PEPLock Demo

Productivity Enhancement Products (PEP), a leading provider of writeable, non-contact access control devices, will show off its latest access control solutions as part of this month’s Card Tech/Secure Tech trade show at the Washington Convention Center in Washington, D.C., April 27-30.Product demonstrations will be ongoing at booth 1931 and at various show locations.

PEP is a member of the show’s Card Team and has provided 50 of its PEPLock Access Control Systems card readers for use by show staff at the registration table and at each conference session. The system will be used to register show and conference attendees.

The PEPLock, a contactless Mifare card reader, will make it possible for show officials to track conference participation by each attendee and assign “loyalty” points as part of a give-away promotion. Mifare is an industry standard for Smart Cards and is recognized by the International Standards Organization (ISO).

PEP’s partners, Giesecke and Devrient America Inc. (G&D) and Schlumberger, both makers of Mifare smart cards, will also be using the PEPLock in their booths.Typical applications for the PEPLock system are access control, transit fare boxes, affinity cards, health/other benefit cards, and assembly work-in-progress tracking.

The PEPLock secure access control system uses passive radio frequency identification (RFID) technology and combines the functionality of a credit card-sized smart card with the ease of a proximity card. The system consists of proximity smart cards, a PEP reader/writer, an antenna and a host communications port.

A PEPLock Software Developer’s Kit (SDK) is available at the show for those wishing to develop an application using contactless smart cards, or for those wishing to explore the technology further. The SDK includes a PEPLock with an RS232 DB9 host connection, a power adapter, two contactless smart cards and manuals. The standard SDK provides a graphical user interface (GUI) using standard OCX controls. PEP has recently released a description of the reader’s protocol giving users the ability to bypass the OCX controls of the standard development kit and to communicate directly with the reader. This gives users more direct control over the functions of the unit.

Another product to be demonstrated to show attendees is the authenticator. Used in applications requiring both privacy and security, the authenticator makes home banking, stock transactions and Internet commerce safer by keeping personal user information private. It does this by acting as a security “wedge” between the PC and the keyboard as it isolates the keyboard from the computer when entering information.Productivity Enhancement Products is the world leader in writeable, non-contact access control devices. In addition to contact and contactless smart card systems, PEP offers a variety of specialized products and services, including some of the world’s fastest data encryption devices, battery-operated portable hand-held computers, and Radio Frequency Identification Systems.

PEP has headquarters at 20672 Merit Circle, Suite 110, Laguna Hills, Calif., 92653. Phone 714/348-4242. Web site [http//www.pepinc.com][1].

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

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Changing Landscape

Discover has long held the distinction of being the nation’s largest issuer in terms of cards-in-force. With the recent acquisitions and mergers activity within the banking industry, Discover will be unseated as the king-of-the-hill.

THE  EMERGING  TOP  TEN (based on EOY 97 cards-in-force)

1. Citibank (inc Travelers, AT&T Universal) 64.8 million
2. Bank One (inc First USA, First Chicago) 53.1 million
3. Discover 50.0 million
4. MBNA America 30.4 million
5. Chase Manhattan  (inc Bank of NY) 30.1 million
6. NationsBank (inc Bank of America) 24.3 million
7. Household (inc Beneficial) 21.5 million
8. Capital One 17.4 million
9. Associates 14.0 million
10. Fleet (inc Advanta) 11.3 million
TOTAL 316.4 million
Source Bankcard Update (April 97 issues)

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ECHO Up 35%

Electronic Clearing House Inc. announced fiscal 1998 second quarter net earnings of $251,000, compared with net earnings of $186,000 for the same period last year, an increase of 35%. Fiscal 1998 second quarter revenues were $5,188,000 as compared with $4,802,000 for the same period last year, an 8% increase.”In this quarter, we delivered part of the 3,000 U-Haul systems that were ordered in November of 1997. We expect that this will result in higher U-Haul transaction volume as we enter the summer months,” stated Joel Barry, CEO of ECHO. “In addition, we are pleased to see our other marketing programs, such as the recently introduced ECHOTEL, growing steadily,” commented Barry. Electronic Clearing House provides credit card processing, check guarantee, inventory tracking services and various Internet services to retail merchants and U-Haul dealers across the nation. Through a subsidiary, Computer Based Controls, ECHO designs, develops and manufactures software and point-of-sale hardware that is utilized as credit card processing terminals, automated money order dispensers, utility bill payment systems, and inventory tracking devices.

