Providian Ratings

Fitch Ratings lowered Providian yesterday, but Providian says the Fitch action has no bearing on its card-backed securities. Fitch said it is concerned about excess spread levels in the Providian Gateway Master Trust, and believes it could trigger an early amortization. Fitch says the decline in excess spread has been driven by a sharp rise in net chargeoffs of the PGMT assets. The increase in loss rates reflects weakness in the economy that began in 2001, limitations in growth, but Fitch notes it is also indicative of the high-risk nature of Providian’s customer base, a high percentage of which would be considered subprime under bank regulatory definitions. Providian responded Thursday by saying it expects that excess spread in its Gateway Master Trust will not fall to a level that would trigger early amortization of the outstanding securitizations of the trust. The Company also said that the Fitch downgrade does not result in an early amortization event in any existing securitization. Providian says early amortization for two specific series of its PGMT will occur if there is a downgrade of Providian National Bank’s credit ratings below BB-/Ba3, respectively, unless Providian National Bank has entered into a back-up servicing agreement with a back-up servicer satisfactory to the investors within 60 days of the downgrade. Providian noted that this ratings trigger is not tied to ratings by Fitch, but is based only on the ratings provided by Moody’s Investor Service and Standard & Poor’s. In pre-marketing trading this morning Providian’s stock was down about 6%.


Smart Card White Paper

The Smart Card Alliance released a white paper yesterday which outlines how smart cards and biometrics enhance security, privacy, performance and return on investment in secure ID systems. A new national focus on domestic security has heightened interest in technologies that improve confidence in verifying the identity of individuals. Earlier this month, legislation was introduced in the U.S. House of Representatives that would include a biometric feature on an encrypted smart chip embedded in driver’s licenses. Federal, state and local officials have proposed other initiatives such as requiring biometrics in immigration documents and issuing secure smart card credentials to transportation workers.



Visa International and SK Telecom have signed an agreement to implement mobile payments/wireless payments that incorporate smart cards and infrared technology, in a move to provide consumers with greater convenience to conduct transactions anytime, anywhere using Visa debit or credit payments over mobile phones.

Both companies will collaborate to implement an innovative payment solution that integrates two major global specifications from the payments and wireless industries: the EMV (Europay-MasterCard-Visa) global smart card standard and IrFM (Infrared Financial Messaging), the global interoperable standard for infrared transmission. The solution allows Visa cardholders and SKT subscribers to pay for goods and services by beaming an infrared signal securely from the mobile phone to a small infrared receiver located at retail point-of-sale terminals, vending machines, subway stalls, tollgates, buses and other payment locations. The cardholder’s payment details are stored securely on an EMV chip within the handset.

This partnership between the two market leaders was signed on Monday at a signing ceremony held at SKT’s headquarters in Korea.

Speaking at the ceremony, Mark Burbidge, Senior Vice President and General Manager, e-Visa Asia Pacific, said, “Our partnership with SKT combines the strengths of the payments and mobile worlds with the convenience of mobile phones with the wide acceptance of Visa cards. The payment industry is undergoing a major transition from the use of magnetic stripe cards to EMV smart cards. These provide greater security and give customers a wide range of new payment functions.flexibility. Visa and SKT are using the extra capabilities of smart cards to enable Visa cardholders to make payments with their mobile devices easily and securely.”

SKT is the first company in the world to implement EMV-based infrared technology for wireless mobile payments. Since 8 April 2002, SKT has been piloting a chip-based payment service using an infrared-enabled mobile phone. The pilot program is being held at SKT’s headquarters and by 20 merchants at the Seoul Finance Center. Later this year the program will be rolled out to more than 30,000 300,000 merchants in Korea. Two million infrared-port enabled handsets will also be distributed by end of this year.

Mobile and online shopping in Asia Pacific has grown rapidly during the past few years. The International Data Corporation (IDC) predicts the market for mobile commerce in Asia Pacific will reach US$36 billion by 2004. The Visa and SKT initiative directly caters for this burgeoning market and is just part of Visa’s efforts to offer greater flexibility and convenience to its cardholders.

