S1 On Track

Security First Technologies announced Friday it now has 22 financial institutions offering secure, Internet banking services using S1’s ‘Virtual Financial Manager’. The company indicated it has 44 other financial entities offering or planning to offer Internet-based personal financial manager systems using S1’s technology. Republic National Bank of New York is the latest institution to sign a letter of intent to use S1’s ‘Virtual Financial Manager’ and ‘Virtual Credit Card Manager’.

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Web Barriers

Consumers are still wary of using credit cards on the World Wide Web. A new study released yesterday by Lycos, Inc. says 86% of the respondents said they are “extremely concerned” or “very concerned” about transmitting credit card numbers via the Internet. About 90% of women expressed concerns about credit card security. The study of 875 surfers was conducted by independent Internet researcher, Cyber Dialogue.

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Top Secret ID Cards

Eltron International Inc. , leading global designer and manufacturer of thermal-label and plastic-card printers, and 3M Verification Systems, worldwide leader in sales of labels and laminates for document and product authentication, Thursday demonstrated in New York the results of their ongoing collaboration in the development of secure identification-printing systems.

Max3000, the initial product offering in Eltron’s MaxSecure ID Printing System series, is the result of a 2-year technical collaboration with 3M.

It integrates 3M Secure Card — a unique composite material and innovative thermal fusion process that produces highly durable, tamper-resistant identification cards — with Eltron’s dye sublimation thermal transfer plastic card printing, lamination and dye cutting technologies.

Designed for either batch or on-demand printing of identification cards that require tamper-resistant security and durability, the Max3000 is a single-process, secure ID card printing system that integrates printing, lamination, rotary die-cutting and optional magnetic encoding of 3M Secure Card media with no operator intervention required.

The unique lamination/thermal fusing process seals the printed images and personalized data inside the card. Once fused, the layers cannot be separated without obvious card damage. Testing conducted under harsh, demanding conditions validate an expected 10-year life for the cards.

The new MaxSecure ID Printing systems are ideally suited for applications where maximum security and durability are paramount, including state and national personal identification, driver’s licenses, health-care identification cards, military identification, social security cards, and access control.

In a related news release dated Feb. 26, 1998, Eltron announced a contract with Viisage Technology, leading provider of biometric identification systems, wherein Viisage will integrate its software with Eltron’s Max3000 to provide a complete digital driver’s license system to the Illinois Secretary of State Driver Services Department.

ISO 9002-certified, Eltron International is the leading designer and manufacturer of thermal-label printers, plastic-card printer, and secure ID printing systems and offers the broadest line of thermal printers in the industry.

Printers include direct- and thermal-transfer bar-code-label and receipt printers, integrated verified printing systems, plastic-card printers, and secure ID printing systems.

Major users are in the health-care, retail, manufacturing, automotive, package-delivery, financial-service, security and government markets throughout the world. Eltron has corporate headquarters in Simi Valley, Calif., and additional facilities throughout the United States, Europe and the Far East. More information about Eltron is available at .

St. Paul, Minn.-based 3M is a $14 billion diversified manufacturer serving an array of commercial, industrial and consumer markets. For more information about other 3M Verification Systems products — the worldwide leader in sales of labels and laminates for document and product authentication — call 800/689-7757. In Canada, call 800/3M-HELPS.

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DCR Rates MBNA Bonds

Duff & Phelps Credit Rating Co. has assigned ratings to the $637,500,000 Class A floating-rate certificates issued by MBNA Master Credit Card Trust II.  The certificates have a coupon of one-month Libor plus 0.11 percent and a final maturity of August 15, 2005. MBNA America Bank, N.A. is the servicer and seller for the transaction. J.P. Morgan is the lead underwriter.

The ratings assigned to the certificates are based on MBNA’s experience as originator and servicer of the credit card receivables, the stable performance of outstanding MBNA securitizations as well as that of MBNA’s bank portfolio, the sound legal structure of the master trust and Series 1998-A, 15.0 percent credit enhancement for the Class A certificates, and 7.5 percent credit enhancement for the Class B certificates.

A New Financing Report Summary detailing this transaction is available on Bloomberg at DCR or by calling the DCR Hotline at 312-368-3198 or by e-mail at hotline@dcrco.com.

