Bigger & Smarter

BankBoston, Bank of Montreal/Harris Bank and consulting firm First Annapolis opened the curtain yesterday on a new joint venture that will combine the existing U.S. card portfolios of BankBoston and Harris Bank with the management and marketing savvy of First Annapolis. The firms expect to close the deal by Nov. 30 and they project the newly formed entity will be among the fifteen largest U.S. card portfolios by the year 2000. Under terms of the agreement: BankBoston will contribute most of its $1.4 billion portfolio in exchange for $5 million in cash, $50 million in preferred shares and 19% of the common shares of the new entity (BankBoston will retain its regional portfolio cardholders); Bank of Montreal/Harris Bank will contribute most of Harris Bank’s $782 million portfolio and $115 million in cash in exchange for a 69% ownership; and First Annapolis will contribute its subsidiary First Annapolis Marketing Information Services, Inc. in exchange for a 12% share of the new company. The yet to be named company has also designated First Data Resources as its provider of data processing, customer service, credit and collections support. In making the announcement Thursday the three firms indicated they see the current shakeout in the market as an opportunistic time for alliances and acquisitions. They also believe the key to future profitability in the card business is data mining and economies of scale. First Annapolis approached between eight and ten issuers with the concept, landed two, and expects to announce a third partner next year. Bank of Montreal says they would like to eventually reduce their ownership to about 35%. The new company expects to go public in 2 years.

PARTNER’S MID-YEAR PORTFOLIO SNAPSHOT
ISSUER RECV YTD VOL ACCTS ACTIVES CARDS
BankBoston $1.4b $2.8b 1.2m 725k 1.2
Harris Bank $782m $672m 1.2m 474k 710k
Source: CardData/Bankcard Update

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AirTouch Cellular Calling Card

Following one of the hottest communications trends in Europe, AirTouch Cellular has introduced Prepaid Cellular Service, offering consumers new options and control over their wireless spending.

AirTouch Cellular offers the only prepaid cellular calling card that provides service throughout Southern California at a flat price per minute, with no roaming or long distance charges for calls made from the region to anywhere in the United States.

AirTouch Prepaid Cellular Calling Cards are easy to buy, easy to use and easy to understand with no credit check, contract, monthly charges or cellular bills. As simple as the name implies, consumers pre-pay for cellular service by purchasing cards in $30 increments. There is also a one-time initiation fee, which may vary by retailer, but is typically $30.

“The use of cellular calling cards is booming in our international markets. In Portugal, for example, 40 to 50% of all new wireless business is being generated from prepaid cellular,” said Nancy Hobbs, executive vice president and general manager, AirTouch Cellular, Southern California.

“Prepaid service is the ideal solution for consumers who want more control over their wireless spending, and students, members of the military, or anyone else living in Southern California on a temporary basis.”

The Prepaid Cellular program continually keeps callers updated on their spending through an announcement at the beginning of each call indicating the minutes left on their current account, and an announcement at the end of each call indicating the remaining dollar amount. Consumers can easily add money to the account at any time by dialing “Star 611,” which is free of airtime charges, or stopping by a retail location.

“AirTouch Prepaid Cellular Calling Cards make cellular affordable because it’s easy to manage my bill,” said Don Mason, owner of Rhythm Television Entertainment, a production company in San Diego.

“Now I can use cellular service to enhance my business — but I control the costs. I simply use it until the money is gone.”

Airtime charges for the Prepaid Cellular Calling Card are seventy-five cents per minute including long distance charges for calls from the home calling area of San Diego, Orange, Los Angeles, Riverside, San Bernardino and Ventura counties. Roaming (use of the service outside of the home calling area) is available in hundreds of cities throughout the United States for $1.75 per minute.

AirTouch Communications is a global wireless communications company, with interests in cellular, paging, and personal communications services in the United States, Belgium, Germany, India, Italy, Japan, Poland, Portugal, Romania, South Korea, Spain and Sweden, as well as an interest in the Globalstar satellite system. The company, based in San Francisco, serves over 9 million proportionate customers worldwide. AirTouch’s cellular division serves more than 3.7 million customers in the United States, including the nation’s largest cellular market in Los Angeles.

