CARTES 2009

From November 17th-19th, the Congress will bring together 1500
delegates and 240 speakers to discuss the latest technical developments
and their marketing and strategic issues. Based on themes related to
cards and identification and supported by feedback on concrete case
studies, the 18 presentations will assess the market and an
indispensable addition to visiting the stands. Congress will offer four
brand new conferences, including ‘Payment in Emerging Countries’;
‘Banking: Leader or Outsider’; ‘Prepaid in Motion’; and ‘Transactions at
the Point of Sale.’ ‘Payment in Emerging Countries’ will examine success
factors needed to create a sustainable system. Meanwhile ‘Banking:
Leader or Outsider’ will discuss how the different market players are
positioning themselves as a result of the emergence of new services
linked to new payment methods such as contactless and NFC and ‘Prepaid
in Motion’ will take a look at the prepaid market and its market
potential. Finally, ‘Transactions at the Point of Sale’ is set to
address how to ensure genuine POS terminal behavior and avoid hacking.

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Hess to Accept MasterCard PayPass

NY-based fuel retailer Hess is now accepting “MasterCard PayPass”.
Hess will accept MasterCard PayPass at more than 870 company-operated
Hess and
Hess Express locations along the eastern United States. In addition to
traditional magnetic-stripe payment cards, Hess will accept MasterCard
PayPass at check-out counters at these locations by early 2010 to
provide customers with quicker transactions and greater payment
convenience. MasterCard PayPass also does not require
customers to sign receipts for purchases under $25, further speeding up
the transaction. This amount will increase to $50 as of October 16th .
The use of contactless payment cards continues to see exponential
growth. As of second quarter 2009, MasterCard had issued nearly 61
million MasterCard PayPass cards or devices, which can be used at over
153,000 merchant locations globally.

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VISA ENCRYPTION

Visa has announced global industry best practices for data field
encryption, also known as end-to-end encryption. These practices are
designed to further the payment industry’s efforts to develop an open
standard and provide guidance to encryption vendors and early adopters.
Visa is also leading efforts to develop an industry data field
encryption standard as chair of the ANSI X9F6 standards working group.
The Visa best practices are designed to help organizations limit
cleartext availability of cardholder data and sensitive authentication;
use key management solutions consistent with standards; use standard
key-lengths and cryptographic algorithms; protect devices used to
perform cryptographic operations; and use an alternate account or
transaction identifier for business processes requiring the primary
account number after authorization, customer loyalty programs or fraud
management.

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VeriFone Takes a Larger Stake in Semtek

VeriFone Holdings has signed an agreement to become the lead investor
in “Series B” financing for Semtek Corporation and doubled its
investment in the security technology developer. In doing so, VeriFone
has acquired an option at a future date to purchase the remaining shares
in Semtek and signed worldwide distribution agreements providing for
open-licensing of the Semtek encryption technology to all other POS
hardware vendors. Semtek encryption technology is essential to the
VeriFone “VeriShield Protect” end-to-end encryption solution for
securing cardholder data. Based on the AES standard, Semtek’s technology
ensures encrypted card data can be used by a typical POS software system
without any modifications or disruption.

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AMEX GLOBAL ADVISORY

Pent up trip demand and supply base changes are likely to cause rates to
slightly increase in most travel categories by the end of 2010, business
class airfares in particular. The travel forecast projects business
travel growth up 1% for the US and 15% for Canada in 2010 with route and
capacity reductions equalizing the 2009 demand decrease, forcing prices
higher than in most other regions. Produced by eXpert insights, the
newly created research practice of American Express Business Travel’s
“Global Advisory Services” predicts travel costs will remain steady
around the globe. With many companies in Europe having traded down from
traditional airlines to low cost carriers in 2009, fares are expected to
decline in the first half of the year as airlines compete for
market-share while in Latin America there has been upward pressure on
rates as some carriers proactively reduced the number and size of
aircrafts servicing some routes and consolidated others. In the
Asia/Pacific region, where a 7% reduction in 2009 business travel hurt
the industry, growth in major countries serviced by American Express is
expected around 6% in 2010.

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Retailers Face Deflation this Holiday Season

More modeling is showing that total holiday retail sales will slip again this year as the “Great Recession” subsides, the “Great Recovery” supposedly builds and the “Credit Crunch” lingers. However, the good news is the decline will be a modest 1.0%, compared to the 3.4% decline one-year ago. Over the past ten years, holiday sales in the U.S. rose an average of 3.4% annually. The National Retail Federation forecasts that sales will decline to $437.6 billion for 2009, compared to $447.5 billion last year. The NRF says though some hopeful signs of a recovery have begun to emerge, like better-than-expected sales in August and momentum in the stock market, continued consumer uncertainty over job security and housing values will take a toll on spending this holiday season. And as retailers become even more promotional, certain popular holiday categories like apparel and electronics may experience deflation due to aggressive sales. The NRF represents more than 1.6 million U.S. retail establishments.

