Fee Spiral

Late fees and over-limit fees continued their upward trend in February as major issuers are now charging nearly $20, on average, for late payments.

     AMONG  ISSUERS  WITH  $100  MILLION+  IN  OUTSTANDINGS
                    LATE FEES           OVER-LIMIT FEES
     Mar 97        $15.01              $14.72
     Sep 97        $18.82              $17.51
     Dec 97        $19.24              $18.44
     Mar 98        $19.33              $18.53
          Source Bankcard Barometer, March 1998

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Coca-Cola Cards

Coca-Cola USA announced Monday it will distribute more than 55 million ‘Coca-Cola Cards’ beginning this week. The special Coke promotion provides customers with a red-wallet size card that contains up to 50 special offers from retailers, restaurants and recreational venues, most of which can be used again and again. The company says the program is the most localized national initiative it has ever offered, with more than 280 local versions of the program. Totally more than 9,500 partners will participate featuring more than 20,000 local offers.

Coca-Cola also announced yesterday that MasterCard will join the program for the second year by offering chances to win a loaded ‘Coca-Cola MasterCard ATM Cash Card’ on 1.1 billion specially marked packages of Coca-Cola. The cash card chances will also appear under bottle caps and on the sides of cups at fountain outlets. MasterCard said yesterday it will begin its participation in May and will award more than 2.2 million ‘Coca-Cola MasterCards’ with values of $20, $40 and $100.

Coca-Cola projected nearly half or 25 million of the Coca-Cola cards will be distributed by hand via ‘Teen Card Crews’ organized by bottlers nationwide.

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M&I’s Total Solution

Businesses looking for a technology partner to build a “virtual store front” via the Internet can now work with M&I Data Services, a financial software and services provider, to build their own E-commerce “store.”

E-commerce refers to the purchase of goods or services via the Internet. The banking industry expects E-commerce, one of the fastest-growing sectors of the Internet, to be a $220-billion business by the year 2000.

The advantages of doing business online include 24-hour access to customers, a fast-growing pool of Internet users worldwide, the ability to respond instantaneously to customers and a more efficient way to conduct business-to-business transactions.

“E-commerce offers the ability to easily and cost effectively expand markets and streamline distribution of products and services,” said Nancy Langer, vice president and general manager of the M&I Data Services Home Banking Division.  “Our unique technology and financial background allows us to provide turn-key, front-to-back-end solutions.  On the front-end, we can build a website for any business, plus handle the back-end transaction when a purchase is made from your website.”

Graphic designers and Internet programmers at M&I Data Services utilize their expertise and technology to build the front-end website.  Electronic Funds Transfer (EFT) Services, the back-end of E-commerce, provides the support mechanisms to securely process credit-card and other payment transactions.

One of the largest card processors in the country, M&I Data Services currently switches and routes more than 40 million EFT transactions monthly and supports more than 1O million card holder accounts.

M&I Data Services offers interfaces that combine existing business systems with the new Internet-based E-commerce services, resulting in a single integrated business system rather than several distinct systems.  Businesses that use E-commerce from M&I Data Services also receive assistance and support from customer service representatives at a toll-free call center.

M&I Data Services has a strong history of providing financial services and years of experience designing high-tech products, including websites.  “We’re leveraging our technology experience,” Langer said.  “We’re not just a financial processing company but a technology provider.”

M&I Data Services offers advanced software and processing services to financial institutions worldwide.  The company is a division of Marshall & Ilsley Corporation (Nasdaq MRIS), a $19.5-billion holding company.  Both are headquartered in Milwaukee, Wis.  For more information on products and services from M&I Data Services, visit its website at .

Three Wisconsin Entities Sign E-Commerce Agreements

Background Information

M&I Data Services recently signed agreements to provide services such as websites and E-commerce to three Wisconsin entities the Marcus Corporation, Tyme Corporation and the State of Wisconsin Department of Transportation.

The Marcus Corporation

The phase one initiative M&I Data Services has planned for the Marcus Corporation of Milwaukee, is development of a movie theatre website, which allows customers to find theatre locations and show times.  Once phase one is complete, phase two initiatives could include further development of the movie theatre website, which will feature ticket purchasing via the Internet.

Tyme Corporation

Tyme Corporation of Brown Deer has selected M&I Data Services to build and host its website, as well as partner in website development for its customers. The Tyme Corporation website will include a search engine that allows customers to select ATM machines across the Tyme network by location (city, county, zip code) or financial institution 24 hours a day, 7 days a week.