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51 Million Americans Now Online

IntelliQuest Information Group, Inc. (Nasdaq:IQST), a leader in providing information-based marketing services to the technology industry, today announced the results of its latest survey of the United States population’s use of Internet and online services, showing 51 million adults, age 16 and older, in the U.S. online as of the second quarter of 1997.

This represents a 46% growth from the 35 million users reported one year ago. The majority of this growth occurred in the second half of 1996, when the online population increased by 34% in six months.

Although growth of the online population slowed in 1997, the market is far from saturated. An additional 8.5 million adults intend to begin accessing the Internet or online services by the end of the year. If these people follow through with their intentions, the number of wired U.S. residents could reach 60 million by year-end.

The most startling new result is in the emergence of online shopping. In this survey, 17% of users (8.6 million adults) claimed to be online purchasers, with a median monthly expenditure of $50, the online commerce market is running at a $5.1 billion annualized rate. These results are more than three times the findings from the levels found one year ago, when a projected 2.6 million individuals were purchasing at a $1.6 billion annual rate.

These results were announced today as part of IntelliQuest’s Worldwide Internet/Online Tracking Service (WWITSv), the most comprehensive study of its kind. The study generates in-depth profiles of Internet and online user demographics, usage patterns, brand awareness, satisfaction rates and growth trends.

The IntelliQuest WWITS study provides subscribing companies with consistent, longitudinal and highly accurate tracking of the online population. Highlights of the findings for the second quarter of 1997 include:

The majority (66%) of users access from home, but the population of users accessing from work is large and growing fast. In the second quarter of this year, 23.3 million people were going online while at work, a 57% increase from the same period in 1996.

There is a relatively small proportion of extremely active users (20%) who spend 10 hours or more per week online, but nearly 40% of all users said they were spending more time online than they did a month ago. Where are they finding the time? Most said by watching less television.

The online population continues to grow towards the mainstream. Females now account for 47% of Internet and online service users, compared with 36% a year ago. This trend should continue, as females make up 58% of non-users who intend to go online in the future.

User satisfaction with the medium remained low. User’s overall satisfaction with their experience was most highly correlated with their degree of satisfaction with their Internet or online service provider. What would they most like to see improved? Speed of access, followed by reliability of connection. While online buying is still done by a minority of users, over half of those online (54% or 27.6 million people) use the medium for shopping; researching the prices or features of products, locating where to purchase products, and selecting products. Online shopping is, at this point, dominated by males (62% of shoppers and 70% of purchasers).

“It is tremendously exciting to see the online world growing towards the mainstream of our society,” said Tom Fornoff, Managing Director of Internet Services at IntelliQuest. “With each wave of our study, we discover new opportunities for the companies building the medium, whether it’s the online purchaser, the business user, the interested but hesitant prospect, or the frustrated new user. All of these users and intenders provide targeted product, marketing or brand opportunities for the industry.”

Rigorous Methodology, Unique Focus

The study employs a rigorous random-digit dial (RDD) methodology to develop projectable estimates of both user and non-user populations. IntelliQuest’s investments in screening techniques, interviewer skills, and expert methodology design (including participation from the U.S. Census Bureau), have allowed the creation of a study that can project the total Internet and online adult population to within an error rate of 1%.

The study is unique in its coverage of both users and non-users of the Internet and online services, as well as its coverage of home, business and school usage. While much current industry research focuses on total usage metrics, the WWITS study allows for analysis and projection of differentiated market segments identifiable by demographics, usage patterns or user attitudes.

The study was designed cooperatively with industry vendors who provided initial funding and questionnaire support, and is available to additional business subscribers. In addition to the U.S. study, conducted quarterly, baseline data for online usage is available for France, Germany and the UK.

For more information

Results of IntelliQuest’s Worldwide Internet/Online Tracking Service are available on a subscription basis. Full service subscriptions include access to the entire data set through detailed crosstabulations, graphical reports with market findings, and custom analysis. Summarized results are available through IntelliQuest’s Internet Trends Report. This report contains awareness, usage, segmentation, shopping and trend data for all three waves of the U.S. WWITS study. For more information on the full subscription of IntelliQuest’s Worldwide Internet/Online Tracking Service and the Internet Trends Report call 1-800-711-3753.