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Priority Club Worldwide

Holiday Hospitality, operator of the Holiday Inn and Crowne Plaza chain, overhauled their hotel rewards program yesterday, introducing a new ‘Club Gold’ and ‘Platinum’ level program. ‘Priority Club Worldwide’ will also combine the former ‘Holiday Inn Priority Club’ and the ‘Crowne Plaza Preferred’ frequent guest programs. The company also announced a platinum version of its bank credit card program through First USA. The new ‘Priority Club Worldwide Platinum VISA’ card offers a 5,000 point bonus for first use of the card and an intro rate of 4.9%. To kick-off its upgraded card the company announced a six million point giveaway to run through June. Established in 1983, ‘Priority Club’, with six million current members, was the first frequent quest program of its kind in the hotel industry.

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Card-Operated Laundry Firm Sold

Mac-Gray Corporation , one of the nation’s leading providers of card- and coin-operated laundry equipment service to multi-housing markets, will acquire Amerivend, its largest Florida competitor, under a definitive agreement announced Thursday by the two companies.

Under the agreement, Mac-Gray will acquire one hundred percent of the outstanding capital stock of Amerivend Corporation and the assets of Amerivend Southeast Corporation (together “Amerivend”).  In addition to being the largest provider of card and coin-operated laundry equipment in Florida, Amerivend adds to Mac-Gray’s route business in the Atlanta market.  It is also the principal distributor of Maytag commercial laundry products in Alabama, Georgia and Florida.

Founded in 1959, Amerivend had 1997 revenues of $18.6 million and has offices in Miami, Orlando, Tampa and Atlanta.

Stewart MacDonald, chairman and chief executive officer of Mac-Gray, said the purchase price, which is subject to certain adjustments, will be approximately $33 million in cash, which includes the repayment of certain debt.  The transaction is subject to customary closing conditions, including regulatory filings, and is expected to close within the next month.

Gerald E. Pulver, founder and president of Amerivend, said “The merger with Mac-Gray is wonderful news for our customers.  Although there was a higher bid on the table, we made this decision because of our long-standing commitment to both our customers and employees.  Amerivend and Mac-Gray share the same commitment to integrity and customer service.  Our people are in good hands.”

Mr. MacDonald said that becoming the largest provider in Florida gives Mac-Gray a strong foundation for continued growth in that state, a particularly promising market because it has the third largest multi-housing population in the U.S.

“It also increases our opportunities for selling Maytag products to the retail Laundromat market throughout the southeast,” Mr. MacDonald said. “Additionally, it brings into our corporation another company with an existing commitment to smart-card convenience for its customers.  Gerald Pulver and Amerivend were the pioneers of smart-card applications for the laundry industry, and it is therefore only fitting that we are able to join together. They fully understand the cashless convenience which smart cards bring to the customers they serve.”

Mac-Gray is the industry leader in smart-card operated laundry equipment, which eliminates the need for coins and thereby provides significant advantages to operators and customers alike.  Founded in 1927, Mac-Gray had 1997 revenues of $81.4 million and completed an initial public offering in October, 1997.

Certain matters discussed in this press release may constitute forward- looking statements within the meaning of the federal securities laws.  The acquisition of Amerivend is subject to certain closing conditions, including regulatory approvals, which may impact the timing or completion of the acquisition.  Actual results and the timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors, including the ability of Mac-Gray to successfully integrate Amerivend’s operations into Mac-Gray’s operations, the impact of Mac-Gray’s growth activities on its operating activities, competition in the laundry services industry, general economic conditions, the availability of equity and debt financing, fluctuations in interest rates and other risks detailed from time to time in the filings of Mac-Gray Corporation with the Securities and Exchange Commission, including quarterly reports on Form 10-Q, reports on Form 8-K and annual reports on Form 10-K.  Reference is hereby made specifically to the “Risk Factors” set forth in the Form S-1 (no. 333-33669), as amended, filed by Mac-Gray Corporation with the Securities and Exchange Commission.

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End-To-End OFX

Herndon, VA-based InteliData Technologies and Microsoft announced yesterday the first end-to-end OFX home banking solution certified to work with the MS ‘Money’ software and Home Financial Network’s ‘Home ATM’. InteliData’s ‘Interpose OFX’ supports a full range of home banking transactions. ‘Interpose OFX’ combines Windows NT with IBM mainframes, enabling banks to gradually add capacity. The component architecture for the in-house OFX solution starts at less than $100,000. Bill payment can be added for a total price under $200,000.

