Debit Card Rewards Webinar This Week

The TowerGroup will present “Just Rewards: Adapting the Credit Card
Loyalty Feature to a Debit Card World” webinar on August 6, 2009.
The TowerGroup Live presentation will discuss the reasons that debit
card transactions now dominate the US
payments market; illustrate the difference in business models between
debit and credit
cards; explain how loyalty programs that work in the credit card environment
need to be adjusted to fit the revenue economics of the debit card
business model and show how rewards can impact the industry and position
issuers for
emerging products such as mobile payments and prepaid cards.
TowerGroup is the leading research and advisory services firm focused
exclusively on the financial services industry.

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Credit Card ABS Metrics Begin to Brighten in June

There appears to be stabilization in delinquency rates and a
deceleration in charge-off increases based on the latest performance for
credit card-backed securities. Delinquency has leveled off over the past
five months, hovering between 4.3% and 4.5%. Charge-offs, which soared
more than 100 basis points in February, increased 35 basis points in
June, the smallest increase in five months. According to Fitch,
charge-offs among prime credit card ABS hit a record 10.79% in June,
compared to 10.44% in the prior month, but up 64% higher than
year-earlier measures. Credit card delinquencies (60+ days) declined 14
basis points in June to 4.31%, but up about 40% over June 2008.
Pricing initiatives and discount options continue to generate
incremental yield, as evidenced by a 36 basis point rise in June’s yield
to 17.95%, representing the highest level in 15 months. Since the
increase in yield completely offset the increase in charge-offs this
month, one-month excess spread improved slightly although the
three-month average excess spread remains compressed at 4.35%.

ABS METRICS
Delinquency Charge-Offs
Jan 09: 4.04% 7.40%
Feb 09: 4.33% 8.41%
Mar 09: 4.44% 8.89%
Apr 09: 4.37% 9.66%
May 09: 4.45% 10.44%
Jun 09: 4.31% 10.79%
Source: Fitch

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PPP Unveils the First Contactless Foil Cards

Following more than one year in development, the industry’s first
full-face foil PVC card certified by Visa for contactless payment
transactions has been introduced. IL-based Perfect Plastic Printing says
its new card enables issuers to provide contactless payment cards with
the same high aesthetic appeal of foil as their traditional cards. The
card is based on INSIDE Contactless’ “MicroPass 4003.” MicroPass 4003
provides support for “Visa payWave,” including “Visa MSD 1.4.2” and
“Visa 2.0.2 Streamline Online qVSDC” standards for global
interoperability. Foil cards have attractive metalized foil applied
across the entire face of the card, offering a mirror-like reflection
unattainable with printing ink alone.

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Small Business Index Hits a Six-Year Low

A July survey has found that small business owners’ optimism dropped to its lowest level in at least six years. The Wells Fargo/Gallup “Small Business Index” stands at -21, down 20 points from the previous survey in April, and 135 points lower than the Index high of 114 (November, 2006). This is the third consecutive quarter with a negative “Index” score. About 37% said they have “poor” cash flow issues, compared to 30% in the prior quarter. Nearly 58% said revenues were decreasing, compared to 51% in the previous quarter. The “Index” consists of two dimensions: 1) Owners’ ratings of the current situation of their businesses and, 2) Owners’ ratings of how they expect their businesses to perform over the next 12 months.

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MASTERCARD 2Q/09

MasterCard reported adjusted net income of $349 million for the second quarter, a 26.4% gain over 2Q/08. Net revenue for the quarter was $1.3 billion, a 2.7% increase over the year ago period. The network says the higher revenues were driven by pricing changes, an increase in the number of transactions processed and a decrease in rebates and incentives. On a local currency basis, MasterCard’s gross dollar volume was down by 0.6% and worldwide purchase volume was down by 0.7%. The Company noted that 35.8% decrease in advertising and marketing expenses versus the year-ago period, primarily related to continued cost containment initiatives in response to market realities. For complete details on MasterCard’s second quarter performance visit CardData (www.carddata.com).

Note: All MasterCard Credit, Charge and Debit Programs processed on MasterCard’s
networks. Source: CardData (www.carddata.com)

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MAY LEI

The Conference Board Leading Economic Index (LEI) for Mexico increased
for the second month in a row by 2.4% while The Conference Board
Coincident Economic Index (CEI) decreased 0.9% in May. With the May
increase, The Conference Board LEI for Mexico now stands at with 106.5
(2004=100), which increased 3% in April and increased 1.4 percent in
March, while the CEI now stands at 104.6 (2004=100), which decreased
0.3% in April and decreased 0.7% in March. These figures come after an
LEI 1.5% 6-month increase while the CEI saw a six-month decrease of
5.8%. Mexico LEI indicators include; US refiners’ acquisition cost of
domestic and imported crude oil, net insufficient inventories, stock
prices, the (inverted) real exchange rate, and the (inverted) federal
funds rate.

