Charge-Offs Dropping

Confirming a trend established by Fitch IBCA and CardData, Standard & Poor’s released data Tuesday afternoon that shows charge-offs are sinking, albeit slowly. According to S&P’s’s ‘Credit Card Quality Index’, the monthly charge-off rate dropped 30 bps to 5.8% from last month’s 6.1% level. The firm says charge-off levels have remained in the 5.8%-6.2% range for the past 12 months, indicating that consumer confidence remains high and a healthy economy has helped mitigate the occurrence of obligor defaults on credit card accounts. Compared with last year’s charge-off numbers, 1999’s level marks a 100 bp improvement. Furthermore, S&P says there are leading indications that charge-offs are likely to remain at these levels, if not move to a somewhat lower level given the positive delinquency trends. June delinquency rates increased slightly, however, the 30-days plus delinquency numbers have stayed under 5.3% since May 1998. The other performance variables tracked by the indexes did show some effects from market conditions. Average yield dropped by 100 bps to 18.9%, and the weighted average base rate increased by 15 bps to 7.2%. Some of these changes may be related to the interest rate uncertainty in the market. In mid-July, the treasury long bonds jumped more than one point. However, despite the increase in the base rate and the lower average yield, excess spread still remains healthy at 5.9%. In comparison, last year’s excess spread numbers were 100 bps less. One variable that has seen little change since July 1998 when it topped 16% has been payment rate, which continues to remain healthy. S&P tracks $276 billion in card backed bonds.

CREDIT CARD QUALITY INDEXES

Distribution Date 7/15/97 7/15/98 5/17/99 6/15/99 7/15/99
Performance Month June 97 June 98 Apr 99 May 99 June 99
Outstandings(Bil.$) 225.5 256.7 280.2 278.9 276.3
Yield (%) 19.1 19.3 18.8 19.9 18.9
Chargeoffs (%) 7.0 6.7 5.9 6.1 5.8
Weighted base rate(%) 8.2 7.6 7.2 7.0 7.2
Excess spread (%) 3.9 4.9 5.7 6.7 5.9
Delinquencies (%) 5.2 5.0 4.5 4.5 5.1
Payment rate(%) 14.8 15.6 16.2 16.5 16.6

Source: Standard & Poor’s

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eN-Touch 1000 Returns

IVI Checkmate announced this morning it has resumed production of its ‘eN-Touch 1000’ terminals and is in the process of fulfilling backlog orders. The placing of the electronics under the glass to eliminate screen wear has resulted in a complete layout redesign and the change from the original working components that were provided by a subcontract manufacturer. The company says it is confident that the actions it has taken have resulted in a highly durable product that is stronger in both feature and function. IVI also reported this morning that revenue for the second quarter of 1999 increased 11% to $28.6 million, compared with $25.7 million in the second quarter of 1998. For more 2Q/99 information visit CardData ([www.carddata.com][1]).

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

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Hypercom’s Global POS Head

Hypercom Corporation announced the appointment of Chris Alexander as president of Hypercom Transaction Systems Group.

Hypercom’s Transaction Systems Group is the company’s new streamlined organization responsible for all payment product sales and support, including Hypercom’s POS Multi-Lane Division and The Horizon Group. As president, Mr. Alexander will be directly responsible for all payment product sales and support throughout North America and the more than 70 countries in which Hypercom offers its products and services. Immediately prior to his current position, Mr. Alexander served as executive vice president and chief operating officer.

“Chris Alexander is a hard-driving, practical and seasoned executive whose astute management is significantly contributing to the growth of Hypercom’s global profit performance,” said Al Irato, Chairman of the Board, Hypercom Corporation. “His appointment to this newly-created position is directly in line with our goal to streamline our operations and poise Hypercom for future success.”

Alexander brings more than 20 years of experience to Hypercom. Prior to joining the company in 1993, he held senior management positions with companies in the communications, data storage and textile manufacturing industries.

Hypercom Corporation (NYSE: HYC) is a global provider of electronic payment solutions, including multi-function point-of-sale terminals, peripherals, network products, Ascendent(TM) payment and transaction software and Internet-based and electronic commerce payment solutions. On a global basis Hypercom delivers the services and technology infrastructure required to quickly integrate and deploy new payment applications. These applications provide competitive value-added programs, improved business performance and low total cost of ownership.

