ACH Soars

Automated clearing house payments totaled more that 5.3 billion in 1998, a 17.5% increase over 1997, according to statistics released by the National Automated Clearing House Association at its PAYMENTS 99 conference. The total dollar amount of the transactions for 1998 was $16.4 trillion, up 17% from $14 trillion in 1997. These figures include government, and inter-bank and “on-us” commercial transactions. The number of direct deposits in 1998 increased by 16.1% over 1997, from 1.9 billion to 2.2 billion. The dollar amount increased from $1.85 trillion to $2.17 trillion, a 15.1% increase. The number of bill and other consumer debit payments made over the ACH Network in 1998 totaled 1.2 billion, a 16.9% increase over 1997. The dollar amount was $678 billion, a 17.7% increase. The number of bill and other consumer debit payments made over the ACH Network in 1998 totaled 1.2 billion, a 16.9% increase over 1997. The dollar amount was $678 billion, a 17.7% increase. Use of the ACH Network for business payments, which include business-to-business payments and intra-business cash concentration and cash management transfers, increased from 644 million payments in 1997 to 757 million in 1998, an 17.5% increase. The dollar amount of these payments exceeded $11 trillion. NACHA says this is the highest growth rate since 1991.

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MemberWorks Acquisition

MemberWorks Incorporated, a leading provider of innovative membership programs, announced Monday that it has acquired Quota-Phone, Inc., a privately-held wholesale provider of nationwide discount shopping services.

Quota-Phone, Inc. adds a broad portfolio of wholesale consumer products and services and a nationwide membership base of over three million members to MemberWorks. In addition, Quota-Phone brings established relationships with financial institutions and affinity groups, among others, to MemberWorks growing roster of client partners. The acquisition will expand MemberWorks current wholesale and MemberLink offerings.

“Quota-Phone fits perfectly with our strategy of delivering high-value membership-based direct marketing solutions,” said Gary Johnson, President and CEO of MemberWorks. “Quota-Phone broadens our product reach and provides a cost-effective means of delivering a wide variety of products and services. Their 17-year history of offering successful marketing solutions is a strong addition to the MemberWorks family.”

Barry Lewisohn, President of Quota-Phone, Inc. added, “I believe that Quota-Phone’s synergy with MemberWorks and the ability to tap into their well-developed infrastructure will allow Quota-Phone to significantly expand its client and customer base as well as add to our already broad product line.”

MemberWorks paid $9.25 million in cash and MemberWorks stock for all of the equity of Quota-Phone. The transaction will be accounted for as a purchase. Quota-Phone, located in White Plains, New York, will operate as an independent, wholly owned subsidiary of MemberWorks.

MemberWorks reported on October 8, 1998, that the SEC staff’s review of its revenue recognition practices was completed in connection with the reporting of its operations for fiscal 1998 and the SEC staff had not objected to the Company’s decision to presently continue to follow the revenue recognition practices consistently followed since its initial public offering in 1996. As the Company reported in its Annual Report for 1998, the SEC issued a press release on September 28, 1998 stating that the “SEC will formulate and augment new and existing accounting rules and interpretations covering revenue recognition, restructuring reserves, materiality, and disclosure;” for all publicly-traded companies. Until such time as the SEC staff issues such interpretative guidelines, it is unclear what, if any, impact such interpretative guidance will have on the Company’s current accounting practices. However, the potential changes in accounting practice being considered by the SEC staff could have a material impact on the manner in which the Company recognizes revenue. Any such changes would have no effect on reported cash flow or the economic value of the Company’s memberships.

Certain matters discussed in the news release are forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. These statements include statements regarding intent, belief or current expectations of the Company and its management. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that may cause the Company’s actual results to differ materially from the results discussed in the forward-looking statements. Among the factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: uncertainty as to new and existing accounting rules and interpretations; uncertainty as to the Company’s future profitability; the Company’s ability to develop and implement operational and financial systems to manage rapidly growing operations; competition in the Company’s existing and potential future lines of business; the Company’s ability to integrate and operate successfully acquired businesses and the risks associated with such businesses; the Company’s ability to obtain financing on acceptable terms to finance the Company’s growth strategy and for the Company to operate within the limitation imposed by financial arrangements; uncertainty as to the future profitability of acquired businesses; the ability of the Company and its vendors to complete the necessary actions to achieve a Year 2000 conversion for its computer systems and applications; and other factors. Other factors and assumptions not identified above were also involved in the derivation of these forward-looking statements, and the failure of such other assumptions to be realized as well as other factors may also cause actual results to differ materially from those projected. The Company assumes no obligation to update these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements.

