Downward Spiral

Second quarter 2000 credit card delinquencies, based on total dollars outstanding, reached a five year quarterly low of 3.88%, down from the previous quarter’s 3.94% and down significantly from a five year quarterly high of 5.45% (4Q/96). However when combined with delinquency figures for other types of loans, the news may not be all that rosy. The ABA says the rate hikes by the Fed appear to have affected some consumers on the periphery by increasing the cost of their monthly debt obligations and that marginal borrowers are starting to juggle payments. Nevertheless the number of credit card bills paid late decreased significantly to 2.99% of all accounts, compared to 3.28% in the previous quarter. The five-year quarterly high for delinquent credit card accounts also occurred in the fourth quarter of 1996, when the percentage of credit card bills paid late reached 3.72%. The figures were released yesterday by the American Bankers Association. The delinquency trend shown by the ABA tracks with the delinquency trends among card-backed securities and the ‘TrendLine’ calculated by CardData ([http://www.carddata.com][1]).

2Q/00 CREDIT CARD DELINQUENCY HISTORY
(based on total dollars outstanding)
1999: 4.10% 1995: 3.58% 1991: 4.48% 1987: 3.28% 1983: 2.81%
1998: 4.57% 1994: 3.06% 1990: 3.46% 1986: 3.83% 1982: 3.03%
1997: 5.24% 1993: 3.86% 1989: 3.06% 1985: 2.88% 1981: 2.86%
1996: 4.61% 1992: 4.19% 1988: 3.44% 1984: 2.80% 1980: 3.38%

Source: American Bankers Association Delinquency Bulletin

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

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Chase Gift Card

Chase Manhattan launched the ‘Chase MasterCard Gift Card’ yesterday. This is one of the first reloadable pre-paid cards offered by a major credit card issuer. Chase Gift Cards are available in denominations from $25 to $1,000, and can be replenished by anyone with a Chase credit or debit card in any of the denominations if the request is made up to 30 days prior to the card’s expiration date. The card requires a $5.95 – $9.95 service charge, based on the denomination. As an added benefit, Chase will include a personalized message on the case in which the card is delivered. The cards are available via a toll free number or Chase’s web site.

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Hungary Cards

Euronet Services has sealed a deal to provide a credit card management system and processing of POS transactions for Credigen Bank, a new consumer credit institution in Hungary which began offering its retail credit card service this month. Consumers can apply for the private label cards on-site at the retailers, receive immediate credit through an on-line approval process, and start using their cards the same day. Euronet’s data processing center in Budapest will manage the credit card accounts on behalf of Credigen Bank. Credigen Bank is the Hungarian subsidiary of France’s Sofinco, a consumer credit subsidiary of the Credit Agricole Group.

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FDC Mid-East

First Data Corp. signed a new agreement to provide card processing services to Arab National Bank in Saudi Arabia. The Saudi Arabia-based Arab National Bank issues both MasterCard and VISA cards to its customers and maintains a bank branch in London and a total of 117 bank branches throughout the Kingdom of Saudi Arabia. ANB converted its credit card portfolio to the FDR Limited system, operating out of Basildon, Essex. According to CardPlanet ([http://www.cardplanet.com][1]) ANB has approximately 70,000 cards-in-force with about 60% in credit cards.

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

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Diebold Uruguay

Diebold, Incorporated announces the opening of a direct operation in Uruguay that marks another step in the company’s expansion within the Latin American financial self-service industry, in which Diebold is currently the market leader.

“The presence of Diebold Uruguay will help to further establish brand awareness and increase our leadership in the South American market. More importantly, this will provide financial institutions within that country valuable tools to increase productivity and improve customer touch-points significantly,” said Ernesto R. Unanue, Diebold vice president and managing director of Latin America.

Having initiated operations recently, Diebold Uruguay has already completed several important business transactions. The company has obtained service contracts from Bancomat and CABAL, a Latin American credit card issuer. Additionally, the Uruguayan entity RedBanc SRL has acquired 26 Diebold self-service terminals, including cash dispensers and advanced- function automated teller machines (ATMs). Several of the new machines have multi-media capabilities with video and sound, which will permit financial institutions to run full-motion video advertisements on the ATM.

