CCB Exits

NC-based CCB Financial Corp. is throwing in the towel on its consumer credit card business. CCB announced Monday it will outsource its consumer credit card business to MBNA. Under terms of the agreement, CCB will become an agent bank of MBNA, and MBNA will purchase approximately $150 million in consumer credit card receivables from CCB’s specialized credit card bank, CCB-Georgia and CCB-Georgia’s affiliate banks, Central Carolina Bank and Trust Company and American Federal Bank, FSB. According to CardData ([www.carddata.com][1]) CCB has about 70,000 active accounts. The CCB/MBNA sale will close this week. CCB expects to recognize an after-tax gain of approximately $.48 per diluted share. CCB will continue to offer business credit cards in its markets and will retain its existing portfolio of business credit card receivables.

CCB FINANCIAL CARD PORTFOLIO (4Q/98)

Receivables: $164,637,252
Ann Volume: $275,000,000
Accounts: 108,901
Actives: 70,499
Cards: 130,485

Source: CardData (www.carddata.com)

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

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Aids MasterCard

The Toronto People With AIDS Foundation and Bank of Montreal launched a special affinity ‘MasterCard’ card Monday. The no-annual-fee ‘MasterCard’ also offers cardholders the choice of earning ‘AIR MILES’ travel miles or ‘FirstHome’ dollars. Revenues derived from the ‘Toronto People With AIDS Foundation Affinity MasterCard’ will be directed towards providing practical and direct support services for people living with HIV/AIDS. The Toronto People With AIDS Foundation is a community-based nonprofit organization with about 4,000 clients.

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Coinstar Award

Coinstar Inc., a retail-based coin counting and electronic commerce company, Monday announced that its founder and CEO, Jens Molbak, is the recipient of this year’s Ernst and Young Pacific Northwest Entrepreneur of the Year award in the service category.

The award recognizes entrepreneurs who have demonstrated excellence in innovation, financial performance, and personal commitment to their business and community.

A panel of business and civic leaders based in the Pacific Northwest selected Mr. Molbak for his work in developing the Coinstar self-service coin counting machine. The on-line machine, found in more than 5,700 supermarkets around the country, makes it easy for consumers to turn their accumulated change back into cash.

The other two finalists in the service category were John T. Boden of Market Contractors, Ltd. and Robert McCausland of Home Mortgage USA.

Past recipients of the Pacific Northwest Entrepreneur of the Year award, now in its ninth year, include Howard Schultz, founder of Starbucks Coffee and Jeff Bezos, founder of Amazon.com.

As the winner in the service category, Mr. Molbak will now go on to the national Entrepreneur of the Year competition to be held later this year in Palm Springs.

Mr. Molbak got the idea for a self-service coin counting machine after moving from the west coast to the east coast and back again. Each time he moved, his growing jar of coins was the last thing to go into the moving truck. Finally in 1989, while a graduate student at Stanford University, Molbak decided it was time to take action. He and his wife stood outside supermarkets interviewing shoppers about their change. The interviews confirmed Molbak’s suspicions, Americans had millions of coins hidden away at home. Two years later Coinstar was founded.

Today, Coinstar has processed more than $1.4 billion of America’s change in more than 49 million customer transactions. In 1998 alone, Coinstar’s network of machines placed 15,838,542,632 coins back into circulation, resulting in Coinstar’s surpassing the U.S. Mint as the leading supplier of coin to the U.S. economy.

Coinstar Inc. and its subsidiaries provide consumers and retailers with value-added services that increase customer loyalty and retailer profitability. The Coinstar network currently delivers the company’s self-service coin counting product to more than 5,700 leading supermarkets in 38 U.S. states, the United Kingdom and Canada. The company’s new Coinstar Shopper product is designed to bridge the gap between the Internet and the store. Consumers can call 1-800-928-CASH, or visit http://www.coinstar.com for the location of the nearest Coinstar machine.

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Money Talks

In response to the continued criticism of card issuers targeting college students, MasterCard announced this morning it is renewing its support for a national educational program for college students and their parents. The program is anchored around a free brochure called ‘Money Talks’ which encourages parents to take an active role in their child’s financial literacy. The ‘Money Talks’ program was developed last year in association with Washington, DC-based College Parents of America. The educational initiative was introduced by MasterCard in 1998 and was also supported by MBNA. More than 25,000 ‘Money Talks’ brochures are now in circulation. College Parents of America has also endorsed MasterCard?s ‘Fundamental Principles on Serving the College Segment’, a set of guidelines for credit card issuers serving the college market. CPA charges a $25 annual membership fee.

