Student Crew

SCM Microsystems announced a deal with FL-based Student Marketing to provide smart card terminals for the first nationwide retail loyalty program for students. The Student Marketing Crew Card program allows college and high school students to receive 5-15% discounts from participating U.S. retailers as well as earn reward points redeemable for thousands of products available on the company’s Web site. The smart cards will calculate reward points and provide crew points from purchases made on merchandise. SCM’s terminal technology will be supplied to retailers and independent franchise partners, such as Dominos, Subway and U-Haul, to award, track and redeem the loyalty points. Student Crew anticipates 500,000 student members and over 27,000 retail merchants to participate by the end of the 2002-2003 school year. Launched in mid-August, the “Crew Card” program will roll out through December in five phases, beginning in southeastern US and moving west. The SCM deal is worth $500,000.

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SecureCode

MasterCard International unveiled a new global e-commerce security solution to tackle Internet transactions. MasterCard’s “SecureCode” uses MasterCard’s “UCAF” to provide an enhanced payment guarantee to online merchants by presenting, collecting and passing cardholder authentication information. Using hidden fields and a merchant plug-in application that is integrated with merchant Web pages, along with authentication information generated by issuing financial institutions, the new service provides explicit evidence of the cardholder’s involvement in a transaction. Online merchants that support MasterCard “SecureCode” will benefit from a MasterCard rules change that shifts liability away from the merchant for chargebacks due to cardholder non-authorization when SecureCode has been utilized. Chargebacks of this nature currently represent as much as 84% of all electronic commerce chargebacks. Merchants may also benefit from an increase in legitimate transactions for existing and new markets, including cross-border transactions. MasterCard is working with VeriSign, WorldPay and others, to bring MasterCard “SecureCode” to online merchants around the world. VeriSign has begun enabling its 75,000 merchants, which process approximately 25% of all online transactions in the U.S., with support for “SecureCode.” WorldPay has also begun automatically enabling its more than 17,000 multi-currency merchants in 115 countries. “SecureCode” also provides issuers with a new way of supporting Maestro PIN-based debit transactions over the Internet, and opens the door to more cross-border transactions with merchants in countries where debit is more established than credit.

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TRIAD 7.0

Fair, Isaac announced the availability of advanced transaction-based scoring with its “TRIAD” adaptive control system, thanks to its recent merger with HNC Software. Initially, transaction-based neural network models will be available for predicting credit risk, attrition, revenue, and bankruptcy within the account management version of TRIAD used by card issuers worldwide. Compared to previous transaction models, these new pooled models provide up to a 78% improvement in the ability to distinguish risky from less risky accounts by incorporating new behavior-based variables and technology. Based on production-proven neural network technology leveraged from the acquisition of HNC Software, the improved scoring engine utilizes transaction and event data and updates transaction-based behavior variables for individual accounts. Fair, Isaac says that by leveraging the timely predictions of transaction-level scoring, “TRIAD” customers can expect to see a 15% to 20% improvement in standard “TRIAD” results, including increased interest income, reduction of bad debt, referrals, and reissue costs, and increase in sales.

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Discover 3Q/02

Morgan Stanley reported yesterday that profits for its Credit Services or Discover card division grew 7% during the third quarter to $210 million. While the portfolio, based on outstandings and accounts, has been flat, Discover’s delinquency rate has showed a significant improvement, down by more than 9% compared to 3Q/01. The interest rate spread widened 80 basis points over the past year, driven by a decline in cost of funds. The over-30-day delinquency rate improved 59 basis points to 5.72%, and the over-90-day delinquency rate was 2.49%, the lowest level in the last seven quarters. Meanwhile, merchant and cardholder fees rose 1% to $547 million due to higher merchant transaction volume and late fees. Transaction volume rose 4.3% from a year ago to $24.3 billion. During the third quarter Discover added no net new accounts and active accounts declined by 600,000. For complete details on Morgan Stanley/Discover’s third quarter performance visit CardData ([www.carddata.com][1]).

