Commercial Card Pitch

First USA Paymentech, Inc. formally introduced a full service commercial card program for financial institutions seeking a commercial card processing partner. The announcement was made during a presentation by Paymentech at the American Bankers Association Conference in Long Beach, California.

Mary Dees, group executive for Paymentech’s commercial card unit, introduced the program during a conference presentation on corporate payment systems and the sophisticated technology and account management demands of such programs.

“When it comes to corporate, purchasing and fleet card solutions, it is no longer just about cards. Clients look for payment process re-engineering and improved expense management,” said Dees. “Companies want to tailor programs that address such issues as spending parameters, robust data reporting, integration of payment information into accounting systems, extensive program and implementation consultation, benchmarking, ongoing analysis, and more.”

Given these complexities, the most cost effective entry to the corporate payment arena for financial institutions is to partner with a processor capable of offering all components,” said Dees. “This is the solution we are taking the banks that have significant goals for their commercial card business.”

Paymentech will market its existing Visa and MasterCard commercial products to financial institution partners. In addition, Paymentech will make available major payment programs such as the PHH/Paymentech MasterCard corporate fleet card, the British Airways co-branded Visa corporate card. Paymentech will also offer a small business card version of the British Airways product that will be available only through agent bank relationships.

“As a third-party processor, we are perceived as a non-threating partner for banks who are serious about playing in the corporate payments market,” said James W. Baumgartner, president of Paymentech’s ability, via its merchant acquiring operation, to help corporate clients sign up and activate purchasing card accepting vendors. Through its Network Services unit, Paymentech has one of the largest terminal bases with purchasing card acceptance capability.

Banks and independent sales organizations (ISOs) utilize Paymentech Network Services for authorization and electronic draft capture transaction processing for merchant point-of-sales locations. Paymentech is also initialized closed loop systems for corporate clients that include commercial card issuing and merchant acquiring.

Paymentech currently delivers basic commercial card services to 70 smaller financial institutions. “We want to offer a range of solutions from a standard programs for small banks to highly customized offerings for larger banks,” said Baumgartner.

First USA Paymentech, Inc., founded in 1985, provides full-service electronic payment solutions, processing approximately 392 million total transactions in the June 1997 quarter. As the third largest processor of bankcard transactions in the United States, Paymentech processed approximately $41.3 billion in bankcard sales volume during fiscal 1997. Paymentech also issues commercial card products to businesses and other entities, and provides commercial card payment and information processing.


Business Card Use Up

Small and mid-sized business owners remain optimistic about future growth, but their optimism is “more subdued” than in 1996, according to the sixth annual Survey of Small and Mid-Sized Businesses conducted by Arthur Andersen’s Enterprise Group and National Small Business United (NSBU). Small and mid-sized business owners anticipate another good year ahead with increases in profits, revenues, employee compensation and new hires — however, projected increases in all four areas are down from what was expected in 1996.

The survey covered topics such as business growth, employment, financing strategies, hiring challenges and technology — including the Internet and World Wide Web.


Despite a more moderate outlook on growth, small and mid-sized businesses are continuing to invest to improve their operations. A large majority of owners surveyed, 89.2 percent, reported that they made significant changes in their businesses.

More than half of owners, 56.5 percent, said they made technology enhancements. These enhancements included computer system upgrades by 52 percent of owners and changes to better utilize the Internet by 19.4 percent of owners. Other changes included improving productivity (38.5 percent), developing new products and services (35.9 percent) and increasing employee training (24.3 percent).

To a large degree, small and mid-sized business owners believe that factors outside their control have the greatest influence on their companies. This is supported by the fact that 40.9 percent of owners cited the economy as the biggest determinant of their success and survival.


A lack of qualified workers continues to pose problems for small and mid- sized businesses, but some have found solutions by better managing and motivating their current employees. More than one-quarter of small and mid- sized business owners surveyed, 27.2 percent, said that a “lack of qualified workers” is one of the top three challenges their companies face.

