ELVA SHUFFLE

Elva Inc. has completed a consolidation of shares at a ratio of 1 for 10 and the stock is now trading under the symbol “EVAI” on the OTC Bulletin Board. ELVA International, Inc., is a leader in the self-powered acoustic smart card industry. ELVA’s patented VocaliD smart cards supply secure online access and transactions from any phone set, cellular or computer without requiring card readers. VocaliD transmits pseudo random audio sequences in order to guarantee highly secure authentication during each use. ELVA owns six smart card technology registered patents in Europe, USA, Canada and Japan. A VocaliD smart card transmits pseudo random audio sequences in order to guarantee highly secure authentication at each use, from any place in the world. VocaliD is also a standard format card that meets any mag stripe based payment and loyalty infrastructure requirements while being compliant with major traditional chip card based technologies.

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Offline Incentives

MO-based Commerce Bank has re-launched a promotion to encourage debit cardholders to sign for purchases instead of using a PIN. The “Skip the PIN – and Win!” contest automatically enters the bank’s debit cardholders in a $1,000 weekly drawing and a $25,000 grand-prize drawing each time they use their ‘Commerce VISA Check Card’ and sign for their purchase rather than entering their PIN. Last year Commerce awarded approximately $86,000 to more than 60 winners and realized a substantial boost in off-line debit card usage. In addition to the current weekly $1,000 prizes and the final $25,000 grand prize, Commerce will award $1,000 daily prizes during the 2001 holiday season. he contest will run through the end of this year. Commerce is using the promotion to educate cardholders about the benefits of skipping the PIN, which include extended warranty, price and purchase protections, special consumer protection rules and back-up authorization limits.

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MDS – CMS

Merchant Data Systems has executed an agreement with Chase Manhattan Bank and Chase Merchant Services to process through First Data’s alliance platform. MDS also announced that Newtek Capital has an investment via a portfolio purchase through Newtek’s Florida-based certified capital company. Recently, MDS signed a contract with another Newtek partner company, Universal Processing Services, to offer its transaction processing to all of Universal. MDS offers merchants an array of services including credit and debit card processing, electronic benefits transfers, equipment sales, leasing and rental programs, 24-7 customer service, supplies and technical support. MDS intends to convert most of its current merchants to the Chase-First Data Platform, enabling merchants to process transactions all over the U.S.

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SMART ID CARDS

Residents of Sabah will be required to register for a new smart ID card next March. The new cards will enable the government to fight identity card forgery problem. The computerization of the 25 district NRD offices in Sabah will help to put the cards online with the State and Federal NRD headquarters and would speed up the issuance of the smart cards. A thorough screening by the NRD, police and the FSTF would be conducted during the registration exercise to ensure that only those who applied for the smart card were eligible. A stringent check is crucial as ineligible people may attempt to register for the smart card using forged documents. Some village chiefs had deliberately assisted foreigners to obtain ID by certifying forged documents used to apply for ID. The government warned that stern action would be taken against village chiefs and NRD officers found to be involved in assisting foreigners to obtain birth certificates and ID.

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CardData 2Q/01

While the seasonal uptick in receivables for the second quarter is showing up in smaller issuer there appears to some stagnation in the number of active accounts during 2Q/01. According to figures collected by CardData, three credit unions reported no change in the number of active accounts between 1Q and 2Q

2Q/01 vs 1Q/01 Portfolio Stats
ISSUER RECV CHG ACTIVES CHG
University of Colorado FCU $48,424,759 +8.7% 13,170 NC
Aberdeen Proving FCU $47,593,674 +0.6% 16,242 NC
Technology CU $36,214,425 +4.6% 17,364 +7.4%
Whitney Natl Bnk $27,366,935 +7.4% 19,468 -1.8%
La Capital FCU $18,286,022 NC 6,083 NC
Source: CardData (www.carddata.com)

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FAN SMART CARD

OTI, P-Card System and Mega-Access announced the launch of the Michael Jackson Fan Card, the first card in a series of cards based on OTI, P-Card and Mega-Access’s smart card solution for identification, payment and loyalty.

