RBA JAN 05

Total credit card balances posted a seasonal contraction of A$900 million during January, ending the month at A$29.3 billion, but up 12.3% over year ago levels. Gross dollar volume for purchases on credit card and charge cards in January of A$12.8 billion was A$3.3 billion lower than the prior month, but up more than 12% from January 2004. Based on data from the Reserve Bank of Australia, consumers charged A$11.9 billion in purchases on credit/charge cards during January compared to A$10.5 billion one-year ago. Card credit limits reached A$78.4 billion at the end of January, compared to A$69.9 billion for January 2004. There are 11.6 million credit card and charge card accounts in Australia, compared to 10.9 million one-year ago.

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Israeli Supreme Court Kills a Merchant Lawsuit

The Israeli Supreme Court has dismissed a $232 million class action lawsuit against Bank Leumi, Israel Discount Bank, VISA ICC, Diners Club, Isracard and American Express over merchant fees. According to this week’s issue of CardFlash International, the ruling reversed a Tel Aviv District Court decision which permitted the lawsuit originally filed by the Union of Pharmacists chairman to turn into a class action. The lawsuit alleged that credit card companies abused their monopolistic power by charging higher fees to small and medium-sized businesses. The suit was spurred by the entry of AlphaCard in July 1998 when it charged fees much lower than other companies. The suit was for the difference between 2% and the amount paid to the other credit card companies. AlphaCard subsequently failed.

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PROVENCO & HYPERCOM

Provenco Group plans to roll-out Hypercom EMV-compliant terminals to merchants nationwide. The deal is valued at US$6.7 million and covers the next two years. Provenco has been a distributor for Hypercom for 20 years. Provenco’s business focus is on retail transaction technology, from a customer using an EFTPOS machine at a corner store in New Zealand to a motorist at a petrol pump in Asia.

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One-Third of Upperclassman Made a Late Payment

New research shows that three out of five college upperclassman expect to have no credit card debt upon graduation and a year after graduation. The survey, conducted by Harris Interactive for Citibank, also reveals that 32% of college juniors and seniors have missed or been late on a credit card payment. Also, a quarter have written a check that bounced. Citi says it found that 42% of upperclassmen expect to be financially secure within three years after graduation, compared to 35% a year ago. The Harris survey also found that 37% think opening unnecessary new credit cards will not lower their credit score and 22% think using a debit card will help them build a credit history. Harris conducted the survey of 1,060 U.S. college juniors and seniors at a 4-year college or university between January 7th and 19th.

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724Pay.com Targets Gambling Revenue via Debit Cards

A Nevada-based firm is planning to launch its 724Pay.com payment
gateway in China to capture gambling volume via debit cards. The Company says the major advantages of fund transfers through debit cards for
Chimera licensees will be the elimination of credit card charge-backs,
thereby further minimizing risks to licensees. Chimera says 80% of the Chinese population possesses some form of debit card issued by local banks and that many Chinese gamble.

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Acacia Enforces Credit Card Fraud Patents

Acacia Research Corporation announced that Financial Systems Innovation LLC, has entered into non-exclusive licenses and settled patent infringement litigation that apply to credit card fraud protection technology. The patented technology includes an electronic card reader, and the generation and use of a transaction number, which specifically identifies each transaction processed within the system without having to print detailed information such as card holder identity or account numbers. The Acacia Technologies group develops, acquires, and licenses patented technologies.

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Asia Payment Systems Launches a Shanghai Data Center

Asia Payment Systems has launched its Shanghai Data Center to serve as the hub for payment processing and credit bureau systems in China. Industrial and Commercial Bank of China, China Construction
Bank, and China Minsheng Bank attended the opening ceremony. In addition to the establishment of this Shanghai Data Center, Asia Pay has begun deploying technical and project management resources to begin the day-to-day project implementations that have been announced previously between SCRC Telecom and Asia Payment Systems. Asia Pay is developing a credit card processing network that provides clearing services to merchants, oil companies, and financial institutions in China, Japan, and other markets of interest in Asia.

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About 50% of Americans Do Not Understand FICO

A new survey has found that 45% of consumers incorrectly think that increasing one’s income will increase one’s credit score. According to the survey conducted last month for the Consumer Federation of America and Fair Isaac, 49% said that a FICO score represents credit availability, debt levels, or credit IQ, or that they did not know what it represents. Respondents who were most knowledgeable about the definition of credit scores were those with incomes over $75,000 (66%), those with a college degree (63%), and those 35-44 years of age (62%). Those with the least knowledge of this definition were those with incomes under $25,000 (34%), those without a high school degree (35%), and those 18-24 years of age (34%). The survey was conducted by Opinion Research between February 10th and 13th and involved 1,013 people.