Visa International

Visa is the world’s leading payment brand. Visa-branded cards generate more than US$2 trillion in annual volume and are accepted at more than 24 million physical locations around the world, including more than 750,000 ATMs. The Visa organization plays a pivotal role in developing innovative payment products and technologies to benefit its 21,000 member financial institutions and their cardholders. Visa is a leader in Internet based payments and is pioneering the creation of u-commerce, or universal commercethe ability to conduct commerce anywhere, anytime, and any way. For more information, visit

Visa Asia Pacific

In Asia Pacific, Visa has a greater market share than all other brands combined with more than 56 percent of retail sales volume. During 2001, a total of US$480 billion was spent in Asia Pacific using Visa cards, a growth of 70 percent over the previous year. Visa Asia Pacific’s Internet address is

About EMV

EMV stands for Europay-MasterCard-Visa, a joint industry working group created to facilitate the introduction of chip technology into the international payment systems environment by developing joint specifications for Integrated Circuit Cards (ICC) and terminals for Payment Systems. EMV serves as the global framework for chip card and terminal manufacturers worldwide.



With credit card fraud rates running ten times higher for Internet merchants than their brick and mortar counterparts, a new Internet payment processing engine has been developed to provide a long-term and cost-effective solution. First National Merchant Solutions this week launched PayFuse, an all-in-one payment processing software with fuses the merchant Web site with the payment engine, allowing merchants to obtain real-time authorizations on credit card transactions in a secure environment. PayFuse determines whether a credit card number is valid or considered too risky, based on prior fraud attempts or chargeback records. When the customer clicks on the “Buy” button, PayFuse accepts the transaction from the storefront via a secure SSL network connection, calculates shipping charges, screens for fraudulent orders with FraudShield, authorizes the transaction in real-time and reports the transaction information to the merchant. In addition to saving its merchants’ money by reducing fraud, overall processing fees decrease with the all-in-one software since it does not require an outside authorization or application vendor.



TransUnion, a leading global information solutions company, announced the availability of TransRisk Account Management for the Canadian marketplace. TransRisk Account Management is a new risk assessment tool to help credit grantors more effectively manage existing accounts and maximize account profitability.

This version of TransRisk Account Management was specifically developed based on Canadian consumer characteristics and will be used exclusively by TransUnion Canada, a TransUnion subsidiary. TransUnion also offers a version of TransRisk Account Management in the United States.

“TransRisk Account Management is a Canadian-specific risk model that provides Canadian credit grantors a superior solution to their account management needs,” said Mark Merritt, director of TransUnion Canada. “TransUnion is committed to serving the Canadian credit marketplace and will continue to develop innovative solutions like TransRisk Account Management to better server our customers.”

TransRisk Account Management targets the needs of risk managers by predicting the likelihood of an existing account becoming 90 days or more delinquent within 12 months of scoring. It has the unique ability to focus on the behavior of existing accounts while identifying creditworthy accounts among those previously considered unscoreable by traditional risk models.

“TransRisk Account Management can help mitigate losses and lead to improved portfolio performance, especially when used in conjunction with one of our other risk models,” said Chet Wiermanski, vice president of TransUnion, who oversaw the development of the risk model.

TransUnion is a leading global information solutions company that customers trust as a business intelligence partner and commerce facilitator. TransUnion offers accurate and reliable financial data through a broad range of products and services that enable customers to manage risk and capitalize on market opportunities. The company uses leading-edge technology coupled with extensive analytical capabilities to prevent fraud and facilitate credit transactions between businesses and consumers across multiple industries and channels, including the Internet. Founded in 1968, Chicago-based TransUnion employs 3,600 associates that support clients in 24 countries. Visit us at

TransUnion of Canada, Inc., a fully owned subsidiary of TransUnion, has offered the highest quality consumer credit related products and services to the Canadian market since 1989. Our products are developed to meet the demands of Canadian businesses while respecting consumers’ needs and expectations. Visit us at


