FRENCH EGG

London-based Egg plc reported this week it has signed up nearly 30,000
French consumers for its new “la Carte Egg VISA” card. The “Egg in France”
card was launched November 2nd. Egg says the average salary of applicants
is Euro 50,000, which is 30% higher than the French average and is
consistent with the appeal of the Egg brand to the upmarket (aged 25-49
with above average income) in the UK. Egg says its advertising in France
has achieved a 40% brand awareness at the end of November. The “la Carte
Egg” card is the first VISA card in France to offer cashback. The card
offers 1% cash back on all purchases, as well as a 12.99% APR. Consumers
applying before the end of the year will have their annual fee waived for
the first year (normally Euro 35) and 5% cash back on purchases up to the
year-end. Launched in October 1998, Egg is an e-commerce company created by
Prudential.

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V-SMART IDENTISMART

Toronto-based Bioscrypt Inc and Pennsylvania-based IDenticard have teamed
to pair IDenticard’s “IDentiSMART” family of patented contactless smart
card solutions with Bioscrypt’s “V-Smart”, an integrated MIFARE smart card
and fingerprint reader. When using “V-Smart,” the fingerprint template is
stored on the “IDentiSMART” card, so there is no remote processing and no
need to network the readers for managing the
population of biometric templates. To gain access to a secured door, the
cardholder presents the smart card and places the preregistered finger on
the reader. “V-Smart” creates a template from the live fingerprint sample
and compares it to the enrollment template stored on the smart card to
verify identity before granting access.

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3Q/02 Delinquency

Credit card delinquency, based on dollars past due, rose 37 basis points between the second and third quarters, although the metric was flat compared to one year ago. The 37 bps jump reported by the ABA yesterday is exactly the same margin of increase reported by the top ten issuers in October for the third quarter. The ABA reported Thursday that based on total dollars outstanding, bank card delinquencies rose to 4.45% from the previous quarter’s 4.08%, but unchanged from third quarter last year. However, based on the number of accounts past-due, credit card delinquencies actually fell to 3.81% from 3.91% in the second quarter. CardData ([www.carddata.com][1]) reported on October 31st, that delinquency rates among the top ten VISA and MasterCard hit 6.48% in 3Q/02 compared to 6.11% in the second quarter. Compared to the third quarter of 2001, delinquency rose by 51 bps. Among the top VISA and MasterCard issuers, MBNA, Bank One, Chase, BofA, and Fleet reported lower delinquency rates this year than 3/01. Meanwhile, Discover reported a 30+ day delinquency rate of 5.72% for the quarter ending 8/31/02, compared to 6.31% for the year-ago quarter. The American Express delinquency rate stood at 3.2% for 3Q/02, compared to 3.1% for 2Q/02, and 3.2% one year ago. For more historical information on delinquency rates visit CardData ([www.carddata.com][2]). (CF Library 10/31/02)

3Q CREDIT CARD DELINQUENCY HISTORY
(based on total dollars outstanding)

1999: 4.25% 1995: 4.21% 1991: 4.54% 1987: 3.72% 1983: 2.75%
2002: 4.45% 1998: 4.63% 1994: 2.90% 1990: 4.01% 1986: 4.90% 1982: 3.92%
2001: 4.45% 1997: 5.31% 1993: 3.83% 1989: 3.45% 1985: 3.15% 1981: 2.37%
2000: 3.93% 1996: 5.03% 1992: 4.27% 1988: 3.40% 1984: 3.30% 1980: 3.40%
Source: American Bankers Association Delinquency Bulletin

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

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UK Holiday Volume

Royal Bank’s Streamline Merchant Services reports that holiday volume in the U.K. on debit and credit cards is maintaining last year’s record levels. Last weekend Streamline processed £630 million in more than 10 million transactions. Withdrawals from NatWest and The Royal Bank of Scotland cash machines were also at high levels last weekend. Over 4.7 million withdrawals were made, with a total value of £302 million which compares with a figure of £281 million for the same weekend last year. The Royal Bank of Scotland Group has over 5,500 machines in the UK.