In January 2000, Diebold acquired the global self-service operations of France-based Groupe Bull. As part of that agreement, the company will also provide service to the more than 100 terminals previously installed at Banco de la Republica Oriental del Uruguay by Groupe Bull.

Diebold, Incorporated is a global leader in providing integrated self- service delivery systems and services. Founded in 1859, the company employs more than 11,000 associates with representation in more than 80 countries worldwide and headquarters in Canton, Ohio, USA. Diebold reported revenue of $1.3 billion in 1999 and is publicly traded on the New York Stock Exchange under the symbol ‘DBD.’ For more information, visit the company’s Web site at [http://www.diebold.com][1].

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

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SLMsoft Saudi Deal

SLMsoft.com, Inc. announced it has entered into a joint venture relationship with Al Masa Distribution FZCO (Al Masa) for the distribution of SLMsoft.com products in selected countries in the Middle East and Southwest Asia.

Al Masa has agreed to invest a total of CDN $3.73 million. $1.5 million will be invested in the joint venture company to be owned by both SLMsoft.com and Al Masa, while the balance has been invested directly into SLMsoft.com. The joint venture will develop its own sales and marketing strategy in the region with the local expertise of Al Masa.

“This agreement with Al Masa highlights our continued focus on a multi- channel distribution strategy, and our progress in expanding into the Middle East region,” said SLMsoft.com Chairman and CEO Govin Misir. “We continue to see this region as having high growth potential, and we are pleased to have a partner who is prepared to make a significant investment in the partnership and the development of this market.”

According to Killen & Associates, spending on information technology products and services in the Middle East region is growing twice as fast as the world average and is forecast to grow from last year’s U.S. $17.8 billion to U.S. $35 billion by 2002. Spending for software and related services is forecast to grow from the current U.S. $4.8 billion to U.S. $11 billion by 2002.

“We have decided to partner with and invest in SLMsoft.com because of its leading e-financial technology, its reputation in the region, and its ability to bring innovative solutions to the international market,” said Mehdi Amjad, Managing Director of Al Masa. “We recognize that there is significant demand for SLMsoft.com’s technology as banks in the region transition to a web- enabled environment.”

Under the terms of the agreement, Al Masa will invest $1.5 million into the joint venture to build market awareness, and to provide the initial working capital. Also as part of the agreement, Al Masa invested $2.23 million in SLMsoft.com through a subordinated debt financing consisting of a 5% convertible subordinated unsecured debenture and warrants to purchase 50,000 limited voting shares. The debenture is due March 19, 2001 and is convertible at maturity into 530,714 limited voting shares at a price of $4.20 per share. The warrants are exercisable at any time on or prior to March 19, 2002 into 50,000 limited voting shares at a price of $5.00 per share. SLMsoft.com will use the net proceeds of the financing for working capital purposes.

About Al Masa Distribution FZCO

Al Masa Distribution is one of the leading information technology distribution companies in the Middle East. Al Masa’s strength lies in the fact that it is a single sourcing point of resellers and system integrators in the region. Today, Al Masa represents many leading international manufacturers in the region for all their distribution needs. Al Masa has developed a strong and reliable distribution network in the region with dedicated sales executives, a focus on individual product lines and a strong delivery infrastructure. Al Masa has offices in Dubai, Singapore, and Jebel Ali, with over sixty employees and revenues of U.S. $60 million.

About SLMsoft.com

Founded in 1986, SLMsoft.com is a leading developer of electronic payment systems and transaction processing solutions, including e-commerce applications with a focus on the financial services industry. SLMsoft.com provides real-time end-to-end e-banking solutions that include Internet banking, interactive voice recognition (IVR), debit and credit card issuing, automated teller machines and point-of-sale network management, retail branch management, core banking and cheque imaging. SLMsoft.com also provides investment brokerage client and portfolio management applications for the brokerage industry; e-health solutions which enable health insurance claims to be evaluated at the point of service, processed and settled in real time; and e-government solutions which enable consumers to pay fees for government services in person, at kiosks, through IVR systems or the Internet. SLMsoft.com has over 1,500 active customer installations worldwide. Currently, SLMsoft.com has more than 600 employees, operating out of 21 locations.