Department of Transportation

The Wisconsin Department of Transportation (DOT), Madison, is taking advantage of the E-commerce solution to make license plate registration renewals easier than ever before.

M&I Data Services already provides a telephone renewal system for the DOT, which has processed more than 750,000 vehicle registrations and registration payments since going live.

Recently, the DOT awarded M&I Data Services a contract to host a secured Internet site, allowing Wisconsin residents to conveniently register vehicles and make registration payments electronically over the Internet.

For more information on E-commerce and Home Banking services from M&I Data Services, call contact.

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FDC Rated Stable

Standard & Poor’s affirmed its ‘A-1’ commercial paper and short-term issuer credit ratings, and its single- ‘A’ senior unsecured, bank loan, and long-term issuer credit ratings on First Data Corp.  At the same time, Standard & Poor’s revised its outlook to stable from positive on First Data Corp.

First Data Corp.’s ratings reflect the company’s leading market positions, stable revenue base, and strong free cash flow.

Hackensack, N.J.-based First Data has a diverse, important presence in credit card and merchant processing services.  The addition of Western Union Financial Services Inc. has propelled First Data to the leading position in the consumer money transfer marketplace.  The company’s better-than-average business profile reflects its ability to sustain long-term client relationships that generate sizable recurring revenue streams.  Revenue growth has been strong, and prospects remain favorable as the company cross-sells its products, introduces ancillary services into its installed base, and expands into adjacent markets.  While the pricing environment is being pressured by competitors and customer consolidations, coupled with a recent slowing rate of growth in its merchant processing services, the company has offset this with on-going cost reduction initiatives.

The company enjoys high barriers to entry, and a broad customer base. Profitability measures are strong, with return on permanent capital historically above 20% and EBITDA  interest coverage exceeding 10 times (x).

Free operating cash flow has averaged over $300 million for the past three years, and cash balances of $411 million (as of Dec. 30, 1997) provides adequate financial flexibility.

OUTLOOK STABLE

Management has a growth strategy that includes new products and markets, strategic alliances, and acquisitions.  The outlook revision reflects Standard and Poor’s belief that First Data’s long term business strategy and capital structure is likely to be more consistent with a single-‘A’ rather than a more restrictive single–‘A’-plus  credit rating.

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ATM Wager Card Coming in Apr

Betting Inc. is moving the ATM card into the home for self serviced opening or replenishing of wagering accounts.

Betting Inc. has scheduled April to begin pilots with sports and OTB gaming operators to test home and public location usage of ATM cards and Betting Inc. equipment to open or replenish accounts.

The ATM card same as cash self serviced transactions offer substantial savings for the gaming operators.

The Betting Inc. equipment will begin to be freely distributed to public locations such as airport lounges, car washes, sports bars etc., in April and will be selectively placed in test home environments.

Betting Inc. is the leading company in the emerging multibillion dollar industry of personal encrypted remote financial electronic card transaction wagering.

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Upping the Ante

The value of American Bankers Insurance Group grew to $3.1 billion or by 16% yesterday as Cendant Corp. made a new offer of $67 per share. The latest development comes two weeks after rival bidder American International Group upped its offer from $47 per share to $58 per share. Cendant, formerly HFS Inc and CUC International, estimated yesterday ABIG could add $140 million in pretax income to its books by the year 2000.

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Nestor Up 41%

Nestor, Inc. reported revenues of $782,000 for the fourth quarter ended December 31, 1997, an increase of 41% compared to revenues of $555,000 for the fourth quarter of 1996.  The Company also reported a significantly lower net loss in the fourth quarter ended December 31, 1997 of $324,000, or ($0.05) per share, compared to a net loss of $571,000, or ($0.08) per share, for the fourth quarter of 1996.

For the year ended December 31, 1997, revenues rose 26% to $5,681,000 from $4,508,000 in 1996.  The net loss for 1997 was $295,000, ($0.08) per share, compared to a net loss of $199,000, ($0.09) per share, in 1996.  Revenue and net income in 1996 include $2,099,000 and $1,127,000, respectively, from product sales and an initial fee related to the exclusive license of Nestor’s intelligent character recognition (ICR) product line to National Computer Systems, Inc. in June 1996.  Excluding the ICR product sales and initial license fee, 1997 revenue grew 129% over 1996 ($5,681,000 vs. $2,477,000), and 1996 to 1997 losses were decreased by 77% (from $1,288,000 to $295,000).

