Sears Card Stumble

Second quarter operating profit for Sears, Roebuck and Co.’s credit card portfolio dropped 13.6% compared to 2Q/97.  Meanwhile, the percentage of Sears goods and services charged to the ‘Sears Card’ has declined to 52% from 55% one year ago. However, managed credit card receivable balances grew 3.3% from the second quarter of 1997, while decreasing 4.2% from 1997 year-end levels. Since 40% of Sears’ profits flow from its credit card operations, Wall Street reacted to yesterday’s earnings report by pushing Sears shares down by 9.5% to close at $51.31. The decline in the ‘Sears Card’ is driven primarily by the intense pricing competition in the bank credit card business whereby offered interest rates have plummeted to their lowest level ever. Sears says the decrease in card receivables is due to the seasonal nature of Sears retail business while growth over the comparable prior-year quarter has been driven by balance growth in existing accounts. For 2Q/98 managed credit card receivables logged $27.7 billion compared to $28.9 billion at EOY 97. Credit card chargeoffs declined to 7.37% from 8.12% for the first quarter. Sears’ 2Q/98 full earnings report is available via [www.carddata.com][1].

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

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Paymentech Up 27%

Paymentech, Inc. reported Thursday that net income for the fourth quarter ending June 30, was $5.0 million, a 27% increase year-over-year.  This compares with earnings of $3.9 million for the fourth quarter ended June 30, 1997. During the June 1998 quarter Paymentech processed approximately $12.7 billion in sales volume and approximately 519 million bankcard and third-party authorization and capture transactions.  For the fiscal year 1998, sales volume processed increased by 19% to $49.3 billion from the previous fiscal year.  Total transactions processed increased 41% to 1.9 billion.

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ATM Fever

A study released this morning by Mentis Corp. reveals that banks continue to aggressively pursue the deployment of ATMs in their retail delivery strategies.  In 1997, the number of installed ATMs owned by banks increased to just over 125,000; up from just over 105,000 in 1996.  Mentis research indicates that this increase has been driven by rising off-premise placements which in turn has been driven by potential surcharging revenues. Nevertheless, while surcharging is a major driver for ATM deployment, Mentis research shows that banks are attempting to accomplish other goals through ATM deployment.  Large banks see ATMs as a way to increase their contact with existing customers, enhancing opportunities for cross-selling and improving customer service.  Small banks, on the other hand, see ATM deployment as a defensive strategy. Mentis also studied the deployment of limited-function cash dispensers. Since 1995, the installed base of cash dispensers more than doubled; from just over 18,000 to more than 37,000 in 1997, representing 30% of the total installed base. Although the actual number of ATMs acquired by large banks in 1997 is larger than that of 1996, ATMs owned by large banks represented 60% of all bank-owned ATMs in 1997, compared to 64% in 1996. Mentis concludes this decline may be the first sign that the installed base of ATMs among these banks is beginning to reach saturation.

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GlobeSet in Turkey

GlobeSet Inc.  announced a new partnership agreement with Info Otomasyon & Entegrasyon A.S. of Turkey to license the GlobeSet Payment System. The GlobeSet Payment System is a SET software solution that allows consumers, merchants and financial institutions to conduct secure payment card transactions over the Internet. Info, the latest OEM channel partner to sign an agreement with GlobeSet Inc., provides the company with an entry into the Turkish IT, financial and retail markets. Since 1981 Info has been a leading systems integrator in the Turkish IT marketplace, completing large-scale electronic commerce and banking projects for customers in the finance, telecommunications and public sectors. A full SET e-commerce implementation with Yapi ve Kredi Bank has already been completed. Info will integrate GlobeSet products into their customer’s existing payment infrastructure.

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Metris Steamroller

Metris Companies’ card portfolio grew by $264 million or 7% during the second quarter, primarily due to a spring marketing campaign that generated 300,000 accounts and the purchase of $100 million out-of-market card portfolio from Huntington Bancshares. Metris ended the second quarter with 2.4 million accounts and logged $800 million in 2Q volume. The managed net interest margin for 2Q/98 was 12.7%, compared with 13.3% for the first quarter and 13.6% for the second quarter of 1997. The managed 30+ day delinquency rate was 7.4% at June 30 compared to 7.4% at March 31 and 5.9 percent at June 30, 1997. The managed delinquency rates were favorably impacted for the current and prior quarters by approximately 10bp due to the KeyCorp and Mercantile portfolio acquisitions.The managed net charge-off rate was 10.6% for the second quarter compared to 8.8% for 1Q/98 and 9.0% for the second quarter of 1997. For a complete look at Metris 2Q earnings and historical portfolio data visit [www.carddata.com][1].