Among mid-sized companies — those with 100 to 499 employees — the need for qualified workers is even greater. Owners at more than one-third of the mid-sized companies surveyed, 37.8 percent, said a “lack of qualified workers” is the top challenge for their businesses. In addition, the need for qualified workers is higher for companies that are expanding.

Progressive companies offer more incentives and greater flexibility to help them attract and retain qualified workers. Their solutions include providing profit sharing, allowing employees to work at home, offering stock ownership plans and implementing other methods to increase motivation, such as giving rewards and recognition based on performance.


Alternative forms of financing, such as credit cards, are gaining in popularity while use of traditional sources of capital, such as commercial bank loans and private loans, is declining. Reliance on commercial bank loans has decreased 24 percent in five years, declining steadily from 49.4 percent in 1993 to 37.8 percent in 1997. In addition, reliance on private loans has decreased by 32 percent, from 23.2 percent in 1993 to 15.8 percent in 1997.

Increasingly, small and mid-sized business owners are turning to alternative methods of financing. Credit card financing has nearly doubled during the past five years, from 17.3 percent in 1993 to 33.5 percent in 1997. Other popular methods of alternative financing cited by owners included vendor credit (19.8 percent), leasing (15.8 percent) and personal or home equity loans (15.5 percent).


Taxes are now the top government-related issue among survey respondents. In fact, 86.7 percent of owners, compared to 75.3 percent in 1996, said tax- related concerns are the most important government-related issues affecting their businesses.

In addition, 94.7 percent of small and mid-sized business owners surveyed said that the Social Security system needs to be reformed. Almost one-third of owners, 29.1 percent, cited rising Social Security costs as one of the most important issues facing their businesses.

This year’s survey was completed prior to passage of the 1997 tax bill. At the time the survey was conducted the top two tax-related concerns cited by owners were tax simplification, by 41.1 percent of owners, and payroll tax reform, by 34.4 percent of owners. Neither issue was addressed in the new tax legislation. On the other hand, capital gains tax incentives, requested by 31.4 percent of owners, and estate tax reform, requested by 17.2 percent of owners, were major components of the new tax package.


Comparing profit and sales performance levels of small and mid-sized companies during the past 12 months clearly shows that some technology investments can result in better returns than others. Computer users experienced a 3.5 percent increase in profits while companies that use remote modem connections to their networks experienced a 5.1 percent increase. In contrast, companies that do not have computers experienced a 0.8 percent decline in profits during the last 12 months.

Likewise, the average company that uses computers saw a 5.6 percent increase in revenue while companies that use remote modem connections experienced a 7.4 percent increase. Companies that do not use computers experienced only a 0.4 percent increase in revenue during the last 12 months.

In other technology developments, the Internet and World Wide Web are growing in popularity. The number of small and mid-sized businesses taking advantage of the Internet has grown significantly _ 43.1 percent of owners surveyed said their companies use the Internet _ up from 25.8 percent in 1996.


Game Financial Acquired

Viad Corp and Game Financial Corporation today announced that Viad Corp’s Travelers Express subsidiary has signed a merger agreement with Game Financial. Travelers Express is a leading provider of payment services for retailers and financial institutions. Game Financial is a leading provider of payment services for the gaming industry.

The transaction is structured as a merger, with Viad Corp issuing common stock in exchange for 100 percent of the outstanding shares of Game Financial. It is valued at $10.75 per share of Game Financial stock for a total of approximately $51 million. The transaction, which is planned to close by the end of 1997, is expected to be slightly accretive to Viad Corp’s earnings in 1998.

Following the merger, Game Financial will become a subsidiary of Travelers Express. Gary A. Dachis, Game Financial founder, president and chief executive officer, along with his management team, will continue to operate the business from its current offices in Minneapolis.

“This is a fine opportunity for both companies,” said Philip W. Milne, president and chief executive officer of Travelers Express. “The merger will fuel Game Financial’s continued growth and open a new distribution channel for Travelers Express’ growing line of payment services. Travelers Express is focused on introducing new payment services to our customers, and we are excited about expanding Game Financial’s product lines into our extensive distribution channel. Bringing together the technology leaders in our respective industries will promote continued innovation in the marketplace.”