DISCOVER CARD PORTFOLIO SNAPSHOT
3Q/01* 4Q/01* 1Q/02* 2Q/02* 3Q/02 Y/Y CHNG
Receivables: $49.7b $49.3b $49.6b $49.4b $49.7b NC
Volume: $23.3b $22.1b $24.1b $23.5b $24.3b +4.3%
Accounts: 45.4m 45.7m 46.0m 46.2m 46.2m +3.4%
Actives: 24.0m 24.0m 23.8m 23.4m 22.8m +1.8%
Chargeoffs: 5.79% 5.85% 6.49% 6.30% 6.27% +8.3%
Delinquency: 6.31% 6.85% 6.75% 5.63% 5.72% -9.4%
Yield: 3.34% 13.48% 12.63% 12.64% 12.71% -4.7%

2Q/01 fiscal quarter ended 5/31/01; 3Q/01 fiscal quarter ended 8/31/01;
4Q/01 fiscal quarter ended 11/30/01; 1Q/02 ended 2/28/02; 2Q/02 ended 5/31/02;
3Q/02 ended 8/31/02.
Source: CardData (www.carddata.com)

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

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Certegy Outlook

Certegy revised its revenue and earnings guidance downward for the next several quarters. The company said the planned fourth quarter nationwide roll-out of a check cashing program for a major discount retail customer has been delayed until mid 2003. Also, the number of machines to be deployed by the end of this year in conjunction with the company’s kiosk-based check cashing program will be less than previously anticipated. Certegy also noted that Banco Real, in Brazil, will de-convert its card portfolio in late February. This decision coincides with its parent’s agreement to outsource $1.5 billion of global wholesale banking data processing services. In addition, ongoing political and economic uncertainty has weakened the Brazilian currency, and has begun to unfavorably impact new card issuance rates. Certegy says the revised guidance was also due to the loss of a large merchant processing customer in August, which moved its account to its new owner’s processor. However a portion of this volume has subsequently been replaced by new merchant signings. For complete details on Certegy’s latest performance visit CardData ([www.carddata.com][1]).

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

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AIS & DEBISYS

Advanced Integrated Systems and California-based Debisys have teamed to deliver a transaction processing system for the prepaid market in the Caribbean. Having recently entered the POS market with Hypercom terminals, and two large banking partners, AIS plans to deploy thousands of terminals in Jamaica and throughout the Caribbean, building the largest Caribbean PIN distribution network. Wireless purchases through the mobile instrument will be an option that Debisys and AIS will bring to the market in short order, in conjunction with their banking partners. AIS is one of Jamaica’s largest transaction processors, specializing in online health insurance claims adjudication and financial transactions.cDebisys supplies proprietary, technology-based transaction processing solutions marketed to the prepaid communications industry, including PCS/cellular, home phone, long distance, calling card and Internet service providers.

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ADS & Crate and Barrel

Alliance Data Systems has signed a six-year agreement with Crate and Barrel to provide private label credit card services for over 100 retail units nationwide, including its Crate and Barrel, Crate and Barrel Outlet, and CB2 retail stores; the Crate and Barrel catalogue; and Crate and Barrel’s online store. Alliance Data will provide a full suite of services including customer account acquisition and activation, receivables funding, card authorization and private label credit card issuance, billing statement generation, remittance processing, customer service functions for all sales channels.

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Contactless VISA

VISA International has developed a new global payment specification to facilitate contactless payments via smart cards or other electronic devices. This is the first time that ‘contactless’ payment chip technology has been applied to general-purpose payment cards. Based on an international standard, “ISO 14443”, the new specification uses a chip embedded in a plastic card or an electronic device, such as a mobile phone which is then held in front of a terminal and a wireless interface to transmit the payment information. The first use of this new specification is expected to be in South Korea with SK Telecom, according to The RAM Report ([www.ramreport.com][1]). VISA and SK Telecom are already working together to test the viability of infrared payment for mobile phone users. Prior to VISA’s announcement, the most common use for the technology has been in transit systems, particularly in Europe and Asia. The new specification will allow for its use for everyday payments should VISA member banks and merchants wish to introduce it. Vendors working with VISA on the use of the new specification include Cybernet, Ingenico, Philips Semiconductors, SchlumbergerSema, and Smart Card Systems.

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

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Lipman – Concord Deal

Concord EFS has signed an agreement with Lipman for the purchase of 20,000 POS terminals. The contract includes the “Class A” certified “NURIT 3020” countertop payment solution. The “NURIT 3020” solution provides fast POS transactions through a customizable, user-friendly interface and an easy loading thermal printer, internal pin-pad, and optional smart card reader. The “NURIT 3020” also has more memory and a faster modem, powering “NURIT CAPTURE,” Lipman’s Web-based check and receipt imaging solution. Other “Class A” certified Lipman products at Concord include: the “NURIT 2085” card payment terminal and the “NURIT 3010” portable payment solution.

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Altnet Micro-Payments

CA-based Altnet has begun testing its new micro-payment system, which uses technologies from AllCharge, Newgenpay, DuoCash and other key technology providers to give file-sharers a way to pay for digital content. Altnet has the ability to respond to 120 million search requests per day, and return secure keyword-indexed files, offering a new potential customer base for content companies to monetize.

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