HOLIDAY RETAIL SALES
2000: $352.2 billion
2001: $364.1 billion
2002: $368.8 billion
2003: $387.2 billion
2004: $410.5 billion
2005: $435.6 billion
2006: $447.4 billion
2007: $460.2 billion
2008: $447.5 billion
2009: $437.6 billion
Source: National Retail Federation

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Retail Credit Card Performance Holding Steady

Charge-offs among retail credit card asset-backed securities eased back a bit in August, but hover above 12% while delinquencies (60+ days) continue to retreat below the 5% level. Since most U.S.-based retailers sold their receivables portfolios in recent years, the only two remaining players of significance are Nordstrom and Target. Fitch Ratings says that credit card performance should not have a negative impact on Nordstrom and Target corporate ratings based on current write-off expectations. Fitch expects significant pressure on credit card profitability to continue through the balance of 2009 and into 2010, as charge-offs are expected to remain at elevated levels as long as unemployment remains high. However, if the write-off rates start trending higher than expected based on worsening unemployment and a continued recession, Fitch would expect the credit card businesses to be loss-making, pressuring the companies’ credit ratings. While some companies built their credit card allowances in the second half of 2008,
others have continued to build their credit card allowances in the first half of this year in anticipation of further credit deterioration and Fitch does not expect most of the large general purpose card issuers to be profitable this year. The charge-off rate for outstanding prime credit card receivables declined in August, ending five consecutive months of record highs.

RETAIL CARDS ABS
Delinquency Charge-Offs
Dec 08: 5.20% 10.51%
Jan 09: 5.58% 10.94%
Feb 09: 4.77% 12.31%
Mar 09: 4.81% 11.05%
Apr 09: 5.07% 12.08%
May 09: 4.76% 12.66%
Jun 09: 4.88% 12.23%
Jul 09: 4.65% 12.99%
Aug 09: 4.70% 12.50%
Source: FitchRatings

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Cardholder Backlash is Bigger Than Expected

A new survey shows 21% of consumers said they were treated unfairly by
card companies and 32% have paid off and closed a card since January
2008. The research also found that half of those that canceled did so in
direct response to the actions of credit-card issuers, such as cutting
limits, hiking rates, or imposing fees. Consumer Reports says its poll
reveals only 41% said they were highly satisfied with their card issuer,
making credit cards one of the lowest-rated services the firm covers.
The survey also found that 45% of respondents say they are charging
less, 43% say they are spending about the same, and 11% are charging
more than they did a year ago. The surveys found that one-third of
Americans say they don’t own a credit card. Of those Americans who use
them: 54% pay their balances in full each month; 13% carry balances over
$10,000 (Median $17,366); and 33% carry balances up to $10,000 (Median
$2,554).

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Employment Trends Index Finally Heads Up

The Conference Board Employment Trends Index (ETI) increased 0.3% from
the revised August number, marking the first increase since January
2008, to now stand at 88.5. Down 15.6% from the year-ago period, the
August ETI was driven by a positive contribution from four out of the
eight components, which were Initial Claims for Unemployment Insurance;
Percentage of Firms With Positions Not
Able to Fill Right Now; Industrial Production and Real Manufacturing;
and Trade Sales. The eight labor-market indicators aggregated into the
ETI consist of those finding “Jobs Hard to Get”; Unemployment Insurance
Claims; Percentage of Firms With Positions Not Able to Fill Right Now;
Employees Hired by the Temporary-Help Industry; Part-Time Workers for
Economic Reasons; Job Openings; Industrial Production; and Real
Manufacturing and Trade Sales.

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U.K. Issuers Tighten Card Market Footprint

In an effort to manage credit card risk, Royal Bank of Scotland has
retreated from the U.K. national marketplace to limit new credit cards
to existing customers only. According to CardFlash International, the
move by RBS mirrors a similar move by HSBC earlier this year to contain
losses in the wake of the recession. Consumers applying for an RBS or
NatWest credit card must have a current checking account with one of the
banks as of October 1st. A mortgage or savings account does not qualify.
RBS has about seven million credit card accounts. Bank of England data
show the average credit card rate is currently 18.13% in the UK.

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Two-Thirds of Holiday Shoppers Cut-Back

MA-based Burst Media has released the results of its 2009 holiday
spending outlook survey that reveals nearly 63% of consumers will cut back.
Although consumers plan to hold tight with
their spending this holiday season, 85.3% of respondents will shop
online. Only 14.6%
of respondents expect to spend more this holiday season than they did in
2008, while one third (32.7%) expect to spend less and 30.1% expect to
spend about the same as they did last year. Interestingly, women will be
more frugal than men this holiday season with 38.1% planning to spend
less on gifts and entertainment, compared to 27.3% of all men. All
income segments will trim holiday spending this year with 29.5% of
respondents reporting household income of less than $35,000
cutting holiday spending, as will 46.3% of households
reporting HHI of $35,000-$75,000, and 31.3% of
households reporting HHI of $75,000 or more. Despite the fact that 63%
of consumers express concern over credit card
security when making an online purchase, 69.3% still
plan to make an online holiday purchase.

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NIC Expands Arkansas Card Tax Acceptance

The state of Arkansas and NIC is offering online tax payments via the
arkansas.gov website for residents of 31 counties.
Working in partnership with county tax collectors, the official state
Web site offers citizens the ability to pay
personal property and real estate tax payments with a credit card or
electronic check online, over the phone, or in person at their
Collector’s office. To use the online payment services, taxpayers may
enter the parcel
number provided on their tax statements or can search the database for
specific parcels. The property tax system guides the user through a
series of entry screens and provides a confirmation and printable
receipt page for recordkeeping. NIC is the nation’s leading provider
of official
government portals, online services, and secure payment processing
solutions.

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