“The merger is a great marriage of two leading payment service companies,” said Game Financial’s Gary Dachis. “It opens up many cross-marketing possibilities between us and it will allow Game Financial to capitalize on the extensive service network, automated call center capacity and operational expertise of Travelers Express. We are enthusiastic about the opportunity this merger presents for our shareholders, employees and clients.”

The Game Financial merger demonstrates the aggressive growth strategy that Travelers Express has pursued for several years. Travelers Express has been focusing on adding market share to existing product lines, but with the Game Financial merger it is entering a new market sector in the payment services field.

The merger has been approved by the boards of directors of both Game Financial and Viad Corp, but remains subject to all normal conditions to closing, including receipt of all necessary regulatory consents, Game Financial shareholder approval and confirmation that the transaction will qualify for pooling of interests accounting treatment.

Game Financial, which was founded in 1990, provides cash access services including credit card advances, check cashing services and ATM services in about 90 casinos across the nation. Since going public in 1994, the company’s revenues have increased to $19 million in 1996, and $14.4 million for the first six months of 1997, an increase of 84 percent over the same period as last year.

Travelers Express started as a money order business in 1940 and is now the largest money order processor in the nation and the second largest U.S. processor of electronic bill payment services. Other payment services include official check and share draft processing for financial institutions. In 1996, Travelers Express processed more than 750 million transactions valued at over $100 billion.

Viad Corp has owned Travelers Express since 1965. The Phoenix-based corporation is a $2.5 billion services company with businesses in airline catering, convention services, travel and leisure, as well as payment services.


New Bankruptcy Tool

A new bankruptcy scoring tool was introduced Wednesday by Fair, Isaac that differentiates between future bankrupts and future profitable accounts. Fair, Isaac says accounts don’t go bankrupt — consumers do, and suggests current bankruptcy tools have reduced revenues and portfolio profitability because they merely forecast bankruptcy incidence.. ‘HORIZON’ uses a bankruptcy loss-ratio performance outcome approach, a complex segmentation scheme and predictive characteristics appropriately weighted to balance risk and revenue. Fair, Isaac developed the tool using data primarily from Trans Union’s consumer credit database.


Smart Card Profits

While business models for smart credit cards are still being developed, a new report, released this morning, suggests the fraud fighting capabilities of smart cards could substantially boost profits for U.S. credit card issuers. The ‘Study on Financial Data Interchange’, published by MA-based Meridien Research, concludes U.S. card issuers could increase profits nearly 30%, from $3.7 billion to $4.7 billion by eliminating credit and debit card fraud through smart card technology. The Meridien report provides quantitative and qualitative analysis of CartesBancaires, Geldkarte, Proton, VISA Cash, Mondex, Clip and others. Meridien says the number of smart cards in financial services worldwide during the second quarter totalled 170 million and should reach 400 million by 1999.


Debit Card Regs Unnecessary

Appearing before the House Banking Subcommittee on Financial Institutions and Consumer Credit, Russell Schrader, senior counsel and vice president of Visa U.S.A., today described strong new protections instituted by Visa to safeguard its debit and credit cardholders from losses due to fraud.

Visa’s consumer protections go well beyond government regulations limiting cardholder liability and are the most comprehensive in the industry. Under the recently announced policy, Visa cardholders have zero liability if they report the loss or theft of the card within two business days. After the two- day period, the cardholder is liable for a maximum of $50. In addition, Visa check cardholders will receive provisional credit within five business days of notification for lost funds due to unauthorized transactions.

The policy also requires every Visa check card issuer to include an activation feature into every unsolicited check card issued, so that the cards cannot be used without first being personally activated by the cardholder.

“Consumers have embraced debit cards for a variety of reasons,” said Russell Schrader, senior counsel and vice president of Visa U.S.A. “Convenient access to checking account funds, acceptance by merchants worldwide, security — all without hassles — are what consumers tell us they like about their debit cards. Visa has voluntarily enacted consumer protections well beyond those required by law to give our banks’ customers added security and peace-of-mind when they use a Visa check card.” “Furthermore,” added Schrader, “we have extended the zero liability protection to Visa credit cards as well, so that cardholder liability for all Visa consumer cards used at the point of sale is the same.”