Mobile Payments Network

eONE Global and Sprint confirmed this week they have joint plans to build a mobile payments network in the USA to enable consumers to make purchases and payments with their wireless devices. eONE Global is owned by First Data and iFormation Group, a company founded by The Boston Consulting Group, General Atlantic Partners, and The Goldman Sachs Group. Sprint, which will be the founding member of a standards and marketing entity for the mobile payments network, and eONE Global will actively seek other U.S. operators to join them in developing this mobile payments network. The development follows an announcement by Europe’s largest mobile operators, which outlined similar intentions to launch an interoperable mobile payments platform in Europe. eONE Global’s subsidiary, Encorus Technologies Limited, will supply its PaymentWorks technology for the open standard platform including multiple channel access, authentication, routing, and settlement of transactions. The solution will provide for multiple payment options, including traditional credit and debit cards. In addition, smaller purchases may be billed direct to a customer’s telephone bill, to a stored value account presented by the operators, or to other new micro-payment alternatives.



Comdata Corporation announced that its Stored Value Systems, Inc. subsidiary, the leading provider of gift and cash card services to the retail and other industries, has established an international division. SVS International will be primarily focused on expanding the popularity and convenience of electronic gift cards to retail clients and their customers outside the United States, while also supporting existing U.S. retailer expansions into other countries.

“Many of the countries where we are currently building operations are familiar with the properties of a traditional paper gift certificate, but have not learned of the convenience and security afforded by an electronic cash card. We have begun to introduce the cash card’s value proposition to our the Canadian retail community such as increasing gift certificate sales by nearly 100%, providing sales lift approaching 63% over the card’s original value and increasing store traffic by nearly 155% over the current gift certificate customer volume,” said Tom Recktenwald, SVS International executive vice president and managing director. “Cash cards allow retailers to turn an old concept into a new product by taking the paper gift certificate out of the drawer and putting them on the shelf, thereby delivering many impulse buyers to our clients. In this regard, SVS International is setting new trends in gift giving by expanding our domestic presence throughout North America and other continents.”

SVS International has recently established a presence in Canada, with operations in Toronto, its first offices outside the United States. “We have established a Canadian sales team to expand our cash card services in the retail, apparel, fast food and other industry segments where we are predominantly engaged in the United States,” said Recktenwald. “Canada is extremely technology-friendly, so this is a natural progression for us. Comdata and SVS have had a presence there for some time in supporting nine domestic U.S. customers’ expansion to the Canadian provinces, including Pier 1 and BlueNotes. We also serve many other Canadian-based businesses with information management services.”

“Additionally, we have recently setup operations in the United Kingdom where retail gifting cultures resemble those of the United States. Within the next couple of years we anticipate operating in most continental European countries.”

In September 2000, SVS became the first cash card provider to automatically calculate foreign and United States currency equivalents in real-time, at the point-of-sale. The feature, exclusive to SVS, allows international shoppers to buy items in U.S. stores and in the same namesake stores within their home countries without time-consuming steps for manual conversion at checkout.

SVS pioneered the electronic magnetic-striped cash card product in 1995 and now counts some of America’s most recognizable names in the retail, restaurant and entertainment industries among its clientele.

“Our core domestic competencies like database management, point-of-sale technology, call center management and card production will translate into a more powerful shopping experience for our international clients,” said Recktenwald. “We’re looking forward to introducing the electronic cash card to shoppers all over the world.”

About Stored Value Systems (SVS)

Stored Value Systems (SVS) is one of the world’s leading providers of electronic gift certificate and card-based transaction programs. International retailers rely on SVS to create customer loyalty, increase sales, and strengthen their competitive position in the retailer marketplace, via both traditional sales channels and on the Internet. At the core of the SVS product is a commitment to use technology to build retail brands as well as customer satisfaction and commitment for retailers around the globe. Headquartered in the United States, Stored Value Systems is a wholly-owned subsidiary of Comdata Corporation.