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The Axe Falls

First Data Merchant Services announced Thursday it will chop off 10% of its 5,200 employee workforce as part of its ongoing management reorganization. The terminations will take place at all ten FDMS service facilities. The company also announced yesterday it will shutdown only its Sunnyvale, CA facility. The nine remaining facilities are located in Atlanta; Louisville; Nashville; Omaha; Hagerstown, Md; Hunt Valley, Md; Melville, NY; Sunrise, FL; and Coral Springs, FL. FDMS said it will assist the 500 people fired with a “dignified transition to new career opportunities”.

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USA Technologies Raises Money

USA Technologies Inc. the leader in unattended credit card-activated control systems, announced today that it has completed a private placement offering.

“The company received an immediate cash infusion of $750,000, and stands to receive an additional $550,000 assuming full exercise of warrants,” said George R. Jensen, Jr., president and chief executive officer of USA Technologies.

“The cash generated by our private placement will allow us to continue the revenue growth that the company has been experiencing since the latter half of 1997,” added Jensen.  “During the last six months, USA has entered into a joint venture agreement with Mail Boxes Etc.; our MBE Business Express(TM) has been recommended by industry-leading Marriott Hotels, Resorts and Suites as a solution to Marriott’s business center needs; MBE Business Express(TM) was awarded Best New Product at the 82nd Annual International Hotel/Motel & Restaurant Show held last November in New York City; and, we have expanded our management team.  In addition, USA and/or MBE Business Express(TM)has been mentioned in several leading publications including the USA Today, New York Times, Dow Jones News Service, Philadelphia Inquirer and the San Diego Union- Tribune.

USA Technologies’ flagship product is MBE Business Express(TM) a joint venture product with Mail Boxes Etc.  MBE Business Express(TM) using USA’s patented technology and previously marketed by USA as Business Express(TM) provides credit card-activated self-service office systems for business travelers and consumers who need to access the internet or e-mail or use personal computers, printers, copiers and fax machines while they are away from their office or home.  Plans call for each unit to feature a dial through telephone to a nearby Mail Boxes Etc. location for additional services and support such as color copying projects, binding and packing and shipping.  A simple swipe of any major credit card activates the office equipment and computer stations which offer many popular software programs as well as access to the internet and e-mail.  To maintain security, MBE Business Express(TM) is equipped with TransAct(TM), USA Technologies’ proprietary payment and management system that processes secure, real-time credit card transactions, billing customers for actual services used while ensuring timely payments to the business center owner.

USA Technologies is a leading owner and licensor of networked credit card- activated control systems for the personal computer, photocopier, facsimile and laptop printing capabilities.  The company’s proprietary technologies make available unattended, point-of-sale control systems for credit card payments.

Statement Under the Private Securities Litigation Reform Act

The statements contained herein regarding the continued growth in revenues of the Company are forward-looking statements that invoke substantial risks and uncertainties.  The following are important factors that could cause the Company’s actual revenues to differ materially from those expressed or implied by such forward-looking statements the failure of the Company to sell the MBE Business Express(TM) in sufficient quantities; the inability of the Company to operate its business at a profit or to fund operations through sales of additional securities; or, the failure of the Company’s patents to adequately protect its technology from competitors.

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Pathways Certified

The Pathways Group, Incorporated has reported certification of its Point of Sale terminal software Smart SCRIP v.1.4) and its back-room management software system for transaction processing Fund Master. The Pathways software platforms enable the Delta-21 POS terminal, manufactured by Schlumberger, to process smart card transactions and credit card transactions seamlessly within the same software processing platform.

Merchants will now be able to accept both types of payment transactions using the same system (Hardware and Software) and will be able to take advantage of the Pathways umbrella to receive volume credit card rates for relatively small numbers of local transactions.  Additionally, participating merchants will be able to benefit from the extensive array of accounting reports and controls afforded by the proprietary Pathways system.

Certification of both the hardware and the software was awarded by First Data Merchant Services (FDMS).  In order to certify LAN/WAN software for processing credit card transactions, First Data requires that the software being certified is able to reliably upload transactions from individual merchant POS terminals.  The LAN/WAN software must determine the appropriate format required by FDMS for each transaction depending on its type, e.g., sale, refund, etc.  It also must determine whether or not the data from the card was entered manually or magnetically captured. It then must submit an online batch of transactions using a proprietary communications protocol implemented by First Data.

