Q1 VOLUME

The number of purchases with credit cards and debit cards rose 4% in the first quarter, compared to the year ago quarter. Debit cards continue to dominate the U.K. payment system capturing nearly 75% of all plastic card purchases during the first three months of 2009, compared to 73% for 1Q/08. According to the APACS quarterly report, there were 1.9 billion plastic card purchases made in the U.K. totaling GBP 94.2 billion compared to 1.8 billion purchases totaling GBP 91.2 billion in the first quarter of 2008. Gross credit card lending to individuals during the first quarter of 2009 amounted to GBP 30.3 billion and repayments were GBP 29.6 billion. Gross lending was 9% lower and repayments were 8% lower than during 1Q/08 when the figures were GBP 33.2 billion and GBP 32.2 billion, respectively. For both 1Q/08 and 1Q/09 the repayment ratio averaged 97%. Bacs volumes and values grew by 1% and 5% respectively during the first quarter. Over the same period, CHAPS sterling volumes fell by 5% whilst values rose by 1.8%. The UK “Faster Payments Service” was launched in May 2008 and by the end of March had processed 142.9 million payments for a value of GBP 53.5 billion. Cheque and credit clearing volumes declined by 11%, total values declined by 9%.

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Vast Majority of Card ABS is Holding Up

A recent review has found that the vast majority of credit card ABS classes remain well insulated from loss. The robust credit card structures combined with bank efforts to actively manage risk and in some cases increase transaction level credit enhancement have resulted in Fitch affirming 467, or 98% of its credit card ABS ratings including all ‘AAAs’. However, Fitch has revised 76 ratings to Rating Outlook Negative and 10 ratings were placed on “Rating Watch Negative.” Fitch Ratings also placed all 29 classes of U.S. credit card ABS transactions issued by 1st Financial Bank ‘Under Analysis’. Last month, 206 classes of Fitch rated U.S. credit card ABS transactions had ‘Under Analysis’ status, which Fitch has since reviewed. In the most recent review, Fitch applied a custom charge-off forecast for each trust. This forecast was derived by applying delinquency roll rates observed over the last six months to current delinquencies and incorporating the effect of Fitch’s unemployment forecast of 10% by early 2010.

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ID EXEC

NXP Semiconductors announced Ruediger Stroh will join NXP as
General Manager of the identification business. Stroh takes over running the identification business from Christophe Duverne, whose next assignment has not been announced. Stroh began his career at Siemens AG where he held multiple management positions. He then became SVP and GM at Infineon Technologies, responsible for the Network and Computer Storage, Data Communications, and Consumer divisions. He also led multiple start-ups in Wireless, Storage Networking and advanced nano materials companies before joining the Agere Systems Leadership Team as EVP of the Storage Business Unit. After the Agere/LSI merger, Stroh’s expanded responsibilities at LSI Corporation included Hard Disk Drive SOCs, Preamps, Motor Controllers as well as SSD controllers.

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MARCH LEI

The Conference Board Leading Economic Index declined 1.1% and The Conference Board Coincident Economic Index (CEI) decreased 0.4% in March.
Two of the seven components in The Conference Board
LEI for Germany increased in March. The positive contributors are the yield
spread and inventory change series. Negative contributors are stock prices, new orders in investment
goods industries, new residential construction orders, consumer confidence and gross enterprises and properties income. Between
September 2008 and March 2009, the coincident economic index decreased
by 3.9% (about a -7.6% annual rate), after remaining
unchanged during the previous six months. Additionally, the weaknesses
among the coincident indicators have become very widespread, with all
four components decreasing during the past six months. At the same time,
real GDP declined at an average annual rate of 11.5% during the
fourth quarter of 2008 and first quarter of 2009 (including a 14.4%
annual rate of contraction during the first quarter), its
largest two-quarter contraction since 1960. The Conference Board LEI for
Germany now stands at 86.6 (2004=100).

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AmEx to Make Another $800MM in Cutbacks

American Express is gearing up for another round of cutbacks that includes the elimination of 4,000 jobs or about 6% of the company’s current worldwide workforce. This second round of reductions will produce an estimated $800 million in savings. It follows the first round of cutbacks announced in October that were aimed at saving $1.8 billion. The latest round of staff is expected to save about $175 million. AmEx expects to save about $500 million in reduced investment spending on marketing and business development. A further reduction in operating costs by cutting expenses for consulting and other professional services, travel, and general overhead is expected to save $125 million.
In October AmEx announced is planned to cut 7,000 jobs or about 10% of its workforce. The Company also cut $125 million in consulting and other professional services, travel and entertainment and general overhead. AmEx also was looking to save $1.0 billion by scaling-back investment spending on technology, marketing and business development and streamlining costs associated with some rewards programs. (CF Library 10/31/08)

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Cred-Ex and CardinalCommerce Partner

NJ-based alternative payment provider Cred-Ex and CardinalCommerce have
teamed to launch the “Merchant Advantage Program”. The program assists
merchants in assessing credit-worthy customers at the checkout page. With
Cred-Ex’s four keystrokes and two clicks only application process, an
instantaneous online full credit evaluation is provided. Using Cred-Ex’s
underwriting engine, merchants can
make immediate credit decisions to issue their customers in-house credit
to complete their purchases based on their own underwriting criteria.
The program is designed to allow the customers the
flexibility to pay for their purchases in
installments, with or without interest. This process dramatically
increases volume and loyalty by attracting and converting new customers,
and by retaining existing clients. Cred-Ex’s technology also helps
combat identity theft
through its patented process.