“Our two primary goals for 1997 were to replace last year’s ICR income with current-product income, and to achieve overall profitability for the year.  We met the first goal and narrowly missed the second as some sales slipped from the fourth quarter into 1998.  Revenue growth was fueled by the expansion of our PRISM product line, where 1997 revenues of $5,232,000 represented a growth of 218% over 1996 PRISM revenues of $1,645,000. Incremental PRISM revenues more then replaced ICR revenues, with contributions from both direct sales and from strategic-partners such as Applied Communications, Inc. (ACI), CSK, Europay International and Total System Services (TSYS),” stated David Fox, President and CEO at Nestor, Inc.

Several new PRISM licenses were announced in the fourth quarter. Scotiabank (Bank of Nova Scotia), a leading credit card issuer in Canada, will use PRISM to detect and prevent fraudulent transactions among its credit card portfolios.  In addition, Nestor’s relationship with ACI yielded two new PRISM licenses in 1997, including HONOR Technologies and, in 1998, Marshall & Iseley, Inc. (M&I Data Services).  The two U.S.-based electronic fund transfer (EFT) organizations will offer PRISM, marketed by ACI under the brand name PRM (Predictive Risk Management), to their financial and banking clients.

“Our net loss for 1997, $295,000, while a considerable improvement over 1996, excluding ICR, was short of our goal.  TrafficVision, Nestor’s video traffic-monitoring product, experienced order slippage in late 1997 but realized the orders in early 1998.  Our initial traffic-operations center installation in Rhode Island, monitoring Interstate 95, was officially opened in February 1998.  Other early 1998 installations are located in Virginia, Connecticut and Texas.  These TrafficVision installations should lead to an acceleration of orders both in the U.S. and abroad.  InterSite, our Web personalization product, also has begun to show real promise.  Two beta sites, Lycos, Inc. and Edward Jones, are scheduled for completion this quarter.  Both TrafficVision and InterSite should begin to contribute meaningfully to Nestor’s revenues in 1998,” concluded Mr. Fox.

Certain information in this press release may include forward-looking statements within the meaning of Section 21 E of the Securities Exchange Act of 1934.  Although the Company believes that the expectations are based upon reasonable assumptions, it can give no assurance that such expectations will be achieved.

Nestor, Inc. is a leading provider of intelligent-decision-support solutions.  Nestor’s client/server products incorporate innovative pattern- recognition technologies ideally suited for data-intensive, mission-critical decision applications in real-time environments.  The Company’s principal clients are financial institutions where it supports credit, debit, retail and corporate fraud detection and case management, merchant fraud; database marketing; and Internet customer personalization applications.  Nestor’s patented technology is also being applied to intelligent-decision applications for a variety of other markets, including real-time traffic management, and intelligent character recognition.  More information can be obtained via the Company’s web site at .

                                 NESTOR, INC.
                    Consolidated Statements of Operations
                 (in Thousands, except for per share amounts)

                                    Three Months Ended     Twelve Months Ended
                                    12/31/97   12/31/96    12/31/97   12/31/96

    Revenues                           $782       $555      $5,681     $4,508

    Net (Loss) After Taxes            $(324)     $(571)      $(295)     $(199)

    Net (Loss) Per Common Share      $(0.05)    $(0.08)     $(0.08)    $(0.09)

    Average Shares Outstanding        9,336      8,888       9,244      8,376

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Top 25 Leaders

The nation’s twenty-five largest bank credit card issuers added four percentage points to marketshare last year, driven largely by acquisitions. According to Bankcard Barometer, outstandings for the Top 25 increased 9.8% or 50% more than the industry as a whole. As a result, marketshare, based on outstandings, grew from 82% to 86%.

      LEADERS                           LAGGARDS  
      Direct Merchants       +125.0%    Advanta          -11.8%
      PNC Natl Bank          +35.7%     First Union      -6.1%
      Chase Manhattan        +29.0%     Household        -4.0%
      MBNA America           +26.1%     Chevy Chase      -3.9%
      BancOne/FUSA           +19.5%     Wells Fargo      -1.4%

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Power Pizza

A major pizza chain will begin accepting American Express cards today in its Utah market. Little Caesars Pizza, with 41 restaurants in Utah, will now accept AmEx cards for both carryout and delivery orders. Besides print advertising pieces and in-store signage, Little Caesars said Friday it will send 70,000 postcards to Utah residents. If successful the acceptance will be expanded nationwide.

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