Headquartered in Phoenix, Arizona, Hypercom markets its products in more than 70 countries through a global network of affiliates and offices in Argentina, Australia, Brazil, Chile, China, Hong Kong, Hungary, Japan, Mexico, Russia, Singapore, Sweden, the United Kingdom and Venezuela. Hypercom’s Internet address is www.hypercom.com.

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BITS Lab Opens Today

BITS, the technology group for The Financial Services Roundtable, will officially inaugurate the new BITS Financial Services Security Laboratory located in Reston, Virginia at a special grand opening ceremony tomorrow, Wednesday, July 28th.

Media are invited to attend this important event, which will be of particular interest to journalists who cover electronic commerce, financial services, advanced technology and the Internet.

The BITS Laboratory will be operated and hosted by Global Integrity Corporation, a subsidiary of Science Applications International Corporation (SAIC). The facility will enable financial services companies and technology vendors to work cooperatively to further strengthen the security of electronic banking systems and related technologies. The lab ultimately will test security features and capabilities of products for select PC operating systems, browsers, servers, and applications software used for PC banking; anti-virus software firewalls; and end-to-end security systems.

The grand opening will feature remarks by the Honorable Robert F. Bennett, US Senate and the Honorable Sam Nunn, as well as other prominent industry leaders and dignitaries. Dedicated media tours of the lab are available.

DATE: TOMORROW — Wednesday, July 28th 1999

TIME: 12 p.m. – 2 p.m. (media tours in the morning by appointment only)

PLACE: 12100 Sunset Hills Road, Reston, VA (30 minutes from Washington, DC)

RSVP/INFO & INTERVIEWS: Megan McDonnell, (203) 325-8772, #14, mmcdonnell@environics-usa.com

BITS, the technology group for The Financial Services Roundtable, was created in 1996 to foster the growth and development of electronic banking and e-commerce in an open environment that will encourage greater choice and efficiency in financial software, access devices, networks and processing capabilities for the benefit of financial institutions and their customers. BITS promotes safety and soundness in payments systems and in electronic banking products. BITS is governed by a Board of Directors comprised of 14 Chairmen and CEOs of the largest U.S. bank holding companies as well as representatives of the American Bankers Association (ABA) and the Independent Community Bankers of America (ICBA). For more information, visit the BITS Web site at [www.bitsinfo.org][1].

[1]: http://www.bitsinfo.org/

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Loose Change

A Coinstar survey, released Tuesday, estimated there is $7.7 billion of out-of-circulation change sitting in American households. According to the “Coinstar National Currency Poll – A Periodic Look at Americans and Their Money”, the typical American consumer has a stash of change valued at approximately $30. Coinstar, which manufacturers a self-service coin counting machine, says the U.S. is in midst of a penny shortage. The study concludes that two-thirds of Americans do not regularly re-circulate their pennies. More than of the 1,000 consumers polled indicated that a penny is the denomination they use least.

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Patsley Continues to Lead Paymentech

Banc One Payment Services, L.L.C., First Data Corp.’s merchant bank alliance with Chicago-based Bank One Corporation combined yesterday with Paymentech to create the nation’s second largest merchant processor based on number of transactions, with 2.5 billion transactions annually.

The new entity comes as the result of First Data’s acquisition yesterday of the publicly-traded outstanding shares of Paymentech.

First Data has a 47.5 percent stake in the combined entity, while Bank One owns the remaining 52.5 percent. Pamela H. Patsley, who served as president and chief executive officer of Paymentech, will direct the operations of the new organization, which will operate under the name of Paymentech.

“We’re thrilled with this new venture for several reasons,” said Ric Duques, chairman and chief executive officer of First Data. “First, our relationship with Bank One, which we value tremendously, is even stronger. Second, First Data/Bank One and Paymentech together bring expanded resources, state-of-the-art reporting tools, greater efficiencies and new opportunities to serve Paymentech and Banc One Payment Services merchants. Finally, as part owners, First Data’s leadership in electronic commerce solutions is strengthened,” he added.

“By leveraging several distinct advantages — including an advanced merchant accounting system and the strong channel relationship with Bank One’s lines of business — the new entity becomes one of the most powerful electronic payment providers today,” said Patsley. “In addition, we will continue to capitalize on Paymentech’s market niche products and expertise in direct marketing, Internet, hospitality and specialty retail, as well as our point-of-sale transaction processing.”

