Mexican E-Commerce Pilot

Visa, Bancomer, Hewlett-Packard and Verifone launched today the first electronic commerce pilot program in the Americas using the SET 1.0 standard. As a result, Bancomer Visa cardholders will be able to make secure electronic transactions through the Internet. SET 1.0 is a standard developed by Visa in cooperation with other card companies and technology providers. This standard allows both the cardholder and the merchant to authenticate their identity and encrypts the information for transmission through the Internet.

“We take pride in being the first country in the continent to launch an electronic commerce pilot using the SET 1.0 standard. The cooperation between Visa and Bancomer has made it possible for us to offer Mexican cardholders the most advanced payment systems, ensuring their Internet purchases are secure,” said Eduardo Eraña, President of Visa International in Mexico. “This new effort is proof of Bancomer’s vision and Visa’s technological leadership. It also represents a milestone in the Bancomer-Visa partnership for the development of emerging technologies,” he added.

Bancomer is the first Latin American bank to issue digital certificates using the SET 1.0 standard. These certificates authenticate the cardholder as a legitimate Bancomer Visa cardholder with the ability to make secure electronic transactions. In addition, Liverpool is the first merchant to be issued a SET 1.0 certificate by Bancomer. This allows the cardholder to make purchases on the Web with full confidence that the transaction will be secure and backed by both Visa and Bancomer.

“Bancomer offers the best products and services to provide our customers with the highest degree of convenience when making their transactions, using cutting-edge technology HP and Verifone technology, and Visa’s expertise and know-how,” said Guillermo Acedo, Adjunct Director General of Consumer Banking for the Bancomer Financial Group.

As part of its “First Global” program, aimed at offering integrated solutions for financial institutions, HP contributed consulting, integration, support and the system platform. Verifone contributed its expertise as a leading worldwide provider of payment solutions for the physical and virtual environments, making its SET 1.0-based products a reality for financial institutions (vGate), merchants (vPOS), and consumers (vWALLET).

The electronic commerce process starts when the certified cardholder logs on to the Internet to review the Liverpool catalog, selects an item and orders it online. Once the order is placed, the merchant automatically requests authorization from Bancomer to complete the transaction. When authorization is obtained from the bank, the transaction is cleared and settled. Afterward, the merchant ships item to cardholder.

Bancomer Visa Classic, Visa Gold, Visa Debit and Visa Business cardholders are participating in this program.

Visa, “the best way to pay,” is the preferred payment brand and the largest consumer payment system worldwide. It 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. As leader in the development of new programs, Visa has 69 chip card programs currently in operation throughout the world, including over 7 million Visa Cash cards, and is introducing Secure Electronic Transaction programs in over 25 countries in order to promote secure electronic commerce though the Internet. The 600 million Visa cards issued worldwide generate over US$1 trillion in sales volume annually, and are accepted at over 14 million merchants all over the world, including 380,000 ATMs of the Visa/PLUS network.

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First USA Card Bonds Rated

First USA Credit Card Master Trust’s $700 million class A floating rate asset backed certificates, series 1997-10. are expected to be rated ‘AAA’ by Fitch IBCA. The corresponding $63.25 million class B certificates are expected to be rated ‘A+’.

Fitch IBCA’s expected ratings are based on the strength of the Visa and MasterCard collateral pool, available credit enhancement, excellent servicing capabilities of First USA Bank and the solid legal and cash flow structures framing the transaction.

Credit enhancement supporting class A is derived from the subordination of the class B and CIA certificates equal to 17% of the total initial invested amount. Class B investors are protected from losses by the 9.5% CIA certificates. The CIA certificates are interests in the trust subordinate in payment rights to class A and class B.

Several economic and credit stress scenarios were devised by Fitch IBCA to determine appropriate credit enhancement levels. The scenarios simultaneously stress yield, chargeoff and monthly payment rate steady state assumptions. In addition, to address the interest rate risk associated with uncapped floating- rate coupons, the coupon is stressed to worst case London Interbank Offered Rate (LIBOR) levels without a corresponding adjustment to yield.

Under the available enhancement, class A withstands a 35% decrease in yield, a 40% decline in payment rates and chargeoffs increasing to over 30% and still makes full and timely payments of investor principal and interest. Class B sustains a 25% decrease in yield, a 30% decline in payment rates and chargeoffs increasing to more than 20% without suffering a principal or interest loss.

Class A and class B investors will receive monthly interest payments of 0.09% and 0.27% over One-Month LIBOR throughout the revolving and accumulation periods and on the expected maturity date in January 2001, provided an early payout event does not occur. Early amortization of the securities may result from a deterioration in asset quality, transferor insolvency or servicer default.

Fitch IBCA also expects to affirm its outstanding ratings assigned to existing master trust series, indicating series 1997-10 will not result in a reduction or withdrawal of current ratings.