When processing credit cards, detailed information contained in the magnetic stripe on the cards is stored in the Pathways Smart Card System Database (Fund Master), along with approval codes and other data received directly by the POS terminals from First Data when a merchant seeks authorization for a transaction.  Likewise, transactions involving smart cards are captured on the merchant terminal and are processed through the same transaction gateway at Pathways.

This comprehensive retention of data enables Pathways to quickly ascertain the validity of any transaction.  Attempts at fraud are immediately identified, resulting in the inclusion of the card in a blacklist which is subsequently downloaded to the POS terminals of merchants enrolled in the Pathways Merchant Network.  This system also services transactions being processed by the proprietary network of Pathways ticketing equipment (TIKITBOX) nationally.

The significance of this achievement is that this certification puts Pathways on the leading edge of the Smart Card revolution, with a product that supplements existing credit and debit card infrastructure without having to “retool” or rewrite expensive software systems.  Further, the technology that has been developed by Pathways is not currently matched by any other transaction processor in the country.

Carey F. Daly II, President and CEO of Pathways was quoted as saying, “This is a major accomplishment for our company.  Our merchant base will now have the ability to process credit and smart card transactions in one database without special handling.  They will receive all of the benefits of our back room processing, which includes  merchant specific reporting tailored to their business, a comprehensive suite of on-line inquiry tools reserved for their use, monthly transaction reports and full transaction tracking on our processing center’s archive database system.

These capabilities as well as the First Data certification represent unique accomplishments for Pathways within the smart card processing industry. Our next step will be to develop a Bank Debit/ATM transaction system to integrate into our Fund Master product”.

The Pathways Group, Inc. provides clients with innovative and unique solutions for securely creating, capturing and processing data and electronic transactions using custom application software and hardware systems. The company was established in 1987 by Carey Daly and has evolved into a leader in the development of custom software and hardware for electronic banking, data and transaction processing, and smart card applications. Pathways creation of proprietary “back room” systems allows for the capture and processing of data and transfer of funds via “ACH” protocol, the standard used in the banking industry for transfer of funds in retail, medical and institutional environments.

Forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Act of 1995.  Actual results may differ materially from those projected in any forward-looking statement. Investors are cautioned that such forward looking statements involve risk and uncertainties, including, but not limited to, dependence on the developing smart card marketplace; market acceptance of the company’s products; the rate at which the company’s customers deploy smart card solutions; and dependence on third party marketing arrangements. A description of the risks and uncertainties attendant to The Pathways Group Inc. and other factors which could affect the company’s financial results are included in the company’s Securities and Exchange Commission filing on Form 1-A.

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MBNA Card Bond Rated

MBNA Master Credit Card Trust II’s $637.5 million class A floating rate asset-backed certificates, series 1998-A, are expected to be rated ‘AAA’ by Fitch IBCA.  The corresponding class B floating rate asset-backed certificates will be privately placed.  The certificates are backed by a pool of receivables generated under MBNA MasterCard and Visa accounts.  The expected ratings are based on the high quality of the receivables pool, available credit enhancement, MBNA’s underwriting and servicing expertise, and sound legal and cash flow structures.

Credit enhancement for the class A certificates totals 15% and is comprised of 7.5% subordination of class B certificates and a 7.5% collateral interest.

With the levels of credit enhancement available, series 1998-A can withstand simultaneous declines of 35% in yield and 45% in monthly payment rates, while chargeoffs increase to a level of 28% and still make full interest and principal payments to class A investors.  In addition, to address the interest rate and basis risk associated with uncapped floating coupons, the available enhancement enables a coupon stress to historic high LIBOR levels without a corresponding increase in portfolio yield.

Investors are protected from a deterioration in credit quality by early amortization events, which would trigger an early payout of investor principal.  However, MBNA’s historically healthy and stable excess spread levels help to minimize this early amortization risk.

Class A certificateholders will receive monthly interest payments of 11 basis points over one-month LIBOR throughout the revolving and accumulation periods and on the scheduled payment date, provided an early payout event does not occur.  Interest will be paid on the 15th of each month commencing in May 1998.  Following a variable accumulation period, principal is expected to be paid to certificateholders on the March 2003 distribution date.  The series termination date is Aug. 2005.  As a part of Group One, series 1998-A will share excess principal collections with other Group One series.

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Smart VISA Corp Cards Coming

A smart card in every wallet may not be what industry experts are predicting this year, but the utility and value of these micro-chip bankcards are rising, according to Visa U.S.A.