“This alliance strengthens Bank One’s investment in the merchant processing industry,” said John B. McCoy, president and chief executive officer of Bank One. “Furthermore, our relationship with First Data and Paymentech, recognized leaders for processing Internet transactions, is a strategic fit with Bank One’s Internet efforts.”

“The growth potential for Internet transaction processing is endless, as more and more merchants are getting linked and more and more consumers are buying. The Paymentech/Banc One Payment Services combination has both the infrastructure in place and the relationships to continue its progress,” said Duques. “First Data’s strategic objective is to process every electronic payment from the point of occurrence to the point of settlement. We’re moving further in that direction everyday; alliances such as Paymentech are very important components to our growth strategy,” added Duques.

Atlanta-based First Data Corp. helps move the world’s money. As a leader in electronic commerce and payment services, First Data serves more than two million merchant locations, 1,400 card issuers and millions of consumers, making it easier, faster and more secure for people and businesses to buy goods and services. With more than 32,000 employees worldwide, the company provides credit, debit and stored-value card issuing and processing services; Internet commerce solutions; wire transfers and money orders; and check processing and verification services throughout the United States, United Kingdom, Australia, Mexico, Spain and Germany. In addition, First Data’s Western Union network includes approximately 74,000 locations with operations in 172 countries. For more information, please visit the company’s web site at [http://www.firstdatacorp.com][1].

Paymentech, founded in 1985 and headquartered in Dallas, provides full- service electronic payment solutions for merchants and third-party transaction processing. The consummation of this merger creates the second largest processor of bankcard transactions in the United States. Paymentech was formerly traded on the New York Stock Exchange under the symbol PTI. For more information about Paymentech, please visit the company’s Internet site at [http://www.paymentech.com][2].

[1]: http://www.firstdatacorp.com/
[2]: http://www.paymentech.com/

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Japan Mondex Promotion Council

MasterCard International, Sanwa Bank and JCB have agreed to establish the Japan Mondex Promotion Council to promote Mondex electronic cash in Japan. In February this year the three companies acquired Mondex franchise rights in Japan from Mondex International Limited. The Japan Mondex Promotion Council¢??s mandate is to develop and promote the Mondex scheme to a variety of industries including the payments and manufacturing sectors. The Japan Mondex Promotion Council is expected to become the operational body for Mondex for businesses operating the Mondex scheme in the future.

In establishing the council, the franchisees will solicit Council members from financial institutions, manufacturers and other companies from a variety of industries. The Council members will jointly develop the Mondex scheme with the three franchisees (MasterCard International, Sanwa Bank and JCB). Asahi Bank, Sakura Bank, Orient Corporation, Hitachi Credit, Oki Electric Industry, Dai Nippon Printing, Hitachi and Matsushita Electric Industrial have already confirmed participation in the Council.

As well as those organisations which have confirmed their participation, a number of companies are actively considering to join the Council, including: Aplus, Life, Mitsui Marine and Fire Insurance, Anritsu, Fujitsu, Hitachi Software Engineering, Japan Card Network, Nichimen, Nissho Iwai, Omron, Toppan Printing, and Toyo Information Systems.

The Japan Mondex Promotion Council will formally launch in October. From July to October Japan Mondex franchisees will provide information to companies interested in Mondex.

Hitachi has already decided to add a Mondex function to its employee ID cards at the beginning of 2000 so that the employees can make transactions using their cards at the company’s cafeterias and shops.

Notes to Editors:

About Mondex International Mondex International Limited (MXI) is a world leader in the provision of smart-card based products and services. The company is a subsidiary of MasterCard International Incorporated and employs over 180 people at its London headquarters and technology centres around the world. Further information regarding Mondex is available on its web sites at: [www.mondex.com][1] / [www.mondexinternational.com][2]

About MasterCard International

MasterCard International has the most comprehensive portfolio of payment brands in the world. With 23,000 member financial institutions, serving consumers in 220 countries and territories, MasterCard is the industry leader in quality and innovation. Nearly 700 million MasterCard*, Maestro*, Cirrus* and Mondex* cards are in circulation today. With more than 16.2 million locations, no card is accepted in more places and by more merchants than the MasterCard Card. In 1998, gross dollar volume exceeded $650 billion. MasterCard can be reached through its World Wide Web site at [www.mastercard.com][3].

