Charge-Off Uptick

Signs of economic recovery are being tempered by rising chargeoffs and serious delinquencies. The latest credit card numbers validate the long held belief that not only do subprime borrowers default at a higher absolute level, they also deteriorate much more rapidly in stressful environments, even in the relatively brief and shallow one experienced to date. Fitch’s chargeoff index rose to 5.88% from last month’s 5.83%, while the greater than 60 day delinquencies index rose to 3.56% from 3.41%, its highest level in four years. Fitch’s prime credit card charge-off index rose approximately 17% over the past 18 months, while subprime credit chargeoffs increased 38% over the same period. Serious delinquencies in the subprime sector exhibited a similar meltdown, rising nearly 50% over the same period, compared to a 23% increase in prime sector late-stage delinquencies.

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DuoCash Raises Cash

DuoCash has announced the close of their Series B financing led by OCI Venture Group, an early stage strategic private equity group focusing on IT, communications and digital media industries, and the venture investment arm of OCI Group, a multi-national Asian conglomerate.

According to DuoCash CEO Victor Nappe, “We see the investment as another validation of our business model and the trend away from free content and advertising-driven media models and towards paid subscription and downloads.” Adds Nappe, “The challenge to date has been several fold: the inefficiency of small transactions, consumers lingering concerns about using their credit cards online, and the lack of access to credit cards by key markets such as teens.”

DuoCash is the developer of a proprietary micro-payment technology utilizing pre-paid phone cards — an untapped market of hundreds of millions of cards currently in circulation with more than $5.2 billion in stored value. Working with the major telco carriers, DuoCash is enabling these phone cards for online transactions — offering convenience and privacy for users, and providing a reasonable and cost-effective alternative to credit cards for websites selling subscription services and premium digital content, such as music downloads, streaming videos, online games, e-books, archived articles, shareware, etc.

This funding comes at a particularly critical time for media and internet companies, with major destinations such as Yahoo!, GeoCities, RealNetworks, Motley Fool, and Blue Mountain moving toward a paid content model. According to a forecast released today by Jupiter Media Metrix, paid content revenue is projected to grow to $1.4 billion in 2002, with categories such as digital music increasing by 179.2%.

Many in the industry feel that a micropayment solution is essential to fueling this growth. Most notably, renowned internet expert Jakob Nielson, the guru of web usability, who has predicted “the emergence of micropayments as one of the main business models of the web.” Says Nielson, “Offering free services on websites is not a sustainable business model, nor is advertising, which doesn’t work on the Web. Most Internet companies are now pursuing an enterprise strategy to make money, but they’ll soon begin turning to individual customers for revenue as well.”

DuoCash (), which was founded in February 1999, will use the funds to market their brand through their strategic and merchant partners, both online and at retail point-of-sale. Prior to this round, the company received series A funding in December 2000, which was led by OCI Venture Group.

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SunStakes Sweepstakes

MasterCard International is kicking off a multi-tiered marketing program for debit MasterCard in support of its dedication to building the category and helping consumers understand the benefits and convenience of using debit MasterCard instead of cash or checks. The centerpieces of the campaign include a new “Priceless” debit television spot, which makes its debut at the Academy Awards, and a SunStakes Sweepstakes, which will launch next month nationwide. The SunStakes Sweepstakes automatically enters consumers for a chance to win exciting prizes simply by using their debit MasterCard for qualified purchases between April 15 and June 30. Summer theme prizes include a 2002 GMC Envoy (grand prize), a high-performance personal watercraft (first prize), and ultra-premium gas grill (second prize). The sweepstakes will be supported via radio spots, which will air in select markets nationwide, statement inserts and messaging, in-branch materials, and direct mail.

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GCA Signs 18

Eighteen gaming properties recently signed contracts to use the innovative products and services of Global Cash Access, the leading supplier of cash access, financial management and customer relationship marketing technologies to the gaming industry.

GCA offers an array of products and services ranging from the latest ATM technology in the gaming industry to guest development marketing services that help casinos understand their customers and increase traffic to the gaming floor and special events.

