Banks Miss Online Card Cross-Sell Opportunities

Online banking and bill payment have become a leading driver influencing consumers’ selection of banks and their perception of bank brands. According to the Keynote Systems’ study, National City, Washington Mutual and Bank of America were the banking sites providing the best online customer experience. More than 56% of consumers in the study said online banking and bill payment services were a very important factor in choosing a bank; ahead of considerations such as the physical location of bank branches (45%) and ATMs (52%). Keynote says that despite the growth and improvements in online banking, most banks have failed to use the online channel successfully to cross sell or grow their wallet share with their customer base. Often, an institution’s banking services, credit card offerings and other services will be messaged on the homepage, and are not easily accessible when a customer is logged into their banking account. Customers express the most interest in credit cards (38%), savings accounts (21%) and mortgages (21%) offered by their banks.

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PSCU Financial Services Renews Two Large CUs

PSCU Financial Services announced that Pentagon FCU and MN-based Wings Financial FCU have signed contract extensions for credit card support programs. Pentagon FCU extended their contract for CreditAbility(TM) and DebitAdvantage(TM) programs through 2009. CreditAbility provides flexible credit card processing and servicing for the credit union’s 240,000 credit cardholders, while the DebitAdvantage program supports more than 91,000 offline debit cardholders. PSCU Financial Services is the nation’s largest Credit Union Service Organization (CUSO). As a non-profit cooperative, the company is owned by more than 500 member credit unions nationwide, representing more than 8 million cardholder accounts and 200,000 online bill payment subscribers.

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Penalty Fee Income Rises 26.5% in 04

U.S. credit card issuers produced an estimated $50.8 billion in fee income last year, an 18% increase over 2003. Penalty fee income for last year is expected to hit $14.8 billion, while the largest category of fee income, interchange income, should come in around $25.4 billion. According to R.K. Hammer Investment Bankers, other fee income for 2004 will include cash advance fee income of $6.1 billion, annual fee income of $3.5 billion, and fee income from enhancements of $1.0 billion. Hammer estimates interest income for 2004 to be $85.5 billion. He says that total income (including interest and all fees) will produce a 17.50% ROA in 2004, or $136.3 billion for the year, before expenses. Based on the Hammer analysis, fee income rose 2.5 times faster than interest income in 2004.

BANK CREDIT CARD FEE INCOME
($ billions)
2003 2004 CHANGE
Interchange: 21.6 25.4 +17.6%
Penalties: 11.7 14.8 +26.5%
Cash Advance: 5.6 6.1 + 8.9%
Annual: 3.4 3.5 + 2.9%
Enhancements: 0.9 1.0 +11.1%
TOTAL: 43.1 50.8 +17.9%
Source: R.K. Hammer Investment Bankers

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Computer Services Forms a Surcharge-Free Alliance

KY-based Computer Services has formed an alliance with its community bank clients to provide customers with access to surcharge-free ATMs. Banks do not have to be customers of CSI to join. This group of community banks is using the alliance as a “strength in numbers” approach to their big bank competitors. Although some CSI customers own dozens of ATMs, the average across the CSI customer base is significantly less than the thousands of ATM locations offered by the big banks. Computer Services, Inc. (CSI) provides service and software solutions for community banks.

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Credit Union Card Loans Up 12.5% in Q4

Credit unions, with credit card loans between $33 million and $104 million, posted an average 12.5% increase in outstandings during the fourth quarter, compared to one-year ago. However, the number of active accounts was flat year-over-year, with some credit unions reporting a 4% to 5% decline. According to CardData’s quarterly survey, gross dollar volume increased 9.8% in the fourth quarter for credit unions. Max FCU in Alabama reported a 19% jump in outstandings, and a 9% increase in active accounts. Alliant CU, formerly United Airlines CU, posted a 17% increase in outstandings, but actives slipped more than 5%. Randolph Brooks FCU, the largest credit union in the peer group, posted a 9.5% gain in outstandings. For complete details on fourth quarter performance visit CardData ([www.carddata.com][1]).