“The U.S. business case for smart cards is becoming stronger as financial institutions and other businesses evaluate how single-function and multi-function cards with micro chips can solve business problems regarding payment, customer service and other benefits,” said Diana P. Knox, senior vice president of chip products for Visa U.S.A. “Today’s telecommunications are very efficient for authorizing traditional magnetic-stripe bankcards, so it is the value-added service that will increase our nation’s demand for smart-cards.”

Smart cards with payment and other functions stored on a single micro chip are being rolled out in United States today. Later this year, a major company will put in Visa Corporate smart cards in the hands of hundreds of its business travelers who frequently rely on a major airline, hotel and rental-car agency. The program is expected to substantially reduce travel costs by ensuring that employees pay the lower rates negotiated by their corporate travel planner.

Multi-use smart cards are also in use on corporate campuses. All employees at Bank of America’s Clock Tower Building in San Francisco carry and identification card that has a traditional, multi-function “contact” micro chip (with Visa Cash and two PC security applications), and a “contactless” micro chip (that allows access to the office building of parking garage when read by a proximity reader).

“Multi-function Visa smart cards are real today, and we are developing our open chip-card platform to enable financial institutions to flexibility utilize whatever range of applications they choose,” said Knox. “For example, an issuer might put Visa Cash stored value in three currencies, credit and several loyalty applications on a chip. It is really up to each bank.”

Visa’s Open Platform strategy, which features the globally popular Java programming language, will enable bankcard issuers to select applications (such as credit, debit, Visa Cash, loyalty, and transit) for their card programs. Issuers can use a range of operating systems. Using Java’s “Write Once, Use Anywhere capability, financial institutions will be able to develop their own non-payment applications and place them onto any Java-based micro chip. Issuers will also be able to dynamically update customer accounts without re-issuing cards.

Single-function smart cards are also helping solve business problems today. Visa Cash, the most widely used open-systems, stored-value product in the world, is being used in a number of environments to reduce cash-handling costs. At Ft. Leonard Wood, Mo., for example, thousands of new soldiers are using Visa Cash cards, instead of hard currency, for everyday purchases on the base. Supported by First Union and the U.S. Department of Treasury’s Financial Management Service (FMS), the program has significantly reduced the flow of actual cash.

The Internet, an environment where cash and coins cannot be exchanged, is transmitting real Visa Cash purchases today. Approximately 500 employees of Bank of America and Visa are using reloadable Visa Cash cards to make purchases from seven merchants on the World Wide Web.

Overall in the United States, 3 million Visa Cash cards have been produced by seven financial institutions since the product was introduced in 1996.

To help financial institutions strategically assess the smart-card industry. Visa is introducing Visa Smart, a communications initiative that packages key industry trends, technologies, products and services.

The new initiative includes Visa Smart Solutions, a program designed to help financial institutions plan and implement their eventual migration to smart cards. To be introduced to financial institutions later this year, the program will combine planning and implementation support, endorsed lists of leading chip-card and terminal manufacturers, Visa Smart Solutions is being designed to give financial institutions a streamlined approach to adopting smart-card technologies, by including:

– Visa Smart products – Visa Smart Credit and Visa Cash – as well as value-added applications such as loyalty programs;

– Customized planning services to help financial institutions manage and prepare for marketplace changes and trends; and

– Implementation services to support planning and program launches.

“As the circles of smart-card activity on the U.S. map grow in number, they will eventually become concentric and fill in any remaining pockets over time … probably in five to 10 years,” said Diana P. Knox, senior vice president of chip products, Visa U.S.A. “Our role is to support our member financial institutions by helping to acheive open and global chip-card standards, and by streamlining research, planning and implementation services.”

Visa is the leader in the emerging payment technology arena with more than 21 million smart cards issued, and more than 70 chip-based and electronic commerce programs in 30 countries.

As the world’s best way to pay, Visa is the preferred payment brand and the largest consumer payment system worldwide, with more volume than all othe major payment cards combined. Visa plays a pivotal role in advancing new payment products and technologies to benefit its 21,000 member financial institutions, their cardholders and the global economy.

In addition to its leadership in smart cards, Visa is pioneering SET Secure Electronic Transaction programs to enable and advance Internet commerce. Visa’s 618 million cards, generating $1 trillion in annual volume, are accepted at more than 14 million worldwide locations, including 380,000 ATMs in the Visa Global ATM Network.

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