Consumers Started Downshifting in Q2/2007

New research reveals that consumer confidence and spending began slowing about eighteen months ago. The analysis, based on data from Experian’s ‘”Simmons” and “Hitwise,” found that from Spring 2007 to Summer 2008, the percentage of U.S. adults who felt they would be financially better off in the next year dropped from 46% to 37%. Not only did the percentage of confident consumers slump, but the number of adults who felt they would be worse off in the coming year grew by 9% to 22%. Other findings: between October 2006 and October 2008, overall visits to retail Web sites declined 4% year-over-year; overall visits to Web sites in the travel category dropped 10%; and online searches for major electronic items saw significant, year-over-year decreases, with “televisions” down 33%, “laptops” down 48% and “computers” down 57%. Experian also found that households earning $250,000 or more were the fastest to abandon the notion they would be somewhat or significantly better off in the coming year, dropping by 40% from Spring 2007 to Summer 2008.

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RETAIL PAYMENTS

The use of cash and checks to pay for goods and services remains the “King” with a combined share of 47%, however both methods continue to decline. Meanwhile, debit and credit cards continue to gain dollar volume share, growing at annual rate of 16% and 3%, respectively. According to an analysis by CardFlash International, the use of customer checks declined more than 13% year-on-year in October slipping to A$97.2 billion. However, direct debit payments rose more than 14% in October to A$48.4 billion, compared to October 2007. For October, the Reserve Bank of Australia reports that debit card dollar volume rose 16.1% to A$10.8 billion and credit card dollar volume increased 3.2% to A$19.4 billion. Debit and credit cards capture about 40% of total retail payments, while “BPAY” and other methods, such as money orders and “Cabcharge” payments, capture 13%. The RBA noted that even though cash remains the most widely used payment method and is in decline, it is particularly important for small transactions, accounting for nearly all payments under $10 and close to 90% of all transactions under $25.

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January – 0% Promo Rates and 6% Go-To APRS

With the prime rate slipping to 3.25% this month, credit card go-to
offered rates will hit record lows in the January billing cycle.
Additionally, 12-month 0% promotional interest rates have returned
in-force as issuers mull a migration back to fixed rates and the
implementation of new floor rates. According to CardWatch all five of
the nation’s top issuers are currently offering 0% promo APRs for about
12-months with Bank of America offering a 15-month zero rate on balance
transfers only. Chase also offers a 15-month zero rate on its 8.99%
fixed rate card offer. Capital One’s zero rate offer runs for 11 billing
cycles. However, most of the issuers now, for the first time, base the
length of the promotional period on credit score. Among the best go-to
rates offered is BofA with a prime +2.99% rate on its “Visa Platinum”
and Citi with a prime +3.49% on its “Perfect MasterCard.” Among other
direct mail offers captured by CardWatch this month is an agent offer
through U.S. Bank offering a 12-month 0% promo rate with a go-to rate of
prime +3.99%.

DECEMBER PROMO & GO-TO APRS
BofA: 0% from Jan 09 to Mar 10; then 6.24%
Chase: 0% from Jan 09 to Dec 09; then 9.24%
Citi: 0% from Jan 09 to Dec 09; then 6.74%
Cap One: 0% from Jan 09 to Nov 09; then 8.15%
AmEx: 0% from Jan 09 to Dec 09; then 10.24%
Source: CardWatch (cardwatch.com)

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MOODY’S V SCORES

Moody’s has released “V Scores and Parameter Sensitivities in the Global
Credit
Card ABS Sector”, applies the measures, which were recently revised, to
typical transactions across all global credit card ABS sectors including:
U.S. credit card, Canadian credit card; U.K. credit card; Japanese
credit card; and Korean credit card. In the report, Moody’s concludes
that it expects V Scores to range from
Low/Medium variability for Canadian and Japanese credit card ABS to
Medium variability for U.S., U.K. and Korean credit card ABS.
V Scores are a relative assessment of the quality of available credit
information and the potential variability around the various inputs in
determining the rating. V Scores are intended to rank transactions by
the potential for significant rating changes owing to uncertainty around
the assumptions. The second supplemental measure being applied by
Moody’s in this sector
are Parameter Sensitivity analyses, which provide a quantitative
calculation of how the initial, model-indicated rating of a structured
finance security may vary if key assumptions are changed. Moody’s
intends to begin reporting transaction-specific V Scores and
Parameter Sensitivities in pre-sale reports, new issue reports and press
releases for all new transactions in the global credit card ABS sectors
beginning January 1, 2009.

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Visa Beefs-Up its U.S. Litigation Reserves

Visa has deposited $1.1 billion to be set aside in the litigation
escrow account. The plan was established at the time of Visa’s initial
public offering to provide coverage and a payment mechanism for
judgments or settlements in specific U.S. legal cases, protecting Visa
and its Class
A and Class C shareholders from any direct losses. Under terms of the
Plan, when Visa funds the litigation escrow its U.S.
financial institutions, the sole holders of Class B shares, bear the
expense via a reduction in their as-converted share count. The deposit
of the funds into the escrow account reduces the conversion
ratio applicable to Visa’s Class B common stock outstanding from 0.7143
per Class A share to 0.6296 per Class A share. On a converted basis, the
245,513,385 Class B shares currently outstanding are equal to154,566,658
Class A shares of common stock.

