People’s Goes S2

S2 Systems, a global provider of integrated e-business solutions for the banking and financial services market, announced that People’s Bank will deploy the company’s leading-edge OpeN/2 solutions for high-volume card activity management and transaction processing. People’s Bank is the largest independent bank in Connecticut and one of the nation’s leading international credit card issuers.

People’s Bank implementation will include OpeN/2:ATM-IN-A-BOX and OpeN/2:CAMS (Card Activity Management). ATM-IN-A-BOX is a flexible and reliable transaction engine capable of handling high volumes and supporting diverse applications; CAMS is a multiple institution, multiple account system that handles all aspects of card activity management. Bundled together, S2’s solution enables People’s Bank to strengthen its competitive advantage by enabling increased customer loyalty, revenue growth and extended service offerings.

“S2’s progressive transaction processing and card activity management solutions are designed to help card-issuers achieve sustainable growth and profit margins in today’s fiercely competitive market,” said Jeff Chick, S2 Systems vice president and general manager, the Americas. “People’s Bank is a long-standing S2 customer, and we look forward to helping this leading institution with its new e-business initiatives.”

“It’s important to have the right technology for our organization,” said Kate Gloss, People’s Bank VP of Corporate Services. “And it is equally important to work with a technology partner who has the domain knowledge and experience to serve our immediate as well as future needs. Our relationship with S2, and its strong heritage in the banking and financial services industries, strongly influenced our decision to deploy the company’s ATM-IN-A-BOX and CAMS product solutions.”

In the financial services industry, ATMs and cards play an increasingly powerful role by enabling banks and other card-issuers to favorably balance fee income against the escalating cost of support services and customer acquisition. ATMs fuel a broad array of value-added services, while an assorted range of debit, credit, customer loyalty, stored-value, and reward cards combine to satisfy customer needs and drive down costs for the financial institution.

About People’s Bank

People’s Bank is a diversified financial services company providing commercial, consumer, insurance and investment services. Founded in 1842, it is the largest independent bank in Connecticut with managed assets of $14 billion, 146 branches and 220 ATMs. People’s is a leader in commercial banking, residential lending, insurance sales and supermarket banking. An international credit card issuer, it ranks 16th nationally as an issuer of MasterCard and Visa cards. People’s subsidiaries offer brokerage services, asset management, equipment financing and leasing, and insurance services.

About S2 Systems

S2 Systems, Inc. is a leading global provider of e-business solutions for the banking, financial services, retail and travel and hospitality industries. For more than 15 years, some of the world’s largest organizations have relied on S2 products to drive their high-volume e-commerce transactions. Today, our leading technology enables business worldwide to implement Web-based initiatives that improve operational efficiency, enhance customer service and generate new revenue streams. S2 Systems has 350 banking customers worldwide including six of the world’s top banks. Headquartered in Plano, Texas, S2 Systems has offices in Atlanta, London, Paris, Maarssen, Stockholm, Dubai, Riyadh, Hong Kong, Beijing, Melbourne and Sydney. For more information about S2 Systems, visit its Web site at [www.s2systems.com][1].

[1]: http://www.s2systems.com

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APR Chargeoffs

Chargeoffs, among bank credit card issuers, continued their march upward in April. For the March collection, ending in mid-April, chargeoffs hit 4.83% according to CardData, the highest level since February of last year but well below 1999 and 1998 levels.

Apr 01: 4.83% Apr 00: 4.81% Apr 99: 5.27% Apr 98: 5.51%
Mar 01: 4.74% Mar 00: 4.86% Mar 99: 5.32% Mar 98: 5.54%
Feb 01: 4.70% Feb 00: 4.94% Feb 99: 5.37% Feb 98: 5.61%
Jan 01: 4.65% Jan 00: 4.97% Jan 99: 5.46% Jan 98: 5.66%
Source: CardData (www.carddata.com)

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Sungold & SafeSpending

Sungold Entertainment Corp. announces that an agreement has been completed for the acquisition of the entire world wide right, title and interest to the internet payment system technology of SafeSpending Services Inc. The internet payment system business is a growing multi billion dollar market.