OTI, a global provider of microprocessor-based contactless smart card technology and product solutions, P-Card System, a provider of smart card-based payment systems and Mega-Access, a provider of on-line identification, loyalty and ticketing solutions, will deliver the first shipment of 250,000 cards from the end of July.

Members of the Michael Jackson Fan Club, run by MJ Entertainment AG, can order the contactless multi-application smart card, which also serves as the club’s membership card, from the official website. With the ability to download new applications to the card from the website as they become available, cardholders will be able to use the card for shopping and loyalty programs both online and in retail stores.

“P-Card Systems is proud to announce the fan club for a worldwide celebrity – Michael Jackson – as the first customer to launch our flexible payment solution,” said Angelika Wegner of P-Card. “Our program offers the highest level of security and flexibility for our customers. We expect to make new announcements in the near future regarding new participants in the program.”

“I am happy we could win a well-recognized name like Michael Jackson to prove that our concept to bridge the gap from the virtual to the real world will fill in the missing link in e-commerce today” said Klaus Landefeld of Mega-Access. “The MJ Card will show that by using a combination of both worlds every aspect, from flexibility to cost, will be taken care of.”

“The combined P-Card and Mega-Access solution is a perfect concept for our technology,” said Oded Bashan, Chairman, President & CEO of OTI. “This is yet another example of our strategy of providing a platform for initial applications with the capability to add additional functionality over time in an economical way.”

The partnership brings together OTI’s patented contactless smart card solutions, P-Card’s patented system of marketing programs for its issuer and acquirer base and Mega-Access’s unique on-line capabilities in identification, application and accounting services. Each issuer can customize its own multi-application smart card from a selection of identification, payment and loyalty applications, and then issue their own branded cards to its venue customers. OTI, P-Card and Mega-Access began their collaboration earlier this year, and have been developing their joint solution since that time. In addition to revenues received from product sales, OTI will earn ongoing revenues by participating in the success of the programs through transaction fees and revenues from technical support.

About OTI

Established in 1990, OTI (On Track Innovations) designs and develops contactless microprocessor based smart card technology to address the needs of a wide variety of markets. Applications developed by OTI include product solutions for mass transit, parking, gas management systems, loyalty schemes, ID and secure campuses. OTI has regional offices in the US, Europe, Asia Pacific, and Africa to market and support its products. The company was awarded the prestigious ESCAT Award for smart card innovation in both 1998 and 2000. Visit OTI on the Internet at www.oti.co.il.

About P-Card System GmbH

P-Card System was established in 1999 after having developed the P-CARD System with EBS Electronic Banking System GmbH (established in 1989 and today a 100% subsidiary of P-CARD System). The P-CARD System is a customer loyalty and payment smart card application based on state-of-the-art technology, designed not to compete with existing programs but leverage their synergies, and permits individual development and rules for the participation in the revenues. Visit P-CARD System on the Internet at www.p-cardsystem.com

About Mega-Access GmbH

Mega Access was established in 2001 to provide a framework for a number of on-line solution providers and provide a single point of contact for the customer. Mega-Access provides card based on-line identification, application, accounting and customer service solutions, designed for an international market. Additional services include call-center solutions, internet access services and marketing concepts. Mega-Access has regional subsidiaries in Europe, the Americas and Asia. Visit Mega-Access on the Internet at www.mega-access.com

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MJ Smart Card

More than 250,000 smart cards for the Michael Jackson Fan Club are being readied for shipment this month. With the ability to download new applications to the card from the fan club website as they become available, cardholders will be able to use the card for shopping and loyalty programs both online and in retail stores. Members of the Michael Jackson Fan Club, run by MJ Entertainment AG, can order the contactless multi-application smart card, which also serves as the club’s membership card, from the official website. Israel-based OTI, German-based P-Card System and Mega-Access teamed to produce the ‘Michael Jackson Fan Card’, the first card in a series of cards based on OTI, P-Card and Mega-Access’s smart card solution for identification, payment and loyalty. OTI is a provider of microprocessor-based contactless smart card technology and product solutions, P-Card System is a provider of smart card-based payment systems, and Mega-Access is a provider of on-line identification, loyalty and ticketing solutions. The initial smart card contract is valued at US$1 million.

