Credit Card Industry May Lose $8B in 2009

Based on third quarter reports so far it appears the bank credit card industry is on track to lose as much as $8 billion for 2009. This would make the first time in 28 years the industry has posted a net loss. However, with major issuers such as Capital One and American Express posting third quarter profits, the fourth quarter could soften the annual loss to $6 billion, according to CardData (www.carddata.com).
But, charge-offs are still nagging the industry. So far this year, Chase, the nation’s largest issuer, reported a $1.9 billion loss for its card business. BofA is down $4.4 billion for 2009, but the figure is for global cards. Last year the industry posted an $8.1 billion pre-tax profit, compared to a record $40.3 billion pre-tax profit for 2007. In 1980 and 1981 the industry lost $125 million and $110 million, respectively. During this recessionary period, the prime interest rate was 21% while the average credit card interest rate was 19.6%, according to CardTrak.com.

Bank Credit Card Annual Pre-Tax Profits
(VISA, MasterCard, Discover, American Express)
($ billions, except as noted)

YEAR TOTAL
2008: 8.10
2007: 40.30
2006: 37.50
2005: 30.60
2004: 31.60
2003: 29.80
2002: 27.80
2001: 24.30
2000: 20.50
Source: CardData (www.carddata.com)

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Optimism Among Small Businesses is Not Growing

Small business owners still have the economic blues but there are signs that many are gearing up to invest in areas such as advertising and capital expenditures. About 44% of small business owners think the economy is getting worse, down from 46% in September. The Discover “Small Business Watch” index rose from 87.7 in September to 88.5 in October. The number of those who said they plan to decrease spending dropped from 50% in September to 44% in October. However, the number of those planning no changes jumped from 22% to 32%. Those who are planning to increase spending dropped from 25% to 23%. Discover found 44% of owners say they have experienced cash flow issues in the past 90 days, down from 46% in September. About 29% of small business owners see economic conditions for their businesses improving, unchanged from September, while 43% see their own conditions getting worse, down two percentage points over last month.

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Omni Prepaid Hires a New CFO

PA-based Omni Prepaid has hired Doug Blasiman, former CEO and Co-Founder
of PrivaCash, as its new CFO. Blasiman was a senior executive officer
and CPA with 29 years of leadership
experience in business development, finance, operations, marketing,
product development,
accounting and banking in both start-up and large corporate
environments. He was the CEO and Co-Founder of PrivaCash, Inc. in 2000,
which was the first
company to offer prepaid instant issue MasterCard debit cards for gifts,
personal
spending and payroll that has lead into a billion dollar industry.
Blasiman is an
industry leader in developing new products and technology in prepaid
debit card programs
including open loop branded prepaid gift cards, GPR cards and payroll cards.

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VISA PRESIDENT

Visa made it official that former COO John Partridge has been named President of the company. In July, Visa announced that President Hans Morris was stepping down after playing a major role in its 2008 IPO. At the same time Visa announced a new structure wherein Visa’s global sales, client service, marketing, product development and innovation functions would be consolidated under COO John Partridge. Morris will remain with the company until the end of the year. Morris joined Visa in September 2007. Joseph Saunders, Chairman and CEO of Visa says Partridge will oversee all client, marketing and product functions globally, enabling Visa to more effectively and efficiently allocate resources among markets to enhance its service to clients and speed Visa’s growth. (CF Library 7/26/07; 7/28/09)

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CyberSource Q3 Revenue Jumps as Transactions Soar

CyberSource reported third quarter revenue of $65.7 million, a 14%
increase compared to 3Q/08. On a GAAP basis, net income for the third
quarter was $2.7 million, compared to net income of $207,000 for 3Q/08.
During the third quarter, CyberSource processed a record 611
million billable transactions, a 30% increase over the same period the
previous year. The value of transactions processed was $29.0 billion, a
6% increase over Q3 2008. CyberSource signed 35,000 new customers in the
quarter, up 26% over the prior year, increasing its customer base to
approximately 284,000 active customers. CyberSource generated $20.3
million of global acquiring revenue during the third quarter, up 5%
sequentially and 1% over the prior year. The Company added approximately
800 new acquiring customers during the quarter, and now has over 6,000
global acquiring customers. Total revenue for 2009 is expected to be
between $262.0 and $263.0 million, compared to prior guidance of between
$260.0 and $263.0 million. For complete details on CyberSource’s third
quarter performance visit CardData (www.carddata.com).

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EPICOR FOR HOSPITALITY

Capital Plaza in Bucharest has deployed Epicor Software solutions for
Hospitality, a global enterprise resource planning solution (ERP).
“Epicor for Hospitality” offers industry-specific applications and tools
for complete property management (PMS) and point of sale (POS)
integration, cash and sales reconciliation, procurement and supply chain
management, along with integral back office capabilities for finance and
accounting, reporting and analytics. “Epicor for Hospitality” is
tailored to meet the requirements of the hotel industry and is used
internationally by hotel chains such as Hyatt and Le Meridien with easy
integration and easy-to-use interface.