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Chargeback Report

A new report from Gartner Group says the average chargeback rate to merchants for credit card transactions on the Internet is about 15%, and can soar as high as 30% for merchants delivering digital products immediately at the time of purchase. Gartner says merchants that do not address the potential growth in costs associated with Internet fraud and chargebacks will face losses that will threaten the viability of their E-business. The new report also identifies several fraud detection methods, including address verification services, rules-based screening services, card verification methods and digital certificate systems.

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People’s Card Head

Mark K. Vitelli has been named executive vice president of Credit Card Services at People’s Bank. Vitelli will be responsible for overseeing the bank’s national and international credit card businesses.

Most recently, Vitelli was senior vice president, national credit card, where his aggressive use of technology has helped People’s achieve one of the most efficient operations in the credit card industry.

“Mark has been instrumental in the success of our national credit card business,” said David E.A. Carson, People’s chairman and CEO. “His leadership has brought the business to its current position as the 17th largest issuer in the U.S. with the best asset quality of the top 25 issuers.”

“Mark has a keen understanding of the credit card business,” said John A. Klein, People’s president, and the former head of Credit Card Services. “He has been a major architect in the design and development of our database marketing initiatives and our risk management capabilities; all critical to accomplishing our marketing and asset quality objectives.”

Vitelli joined the bank in 1984 as a management trainee and has served in various management positions throughout the bank. In 1990, he was promoted to vice president, area manager in People’s Hartford Region. In 1991, Vitelli became vice president, Consumer Credit. And in 1993, Vitelli was made first vice president, Consumer Credit, responsible for credit card administration and strategic planning, including finance, operations, asset protection and the consumer lending business.

Widely regarded within the credit card industry, Vitelli has spoken domestically and internationally on collections as well as automation, telephone services and securitization. He is a member of the Visa Risk and Operations Committee.

A Milford resident, Vitelli holds a bachelor’s degree in economics and history from Yale University and a master’s in business administration from Sacred Heart University.

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 more than $12 billion, 129 branches and 197 ATMs. People’s is a leader in commercial banking, residential lending, Savings Bank Life Insurance sales and supermarket banking. People’s ranks 17th nationally as an issuer of MasterCard and Visa credit cards.

People’s subsidiaries offer brokerage services through People’s Securities, Inc., asset management through Olson Mobeck & Associates, Inc., equipment financing and leasing through People’s Capital and Leasing Corp., and insurance services through R.C. Knox and Company, Inc.

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WWW Commerce

Explosive growth of the Internet will thrust Internet purchases sky high. In recent market research, International Data Corporation reports the amount of commerce conducted over the World Wide Web will top a staggering $1 trillion by 2003.

“Because of the increase in the number of people who make purchases over the Web, the growth of the average transaction size, and the adoption of the Web as a viable vehicle for business procurement, Internet commerce will grow substantially,” said Carol Glasheen, director of primary research and market models at IDC.

According to IDC, the number of users who make purchases over the Web will jump from 31 million in 1998 to more than 183 million in 2003. Furthermore, there is ample opportunity to expand the 183 million as it will represent only 36% of all Web users.

Although the number of Web users is increasing in many foreign countries, Internet commerce is currently U.S.-centric. In 1998, 56% of Web users resided outside the United States; however, non-U.S. Internet commerce accounted for only 26% of worldwide spending. By 2003, IDC estimates 65% of Web users will be international, and the United States will account for less than half of worldwide Internet commerce.

“There are several reasons for the U.S. focus today,” Glasheen said. “For example, home PC penetration and the percentage of business PCs that access the Internet are much lower outside the United States. Additionally, the smaller number of users and slightly smaller transaction sizes outside the country generate smaller amounts of commerce. But this is changing as Europe and other regions quickly accept the Web.”

IDC’s report, The Global Market Forecast for Internet Usage and Commerce (IDC #B19262), sizes the market for Internet commerce, including the number of users and devices accessing the Web, the value of commerce transactions per user, and the number of pages on the Web from 1995 to 2003. The forecast is segmented by region (the United States, Canada, Western Europe, Asia/Pacific, Japan, and the rest of world) and user segment.

