South Korea Problems

The South Korean government yesterday announced it will relax regulations on credit card issuers and may even buy bad debt from issuers to help issuers survive. The Korean payment card industry has been hit with high loss rates and an accounting scandal at SK Group which has forced credit card-backed bond yields to surge. Card payments 30+ days overdue increased 23% to 8 trillion won in January from 6.5 trillion won in December. Credit card issuers lost a total of 261.6 billion won in 2002. In January, credit card losses topped 412.8 billion won, nearly double all of 2002’s losses. To deal with the rising delinquency problem, the South Korean government says it will extend the maximum maturity date of the loans provided to delinquent credit-card users from the current 1 to 3 years to 5 years. The Ministry of Finance and Economy, the Financial Supervisory Service, and the Bank of Korea said credit card issuers will also require credit card companies to reduce operating expenses and boost capital. Some card issuers have indicated they will reduce grace periods from 40 days to 25 days, and drop zero percent interest rate offers. The FSS says eight card companies have plans to raise about 2 trillion won through rights offerings, or by issuing subordinated bonds. However, the Korea Non-Bank Financing Association said some card issuers might still face bankruptcy.

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Cap One & AARP

An age discrimination lawsuit filed against Capital One has been expanded and has been joined by the AARP. The suit, which involves as many as 60 former employees, alleges that Capital One instituted a plan of forced separation that was unfair to employees age 40 and older. A motion filed late last week in U.S. District Court in Richmond, Virginia expanded the period covered in the suit from Oct. 1, 2001, to the present. The lawsuit formerly covered the period between Oct. 1, 2001, and Sept. 30, 2002. The lawsuit is seeking class action status. VA-based Butler, Williams, Pantele & Skilling has been joined by the AARP in representing the plaintiffs. Capital One reportedly said the firings were “performance related.” In February, Capital One was ranked in Fortune’s listing of the “100 Best Companies to Work for in America,” for the fourth year in a row. Capital One was also recognized as one of the top “25 Best Places to Work for Women.” The credit card issuer has more than 20,000 employees worldwide.

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Internet Gambling

The Senate Banking Committee is holding hearings this morning on Internet gambling. Legislation previously introduced in the Senate (S. 627) and in the House (H.R. 21) contains core provisions that establish a workable framework for combating illegal Internet gambling. MasterCard said Monday strongly supports appropriate measures to combat illegal Internet gambling. In July 1999, MasterCard announced it would voluntarily develop rules to enable its member banks to prevent the use of MasterCard-branded cards in connection with Internet gambling transactions. The MasterCard rules require that, in order for a merchant to seek payment authorization in connection with an Internet gambling transaction, the merchant must code the authorization request to indicate that the transaction is an Internet gambling transaction. Merchants who will not abide by these rules are not permitted to accept MasterCard cards. As a result, the GAO says some Internet casino operators now estimate that four out of every five requests for credit card payments are denied.

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Cyota Japan

Japan’s UFJ Card has selected Cyota to provide the “Verified by Visa” Internet payment security service for its seven million cardholders. UFJ Card’s “VbV” program is the first large scale commercial implementations of VISA’s new program in Japan. UFJ Card is the card division of UFJ Bank, created through the merger of Sanwa bank and Tokai bank. UFJ’s service is provided through Intelligent Wave, Cyota’s partner in Japan. Triangle Technologies, which has helped form numerous strategic alliances in Japan for its clients, assisted in signing the distribution agreement between Cyota and Intelligent Wave. Cyota’s “SecureSuite” has already been implemented by seven of the world’s largest issuers, and is available as a hosted or non-hosted solution.

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SMART PC

Wave Systems has developed a Packard Bell personal computer imbedded with its “EMBASSY” chip and “Wave TrustEdge” smart card reader to provide advanced financial services for European consumers. When the “EMBASSY” system secures a device such as a personal computer, personal information such as credit card numbers, PIN numbers and other end-user secrets are easily accessed by users, but protected from theft by intruders.
Packard Bell brand personal computers enabled with “EMBASSY” secure technology are available in Europe from selected retailers.

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DINERS CLUB

Diners Club has launched a new Web site to reach the Canadian news media. The new site will focus on information relating to the “Diners Club Maple Leaf Club Card,” “Gold Card,” and “Silver Card.” Diners Club says industry analysts have found that its average annual charge volume is 60% higher than its closest competitor. In 2002, Diners Club served more than 8 million cardholders who charged over US$29 billion. Diners Club is a member of Citigroup and, in Canada, a division of Citibank Canada.

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CardAlert

Computer Sciences Corporation has unveiled a suite of new software products, based on 724 Solutions technology, that automate the way card issuers notify customers about suspicious activity, balances, payment due dates, late payments and credit limits. CSC’s new products include “Hogan BankAlert” and “CAMS II CardAlert.” “Hogan BankAlert” notifies customers of deposit and loan account activities such as overdrafts, loan due dates and payroll deposits. “CAMS II CardAlert” alerts customers about credit card conditions such as bill due dates and over-limit balances. CSC can host and manage the applications through CSC’s “eHub” facilities, enabling firms to avoid additional up-front information technology investments. To complement these product solutions, CSC is offering two 724 Solutions products designed to reduce costs associated with card fraud and debt collection. “724 Solutions Fraud Reduction” automates the process of verifying suspicious credit and debit card activity. “724 Solutions Collection Alerts” automates the process of contacting customers for collection of past-due debt.

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SMART LABELS

Royal Philips Electronics has teamed with LAB ID and Psion Teklogix to provide Benetton with RFID item level tagging technology. Benetton says this new technology will be employed at the point of sale, automatically registering sales and returns and feeding information back into the company’s ordering system. Clothes produced under Benetton’s core brand “Sisley” have been fitted with RFID-enabled labels based on Philips’ I.CODE semiconductor technology. Philips teamed with LAB ID and Psion Teklogix to produce the smart labels system. Philips says it expects to ship 15 million “I.CODE ICs” to Benetton this year. Philips’ I.CODE ICs enable a highly automated scanning process that does not require line of sight and can scan multiple items at once. This means that a box containing a variety of garments in different styles, colors and sizes, which traditionally would have been unpacked and checked by hand, can be scanned in one go and the information uploaded directly into the company’s main computer system. In store, Benetton will use RFID technology in smart shelves and in dressing rooms to highlight where individual garments are located.

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