SLMsoft.com, ESP-Link and EC-street are trademarks of SLMsoft.com, Inc. All other product and company names mentioned herein may be trademarks of their respective owners.

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Fujitsu – Tidel Deal

Fujitsu-ICL Systems Inc., the North American supplier of Fujitsu products for financial services, retail and commercial handheld applications, and Tidel Technologies Inc. , one of the nation’s largest ATM manufacturers, announced the signing of a strategic Original Equipment Manufacturer agreement whereby Fujitsu-ICL will supply bill dispensers to Tidel for inclusion in its Ignition series and Chameleon series ATMs. The agreement, estimated to be worth $10 million in its first year, is Fujitsu-ICL’s first partnership agreement as an OEM and Tidel’s first strategic supply agreement for its new products.

![][1] “Fujitsu already is one of the world’s top manufacturers of full-scale, Web-enabled ATMs, and this partnership with Tidel signals our intent to become a leading OEM supplier in the ATM components market,” said Ron Omohundro, executive vice president and general manager for Fujitsu-ICL’s products division. By ensuring a steady supply of bill-dispenser components, the agreement allows Tidel to meet continued retailer demand — from convenience stores to large supermarkets and shopping malls — for its quality ATM equipment.

“We demand quality and expertise in cash-handling technology, which is why we selected Fujitsu-ICL as our hardware partner,” said Mark K. Levenick, chief operating officer of Tidel. “Fujitsu produces intelligent and reliable units that make the dispensing of cash and other media quick and consumer-friendly.”

About Tidel

Tidel, based in Houston, is a manufacturer of automated-teller machines and cash-security equipment designed for specialty retail marketers. Tidel pioneered the dial-up ATM in 1992 and was recently selected by Business Week as one of its top 100 hot growth companies for 2000. To date, Tidel has sold more than 25,000 retail ATMs and 110,000 retail cash controllers in the U.S. and 36 other countries. Tidel Technologies’ Web site: [www.tidel.com][2]

About Fujitsu-ICL Systems Inc.

Fujitsu-ICL Systems Inc. is a joint venture between Fujitsu, a leading provider of Internet-based IT solutions for the global marketplace, and ICL, a $4.4 billion e-Business services company wholly owned by Fujitsu. The company targets retail, financial and e-Business services markets. Its Fujitsu Products group has almost 30 years experience in providing hardware/software solutions and services for retail point-of-sale (POS), specialized handheld computing and ATM applications. Its Retail Software and Services group provides development and customization services and support for retail POS software applications. Its Fujitsu Business Solutions group provides consultancy-led e-services and customer relationship management (CRM) that enable its clients to build high-value, personalized relationships with their customers.

ICL’s Web site: [www.icl.com][3]

Fujitsu’s Web site:[www.fujitsu.com][4]

[1]: /graphic/tidel/tidel.gif
[2]: http://www.tidel.com/
[3]: http://www.icl.com/
[4]: http://www.fujitsu.com/

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Checkmate Snags Beaver

Royal Bank of Canada and IVI Checkmate announced the launch of more than 2,000 SmartSELECT point-of-sale terminals at Home Hardware and Beaver Lumber stores across Canada. SmartSELECT, with its high-speed modem, increased memory, and all-in-one compact design, will give Home Hardware and Beaver Lumber the industry’s fastest and most advanced point-of-sale technology for dial-up payment terminals. Royal Bank has packaged IVI Checkmate’s eN-Touch 3000(TM) with payment and transaction management software and markets the terminal under the name SmartSELECT.

![][1] “SmartSELECT was chosen because of its ability to provide information and services not currently available in our stores. Its ease of operation and space efficient size were also determining factors,” said Arnie Shantz, dealer services manager, Home Hardware. “Royal Bank understood its potential for the retail environment and developed a unique solution customized to meet Home Hardware’s present and future business needs.”

