Rate Hike Primarily Affects Refinancing Activity

While it is very likely the Feds will raise rates by 50 basis points in the next two weeks, the impact will largely affect refinancing activity, home prices, and collateral performance in the mortgage sector. Credit card issuers, blessed with lower funding costs over the past three years, will largely have to absorb the first wave of increases, but will recoup the impact by passing the rate increases to consumers over the summer. Some issuers recently switched from fixed rates to variable rates in anticipation of the increases. Discover switched its standard purchase rate from a fixed 16.99% to prime +12.99%, effective April 1st. Effective June 1st, American Express changed its default interest rate from a fixed 23.99% to prime +21.99%. A handful of VISA and MasterCard issuers have rejiggered punitive interest rates from fixed to variable, and have adjusted the effective dates of the prime rate. MBNA recently noted in its SEC filings that a 100 basis point increase in interest rates could reduce net income by $67 million for the year. MBNA said it could offset its costs by raising interest rates for cardholders but the company noted there is a lag of about 45 days before rate hikes takes effect upon cardholders. Fitch said yesterday it remains cautious in its near-term outlook for subprime credit card ABS. Higher rates may put pressure on subprime borrowers to reload available credit lines undermining stable to improving collateral performance. Notwithstanding, Fitch believes excess spread levels in the credit card sector, can absorb higher rates, though a rate increase may cause some spread compression for some issuers in the subprime segment.

[Click Here To View The Notice of Amendment to the Discover Cardmemeber Agreement In PDF Format][1]

[1]: http://www.cardweb.com/cardflash/2004/june/discover.pdf

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VISA Finds E-Payments Drive Canada’s Economic Growth

VISA Canada released a report this week that shows electronic payments contributed $C107 billion to the Canadian economy since 1983, accounting for nearly 25% of Canada’s cumulative economic growth. The study found a strong link between payment system efficiencies and economic growth. Merchants and financial institutions can process and settle transactions more efficiently, reliably, and securely in an electronic payment system, thanks to lower payment system and infrastructure costs and greater economies of scale. Visa is the leading payment brand in the world. Global Insight, Inc. provides the most comprehensive economic coverage of countries, regions and industries available.

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An Online Biometric Payment Portal Planned

Secured Digital Applications this week announced plans to conduct a field trial of an online biometric payment portal during the second half of 2004, with initial deployment of the portal in the Malaysian and Singapore markets. After successfully implementing the payment portal for the Asia-Pacific region, the Company intends to introduce a similar portal for the North American market. Secured Digital Applications, Inc. (formerly known as Digital Broadband Networks, Inc.) and its subsidiaries are involved in the development, integration and provision of secured shipping and supply chain management service, sale of biometrics security systems and the development of Web based interactive multimedia content.

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Direct Response Inks Another Hispanic Deal

Los Angeles-based Direct Response Financial Services has inked a deal with PromoConnect USA to sell stored value cards to the U.S. Hispanic population. PCUSA has an existing national sales force reaching into Hispanic communities throughout the United States. The PCUSA sales teams are specially trained in understanding and reaching the Hispanic market. PCUSA has recently been successful in offering stored value credit cards on behalf of one of the largest U.S. banks where PCUSA quadrupled the number of stored value card sales for their banking customer over the previous year. Direct Response Financial Services Inc. makes it easier, faster and more secure for people and businesses to buy goods and services, using virtually any form of payment: credit, debit, smart card, stored-value card, electronic check at the point-of-sale, or over the Internet. PromoConnect USA Inc. is a privately-held Nevada corporation with offices in California, Texas, Oklahoma, Arizona, Nevada, Illinois and New York.

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Fiserv’s PDQ has a PDQ Start

Fiserv reports that its out-of-the-box payroll solution, called “PDQ,” has signed 12 financial institutions, including Charter Bank in Bellevue, WA, and United Bank in El Paso, TX in the last 30 days. Fiserv began marketing PDQ via its account management and sales teams to financial institutions and payroll processors in late April and early May – in an effort to address the burgeoning payroll debit card market, according to Frank Smeal, President of the Fiserv division that handles bank outsourcing services. Fiserv, Inc. provides industry leading information management systems and services to the financial industry, including transaction processing, outsourcing, business process outsourcing and software and systems solutions.