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Wireless Spreads

U.S. Wireless Data, Inc. announced today a large Round Table Pizza franchise with nine California locations has chosen U.S. Wireless Data’s Tranz Enabler as its credit card processing solution. Additionally, Augusta Restaurants Corp. and its nationally acclaimed “Cafe Annie” restaurant are “going wireless.” Cafe Annie, Cafe Express, Taco Milagro and Yapa locations throughout Texas will be converting to U.S. Wireless Data’s Tranz Enabler technology. U.S. Wireless Data’s CEO Evon Kelly commented, “This is our second and third restaurant agreement in the past three weeks, and although modest in sheer numbers, their significance cannot be underestimated. This is clearly an exciting trend and application for our technology. The restaurant industry is particularly interested in our high speed processing solution to help move patrons faster.”U.S. Wireless Data, Inc. has developed, tested and is now delivering compelling new proprietary products, programs and standards to the transaction processing and credit card industry which utilize Cellular Digital Packet Data (“CDPD”) wireless networks. USWDA delivers the fastest and most cost-effective transaction processing solution to retail merchants in the United States today – wired or wireless. USWDA will generate recurring revenue from every transaction processed be merchants who utilize the Company’s CDPD wireless technology. The Company’s strategy will be to deploy its technology through marketing and partnership agreements with major cellular phone companies, regional and community banks, select ISO’s and its won sales force.

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Hibernia’s New Biz Debit Card

For those businesses that want the ability to make purchases without cash, checks or credit cards, Hibernia has the answer.

The Hibernia Business Debit Card works like a check and an ATM card. All purchases are deducted from the customer’s primary business checking account — with no monthly bills, annual fees or interest charges.

Like its cousin for consumers — the Hibernia MasterMoney(TM) Card — the Hibernia Business Debit Card can be used to make purchases at any of the 15 million locations worldwide where MasterCard is accepted. And it is accepted at more than 280 Hibernia ATMs and more than 368,000 ATMs around the world.

“For more than two years, our consumer customers have enjoyed the convenience and flexibility of making purchases with a debit card, and now we’re delighted to offer a debit card specially designed for small businesses,” said Bob Kottler, senior vice president in charge of Hibernia’s Small-Business Banking area. “This card is an ideal way to pay for travel arrangements, hotel accommodations, business meals, office supplies and a variety of other expenses. To make purchases, cardholders simply present the card and sign the receipt.”

Along with making purchases and cash withdrawals, the card enables small businesses to check balances and transfer funds between accounts. Additional cards can be requested with pre-set spending and cash-access limits for designated employees. Each card will have its own personal identification number (PIN).

Customers’ monthly checking statements conveniently list the amount, date and place where each purchase was made.

To apply for a Hibernia Business Debit Card, customers can visit any Hibernia Banking office or call toll-free 1-800-996-8672.

Following the completion of a merger with Peoples Holding Corp. in northwest Louisiana, Hibernia would be a $12.4-billion-asset organization with 240 banking locations in 33 Louisiana parishes and nine Texas counties. It would be either first, second or third in deposit market share in 29 Louisiana parishes and four Texas counties. Hibernia’s Louisiana markets represent approximately 80% of the state’s population and 85% of its deposits. Its statewide Louisiana deposit and loan market shares would be 21% and 23%, respectively.

The company’s common stock (HIB) is listed on the New York Stock Exchange. Hibernia news releases, product-and-service information and other useful data can be accessed through the company’s internet site at .

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Dove Promotions

International management consulting firm Dove Associates announced today that Jennifer Kendrick and Scott Wilkinson have joined the firm as Associates in the Financial Services practice. Dove Associates is widely recognized in the financial services industry for its thought leadership in helping EFT (Electronic Funds Transfer) networks, processors, financial institutions, and technology companies address strategic and organizational challenges.