“GCA offers superior cash access services and outstanding customer service, so our decision to extend our contract for two more years was very easy,” said Jim Burns, chief financial officer for Casino Arizona at Salt River. “With GCA, we have access to patron database services, which allows us to target both potential and existing customers and improve our level of customer service.”

Several of the properties that signed contracts chose to use at least one of GCA’s innovative products or services, including the Casino Cash Plus(R) 3-in-1 ATM.

GCA’s Casino Cash Plus 3-in-1 ATM has become widely accepted due to its convenience to casino patrons and proven profitability to casino operators. Statistics show that a significant percentage of standard ATM cash request transactions at gaming properties are denied because of bad PIN numbers, exceeded limits or insufficient funds. The Casino Cash Plus 3-in-1 ATM eliminates such denials with a patented rollover feature, which gives patrons the option of obtaining funds via a POS debit transaction or a pinless credit card cash advance.

“We are really looking forward to the benefits of using GCA’s 3-in-1 ATMs,” said Richard Lobdell, chief financial officer of The Palace Indian Gaming Center, who signed a new contract with GCA. “We plan to use more of their cash access products, including the ACM (automated cashier machine), which will offer our patrons the ability to complete all of their cash access needs at one terminal. Since GCA’s products and services are integrated, I am confident that we can maximize cash flow and move our business to the next level.”

Properties that recently signed agreements with GCA are:

— Avi Resort & Casino – Laughlin, Nev. — Casino Arizona at Salt River – Scottsdale, Ariz. — Diamond Lil’s – Renton, Wash. — Freddie’s Club – Renton, Wash. — Gold Rush Casino – Henderson, Nev. — Las Vegas Motor Speedway – Las Vegas — Magic Star – Henderson, Nev. — Paradise Plaza Casino – St. Maarten, Netherland, Antilles — Point No Point Casino – Kingston, Wash. — Ramada Express – Laughlin, Nev. — Renata’s – Henderson, Nev. — Rincon Casino – Valley Center, Calif. — Sahara Hotel & Casino – Las Vegas — Silver Club – Sparks, Nev. — The Lift Casino – Las Vegas — The Palace Indian Gaming Center – Leemore, Calif. — The Venetian Resort Hotel and Casino – Las Vegas — Wildhorse Gaming Resort – Pendleton, Ore.

About Global Cash Access

Global Cash Access is a joint venture of First Data Corp. and M&C International, Inc. Providing access to the gaming industry’s largest patron database, Global Cash Access uses Internet technologies to deliver funds transfer, financial management and customer relationship marketing services to more than 1,000 gaming properties in the US, Canada, Caribbean and Europe. More information on the company is available at [www.globalcashaccess.com][1].

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

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Consolidated Report

ConsumerInfo.com has introduced the first 3-Credit Bureau report with the option to see all three scores. The product has the ability to score and analyze all three reports within seconds after the order is placed online. The three-column format highlights differences among the three bureaus’ information and alerts consumers to potential inaccuracies. Since the three scores are derived from this information, any variations among these scores help consumers understand the impact that inaccuracies can have on their credit rating. Experian announced earlier this it has reached an agreement to acquire ConsumerInfo.com from Homestore.com, Inc. for $130 million in cash. Most of ConsumerInfo.com’s revenue is derived from membership subscriptions. Founded in 1997, ConsumerInfo.com currently has 778,000 members. Under ConsumerInfo.com’s program, members can access their credit reports as often as desired, monitor their files monthly, and receive advice on managing credit and debt levels for an annual subscription of $79.95. ConsumerInfo.com also sells individual credit reports, credit scores and other services at prices ranging from $9.95 to $44.95. Since its founding in 1995, the company has provided credit reports to more than 2 million consumers.

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USTT – Stitch

PA-based USA Technologies yesterday announced its intention to acquire Stitch Networks, a provider of wireless networking solutions for the remote management and control of distributed assets. The deal brings USTT strategic relationships with Eastman Kodak, Texas Instruments, and Motorola, as well as a strategic alliance with Dixie-Narco, a major vending machine manufacturer. The Stitch transaction is the first of several key relationships that USTT expects to announce this year. USTT is an IBM Business Partner and an inaugural member of the Sprint Enabling Application Service Provider Program for e-commerce. It has also established partnerships with a number of global IT, multimedia, and telecommunications companies including Marconi Online Systems, RadiSys Corporation, DoubleClick Inc., and Xerox Corporation.