The acquisition agreement with SafeSpending includes all copyrights, trademarks, source codes and SafeSpendings’ intellectual property. Under the terms of the agreement Sungold has agreed to pay a 7.5 percent royalty of net revenue relating to the technology and 330,000 common shares in the capital of Sungold Entertainment Corp. upon Sungold or it’s subsidiary Horsepower Broadcasting Network Inc. receiving $1,000,000 in net revenue from the sale or license of the technology. The SafeSpending internet payment system is a pre-paid spending system that uses cards with a unique PIN number which can be used to make purchases online from merchants or individuals.

A survey by Odyssey Online found that 83 percent of respondents said that payment security concerns prevented them from shopping online. The alternatives to credit and debit cards being offered as more secure alternatives, such as Smart Cards, fail to address consumer concerns about privacy.

SafeSpending has developed a system which allows consumers to pre- purchase spending cards of a certain value that will enable the consumer to purchase online without divulging any personal, confidential information as would be necessary if one used a credit card or any other traceable transaction service.

The pre-paid cards will be of a certain value (e.g. the cards value will come in $25.00, $50.00, $75.00 and $100.00 increments), allowing the consumer to choose which card best suits their purchasing needs. The cards will be available behind the counter at most major retailers. Online merchants can be assured of almost immediate payment, and pay a smaller fee to the Company for use of the SafeSpending payment system than they would usually pay to a credit card company. Merchants accepting prepaid spending cards would be immune from fraud. Music and media outlets, looking for ways to tap into the vast teen market online, may find prepaid spending cards a solution to their current marketing dilemma. Individuals selling on auction sites could receive payment from bidders by providing SafeSpending with an account number. Conversely, auction sites are looking for solutions to the fraud for which their sites are becoming infamous. Online gamblers can monitor their wagering by using age restricted SafeSpending cards instead of credit cards.

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Gets Gassed

Hong Kong payments startup First Ecom.com, Inc. announced this weekend it is merging with Gasco Energy, Inc. to shore up its market capitalization. First Ecom processes credit card transactions made over the Internet in multiple currencies, either domestically or offshore in a tax-neutral jurisdiction. The company has not released first quarter results, but for year 2000 the firm reported revenues of US$854,871 and a net loss of $ 17,809,461. First Ecom trades on both the NASDAQ and BSX. Under terms of the deal with Gasco, First Ecom will own all of Gasco outstanding shares then transfer all of its e-commerce assets to a separate company. At the conclusion the transactions, the survivor of the First Ecom – Gasco merger would have no interest in the new E-commerce company. The former shareholders of Gasco would own a majority of the merged company’s shares and the shareholders of First Ecom would have shares in both the merged company and the new E-commerce company.

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Golden Eagle Leader

Hypercom Corporation appointed Scott Tsujita to the newly-created position of Senior Executive Officer, Golden Eagle Leasing, Inc., a wholly-owned Hypercom subsidiary and micro-ticket leasing organization for point-of-sale card payment terminals. As senior executive officer of the company, Mr. Tsujita will be directly responsible for overseeing day-to-day operations and long term strategic planning. Tsujita will report directly to Chris Alexander, President and CEO, Hypercom Corporation. He will also continue to serve as Vice President of Finance, Hypercom Corporation.

“Scott Tsujita is a savvy, seasoned and highly respected professional in the electronic payments industry. His appointment and expanded responsibilities are directly in line with Hypercom’s sharp focus on delivering value to our stakeholders,” said Alexander.

Mr. Tsujita is a 15-year veteran of the electronic payment and financial service industries. Prior to joining Hypercom in 1992, Tsujita served with KPMG Peat Marwick in Vancouver and subsequently as Senior Manager with Phoenix-based Zolondek, Blumenthal, Green, Freed & Strassels. Golden Eagle Leasing, based in Ridgefield, Connecticut, operates as a standalone business unit responsible for providing the ISO/bank processor market with a comprehensive, all inclusive equipment acquisition/deployment program encompassing purchase, rental or lease options for point-of-sale equipment.