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TRM Acquires Canada’s Mighty Cash ATM Network

Portland, OR-based TRM has acquired Canada’s Mighty Cash Financial ATM network, marking its entry into the Canadian ATM market. Through purchase of all outstanding shares of Mighty Cash, TRM’s Canadian network consists of 72 ATM locations comprised primarily of merchant-owned programs. TRM Corporation is a consumer services company that has provided convenience banking (ATM) and photocopying services for more than 20 years.

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Prepaid Tickets to Access Discover’s Network

Discover and Utix have partnered to enable consumers to redeem prepaid cards for rounds of golf, visits to day spas, or days at the slopes in the form of a prepaid gift ticket at thousands of venues across the country. The new suite of Utix prepaid products is one of the first designed under the exclusive partnership agreement between Discover and WildCard Systems, and are accepted throughout the Discover/NOVUS Network. The Discover/NOVUS acceptance mark will be present on the back of all “Universal Golf” and “Universal Spa” prepaid gift cards. In addition, a directory of participating venues will accompany each prepaid card. The first of the new prepaid “Universal Golf” and “Universal Spa” tickets will be available to the corporate premium industry this month. The retail product, “Giftix,” will be available to consumers at national retailers by the fall of this year.

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JCB International Signs Major Deal in Hong Kong

Hang Seng Bank and JCB International have teamed to launch the “HANG SENG/JCB Standard Card and the “HANG SENG/JCB Gold Card” in Hong Kong. The new cards offer privileged access to restaurants, hotels, theme parks, and golf courses, plus exclusive VIP airport lounge service in Tokyo, Osaka and other major cities in Japan. Cardholders can also access privileges offered at JCB Plazas, according to this week’s issue of CardFlash International. Hang Seng and JCB say that in the months ahead discount packages for travel to Japan and other valued-added programs for the new cards will be introduced. JCB opened its first overseas representative office in Hong Kong in 1981, and also issued the first JCB credit card outside Japan in Hong Kong in 1985. Hang Seng Bank operates 159 branches in Hong Kong.

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Fair Isaac Launches ID Theft Protection Programs

Fair Isaac’s myFICO.com has launched a line of products and services for consumer identity theft and credit protection. The new “myFICO Identity Theft Security” comes in a “Standard” version for $1.95 per month, a “Deluxe” edition for $4.95 per month, and a “Premium” version to be released later this year. The “Standard” version constantly monitors over 400 sources of public data for subtle changes to a borrower’s personal information and includes identity theft insurance and a toll-free help line with personal assistance. The “Deluxe” version adds quarterly monitoring of the consumer’s “FICO” credit score. The “myFICO Identity Theft Security Premium” program will soon be available through certain bank partners and on the myFICO.com Web site later this year. The “Premium” product gives consumers all the benefits of the “Deluxe” product, but with the added strength of Fair Isaac’s “Falcon Fraud Manager.” Falcon minimizes fraud losses by detecting fraudulent card transactions in real time, then instantaneously alerting the customer.

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JCB HANG SENG CARD

Hang Seng Bank and JCB International have teamed to launch the “HANG SENG/JCB Standard Card and the “HANG SENG/JCB Gold Card” in Hong Kong. The new cards offer privileged access to restaurants, hotels, theme parks, and golf courses, plus exclusive VIP airport lounge service in Tokyo, Osaka and other major cities in Japan. Cardholders can also access privileges offered at JCB Plazas. Hang Seng and JCB say that in the months ahead discount packages for travel to Japan and other valued-added programs for the new cards will be introduced. JCB opened its first overseas representative office in Hong Kong in 1981, and also issued the first JCB credit card outside Japan in Hong Kong in 1985. Hang Seng Bank operates 159 branches and automated banking centres in Hong Kong.

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Deutsche Bank to Offer AmEx Corporate Cards

Deutsche Bank and American Express this week inked an accord to launch a jointly branded “American Express Corporate Card” and “Business Travel Account” program. The product will be distributed by Deutsche Bank to its corporate customers in Germany and their selected subsidiaries worldwide, according to this week’s issue of CardFlash International. The combined program provides companies with a flexible payment solution for their employees and is designed to help corporate customers to better manage their travel and entertainment expenses and identify opportunities for cost savings. Earlier this year, Deutsche Bank agreed to issue American Express corporate cards to its own 66,900 employees. The expense management solution will be available to Deutsche Bank corporate customers in July.

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