Ms. Kendrick has extensive experience in strategic planning, financial analysis, and market research. Her career in the financial services industry includes experience restructuring EFT businesses; strategic planning for ATM (Automated Teller Machine) deployment and processing businesses; and identifying new product and market expansion opportunities for electronic banking. Prior to joining Dove, Ms. Kendrick was a Vice President specializing in channel strategies for NationsBank, giving her first-hand knowledge of the issues financial institutions face. Ms. Kendrick also spent two and a half years developing her consulting skills in Andersen’s financial services practice. She earned her Bachelor’s degrees in economics and business management at North Carolina State University.

Mr. Wilkinson brings to Dove ten years of experience developing channels and complex information systems in the financial services industry. He has led the development and implementation of major electronic channel strategy initiatives, including systems design, financial analysis, and product development. Mr. Wilkinson has also managed alternative delivery channel pilots, including Internet, kiosks, PDAs (Personal Digital Assistants), ATMs, and PC banking. Before joining Dove, he worked on channel strategies and alliances at Royal Bank of Canada and complex information systems for both Royal Bank and Burns Fry, a Canadian brokerage company. Mr. Wilkinson holds a Bachelor’s degree in political science from the University of Toronto and a certificate in strategic marketing from McGill University Management Institute in Montreal.

Founded in 1981, Dove Associates is an international management consulting firm specializing in strategy and organization effectiveness, with offices in Boston, Atlanta, London, Minneapolis, San Francisco, and Washington. The focus of Dove’s financial services expertise is on ATM and debit cards, online banking, electronic commerce, and bill payment and presentment. Dove counts among its clients leading organizations worldwide, including most of the major EFT networks and banks in the U.S., as well as PepsiCo, Quaker Oats, UNUM Corporation, Johnson & Johnson, Procter & Gamble, and TCI. For more information, please contact Susan Hrishenko, Marketing Manager, Dove Associates, 75 Park Plaza, Boston, MA 02116, phone 617/482-2100, fax 617/482-1470.

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Fleet-Discover Cash Advances

NOVUS Services announced that Fleet Bank is now accepting the Discover Card and other NOVUS card brands for cash advances at 1,200 Fleet Bank locations throughout the Northeast.

“We are very pleased with Fleet Bank’s decision to accept the Discover Card and other NOVUS card brands for cash advances. Fleet Bank is providing our Cardmembers with another convenient option for cash access,” said William R. Simmons, executive vice president and general manager, NOVUS Network Services.

Fleet Bank has 1,200 retail branches located in Connecticut, Massachusetts, Maine, New Hampshire, New Jersey, New York, and Rhode Island. Fleet Bank focuses on customer service with “Cross Border Banking from Fleet,” that allows customers to walk into any Fleet Bank branch and conduct business as if they were in their hometown bank.

NOVUS Services, a business unit of Morgan Stanley Dean Witter & Co., operates the Discover Card, the NOVUS Network and a growing number of new card brands accepted at all NOVUS Network locations.

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Fiserv/PaySys Team Up

Fiserv Orlando, a national leader in financial information processing services, and PaySys International, Inc., the world leader in credit card management software, announced today that the two companies have formed a strategic partnership.

As part of the partnership, Fiserv Orlando and PaySys will cooperatively market each other’s revolving-credit-related services to the retail marketplace. The two organizations also agreed to participate in joint marketing activities such as trade shows, conferences, advertising, and direct mailing efforts.

“New Strategic Channel” for Fiserv

For Fiserv Orlando, the alliance with PaySys offers “a new strategic channel that provides us with additional new business opportunities,” said Harry Shuman, president of Fiserv Orlando. He noted that Fiserv Orlando’s credit information processing service, the PLUS(TM) (Private Label Universal Services) System, is based on PaySys’ VisionPLUS(TM) software and has been marketed nationwide for several years.

He said that Fiserv Orlando’s current clients include such notable players as Chase Manhattan Bank, Alaska USA Federal Credit Union, Green Tree Financial, Orchard Supply Hardware, EDS/Farm Credit, Unicorn Financial Services, and others.

