through an agent-bank agreement with MBNA. However, MBNA was acquired by BofA forcing Wachovia to explore its options.

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G&D 2005

Munich-based Giesecke & Devrient reported that its “Cards Segment” revenue rose 5% last year to 595 million euros, compared to a 24% increase in 2004. The Company says fierce competition and plummeting prices impacted its sluggish performance. However, G&D says the card unit effectively improved its earnings power and defended its share of the global market despite the lackluster results. One of the biggest growth drivers of 2005 was the launch of the Austrian social insurance e-card. In only 6 months, the Company had delivered 8 million cards. Overall, Giesecke & Devrient posted net sales of 1.16 billion euros, a 7% gain over the prior year. Government contracts represented the biggest drive of increased sales. For complete details on Giesecke & Devrient’s latest results visit CardData (www.carddata.com).

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EU Greenlights Gemplus & Axalto Merger

The European Commission this week cleared the proposed Axalto and Gemplus merger. The shareholders and boards of directors of both companies have already approved the transaction and the U.S. antitrust authorities have not raised objections to the transaction. In December, the boards of Axalto and Gemplus unanimously approved a merger of equals to create Gemalto. The $1.1 billion transaction will create a company with annual revenues of $2.1 billion and 11,000 employees. Management of the companies expect to realize joint annualized net operational synergies of approximately $100 million by the third year after closing on a fully phased basis. Alex Mandl, the President & CEO of Gemplus, will assume the position of Executive Chairman and Olivier Piou, CEO of Axalto, will be the CEO of Gemalto. Mr. Mandl and Mr. Piou will jointly constitute the Office of Chairman. Frans Spaargaren will assume the position of Chief Administrative Officer with responsibility for integration, procurement, supply chain and IT and Charles Desmartis will be the CFO of Gemalto. The Board of Directors of the combined entity will be comprised of 11 members, 5 proposed from the current Axalto Board, 5 proposed from the current Board of Gemplus and 1 other independent member will be jointly nominated. Deutsche Bank acted as financial advisor to Axalto and Morgan Stanley as financial advisor to Gemplus. (CFI Library 12/8/05)

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Card Express Names a New VP/Marketing

California-based Card Express has hired Karen Glessner, former Product Management Leader of the Corporate Card at GE Corporate Payment Services, as VP/Marketing. Glessner is responsible for all of CardEx’s marketing efforts including development and execution of the international marketing plan, product development, advertising, public relations, channel marketing and events planning. Karen has over 18 years of marketing and product management experience in financial services and technology. Card Express is a processor of prepaid debit card products and services utilizing the VISA and MasterCard networks.

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3R Card Scam Settles with the FTC

The FTC has settled with a Canadian advanced-fee credit card operation that operated under the name “3R.” Under the settlement, they will pay full redress to consumers, totaling $1.85 million, and stop their illegal practices, including falsely promising consumers a “guaranteed” low-interest credit card for an advance fee, calling people whose telephone numbers are registered on the National Do Not Call (DNC) Registry, and failing to pay the required annual fee to access DNC-listed numbers.

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Coinstar Expands Gift Card Mall Program

Coinstar announced the expansion of its gift card mall
program into the United Kingdom. The program represents the company’s
latest move in developing a comprehensive offering that helps retailers
increase consumer traffic and drive profit at the front of the store. The
program includes targeted card selection, inventory control, management of
card sourcing, display design and merchandising and multiple point-of-sale
technology integration. The gift card mall consists of a display rack of
leading dining, clothing, entertainment, book, home and service gift cards
strategically placed for shopper convenience. Gift vouchers are a $1.5 billion market in the U.K.

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First Guardian to Enter Card Processing

New York-based First Guardian Financial says it is in the process of exploring and developing a merchant credit card processing service to target small and mid sized businesses. The company intends to establish/develop this venture either as a joint venture or as an intermediary with an established processor or explore developing its own from the ground up, whatever course the company decides it believes that it is essential to enter into this multi billion dollar sector. First Guardian Financial Corporation provides financial services/products to small and mid sized business across the United States.

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