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BANACCI ACQUISITION

Citigroup and Grupo Financiero Banamex-Accival announced that Citicorp, a wholly-owned subsidiary of Citigroup, today commenced its previously announced offer to

— purchase all of the outstanding Banacci ordinary shares for an aggregate of US$12.5 billion in cash, or US$2.6544, for each share that is validly tendered prior to the expiration date, and simultaneously;

— sell to each Banacci shareholder who validly tenders Banacci ordinary shares in the offer prior to the expiration date 0.0269 share of Citigroup common stock per Banacci ordinary share tendered at a price of US$1.3272 per 0.0269 Citigroup share (equivalent to $49.26 per Citigroup share).

The simultaneous offer to purchase and offer to sell form a single offer and can only be accepted together. The total net consideration resulting from the simultaneous offer for each Banacci ordinary share validly tendered will be US$1.3272 and 0.0269 share of Citigroup common stock.

Banacci’s board of directors has unanimously determined that the offer is fair to, and in the best interests of, Banacci’s shareholders and recommends that Banacci’s shareholders accept the offer and tender their shares. The simultaneous offer will expire at 445 p.m., New York City time (345 p.m. Mexico City time), on Thursday, August 2, 2001, unless extended.

Completion of the offer is subject to the satisfaction of certain conditions, including the granting of required approvals by regulators in the United States and abroad. In Mexico, the registration of Citigroup shares and the offer have been approved by the securities regulators and the acquisition of Banacci by Citicorp has been approved by the Ministry of Finance, the Competition Commission and the Commission on Foreign Investment (“CFI”). With respect to Banacci’s telecommunications companies, Avantel S.A. and certain affiliates, CFI has set a time period for them to establish their compliance with applicable foreign investment laws.

In connection with the proposed transaction, Citigroup has filed a registration statement on Form S-4 with the Securities and Exchange Commission. Investors and security holders are advised to read the registration statement (as amended) because it contains important information. Investors and security holders may obtain a free copy of the registration statement and other documents filed by Citigroup with the SEC at the SEC’s web site at (http//www.sec.gov). Free copies of the registration statement and other documents filed by Citigroup with the SEC may also be obtained from Georgeson Shareholder, our information agent, by directing a request to Georgeson Shareholder, 17 State Street, 10th Floor, New York, New York 10004, banks and brokers call collect (212) 440-9800, all others call toll free (800) 223-2064.

Citigroup (NYSEC), the preeminent global financial services company, provides some 120 million consumers, corporations, governments and institutions in more than 100 countries with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, insurance, securities brokerage and asset management. Major brand names under Citigroup’s trademark umbrella are Citibank, CitiFinancial, Primerica, Salomon Smith Barney, and Travelers.

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Acquirer Fees 2001

A new study of fees, that acquirers charge regional or small merchants, found strong evidence of price convergence toward the median ranges of key merchant fees. The research also found that unbundled pricing strategies have emerged as a dominant strategy among various classes of acquirers. The study, conducted by MD-based First Annapolis, included 38 acquirers and ISOs, 19 of which are ranked among the Top 50 U.S. acquirers. The study was previously conducted in 1999. First Annapolis says the median range of the American Express transaction fee, VISA/MasterCard transaction fee, statement fee, annual fee, and chargeback fee has not changed over the past two years but acquirers have gravitated to the same price points on these key fee items.

ACQUIRER LIST PRICES
FEE TYPE MEDIAN RANGE
Chargeback Fee $10 to $20
V/MC Transaction Fee 10 cents to 25 cents
AmEx Transaction Fee 10 cents to 25 cents
Authorization Fee None
Other Card Type Fee Greater than 10 cents
PIN Debit Transaction Fee Greater than 10 cents
Voice Authorization Fee 25 cents to $1.00
Application Fee Greater than $50
Monthly Minimum $10 to $20
Statement Fee $5 to $10
Annual Fee None
Interchange Downgrade Fee Greater than 50 bps
Termination Fee Greater than $100
Source: First Annapolis

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MOBILE DATA STUDY

Billions of Euros are at stake as companies battle for control of a mobile communications data market set to be worth almost EUR130 billion per annum by 2011, says a new report from Analysys, the global advisor in telecoms and new media (www.analysys.com).

