INTERIM DEVICES

A new analysis forecasts that the application of NFC as a mobile retail marketing tool via coupons and smart posters will support the growth of global NFC mobile payment transaction values from $8 billion this year to $30 billion within three years. Juniper Research says vendors are developing and launching a variety of interim solutions such as stickers and SD cards to get NFC to market faster on existing phones rather than new NFC enabled phones. The first NFC devices will be shipped commercially later in 2009 and the market will ramp up from 2011. Juniper also notes that NFC “Felica” payments are already established in Japan, but by 2014 North America and Western Europe will be experiencing high growth.

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VeriFone Returns to Profitability in 2Q/09

VeriFone reported an 18.5% decline in second calendar quarter revenues to $211.2 million, compared to the year ago quarter. However, the terminal manufacturer posted $21.9 million in net income for the quarter, compared to a net loss of $7.2 million one-year ago. VeriFone noted that its sequential non-GAAP EPS growth of 53% was driven by a solid revenue performance and a sequential expansion of gross margins.
Non-GAAP gross margins were 36.8%, for the three months ended July 31st, compared to 33.8% in the prior quarter and 37.6% for the comparable period of 2008. During the most recent quarter, VeriFone and RBS WorldPay agreed to jointly market “VeriShield Protect” and VeriFone Transportation Systems announced it has installed more than 1,000 payment monitors in Boston-area taxis. VeriFone also rolled out “PAYware CMS 8.0” and introduced the “QX1000” plug-and-play solution for POS contactless acceptance. For the third calendar quarter ending October 31st, VeriFone now expects to report net revenues in the range of $208 million to $215 million. For complete details on VeriFone’s latest performance visit CardData (www.carddata.com). (CF Library 5/26/09; 8/6/09; 8/26/09; 8/11/09)

REVENUE HISTORICAL
2Q/06: $147.6 million
3Q/06: $156.6 million
4Q/06: $216.6 million
1Q/07: $217.2 million
2Q/07: $231.7 million
3Q/07: $237.9 million
4Q/07: $185.5 million
1Q/08: $233.0 million
2Q/08: $258.7 million
3Q/08: $244.7 million
4Q/08: $214.0 million
1Q/09: $201.6 million
2Q/09: $211.2 million
Source: CardData (www.carddata.com)

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Faulty Business Models Impede Proximity Payments

A new report estimates a cash universe of about $225 billion in the U.S. is available for proximity payments. However, last year only about $4 billion was captured of the cash universe. Celent says in its report that estimates of $70 billion to $80 billion by 2013 are way too
optimistic. Celent estimates that a 30% cash displacement ratio, or
an incremental $151 per card account, per year is reasonable, with an
average revenue increase of $1.83 per debit card account per year. Celent says that unfortunately, a number of business model issues have prevented players across differing industries from crossing the finish line to widespread mobile NFC adoption. Many of these issues are tied to
hesitation about the uncertainties of mobile NFC adoption. Mobile
carriers and merchants do not want to make infrastructure investments
until there is proven demand; banks do not want to issue virtual cards
until the infrastructure is in place. A classic payments “chicken and egg” scenario has stagnated mobile NFC roll-out.

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Credit Card Limits Cut 17% to $3.1 Trillion

A new report confirms a significant migration of consumer balances to well below “prime” credit scoring levels. The study also reveals a growing number of “strategic defaulters,” or those borrowers who default on their mortgages only because the value of their home has declined well below their mortgage balance. According to the new Experian–Oliver Wyman “Market Intelligence Reports,” sub-prime and deep sub-prime outstanding balances have grown by more than 33% in the past three years. Also, during the last 12 months, bankcard credit lines have declined by 17% to $3.1 trillion. In studying the distressed borrower population Experian and Oliver Wyman uncovered a segment of borrowers it calls “cash-flow managers,” that closely mimics “strategic defaulters.”
Unlike “strategic defaulters,” these borrowers continue to make occasional payments on their mortgage, indicating their intention to get out of delinquency. While 60% of “strategic defaulters” are charged-off within six months after serious delinquency, one-third of cash-flow managers cure on their mortgage within six months after serious delinquency and another third remain less than 90 days past due.