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OCT INDEX

The Conference Board announced that the leading index declined 2.6% in October.
The leading index fell sharply in October, the largest monthly
decline since January 1987. Three of the seven components in the leading index
increased in October. The positive contributors to the leading index are
new residential construction orders, inventory change series, and
gross enterprises and properties income. Negative contributors are stock prices, new orders in
investment goods industries, consumer confidence and yield spread.
Since April 2008, the leading index has fallen by 6.8%, well below the 3.6%
decline between October 2007 and
April 2008. Additionally, the weaknesses among the leading indicators
have remained more widespread than the strengths in recent months. The leading index has been trending downwards since July 2007,
declining by more than 10 percent during this period. After growing
steadily through 2006 and 2007, the coincident index has been
fluctuating around a slight downward trend in 2008. The accelerating and
widespread decline in the leading index suggests that the economy will
remain weak going into 2009, and that the contraction in economic
activity may deepen in the near term. The leading index now stands
at 89.3 (1990=100).

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ChristmasFuture Offers Charitable Cards

Social media users can purchase giftcards for charitable giving using “ChristmasFuture”.
Giving through ChristmasFuture is fast and simple and doesn’t require
any driving or gift-wrapping. By tweeting unique gift pickup codes directly to people in their
networks, Twitter users have been able to give to their entire networks
in a short period of time and 100% of the online gift cards go to chosen projects.

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AQUA & LLOYD JAMES

Aqua credit has appointed Lloyd James Group as managers of its insert programme.
Lloyd James Group Ltd is a provider of on and
off-line data solutions, offering a comprehensive set of interactive services
that cater for the wide ranging marketing needs
including a full service data bureau, data analysis, list broking and
list & media management. The Aqua customer is predominantly low-income earners, part-time workers and the
self-employed. The card specialises at targeting consumers who feel underserved by ‘Prime’
lenders.

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Shell-Shocked Americans Become Savers

More evidence that Americans are switching from credit/spend mode to
the savings/budget mode as Visa finds that more consumers are saving for
emergencies and major purchases. The U.S. Commerce Department’s Bureau
of Economic Analysis recently reported that the personal saving rate, as
a percentage of disposable personal income, had climbed from 1.0% in
September to 2.4% in October. The Visa poll found that saving for
emergencies and a rainy day (30%) topped the list of what Americans set
aside money for, followed by retirement (20%) and education (10%).
Overall, 66% of Americans surveyed said they set aside some amount every
month for major expenses. Additionally, Visa found that Los Angeles area
respondents set aside the most for emergencies (39%), followed by
Orlando (34%) and San Antonio (33%). New York City, Chicago and the
state of Vermont ranked near the bottom, with each of these areas
reporting only 22% of residents saving for emergencies.

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GIFT CARD PRIMER

The Ministry of Small Business and Consumer Services’
Consumer Protection Branch reminds consumers that the expiry dates on
gift cards issued on or after October 1, 2007,
fees or deductions from a gift card’s value and expiry dates on mall
gift cards issued as of September 1, 2008 are
banned and there are limits on administrative fees. Canadians spend
about $1.26 billion on gift cards during the
holiday with 82% of Canada’s largest retailers offering gift cards.

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TransFirst Inks BankAtlantic Merchant Deal

FL-based BankAtlantic has entered into an merchant services agreement with Dallas-based TransFirst LLC.
Through the agreement, BankAtlantic will provide its business, corporate and
municipal customers with “TRANSACTION CENTRAL”, a Web-based centralized
payment processing system that performs local and national processing
24/7, and “TransLink”, a comprehensive Web-based reporting system and
management tool, delivering 24/7 access to a variety of merchant
services and merchant bankcard solutions. BankAtlantic’s customers also
benefit from dedicated and collaborative sales support teams, portfolio
performance reports, a 24/7 Merchant Helpdesk, competitive pricing, and
innovative products.

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KETERA & VAT

On demands spend management provider Ketera is ready to manage the recent change in the Value Added
Tax (VAT) rate which took effect December 1, 2008. The British government’s recent decision to reduce the standard VAT rate
by 2.5%, as part of the country’s economic stimulus package, introduces
compliance challenges and requires significant investments in time and
resources for business owners who are using software applications to
manage many aspects of their businesses, particularly accounting / ERP
and Ecommerce. Updates to tax rates were made seamlessly and
transparently without any impact to customers using Ketera’s web-based
suite, offered in a Software as a Service (SaaS) model. These automatic
updates to transactional forms, including procurement and invoicing,
save time and money through improved accuracy and by avoiding manual
updates to multiple forms.

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