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Elan Renews ME Bank

Elan Financial Services has renewed its contract with Bangor Savings Bank in Bangor, Maine, to provide a wide range of financial services for five years. Bangor Savings Bank, with $1.3 billion in assets, has been with Elan since 1991.

Elan Financial Services will drive Bangor Savings Bank’s 42 ATMs and process its customers’ electronic funds transfer (EFT) transactions and Visa check card transactions.

Elan Financial Services supports more than 10,000 ATMs and 12 million cards, for 3,000 financial institutions, with a complete range of products and services including credit card issuing, ATM, debit card, and merchant processing. Elan provides full-service support and management tools that are offered uniquely through a single source.

Elan is part of Minneapolis-based U.S. Bancorp (NYSE:USB). With assets in excess of $171 billion, U.S. Bancorp is the 8th largest financial services holding company in the United States and operates the third largest bank-owned ATM network. Visit U.S. Bancorp on the web at [usbank.com][1].

[1]: http://usbank.com

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Leapfrog Gets Financing

Leapfrog Smart Products, Inc., announced that it has entered into an agreement for venture capital-backed financing for the company. The investment, totaling $3,900,000 is expected to begin closing by April 15, 2002. The purchaser is Broad Street Capital Partners I fund based in Chattanooga, Tennessee.

Mark Thatcher, principal and managing director for Broad Street, was enthusiastic about the investment, “The Broad Street fund was established specifically to invest in small cap companies that have great potential in growing markets. Leapfrog is a perfect fit for us; we think the company has sound management, a solid business plan, and a proven market for their technology.” The Broad Street fund is newly established and Leapfrog will be one of the first portfolio companies.

“Broad Street’s investment into Leapfrog marks the first venture capital into the company,” comments Leapfrog CEO, Randall Schrader. “We believe that with this infusion, we will be able to strengthen our balance sheet and begin execution of our marketing plan. This funding positions us well for future financing and establishes our fiscal viability. We can now truly penetrate our targeted markets and generate significant revenues. As an emerging company, we will be able to begin the next stage of our corporate growth.”

The funds are scheduled to be received by Leapfrog in three traunches beginning in April and completed by May 31. The investment is in the form of a convertible preferred stock priced at $1.50 per share, with an accumulated dividend. The preferred shares are convertible on a one-for-one basis to common stock. Upon completion of funding, Broad Street will also have a seat on Leapfrog’s Board of Directors.

About Leapfrog Smart Products:

Leapfrog is poised at the forefront of providing proprietary software and hardware solutions, including biometric technologies developed for user authentication and access control in both computer networks and physical environments. The company, by creating compelling applications to generate demand for its products, intends to be a recognized leader in providing Smart Card software and hardware solutions. For more information on Leapfrog, please visit the Company’s web site at .

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ICMA MEMBERS

The International Card Manufacturers Association, a global non-profit association for card manufacturers, personalizers and service providers, recently announced the addition of five new members. These new members include two associate members, or suppliers, and three principal members, or card manufacturers.

Associate Members (Suppliers)
· Indigo USA, Woburn, MA, USA
· MagTek Inc., Carlson, CA USA

Principal Members (Card Manufacturers)
· IntelCav Cartoes Ltda, Getulioo Vargas – RS, Brazil
· Mahavir Decorative Products Pvt. Ltd., Pune, India
· SOKYMAT SA, Cards & Labels, Granges Veveyse, Switzerland

“ICMA’s strength is drawn from the vast knowledge and expertise we obtain from our membership base,” said Jeffrey E. Barnhart, executive director of ICMA. “The addition of new members enables ICMA to further expand its services and better serve the needs of this ever-changing industry.”

For information on becoming a member of ICMA, contact Lynn McCullough at (609) 799-4900; e-mail lmccullough@icma.com or visit the ICMA Web site at http://www.icma.com.