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

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Quarterback VISA

MBNA and the NFL Quarterback Club announced Wednesday the launch of the ‘NFL Quarterback Club VISA’ credit card program. The new program is an enhancement to MBNA’s NFL VISA credit card program, which began in the fall of 1995 and now has more than 1.2 million cardholders. The ‘Quarterback Club VISA’ offers cardholders a custom-designed color action shot of four marquee players including  John Elway of the Denver Broncos, Brett Favre of the Green Bay Packers, Barry Sanders of the Detroit Lions, and Steve Young of the San Francisco 49ers. The new card also offers cardholders a chance to win a trip to the annual ‘Quarterback Challenge’, free admission to the Pro Football Hall of Fame, merchandise discounts, and the guaranteed lowest rate for Sports Illustrated subscriptions.

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Volume Driver

Platinum cards are stealing wallet share from gold/basic cards and rewards cards are capturing an additional 11% of total wallet spending. The findings come from the J.D. Power and Associates ‘1998 Comprehensive Credit Cardholder Study’, due out next month. The study also found that platinum cards have pushed total credit card spending higher.The study also reveals that 26% of cardholders now have a platinum credit card and are accepting platinum card solicitations at twice the rate of non-platinum cards.  Although the platinum card captures 25% more total wallet spending than the gold/basic card, rewards cards still capture the greatest share of wallet spending,19% more than the platinum card. Final results are scheduled for release August 11.

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Wells E-Bill Pilot

Wells Fargo has launched a pilot to present consumer bills on its web site that will lead to a full roll-out next year. The six-month pilot, involving a group of Wells employees, will enable participants to receive their Wells Fargo credit card bills online the day after each billing cycle concludes. The biller-branded, richly formatted bills will contain all product/disclosure information typically included in mailed statements. Users can record notes about specific payments, and file bills electronically for future reference.The pilot is the first of its kind to be supported with new technology developed by MSFDC, a joint venture between Microsoft and First Data Corporation. Initially, pilot participants will receive their bills online only through MSFDC, but the Wells Fargo service will ultimately be capable of delivering all of a customer’s bills, even when presented through other sources.

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Bell Signs TNS for Wireless Solution

Transaction Network Services, Inc. announced yesterday that it has signed an agreement with Bell Atlantic Mobile to begin offering a seamless end-to-end wireless solution for credit card processors who want to provide processing services to merchants and vendors who do not have access to telephone lines.

The Bell Atlantic Mobile AirBridge wireless data network will be interconnected with TNS’ TransXpress X.25 network, eliminating the need for merchants to use dedicated or shared telephone lines to carry transaction traffic.  Because there is no need for a physical “hook-up,” the solution is particularly attractive to mobile merchants such as taxi and limousine drivers, as well as in-home service providers such as plumbers, electricians, and home delivery companies.  Mall kiosks and sporting and special event retailers, as well as fixed site merchants, will benefit from the freedom of the wireless solution as well.

“Our decision to incorporate wireless data into our network services is based on our ongoing commitment to offer processors new technologies that will enable them to broaden their electronic merchant base,” said Brian Bates, senior vice president and general manager of TNS’ POS division.  “Moreover, we want to ensure that the implementation process, especially when it involves new technology, is made as easy for our customers as possible.  We also want to ensure the same high level of TNS customer support as processors bring up new technologies, so by offering turnkey solutions, we can minimize customer effort and maximize customer satisfaction,” Bates explained.

“This agreement with TNS is consistent with our strategy to focus on the growing needs of the huge retail market for faster, cheaper credit card processing,” said Bill Davidson, vice president-wireless data sales and marketing for Bell Atlantic Mobile.  “Our AirBridge Wireless Retail Solutions Group will work with TNS to provide merchants with flexible options for conducting credit card transactions.”

Bell Atlantic Mobile owns and operates the largest wireless network in the East, covering 112,000 square miles, and the largest chain of retail outlets devoted exclusively to wireless voice, data and paging.  Based in Bedminster, NJ, Bell Atlantic Mobile has 5.5 million customers and 7,000 employees from Maine to Georgia and, through a separate subsidiary, in the Southwest. Through its “Wireless at Work…” community relations program, the company uses its technology to help individuals and communities improve security and emergency communications.  Bell Atlantic Mobile’s parent is one of the world’s largest wireless communications companies, with domestic operations in 25 states and international investments in Mexico, Europe and the Pacific Rim. For more information on Bell Atlantic Mobile visit: ;  on global operations visit: .

Transaction Network Services, Inc. (TNS), headquartered in Reston, Virginia, provides data communications services for transaction-oriented applications.  The company is listed on the NASDAQ Stock Market under the symbol TNSI.  Additional company information is available on the TNS website at .

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L.L. Bean Card Renews

MBNA and ME-based L.L. Bean extended the contract for the ‘L.L. Bean VISA’ credit card.  The long-term agreement also provides for a number of new enhancements to the program, a lower fixed interest rate of 15.99%, and the continuation of several popular money-saving features. The centerpiece of the cobranded card is the L.L. Bean ‘Outdoor Advantage Program’, which offers free regular FedEx shipping on L.L. Bean orders in the contiguous U.S. when you use the card; free monogramming on L.L. Bean catalog items and coupons applicable toward L.L. Bean merchandise based on the use of the card. The card was launched in 1996.

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