Hypercom Corporation (NYSE:HYC) is a leading global provider of electronic payment solutions that add value at the point-of-sale for consumers, merchants, and acquirers. Hypercom’s products include secure card payment terminals and web appliances, networking equipment, and software applications for e-commerce, m-commerce, smart cards, and traditional payment applications. Headquartered in Phoenix, Arizona, Hypercom maintains an installed base of more than 4 million card payment terminals, which operate seamlessly with the products of its Network Systems Division. These solutions are installed in over 100 countries and conduct more than 2.85 billion transactions annually. Hypercom’s Internet address is [www.hypercom.com][1].

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

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iPIN

CA-based i PIN launched its ‘Stored Value Module for M-Commerce’last week. The new feature will enable mobile operators worldwide to offer their subscribers prepaid accounts to purchase goods anytime, anywhere within the wireless merchant community. The prepaid option enables mobile subscribers to load their stored value accounts using credit cards, debit cards, cash or electronic checks. Purchases are then debited from these accounts in real time. Should users have insufficient funds, they will be prompted to reload their accounts at the point of sale in order to complete the transaction. The subscribers’ stored value accounts can be accessed via any Internet enabled device. iPIN is launching a customized stored value solutions with France Telecom’s mobile property, known as Orange, and British Telecom’s Openworld division.

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NOVA Acquisition

U.S. Bancorp announced this morning the signing of a definitive agreement to acquire NOVA in a stock and cash transaction valued at approximately $2.1 billion. Following the acquisition, the combined companies will have more than $100 billion in payment processing volume in 2001. NOVA has a client base of 560,000 small-to-medium sized businesses and U.S. Bancorp’s base of 90,000 customers includes larger merchants and airlines. U.S. Bancorp provides services to 2,900 financial institutions and agent banks. NOVA provides payment servicing to over 1,800 banks, 30 trade associations and 150 Member Services Providers. Under terms of the agreement, NOVA will retain the NOVA Information Systems name and will become a wholly owned subsidiary of U.S. Bancorp, led by Edward Grzedzinski who currently serves as NOVA’s chairman, president and CEO. NOVA reported first quarter total revenue of $370.1 million and EBITDA of $51.5 million, according to CardData.

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Football Cards

The Belgian Football League is switching to advanced smart cards for ticketing and to keep troublemakers away. The new ‘Football Fan Card’ will be valid for three years and will be required for stadium admittance on game days. The cards may also include biometric data such as fingerprints. MA-based Keyware has signed a US $1 million contract to embed its software onto the league’s new personalized smart cards, which will be introduced for the 2001 – 2002 football season. More than 300,000 cards have been prepared for the new season. Keyware also recently partnered with Bull Hungary to develop a smart card system for the Hungarian Football League.

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Metris Settlement

Metris’ Direct Merchants Credit Card Bank confirmed this morning it has reached a settlement with the Office of the Comptroller of the Currency regarding its sales and marketing practices used in connection with an offer for a partially secured credit card. Under terms of the agreement Metris/DM will pay approximately $3.2 million in restitution to an estimated 62,000 credit card customers. The OCC also has notified Direct Merchants Bank that it may assess civil money penalties. The OCC discovered problems with Metris/DM credit card marketing during a routine examination of the bank’s operations. The agreement relates to marketing campaigns conducted between March 1999 and June 1, 2000. During that period, the bank mailed 84 million credit card offers. The OCC took issue with 13.5 million of the solicitations. Approximately 13% of the applicants received a card other than the one prominently featured in the promotions. Other issues identified by the OCC were primarily technical violations such as not properly describing a “processing fee” as a “finance charge” under the Truth in Lending Act. Pursuant to the OCC agreement, Metris/Direct Merchants Bank has agreed to refund all processing fees cited by the OCC. In addition, it has agreed to refund to approximately 500 customers the difference between the interest that they would have paid on the credit card featured in the offers and the interest they actually were charged on the alternative card they received. In most cases, the difference was 1% or 2%. Metris/Direct Merchants says the credit card offers involved were part of test marketing campaigns and were stopped before the OCC brought the matter to the bank’s attention. The bank also noted that all of problems were or have been corrected.

