Chargeoffs Decline Again

Charge-offs among $237 billion of card-backed securities dipped slightly in April to 6.6% and remain significantly below last April’s rate of 7.1% according to Standard & Poor’s Credit Card Quality Index.  In other good news delinquency dropped 400 bp during April, hitting 5.2%.  Among major issuers reporting declines in chargeoffs:  Discover’s down 120 bp to 6.5%; Chase’s Chemical Master Trust dropped 90 bp to 6.1%;  and First USA down 20 bp to 5.3%. First Chicago’s Master Trust II reported a sharp increase of 120bp, to hit 9.7%.

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Elvis Card Lives

The Bank of Scotland is set to introduce the ‘Elvis MasterCard’ next week. The bank will be using Elvis impersonators to give out application information. An Elvis magazine and special retail discounts are also in the works. BOS will be offering an 11.9% introductory rate. The bank says it projects the Elvis card will surpass its highly successful ‘James Bond 007 MasterCard’. In a bit of irony, Elvis Presley never visited Britain except to refuel his plane.

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US Wireless Snags The Pyramid

U.S. Wireless Data, Inc. announced Thursday that “THE PYRAMID” arena will begin utilizing U. S. Wireless Data’s proprietary wireless credit card processing solution, the TRANZ Enabler, using GTE’s Cellular Digital Packet Data network.

The TRANZ Enabler solution will be employed throughout the arena at merchandise, souvenir and concessions stands as well as the ticket office. The Pyramid, located in Memphis, Tenn., is a 20,000 seat, state-of-the-art sports and concert arena. The Pyramid is the site of over 100 major live events annually including major rock concerts, all University of Memphis men’s home basketball games, NBA pre-season basketball games and NCAA basketball tournaments. The first event in which the TRANZ Enabler was employed was a concert featuring Eric Clapton on May 17, 1998. U.S. Wireless Data’s wireless credit card processing solutions are currently in use at a number of arenas and stadiums throughout the United States including:

the Fleet Center in Boston (home to the Boston Celtics & Boston Bruins), the Houston Astrodome (home to the Houston Astros), McNichol’s Arena in Denver (home to the Denver Nuggets and Colorado Avalanche), the Ice Palace in Tampa, Fla. (home to the Tampa Bay Lightening), Texas Stadium (home to the Dallas Cowboys) and Reunion Arena in Dallas (home to the Dallas Mavericks and Dallas Stars).

By implementing U.S. Wireless Data’s TRANZ ENABLER wireless solution, sports arenas and stadiums like The Pyramid are able to execute credit card payments without the added cost of additional telephone lines or tying up other existing phone lines. More importantly, throughput and productivity are enhanced as credit card transactions can be completed in 3-5 seconds versus 15-20 seconds using traditional dial-up credit card terminals. Greg Lowry, marketing manager for The Pyramid, commented, “We were extremely excited when U.S. Wireless Data presented us with a more efficient method to accept credit card payments in a timely manner. As host to as many as 20,000 customers at any one event, speed of service is the top priority. Long lines are very commonplace for purchasing both concessions and tickets, so throughput is a major issue for management. The U.S. Wireless Data wireless transaction processing solution provides the answer. We can now offer a better service to our customers and actually reduce our overall credit card transactions expenses.” Clyde Casciato, vice president of Sales for USWD stated, “The speed of the TRANZ Enabler is a key attribute in its appeal to the marketplace. The arena and live event industry is potentially an explosive and relatively untapped market for these wireless transaction processing solutions. The speed of clearing credit cards using these solutions means that merchants can keep lines moving and optimize productivity.”

USWDA’s proprietary enabling technology, TRANZ Enabler, converts a merchant’s existing dial-up TRANZ VeriFone credit card terminal into a high-speed wireless terminal. It provides merchants with a faster and more cost efficient way to transact business. The wireless transaction takes 3 to 5 seconds versus 11 to 20 seconds with a dial-up service. Going wireless means the merchant no longer needs a dedicated or shared telephone line to carry transaction traffic, thereby eliminating delays, busy signals and the cost to install or pay for monthly telephone service. And because it’s wireless, the merchant can transact business anywhere the customer wishes to buy, instead of being confined to a service counter with a telephone line. U.S. Wireless Data, Inc. has developed, tested and is now delivering new proprietary products, programs and standards for the transaction processing and credit card industry which utilizes wireless cellular digital packet data (CDPD) networks. USWD delivers the fastest and most cost-effective transaction processing solution to retail merchants in the United States today. The Company has joint marketing initiatives in place with GTE Wireless and Bell Atlantic Mobile.