Royal Bank vice-president of merchant services and point of sale, Frank Moore, said: “The new SmartSELECT goes beyond traditional debit and credit card processing and provides a new world of electronic marketing and other enhanced features for our small and large retail clients.” The SmartSELECT terminal has a back-lit touch screen display and will support a wide range of pioneering software applications, including those created by Ernex Marketing Technologies Inc., a wholly owned subsidiary of Royal Bank. Ernex runs a variety of value-added electronic marketing programs for retailers such as electronic gift certificates, instant coupons and sweepstakes, loyalty points programs and personalized messaging.

IVI Checkmate Ltd. executive vice-president and general manager, Geoff Bowen, sees SmartSELECT as an ideal solution for a wide range of retailers who want the capabilities of tomorrow’s technology today. “By working with Royal Bank, we were able to enhance the product’s capabilities to create a win-win solution for the bank, the retailer and ourselves,” said Bowen.

About Home Hardware Stores Limited

Home Hardware Stores Limited is a co-operative of dealer-owned and operated independent hardware, building supply and furniture stores under the Home Hardware, Home Building Centre, Home Hardware Building Centre, Home Furniture and Beaver Lumber banners. Founded in 1964 by approximately 120 independent hardware dealers, the company today has grown to include 1,100 members in every province and territory in Canada with annual retail sales approaching $3 billion. Home Hardware Stores Limited, RONA, Inc., and Do it Best Corp. comprise the Alliance International LLC buying group generating more than $6 billion in retail sales a year.

About Royal Bank of Canada

Royal Bank of Canada (RY) is a diversified global financial services group and a leading provider of personal and commercial banking, investment and trust services, insurance, corporate and investment banking, on-line banking and transaction-based services including custody. The group’s main business units include Royal Bank, RBC Dominion Securities, Royal Investment Services, RBC Insurance and Global Integrated Solutions. The group has 49,000 employees who serve 10 million personal, business and public sector customers in 30 countries. For more information, visit Royal Bank’s Web site at [www.royalbank.com][2].

About Ernex Marketing Technologies Inc.

Ernex Marketing Technologies Inc., a wholly owned subsidiary of Royal Bank of Canada, is a transaction information company specializing in point-of-sale loyalty and electronic marketing programs. For more information, visit its Web site at [www.ernexinc.com][3].

About IVI Checkmate

IVI Checkmate is a major electronic transaction solutions provider in North America. The Company designs, develops, and markets innovative payment and value-added solutions that optimize transaction management at the point-of-service in the retail, financial, travel & entertainment, healthcare, and transportation industries. IVI Checkmate’s software, hardware, and professional services minimize transaction costs, reduce operational complexity, and improve profitability for its customers in the U.S., Canada and Latin America. For more information on IVI Checkmate, visit its web site at [www.ivicheckmate.com][4].

[1]: /graphic/checkmate/checkmate.jpg
[2]: http://www.royalbank.com/
[3]: http://www.ernexinc.com/
[4]: http://www.ivicheckmate.com/

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100,000 SmarTrip Cards

Cubic Transportation Systems and The Washington (DC) Metropolitan Area Transit Authority confirmed this morning that the number of ‘SmarTrip’ contactless fare cards sold has passed the 100,000 mark. The new ‘SmarTrip’ card was introduced to Metro commuters a little over one year ago. SmarTrip was the first contactless smart card to be introduced by a major mass transit system in the U.S. This summer, the Chicago Transit Authority introduced Cubic’s contactless card technology to full-fare systemwide, offering a first-of-its kind intermodal, interagency card. (See CF Library 5/19/99 & 9/12/00)

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iShopSecure Solution

iShopSecure, Inc., a privately-held company based in Davie, Florida, has launched a patent-pending technology and business process that eliminates credit card fraud and allows consumers to shop from more than 750,000 web sites without putting their credit card or other personal information online. iShopSecure technology, called the I-Card(TM) /CCRT (Credit Card Replacement Technology), are patents-pending technology that simplifies and secures Internet credit card transactions for consumers and small businesses to ease their fears of online credit card fraud and privacy issues which, according to The Forester Report, prevents some 52% of all online users from making on-line purchases, a problem which also cost merchants and credit card issuers more than $230 million last year. This technology is comprised of a series of software programs, servers, and business processes that acts as an automatic clearing house and intermediary between the consumer and the merchant. Although iShopSecure’s technology is cutting-edge, consumers will find it easy to use.