Schrader testified that additional federal regulations governing cardholder liability for debit cards, such as the Visa check card, are unnecessary and could impede the development of new payment devices. “Visa’s new rules — along with existing federal and state laws — effectively address any potential problem. While Visa is certain the new rules are right for existing debit cards, we cannot say for sure what the best cardholder protections will be for the new, emerging electronic payment devices Visa is developing.”

The Visa check card is the fastest growing consumer payment device in the history of Visa. There are now 119 million Visa debit cards worldwide, forty percent more than just one year ago, including 50 million cards in the United States. In fact, one in four Visa transactions in the United States is a debit card transaction.

In early August, Visa announced an alliance with the National Consumers League to educate consumers about debit cards. As part of this effort, the National Consumers League will produce and distribute a free debit consumer education brochure that will be available this fall. Consumers can reserve a copy by calling 1-800-355-9NCL.

Visa 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. Visa is the only consumer payment system to facilitate $1 trillion worth of purchases of goods and services in a fiscal year. Visa’s nearly 600 million cards are accepted at more than 14 million worldwide locations, including 370,000 ATMs in the Visa/PLUS Global ATM Network. Visa’s Internet address is .


Paymentech Earnings Off

First USA Paymentech revised and lowered its previous quarter’s earnings by $16.4 million or $0.49 per share yesterday. The earnings reduction was due to three pre-tax charges totalling $21.5 million which includes a $12.5 million charge for employee stock option loans, a $5 million write-off for obsolete technology/equipment and a $4 million charge for the shortened useful life of certain assets. PTI also says its earnings for the quarter ending Sept 30 will not meet analysts’ estimates due to difficulty in growing its third-party processing business, delays in planned cost-savings, the repricing of several key processing relationships and the effects of the UPS strike. In other PTI developments yesterday: CFO David Truetzel resigned due to family concerns.


People’s Typo

People’s Bank has indicated that today’s American Banker has charts listing incorrect statistical data regarding credit card asset quality. These numbers relate to People’s managed net charge-offs, noncurrent credit card loans and percentage change for both from 1Q96 to 1Q97.

The correct statistics for 1Q97 are:

managed charge-off percentage 4.01%
managed net charge-off percentage change from 1Q96 (0.31)%
percent of managed loans noncurrent 1.86%
managed noncurrent percentage change from 1Q96 (6.48)%

The American Banker has been contacted about the statistical errors and People’s Bank anticipates a correction shortly.

People’s Bank is a 154-year-old diversified financial institution offering consumer and commercial banking services as well as investment services provided by its wholly owned subsidiary, People’s Securities, Inc. People’s serves Connecticut through a network of 110 branches. By early 1998, the bank will be operating offices in 45 Super Stop & Shops throughout Connecticut providing seven-day-a-week service with extended hours. People’s is the leading mortgage originator in Connecticut and, nationally, is the 26th largest issuer of Visa and MasterCard.


$16 Billion Smart Card Market

The worldwide market opportunity for smart card manufacturers such as Motorola, Gemplus, Schlumberger and others will grow from $1.2 billion in 1996, to $7.6 billion in 2000, a 59 percent growth rate (CAGR) typical of emerging markets, according to a new study from Killen & Associates.

From 2000 to 2005, the more mature market will grow at 16 percent CAGR, reaching $16 billion in 2005.

Michael Killen, company president, said, “In a few short years, banks and non-banks like American Express, AT&T, Novus and hundreds of others around the world will significantly step up their purchases of smart cards. They want to seize emerging opportunities to provide the wide range of applications and services enabled by multi-function smart cards.”

The Killen study, “Non-Banks’ Smart Card Strategies: New Opportunities to Increase Sales and Profits”, recommends strategies to banks and non-banks, including card associations, for protection and expansion of their brands as they enter volatile new smart card markets. The study tracks VISA, MasterCard/MONDEX and Banksys’ Proton initiatives, and projects likely winners in the smart card race.

