Card Issuing Expenses to Top $92 Billion

Total expenses for the issuing side of the prime bank credit card business in the USA is projected to be $92.1 billion this year. With total estimated 2003 income of $119.5 billion, the industry will generate a pre-tax profit of about $27.4 billion or a 4.25% ROA. Based on data gathered by R.K. Hammer Investment Bankers, based in Thousand Oaks, CA, the industry ROA will rise about 5 basis points from 2002. Hammer says the rise in operating expenses and charge offs would have impacted P/L this year but the cost of funds, blended, and continuously declining, have saved issuers again from a decline in P/L impact. Of the $92.1 billion in total expenses: $25.8 billion or 28%, is the blended cost of funds; $31.3 billion or 34% is operating expenses; and, $35.0 billion or 38%, is charge-offs.

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Equifax Consumer Direct Revenues Double

Atlanta-based Equifax reported that its Consumer Direct revenues for the second quarter doubled over the prior year. The direct sale of credit bureau reports and related services to consumers has produced $32.2 million in revenues since the start of this year, compared to $16.5 million in the first six months of 2002. During 2Q/03, Equifax generated $17.4 million in Consumer Direct revenues compared to $8.7 million one year ago, and $14.8 million in the prior quarter. During the second quarter, Equifax introduced “Credit Watch Gold” and “Credit Watch Silver” to U.S. consumers. Experian Consumer Direct’s Internet properties include ConsumerInfo.com, FreeCreditReport.com, CreditExpert.com, Qspace.com, GetMyReport.com and CreditMatters.com. The Web sites receive more than 9 million visitors monthly. For complete details on Equifax’s second quarter performance visit CardData ([www.carddata.com][1]). (CF Library 6/12/03)

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

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Walmart.com Goes with Certegy’s PayNet

Walmart.com has inked an agreement with Certegy for full check warranty and electronic check processing services. Walmart.com has become one of the first mass retailers online to allow customers to make purchases over the Internet using their checking accounts. Certegy’s “PayNet” platform is designed specifically to manage consumer-not-present transactions. The service went live this month. Forrester Research predicts that Internet sales will increase by 26% this year to $96 billion.

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VISA Smart Cards Dip Below $2 Each

A new smart card product costing $1.98 each has been launched under the “VISA Smart Breakthrough Card” program. This morning, Philips Semiconductors and VISA announced the “GP-Entry” card which conforms to the “GlobalPlatform” specifications and has 8K of EEPROM memory and a VISA payment application that supports major authentication technologies, such as “Static Data Authentication” and “Dynamic Data Authentication.” There are currently nine card products in the “VISA Smart Breakthrough Card” program, supporting DES and PK security with a variety of ROM and EEPROM memory sizes. Prices range from $1.98 for a “GP-Entry” card to $3.47 for a dual interface card also supporting DDA with 16K of EEPROM. Additionally, the program includes a static/native card priced at less than a dollar. All prices are based on white plastic cost and include the “VISA Smart Debit/Credit” application in ROM. The program also provides a “Custom Mask” process whereby the required applets for a market specific requirement are stored in ROM. VISA says that of the 60 million VISA EMV cards issued to-date, 22 million cards have been issued under the “VISA Smart Breakthrough Card program.”

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Widener University Joins CampusMate Program

PA-based Widener University has joined Bank Rhode Island’s “CampusMate” program to offer its 6,700 students a full range of campus payment processing services, from tuition budgeting to the “Campus1Card.” Its custom-built technology enables parents and students to pay college expenses by telephone, the Web, or through the mail using a credit card, debit card, or electronic or paper check. Because it is custom-tailored for each client, CampusMate can “plug in” to different computer systems within a university. The Bank now has four major colleges and universities enrolled in its CampusMate program, Rhode Island School of Design, Johnson & Wales University, and the University of Rhode Island.

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People’s Bank Card Credit Quality Improves

People’s Bank reported Friday that its average managed credit card portfolio grew $123 million, or 6% during the second quarter. Managed credit card net charge-offs declined $15.4 million, or 34%, since the second quarter of 2002, while the net charge-off rate improved 297 basis points to 5.75%. Managed credit card delinquencies declined $22.2 million, or 24%, with the delinquency percentage improving 151 basis points to 3.16%. For complete details on People’s second quarter performance visit CardData ([www.carddata.com][1]).

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

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VIRGIN ISLAND CARD

The British Virgin Islands Tourist Board and American Express have inked an agreement designating American Express the “Official Card of the British Virgin Islands.” The British Virgin Islands is comprised of over 60 islands, including Tortola, Virgin Gorda, Anegada, and Jost Van Dyke. “The Official Card Program” combines the company’s commitment to providing customers with lifestyle choices by promoting its relationships with hotels, restaurants, retailers and other merchants operating in the British Virgin Islands.

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Card Surcharges Impact Card Volume

Card volume in Australia has slowed since the adoption of credit card reforms this year, which permits merchants to surcharge customers for credit card transactions. According to data released by the Reserve Bank of Australia, Australians charged $11.7 billion during May, a weak 4.5% increase over the previous year. By comparison, credit card volume between May 2001 and May 2002 increased 41.3%, nearly ten times the current growth rate. Other data released today shows that Australians now owe a record $24 billion in credit card debt, a 12.7% increase over May 2002. Of the $11.7 billion in May card transactions, $10.8 billion were purchase transactions.

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NETePay Certified by FDMS

Datacap Systems announced the certification of First Data Merchant Services’ “North Platform with NETePay.” NETePay uses the Internet to obtain 2 second authorizations through FDMS processing hosts. The IP protocol transactions are sent encrypted from the client control to NETePay via a standard Internet connection, allowing large chains to consolidate all enterprise transaction activity through a single server. Datacap’s payment interfaces allow virtually any system, regardless of operating system or hardware platform, to get easy access to payment processing networks for credit, debit, check, EBT, house charge, gift card and loyalty program processing.

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Texaco-to-Shell Card Migration Nears Completion

Shell Oil and Motiva Enterprises reported last week they have, to-date, converted 4.8 million Texaco card accounts, representing 8.8 million cardholders, to Shell cards, with approximately 1.2 million Texaco accounts to be converted. Most of the remaining Texaco cardholders will receive new Shell gasoline cards by September 2003. Shell and Motiva initiated the conversion of Texaco stations following Chevron’s merger with Texaco. Shell and Motiva are also upgrading existing Shell sites to the brand’s new global image called RVI. This new look better reflects consumers’ desire to be in a warm, modern, and welcoming environment.

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VISA VBV

VISA’s cardholder authentication service for Internet payments is now available in China. VISA Asia/Pacific says there are already 59 million Internet users in China, ranking second in the world. Among these Internet users, 33.8% or close to 20 million users have used the Internet in the past year to make a transaction or purchase. China Construction Bank is the first acquiring bank in China to offer the new VISA authentication service to online merchants. CCB expects that within the next six months, there will be more than 300 online merchants participating in this secure online payment service. Bank of China and China Merchant Bank are the first card issuers to offer “VbV” to its cardholders.

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