WaMu to Acquire Providian for $6.45 Billion

Providian, the nation’s 9th largest general purpose credit card issuer with an $18 billion card portfolio, is being acquired by Seattle-based Washington Mutual for $6.45 billion. After nearly collapsing in 2001 with a $55 million loss, Providian has reinvented itself from a major sub-prime issuer to a significant middle-market player, doubling its profits over the past three years. Under terms of the deal announced this morning, WaMu will pay 89% in stock and 11% in cash. Providian will become WaMu’s fourth major business unit and will continue to operate out of in San Francisco. Joseph Saunders, who led the Providian turnaround since November 2001 as chairman and CEO, will continue to run the credit card business after the merger. WaMu also indicated it plans to retain all of Providian’s management team and infrastructure. In the first quarter, Providian posted a 41% increase in net income to $133.0 million. Last year, Providian posted net income of $381.2 million, compared to $219.4 million in 2003 and $179.7 million in 2002. Prior to its near collapse in 2001, Providian posted net income of more than $600 million in 1999 and 2000. According to CardData, Providian had $18,089,000,000 in credit card outstandings as of March 31st, and 9.9 million accounts. WaMu currently has assets of $319.7 billion. The PVN/WaMu deal is expected to close in the fourth quarter. (CF Library 11/26/01; 4/26/05)

PROVIDIAN NET INCOME HISTORICAL
1999: $614.5 million
2000: $667.4 million
2001: -$54.6 million
2002: $179.7 million
2003: $219.4 million
2004: $381.2 million
Source: CardData (www.carddata.com)

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5MM Web-Driven Businesses Now in the USA

A new joint study from MasterCard and Warrillow has found that Web-driven businesses now represents 25% of the U.S. small business market, accounting for more than 5 million businesses. When compared to their traditional counterparts, Web-driven entrepreneurs are more likely to be women and university educated. Warrillow says Google is a big key to the success of these Web-driven businesses when it enables tiny businesses to buy a sponsored link. The report is being released today in conjunction with the “The Warrillow Summit,” which gets underway this morning in Chicago.

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AmEx Offers Advance Odd Couple Show Tickets

American Express has launched a promotion to offer advance purchase tickets of Broadway’s upcoming “The Odd Couple” to AmEx cardholders via the new AmEx/Yahoo Broadway Web site. For the Early-on-Sale period, starting June 6 and continuing through July 4, tickets will be available only to American Express Cardmembers and can only be purchased through American Express’ newly-minted Broadway Web site, American Express presents Broadway, Live at Yahoo! or by calling Ticketmaster. American Express Company is a diversified worldwide travel, network, and financial services provider founded in 1850.

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Lipman Adds GPRS Wireless Capabilities

Lipman is now offering a GPRS wireless communication option on its “Xplorer,” “Secura Integrated” and “Xtreme Integrated” payment systems. The additional GPRS functionality further enhances the versatility of the Xplorer, Secura and Xtreme systems. Based on SecuraCell technology, both Xplorer and Secura systems have received EMV approval as well as widely recognized security certifications such as Visa PED and ZKA. Lipman is a leading worldwide provider of electronic payment systems and develops, manufactures and markets a variety of handheld, wireless and landline POS terminals, electronic cash registers, retail ATM units, PIN pads and smart card readers, as well as integrated PIN and smart card solutions.

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Exante Lands a Former MasterCard/AmEx Exec

Connecticut-based UnitedHealth Group has hired Philip Philliou, former VP/Advanced Payments & Technologies at MasterCard and former director of strategy and marketing at American Express, as chief strategy officer for Exante Financial Services. In his new role, Philliou will direct strategy for one of the only financial services institutions in the country dedicated solely to the health care industry. UnitedHealth Group is a diversified health and well-being company and serves approximately 55 million individuals nationwide. Exante Financial Services is focused on enhancing the health and well-being industry for insurers by offering health savings accounts, card technology and a host of electronic solutions.

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Mega-Players to Dominate Banking by 2010

By 2010, the global banking scene may be dominated by less than a dozen mega-players that have the power to rapidly and dynamically deploy resources to shifting high-growth markets. The prediction comes from TowerGroup who also says that forces are now converging to bring long-discussed trends to fruition, where financial institutions are able to fully leverage the enterprise vision. Among other “mega-trends” identified by TowerGroup: a wide range of niche-focused players of varying sizes will thrive by specializing and providing superior customer value to captive or highly-targeted markets; regulatory compliance will become accepted as an inherent cost of doing business, and will be leveraged by successful financial institutions as an important means to gain and maintain customer trust; winners in the financial services industry will take advantage of precise predictive analytics and automated decision support tools to manage business more effectively and deliver higher customer value; and, IT spending across all financial services vertical sectors globally will reach $361 billion in 2005, and will grow to close to $450 billion by 2010.

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E-PAYMENT BEHAVIOR

Credit cards remain the most important e-payment method in Europe, but
its share of all online purchase transactions is declining, from 93.0%
in 2003 to 81.5% last year. On the other hand direct debiting
processes, especially the electronic direct debit in Germany, have
increased market share strongly from 6.5% in 2003 to 17.0% in 2004. A
new study to be released by Pago next week also shows that offline
payment methods (invoice purchases, cash on delivery and pre-payment)
still have only a single digit share, but, the online bank transfer, a
new payment method available to German consumers, has taken more than
0.5% of market share from scratch. Pago research also found that UK
consumers and those from Non-European countries continue to use credit
card payment for 100% of their transactions, but, credit card share for
consumers from the rest of Europe, excluding Germany and the UK, amounts
to 88.6%. Pago says it is proving difficult for the credit card to
really conquer the German consumer: only 28.7% of transactions were made
using a credit card versus 35.0% in 2003 while electronic direct debit
has grown from 56.7% in 2003 to 64.0% last year. The research was based
on an analysis of 20 million purchase transactions processed through the
Pago platform. Pago is a Deutsche Bank and Beisheim Holding Schweiz company.

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Legislation & Greed May Hinder Prepaid

Government, globalization, and greed are the three major issues facing the prepaid debit card industry. The head of CA-based Card Express, a/k/a CardEx, says the U.S. government is a potential obstacle to the industry, because of legislation, including money transmittal laws and escheatment laws. President/CEO Alan Safahi says the global expansion of prepaid cards will offer tremendous opportunities for financial institutions and processors especially in Third World countries. Safahi cautions that the industry must avoid any perception of gouging customers as it pertains to products like general purpose cards offered to the unbanked or underbanked. CardEx’s technology platform supports nearly 40 prepaid debit card applications.

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V/MC Credit Card Account Gap Widens in Q1

While VISA leads in credit card gross dollar volume and cards-in-force, MasterCard now holds a nearly ten million account advantage over its rival. After unseating VISA in total credit card accounts in the third quarter of 2002, the gap with MasterCard has widened to 226.6 million accounts versus 216.8 million. According to CardData ([www.carddata.com][1]), VISA posted a 9.4% gain in first quarter gross dollar volume for credit cards of $178.2 billion. MasterCard reported $131.6 billion in credit card GDV, a 3.8% gain over 1Q/04. VISA holds a 20 million credit card advantage over MasterCard. As of March 31st, MasterCard had 277.8 million credit cards, compared to VISA’s 297.9 million. However, MasterCard’s credit card base is growing by 5.9% compared to VISA’s 4.7%.

FIRST QUARTER HISTORICAL
Credit Card Accounts
(millions)
VISA MASTERCARD
2002 206.6 190.5
2003 200.9 208.4
2004 205.8 211.1
2005 216.8 226.6
Source: CardData (www.carddata.com)

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

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