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Coinstar 1Q/01

Coinstar Inc. reported 1Q/01 revenues for the North American core business were $27.1 million in the first quarter of 2001, an increase of 29.4 percent from the first quarter of 2000. Comparable revenues (for machines installed in the same location for more than one year) increased 17 percent. Direct contribution increased 35.1 percent to $14.4 million, as the direct contribution margin expanded to 53.0 percent in the first quarter of 2001 from 50.7 percent in the first quarter of 2000.

Earnings before interest, taxes, depreciation and amortization (EBITDA) increased 53.1 percent — to a record $8.1 million in the first quarter of 2001 — from $5.3 million in the first quarter of 2000. The company posted net income from the North American core business of $11,000, or breakeven, on a per share basis, compared to a net loss of $1.7 million, or $0.08 per share, in the same period last year. “We were free cash flow positive for the core business in the first quarter, and expect to be so for the remainder of the year,” said Diane Renihan, chief financial officer of Coinstar. “And, for the first time, our core business posted a net profit for the quarter — ahead of plan. We now expect to be profitable again, on a continuing basis, by the third quarter of 2001.”

“Our business has never been better,” said Rich Stillman, chief operating officer of Coinstar. “The first-quarter performance — including EBITDA growth of 53 percent — surpassed our own expectations. The strong volumes demonstrate the sustainable benefits of our advertising and promotional programs. Additionally, they provide evidence that the Coinstar service is non-cyclical. The solid direct contribution margin reflects the operating leverage in our business, as incremental revenues provide substantially higher unit cash flow. And, we have taken several steps to leverage the network through marketing and new product initiatives.”

Key Developments

In April 2001, the company announced its first national promotion of the year for the core business. In conjunction with Radio Disney, children who process $5 or more through a Coinstar machine will get a chance to win a trip for four to the Walt Disney World Resort in Orlando, Florida. In March 2001, Coinstar also signed a strategic alliance agreement with DataWave Systems (CDNX:DTV.V)(OTCBB:DWVSF) and Michigan National Bank to begin testing the sale of MasterCard branded prepaid cards through the Coinstar network. Coinstar plans to begin testing prototypes of the cash card system in the second quarter of 2001, followed by a small-scale pilot later in the year, which could lead to a full-scale roll out in 2002. Coins that Count(TM) — which uses the Coinstar network to accept donations on behalf of nonprofit organizations — continued to expand, raising over $400,000 in contributions in the first quarter of 2001, compared with approximately $1,300 in the first quarter of 2000. In April 2001, the company announced its partnership with The Leukemia & Lymphoma Society, which becomes Coinstar’s third national Coins that Count(TM) partner, joining the U.S. Fund for UNICEF and the American Red Cross.

North American Core Business Outlook

For the second quarter of 2001, the company expects revenues for its core business of $29 to $30 million, representing year-over-year growth of 18 to 22 percent. It also expects to generate a direct contribution margin of 54 to 55 percent and EBITDA growth of 60 to 70 percent, compared with the second quarter of 2000. For the full year, Coinstar is raising guidance for its core business. The company now expects revenues of $119 to $125 million, direct contribution of $64 to $69 million, EBITDA of $31 to $35 million, and net income between a loss of $1 million and a profit of $3 million.

SUBSIDIARY OPERATIONS

Coinstar International. First quarter 2001 revenues for the United Kingdom operation nearly tripled. As announced on May 1, Coinstar plans to expand its service in the U.K. after reaching rollout agreements with two of the country’s largest supermarket retailers: Asda Stores, a subsidiary of Wal-Mart, and Sainsbury’s Supermarkets. “The U.K. represents an exciting expansion opportunity that leverages our existing infrastructure in the United States,” said Stillman. “Coinstar has attracted two excellent partners with a combined market share of 40 percent. With their support, we fully expect to repeat the success Coinstar has enjoyed in the United States.”