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First STV Biometric Card

Product Technologies Inc. (PTi) announces that its smart card platform, SmartCity, was used to develop the first system combining a stored value application with biometric security on a single smart card. SmartCity also manages the system’s back office, including card issuing, transaction processing, settlement, and database management.

SmartCity is PTi’s turnkey smart card based e-purse (electronic purse) application that also provides a multi-application development platform and tools to systems integrators.

Army recruits entering basic training at Ft. Sill, Oklahoma, will receive cards carrying their fingerprints and loaded with $200 to $260 in salary advances to cover their initial expenses.

The last of three stored value applications being tested at Army bases by the Treasury Department’s Financial Management Service, the Ft. Sill project is meant to demonstrate that stored money on smart cards will save trainees, vendors and accountants the hours of paperwork currently consumed processing cash purchases on the base. Prior to the launch of the system in early March, recruits had to sign paper vouchers for every purchase, and the information then had to be transcribed into the Army’s accounting system before vendors could get paid.

“Multi-application solutions such as this one combining e-purse technology with biometrics on a smart card represents the future of the SmartCity application, ” said Bill Mangino, PTi’s president and chairman. “We are very pleased to be involved in such a ground-breaking and already successful project.”

The Ft. Sill project has already been recognized as an innovator in the security industry. At CardTech SecurTech `98, Mellon Network Services, the project’s system integrator, was presented with the Larry Linden Memorial “Innovative Security Technology Application Award” for its work on the Ft. Sill project. CardTech SecurTech, the largest smart card tradeshow of its kind in the world, was held in Washington, D.C., in April.

Convenience and High-Level Security

When the card is issued, a recruit’s right and left index finger are scanned and stored as an encrypted file on the card, not in an online database. This protects the user’s privacy, while providing a much higher level of security than PIN numbers.

Each card is then loaded with a cash value and set up with an adjustable “cumulative spend limit” that intelligently determines whether authentication is required for a purchase transaction. Low-value purchases are made without cardholder authentication, until $10.00 in cumulative purchases are made — allowing for fast throughput on low value/low risk transaction.

When the “cumulative spend limit” is reached, the card instructs the terminal to ask for a finger scan in order for the purchase to proceed. The terminal then compares the finger scan to the template stored on the card, and if there is a match, authenticates the cardholder as the rightful owner and authorizes the transaction.

Mellon Network Services was the project’s system integrator, under contract to the Financial Management Service. Gemplus provided the smart cards and Identicator Technologies provided the biometric technology. VeriFone, Inc. supplied the point-of-sale terminals.

About PTi

PTi is a leading supplier to systems integrators of smart card-based e-purse applications that can be used in combination with loyalty and other applications. It is headquartered in Middletown, CT, with a branch office in Moscow, Russia. Further information on the company can be found at: [http://www.prodtech.com.][1]

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

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SCIA’s New Officers

The Smart Card Industry Association (SCIA) has elected new officers for 1998 who will continue SCIA’s accelerating growth and manage its role in helping guide the worldwide smart card industry into the new millennium.

The four officers and their positions are Jim Lout of Precis Smart Card Systems, chairman; Peter J. Quadagno of Quadagno & Associates, Inc., vice-chairman; Bruce Caswell of IBM Smart Card Solutions, treasurer; and Jonathan Adams of Schlumberger Smart Card & Systems, secretary.

SCIA President and CEO Dan Cunningham will work with the new officers to grow membership and expand value-added member programs.

SCIA is a global trade association active in the smart card industry, which strives to stimulate the adoption, use, understanding and innovation of smart card technology in the marketplace. SCIA is also co-founder and a sponsor of CardTech/SecurTech, the leading advanced card and security technology conference.

For more information, contact SCIA at 191 Clarksville Road, Lawrenceville, NJ 08648; tel.:(800)848-7242 or (609)799-7032; or access SCIA’s web site at

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UK’s First Drive-Thru ATM

Britain’s only drive-thru ATM will be unveiled this morning by Barclays at Hatton Cross, near Heathrow Terminal 4.  The NCR ATM will be part of a six-month pilot by Barclays. By comparison NCR says it shipped 5,000 ‘Drive-Thru ATMs’ in North America last year. NCR says its U.S. research showed that consumers are at least 20% more likely to use a machine they can access from their car, than one they have to approach on foot.