The market sizings and forecasts included in the report come from IDC’s Internet Commerce Market Modela, which is based on more than 40,000 primary research interviews annually in 31 countries and on IDC’s supply-side forecasts for PCs, network computers, modems, and other technologies. This model offers a unique perspective on the Internet and provides a detailed understanding of Web demographics and behaviors.

To order a copy of the report, contact Sue Beauregard at 1-800-343-4952, ext. 4774 or at sbeauregard@idc.com.

About IDC

International Data Corporation is the information technology industry’s most comprehensive resource on worldwide IT markets, trends, products, vendors, and geographies. IDC provides data, analysis, and advisory services to the world’s leading IT suppliers as well as IS professionals in finance,

insurance, entertainment, advertising, consumer goods, and publishing. IDC’s research and opinions are based on the results of more than 300,000 end-user surveys, in-depth competitive analysis, broad technology coverage, and strategic analysis. IDC is committed to providing global research with local content through its 500 analysts in more than 40 countries worldwide. Additional information on IDC can be found on its Web site at http://www.idc.com.

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Chinese Payment Network

Intermost Corporation yesterday announced that it has signed a joint venture agreement with Jiayin Investment Company Ltd. to develop China’s first network payment system. Jiayin’s telephone banking system and computer network technology is used by 75% of commercial banks in Shenzhen, the high-tech and information technology capital of China.

The name of the new company is tentatively called Jiayin Electronic Payment Technology Co. Ltd., subject to the company registrar’s approval. Under the terms of the agreement, Intermost will hold 70% interest in the joint venture company. Jun Liang, President of Intermost, said, “The registered capital of the new company is 5 million RMB. However, total investment for the new business is expected to be much more.”

Mr. Liang continued, “This joint venture comes during a major growth stage in the Chinese Internet market. The number of Internet users has grown steadily since China lowered its nationalized Internet access fees in March. Since then, the number of Internet users in China has ballooned from about 2 million to over 5 million. That’s a 150% increase in three months; China has suddenly become one of the largest Internet-user communities in the world. Intermost has a significant opportunity here since there is a tremendous bottleneck caused by the lack of a national electronic payment system. E- commerce applications are extremely limited in this market. Through our joint venture, we will be able to promote Jiayin’s proprietary E-commerce system, which is already a market leader, both technologically and in marketshare.”

Jiayin also has an exclusive agreement with the Shenzhen Financial Settlement Center, a central bank organization in Shenzhen, to pilot test a telephone and Internet payment system. The final version of the Internet payment system has been completed and is awaiting approval from the People’s Bank, China’s central banking authority. Jiayin will assign all related existing contracts, technology and patents to the joint venture and will no longer operate payment-related business in China.

Intermost is the first US-listed information technology firm from China. The Company is an Internet content provider in China, focused on business-to- business content hosting and maintenance. Intermost is a market leader in providing services to large organizations and export-oriented companies. Investor information can be found on the web at: http://www.MarketManagement.com or http://www.Intermost.com .

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EasyPay Server

Atlanta-based NIIT introduced ‘EasyPay Server’ this morning. The new solution will enable service-oriented organizations, such as utilities and credit card companies, to directly present electronic bills to the consumer for payment via the Internet. Billers will also benefit from enhanced cross-selling revenue opportunities, improved bill and statement analysis and the flexibility to choose between two modes for implementing billing and payment solution: the ‘Biller Direct’ mode and the ‘Consolidated’ mode. The ‘Biller Direct’ mode allows the user to directly access the biller’s website, while the ‘Consolidated’ mode allows multiple billers to work through an Internet service provider to deliver one consolidated electronic bill to the consumer. NIIT says it is working closely with CheckFree to provide the consolidation and payments services to large billers, consumers and financial institutions.

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Schlumberger 20 Years

Schlumberger celebrated 20 years of innovation in the smart card business at a press conference in Paris last week. Schlumberger manufactured the very first commercial smart card and lead the way for new mass-market applications such as with banking cards, GSM cards and phone cards. The company is now looking forward to the way this widely accepted technology will impact the way we work, travel, communicate and live in the twenty-first century.

The key benefit of smart cards remains the exceptional level of security and privacy they deliver in a personal and portable form. But accelerating performance and major advances in software mean they are no longer simply just ‘a better way’ of accessing networked services. They are the key enablers for a vast range of new services such as e-commerce and mobile banking.