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Super ATMs

A San Francisco company says it is the only company in the world to received all the regulatory approvals to provide stand- alone, self-service booking and ticketing services via ATMs. Docunet, Inc. says it will deploy ‘Super ATMs’ nationwide that will dispense airline tickets, traveler’s checks, event tickets and pre- paid phone cards in addition to basic cash services. The company signed a marketing agreement Friday with DDMD to market its product. Docunet says the market for dispensing new products via ATMs is huge. For example the U.S. market volume for airline tickets is $100 billion, traveler’s checks is $50 billion and events ticketing racks up $5 billion each year. With the average cost of booking and delivering an airline ticket at $40 there is a compelling business case to switch to ATM delivery says Docunet.

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Web ATMs

M&I Data Services and North Communications have teamed up to offer full-service Web-based electronic banking through advanced touchscreens to their bank customers nationwide. The new kiosks resemble ATMs but offer touch control, full-motion video and multi- lingual audio. Consumers can not only apply for loans, open accounts, check balances but also can query automobile valuations or check current stock prices. The kiosks also have the capability of providing live, on-screen videoconferencing with a bank customer service representative.

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ATM Surcharging Limits

Consumers are very tolerant of incremental increases in average ATM surcharge amounts according to NC-based Mentis Corporation’s “Consumer Attitudes and Preferences” study. Well over 50% of consumers say they would continue to use ATMs if the average surcharge increased from $1.50 to $2.00. However if the average surcharge doubled to $3.00, more than 75% of current surcharge- paying consumers would discontinue their use of other banks’ ATMs altogether. Mentis says its study shows that banks need to be cognizant of consumers’ surcharge thresholds since exceeding tolerable limits may result in declining transaction volume and less profitable machines. Mentis also found that the value proposition of convenient access to bank services through ATMs is not strong enough to attach a monetary value to ATM use. About two- thirds of consumers interviewed say they would opt for free transactions if given a choice between free ATM transactions and highly convenient ATM access. Mentis says if banks are to succeed in migrating routine transactions out of branches, they must pr.ply incent the behaviors they wish to produce.

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VISA SpendTrak Update

At the midway point of the holiday shopping season retail credit card charge volume is holding to a 12.4% increase over last year, and total card volume, since the Thanksgiving weekend, is up 13%. VISA says its U.S. holiday retail purchase volume hit $15.6 billion and total U.S. volume hit $19.4 billion as of December 11. VISA also says retail transactions thus far, total 236 million versus 205 million last year.

VISA U.S. RETAIL MAP
Pacific $3.0 (+13.7%) Southeast $3.3 (+13.4%)
Northeast $3.3 (+11.7%) Mountain $1.0 (+13.6%)
Southwest $1.3 (+11.7%) Grt Plains $1.0 (+11.7%)
Grt Lakes $2.7 (+10.7%)

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Open MULTOS Platform

Open platforms represent the key to the successful adoption of smartcards around the world, today claimed Hugh Kingdon, Vice President, Marketing of MAOSCO, the cardsortium created the drive the adoption of MULTOS as an industry standard multi-application smartcard platform.

Speaking at the CardTech SecurTech ’97 conference in San Jose, Hugh Kingdon said, “The development and ultimate success of the smartcard depends on the provision of an open, global, highly secure, multi-application platform. It is this that will enable and drive the mass adoption of the smartcard in the same way that products such as DOS and Windows drove the development of the computer industry.

“Only with an open, multi-application platform, will consumers embrace smart cards into their private and work lives, because open platforms will enable a wide range of products and services, providing new levels of functionality, convenience and security.

“My role, and role of the MAOSCO consortium therefore, is to deliver MULTOS as an open, secure standard and to vigorously defend this openness.

“Any card issuer can issue MULTOS cards and it is the card issuer alone who determines which applications and products reside on their MULTOS cards. MULTOS may be freely used to support products or services which are competitive to those of consortium members MasterCard and Mondex.

“There are no restrictions on who may produce MULTOS cards or on the silicon platform that must be used. Card fabricators and silicon providers do not even need to take a license.

“It is quite wrong to assume that MULTOS activity is restricted to MAOSCO consortium members. The MULTOS market is truly open. The role of the consortium is to control the MULTOS specification and to ensure the openness of the platform, on behalf of, and to the benefit of, the whole industry.”

MULTOS provides the card issuer with the flexibility to target an individual consumer by bringing together a unique combination of products and services on a single card – within a framework of security and control.

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WolfMart Online

Tired of long lines? Too much to do, too little time? Capitolnet Marketing Group, along with Action Graphics and First Union National Bank, have made it possible for Wolfpack fans to order merchandise directly on-line. As of December 4, 1997, WolfMart, North Carolina State University’s online catalog, is now completely interactive. Sam Matheny, General Manager of Capitolnet Marketing Group, said, “We are very excited about this opportunity and off to an excellent start with over $1,000 in orders in the first three days of business.”

“What an innovative, fun way to shop. Open Market software has enabled NCSU fans across the nation easy access to their favorite Wolfpack gear,” said Julie McCarthy, Marketing Assistant for Capitolnet Marketing Group. The ability to order 24 hrs a day, 7 days a week makes WolfMart a convenient way to shop. WolfMart is now fully functional with transactions being processed by First Union National Bank. Credit card security is ensured as transactions are handled using Open Market’s Transact and SecureLink software.