Meals.com. Coinstar’s 89 percent-owned subsidiary, Meals.com, posted revenues of $335,000 in the first quarter of 2001, compared with $14,000 in the year-ago period. Meals’ cash balance as of March 31, 2001 was $4.5 million. During the first quarter, Meals has continued to demonstrate its ability to help retailers and packaged goods manufacturers increase sales and profits. Using the Meals system, Ukrop’s Super Markets has experienced same store sales increases of approximately one percent, which translates to about $1 of incremental profit per household, per month.

CONSOLIDATED RESULTS

On a consolidated basis, revenues increased 30.8 percent to $27.5 million in the first quarter of 2001. EBITDA increased 51.3 percent year-over-year. The company reported a net loss of $4.0 million, or $0.20 per share, compared with a net loss of $3.9 million, or $0.20 per share, in the first quarter of 2000.

STRATEGIC ALTERNATIVES ANALYSIS

Coinstar’s board of directors has completed the initial phase of its strategic alternatives analysis with J.P. Morgan. Based on a number of factors, including Coinstar’s strong operating performance and the analysis provided by J.P. Morgan, the board has determined that the long term interests of Coinstar shareholders are best served by Coinstar continuing as an independent public company executing management’s strategic plan. J.P. Morgan will continue to work on Coinstar’s behalf to consider strategic alternatives for Coinstar’s Meals.com subsidiary.

About Coinstar Inc.

Coinstar Inc. (Nasdaq:CSTR) owns and operates the only nationwide network of supermarket-based machines that offer coin counting and other electronic services. Linked by a sophisticated interactive network, the company has more than 8,500 machines throughout North America, as well as in the United Kingdom. Meals.com, the company’s majority-owned subsidiary, is an infrastructure provider that helps supermarket retailers and packaged goods manufacturers communicate directly to consumers through the use of online and in-store technologies.

For more details on Coinstar’s 1Q/01 results visit CardData ([www.carddata.com][1]).

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

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Gov Card Losses

Testimony at a U.S. House hearing this week revealed that federal agencies owe millions of dollars in delinquent credit card debt on government travel cards and that some federal employees are making personal use of the credit cards. The General Services Administration said that in March federal employees were at least 60 days delinquent in paying back more than $25 million in credit card charges or about 7% of the total owed. The GSA noted that Pentagon employees had $17 million in 60+ days delinquency or about 9% of the total owed. According to the Associated Press, government officials testified they have begun to garnish employee wages to combat the problem. The Department of Defense has also taken an aggressive position to fight chargeoffs.

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SoftPay EMV at Level 2

VeriFone, a division of Hewlett-Packard Company and global leader in end-to-end electronic payment solutions, announced that it has received EMV Level 2 Type Approval with EMVCo for VeriFone SoftPay EMV e-payment software for all VeriFone terminals using the Verix operating environment, starting with the VeriFone Omni 3350 multi-application payment terminal.

The Verix-based Omni 3350, which earned EMV Level 1 Type Approval last August, together with SoftPay EMV, is the industry’s first EMV-approved solution to have a truly global platform. It offers the fastest time-to-market for merchants wanting to implement a complete, powerful EMV-approved multi-application solution that works across hosts and across borders. In addition, VeriFone’s Omni 3350 and SoftPay EMV solution accepts a broader range of EMV card functionality including DDA functionality and enciphered PIN, compared to other EMV-approved solutions, and has demonstrated superior performance in lab tests compared to competitive solutions that have received EMV Level 1 and Level 2 Type Approval.

“We are very pleased to see that the worldwide leader in EFT point of sale solutions is one of the first global companies to receive an EMV Level 2 Type Approval,” said Jeff Sachs, senior vice president, Global Acceptance at Visa International. “VeriFone’s EMV Type Approval is a clear message to our members about the commitment of the industry to this standard.”

With SoftPay EMV, customers don’t need to write EMV functionality. SoftPay EMV’s plug-in module handles all necessary EMV functionality, making it unnecessary to write EMV code for each new application. Instead, only host specific code, in a discrete module that doesn’t affect any current functionality, needs to be added to the application. This gives customers an easy migration path to EMV. The EMV module within SoftPay eliminates the need to go through the Level 2 Type Approval process whenever the host module, any other SoftPay module, or the SoftPay core code is changed.