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Free Travel-For-Life

Carlson Companies’ electronic shopper loyalty card program, ‘Gold Points Plus’, announced Thursday it will offer a grand prize of “Free Travel for Life” and scores of other prizes to lucky cardholders. The ‘Free Travel for Life’ program will launch June 1 and run through December 31.  The Grand Prize will provide one free vacation per year for two to destinations such as Australia, Europe, China and other locations around the world for the life of the winner. The ‘Gold Points Plus’ program, launched in January of last year and currently in test market in the Minneapolis-St. Paul region, has more than 550,000 active card users and 500 merchant locations in the program.

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NBS Nets $3 Million for Card Plant

NBS Technologies Inc reported Thursday that for the quarter ended March 31, 1998, net income increased to $2.6 million ($0.09 per share) for the quarter ended March 31, 1998, compared to $0.6 million ($0.02 per share) in the prior year. This increase is due primarily to the gain from the sale of the card plant in the United Kingdom. This was offset by higher depreciation and amortization charges, higher interest expense and the write-off of deferred financing costs.

Net income remained constant at $1.4 million ($0.05 per share) for the six month period.

On March 20th, the Company completed the sale of its card plant in the United Kingdom resulting in a gain of $3.0 million, net of provisions for taxes and other items. The net cash proceeds of $9.0 million were used to repay debt. In addition to reducing debt, the sale will allow the Company to focus its resources on high growth opportunities, as well as its issuance and transaction terminal businesses. NBS sees this as an exciting time for the introduction of new technologies, particularly solutions using smart cards and biometric identification.

This divestiture fits with the Company’s strategy of focusing energies on developing the technologies and expertise required to support the NBS position as a full-service provider of card services, card issuance systems, imaging systems, transaction systems and related services. Recently, NBS was awarded a contract, incorporating all of the Company’s product lines, to supply an advance security system in the main Harrods store in London, England. NBS will supply identity cards with digital imaging, magnetic stripe and bar code technology, and the related card readers, access control and information systems to assist Harrods in managing over 7,000 employees and concessions staff, as well as contractors and visitors when they are on Harrods premises. In addition to access control, the cards will be used for cashless vending in the staff restaurants and for time and attendance information. Computer systems at NBS are being examined to identify those that could be affected by the Year 2000 issue. Solution design, testing and implementation will be completed in a timely manner which should ensure NBS does not encounter any material adverse effects from the Year 2000 issue.

NBS is pleased to announce the appointment of Charles R. Walsh to the Board of Directors. He will replace the outgoing director Richard J. Schmeelk, whom we thank for his invaluable contributions. Mr. Walsh is a former Director and Executive Vice President and CEO of Chase Manhattan Bank’s nearly $30 billion worldwide credit card business.

While the Company’s short-term results continue to be impacted by changes in product mix, and investments in new products and markets, the management of NBS remains optimistic for the future as the market for NBS products and services remain robust.

Consolidated Statement of Operations
(Unaudited)

                                             Three Months Ended
                                                 March 31,
(in thousands of Canadian dollars)           1998          1997
                                       ————————
Sales                                   $  34,736     $  35,009
Cost of sales                              22,239        22,596
                                       ————————
Gross profit                               12,497        12,413
                                       ————————

Expenses
Selling, general and administrative        6,884         6,845
Research and development                   2,075         2,044
                                       ————————
                                            8,959         8,889
                                       ————————

Income before undernoted items              3,538         3,524
Depreciation and amortization               2,136         1,493
Interest – short-term debt                    420           276
             – long-term debt                 931           920
Other                                      (2,648)           38
                                       ————————
                                              839         2,727
                                       ————————

Income before income taxes                  2,699           797
Income taxes                                  124           196
                                       ————————
Net income for the period                   2,575           601
                                       ————————
                                       ————————

Net income per share                   $     0.09       $  0.02
                                       ————————
Weighted average common
shares outstanding (thousands)            29,981        29,981
                                       ————————
                                       ————————

Consolidated Statement of Operations

(Unaudited)

                                             Six Months Ended
                                                  March 31,
(in thousands of Canadian dollars)           1998          1997
                                       ————————

Sales                                   $  68,596     $  69,247
Cost of sales                              44,816        44,710
                                       ————————
Gross profit                               23,780        24,537
                                       ————————

Expenses
Selling, general and administrative       13,933        13,465
Research and development                   3,976         3,979
                                       ————————
                                           17,909        17,444
                                       ————————