“The first smart card dramatically reduced levels of bank card fraud,” says Olivier Piou, Schlumberger Vice President Smart Card Products. “Today’s smart card can secure complex e-commerce transactions. Tomorrow’s card will empower the individual and unlock the full benefits of the digital age.”

Market Catalyst

Today the smart card is already catalyzing markets around the world for example banks are reducing fraud and entering new markets such as on-line bill payments, secure stock trading and e-cash, telecommunications operators are delivering personalized online services to subscribers, corporations are securing access to PCs and networks, and transport operators are speeding operations with contactless electronic tickets.

The current rate of evolution of the smart card means that by 2005, cards will offer over 1MB memory – five times as much as the most advanced cards currently available – and processing capability will be an order of magnitude higher than today. On the software side we will see the increasing use of open systems and the introduction of enhanced security with cryptography and biometrics becoming standard. Smart cards will also be ‘network-friendly’ with their own IP number.

This will radically change the way that cards are able to interact with their owners, storing preferences and supporting multi-media communications and graphical interfaces. These developments will permit applications to be developed and introduced with astonishing speed, similar to that experienced over the past ten years with the PC.

Technological Convergence

At the same time we are seeing the convergence of technologies and communications methods: banking services are available over the mobile phone, soon Internet services will be available via a host of different media such as digital television, mobile phones and public payphones, and e-purse and city purse developments are seeing the integration of transport, retail,parking and other public services.

All these developments require a single portable identity system that can easily and securely recognize the individual user of the service.

This is where the smart card comes into its own. Smart cards have already been accepted as the most portable and secure system. With the introduction of biometrics and additional cryptographic capabilities to ensure even higher levels of security, individuals can carry their own personalized digital ID around with them: “smart cards maketh digital man.” Enter your smart card into your mobile phone, banking terminal or computer, present it to your doctor or at the airport security counter, and it will enable secure access to all the appropriate information in order to allow you to communicate, execute financial transactions, be reimbursed for medical expenses and travel freely.

“The 21st century will usher in the digital age and smart cards will provide the key to access its benefits,” says Olivier Piou. “The way that commerce has functioned for the last two millennia, via face-to-face contact, written signatures, handshakes and cash, will be fundamentally changed with electronic transactions. Smart cards are the solution and in the next twenty years every person on the planet will use the technology.”

Schlumberger believes it has a unique experience in all the different domains including smart cards, terminals, servers and systems integration expertise to facilitate this vision of the future. Irwin Pfister, Executive Vice President Schlumberger Test & Transactions, says, “With the objective of enhancing everyday life, improving mobility and communications, Schlumberger as been providing smart card-based solutions for twenty years and is uniquely positioned to meet the demands for ever more far-reaching applications.”

One Universal Card

What stands in the way of progress? In the short term, it’s almost certainly simple issues such as arrangements that allow issuers to share multi-application cards; and a culture shift which will see individuals accept the benefits that networks bring, and put their trust and ‘digital secrets’ onto their personal smart card. A watershed will probably occur when users are able to buy and configure their own cards. That will make the ‘universal card’ a reality, and it’s technically possible today.

“We deliver the technology required for service providers to share one universal card today,” adds Olivier Piou. “It would be already technically possible in 1999 for individuals to download their personal selection of different services onto a card. What would be required for this to become the norm, is for individuals to recognize that it will bring value to their everyday life and encourage a change in the way cards are issued.”

About Schlumberger

Schlumberger Smart Cards & Terminals is the leading provider of smart card-based solutions worldwide, shaping the new world of smart solutions by providing leading-edge technology to enable innovative smart card and terminal applications that enhance the security and convenience of businesses and communities of all kinds. Schlumberger smart card solutions encompass a wide range of cards, terminals, development tools and support in open configurations for operators, developers, integrators and distribution worldwide. As part of the Smart Village(R) vision, the Schlumberger offer includes the milestone Cyberflex(TM) card, the industry’s first Java(TM)-based smart card. The Smart Cards & Terminals group operates 45 facilities in 34 countries across the globe. Additional information is available on the World Wide Web at http://www.slb.com/smart cards.

Schlumberger Test & Transactions is the parent division for Schlumberger Smart Cards & Terminals and Schlumberger Automated Test Equipment, leveraging the combined strengths of the two business units to provide leading-edge, cost-effective solutions to customers.