Headquartered in Stamford, Connecticut, MemberWorks Incorporated is a leading provider of innovative membership programs.

MemberWorks offers its programs to increasingly sophisticated consumers seeking economy, efficiency and convenience in their purchase of products and services. As of March 31, 1999, there were approximately five million members enrolled in the Company’s programs.

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Corporate Platinum

American Express Corporate Services unveiled yesterday the ‘Corporate Platinum Card’ for executives at large and mid-sized companies. The program has been widely available for small businesses. Since Nov. 1997, more than 75 companies have enrolled 500 executives in a pilot program for the new ‘Corporate Platinum Card’. Participants surveyed during the pilot identified the “International Airline Program” and free enrollment in “Membership Rewards” as the most beneficial features of the new ‘Corporate Platinum Card’. While the annual fee for the card is $300, AmEx says that if a ‘Corporate Platinum Card’ member used each benefit just once, the total value of the services, if purchased separately, would be more than $5,000. The “International Airline Program” offers cardholders traveling overseas, who have booked a full-fare first class or business class ticket on participating airlines, a complimentary companion ticket with the same itinerary. However companion tickets may not be used for business travel.

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IVI Acquisition

Datacard Corp. said Monday that it has agreed to sell its Financial Systems POS subsidiary to IVI Checkmate. IVI says the strategic decision was driven by Datacard’s Financial Systems strong presence in the petroleum industry. Datacard’s Financial System subsidiary introduced its ‘Jigsaw’ terminal product line three years ago. The ‘Jigsaw’ system has received ‘Class A’ certification on several financial service networks, including Vital Processing Services.

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Bylaws Slammed

American Express CEO Harvey Golub predicted Monday that the U.S. Department of Justice will either overturn VISA and MasterCard’s bylaws prohibiting members from issuing card products offered by American Express and Discover or reach a settlement with VISA and MasterCard. Golub points out that similar bylaws have been pre-emptively struck down around the world enabling AmEx to establish partnerships with more than 40 foreign financial institutions. AmEx also announced yesterday a renewal of its efforts in the USA to reach out to banks to do co-branding relationships or buy existing portfolios. Golub originally invited VISA and MasterCard members, three years ago, to do business with AmEx, in violation of the card associations’ bylaws. Golub’s comments were made, yesterday and three years ago, at a Faulkner & Gray conference and reported on by American Banker. Faulkner & Gray and American Banker are both units of Thomson Financial Services.

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Wiz Picks GERS

GERS Retail Systems announced that The Wiz, New York area’s largest consumer electronics retailer, has chosen the GERS Retail Suite of products to facilitate its day-to-day operations.

“We’re pleased to welcome The Wiz to our family of clients and are happy they chose our system to handle their operational needs,” said Jim Henderson, GERS’ President and CEO. “The agreement with The Wiz marks GERS’ largest online POS installation to date, making this opportunity extremely important to us.”

Along with GERS Base Package, The Wiz will purchase the Radio Frequency Warehousing, Bar Coding, POS, Customer Service, Credit Card Interface, Third Party Credit Card Authorization, and EDI Interface modules. The Wiz is scheduled to begin using GERS’ system in July.

Headquartered in Edison, New Jersey, The Wiz will utilize 1,000 user licenses in its 40 New York City area stores. The retailer sells a broad assortment of electronics and music, including stereos, CD players, DVD, computers and TVs. Future services planned for The Wiz include store ticket sales for events at Madison Square Garden and Radio City Music Hall and payment centers for Cablevision customers.

Built within an Oracle relational database to facilitate optimal growth, the GERS Retail Suite of products is a comprehensive management tool that alleviates retailers of manual tasks by providing real-time automation of integral daily tasks such as sales, inventory, merchandising, and accounting, with the flexibility to shape the system to their individual needs. The GERS system features clear menus with friendly pop-up windows to guide users through each procedure to save time and increase employee productivity.