Income before undernoted items              5,871         7,093
Depreciation and amortization               4,206         3,033
Interest – short-term debt                    890           515
         – long-term debt                   1,820         1,860
Other                                      (2,622)          (65)
                                       ————————
                                            4,294         5,343
                                       ————————
Income before income taxes                  1,577         1,750
Income taxes                                  153           394
                                       ————————
Net income for the period                   1,424         1,356
                                       ————————
                                       ————————
Net income per share                   $     0.05       $  0.05
                                       ————————
Weighted average common
shares outstanding (thousands)            29,981        29,981
                                       ————————
                                       ————————

Consolidated Balance Sheet

                                         March 31, September 30,
(in thousands of Canadian dollars)           1998          1997
                                       ————————
ASSETS                                 (unaudited)

Current
Accounts receivable                   $   19,255    $   21,206
Inventories                               15,345        14,317
Prepaid expenses and deposits              1,891         1,482
                                       ————————
                                           36,491        37,005
Capital assets                             24,586        27,330
Other assets                                1,267         2,806
                                       ————————
                                       $   62,344     $  67,141
                                       ————————

LIABILITIES

Current
Bank indebtedness                     $   16,185    $   14,957
Accounts payable and accrued liabilities  29,709        26,135
Deferred revenue                           2,627         2,178
Current portion of long-term debt         12,736         9,460
                                       ————————
                                           61,257        52,730
Long-term debt                             12,984        27,732
                                       ————————
                                           74,241        80,462
                                       ————————

SHAREHOLDERS’ DEFICIENCY
Capital Stock                              90,712        90,712
Deficit                                  (102,609)     (104,033)
                                       ————————
                                          (11,897)      (13,321)
                                       ————————
                                       $   62,344    $   67,141
                                       ————————
                                       ————————

Consolidated Statement of Changes in Financial Position
(Unaudited)

                                             Six Months Ended
                                                  March 31,
(in thousands of Canadian dollars)           1998          1997
                                       ————————

OPERATING ACTIVITIES

Net income for the period               $   1,424    $    1,356
Depreciation and amortization               4,206         3,033
Amortization of deferred financing costs      204           115
Amortization of deferred foreign
exchange loss on long-term debt              557           189
Change in non-cash working capital          2,286          (525)
Gain on disposal                           (2,991)            –
                                       ————————
Cash generated by operating activities      5,686         4,168
                                       ————————

INVESTING ACTIVITIES

Net proceeds from disposal                  9,025             –
Purchase of capital assets,
net of disposals                          (4,165)       (3,167)
                                       ————————
Cash generated by /
applied to investing activities            4,860        (3,167)
                                       ————————

FINANCING ACTIVITIES

Issuance of long-term debt                    785           529
Repayment of long-term debt               (12,559)      (10,415)
Deferred financing cost                         –          (395)
                                       ————————
Cash applied to financing activities      (11,774)      (10,281)
                                       ————————
Decrease in cash during period             (1,228)       (9,280)
Bank indebtedness at beginning of period  (14,957)       (8,683)
                                       ————————
Bank indebtedness at end of period      $ (16,185)    $ (17,963)
                                       ————————
                                       ————————

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Maximum Miles

Hyatt Hotels and American Express announced Thursday the ‘Maximum Miles from Hyatt’ program. Guests will be able to earn quadruple miles on select airlines for every stay at Hyatt Hotels and Resorts worldwide between June 1 and August 31 when they stay two or more times during the period and charge their stay with the American Express Card. To participate guests must enroll in Hyatt’s ‘Gold Passport’ program. There are 179 Hyatt hotels and resorts around the world.

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I-Banking Partnership

Unisys and HTI Voice Solutions announced yesterday that they have signed a VAR (Value Added Marketing) agreement to bring Internet financial service solutions to mid-tier banking institutions in the US and Canada.  Under this agreement, HTI will provide turnkey web- based system solutions on the Unisys ClearPath and Aquanta Windows NT based platforms.  HTI will develop these applications using the Edify Electronic Banking System (EBS).  HTI will also provide the software for systems integration, project management and support services needed to implement these complex solutions.

The HTI/Unisys solution allows medium sized banks to take advantage of Internet banking opportunities and offer on-line services such as account inquiry, bill payment, fund transfers, ACH (Automated Clearing House) transactions, portfolio review and on-line trading.  Employing web-based solutions yields a significant competitive advantage, excellence in service and greatly reduced cost per transaction.  The solution is positioned to lower the cost of entry yet designed to grow with the company, as needs demand. Edify’s EBS, which is optimized for the Microsoft Windows NT environment, offers the ability to interface with existing banking back office environments and software packages.