President Michael Killen will address these issues and others at two upcoming conferences:

Oct. 8 — London — “New Revenue Sources For Phone Cards:
Opportunities Created By Advances In Technology”
For details contact:
Tel: + 44 (0) 171 915 5055
Fax: + 44 (0) 171 915 5056
Address: IIR Ltd., 6th Floor, 29 Bressenden Place, London SW1E 5DR

Oct. 27 — Madrid — “Impact of High Technologies on Banks:
Card Issuing, Merchant Acquiring, and Retail Services’ Lines of
For details contact:
Instituto Espanol de Gestion y Direccion Empresarial (IEGDE)
Spanish Business Management Institute, IEGDE,Torquemada 10 B1, E-28043
Madrid, Spain
Tel: +34 1-381 92 63
Fax: +34 1-381 92 02
Web site:

Killen & Associates is a leading market research and consulting firm whose studies, seminars and television programming enable clients in the telecommunication, banking/financial services and information technology industries to identify business opportunities created by technology advances, public policy changes and market forces.

For additional information, visit Killen & Associates’ Web site: .


FDC & Advanta Tango for 7 More

First Data Enterprises, a unit of First Data Corporation (NYSE: FDC), and Pennsylvania-based Advanta Corporation today announced that they have signed an agreement renewing the bankcard issuing giant’s processing agreement with First Data for another seven years, effective Oct. 1. Financial terms of the agreement were not disclosed.

Under the agreement, First Data will provide data processing and other card portfolio management services to Advanta.

“We are pleased to continue our relationship with First Data. The expertise and innovation they provide will help us effectively manage our credit card portfolio and achieve our goals for the future,” said Advanta senior vice president, Pamela Godwin.

Advanta, a First Data client since 1990, is ranked as one of the top 10 issuers of bankcards in the U.S. with $11.2 billion in managed credit card receivables at the close of June 1997.

“Our commitment to deliver the highest level of performance and innovative technology to our clients is reflected in Advanta’s decision to continue to partner with First Data,” said Jack McDonnell, president of First Data Enterprises. “We’re confident that this strategic decision will play a role in Advanta’s continued success as one of the leading bankcard issuers in the nation.”

With more than 6 million customers, $21 billion in managed assets and over 4,000 employees as of June 30, 1997, Advanta is a financial services enterprise that serves consumers and small businesses through innovative offerings of credit cards, mortgages, leases, insurance and deposit products.

First Data Enterprises provides comprehensive data processing and information services to national and non-traditional bankcard issuing financial institutions. Through delivery of technology and scale of resources, it helps issuers to enhance their portfolio growth, increase market share, reduce risk and improve profitability.

Hackensack, N.J.-based First Data Corporation is a global leader in payment systems, electronic commerce and information management products and services. First Data and its principal operating units process the information that allows millions of consumers to pay for goods and services by credit, debit or smart card at the point of sale or over the Internet; by check or wire money. For further information about First Data, please visit the company’s web site on the Internet at .


New Start Talkin’ Cards

7-Eleven, known for around-the-clock convenience, is now making cellular calling a whole lot easier. The convenience store company has teamed up with Southwestern Bell Wireless to offer Start Talkin’ Prepaid Cellular Calling Cards for on-the-go customers in St. Louis and Kansas City.

“Basically, 7-Eleven and Southwestern Bell Wireless are in the business of removing hassles from people’s lives. Joining forces with Southwestern Bell to provide cellular calling without a contract, a deposit or a monthly bill is exactly the kind of convenient service our customers want from us,” said Michael Baldwin, 7-Eleven category manager, phone card services. “We’re already the nation’s largest retailer of prepaid long-distance phone cards, and that makes Start Talkin’ Prepaid Cellular Calling Cards a perfect product fit.”

7-Eleven and Southwestern Bell Wireless have made it easy to obtain Start Talkin’ Prepaid Cellular Calling Cards. There are no contracts, no credit checks and no monthly bills for customers to worry about with the pay-as-you-go service. All a customer needs to use the prepaid cellular cards is a cellular phone and activation through Southwestern Bell. Once customers have activated their Start Talkin’ cellular service, they can purchase a Prepaid Cellular Calling Card at 7-Eleven for $50 worth of cellular calling.

