Citi’s U.S. Card Profits Rise Sharply

Citigroup reported that 1Q/06 profits for its U.S. Cards unit rose 19% year-on-year to $926 million after nose-diving 60% in the prior quarter. The sharply higher profits were driven by lower bankruptcy filings, higher purchase volume and a continued favorable credit environment. However, total revenues for the U.S. card unit slipped 6% to $3.2 billion compared to the year-ago quarter. Citi says the lower revenues were attributable to lower average managed receivables and continued net interest margin compression. Purchase volume increased 11% year-on-year to $68.4 billion. Bank credit card outstandings for the U.S. were down 2% to $109.7 billion compared to one-year ago. However, private label card outstandings increased 6% to $26.2 billion. Citi’s account base at the end of the first quarter rose 5% to 131.2 million accounts. Citi’s charge-offs plummeted from 6.68% in the fourth quarter to 3.90% for 1Q/06. Charge-offs for bank credit cards dropped to 3.49% compared to 6.61% in the fourth quarter. Charge-offs for private label credit cards also dropped from 6.93% in the fourth quarter to 5.62% for 1Q/06. Overall delinquency (90+ days) dipped slightly from 1.75% for 4Q/05 to 1.74% for the first quarter 2006. Delinquency for bank credit cards increased by 3 basis points from the prior quarter. For complete details on Citigroup’s 1Q/06 performance, visit CardData ([www.carddata.com][1]).

CITIGROUP
U.S. Credit Card Net Income
1Q/05: $ 778 million
2Q/05: $ 735 million
3Q/05: $ 797 million
4Q/05: $ 444 million
1Q/06: $ 926 million
Source: CardData (www.carddata.com

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

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HSBC Takes Over the Boscov’s Portfolio

HSBC has inked a deal to acquire the private label credit card receivables and to manage the ongoing credit program of PA-based Boscov’s Department Stores. Boscov’s Department Stores is the largest full-line, family-owned independent department store in the country, operating 40 stores in Pennsylvania, New York, New Jersey, Delaware, Maryland and Virginia. The current Boscov’s card program offers cardholders up to four points for every dollar charged on the Boscov’s store card. HSBC Retail Services has more than 60 active merchant relationships.

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VeriFone Lands a RBS Lynk Contract

VeriFone has been awarded a $7 million contract from RBS Lynk to provide payment solution systems and connectivity services for resale to U.S. merchants. The annual contract includes countertop and wireless systems in both the Omni 3700 and Vx Solutions product families, the consumer-facing Omni 7000 series that is popular in multi-lane retail stores, as well as pin pads. The contract also includes the VeriFone Connect all-inclusive service for portable and wireless connectivity at the point-of-sale that includes wireless activations and monthly service, deployment, help desk support and asset management and billing.

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EVO Merchant Services Picks Hypercom

New York-based EVO Merchant Services has selected and “Class A” certified Hypercom “Optimum T4100” multi-application card payment terminal and will market the device to its merchant base. Hypercom’s new IP-enabled Optimum T4100 is designed specifically for smaller retailers. EVO Merchant Services is an electronic payments processing company processing over $10 billion per year.

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Nextwave TitaniumPlus Prepaid MasterCard Launched

DataWave Systems has launched the first instant-issue prepaid MasterCard
card program in Canada. Consumers can purchase and reload the “Nextwave
TitaniumPlus Prepaid MasterCard” cards at participating Money Mart Stores
throughout the country. The card can be used to purchase goods and
services from millions of locations worldwide where
MasterCard is accepted. This includes Internet and mail-order purchases.
In addition, cardholders can withdraw cash from ATMs displaying the Cirrus
logo. As cardholders register with Money Mart, a Nextwave
TitaniumPlus card personalized with their name will be mailed to them to
replace the instant-issue card. DataWave is a developer of prepaid and
stored-value programs. Money Mart provide check cashing and
other basic financial services with more than 1,600 locations in Canada,
the U.S. and the U.K.