Headquartered in Austin, Texas with offices in Atlanta, Ga. Redwood City, Calif. and London, England, IntelliQuest provides information-based marketing services to the technology industry. IntelliQuest uses its proprietary databases and software to help technology companies track product performance and customer satisfaction, measure advertising effectiveness, assess brand strength and competitive position, determine price sensitivity, and evaluate new products, markets or other business opportunities. The Company also licenses custom proprietary software applications and associated services to technology manufacturers for electronic product registration. IntelliQuest has over 400 employees worldwide. IntelliQuest Information Group, Inc., MarCom Department, 1250 Capital of Texas Highway South, Building One, Suite 600, Austin, Texas 78746, (512)329-0808, fax (512)329-0888, email [info@intelliquest.com][1]; World Wide Web [http://www.intelliquest.com.][2]

[1]: mailto:info@intelliquest.com
[2]: http://www.intelliquest.com

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MBNA Buys Fidelity

MBNA’s munchies for quality portfolios continued yesterday with the signing of an agreement to acquire the Fidelity Trust Company portfolio.. MBNA expects to close the deal before the end of this month with a transfer of accounts taking place in October.Under terms of the agreement, Fidelity will enter into a five-year affinity contract with MBNA and will continue to market VISA and MasterCards under the Fidelity name. Fidelity put its portfolio on the block July 1. According to CardWeb, Inc.’s new ‘CardData’ service, at mid-year Fidelity had $467,484,000 in receivables, $565,280,000 in year-to-date volume, 323,481 in gross accounts, 223,734 actives and 474,000 total cards. MBNA currently has more than 21 million accounts.

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Mall VIP VISA

PNC Bank unveiled a new VISA card yesterday offering cardholders a 2% rebate on purchases at participating shopping malls and a 1% rebate on all other purchases. The new ‘Mall V.I.P. VISA’ card will issue the rebates monthly in the form of ‘Mall V.I.P. Dollars’, good at any VISA-accepting mall merchant. PNC will cap annual rebates at $500. The no-annual-fee card carries a six-month 6.9% intro rate, a long-term rate of LIBOR +10.43% on purchases and LIBOR +15.77% for cash advances. More than 350 malls will launch the card this month with an additional 150 malls joining by year’s end representing 70% of mall retail space nationwide. Auriemma Consulting Group assisted with development of the new product. According to the September issue of CardTrak, PNC Bank is the nation’s fastest growing issuer, nearly tripling its portfolio since the summer of 1996, thanks largely to its alliance with the AAA.

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EC Payables Live!

Sterling Commerce (NYSE: SE) today announced an alliance with Grant Thornton LLP to offer EC Payables Live!(SM)

This multi-step electronic commerce assessment and implementation process will help government agencies comply with the Debt Collection Improvement Act of 1996, which requires government agencies to implement electronic payments by January 1, 1999.

![][1] EC Payables Live! combines Sterling Commerce’s decades of electronic commerce (EC) experience with Grant Thornton’s in-depth knowledge of the federal financial management process and systems. The overall solution consists of four phases:

EC Readiness, which provides an agency with an objective snapshot of its status toward implementing EC, and an appraisal of its capacity for making further progress in the short and long term. EC Payables Pilot, in which a short-term proof of concept is implemented that demonstrates desired business results and captures the metrics needed to develop a production business case. EC Payables Production, which includes both the technical aspects of installing production-grade EDI software, and the business aspects of re-engineering payables processes to take advantage of the savings offered by EC. Payables Partner program, which transitions an agency and its trading partners to an EDI environment.

“All federal agencies are faced with the challenge of complying with the electronic payments mandate,” said Howard Stern, director of government markets for Sterling Commerce’s Commerce Services Group. “EC Payables Live! offers a complete electronic commerce solution that leverages the sizable investments agencies have already made in their legacy systems.”

“Our alliance with Sterling Commerce combines the best in electronic Commerce with proven expertise in federal financial management,” said Hank Steininger, partner-in-charge of Grant Thornton’s federal consulting practice.