About Comdata Corporation(R)

Comdata is redefining the movement of money and information through technology for businesses, their customers and employees. A leading provider of transaction and information services, Comdata provides credit and debit processing and reporting for commercial fleets and merchants, electronic cash, gift and chip card programs for retailers and governmental agencies, Comchek(R) eCash payroll services for food, retail and other service industries, and point-of-sale equipment for travel plazas and convenience stores. Headquartered in Brentwood, TN, Comdata employs nearly 2,000 people throughout the United States and Canada. Comdata is a wholly-owned subsidiary of Minneapolis-based Ceridian Corporation (NYSE: CEN).


Kathol Chairs TC68

First Data announced that Gene Kathol, VP of research and development, has been named chair of Technical Committee 68 Financial Services, an official committee of the International Standards Organization headquartered in Geneva, Switzerland. Kathol assumed the ISO post by unanimous acclamation of the TC 68 membership during their recent annual meeting held in Delft, Netherlands. Kathol has participated in or chaired several domestic work groups, and held various management positions, including serving as chair of a national standards group the Retail Electronic Financial Transactions sub-committee from 1996 to 2001.


Bankruptcy Reform Dead

The prospects that bankruptcy reform legislation could soon be headed to the President’s desk dimmed yesterday as Democrats and Republicans made only slight progress in their debate over a provision banning abortion protesters from using bankruptcy laws to avoid paying fines for unlawful conduct. Sen. Charles Schumer (D-NY) and Rep. Henry Hyde (R-IL) debated the difference between a “blockade” and a “peaceful protest” by someone near an abortion clinic. Hyde says protesters should be allowed to discharge their protest-related debts if they were fined for inadvertently stepping across lines designed to keep them a certain distance from an abortion clinic. However, Hyde admitted yesterday that blockading should not be dischargeable. Democrats indicated they believe a compromise is not going to come. House Judiciary Committee and Conference Committee Chairman James Sensenbrenner (R-WI) told Hyde and Schumer to meet and work out the language differences over the next two weeks. Another meeting is tentatively set for the week of June 10th. Bankruptcy reform bills were first introduced in Congress five years ago.


TNS & Convenience Connexions

VA-based Transaction Network Services has joined in the multi-vendor Convenience Connexions Alliance, formed by the NCR, to provide new transaction functions to customers by enabling ATMs to cash checks and process money orders and wire transfers. As one of the partners enabling these new ATM functions, TNS is providing the network backbone through the use of TNS’ nationwide, secure IP transaction network, TNS Connect. TNS Connect is a dedicated, private IP-based network that transports ATM transactions to the required processor hosts, while adhering to the highest security standards. During the transaction process, TNS Connect routes the information over its secure IP network to the appropriate partner in order to complete the transaction.



NamITech Limited and the Mpumulanga Government have implemented a smart card and biometric system to handle an existing welfare grant payment system. With the new Empilweni Payout Services, the beneficiary inserts his smart card into the smart card reader installed on the payout machine. The last transaction number stored on the card is compared with the transaction number in the system database, to ensure that the beneficiary has not yet been paid. The biometric template is read off the card or from the local database, if this is available, following which the beneficiary places his finger on the fingerprint reader. If the fingerprint verification is successful, the kiosk dispenses the amount owed to the beneficiary, takes a digital photograph of the beneficiary and the card data is updated and ejected. NamITech is currently supplying 20,000 cards per month to the Empilweni project, and the upgraded system will be rolled out over the next six months. Some 160,000 beneficiaries were enrolled on the existing system within three months and payment commenced from month four. The system has proved to be extremely stable and is now paying 180,000 beneficiaries from 36 workstations over 13 days per month. NamITech Limited and the Mpumulanga Government plan to eventually add e-purse applications.


TNB Hires Agent Issuer Manager

TNB Card Services has hired Jay Kurian, formerly of Banco Popular, as SVP and Agent Issuer Program manager, to provide an alternative to credit unions that choose to sell their card portfolios and issue cards through TNB rather than manage the programs themselves. Most recently, Kurian was with Banco Popular as director of U.S. card products in Orlando, Florida. Previously he held management positions responsible for card products at Signet Bank and AT&T Universal Card.