The report, Controlling the 3G Value Chain, says that the next 24 months – leading up to the introduction of advanced non-voice services associated with third generation (3G) technologies – are critical for determining the winners in the 3G value chain. At a time when mobile operators are having to invest in the development of new applications and the roll-out of 3G networks, they are being faced with falling average revenue per user (ARPU), which is not expected to be reversed until after 2003 by increasing non-voice revenue.

Katrina Bond, lead author of the report, comments, “It will be another two years before mobile data services begin to reverse the decline in ARPU, leaving operators with some critical interim strategic decisions about where they position themselves along a new extended value chain.”

In order to deliver new types of service, such as infotainment and m-commerce, operators will need to add content aggregation and transaction management to their traditional service delivery and transportation skills. This makes it attractive for them to form partnerships with portals, such as AOL and Yahoo!, and financial institutions, such as Deutsche Bank and Visa. In addition, operators with relatively low market share, and 3G new entrants that come to market without an established customer base, will find deals with mobile virtual network operators (MVNOs), such as Virgin Mobile, attractive as a way of building their customer base and network usage.

However, portals, financial institutions and MVNOs pose a threat, as well as an opportunity, for operators. Once established, these players are in a position to grasp the EUR8 billion in revenue per annum that is forecast for the marketing and billing of new infotainment and m-commerce services. Moreover, MVNOs may eat into the EUR70 billion that is forecast for the delivery of marketing and billing services for basic network access, a function which is considered an essential element of the network owners’ business.

At stake, says the report, are mobile data revenues that will increase from just EUR7 billion in 2000 to almost EUR130 billion by 2011. The majority of this revenue will come from datacomms services, such as messaging and file transfer, and infotainment services, with a small proportion being derived from m-commerce advertising and commissions on mobile transactions.

Bond advises, “Operators have to find a balance which enables them to form partnerships with companies that have content offerings, while still retaining their role as the customer-facing deliverers of mobile services.”

The report is the third in a series that addresses the most pressing issues facing mobile operators in the current climate. The other two are Successfully Marketing Mobile Data Services to SMEs, which examines the vulnerability of operators to IT vendors in the small and medium-sized enterprise sector; and Evaluating the Business Case for 3G Network Sharing, which examines the cost benefits of 3G network infrastructure sharing.

Written by Katrina Bond with Paul Knott and Ade Adebiyi, Controlling the 3G Value Chain is published by Analysys Research and is available in two packages, priced at (pound)1000 (US$1700), which includes one paper copy + one hour Analyst Support; and (pound)1250 ($2125), which includes electronic access + one paper copy + one hour Analyst Support. For more information please telephone Analysys Research on +44 (0)1223 341300 or email research@analysys.com.

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MBNA CU Deal

MBNA is moving into the credit union segment. Yesterday, CO-based Ent Federal Credit Union signed an agreement for MBNA to market and manage credit card operations for Ent. Ent Federal Credit Union is a $1.2 billion credit union headquartered in Colorado Springs, with 13 branch locations serving 130,000 members. It is the largest credit union in Colorado. MBNA also recently purchased a small bank portfolio in Michigan with 50,000 cardholders (CF Library 6/28/01)

ENT FCU 1Q/01
Receivables: $35,894,869 Actives: 16,342
1Q Volume: $15,895,958 Cards: 40,076
Accounts: 27,772
Source: CardData (www.carddata.com)

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SIM PLANT CLOSES

Hitachi announced it will close its SIM card factory in Ryuo City in Yamanashi Prefecture due to the European mobile phone slump. Hitachi indicated it will continue production of SIM card chips at its two other plants in Japan. The company started the Yamanashi plant in January after investing 30 billion yen for its construction. Hitachi’s production of SIM card chips has declined from 22 million units per month to 13 million.

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