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PERSONAS ATMS

Yapi Kredi Bank has signed a US$6.7 million multi-year contract for NCR to
provide hardware maintenance and support services for the bank’s “Personas”
ATMs. YKB has had a long-standing relationship with NCR both in terms of
hardware and software solutions and through the company’s “Channel Partner
Program,” whereby NCR has supported the bank’s internal maintenance of its
ATM network. The bank currently has over 420 domestic branches and a
network of 1,370 ATMs. It also handles 30% of Turkey’s credit card business.

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2003 Retail Muted

Slow economic growth, combined with continued rapid expansion of retail selling space by the discounters, will keep a lid on comparable store sales increases and make it difficult for the supermarkets and department stores to gain much traction next year. The conclusions were reached by Fitch Ratings yesterday which also said that despite a significant number of ratings downgrades recorded during 2002, the rating outlook for the retail sector continues to skew negative. Other risk factors for 2003 include credit card portfolio risk and consolidation. Fitch says that although the slow-growth department store and supermarket sectors could benefit from the economies of scale that would come with additional consolidation, they expect such activity in the retail industry to remain fairly muted in 2003.

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Market Share Shift

VISA, MasterCard, and Discover all posted gains in U.S. credit card market share during the third quarter at the expense of American Express. However, in total 3Q/02 U.S. volume, which include credit cards and off-line debit cards, MasterCard stole market share from both VISA and American Express. American Express gave up 50 basis points in credit card share and 40 basis points in total market share between the second and third quarter. MasterCard picked up 60% of the AmEx loss in the credit card market and all of the AmEx loss in total third quarter volume. In credit + debit volume, MasterCard was the only network to post a gain in overall share. In total 3Q/02 volume, Discover was flat and VISA gave up 16 basis points. For complete details on quarterly card network performance visit CardData ([www.carddata.com][1]).

SHARE SNAPSHOT
(Based on Purchase + Cash Advance $Volume)
CREDIT CARD SHARE CREDIT + DEBIT SHARE
2Q/02 3Q/02 2Q/02 3Q/02
VISA 42.8% 42.9% 51.6% 51.5%
MasterCard 34.2% 34.5% 31.3% 31.7%
American Exp 16.4% 15.9% 12.2% 11.8%
Discover 6.6% 6.7% 4.9% 4.9%
Source: CardData (www.carddata.com)

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

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Fifth Third Bank Processing Solutions

Fifth Third has renamed its processing subsidiary as Fifth Third Bank Processing Solutions and has promoted Robert Sullivan to EVP of the processing firm, replacing the retiring Barry Boerstler. Mr. Sullivan assumes direct responsibility for the day-to-day operations of the company, including new sales, relationship management, administration, product development and marketing for both the merchant and financial institutions processing businesses.

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EMV PIN Pad

VeriFone is set to roll-out an EMV smart programmable PIN pad for a base price of approximately US$145 per device in most market deployments. The launch of new “SC 5000” is part of VeriFone’s participation in the “VISA Smart Breakthrough Acceptance Device Program.” The “SC 5000” enables existing VeriFone magnetic stripe terminals and electronic cash registers to read and process EMV-compliant smart cards. It is the only smart peripheral device in VISA’s new program. VeriFone has also agreed to offer each participating VISA member a license for “VeriCentre LE,” its terminal management system allowing software and parameter downloads to VeriFone terminals. The license cost will be US$5,000 or less depending on hardware purchase commitments. Earlier this month, VISA announced that terminal manufacturers Cybernet and Intellect were set to deliver $200 EMV terminals as part of the program. The Cybernet terminal is available now and the Intellect product will be available in early 2003. (CF Library 6/25/02; 10/28/02; 12/13/02)

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