Schlumberger Test & Transactions is a business unit of Schlumberger Limited, a $11.8 billion global technology service company providing oilfield services, natural resources management, transactions-based technology and associated systems, and semiconductor test equipment.

Cyberflex and Cardlet are trademarks and Smart Village is a registered trademark of Schlumberger. Java and Java Card are trademarks of Sun Microsystems, Inc.

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Card Backs

Faced with immense pressure from major banks, VISA and MasterCard logos will likely drop off the front of some payment cards by the end of this year. MasterCard’s board voted last week to permit certain issuers to move the MasterCard logo to the back of their debit or credit cards. However, MasterCard is requiring that issuers making the move commit to issuing more MasterCards. MasterCard, which announced earlier this year it was re-focusing on the needs of key members, was expected to give in to the logo placement issue first. However, VISA took some of MasterCard’s thunder away, as its International board decided earlier this month to launch a pilot, whereby any issuer of VISA’s off-line debit product, the ‘VISA Check Card, could test moving the VISA logo to the card back. The VISA pilot will begin later this year. In January Citibank quit VISA’s U.S. board and began a migration to issue more MasterCards after MasterCard showed more responsiveness to Citibank’s agenda. Citibank’s agenda included lowering its costs associated with the card brand and gaining more flexibility in building its ‘Citicard’ brand.

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EDS – CUNA

CUNA Service Group, and EDS have just expanded their 20-year business relationship to include Internet-based services that simplify IRA program management for credit unions.

CSG is the only IRA administrator that serves credit unions exclusively. Therefore, most credit unions with IRA programs choose to have CSG manage their entire program administration. CSG handles all back-office administration, including tax reporting and periodic payment calculations. Whether managed by CSG or internally, CSG’s electronically-enabled products and services help credit unions become more efficient, effective and compliant with federal laws governing IRAs.

“Credit unions will find that processing time is dramatically shorter with this fully automated, paperless system — which is part of our long-term goal to offer the products and services to make credit union operations smooth and successful,” said Peg Nugent Rectanus, senior vice president for CSG. “EDS, using their electronic business expertise, is helping us connect systems to make accessing and sharing data with customer credit unions faster, more flexible and more dependable.”

EDS helps IRA program administration become faster, easier and more efficient with an electronic data delivery service that links credit unions to CSG via the Internet. This Web-based technology, called Connect One, can accept any data from any type of system in any format that needs to be shared between one financial institution and another. Connect One electronically reformats the data, then transmits it safely to its destination without having to make even a tweak to current systems. Credit unions handle data in many formats, including credit card transactions, share drafts, checks, settlements with U.S. Central and Federal Reserve transactions, that Connect One transmits electronically. Credit unions can access the IRA system through Connect One Link, the Internet doorway to both systems.

“Through our long-standing relationship with CSG, EDS has built in-depth knowledge of CSG’s products, services, customers and the industry,” said Dana Rowlett, president of EDS’ Credit Union Industry Group. “Based on our relationship and that knowledge, we hope to continue to leverage EDS’ core credit union products to build end-to-end electronic interfaces to CSG products to better enable electronic business across the industry.”

Connect One is part of an EDS-developed technology that moves data from one company to another without making system changes, which makes system implementation a breeze. EDS processes 139 million transmissions per month between different types of businesses: between one financial institution and another, between doctors’ offices and insurance companies, and between retailers and suppliers, to name a few. This along with the new 20,000-employee E.Solutions organization supports EDS’ focus on electronic business.

With its network of affiliated state credit union leagues, Credit Union National Association (CUNA) serves more than 90 percent of America’s 11,200 credit unions, which are owned by more than 77 million consumer members. Credit unions are not-for-profit cooperatives providing affordable financial services to people from all walks of life. For more information on CSG and CUNA, visit the CUNA and Affiliates Web site at http://www.cuna.org.

EDS, a leader in the global information technology services industry for more than 35 years, delivers management consulting, electronic business solutions, and systems and technology expertise to improve the performance of more than 9,000 business and government clients in about 50 countries. EDS reported revenues of $16.9 billion in 1998. The company’s stock is traded on the New York Stock Exchange and the London Stock Exchange. Visit EDS via the Internet at http://www.eds.com.

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