“We’re delighted to formalize our business alliance with PaySys,” said Dan Welbaum, Fiserv Orlando’s senior vice president of sales and marketing. “Their superb VisionPLUS credit processing software, when combined with our state-of-the-art data processing services, delivers maximum value to private-label credit issuers nationwide. We’ll now be working closely with PaySys to identify new opportunities for marketing our VisionPLUS-based processing solution.”

“A Natural Alliance” Between Fiserv and PaySys

“The alliance with Fiserv is a natural,” explained Steve Grubb, CEO/president of PaySys. “Fiserv has long used our software for processing private-label cards. The partnership between our two companies is the logical next step.”

“By aligning with Fiserv, we’re able to offer our prospective customers an additional alternative,” Grubb added. “Retailers wanting to do their own processing can license our latest software system, VisionPLUS. For those wanting to outsource their portfolios, we can recommend Fiserv’s processing services.”

More About Fiserv and PaySys

Fiserv Orlando, a leading information processor and software supplier to the financial industry since 1968, serves hundreds of clients nationwide. Formerly known as FIS, Inc., Fiserv Orlando was acquired by Brookfield, WI-based Fiserv, Inc. in September 1997. In addition to the PLUS System, Fiserv Orlando provides a wide range of products and services to the financial industry, including PC-based loan origination software products, mortgage servicing systems, core-banking data processing services, ATM processing services, electronic report archival and document imaging products, and more.

Fiserv, Inc., the parent corporation of Fiserv Orlando, is an independent provider of financial data processing systems and related information management services and products worldwide. Fiserv has operations in more than 75 cities including London and Singapore and a staff of over 10,000 financial-services and information-management professionals. Fiserv serves over 5,000 banks, credit unions, mortgage firms, and savings institutions in more than 60 countries. A publicly held company, Fiserv is traded on the NASDAQ over-the-counter market under the symbol FISV.

PaySys International, Inc., a pioneer in credit card management software, has installations running in over 30 countries on six continents. More banks and retailers use PaySys software solutions and more credit card accounts are processed on PaySys systems each day than with any other card solution.

VisionPLUS, which handles retail, bank-card, and loan processing all in one system, is the latest product from PaySys, the company that also developed the legendary CardPac and VISION21 systems. A privately held company headquartered in Atlanta, PaySys has over 400 employees and operates offices and support centers in Orlando, Fla.; Columbus, Oh.; Melbourne, Australia; Dublin, Ireland; Singapore; Johannesburg, South Africa; and Costa Rica.

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Changing Landscape

The wave of banking mega-mergers will have a profound impact on the bank credit card landscape. This morning Banc One and First Chicago NBD announced they will merge in a $30 billion deal. The merger follows last week’s Citibank-Travelers Group merger valued at $70 billion. However the bigger story this morning is the expected announcement that NationsBank and Bank of America will merge in a deal valued at about $60 billion. With the close of these mergers the bank credit card industry will become intensely concentrated among a handful of banks. At the end of 1997 the top ten U.S. issuers of bank credit cards (VISA, MasterCard, Discover and AmEx Optima) held a collective market share of 63.8%, based on outstandings. By the end of 1998 the top ten will have added at least $34 billion creating an aggregate market share of more than 72%. Among the top twenty five bank credit card issuers the market share will exceed 90%.

THE EMERGING TOP TEN (based on EOY 97 outstandings)

1. Citibank (inc Travelers, AT&T Universal) $64.9 billion
2. Bank One (inc First USA, First Chicago) $56.6 billion
3. MBNA America $44.5 billion
4. Discover $36.0 billion
5. Chase Manhattan (inc Bank of NY) $32.5 billion
6. NationsBank (inc Bank of America) $19.5 billion
7. Household (inc Beneficial) $17.5 billion
8. Fleet (inc Advanta) $13.8 billion
9. Capital One $13.6 billion
10.American Express (Optima only) $10.5 billion
TOTAL: $309.4 billion
INDUSTRY: $431.6 billion

THE CURRENT TOP TEN (based on EOY 97 outstandings)