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NFC Stickers May Drive M-Payments Next Year

A new analysis forecasts that the application of NFC as a mobile retail marketing tool via coupons and smart posters will support the growth of global NFC mobile payment transaction values from $8 billion this year to $30 billion within three years. Juniper Research says vendors are developing and launching a variety of interim solutions such as stickers and SD cards to get NFC to market faster on existing phones rather than new NFC enabled phones. The first NFC devices will be shipped commercially later in 2009 and the market will ramp up from 2011. Juniper also notes that NFC “Felica” payments are already established in Japan, but by 2014 North America and Western Europe will be experiencing high growth.

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Mobifyer and Partners Target Developers

RFID developer Mobifyer has partnered with TranZfinity, eGrips, and SCM to jointly launch a series of developers
contests to increase the adoption and acceptance of contactless, RFID,
and NFC technologies with existing in-market mobile phones.
Submissions to the “Ideas That Mobify” contests will be judged for their
innovation, usefulness, usability, and utilization of the contactless,
RFID, and NFC solution components assembled by Mobifyer. Submissions are
due September 29, 2009 and winners will be announced at the opening of
the International CTIA WIRELESS IT & Entertainment show that takes place
October 7-9 at the San Diego Convention Center. The winner and
runners-up will receive prizes and have their applications featured on
the Mobifyer website.

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MOBEY & NFC FORUM

The NFC Forum non-profit industry association and the Mobey Forum
financial industry forum have signed a Memorandum of Understanding in
Oulu, Finland. Providing banks mobile financial services, the Mobey
Forum hopes to further efforts to create open standards for the delivery
of services through this latest development. Aimed at offering secure
and interoperable mobile financial transactions on a standardized
payment platform, the memorandum agreement coincides with the NFC Forum
all-members meeting in Oulu on August 31-September 6. During the NFC
Forum, 140 NFC Forum member organizations convene to advance initiatives
focused on bringing NFC products and services to market.

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Credit Cardholder Satisfaction Drops Sharply

Overall credit card customer satisfaction declined to a three-year low driven primarily by cardholders discontent with rates and fees. Nearly 20% of customers report experiencing an increase in their interest rate since 2008, almost double compared to one-year ago. The J.D. Power and Associates “2009 Credit Card Satisfaction Study” also found that late payment fees, which have the greatest negative impact on
satisfaction, were incurred by 14% of customers, compared with 11% in
2008. Overall satisfaction with fees and rates declined to 603 versus 640 in 2008 and 658 in 2007. The Power study measures customer satisfaction with credit cards by examining six key factors: interaction; fees and rates; billing and payment process; rewards;
benefits and services; and problem resolution. American Express ranked highest among credit card issuers for a third consecutive year with an index score of 762 thanks to strong performance in rewards, benefits and services, and billing and payment process factors. The Discover Card (751) and National City (740) follow AmEx in the rankings. Power noted that overall satisfaction among credit card customers remains the lowest across the financial services industries in which it conducts research, including insurance, banking and investment services.

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Epson POS Printer Cited by a National Mag

Epson’s “TM-T88IV POS” printer was named “Best Channel Product” by Business Solutions Magazin
Resellers named Epson’s TM-T88IV Best Channel Product based on scores in five categories, including: Richness of
Features / Functionality, Product Reliability / Durability, Ease of
Integration, Ease of Upgrade, and VAR’s Ability to Service. Resellers were asked to rate products on a scale of 0 (worst) and 5
(best). Epson’s TM-T88IV received the highest scores in Product
Reliability / Durability (4.68) and Ease of Integration (4.56). The
magazine also published a VAR comment corresponding to each product.

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CU Introduces Student Credit Card Care Package

With 84% of college undergraduates holding at least one credit card, card issuers are allowed to aggressively market to this demographic for only five more months before legislation puts on the brakes in February 2010. Students on campuses across the country are in the cross hairs this fall, more than half of whom have four or more credit card accounts, graduate with an average of $4,138 in credit card debt (44% more than 2004) and only 17% of whom pay off their balances each month. On average, students accrue more than 14% interest monthly by only making the minimum payment. In response, the Consumers Union nonprofit publisher of Consumer Reports has assembled its “Credit Card Care Package,” via creditCardReform.org, to prepare students for the aggressive credit card marketing tactics, which tend to include gifts in exchange for filling out a credit card application and issuing credit cards to people under 21 without a cosigner. Consumer Union is reminding students cheap gifts are not worth a 35% interest rate in the event of a missed payment; bank accounts with a debit card is usually the better option; shop carefully for a credit card and understand the contract. The new report also warns students of the teaser rate; not to finance big expenses such as an education with a credit card; to pay off balances monthly and on time; and never to cosign for friends.

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