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GECF 1Q/06

GE reported that profit for its Consumer Finance unit climbed 14% in the first quarter to $836 million as GECF produced revenues of $5.1 billion, an 8.6% increase over 1Q/05. During the quarter, GECF launched the “Dillard’s American Express Card,” becoming the seventh U.S. partner for American Express. GECF also agreed to make a strategic investment in Cosmos Bank, a major banking and consumer finance player in Taiwan, forming a strategic alliance to acquire a 10% stake. Additionally, GECF awarded a multi-year, multi-million dollar contract to VeriFone to supply as many as 20,000 units annually of its “Vx Solutions” payment systems. For complete details on GE’s first quarter performance, visit CardData (www.carddata.com). (CF Library 1/23/06; 2/24/06; 3/21/06)

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Financial Services & Crime Prevention

A new survey of financial service providers from Datamonitor on behalf of
Norkom Technologies reveals a significant shift in the way the providers
manage their regulatory compliance obligations and their efforts to stem
financial crime. It reveals that 21% either are or plan to integrate the
departments that address financial crime and compliance, along with the
technology infrastructures that support their activities. The research
also reveals that traditional corporate structures hamper progress.
Organizational inflexibility; the departmental silos that
discourage cross functional communication, shared processes and pooled
approaches, were named as the number one barrier to consolidation by 67% of
respondents. The research also reveals that ID theft and money laundering
are the financial crimes which give financial institutions the most
widespread cause for concern, named as top three issues by 87% and 86% of
respondents respectively.

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MasterCard Names a President of LAC Region

MasterCard International has named Richard Hartzell as President of its Latin America and Caribbean Region. He succeeds Javier Perez, who was recently named President of MasterCard Europe. Hartzell had been Senior Vice President, Regional Key Accounts, overseeing a team dedicated to business development, customer competitive strategy, product development and market opportunities for key customers. Hartzell started his career at MasterCard in 1993, and held a number of roles including Senior Vice President, Operations and Administration, for the Latin America and Caribbean region. In 2000, he left MasterCard to become General Manager of Latin America for Oasis Technology, an e-funds company and provider of software solutions for the payments industry, and returned to MasterCard in 2002 as Senior Vice President, Regional Markets. Prior to joining MasterCard, Hartzell worked in the payment services industry internationally for 13 years with Bank of America and Chase Manhattan Bank.

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HSBC Bank UK Implements VASCO’s Digipass GO3

VASCO has announced that HSBC
Bank will use its “Digipass GO3” strong authentication device for corporate
banking. HSBC will start the roll out of “GO3” to 180,000 UK Business
Internet Banking customers in May 2006. “Digipass GO3” is a lightweight, low cost strong user
authentication token, especially designed for the large volume banking
market and is easy to use. The customer generates a unique one-time
password with a touch of a button. “Digipass GO3” also supports a host
(website) authentication functionality.

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European Commission Attacks Payment Card Fees

The European Commission is continuing to analyze the high market concentration and lack of competition in some countries in the business of providing payment card services to merchants. This week, the EU reiterated the need for creating a “Single Payments Area” to make cross-border payments which could save the EU economy between 50 billion euros and 100 billion euros per year. The interim report by the EU says
even without interchange fees, card issuing remains profitable. The evidence suggests that card issuing would generate positive profits in 20 out of 25 countries even without interchange fee income. Profitability in card acquiring varies, though is quite satisfactory overall. Credit card acquirers across the EU have a 15% profit-to-cost ratio as a weighted average, while debit card acquirers average around 5%. Businesses in some countries pay a far higher merchant fee on average than others. The EU says this pattern is particularly pronounced. Merchants in Hungary, the Czech Republic and Portugal have to pay an average fee of between 2.5% and 3.1% of the total transaction value to accept a MasterCard/VISA credit card. This is 3 to 4 times higher than in Sweden, Finland and Italy.

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VendTek Signs New Agreement with Pioneer

VendTek Systems’ wholly owned subsidiary Now Prepay has entered into a new
agreement with Pioneer Petroleums based in Burlington, Ontario to
implement Point-of-Sale Activation terminals. The new software allows
physical cards to be sold through the “e-Fresh” system along with virtual
products. It will also allow Now Prepay to add other swipe activated
products as they become available. Additionally, Now Prepay is working
with Bell Canada to deliver a set of prepaid long
distance products that can be activated at Pioneer Petroleum Snack Express
sites. Pioneer has 150 locations throughout Ontario and initially 88
Snack
Express stores will have the POS activation terminals. VendTek develops
and licenses automated transaction system software and supporting
technologies.

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Datacard Provides Turnkey EMV Smart Cards

The Datacard Group has announced that it has successfully implemented a
fully-integrated EMV smart card solution for the Industrial Commercial
Bank of China. The “Affina” smart card issuance and management
software suite enables card issuers to introduce smart cards into their
existing Datacard production environments affordably for pilot and rollout program phases. The modular and scalable platform allows an issuer to reuse the same software and hardware resources as the size and needs of their smart card program change over time. Datacard Group provides secure
ID and card personalization solutions in more than 120 countries.

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