1. Citibank $48.2 billion
2. MBNA America $44.5 billion
3. Bank One (inc First USA) $38.6 billion
4. Discover $36.0 billion
5. Chase Manhattan (inc Bank of NY) $32.5 billion
6. First Chicago NBD $18.0 billion
7. Household $17.3 billion
8. AT&T Universal $15.3 billion
9. Capital One $13.6 billion
10. Advanta $11.2 billion
TOTAL: $275.2 billion
INDUSTRY: $431.6 billion

Source: Bankcard Update/Bankcard Barometer (April 97 issues)

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DAMARK Proc Deal

Paymentech, the largest processor of credit card payments for direct marketers, announced the implementation of an electronic payment program for DAMARK International, Inc. DAMARK is a major integrated relationship marketer providing consumers with a wide range of tailored programs, products and services through direct mail and telemarketing channels.

In addition to credit card processing, DAMARK utilizes Paymentech’s electronic check processing (ECP) verification services and receives all merchant reporting via the processor’s recently launched E-mail reporting service. With Paymentech’s “Email Reporting,” DAMARK simply opens E-mail to retrieve merchant reports that arrive every morning. The service, requiring only standard E-mail and PGP encryption software, replaces mailed or faxed reports.

“Paymentech’s direct response unit delivers strong customer service and outstanding product offerings,” said Mark A. Cohn, DAMARK’s president. “No other processor has developed such a robust menu of products geared to the special payment needs of direct response marketers.”

Paymentech, the nation’s third largest electronic payment solutions provider, expects to process over seven million credit card transactions annually for approximately $500 million in sales volume for DAMARK.

According to Kim H. Plahn, vice president of finance for DAMARK, the company also benefits from Paymentech’s specialized chargeback and retrieval program. “This enables DAMARK to focus on customer operations while allowing Paymentech to manage chargeback issues and retrieval requests related to credit card purchases. Paymentech does the work for us and then provides the information we need to proactively resolve a consumer’s issue,” said Plahn.

Paymentech’s automated chargeback management system shields the merchant from this administrative burden. A dedicated chargeback specialist develops a customized solution for direct merchants and manages compliance and arbitration of chargebacks on the merchant’s behalf. Paymentech fulfills all retrieval requests within 24 hours of receipt, maintains an on-line order history database, and fully protects the merchant’s chargeback rights. In 1997 Paymentech customers enjoyed an overall chargeback rate lower than the industry average.

DAMARK International, Inc., headquartered in Minneapolis, is an integrated relationship marketer providing consumers with a range of tailored programs, products and services through direct mail and telemarketing channels. DAMARK offers a variety of membership clubs which provide members with discounts on numerous lifestyle and convenience products. Almost 1.4 million consumers belonged to a DAMARK-managed membership program at the start of 1998. Brand-name, value-priced merchandise is also sold through catalogs in six broad categories: computers, home office, consumer electronics, home decor, home improvements and sports/fitness.

Paymentech , founded in 1985, is the leading provider of full-service electronic payment solutions to the direct response industry. Paymentech () is the third largest processor of bankcard transactions and a leading issuer of commercial cards in the United States.

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S1 Surpasses 100,000 Accounts

Security First Technologies (S1), a wholly-owned subsidiary of Security First Network Bank (Nasdaq: SFNB), announced today that at the end of the first quarter, 100,000 accounts, representing more than 70,000 customers of client financial institutions, are using S1’s Virtual Financial Manager(TM) solution to bank, pay bills and manage their money over the Internet.

“It’s quite a milestone for us to reach the 100,000 accounts level,” said James S. Mahan III, chief executive officer of Security First Technologies. “Many of the institutions we serve are just starting to launch their transactional web sites, and others are just beginning to market their new services to their customers. We expect to see significant growth in users of our banking software in the coming months. It’s tremendously satisfying to see our client institutions and their customers embrace our technology,” he said.

More than 69,000 accounts are processed through the S1 Data Center. The balance is processed by client institutions in-house or through third party data processors. Twelve (12) institutions currently use the S1 Data Center for transaction processing with five (5) of the 12 representing 98% of the volume. The number of accounts processed represents a 40% increase over figures for December 1997.