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PEMCO Deploys ReD’s PRISM Neural Technology

Retail Decisions announced that Seattle-based PEMCO Technology Services, has implemented PRISM neural technology solutions to detect and prevent ATM, credit and debit card fraud. The Retail Decisions Group is an international electronic payment transaction services business that provides fraud prevention, payment processing and transaction and consulting services to the retail, finance, telecommunications and e-commerce sectors. PEMCO Technology Services supports more than 230 US financial institutions and processes 330,000 transactions daily for more than 2 million cardholder accounts.

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VeriFone Introduces IPCharge for ISO Resale

VeriFone, Inc. has introduced IPCharge, a Web-based hosted payment processing solution that merchants can use to process payments quickly, securely and cost-effectively. IPCharge processes card-present, mail-order/telephone-order (MOTO), Web and ecommerce transactions and can be used by any merchant with Internet access. VeriFone, Inc.,is a global leader in secure electronic payment technologies.

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Discover Q1 Profits Up 4% as Metrics Improve

Morgan Stanley reported this morning that its Credit Services division, including the “Discover Card,” posted $380 million in pre-tax profits for the quarter ending February 28th, compared to $365 million for the year-ago quarter. Managed outstandings rose slightly from year ago levels, transaction volume increased nearly 7%, and delinquency and charge-offs continue to fall sharply compared to one year ago. Merchant and cardholder fees declined 8% to $479 million, due to lower over-limit and late payment fees. Managed credit card loans of $47.7 billion at quarter end were up $400 million from one year ago. International card loans were $2.6 billion for the first quarter. Total transaction volume increased to $25.9 billion, the second highest quarterly volume ever. The account base declined during the first quarter by 200,000 accounts. International card accounts rose to 1.4 million. Active accounts declined 4% from 1Q/04 to 19.5 million. The credit card net charge-off rate was 5.11%, 120 basis points lower than a year ago, and down 34 basis points from the prior quarter. The charge-off ratio was the lowest in three years. The over-30-day delinquency rate also declined 156 basis points from 1Q/04 to 4.24%, and the over-90-day-delinquency rate declined 81 basis points over the same period to 2.05%. For complete details on Discover’s first quarter performance visit CardData ([www.carddata.com][1]).

DISCOVER CARD PORTFOLIO SNAPSHOT
1Q/04* 2Q/04* 3Q/04* 4Q/04* 1Q/05 Y/Y CHNG
Outstandings: $47.3b $46.8b $47.1b $48.3b $47.7b +0.8%
Volume: $24.2b $24.4b $25.4b $25.7b $25.9b +7.0%
Accounts: 45.9m 46.0m 46.0m 46.2m 46.0m +0.2%
Actives: 20.3m 19.9m 19.6m 19.7m 19.5m -3.9%
Chargeoffs: 6.31% 6.48% 5.76% 5.45% 5.11% -120bps
Delinquency: 5.80% 4.88% 4.81% 4.55% 4.24% -156bps
Yield: 12.20% 11.88% 11.69% 11.59% 11.23% -97bps
Notes: * 1Q/04 ended 2/29/04; 2Q/04 ended 5/31/04; 3Q/04 ended 8/31/04;
4Q/04 ended 11/30/04. Source: CardData (www.carddata.com)

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

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MBNA’s Cardholder Fees Soar 75% Since 2001

MBNA’s credit card loan fees have increased 78% over the past five years, topping $500 million last year. However, the pace slowed in 2004 as cardholder fees increased a modest 10%, compared to a 32% spurt in 2003 and a 20% jump in 2002. During 2004, MBNA’s credit card loan fees increased $48.7 million to $515.9 million, compared to an increase of $114.1 million to $467.2 million for 2003. Cardholder fees for 2002 were $353.1 million. However, excluding the change in the estimated value of accrued interest and fees in 2002, credit card fees would have increased $99.7 million or 27.1% for 2003. MBNA says the increase in credit card fees last year was primarily the result of the growth in receivables, accounts and a change in the timing of fee assessments. The increase in credit card fees for 2004 was also a result of higher late and over-limit fees implemented in 2003. During 2004, MBNA eliminated charging over-limit fees for accounts that have been over-limit for consecutive periods and holding the minimum payment constant, thereby shifting payment dollars to principal, thus accelerating the rate at which outstanding balances on these over-limit accounts are reduced below the credit limit. The estimated effect of these changes reduced total other operating income by approximately $30 million for 2004. In 2005, MBNA modified its over-limit fee to charge for exceeding the credit line any time during the billing cycle.

MBNA CARDHOLDER FEE HISTORICAL
2000: $289.5 million
2001: $295.1 million
2002: $353.1 million
2003: $467.2 million
2004: $515.9 million
Source: CardData (www.carddata.com)

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