TRUSTED VISA

Reader’s Digest Canada announced that VISA has ranked at the most “Trusted Brand” in credit cards. Respondents to the national survey were asked to name the brand they most trusted in 35 product categories and then to rate the brand’s performance in five key areas: quality, innovation, customer service, advertising and value for money. In the “Bank/Trust Company” category, it was a tie between RBC Financial Group and TD Canada Trust. Almost one-third of Canadians polled in the survey strongly agreed with the statement “It is more difficult to trust products and brands today than it was twenty years ago.”

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Online Behavior

Nearly 60 million Americans sought loan, credit card, insurance and investment information online last year. Of this total, 63%, or 36.8 million, followed up by applying offline for loans, credit cards, and insurance or investment products, compared to only 21.8 million who applied for similar products online. The data were developed from a survey conducted by Milwaukee-based The Dieringer Research Group, which compared the online and offline behaviors of 4,000 U.S. adults. About 24 million consumers sought product information for credit cards and investment purposes. Dieringer says financial service consumers who use the Internet as a shopping tool are about 70% more likely to apply for services offline than online. Although the demographic and life stage characteristics of online financial service shoppers varied significantly by the types of products sought, the survey found surprisingly little difference between shoppers who applied online or those who applied offline.

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Diebold VSAT

Diebold has inked a deal to offer always-on broadband connectivity with its ATMs, thus becoming the first ATM manufacturer to provide this service to financial institutions. Under a contract with Spacenet, Diebold will become an authorized channel partner of Spacenet’s “Connexstar” business-grade satellite broadband service. In addition, Diebold’s adoption of Spacenet’s broadband VSAT technology enables it to incorporate a variety of advanced emerging applications into their ATM and other transaction platforms. Using “Connexstar’s” high-speed, multicast-enabled Internet connection, devices will be able to support ticket ordering, video and multimedia content delivery, and Internet access. Spacenet is the US subsidiary of the Israeli firm Gilat Satellite Networks. Gilat has deployed 400,000 VSATs globally.

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GEMPLUS 4Q/02

Gemplus reported a fourth quarter operating loss, excluding extraordinary costs, of 16.6 million euros, a 43.5% decline from 4Q/01. For the year 2002, Gemplus posted a net loss of 320.9 million euros compared to 100.2 million euros for 2001. Net loss for 4Q/02 was 96.8 million euros compared to 38.6 million euros for 3Q/02. However, operating expenses for 4Q/02 were down 24.3% due to restructuring. Net income for the fourth quarter was affected by a provision for restructuring (19.3 million euros), foreign exchange losses (11.6 million euros), deferred tax assets write-down (41.4 million euros) and goodwill write-off (6.4 million euros). Contactless card revenues were down 3.2% compared to the third quarter, because of lower shipments which were down 2.9%. Gemplus says pricing pressure remains substantial, but eased during the fourth quarter in Europe and in the Americas. The smart card manufacturer says there is still a need to further reduce costs. Gemplus said it could not provide any guidance for 2003 due to uncertainty as to costs and revenues.

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MC SMART CARDS

MasterCard International reported that smart card issuance in the Asia/Pacific region doubled last year. At the end of 2002, there were more than 8.0 million smart cards in the region, compared to 3.8 million in 2001. Globally, more than 127 million MasterCard smart cards have been issued, a growth of 7% in year 2002, as compared to 2001. Therefore, Asia/Pacific’s share of the number of MasterCard smart cards worldwide grew from 3.3% to 6.3% in year 2002. MasterCard says that working with KeyCorp Limited, it has brought down the price of its 16K multi-application MULTOS card to US$1.99. The card contains the MasterCard “M/Chip” credit/debit application, “Mondex” e-cash, PKI file storage and PKI identification applications in the ROM portion of the chip. MC has slated 2006 as the year for which most cards in Asia/Pacific will be migrated to chip cards.

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T.G.I. Fridays & Fifth Third

Carlson Restaurants Worldwide/T.G.I. Fridays has selected Fifth Third Bank Processing Solutions as their endorsed credit card processor. Fifth Third Bank processes 8.2 billion ATM and POS transactions per year for more than 180,000 retail locations and financial institutions worldwide, including The Kroger Co., Abercrombie & Fitch, Nordstrom, Inc. and The Finish Line. Fifth Third processes $83 billion in credit card sales annually. Fifth Third Bank has recently moved from the eighth largest bank acquirer to the fifth largest bank acquirer according to The Nilson Report (February, 2002).

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HOME CAPITAL 4Q/02

Home Capital reported this week that its consumer lending unit had
22,265 VISA cardholder accounts with receivables of $16.2 million at EOY
2002. The gross credit card receivable balance is comprised of $10.0
million in accounts secured by cash deposits or mortgage collateral and
$6.6 million in
unsecured accounts. The total credit approved is comprised of $17.0 million
in secured and $9.5 million in unsecured credit lines. The recent
introduction of the secured “Equity Plus VISA” product has pulled in 208
accounts and receivables of $4.0 million at year-end. The Company’s
strategy of focusing on credit cards secured by cash deposits or home
equity is illustrated by the increase of secured loans to 60.2% of the
credit card receivables as compared to 28.4% at the end of 2001. In
November, Home Trust announced a further expansion of its partnership with
First Data through which Home Trust will offer VISA credit card acceptance
services to Canadian merchants beginning in the first quarter of this year.

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MC UK Fees

The UK Office of Fair Trading has notified MasterCard that its interchange fee is an “unjustifiably high fee” and an “infringement of the Competition Act” unless MasterCard can provide a cost-justification for the fee. The bold move mirrors the action recently taken in Australia, whereby the Reserve Bank of Australia is cutting credit card merchant fees by 40%. The OFT is unofficially looking for MasterCard to cut the interchange fee from 110 basis points to 70 basis points. VISA is not part of the current OFT investigation. However, VISA agreed with the European Commission last summer to reduce the rate of cross-border interchange by 27%, to 70 basis points, by 2007. Interchange fees in the UK produce about $1.3 billion in revenue according to the RAM Research Group. MasterCard has about a 32% share of the UK market. The British Retail Consortium, originally complained to the OFT about the fees in 2000 and reportedly welcomed the OFT ruling. MasterCard has eight weeks to respond to the OFT. In August, the Reserve Bank of Australia released its final reforms on credit card programs which included dropping average interchange fees by 40% and lifting the restriction imposed by credit card programs which prevent merchants from recovering from cardholders the costs of accepting credit cards. Under the new RBA rules, interchange fees will decrease from around 95 basis points to approximately 55-60 basis points by July 1st of this year. (CF Library 8/27/03; 1/14/03)

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