Membership Rewards

American Express has launched a new dining & entertainment category within its “Membership Rewards” program. Enrollees can now redeem points through a new partnership with Ticketmaster for concert tickets, Broadway plays, sporting events, etc. Enrollees can also redeem “Membership Rewards” points for movie theater tickets, movie rentals and restaurant certificates through a number of other partners including: “Be My Guest Dining Cards,” BLOCKBUSTER, Broadway.com, Clear Channel Entertainment, Smith & Wollensky Restaurant Group, NY Restaurant Associates, Fleming’s Prime Steakhouse & Wine Bar, Hollywood Movie Magic, Morton’s of Chicago, The Steakhouse, “By Invitation Only” events from American Express and the US Open Championships. Membership Rewards, first launched in 1991, has more than 4 million U.S. enrollees and more than 9 million worldwide.

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BASE24 Clients

ACI Worldwide reported several financial institutions are in production with “BASE24 6.0” including: ABSA Group, Ltd. (South Africa); Bank One (United States); CEKAB (Sweden); Comercial Mexicana (Mexico); Giro Bankcard, Ltd. (Hungary); El Palacio de Hierro (Mexico); and National Credit Card Center of R.O.C. (Republic of China). To support new delivery channels allowing consumers to shop and bank almost anywhere in the world, BASE24 6.0 gives users the ability to acquire transactions in different currencies and apply them to accounts operated in many currencies.

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FEE FALL-OUT

Australia’s central bank’s decision to cut merchant credit card fees and permit merchants to charge customers fees for using credit cards will hit the bottom line of issuers. Future earnings of National Australia, ANZ Banking Group, Commonwealth Bank, and Westpac could be reduced by up to 2%. The major global card networks, VISA and MasterCard, may also get tangled up in similar reforms launched in other countries. American Express is not subject to reforms by the Reserve Bank of Australia. The RBA announced yesterday it will drop average interchange fees by 40% and lift the restriction imposed by credit card programs which prevent merchants from recovering from cardholders the costs of accepting credit cards. Interchange fees will decrease from around 95 basis points to approximately 55-60 basis points by July 1, 2003. The Reserve Bank’s standard on merchant pricing will come into force on January 1, 2003. The RBA also announced an end to restrictions imposed by credit card networks which limit the entry of new competitors. Specialist credit card institutions authorized and supervised by the Australian Prudential Regulation Authority will now be eligible to apply to participate in credit card programs. There are approximately 10 million cardholders among Australia’s population of 20 million.

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Upromise Expansion

Upromise has added Skippy Peanut Butter, Centrum multivitamins, Lehigh Valley Dairies milk products, Fisher nuts, and pasta from Muellers, R&F, Pennsylvania Dutch and Anthony’s to its college savings program. The new brands will contribute 3-5% of each participating product’s purchase price into a member’s Upromise account. The companies join thirteen other leading consumer packaged goods manufacturers already participating in the program. Upromise says families can now save on more than 2,700 items at more than 15,000 grocery and drug stores, including America’s four largest grocery chains and all CVS/pharmacy locations. More than two million families nationwide have registered for the Upromise service since it launched less than 18 months ago.

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People’s Bank

Fitch Ratings lowered the “Individual” rating for CT-based People’s Bank to ‘C’ from ‘B/C’ and revised its long-term outlook to “Negative” from “Stable”. People’s has been focused on improving asset quality in its card portfolio through stricter underwriting, improved collections tactics and marketing geared towards higher quality borrowers. Fitch expects the Bank’s growth to be slow and credit card quality to remain weak in the near to intermediate time horizon. Fitch says high operating costs and a poorly performing credit card portfolio continue to dampen the bank’s overall profitability. Asset quality trends in the credit card portfolio have shown some improvement lately, but loss levels remain elevated and higher than many other standard/prime credit card issuers. In its second quarter earnings report People’s Bank reported that its managed net charge-offs have decreased for three consecutive quarters, and managed delinquencies have declined five consecutive quarters. From the peak level in 3Q/01, managed net charge-offs improved $14.3 million, or 22%, and were $5.1 million, or 9%, lower than the first quarter of this year. Managed delinquencies declined $19 million, or 16%, from the first quarter. Net charge-offs (as a percentage of average managed loans) for credit cards were 6.91%, compared to 6.95% for 1Q/02 and 6.99% for 2Q/01. Delinquencies as a percentage of quarter-end managed loans for the credit card services segment were 3.56% compared to 3.97% for 1Q02 and 4.11% for 2Q01. Average managed loans for credit card services declined $633 million, or 18%, from 2Q01. For complete details on People’s 2Q/02 performance visit CardData ([www.carddata.com][1]).

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

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VISA Buxx

VISA’s prepaid teen card will get a big boost tonight in the “Miss Teen USA Pageant,” airing on CBS. All the delegates for the pageant received a “VISA Buxx” card preloaded with $350 and the new “Miss Teen USA” will receive a “VISA Buxx” card loaded with $2,500. The cards were issued by U.S. Bank. VISA, a major sponsor of the “Miss Teen USA” program, provided the load value. “VISA Buxx” will also be featured in a video segment describing the card’s value to teenage shoppers and their parents. VISA launched the teen card in August 2000. U.S. Bank was the first “VISA Buxx” and has issued the card to more than 25,000 teens and parents. Nationally about 100,000 teens have signed up for the product through U.S. Bank, Bank of America, First Tennessee, First Union, National City, and Wachovia. More than 11 million viewers are expected to tune in tonight. (CF Library 8/10/02)

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NCAA Mascot Contest

Capital One and ESPN have launched the “Capital One All-America Mascot Team” which will be comprised of 12 NCAA Division IA and IAA football mascots, one of which ultimately will be named the “Capital One Mascot of the Year” at the Capital One Bowl on Jan. 1. A panel of judges from Capital One, ESPN/ABC Sports and the collegiate/mascot community will select the winners in late September 2002.

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Child Porn Billing

The Attorney General for Michigan has issued cease and desist orders to six Web site billing companies, demanding that they stop facilitating the promotion and distribution of child pornography over the Internet. “BillCards,” “CardBilling,” “CCbill,” EAN Enterprises d/b/a “LancelotSecurity,” “iBill,” and “Trust-Bill” were each notified that their actions in providing access to and collecting proceeds from members on behalf of “fee-based” child pornography Web sites are in violation of Michigan law. The State’s High Tech Crime Unit headed up a five-month project called “Operation NO-Lita” to target foreign child porn Web sites that use local business partners, like such billing companies, to tap into the U.S. market.

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MasterCard U.S. Credit

MasterCard’s U.S. credit card business, based on gross dollar volume, continues to grow at a 16% annual pace, down somewhat from the 19% growth rate for the fourth quarter but up slightly from the 15% pace for 1Q/02. During the second quarter, MasterCard added 11.9 million (net) new cards to bring its U.S. credit card portfolio to 252.1 million. On an account basis, MasterCard added 8.4 million net new accounts for a total of 198.9 million at mid-year. Outstandings for MasterCard credit cards, at mid-year, were $258.8 billion, according to CardData (www.carddata.com). MasterCard noted that charge-offs were up 33% on an annual basis.

MasterCard 2Q/02 Snap Shot
(U.S. credit card only; Y/Y Change)
Purchase Volume: $93.0 billion +15% Accounts: 198.9 million +15%
Cash Volume: $28.9 billion +20% Cards: 252.1 million +16%
Purchase Trans: 1.1 billion +15% Outstandings: $258.8 billion +16%
Cash Transactions: 24 million +4% Charge-offs: $4.6 billion +33%
Source: CardData (www.carddata.com)

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