Commenting on the agreement with GERS, Thomas Dolan, Senior Vice President and Chief Information Officer of Cablevision, said, “As Cablevision grows to become the New York area’s leader in entertainment and telecommunications services, customer retention is increasingly important. The integration of key technical systems with our current systems will assure our ability to further strengthen customer service and satisfaction.”

Bill Marginson, President of The Wiz, added, “Our significant investment in technology is an acknowledgement of how important excellent systems are to The Wiz’s mission and the success of our long-term strategies.”

San Diego-based GERS Retail Systems provides fully-integrated, Open Systems computer solutions software, hardware, and comprehensive training for retailers of softlines, hardlines, department stores, home furnishings retailers, and consumer electronics/wireless retail operations.

Cablevision Systems Corporation is one of the nation’s leading telecommunications and entertainment companies. The Company’s cable television operations serve more than 3.4 million customers located primarily in the New York, Boston and Cleveland Metropolitan areas. Rainbow Media Holdings, Inc., a 75% owned subsidiary of Cablevision, manages entertainment, news and sports programming services. Rainbow Media’s assets include ownership interests in American Movie Classics, Bravo, Madison Square Garden, L.P., Radio City Entertainment and FOX Sports Net. The Company also owns and operates The Wiz consumer electronics stores at 40 locations in the New York Metropolitan area as well as Clearview Cinemas, operators and consolidators of community-based movie theatres.

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First Quarter 1999

The seasonal contraction in credit card outstandings has been verified again as portfolio results for the first quarter begin to trickle in. According to CardData’s ‘1Q/99 Portfolio Survey’ (www.carddata.com) the first quarter contraction appears to be somewhat modest this year. CT-based People’s Bank added more than 60,000 accounts during the first quarter despite a $100 million+ drop in outstandings. Likewise First Virginia, which recently sold its portfolio to MBNA, posted a slight gain in gross accounts, active accounts and cards-in-force despite a decline in first quarter outstandings. First Virginia reported Friday that its sale of $101.8 million in card loans to MBNA was completed last month and resulted in a one-time gain of $10.7 million. First Virginia also sold $51.5 million of its portfolio late last year.

1Q/99 PORTFOLIO STATS

ISSUER OUTSTANDINGS VOLUME ACCOUNTS ACTIVES CARDS

People’s Bank $3,633,404,606 $1,730,588,253 2,767,657 1,766,538 3,492,742
KeyCorp $1,338,322,657 $ 508,133,842 1,087,488 622,992 1,418,802
First Virginia $ 104,231,000 54,453,000 202,000 110,000 233,000
FirstMerit $ 98,598,309 59,425,798 100,273 61,815 123,152
Calif. Commerce $ 61,680,179 29,515,056 45,923 27,617 66,675

Source: CardData (www.carddata.com)

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Edify Signs Six Community Bank

Edward J. Wehmer, President and CEO of Wintrust Financial Corporation, announces a new Internet banking initiative for their six community banks.

Wintrust Financial has signed a contract with Edify Corporation to provide Wintrust’s community banks with full service Internet banking. This Internet capability, scheduled to be launched in the second quarter of 1999, is another step in Wintrust providing a full service alternative delivery system for its community banks’ complete array of products and services.

This electronic banking system will allow customers to access account information and perform secure transactions across the Internet, 24 hours a day, seven days a week. As a full service Internet bank, customers will be able to log on to their bank’s personalized Web page to access a variety of products and services including account balance review, funds transfer and electronic bill pay. It uses leading bill payment processors like CheckFree(R) and Integrion(R). This system is also fully compatible with personal financial management software like Intuit Quicken(R) and Microsoft Money(R). Eventually customers will be able to submit loan applications, look up the status of their trust and investments, and trade securities electronically. Wintrust’s insurance premium finance subsidiary, First Insurance Funding Corp., will also be using this system to distribute its products and services more efficiently, while providing customers real time access to their loan accounts.

“We see Internet banking as another important delivery system for our special kind of community banking,” says Wehmer. “Most of our customers still will want to visit our banks and interact with their personal banker. But for those more ‘technologically demanding’ customers, we wanted to provide them a state-of-the-art electronic banking system. This Internet banking technology is the portal for future high tech distribution initiatives by Wintrust’s community banks and our Wintrust Asset Management subsidiary.” Wehmer continues, “while we still want to provide customers with good old-fashioned banking service, there is a growing demand to provide these same services electronically. We want our banks to be a leader in this area as well.”