Mahan explained, “Typically, there’s a significant period of time between implementation of Internet financial services applications by an institution and a commercial offering to their customers. This allows for testing, friendly-user trials and soft launches. That’s why,” he added, “it’s important for S1 to focus on our long-term goals for growth and market share.”

In total, 66 financial entities, including bank holding companies and insurance service providers, with combined assets of more than $800 billion and representing more than an estimated 40 million customers are offering or are planning to offer Internet-based personal financial management systems using S1’s technology. This includes institutions that are direct licensees of S1’s software, institutions who process their VFM transactions through third party data processors and those who process through S1’s Data Center.

Virtual Financial Manager(TM) is the suite of products S1 offers to client institutions. Currently, Virtual Bank Manager(TM) and Virtual Credit Card Manager(TM) are available. Virtual Investment Manager(TM) is slated for later this year. Insurance and loan applications are planned as future product offerings.

Security First Technologies develops integrated, brandable Internet applications that enable financial institutions to offer products, services and transactions over the Internet in a secure environment. S1 also offers strategic marketing support, training, product integration, and customer and data service center outsourcing. Security First Technologies, through direct sales and channel partnerships, has agreed to provide software applications and technology to 66 financial entities, including 15 of the top 100 U.S. financial institutions.

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TSYS Tops 20% for 1Q98

Today, Total System Services, Inc.(R)(TSYS(R)) announced record revenues and net income for the quarter ended March 31, 1998.

Net income for the quarter increased 20.4% to $10.3 million, or basic and diluted earnings per share of $.08, up from $8.5 million, or basic and diluted earnings per share of $.07, for the same period last year. Revenues for the first quarter of 1998 were $96.3 million, an increase of 15.9%, compared with revenues of $83.1 million for the first quarter of 1997.

Chairman of the Board and Chief Executive Officer, Richard W. Ussery, said, “We are pleased to announce our financial results for the first quarter of 1998. Continuing our commitment to develop and deliver new products and services to our clients, we announced an alliance with CheckFree which will allow cardholders of TSYS clients to receive and pay their credit card bills over the Internet. We were extremely pleased to announce that five of the six approved card issuers for the U.S. General Service Administration’s contract for commercial card services are our clients.”

Ussery continued, “We announced the formation of TSYS Canada, Inc.(sm) (TCI), a wholly owned subsidiary headquartered in Columbus, Georgia, to support new customers, such as Royal Bank of Canada and Canadian Tire Acceptance Limited. We also announced that TCI opened an office in Welland, Ontario, Canada.

“We are continuing the conversion of the Citicorp Universal Card Services (formerly AT&T Universal Card Services) portfolio to TS2 with approximately two million accounts converted in the first quarter of 1998. Also, we continue to make steady progress on our campus project and eagerly await the completion of the first phase. Our efforts to ensure that all of the Company’s non-compliant processing systems, including our general cardholder system, become Year 2000 compliant remain on schedule,” Ussery said.

TSYS () is one of the world’s largest credit, debit, commercial and private-label card processing companies. An 80.7% owned subsidiary of Synovus Financial Corp. (), TSYS serves card-issuing institutions throughout the United States, Puerto Rico, Canada and Mexico. Creating innovative processing solutions, TSYS makes it possible for more than 92 million cardholders to use their debit, commercial and private-label cards anytime, anywhere, without fail. We enable card- issuing institutions to profitably compete and better serve their customers through our world class people, technology and service.

TOTAL SYSTEM SERVICES, INC. Financial Highlights (In thousands, except per share data)

Three months ended
March 31,
Percentage
1998 1997 Change
Revenues $ 96,318 83,137 15.9
Expenses 83,766 72,312 15.8
Equity in Income of Joint Ventures 2,028 1,769 14.6
Operating Income 14,580 12,594 15.8
Other Income 759 452 68.1
Income before Income Taxes 15,339 13,046 17.6
Income Taxes 5,089 4,529 12.4
Net Income $ 10,250 8,517 20.4
Basic Earnings Per Share $ 0.08 0.07 20.3
Diluted Earnings Per Share $ 0.08 0.07 20.1

Average Common Shares Outstanding 129,333,443 129,289,680

Average Common and Common Equivalent
Shares Outstanding 129,718,184 129,460,884

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