“SoftPay EMV is one of the only global, modular applications that has been granted EMV Level 2 Type Approval,” said Eric Lecesne, general manager, VeriFone Technology and Product operation. “VeriFone continues to be among the first to deliver EMV compliant terminals and payment applications that meet global market demand for multi-application capability and a lower total cost of ownership, as well as easy migration to EMV.”

VeriFone’s SoftPay payment application is currently deployed in Europe, Asia, Latin America, Canada and the United States. With SoftPay EMV’s modular design, emerging markets can migrate easily to EMV, saving time to market for achieving Type Approval.

VeriFone’s EMV-approved Omni 3350 and SoftPay EMV solution has the speed and 32-bit processing power to easily handle the demanding cryptography and Dynamic Data Authentication requirements related to EMV compliance across borders, and across hosts. In addition, the Verix operating environment used by the Omni 3350 features application separation and file authentication to support multiple applications running securely on a single terminal and to prevent intrusion into the terminal’s applications. Verix also provides dynamic memory allocation to optimize the use of memory on the Omni 3350, maximizing the multiple applications it can hold. The Omni 3350’s 3 Mbytes of memory offers merchants plenty of room to add new chip-based applications in the future.

To date, VeriFone has shipped nearly 1 million smart card enabled terminals worldwide, demonstrating the company’s proven experience in delivering global smart card solutions. Other VeriFone products that have received EMV Level 1 Type Approval include the Omni 2650 terminal and CM 450, SC 552, SC 550, SC 542, SC562 and SC 455 smart card reader and PINpad products.

SoftPay

SoftPay is composed of a rich set of state-of-the-art, pre-certified transaction modules that seamlessly link into a complete merchant-ready application. Because SoftPay’s EMV module already has EMVCo Type Approval, it provides an easy way for VeriFone’s customers worldwide to migrate to EMV. This modular architecture makes it easy to tailor SoftPay functionality to meet merchants’ unique requirements. Adding payment capabilities is as fast and easy as selecting the appropriate module from VeriFone’s extensive library to easily create custom payment applications.

Omni 3350

VeriFone’s new Omni 3350 terminal, complete with a built-in smart card reader, is designed to handle the performance demands of e-payment. The Omni 3350 uses SoftPay, VeriFone’s advanced e-payment software, which includes an EMV software module. In addition, the Omni 3350 features a triple-track magnetic-stripe reader, a 32-bit processor with a 14.4K modem, generous memory optimized with dynamic memory allocation, and a 12.5 lines-per-second integrated printer. The terminal can process all forms of e-payment and features high performance in a sleek integrated design.

About EMVCo

EMVCo, the smart card standards organization, was established in February 1999 by Europay International, MasterCard International and Visa International to administer, maintain, and promote the EMV(TM) Integrated Circuit Card, Terminal, and Application Specifications for Payment Systems (commonly referred to as the EMV Specifications). The EMV Specifications, originally developed jointly by the three organizations, defines a set of requirements that ensure interoperability for credit and debit payment applications between smart cards and terminals on a global basis, regardless of where the card is used. The EMV Specifications serve as the global framework for smart card and terminal manufacturers worldwide. As technology advances and the implementation of smart card programs becomes more prevalent, the formation of EMVCo will ensure that a single terminal approval process is developed at a level that will allow cross payment system interoperability through compliance with the EMV Specifications. To view the EMV Specifications or for more information, please visit [www.emvco.com][1].

About VeriFone

VeriFone (), a division of Hewlett-Packard Company, is the leading global provider of secure electronic-payment solutions for financial institutions, merchants and consumers. The division has shipped more than nine million electronic-payment systems, which are used in more than 100 countries.

About HP

Hewlett-Packard Company — a leading global provider of computing and imaging solutions and services — is focused on making technology and its benefits accessible to individuals and businesses through simple appliances, useful e-services and solutions for an Internet infrastructure that’s always on. HP had total revenue from continuing operations of $48.8 billion in its 2000 fiscal year. Information about HP and its products can be found on the World Wide Web at [http://www.hp.com][2].

[1]: http://www.emvco.com
[2]: http://www.hp.com/

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