Circuit City Completes its Exit from the Card Biz

Circuit City Stores confirmed it has closed the sale of its private-label credit card operation, which included both its private-label Circuit City credit card accounts and its co-branded “Circuit City Plus VISA” credit card accounts, to Bank One. On the sale date of May 25th, the private-label operation included receivables and related cash reserves of approximately $1.8 billion and approximately 1.5 million active accounts. Circuit City anticipates that the net cash proceeds from the sale will total approximately $400 million and that the after-tax loss on the sale will total approximately $9 million. The two companies entered into a relationship in which Bank One purchased the portfolio, will offer new private-label and co-branded credit cards, and will provide credit card services to existing cardholders. The deal completes Circuit City’s exit from the card issuing business following the sale in November of its $1.5 billion VISA and MasterCard credit card portfolio to FleetBoston for $1.3 billion. (CF Library 1/21/04)

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SIBS Signs 3-Year Contract for Gemplus GemValue EMV Cards

Gemplus International has signed a contract for Portugal’s EMV migration with Sociedade Interbancária de Serviços. From May, Gemplus will provide EMV-enabled debit and credit cards to SIBS in a deal that will last 3 years and see the estimated delivery of six to eight million EMV cards. SIBS has already made its first order of 50,000 “GemValue” EMV cards from the smart card technology-based solutions provider, and production is currently underway in Gemplus’ facility. SIBS is a cooperative creation of the Portuguese banking industry.

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VISA Gains Market Share by 200bps in Q1

As in any dynamic industry, shift happens, and the first quarter for the U.S. payment card business is no exception. VISA and American Express added 200 basis points and 60 basis points to their market share, respectively, during the first three months of 2003, compared to one-year ago. The gains came at the expense of MasterCard, which lost 160 basis points, and Discover, which posted a 100 basis point decline, in the first quarter. Based on year-over-year growth of gross dollar volume, American Express reported a 19% increase and VISA posted a 17.5% gain, according to CardData ([www.carddata.com][1]). Without question, VISA’s strong growth was driven by its signature debit card business which posted a 23.6% increase in GDV. For American Express, “Membership Rewards” and its cash-back programs have been key drivers. While MasterCard posted a healthy 7.4% increase in first quarter GDV it was not enough to overcome the strong double-digit gains posted by VISA and American Express. Discover’s first quarter volume declined 7.3% between 1Q/04 and 1Q/03. (Discover’s first quarter ended 2/29/04). For complete details on the first quarter performance of the U.S. payment card networks, visit CardData ([www.carddata.com][2]).

GROSS DOLLAR VOLUME
1Q/03 1Q/04 CHANGE
VISA: $244.4b $287.2b +17.5%
MasterCard: 146.7b 157.5b + 7.4%
AmEx: 58.9b 70.1b +19.0%
Discover: 26.1b 24.2b – 7.3%
Source: CardData (www.carddata.com)

MARKET SHARE
1Q/03 1Q/04 CHANGE
VISA: 51.3% 53.3% +200 bps
MasterCard: 30.8% 29.2% -160 bps
AmEx: 12.4% 13.0% + 60 bps
Discover: 5.5% 4.5% -100 bps
Source: CardData (www.carddata.com)

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

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Maduro & Curiel’s Bank Signs with First Data/PROCESA

Maduro & Curiel’s Bank, the largest commercial bank in the Dutch Caribbean, announced it has signed a five-year processing agreement with First Data. Processing Center, S.A. (PROCESA), a company recently formed by First Data and Banco General, offers payment processing solutions, customized for the Latin American and Caribbean regions, and will service MCB’s credit and private label card needs. First Data has worked with MCB for more than 15 years providing complete merchant processing services including authorizations, settlement, interchange management, association compliance, chargeback processing and funding services for approximately 3,000 merchants from the bank’s portfolio. In addition, First Data develops and deploys a variety of front-end and merchant point of sale product solutions for transaction submission and management.
PROCESA’s operations center is located in Panama City, Panama. Maduro & Curiel’s has 150,000 debit cards and 100,000 credit cards issued.

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MasterCard Expands its CRM Expertise

MasterCard Advisors yesterday announced the acquisition of consulting firm Watch Hill Partners. Watch Hill specializes in CRM and has developed a methodology tat enables its clients to identify gaps between the business case and the consumer needs for CRM. MasterCard says Watch Hill will be integrated with its Advisors’ Customer Experience Group. The CEG has already experienced success in the CRM field. For example, a client in the banking industry wanted to change its customer experience from one driven by financial products to one aimed at being a customer’s true financial partner. Applying its methodology, CEG helped the bank retain customers and increase customer satisfaction scores by 40%. The bank increased its sales by 12% and reduced its marketing cycle time and development costs by 25%. MasterCard believes the addition of Watch Hill will bolster its CRM expertise. Brad Waugh, Watch Hill’s CEO, will serve in an executive management capacity for the CEG. In February, MasterCard Advisors acquired TowerGroup from Reuters. MasterCard’s research services currently include MasterCard Advisors and Purchase Street Research. (CF Library 2/20/04)

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Punitive APRs Up 23%, Approach 30%

Punitive interest rates, charged by the nation’s top ten card issuers, increased from an average of 23.26% in April 2001 to an average of 25.88% for last month. Providian currently assesses the highest penalty APR of 29.99%, according to CardTrak ([www.cardtrak.com][1]). However, CompuCredit’s sub-prime “Aspire VISA” assesses of delinquency APR as high as prime +36.25%, with a 41.00% minimum. Bank One charges penalty rates as high as 27.74%, even though it discloses a maximum penalty APR of 24.99% on its current applications.