About ICMA

Based in Princeton Junction, NJ, ICMA is a non-profit association of plastic card manufacturers, personalizers and related industry participants. With more than 220 members globally, the ICMA acts as a clearinghouse for industry issues, including the production, technology, application, security and environmental issues of plastic cards.

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TransLink Expands

Less than six weeks after the start of a six-month pilot program for the TransLink regional fare payment system in the San Francisco Bay Area, the size of the test program may nearly double. The Metropolitan Transportation Commission and a half-dozen Bay Area transit operators agreed yesterday to issue as many as 2,000 to 3,000 additional TransLink smart cards to new pilot program volunteers over the next few weeks. The first batch of TransLink smart cards were mailed to some 4,300 program volunteers in late January, and the pilot program began Feb. 1 on selected routes and at certain stations of six of the region’s largest transit agencies. Each TransLink smart card distributed to pilot program volunteers is pre-loaded with $3 in TransLink e-cash. Participants in the demonstration can load additional value onto their smart cards at self-serve Add Value Machines in transit stations and some 40 retail locations throughout the Bay Area, or by calling the TransLink Customer Service Center. The group also announced yesterday that TransLink is scheduled to go into operation next month throughout San Francisco’s Muni Metro light-rail system. (CF Library 1/31/02)

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BIN RAIDING

Consumers are placing themselves at serious
risk
of becoming fraud victims in the wake of a new crime that has arrived from the
US and is spreading across Britain, according to two surveys commissioned by
Experian, the information solutions company and leading provider of fraud
prevention solutions.

Bin raiding – the process of searching through bins to obtain personal
financial information to commit fraud – is growing at a phenomenal rate in the
UK but consumers remain unaware and, as yet, uninformed of its dangers. Bin
raiding is already widely recognized in the US, where it is known as dumpster
diving, with Americans being far more aware of the issue and taking much
greater care over how they discard their financial information.

To find out the extent to which people leave themselves vulnerable to identity
theft, Experian, in conjunction with Nottingham City Council and with the
support of Nottinghamshire Police, commissioned an independent, data
protection
registered research company to analyze the contents of hundreds of domestic
refuse bins under controlled, secure conditions, to see what people were
throwing away which could be useful to fraudsters. All data was anonymized to
ensure that nobody’s privacy was infringed.

The most worrying aspect of this new type of crime is that consumers continue
to discard significant quantities of personal financial information which can
and are being used by fraudsters to commit transaction fraud and identity
theft. The results of this research showed that:

· On average one in every five bins contains a whole credit or debit card
number
linked to an individual name and 80 percent of these have an associated
expiration
date. In more affluent areas, up to two in five bins (40 per cent) contains a
whole credit or debit card number linked to an individual name and 80 percent
of these have an associated expiration date.

· Only 14 percent of household rubbish bins contain absolutely no information
of interest to fraudsters.

· Almost three quarters (72 per cent) of bins contain the full name and full
address of at least one household member.

· Bank account details are regularly found in bins and, on average, one in
every
five bins contains a bank account number and sort code that could be
related to
the full name and address of a household member. In more affluent areas, 27
percent of bins contains bank account numbers and sort code details.

· Only rarely were attempts made to destroy information. Just eight per
cent of
households throwing away full card numbers had made attempts to destroy the
documents, and only one percent of households had been successful.
In a second survey commissioned by Experian to find out how widespread the
problem of bin raiding is, it was revealed that 75 percent of local
authorities admit that bin raiding is regularly taking place in their area
and,
of these, 80 percent agree that the problem is getting worse.

“It is staggering what people throw away,” commented Gareth Jones, Head of
Fraud at Experian. “One bin contained a signed blank cheque and another an
unused cheque book. From one bin, there was an individual’s full name,
address,
date of birth, bank account number, sort code, employment details, and medical
information. This person had also thrown away a whole benefit book, utility
bill, and other official letters that might be used to corroborate identity.
There was also significant information about this person contained in a
completed passport application.

“Just as worrying is how widespread bin-raiding has already become. While
it is
predominantly an urban phenomenon at this stage, it is already spreading into
rural areas. Not one local authority surveyed denied that bin-raiding
occurs in
their area.”

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