“Unisys selected HTI as our development partner because of their vast experience in the Internet solutions arena,” stated John M. August, Director, Financial Industry Marketing, Unisys.  “Since 1986, they have been designing, developing and installing innovative interactive customer service solutions for a large number of financial services companies.  HTI understands how systems should be designed to maximize functionality and ease of use.”

“We believe that the Unisys partnership will further strengthen our position in the financial services industry and allow us to bring cost-effective solutions to community and regional banks,” reported Kenneth B. Brater, President and CEO of HTI.  “We’re building on a track-record of success as a long-term developer on Edify’s Electronic Banking System and our expertise in interfacing Edify with a variety of banking packages including MISER and DDI.”

“We are pleased to see HTI and Unisys using their strengths to expand into new Internet banking markets,” said John Kirst, Director of Channel Sales at Edify Corporation.

About HTI

HTI Voice Solutions helps companies solve business problems and communicate more effectively through the strategic implementation of advanced voice, web and system integration technologies.  For over 11 years the company has been developing solutions that allow clients to improve service, streamline operations and reduce expenses.  For more information on HTI Voice Solutions, access their virtual press room at .

About Edify

Edify Corporation is a leading supplier of self service solutions used by Global 2000 organizations to deploy automated services via the Internet, corporate intranets and the telephone.  The company’s flagship product, the Electronic Workforce, is an application development and runtime platform, enabling fast, cost-effective creation and deployment of semi-custom self service solutions.  The Electronic Banking System and Employee Service System are packaged application products addressing the needs of the electronic banking and employee self service markets respectively.  Edify self service solutions offer organizations the means to automate, integrate and personalize interactions with customers and employees, yielding stronger, more profitable relationships.  The company’s software has been licensed to more than 1,000 organizations worldwide.  Edify software is distributed directly and through leading solutions providers, application partners and distributors worldwide. With 360 employees, Edify Corporation is headquartered in Santa Clara, California.  Additional information about Edify may be obtained by calling 408-982-2000 or via the World Wide Web at .

About Unisys

Unisys is an information technology solutions provider that has a portfolio of information services, technologies and third-party alliances needed to help clients capitalize on their information asset to enhance their competitiveness and responsiveness to customers.  Unisys expertise is founded on the strengths of three global businesses: Information Services, providing consulting, application solutions, systems integration and outsourcing; Computer Systems, providing industry-leading technologies; and Global Customer Services, delivering comprehensive services and products supporting distributed computing environments.  Access the Unisys home page on the World Wide Web — — for further information.

Unisys is a registered trademark, Aquanta and ClearPath are trademarks of Unisys Corporation.  HTI Voice Solutions and HTI are registered trademarks of HTI Voice Solutions.  Edify is a registered trademark and Edify Electronic Banking System is a trademark of Edify Corporation.  Microsoft is a registered trademark and Windows NT is a trademark of Microsoft Corporation.  All other brands and products referenced herein are acknowledged to be trademarks or registered trademarks of their respective holders.

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New HH CC Chief

Household International announced yesterday that Mr. Bobby Mehta, has been named Group Executive in charge of the company’s domestic MasterCard/Visa business. Mehta was a SVP of The Boston Consulting Group.  He was a senior member of BCG’s Financial Services Practice and head of the Los Angeles office. Since 1996, Mehta has worked on numerous projects with Household for whom he developed several credit card marketing strategies.

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X Prize Platinum

The X PRIZE Foundation, a nonprofit organization created to jump-start the space tourism industry, launched one of the most unusual and exciting sweepstakes in history yesterday.  The grand-prize winner of the ‘Your Ticket to Space’ sweepstakes will take a sub-orbital trip into space, thereby earning official classification as an astronaut. To enter the sweepstakes consumers need to apply for and use one of six different ‘X PRIZE Platinum Visa’ credit cards offered by First USA. Card members receive an entry into the sweepstakes for each purchase. Consumers may also enter the sweepstakes e by calling a special toll-free number. Thousands of prizes will be awarded in the sweepstakes, including zero-gravity flights like the ones used to train astronauts to work in weightless environments, supersonic flights in Russian MiGs and trips to space camp.  The sweepstakes will award nearly 1,000 prizes annually through drawings every three months.  The first drawing will be held September 15.

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