Sterling Commerce, with executive offices in Dallas, Texas, is a leading global provider of electronic commerce software products and services that enable businesses to engage in business-to-business electronic communications and transactions. Sterling Commerce has been providing electronic commerce solutions for over 20 years and has over 30,000 customers worldwide and more than 1,700 employees. For more information about Sterling Commerce products and services, visit Sterling Commerce on the World Wide Web at [ http://www.stercomm.com.][2]

Grant Thornton LLP, the seventh largest U.S. accounting and management consulting firm, provides a comprehensive range of professional services to organizations of all sizes. Worldwide, clients are served through Grant Thornton International’s 48 U.S. offices and 500 international offices in 85 countries. The Washington consulting practice provides value-added services in response to legislative challenges such as the CFO Act, regulatory challenges such as OMB guidelines, initiatives such as downsizing and privatization, and technology trends like data warehousing and client/server- based systems. Visit Grant Thornton’s Web site at for more information.

[1]: /graphic/grant_thorton/gt.gif
[2]: http://www.stercomm.com

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BlueGill to use CyberCash

BlueGill Technologies, Inc(TM) and CyberCash, Inc. (NASDAQ:CYCH) today announced that they will offer an Internet billing solution that incorporates CyberCash’s payment services and BlueGill’s 1 to 1 Server(TM). Combining CyberCash’s payment technology and BlueGill’s bill presentment application will provide a full, interactive solution to companies that want to deliver bills and statements online and have them paid directly at their website. With a solution that utilizes legacy system and web server management and secure Internet payments, companies are now empowered to control their own billing, reduce expenses, and strengthen their relationships with their banks and customers.

BlueGill’s 1 to 1 Server enables billers to generate personalized Internet bills and e-mail from existing print applications. BlueGill’s technology leverages a company’s investment in their legacy billing systems, and enables them to launch an Internet billing initiative without re-writing their legacy applications or the conditional processes, which generate the personalized messages.

To complete the billing cycle, CyberCash will add its PayNow(TM) Secure Electronic Check Service, enabling billers to accept payment online directly at their website. Combining payment with the presentment piece of interactive billing truly makes for a full p.pless billing solution; all of which enables a company’s billing system to be more efficient and cost-effective to run.

When paper statements are produced in volumes exceeding 1 million pages per month, the typical cost is approximately $0.50 per document. If a company has 5 million customers, for example, and it started delivering 1% of it’s monthly bills via the Internet instead of paper, the company would save $300,000 per year in printing and mailing costs alone.

“Billers have also learned that their monthly statements are the most cost-effective tool for communicating with their customers,” said Hal Davis, president of BlueGill Technologies. “Readership is guaranteed and personalized target marketing is made possible. With an online billing system, billers can build a strong `one-to-one’ relationship with their customers.”

“Combining BlueGill and CyberCash’s complementary solutions provides significant benefits to billers,” said Richard Crone, vice president of CyberCash and general manger of PayNow. “In a billing and receipt relationship, the check payment represents an ongoing commitment to continue the service for the next billing period, consummating what marketing people call the follow-on sale. This buying and commitment mindset is one that shouldn’t be taken lightly in crafting the statement review and customer-initiated buying and payment process.”

Companies can provide their customers the ability to analyze their statements, get immediate details on a particular item, view their payment history, or even save this information to their PCs; all of which can be provided and updated on a real-time basis. With the use of CyberCash’s payment service, these customers can now pay their statements securely online from any existing checking account.

As many companies have already begun to exploit marketing messages in their legacy documents, they can also leverage the traffic driven to their websites from their paying customers to cross-sell other products and services. Companies can extend their services and customer base by providing links and advertisements for new or existing products and services, which are placed strategically throughout the customers’ statements. Since it typically takes months to plan a marketing campaign, process for printing, complete inventory, and deliver the inserts with paper bills, companies can additionally reduce their marketing expenses and accelerate their online marketing campaigns.