Lloyd Bowden, Wintrust’s Executive Vice President of Technology states, “technology is a great equalizer for community banks like ours. It enables us to have high tech services such as Internet banking that are every bit as advanced as the big banks. And because we can license these systems and avoid internal development, our technology is advanced, our costs are less, and our speed of delivery is quicker.”

Wintrust is a financial services holding company whose common stock is traded on The Nasdaq Stock Market(R) under the symbol “WTFC”. Its six suburban Chicago community bank subsidiaries, each of which was founded as a de novo bank since December 1991, are located in high income retail markets — Lake Forest Bank and Trust Company, Hinsdale Bank and Trust Company, North Shore Community Bank and Trust Company in Wilmette, Libertyville Bank and Trust Company, Barrington Bank and Trust Company, N.A., and Crystal Lake Bank and Trust Company, N.A. The banks also operate facilities in Lake Bluff, Glencoe, Winnetka, Clarendon Hills and Western Springs, Ill. The Company’s finance subsidiary, First Insurance Funding Corporation, one of the largest commercial insurance premium finance companies operating in the United States, serves commercial loan customers throughout the country. Wintrust Asset Management Company, N.A., a new trust subsidiary, allows Wintrust to service customers’ trust and investment needs at each banking location. Currently, Wintrust operates a total of 21 banking offices. All of the Company’s banking subsidiaries are locally managed with large local boards of directors and local management. Wintrust Financial is one of the fastest growing de novo bank groups in Illinois.

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Convergent Acquisitions

Convergent Cos. Inc. announced Friday that it has acquired controlling interest of WebCash Corp. and Galaxy.NET Telecom Inc., both private companies, located in Campbell, Calif. for an undisclosed amount of cash and stock.

These acquisitions represent the completion of Convergent Cos. initial acquisition program to offer E-Commerce (one stop for credit card, electronic checks, 1-900 billing and 1-800 credit), solutions to websites and Broadcast capabilities to website hosted by the company.

WebCash is presently offered to its E-Commerce web site hosted customers. Prime Video, a wholly owned subsidiary of Convergent Cos., will provide proprietary video technology to the web hosting customers to provide the best video possible. The company plans to announce and exhibit this new service at the National Associations of Broadcasters show in Las Vegas April 19-21, 1999.

The company has completed a 24 month beta test of its WebCash service in which 300 web sites were enabled to use WebCash. During the beta test over 400,000 transactions with $4 million of commerce were successfully completed. The company has development work and testing on going with major corporations and expects to be able to announce in the near future the launches for these new customers.

The company currently hosts web sites for 300 customers and does web site development for 50 customers. Some of the customers use multiple company services.

Convergent Cos. and its acquired companies currently employ 24 full and part time people.

Convergent Cos. will expand its board of directors to seven persons. Michael Lindsay, CEO and president of Galaxy and WebCash will join the board.

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ABH Head Resigns

American Bank Note Holographics Inc. announced Friday that its CEO and Chairman has resigned. The resignation of Morris Weissman was effective immediately. Two weeks ago Salvatore D’Amato was re-appointed to the Board of Directors following the resignation of Jeffrey Silverman. D’Amato was the Chairman and President of ABH from 1983-1990. ABH is the world leader in mass-produced secure holograms for credit cards, ID cards and valuable documents.

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Toning Down

San Francisco/London-based GS Telecom, Ltd. is toning down its projections for sales revenues and the ‘ATTM Universal Card’. The company said Friday the independent analyst who made the projections is no longer considered “independent”. GS says it found out Thursday that Barrington Financial Securities is an affiliate of Switzerland-based Union Trading-Financial. Union Trading has been engaged by GS to raise $25 million in capital to acquire the ‘ATTM Card’ technology. The ‘ATTM Card’ is a multi-currency smart card that features phone card applications as well as ATM access. GS predicted last month it expects to produce annual revenues of about $1.5 billion by 2004 and issue one million ‘ATTM Universal’ cards over the next 36 months. Barrington said it found the GS figures to be “extremely conservative”. GS said Friday that until funding is available ATTM International, Inc. will have few staff and limited resources.

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