CREDIT CARD PENALTY INTEREST RATES
2001 2004
1. Citibank 24.99% 27.99%
2. MBNA 19.99% 24.99%
3. Bank One 19.99% 24.99%
4. Chase 21.99% 25.99%
5. Discover 22.99% 24.99%
6. Capital One 22.40% 25.90%
7. Am Express 23.99% 23.99%
8. Bnk of Amer 24.40% 25.99%
9. HSBC/HH 23.90% 23.99%
10. Providian 27.99% 29.99%
AVG 23.26% 25.88%
Source: CardTrak (www.cardtrak.com)

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

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Oberthur Takes Over EMV Card Personalization for Sistema 4B

Sistema 4B has agreed to transfer its card personalization and fulfillment activities to Oberthur Card Systems. Sistema 4B’s personalization staff and production equipment will be folded into Oberthur Card Systems. As per the terms of the agreement, Oberthur Card Systems will manufacture and personalize the cards for all of Sistema 4B’s current customers for the next several years. Oberthur has achieved more than 100 successful EMV pilots last year, and has personalized more than 60 million EMV cards to-date.
Sistema 4B is a payment systems service company for a group of 31 member banks. The volume of cards issued by its member Banks has reached 14 million, its ATM network currently exceeds 12,500 units, and a POS network of more than 262,000 terminals has been rolled out in merchant and acceptance locations all over the country.

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UNEMBOSSED MC

The first unembossed MasterCard card program is being launched by PT. Bank Rakyat Indonesia. The new “BritAma PrimeCard MasterCard” is being launched as a debit card and will be initially made available to all existing BritAma ATM cardholders. The unembossed card can be used for signature or PIN-based purchases at merchant locations accepting the MasterCard and Maestro brands globally. The card can also be used at MasterCard/Maestro/Cirrus ATMs globally and offers domestic acceptance at more than 500 Bank BRI ATM machines and all ATMs belonging to the Link and ATM Bersama networks. Bank BRI is launching three types of “BritAma PrimeCards” – “Classic,” “Gold” and “Platinum.” Each card will be distinguished through the amount for opening deposit, minimum balance and ATM and POS transactions limits per day. The “Platinum” card offers preferential treatment at all Bank BRI branches and access to the executive airport lounges in selected cities in Indonesia. Currently, MasterCard has 2.9 million cards-in-force in Indonesia, producing $1.3 billion in gross dollar volume. In March, Croatia’s Hypo Alpe-Adria Bank launched an unembossed “MasterCard Electronic BusinessCard.”

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Hancock Merchant Services Created

MS-based Hancock Bank and First Data have teamed to form Hancock Merchant Services. First Data recently purchased controlling interest in the merchant portfolio. Hancock Bank, founded in 1899, operates 103 full-service offices and more than 140 ATMs throughout South Mississippi, Louisiana, and the Florida Panhandle. Hancock Merchant Services offer credit, debit, gift card, and point-of-sale solutions to merchants in its market footprint. First Data currently serves approximately 3.5 million merchant locations.

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TNS Acquires Synapse from USWD

VA-based TNS has acquired certain assets of U.S. Wireless Data, including the “Synapse” platform. In this acquisition TNS acquired the Synapse platform, which enables wireless point-of-sale/point-of-service transactions in existing as well as expanding vertical markets. Synapse offers wireless payment solutions for a variety of merchants including Taxi and Limousine companies, Towing services, Arts and Crafts shows, Mobile Concession and Souvenir Stands and Outdoor Markets. TNS, Inc. is one of the leading providers of business-critical, cost-effective data communications services for transaction-oriented applications.

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TNB Signs Three OK Credit Unions

Three Oklahoma credit unions have chosen Dallas-based TNB Card Services to provide full-service credit card processing to their members, including Oklahoma Educators CU, The Focus Federal CU, and Oil Capital Community CU. This partnership will allow each of these credit unions to offer their members TNB’s best-in-class products and services while building the credit union’s loan volume. Oklahoma Educators Credit Union was established in 1960 to serve educators and support personnel in Oklahoma. The Focus Federal Credit Union has two locations in Oklahoma City and one in Chickasha. Oil Capital Community Credit Union is located in Tulsa. TNB Card Services, owned and directed by credit unions since 1976, provides full-service credit and debit card processing, as well as an agent issuing solution for credit unions nationwide.

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