Prepaid calling time is debited per minute for local calls, long distance calls and calls made when “roaming” outside the customer’s Local Rate Area. Per minute rates vary depending on the market. There are no other monthly fees to pay, which means the $50 time card buys the consumer more than 80 minutes of local talk time that can be used for two months.

With approximately 16,700 convenience stores worldwide, operations of The Southland Corporations (Nasdaq:SLCM), operator and franchisor of 7-Eleven stores, include more than 5,400 7-Eleven and other convenience stores in the United States and Canada. In addition, licensees and affiliates operate about 11,300 7-Eleven stores in the U.S., its territories and 18 other countries. 7-Eleven’s home page is located at .

For more information about Southwestern Bell Wireless and Start Talkin’ call 1-800-331-0500.

Southwestern Bell Wireless, together with SBC’s other wireless affiliates, is a leading wireless provider, serving nearly 5 million customers in 78 markets nationwide. It is a subsidiary of SBC Communications Inc. SBC Communications Inc. is a global leader in the telecommunications industry, with more than 32 million access lines and nearly 5 million wireless customers across the United States, as well as investments in telecommunications businesses in 10 countries. Under the Southwestern Bell, Pacific Bell, Nevada Bell and Cellular One brands, the company, through its subsidiaries, offers a wide range of innovative services, including local and long- distance telephone service, wireless communications, paging, Internet access, cable TV and messaging, as well as telecommunications equipment, and directory advertising and publishing. SBC () has more than 114,000 employees and reported 1996 revenues of $23.5 billion. SBC’s equity market value of $56.5 billion (as of June 30, 1997) ranks it as one of the five largest telecommunications companies in the world.


Fair,Isaac Founders Honored

Fair, Isaac and Company, Inc. founders William R. Fair and Earl J. Isaac posthumously received the American Bankers Association Bank Card Distinguished Service Award for their pioneering work in credit scoring. Patrick G. Culhane, Fair, Isaac executive vice president, Credit, presented the awards yesterday to the recipients’ family members at the ABA Bank Card Conference in Long Beach. Fair and Isaac are the second and third nonbankers to receive the award out of a total group of 10 recipients since the award’s introduction in 1995.

The Distinguished Service Award is designed to honor those individuals who have made a major contribution in establishing and building the bank card and payments system industry, especially during the period between 1960 and 1985. Larry Rosendberger, president and CEO of Fair, Isaac, selected on some of the founders’ significant contributions, and also emphasized that their innovation and drive are embodied in the company today.

“In the 1950s, at a time when the first digital computers were being applied to operations research, Bill, an electrical engineer, and Earl, a mathematician, explored the concept of applying a systematic approach to solving business problems,” Rosenberger explained. “They adapted the concept of feedback, as used in tuning electrical systems, to decision systems and process improvements.

“As a result they brought new insight into the field of data management and its application in consumer credit decisions. Their work marked the credit granting industry’s first distinction between risk preference and risk assessment, leading to fairer and less biased lending practices due to the inherent objectivity of a systematic process. Bill and Earl’s pioneering work fueled the democratization of lending and made a positive social contribution.

“The pioneering spirit and leadership with which Bill and Earl founded and shaped the company is demonstrated in Fair, Isaac’s work and values today. Although Bill and Earl are gone, the company has inherited their drive and continues to build upon their vital contributions.”

Since 1956, Fair, Isaac has helped businesses maximize the value of data for strategic decision making. The company pioneered the use of credit scoring in consumer and commercial lending. Today, Fair, Isaac provides data-driven decision making solutions such as customer and operational data management and modeling, data warehousing and information analysis, strategy design, and software to businesses in financial services, direct marketing, personal lines insurance, retail, health care and telecommunications. Headquartered in San Rafael, Calif., Fair, Isaac employs more than 1,200 people in 16 offices worldwide. For the fiscal year ended September 30, 1996, the company reported revenues of $148.7 million, a 31 percent increase over the prior fiscal year.