[1]: http://www.mondex.com
[2]: http://www.mondexinternational.com
[3]: http://www.mastercard.com

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MemberWorks Online

CT-based MemberWorks, Inc. announced yesterday the acquisition of CA-based CIC Interactive. CIC Interactive is an Internet marketing company and on-line provider of value-added membership programs. CIC has strategic relationships with Intuit, MarketWatch.com, Infoseek and NextCard. MemberWorks says the acquisition will extend its membership service programs to the Internet. MemberWorks currently has five million members.

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AmEx 2Q/99

American Express signed up new cardholders at a record pace during the second quarter which helped offset its loss of 1.6 million government cards last year. AmEx Travel Related Services added 800,000 cards in the U.S. and about 200,000 new cards overseas. For new account acquisition this was AmEx’s strongest quarter in three years. AmEx was also helped out by strong growth in its charge volume. Average quarterly spending per cardholder has climbed 12.6% over the past twelve months from $1,717 to $1,933. However AmEx TRS spent $325 million during the second quarter for marketing and promotion compared to $275 million for 2Q/98. Chargeoffs dropped to 5.3% during the second quarter from 6.6% one year ago. Second quarter delinquency (30-89 day) dipped to 1.8%, from 2.3% for second quarter 1998 and 90+ day delinquency declined from 1.1% last year to 0.9% this year. For full financials details on AmEx visit CardData ([www.carddata.com][1]).

AMEX TRACK RECORD

2Q/99 1Q/99 4Q/98 3Q/98 2Q/98 1Q/98
Receivables $18.3b $16.7b $16.7b $15.4b $14.8b $14.2b
Q Volume $46.0b $41.6b $44.2b $41.5b $41.4b $38.5b
Cards 28.7m 27.9m 27.8m 29.5m 29.6m 29.5m

Source: CardData (www.carddata.com)

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

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Hawaii Smart Cards

WA-based The Pathways Group, Inc. announced Monday an agreement with the Hawaii Millennium Commission to provide the ‘Official Hawaii Millennium Smart Card’. The cards will be a significant part of Hawaii’s yearlong celebration of the “Dawn of the New Millennium”. It is projected believe that 250,000 smart cards could be used at an estimated 3,800 locations throughout the state. Yesterday’s announcement follows last week’s announcement that Pathways will provide the “Official Hawaii 2000 Millennium Web Site”. As part of this agreement, Pathways will also provide a complete, integrated smart card system that will allow smart card holders to use their cards in both real and virtual e-commerce activities. Pathways will also furnish a full suite of services to its clients, including custom applications, card fulfillment, personalization, and credit card processing.

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GE Corp Cards

GE Capital Financial signed an agreement with Hitachi Credit Corp. last night to support large multinational corporations with operations in Japan. Under terms of the deal Hitachi will provide yen-denominated ‘MasterCard’ corporate charge cards, Japanese language statements and other in-country cardholder services. GE Capital will serve as the primary contact for multinational corporations to streamline global program management. Hitachi will provide card transaction data in a format that allows consolidation of global spending data via GE Capital’s ‘Synergy 2000’ reporting system. GE says this data consolidation leads to more effective vendor negotiations and policy compliance, ultimately driving savings to a company’s bottom line. The Hitachi agreement is the first of several major alliance agreements planned by GE Capital Financial Inc. The alliance complements GE Capital’s existing capabilities to issue and support cards denominated in U.S. and Canadian dollars, euro, Pound Sterling, and Irish Punts.

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PaymentNet Renames

The confusion between ‘PaymentNet’ the company and ‘PaymentNet’ the corporate card Internet reporting system developed by Paymentech has ended. Redwood City, CA-based PaymentNet, Inc. has changed its name to Signio, Inc. and has formed a strategic alliance with Paymentech. Signio also announced this morning a new flat fee, online payment transaction pricing. The company becomes the first in the industry to deliver a rich payment processing platform and suite of services that offers connectivity across the Internet from e-commerce applications to all major back-end credit card processors. Besides a distribution deal with Paymentech, Signio also entered into distribution deals with Wells Fargo Bank and TeleCheck. Signio says it chose its new name because Signio is a variation on the Latin word ‘signum’ which means to mark, sign, or seal. The company says it selected the name as a metaphor for an electronic signature. Paymentech holds a trademark for ‘PaymentNet’.

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