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The Home Depot Accepts Discover Zip

Home improvement retailer is now accepting the “Discover Zip payment”
device at its 1,974 stores. Discover’s new mini-adhesive card can be
attached to personal items that are always at hand, such as a mobile
phone, PDA or MP3 player, in addition to the traditional bank card or
key chain fob. Purchases are made with a quick tap of these devices on
a Zip reader found at the checkout. The
Home Depot had sales of $71.3 billion and earnings from continuing
operations of $2.3 billion.

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VISA 2Q/09

Visa reported that second calendar quarter adjusted net income, excluding its recent sale of VisaNet do Brasil, increased 11% to $507 million and net operating revenue increased 2% to $1.6 billion, compared to the same quarter in 2008. Sequentially, net operating revenue was flat and adjusted net income was down 8%. However, global transaction growth for the quarter ended June 30th picked up to an annual rate of 8%, compared to 6% in the prior quarter and 13% in the year ago quarter. For the second calendar quarter there were 10.3 billion transactions processed via VisaNet. Visa released first calendar quarter performance data which showed that payments volume growth, on a nominal basis, was a negative 5% over the prior year at $617 billion; total volume, on a nominal basis and inclusive of cash volume, was $969 billion, a 7% decline over the prior year; and the total cards carrying the Visa brands rose 6% worldwide over the prior year to over 1.7 billion. Visa predicts annual net revenue growth of high single digits in 2009 and at the lower end of the 11% to 15% range in 2010. For complete details on Visa’s latest performance visit CardData (www.carddata.com).

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JUNE DEBT

Growth in credit card outstandings remained stagnant in June, stuck around GBP 53-54 billion for 2009. However, year-on-year growth was down 2% in June, compared to 5% in May. According to the The Bank of England, net credit card was GBP 54.5 billion in June. But, the amount outstanding of credit card lending increased by GBP 1.5 billion following the de-securitisation of credit card portfolios to several UK
banks from associated non-resident companies. Overall, the
increase in total net lending to individuals in June (GBP 400 million)
was lower than the May increase (GBP 500 million) and below the
previous six-month average. The twelve-month growth rate continued to
fall, by 0.2 percentage points to 1.2% and the three-month annualized
growth rate decreased by 0.1 percentage points to 0.5%. Total consumer
credit increased by a net GBP 100 million, in line with the previous
six-month average. The annual growth rate of consumer credit continued
to fall, to 1.9%; but the three-month annualized growth rate increased
by 0.1 percentage points to 0.6%.

NOTE: Chart does not include about GBP10 billion from specialist
lenders, retailers, and insurance companies. SOURCE: Bank of England

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Americans Exhibit Cautious Optimism in 09

Consumers’ current money mindset is “cautious optimism,” and more are
effectively managing their spending with 75% cutting back, while financial confidence has jumped 10% to 56% since 1Q/09. The same research shows 59% of consumers are shopping more at discount stores; 31% are shopping more at second-hand stores; financial stress dropped 13% since 1Q/09 to 48%; 62% have been adhering to a budget; and those expecting their financial situation to improve has jumped 8% to 36%. These findings are according to the latest Western Union “Payment Services Money Mindset Index,” for which Javelin Research surveyed more than 3,000 consumers on their current behaviors and emotional mindset regarding debt and personal finance issues. Among those cutting back, 79% said dining out was the first to go; 67% stopped buying new clothing; 56% are prepared to create a budget with their knowledge of personal finances; and 41% are canceling bills or services deemed non-essential. Regarding their credit scores, 63% believe they are accurate; 56% believe they are biased/unfair; 23% haven’t seen their credit score; 49% of those between the ages of 18-24 have never seen their score and 29% do not believe they are in control of their credit scores.

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US Dataworks Names a New CFO

Payment processing solution provider US Dataworks, has hired Randall J. Frapart,
previously with Plumgood Foods, as its CFO. Frapart served
as Chief Financial and Chief Operating Officer of Plumgood Food, LLC, an
online grocer. From January 2006 to December 2007 he served as
Executive Vice President and Chief
Financial Officer of ForeFront Holdings Inc, a publicly traded global golf
accessory company. Previously, Frapart served as Senior Vice
President and Chief Financial Officer of HyperFeed Technologies, Inc., a
publicly traded provider of software, which provides ticker plant and
smart order
routing technologies and managed services to exchanges, hedge funds and
other
financial institutions. Frapart began his career
at KPMG in Chicago, where he held various positions in the Information,
Communication and Entertainment Assurance practice for over 12 years.
He received his B.S. in Accounting from Washington University in St. Louis,
has his MBA in Management from the University of Texas and is a
certified public
accountant.

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