PAY-WARE SMART-PIN

The U.K.’s leading home and garden improvement chain has announced plans to Implement “PayWare SmartPIN” as part of a 2003 Northampton pilot and later as the backbone of a national smart card roll-out.
Wilkinson is implementing Trintech Group’s “PayWare SmartPIN” to accept chip-based credit and debit cards with secure PIN authorization at the point of sale. The Wilkinson trial in Northampton will take place in the first half of 2003. Once the trial is completed, the national roll-out of chip cards is expected to take place in the second half of the year and Wilkinson plans to implement “PayWare SmartPIN” in the rest of its 200+ stores across the country. The system integration will be done by RBS, who are Wilkinsons EPoS partner. Trintech is supplying PIN Pad terminals capable of reading international standard EMV chip cards and allow customers to authorize a transaction using a PIN number rather than a signature. RBS will modify the back office card processing systems to ensure that these are compliant with industry requirement for handling IC chip cards.

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Sharp Rebound

More evidence the economy is slowly but surely recovering: credit card debt expanded by $6.5 billion in July. One year ago, as the recession was taking hold, consumers loped off $2.2 billion from revolving credit during July. The sharp increase in July was the second highest monthly jump since November of last year. During July, consumers revolving credit was growing at an annual rate of 10.8%. Since the first of this year consumer revolving credit has grown by $29.7 billion. Bank credit card debt at mid-year was $611.4 billion according to CardData (www.carddata.com). Bank credit card outstandings at mid-year were growing at an annual rate of 7.8% while overall revolving credit was growing at an annual rate of 3.4%. According to figures released Monday afternoon by the Federal Reserve, American consumers were $1.724 trillion in debt, exclusive of home mortgages.

REVOLVING CREDIT HISTORICAL
($billions)
Jul02 Jun 02 May 02 Apr 02 Mar 02 Feb 02 Jan 02
GRWTH: 10.8% 6.5 4.1 8.0 4.8 2.2 1.8
$OWED: $722.1 715.6 712.1 708.7 705.4 705.0 702.4

Dec 01 Nov 01 Oct 01 Sep 01 Aug 01 Jul 01 Jun 01
GRWTH: -9.7% 12.7% -7.1 0.6 -2.2 -3.7 2.1
$OWED: $692.4 698.0 686.4 692.7 693.5b 698.1 700.3

Source: Federal Reserve; revised figures as of 09/08/02;
For complete historical data visit CardData (www.carddata.com).

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Mid-Year Pulse

The bank credit card industry passed the 500 million account milestone at mid-year and the percentage of active accounts versus gross accounts remained solid at 58%. Overall the industry is growing at an annual rate of 8%.

Bank Credit Card Pulse
Growth
Outstandings $611.4b +7.8%
Q Volume $359.9b +7.1%
Accounts: 500.5m +8.1%
Actives: 290.3m +8.1%
Cards: 607.6m +9.3%
Source: CardData (www.carddata.com)

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NextCard Update

NextCard confirmed Friday that federal securities regulators are investigating the company. The Internet credit card issuer also confimed that its chief executive, John Hashman, resigned last week. Federal banking regulators opened investigations into NextCard’s failure seven months ago. In May, the FDIC notified NextCard that it might take legal action against various company executives and directors. Before the collapse of the company, NextCard’s top executives cashed out stock options worth $29 million The FDIC decided in July to shut down about 800,000 NextCard credit card accounts. The OCC closed NextBank on Feb. 7th and the FDIC was appointed the receiver. The OCC said NextBank was classifying some delinquent accounts sold into a securitization trust as fraud losses, although the delinquencies were actually attributable to credit quality problems. The FDIC estimated that the cost to the Bank Insurance Fund for the failure of NextBank will run about $400 million. (CF Library 2/8/02; 2/11/02; 3/14/02; 6/10/02; 7/3/02; 7/11/02)

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DATACARD & VIGILOS

Vigilos and Datacard Group have inked a deal to resell Vigilos’ Avanta security integration software. Avanta software, which manages data from CCTV cameras, access control and intrusion systems, will be integrated with Datacard “ID Works” identity software platform. Vigilos provides enterprise-level software that enables large organizations to dramatically increase the effectiveness and efficiency of their physical security organizations. Datacard Group provides software, systems and professional services needed to build profitable card programs.

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NYCE ERS

NYCE Corporation has launched its “Enhanced Report Suite” which provides NYCE network participants with quarterly and year-end product management reports specific to their financial institution. ERS subscribers also receive Network-wide performance information and annual benchmark data on key ATM/debit card performance measures and best practices. The “ERS” also depicts trends for transaction volume and cardholder behavior by way of detailed ATM and POS transaction data. Some examples of specific reports are: average number of transactions per active cardholder for ATM and POS; average purchase transaction amounts, with and without cash back, and ATM withdrawal amounts; most frequently used ATM and POS locations for the institution’s cardholders; transaction distribution by market sector (type of retailer) with transaction amounts and percentage of cash back; ATM/POS transaction distribution by state; and denied transactions segmented by reason for denial.

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KRB Downgrade

Fitch Ratings revised its “Rating Outlook” on MBNA from to “Negative” from “Stable.” The revision centers on the low and recent decline in the level of tangible capital present at MBNA, particularly in light of increased regulatory scrutiny of specialized credit card lenders, and the lack of diversity in the company’s overall funding structure. While MBNA has been gradually building its tangible equity base over the last two-plus years through retained earnings, proforma tangible capital ratios have been set back in the second and third quarters of 2002 as a result of the addition of purchased credit card and other intangibles related mainly to the purchase of two credit card portfolios, one from Wachovia Corp. in second-quarter 2002, the other from Alliance & Leicester plc of the UK. Combined, these two deals have or will add more than $600 million in intangibles to MBNA’s balance sheet. With respect to funding, MBNA has relied upon securitization as the dominant means to fund its growth over the years. The company has received good execution in asset-backed markets allowing it to fund its business at attractive interest rates. At 75% of total managed financings, however, Fitch is concerned that MBNA would have less financial flexibility to access additional sources of liquidity given that three-quarters of its assets are already pledges to third parties. Additionally, more than 80% of the company’s credit card assets, which are the best performing assets in MBNA’s loan portfolio, have already been securitized, reducing financing flexibility in the future. For complete details on MBNA’s 2Q/02 performance visit CardData ([www.carddata.com][1]).

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

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