“We believe that this technology will open the doors to the e-commerce revolution,” said Joseph A. McDonnell, Chairman of the Board/CEO, iShopSecure, Inc. “By offering a private and secure online shopping environment we hope to increase consumer confidence in making online purchases.”

The I-Card(TM) (“a fraud-free” credit card)/CCRT technology is unique in addressing privacy and security concerns because consumers never have to put their credit card or personal information online.

Furthermore, the I-Card / CCRT requires no physical cards or hardware. Consumers simply download Easy Click Shopping Assistant(TM), a small browser resident software program that they use when they shop online which stores their user profile, which is their home “ship-to” address (or any one of 20 other ship-to addresses), and auto populates the merchants’ shopping carts during the checkout process to make shopping convenient.

During this checkout process, the purchaser, via Easy Click(TM), prompts iShopSecure or their credit card issuer to instantly and automatically provide an anonymous online credit card number with a credit limit equal to the amount of the total transaction as authorized by the purchaser. Because the purchaser’s actual credit card information is never transmitted over the Internet they are given the confidence and the freedom to shop in a totally private and “fraud free” environment. Merchants receive a credit card number from an accepted brand of credit card with a credit limit equal to the amount of purchase as established by the purchaser during the checkout process. This process prevents questionable merchants from fraudulently debiting the card for more than the agreed upon purchase amount.

ABOUT ISHOPSECURE, INC.

iShopSecure, Inc., specializes in providing comprehensive turn-key technology solutions to safeguard credit cards from online credit card fraud and privacy issues, the biggest barriers to the growth of e-commerce on the Internet. This technology eliminates credit card fraud and facilitates online purchasing confidence and online spending. With its patents-pending technology, iShopSecure is dedicated to providing a fraud-free secure shopping environment on the Internet as a benefit to consumers and e-tailers. iShopSecure’s seasoned management team has more than 150 years of experience in a diverse range of industries and professions such as technology, credit card security, banking, business and legal, as well as intelligence and counter-intelligence. iShopSecure has a support staff of highly seasoned professionals in areas of e-commerce, Internet transactions, banking, and credit card processing.

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Sector Analysis

While credit card receivables for the industry grew 10.1% between 2Q/99 and 2Q/00, the sub-prime, non-bank and credit union sectors were the top performers. According to the latest sector monitor published in RAM Research Group’s ‘BankCard Update’, the credit union sector not only delivered better-than-average growth, but also delivered the highest average daily balances per active account as well as the highest year-to-date volume per active account. The sub-prime sector has consistently been the fastest growing segment of the industry for the past three years. The co-branded and low-rate sectors continue to languish.

SECTOR INDEX GROUP GROWTH ADB VOL
Cobranded/Affinity + 5% $2246 $2045
Secured/Sub-Prime +30% $1422 $1004
Low Rate (>$3b) + 1% $2324 $2247
Low Rate (

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No-Show Chargebacks

MasterCard announced yesterday it is changing its chargeback rules to help the hospitality industry fight no-shows. Under the new rules, lodging establishments will have the right to dispute chargebacks when they are received as a result of a guaranteed no-show. For example, when a cardholder claims they did not make a guaranteed reservation or claims they did not authorize the charge. Lodging merchants will now be able to submit documentation to MasterCard showing they obtained the cardholder’s account number, card expiration date, name embossed on the card and address. They can also provide a reservation confirmation number at the time the guaranteed reservation was made in order to defend themselves against guaranteed no-show billing chargebacks. Historically merchants have had limited rights in disputing such claims. Consumers will also now be required to file their dispute in writing. The new changes are effective October 13, 2000 for MasterCard members and lodging merchants.

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