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Biz Owners Rely on Cards but Frustrated

A new study has found that 59% of small business owners are currently
using credit cards to finance their business, up from 49% in December.
At the same time 75% report that their credit-card terms have worsened
over the past six months, compared to 69% in December. The research by
the National Small Business Association also reveals that
86% of small business owners use their consumer or business credit cards
primarily or exclusively for business purposes. When asked what
percentage of their overall debt/financing is comprised of credit card
debt, 34% said it was 25% or more. About 20% said the interest rate they
were paying for the primary credit card was more than 20%. When it comes
to credit lines, 31% said the combined credit lines on all their cards
was between $20,000 and $49,000, while 23% said it was $100,000 or more.
About 63% report that their interest rate has been increased in the last
year and 41% report their credit line has been reduced. The survey was
conducted between April 27th and May 5th.

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Amtrak to Deploy ExaDigm Mobile Terminals

CA-based wireless payment solution provider ExaDigm has been tapped by
Amtrak to provide mobile payment terminals. ExaDigm’s “XD2500 Mobile
Wireless Payment Terminal” will be deployed
nationwide for use by 1,600+ conductors and assistant conductors on all
passenger routes. Amtrak’s deployment of the XD2500 for onboard ticket
sales is centered on an initiative which will result in the
implementation of a faster, easier payment process for customers;
reduction of credit card losses; full PCI-DSS compliance in the onboard
sales environment; and a reduction in the risk of credit card fraud.
Amtrak will commence a nationwide rollout of the “XD2500” this summer.
It is anticipated that a full deployment will be completed early next year.

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GRADIAN & CIDWAY

Gradian
has partnered with Swiss technology group Cidway to help UK
businesses and consumers tackle identity theft and fraud. Gradian will
provide Cidway’s ground-breaking technologies for mobile
phones that make transactions like online banking, remote access or
mobile payment much more secure by using unique PINs and one time
passwords, enabled over mobile phone
based applications. Cidway protects customers from rising security risks
and attacks such as phishing (fake emails and websites designed to gain
customers’ account details) or man-in-the-middle (fraud in which the
attacker makes independent connections with the victims and relays
messages between them to change transaction details). Cidway products
are already being deployed by banks, governments and enterprises right
across Europe, Middle East and Asia.

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VISA LAC

Visa Inc. payments volume on all Visa-branded
products in the Latin America and the Caribbean Region (LAC) grew 27%
over the previous year to US$193 billion for the year ending on December
31, 2008. Visa’s strategy in the region to increase debit card
activation and
migrate transactions to the point-of-sale played a key role in the
growth during this period. In fact, the total number of payment
transactions continued to advance reaching 5 billion, which reflects a
growing proportion in non-discretionary spending at the point-of-sale by
consumers in key areas such as gas stations, supermarkets, fast food
restaurants, healthcare and recurring payments. The result was an expansion in the number of cards carrying the Visa brand in the region, which reached 340 million in 2008.

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INSIDE & ENOVIA

Dassault Systèmes announced that INSIDE Contactless has successfully
implemented the ENOVIA
Synchronicity DesignSync solution. By leveraging Dassault Systèmes
ENOVIA Synchronicity DesignSync Data
Manager, DesignSync DFII and ProjectSync INSIDE Contactless has been
able to improve global team collaboration while also optimizing product
design. This approach has enabled INSIDE Contactless to increase
system-on-chip design integration efficiencies and IP reuse by utilizing
modular data abstraction within a hierarchical design data and
configuration management system. INSIDE Contactless is using the
DesignSync solution to
design high-performance contactless chip technologies for
next-generation payment, transit, identity and access control
applications. INSIDE’s secure contactless and NFC solutions are
currently found in smart cards, key fobs, mobile phones, handheld
devices, point-of-service systems and PC peripherals.

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AmEx Charge-Offs Top 10%; Delinquency Slows

American Express reported that managed U.S. charge-offs in April hit 10.1%, compared to 8.8% in March and 8.6% in February. However, 30+ day managed U.S. delinquency edged down to 4.9% in April from 5.1% in March and 5.3% in February. Credit card outstandings for the U.S. declined to $55.4 billion from $56.5 billion in March and $57.8 billion in February. AmEx notes that the March charge-off ratio was impacted by the sale to third parties of certain cardholder loans that had been previously written-off. The net write-off rates for March reflect the benefit of the sale proceeds being treated as a partial recovery of such previously written-off balances. AmEx also notes that the results for April are consistent with the Company’s estimate that the U.S. lending write-off rate on a managed basis for the second quarter is expected to increase between 200 and 250 basis points over the first quarter rate of 8.5%. For complete details on American Express’ latest performance visit CardData (www.carddata.com).

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