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Mocapay and VF PAYware Connect Integrate

VeriFone and Mocapay have partnered to deliver mobile gift and
couponing on behalf of its customers, integrated with VeriFone
customer-facing payment systems. Mocapay has integrated and certified
with VeriFone’s “PAYware Connect” gateway to extend its reach and
availability to a broader set of merchants and to help expedite
certifications with new processors. Mocapay’s platform provides
merchants the ability to mobile-enable their existing gift and loyalty
programs through payment at the POS. Gift cardholders can transact at
the point-of-sale, access their account balance and transaction history,
find the nearest location, and reload their account from their mobile
phone.

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INGENICO 3Q/09

Ingenico’s consolidated revenue for the third quarter declined 1%
year-on-year to 182 million euros, but rose 5% from the prior quarter.
In North America revenue was up for the second quarter in a row and
increased 16% due to large one-off sales to large retailers. In Latin
America revenue slightly increased by 3%. China/Asia‐Pacific revenue
increased 26% due to continued performance in Australia and a high level
of sales in China. EEMEAA revenue continued to decline (‐30%) due to the
impact of the downturn. Northern Europe revenue continued to decrease
(‐7%) mainly due to the United Kingdom whereas performance in Germany
continued to be strong, notably thanks to the healthcare market.
Southern Europe revenue resumed growth (+5%) as sales in France held
well whereas Spain continued to be impacted by downturn. In September
Ingenico announced the acquisition of 100% of easycash Beteiligungen, a
leading German payment services provider, for an enterprise value of 290
million euros. For complete details on Ingenico’s third quarter
performance visit CardData (www.carddata.com).

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Hypercom and Heartland Payment Systems Team

Hypercom Corporation and Heartland Payment Systems have entered into a
strategic
relationship to deliver payment systems to retailers and implement
Heartland’s end-to-end encryption “E3”
solution. Heartland is licensing Hypercom’s “SmartPayment Server Software”
products as key components of its host electronic transaction processing
platform. Branded as “Heartland Connect Gateway”, this software will
enable Hypercom POS systems to integrate E3 technology which
is designed to protect card data from the moment of swipe through
transmission to the card brands. The gateway will also allow Hypercom
terminals and others to support E3. “SmartPayments” will facilitate
Heartland’s ability to offer E3 to several
key markets by providing an infrastructure and total solution that
supports restaurant, hotel and retail, mobile commerce, IP terminals, an
e-commerce virtual terminal solution for card-not-present and
card-present transactions including debit. “SmartPayments” provides the
ability to support integrated plug-ins for Microsoft’s Retail Management
System (RMS) and Intuit’s QuickBooks accounting packages.

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GCONOMY VISA

A new credit card that rewards cardholders for positive green actions has been launched by Barclaycard US and RecycleBank in the USA. The new “Gconomy Visa” offers points for each purchase, donates a portion of every purchase to a “green” schools program, and rewards households for recycling. The card is also made from 55% recycled plastic. Cardholders earn 1.5 “RecycleBank Points” for every dollar spent with “RecycleBank Reward Partners” and one point spent elsewhere. A portion of every purchase is donated to the “RecycleBank Green Schools Program,” that offers numerous grants, ranging from $100 to $5,000 to schools that work with children (ages 6-18) in the fields of environmental awareness, education, and action. Additionally, RecycleBank motivates households to recycle by measuring the amount of recycled material from the home and converting it into “RecycleBank Points.” RecycleBank has committed to donating a minimum of $1 million dollars over the next five years to the RecycleBank Green Schools Program via the “Gconomy Visa” card. NYC-based RecycleBank services over 1 million members across 22 states and the U.K.

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Sept Card ABS Metrics Point to Higher Charge-Offs

Charge-offs among credit card-backed securities retreated in
September, but delinquency rates, the precursor of future charge-offs,
continued to worsen. Payment rates also continued to decline and may
likely continue to decline. According to Moody’s Investors Service,
charge-offs among credit card ABS declined from a record 11.49% in
August to 10.72% for September. Moody’s continues to expect the
charge-off rate to peak at between 12% and 13% in mid-2010. Delinquency
rose for a second consecutive month from 5.79% to 5.97% in September.
The payment rate fell to 16.76% from 16.90 the prior month. Yields on
credit cards in turn slipped modestly in September to 20.39%
from 20.52%. This month, Moody’s notes that almost 310 basis points of
the yield index is due to principal discounting, which improves the
yield figure through re-characterizing securitized cashflows as finance
charge collections.

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Expedited CARD Act Moves Along; Likely to Pass

The Financial Services Committee unanimously passed H.R. 3639, the
“Expedited CARD Reform for Consumers Act of 2009, which moves up the
effective date for credit card reforms from February 22nd to December
1st. The bill now moves to the House floor for consideration. The
committee voted to keep the original effective date of February 22nd for
prepaid gift cards and for small credit card issuers with under 2
million cardholder accounts. Meanwhile, the ABA says banks are working
diligently to implement the “CARD Act” by next February, as Congress
required, but it would be extremely difficult, if not impossible, for
them to meet the new deadline contemplated by this bill. Moving up the
implementation date will place additional strain on institutions and is
likely to further restrict access to credit at a time when consumers,
small businesses and the broader economy need it the most. The ABA also
noted that federal regulators are still in the process of finalizing
rules pursuant to the “CARD Act.” If H.R. 3639 were enacted it would
create a scenario where card issuers are required to comply with rules
that are not yet in place. This would expose banks to significant risk
of litigation and also cause a lot of confusion for both banks and their
customers. The result could be a dramatic pull-back in lending.

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