AmEx vs Associations

American Express’ Chairman/CEO yesterday repeated that taking private legal action against VISA and MasterCard because of their bylaws, which prevent banks from working with AmEx, is a “viable option.” Kenneth Chenault said the profits lost by AmEx, as a result of being prevented from working with U.S. banks, have been significant. AmEx said it clearly has a strategic and financial interest in the outcome of the DOJ lawsuit against the card associations. Chenault accused VISA and MasterCard of taking actions that are not always in the interest of their full membership. He said the substantial co-brand subsidies the associations make to a few of their large players to support sports leagues and other co-brand partners, produce no direct benefit to the majority of association members. Chenault also said VISA and MasterCard have failed to provide their members with competitive flexibility. He said they respond by looking out for their own interests first, and they do this by restricting the ability of their members to openly compete across all fronts. Chenault also commented on the recent debit card settlement. He said the large settlement checks VISA and Mastercard have agreed to write, get drawn on their members and that some members are already raising a flag on how these costs will get apportioned. He said all bankcard issuers will ultimately pay for the restrictive practices and pricing policies of the associations, even though most members have no direct management control.

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Experian & PromiseMark

Experian Consumer Direct has acquired VA-based PromiseMark, a developer of Internet-based consumer protection and recovery services for consumers who have been victimized by identity theft, viruses, data loss or hacking. PromiseMark offers its customers a suite of unique identity theft solutions. Its fraud resolution agents are trained to quickly handle identity-theft issues that would normally take a victim two years and 200 hours to resolve on their own. PromiseMark also affords coverage to victims for their financial losses up to $50,000 in the event it cannot remedy all of the damage and recover all of the customer’s losses.

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MasterCard USA 1Q/03

MasterCard yesterday reported first quarter gross dollar volume of $146.7 billion in the USA, a 10.3% gain over 1Q/02. Credit card volume was up 10.4% to $117.2 billion, while off-line debit card volume grew 10.1% to $29.4 billion. The GDV increase was driven by a solid 12.3% gain in credit card purchase volume, and a 20.7% gain in debit card purchase volume. The number of cash transactions on both credit and debit cards declined 5.3% and 1.1%, respectively. The number of MasterCard credit cards issued in the USA was up 10.6% to 264.7 million, and outstanding balances reached $278 billion, a 13.2% increase over the same period in 2002. The number of debit MasterCard cards issued rose 15% to 50.5 million. For complete details on MasterCard’s 1Q/03 performance visit CardData ([www.carddata.com][1]).

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

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OPEN-LIMIT & T-SYSTEMS

OPENLiMiT Holding AG and T-Systems International GmbH have signed an agreement, making OPENLiMiT a global value-added reseller for products and services of T-Systems in the area of “E4NetKey Smartcards” operated with the OPENLiMiT software. As part of the agreement, T-Systems will also be providing PKI services to OPENLiMiT and its customers. T-Systems is a German based company and a division of Deutsche Telekom. OPENLiMiT, a Swiss based company, is a wholly owned subsidiary of Jure Holdings.

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HP FRONT OFFICE

HP has launched the “Next Generation Front Office” initiative, which enables banks to act as sales organizations to their customers and increase performance and revenue streams, while reducing costs by up to 50%. HP also announced that Luottokunta, Finland’s leading credit institution, needed to renew its current hardware and software infrastructure to diversify its services, to enhance its service levels and to be prepared for the introduction of EMV (Europay, MasterCard, Visa) smart cards by the year 2005. HP was chosen to supply a Unix-based high-availability “Superdome” server environment, to replace its current mainframe architecture. The IT infrastructure, which requires very high availability, includes “Oracle9i” database and Oracle’s “Real Application Cluster” solution.

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Patriot Act

The US Department of Treasury has issued the final rules implementing “Section 326” of the USA Patriot Act. Under “Section 326,” banks, insurance companies, credit card companies, money service businesses, mutual funds, broker dealers, casinos, must take steps to verify the identity of account holders and to eliminate financial transactions and flows of money to terrorist organizations. The new regulations call for these institutions to compare the names of new account applicants against lists of known terrorists and/or terrorist organizations, verify and confirm the identity of the account holder and maintain related records. Failure to comply with the law carries the threat of daily penalties as well as potential jail time. Boards of directors must approve and monitor such compliance programs, and bank examiners must audit such programs. The Treasury Department has issued final regulations for the Patriot Act now in effect, but they have given a grace period until October 1, 2003, to allow financial institutions to amend internal processes to meet the new mandates.

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AMEX AEROPLAN

American Express Bank of Canada has been selected as the winning bidder to partner with Air Canada to offer “Aeroplan” frequent flyer points to its holders. Under the terms of the deal, “Aeroplan” will become a partner in American Express’ “Membership Rewards” program and the two companies will work together to develop a range of co-branded charge cards for consumers and corporations. The deal is subject to definitive agreements and approval of the court overseeing Air Canada’s restructuring. CIBC has been the exclusive credit card partner of Air Canada in Canada. Last month, Air Canada and CIBC agreed to extend their “Aeroplan” air miles contract from 2009 to 2013. Under terms of the deal, CIBC agreed to boost its prepayment to Air Canada for air miles from $200 million to $350 million, and agreed to pay Air Canada a 19% more per “Aeroplan” mile. CIBC also agreed to share the program with another credit card issuer.

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Skypay

WA-based Intermec Technologies has introduced new wireless credit card authorization software. “Skypay” combines turnkey payment processing and settlement services with application software and mobile equipment, including ‘Intermec 700 Series” mobile computers and “782” work board printers with integrated magnetic stripe readers. The software also supports payment by cash or check. Fifth Third Bank Processing Solutions is providing “Skypay’s” credit card authorization and settlement services. Fifth Third is is providing settlement on all “Skypay” transactions within 72 hours. Intermec Technologies Corp. is a unit of UNOVA Inc.

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The Globe 100

Pegasystems has been named for the first time to The Boston Globe’s annual edition of “The Globe 100,” which ranks the best-performing publicly held companies based in Massachusetts. The Globe describes its list as a compilation of ‘The Best of Massachusetts Business’ and ‘The Most Enduring Companies.’ Pegasystems was one of only nine first-time members to the Globe 100, achieving the rank of 63 based on such criteria as return on average equity and one-year percentage change in revenue and profit margin.

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Adams on NetBank Board

Atlanta-based NetBank has named Eula Adams, former senior EVP of First Data, to its board of directors. The board, made up of 11 directorys, recommended Adams as a candidate after completing a candidate search and preliminary interview process. The company’s full board voted unanimously to approve his appointment, citing his extensive background in financial services and his experience as a certified public accountant.

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GEMPLUS S-TRAVEL

Gemplus has been selected to supply smart card technology to the “S-Travel” initiative sponsored by the EC and the Swiss Office for Education and Science. The “S-Travel” initiative, aims at defining and developing international security standards and procedures based on smart cards and biometrics to better identify frequent travelers. The program is scheduled to pilot in 2003/2004. The “S-Travel” initiative will combine digital certificates, smart card solutions, and biometrics technology integration.

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