With the holidays just around the corner, a golf shirt, sweat shirt, duffel bag or embroidered hat can be a great gift idea for any Wolfpack fan. A wide selection of logos and colors allow shoppers to personalize many of the gift items available.

That’s not all fans can find here. Capitolnet Marketing Group was one of the first to provide college football ticket sales online. This service has now been extended to include Wolfpack women’s basketball and gymnastics tickets. Please visit for more information. You may contact us at wecare@gopack.com.

About Capitolnet Marketing Group

![][1] Capitolnet Marketing Group (CMG), a division of Raleigh-based Capitol Broadcasting Company Inc., specializes in Internet-based marketing including advertising, commerce and multi-media production services. CMG (http://www.capitolnet.com) provides businesses with innovative marketing solutions by developing and managing websites and Internet applications that provide informative and entertaining content.

About First Union

![][2] First Union offers access to a full array of products and services through its Internet home page (). Customers may purchase merchandise online as well as check balances in their checking, savings, money market, CAP, credit card, IRA, loan and time deposit accounts. First Union’s Cyberbanking customers also can pay bills and transfer funds between eligible First Union accounts, re-order checks and issue stop payment requests.

Charlotte-based First Union Corporation (NYSE: FTU) provides financial products and services to more than 12 million customers nationwide. First Union is the nation’s sixth-largest bank holding company with $143 billion in assets as of June 30, 1997.

[1]: /graphic/capitolnet/capitolnet.gif
[2]: /graphic/firstunion/firstunion.gif

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ETA Annual Expo

Electronic Transactions Association will be Jazzin’ It Up in New Orleans for the group’s 1998 Annual Meeting & Exposition. Because of the success of our earlier tradeshows, we have doubled the size of our 1998 expostion to over 80 exhibit booths. Over 500+ attendees are expected to participate in what has become THE acquirers meeting in the electronic transactions industry. Cutting edge acquiring industry seminars will be presented by dynamic speakers and will include: Opportunities into the Next Millenium — Invited speaker Carl F. Pascarella, President of VISA, U.S.A. ReInventing Your Enterprise Invited speaker Allen Neuharth, Chairman & President of USA Today Strategic Positioning for the Future — Invited speaker Albert irato, President of Hypercom, Inc. There’s More Out There… Marketing Opportunities — invited speaker Fred Gumbel, President of Vital Processing Service Value-Added Selling to Merchants Setting Up A Merchant on the Internet Sponsorship and Exhibit opportunities are available, for information call ETA (800) 695-5509. Meeting registration materials will be available mid December.

The Electric Transactions Association is a national not-for-profit trade association representing organizations offering electronic transaction processing products and services. Our membership represents leading companies providing services between merchants and settlement banks; financial institutions; and businesses providing equipment or services to the industry. ETA was organized to influence policy within the industry by providing leadership through education, advocacy and the exchange of information.

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Global Acquires ECS

Global Games Corp./Global Communications, Inc. , announced Thursday that it has acquired 100% of Electronic Card Services, Inc., Miami, Florida.

ECS is in the business of providing electronic cash cards accepted by major retailers. As more and more organizations accept payment through electronic means, electronic card services provide a method by which cash can be exchanged for electronic cash which can then be redeemed at retailers, phone companies and online. ECS is doing business in the U.S. and Canada, primarily with prepaid phone cards marketed via machine dispensing.

Through its affiliation with Global Communications, the cash card applications of ECS will be broadened to allow consumers to use the card for chat line, prepaid cellular usage, and Internet access via 800 phone numbers for travelers seeking to avoid high cost alternatives. More applications will be available…virtually equaling a debit card. Global will also provide numerous new high volume sites for the cards to be dispensed, as well as Internet marketing support.

According to Telecard World Magazine, electronic cash card sales in 1997 will approximate $2.2 million for prepaid phone card usage alone, with growth to $4.3 billion by the year 2001.

ECS booked $450,000 in revenue in its last quarter. Revenue for 1998 is forecast to be at $14 million with pre-tax profit of approximately $7 million.

Global’s acquisition price for ECS was $1.6 million, made up of 4 million shares of Global stock (restricted) and $800,000 in cash.

Global Communications provides commercial Internet services, third party credit card processing, and Internet entertainment with bingo and lotto games.

A letter of intent was recently signed to acquire all of the stock of Integrated Consumer Entertainment, Ltd., an Illinois-based provider of dating chat line and other services in several major U.S. markets. Completion of this acquisition is expected later this month.

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Economic Concerns

With corporate layoffs surging and consumer debt soaring there is concern on Wall Street this morning that credit card-backed securities will be affected next year. Fitch IBCA’s December issue of “Credit Card Movers and Shakers” says the pace of corporate cutbacks during the past two months as well as the pickup in consumer credit in October is “worrisome”. Total layoffs announced thus far this year exceeds 450,000 jobs, the second highest year in U.S. history. During October consumer credit increased 10.5%, the fastest rise in more than a year. Fitch says the current, historically high chargeoffs and consumer bankruptcies are the result of the abundance of available credit generated between 1993 and 1995, a period when many Americans were out of work or working at lower paying jobs due to prior cutbacks.

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