Interactive billing not only provides key marketing tools that drive customers to a biller’s site and opens the doors for additional revenue streams, but bringing customers to the biller’s site increases the most prized asset of a company: the relationship with their customers. A complete interactive billing solution which combines BlueGill and CyberCash does not require a biller to post their company information, or offer their goods and services, at any other site except their own. This prevents a company from being intermediated from their customers and maintains this vital relationship.

“The billing and payment cycle is one of the most important and leverageable touchpoints with a customer as it maintains their ongoing commitment to the biller,” says Richard Crone, vice president of CyberCash and general manager of PayNow. “The deeper the relationship, the more likely they are to maintain their relationship in the wake of intense competition.”

As billers are fighting for ways to differentiate themselves, they need to provide added value at every point where they come in contact with their customers. With products from BlueGill and CyberCash, billers can build a strong personalized relationship with all of their Internet connected customers.

About CyberCash, Inc.

CyberCash, Inc. of Reston, Virginia, is a technology driven company that provides software and services to enable secure financial transactions on the Internet worldwide. The Company offers a complete suite of Internet payment solutions, including a credit card service, which handles payments using major credit cards; the Company’s innovative micropayment service, which enables cash transactions; and the secure electronic check service which allows customer-to-business and business-to-business funds transfer via checking accounts. CyberCash works with virtually all transaction processing institutions, and allows banks to offer secure Internet payment systems to their customers. The Company is traded on NASDAQ under the symbol CYCH.

About BlueGill Technologies, Inc.

BlueGill’s products enable large companies to distribute monthly statements and other documents over the Internet. BlueGill’s 1 to 1 Server bridges the gap between legacy printing applications and the Internet by building personalized HTML pages, PDF, other data files, e-mail and OFX from existing print and billing applications. These products allow billers to build better relationships with their customers by speeding the flow of statement information and presenting it in customized, personalized electronic format with added value beyond what traditional paper documents could deliver.

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MBNA’s J-Series Card Bonds Rated

MBNA Master Credit Card Trust II’s (MBNA) $637.5 million class A floating rate asset-backed certificates, series 1997-J, are expected to be rated ‘AAA’ by Fitch. The corresponding $56.25 million class B floating rate asset-backed certificates, are expected to be rated ‘A+’. 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. The class B certificates, in turn, are enhanced 7.5% by the collateral interest.

For July, the trust chargeoffs increased to a weighted average of 4.87%, while portfolio yield and monthly payment rate increased moderately. Additionally, three month excess spread rebounded 21 basis points to 4.60%.

The trust portfolio has experienced an industry wide increase in delinquencies and chargeoffs which has impacted many credit card issuers over the last 18-24 months. Yet, MBNA’s chargeoffs have averaged 4.34% for the last twelve and 4.58% for the last six months. Additionally, MBNA’s chargeoffs continue to perform better than the industry average.

In an industry which has seen tightening margins or excess spread as a result of increased chargeoffs and consumer bankruptcy filings, MBNA has consistently managed losses within projections while its excess spread has remained stable. Fitch believes this reflects MBNA’s continued commitment to credit quality. Furthermore, Fitch is confident MBNA’s chargeoff rate will continue to perform within steady state projections.

With the levels of credit enhancement available, series 1997-J can withstand simultaneous declines of 35% in yield and 45% in monthly payment rates (MPR), while chargeoffs increase to a level of 28% and still make full interest and principal payments to class A investors. Class B enhancement covers simultaneous declines of 25% in yield and 35% in MPR, while chargeoffs rise to a level of 19%. 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 and B certificateholders will receive monthly interest payments of 12 basis points and 30 bps over one-month LIBOR, respectively, throughout the revolving and accumulation periods and on the scheduled payment date, provided an early payout event does not occur. Following a variable accumulation period, principal is expected to be paid to certificateholders on the September 2004 distribution date. The series termination date is February 2007. As a part of Group One, series 1997-J will share excess principal collections with other Group One series. Series 1997-J is the tenth issue of 1997 and the thirty-eighth issue from the master trust.

For information about performance on any outstanding MBNA MCCT II series please refer to Fitch Asset-Backed Surveillance on the internet at or on Bloomberg by typing FTC “GO”.

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