4Q/04 CREDIT UNION PERFORMANCE
ISSUER OUTS VOL ACTIVES
Randolph Brooks FCU + 9.5% +10.8% +1.9%
Alliant CU +16.6% +11.1% -5.2%
Anheuser-Busch Emp CU +13.2% +14.2% +2.3%
Max FCU +18.9% + 3.7% +9.0%
Sikorsky CU + 6.5% + 2.3% -4.5%
Group Average +12.5% + 9.8% +0.3%
Source: CardData (www.carddata.com)

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

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CMS Endorses Peppercoin Micropayments

Micropayments specialist, Peppercoin, got a big push today as Chase Merchant Services agreed to recommend the small-dollar transaction service. The “Peppercoin Small Transaction Suite” provides a transparent and scalable interface that easily integrates into existing payments networks. Peppercoin accepts preferred credit and debit cards and complies with the rules and regulations of the credit card associations to securely support a variety of business models. The Company targets digital, mobile and physical POS merchants with its service.

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MasterCard Tackles Tsunami Phishing

MasterCard and NameProtect have found 133 potential tsunami-related phishing sites that the federal law enforcement agencies are now investigating. Both companies are volunteering their services to help stop scam artists from stealing tsunami donations. In June 2004, MasterCard and NameProtect united to aggressively combat illegal online activities such as phishing, identity theft schemes and the brokering of illegally obtained credit card numbers in the online environment. The partnership calls for the companies to work together to identify sites established solely to steal personal information and then squash illegal activity before people’s accounts and information are compromised.

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Payment Rate Rebounds in November by 3%

After dipping sharply in October, monthly payment rates on asset-backed credit card bonds rebounded nicely in November. Payment rates, the amount that cardholders pay toward outstandings each month, set an all-time high in August, and remain more than 180 basis points above year ago levels. According to FitchRatings, the monthly payment rate for November among prime issuers was 17.09%, compared to 16.67% in the prior month, and 15.27% one-year ago. Moody’s reported this week that the monthly payment rate for November was 16.41% compared 14.63% one-year ago. Standard & Poor’s reported last month, that October’s MPR was 17.1%, compared to 16.9% for October 2003.

MONTHLY PAYMENT RATES
(Prime Credit Card-Backed ABS)
Nov 03: 15.27%
Jun 04: 17.28%
Jul 04: 17.33%
Aug 04: 17.56%
Sep 04: 17.22%
Oct 04: 16.67%
Nov 04: 17.09%
Source: FitchRatings

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SmartPay Acquires DT Intrinsic Technology

SmartPay Jieyin has entered into an agreement to acquire DT
Intrinsic Technology, a firm that provides billing and service management software platforms to Chinese mobile carriers. Intrinsic was one of the earliest innovators in China’s wireless industry
and a driving force in the development of the value-added services market. Intrinsic’s core competence is in the areas of service provisioning, system maintenance and implementation. The Intrinsic platform will strengthen SmartPay’s position with mobile operator merchants and adds billing, systems integration and service management capabilities. SmartPay works with over 15 Chinese banks and numerous merchants including 10 of China’s largest mobile telecom operators and is China’s clear leader in processing payments originating from
mobile phone subscribers.

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Bankruptcy Filings Drop 11% in November

Bankruptcy filings during November declined more than 11% over year ago levels. Overall, bankruptcy filings are down more than 4% year-to-date. During November, 116,952 filings were made compared to 131,921 for November 2003. Year-to-date bankruptcy filings were 1.4 million. During the 12-month period ending September 30th, there were 1,618,987 bankruptcies filed, down from the 1,661,996 bankruptcy cases filed in fiscal year 2003. During the third quarter, there were 396,438 consumer and business bankruptcy filings, a decline of more than 4% over 3Q/03, and down nearly 6% from the previous quarter. The decline for the first nine months of this year is the first drop in consumer bankruptcy filings since 2000.

Monthly Filings Historical
Nov 03: 131,921
Dec 03: 113,383
Jan 04: 114,737
Feb 04: 124,719
Mar 04: 152,567
Apr 04: 145,543
May 04: 136,509
Jun 04: 127,742
Jul 04: 133,390
Aug 04: 125,783
Sep 04: 127,664
Oct 04: 133,404
Nov 04: 116,952
Source: CardData (www.carddata.com)

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