2008 Portfolio Sales Up as Premiums Fall

The second largest volume of credit card assets trading hands in one
year took place in 2008 as more than $55 billion in deals were done.
However, average sale premium prices for “prime” and “super prime” card
portfolios dropped to 16.57% for 2008, compared with a 21.40% average
card portfolio premium sale price in 2007. The range of estimated gross
premiums for 2008 was 13.0% to 22.7%, compared to 8.5% to 34.5% for 2007
and 3.0% to 23.9% ten years ago. According to card industry broker
expert R.K. Hammer, the number of significant portfolio sales, excluding
about 70 small credit union portfolio deals, was 35 for 2008 compared to
51 in the prior year. Hammer notes that the banking credit crunch,
liquidity crisis, economic downturn, and rising consumer bankruptcy and
loan losses all contributed toward less capital chasing new card deals.
It had more to do with what was going on within buyers’ organizations,
rather than within portfolio sellers. However, Hammer says that the
better loan quality, larger size card deals (“prime” and “super prime”)
are still going for higher premiums, in the more traditional 20.5% to
23.0%+ range. R.K. Hammer, a global card advisory firm, has 17 of the
top 20 U.S. issuers as clients, plus bank card issuers in 50 countries.

Card Deals Historical
1999: $19.40 billion
2000: $19.70 billion
2001: $12.00 billion
2002: $21.80 billion
2003: $40.50 billion
2004: $30.57 billion
2005: $44.30 billion
2006: $90.26 billion
2007: $ 9.40 billion
2008: $55.30 billion
Source: R.K. Hammer

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Shell Direct Debit Card is Launched

Shell has launched the “Shell Saver Card” which provides an electronic
check payment option for customers.” The new card is a non-credit payment product issued to consumers
directly from Shell, has no application or annual fees and offers a
promotional savings of 5 cents per gallon on Shell gasoline or diesel
purchases until June 1, 2009 and 2 cents per gallon thereafter. The payment option provides consumers with a convenient way to
pay for purchases with a direct link to a checking account and savings
on each gallon of fuel pumped at Shell stations. All Shell Saver Card transactions will be routed through the Shell
network and payment processor First Data using First Data’s “TeleCheck”
check verification services. Because
the card is linked to a checking account, it offers the added advantage
of no impact on consumer credit scores, especially important to
consumers who wish to avoid using credit but customers who apply for the
Shell Saver Card must have an active checking account in good standing
to qualify.

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Dollar General nFinanSe Discover Card

Prepaid card provider nFinanSe announced that its
“nFinanSe Discover Network Reloadable Prepaid Card” is now available at
discount retailer Dollar General. Consumers can purchase the
Card for only $5.95 and conveniently load funds at Dollar General
locations. No credit check or bank account is required. The nFinanSe cards are “instant issue” and
cardholders have the ability to receive emails or text messages on their
cell phones with transaction and balance information after each use.

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EVERYDAY CHARGES

Using payment cards for everyday purchases, particularly for transactions under GBP 20, are gaining popularity among Brits. New research from Sainsbury’s reveals that there are some 7.55 million card card users who spend a total of GBP 3.64 billion on their cards every month. The average monthly spend figure for a typical “everyday” credit card user is GBP 483, but some 1.41 million “everyday” card users regularly put GBP 750 or more of their overall monthly expenditure on their credit card. With as many as 12 million (48%) of all credit card holders not earning any rewards from expenditure on their cards(2), the bank estimates that there could be as much as GBP 1.76 billion worth of spend by everyday credit card users that is going unrewarded each month.

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RBS WORLDPAY BREACH

RBS WorldPay (formerly RBS Lynk), the U.S. payment processing arm of The Royal Bank of Scotland Group, confirms that its computer system had been improperly accessed by an unauthorized party. The breach
affected U.S. pre-paid cards include payroll cards and open-loop gift cards. Personal information associated with certain payroll cards may have been improperly accessed. PINs for all PIN-enabled cards have been or are being reset. Affected individuals are being notified and information has been posted on the RBS WorldPay Web site. Actual fraud has been committed on approximately 100 cards. Certain personal information of approximately 1.5 million cardholders and other individuals may have been affected and, of this group, Social Security numbers of 1.1 million people may have been accessed. RBS says the breach was identified on November 10th and law enforcement agencies and
federal regulators were notified by RBS WorldPay shortly thereafter.

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BOXING DAY

A new survey has found that 34% of online Canadian shoppers are taking their “Boxing Day” shopping online. The survey, conducted by Ipsos-Reid on behalf of PayPal Canada, also reveals that “Boxing Day” shopping is anything but hassle-free. Sixty-eight per cent of Canadians indicate that crowds and long lines are their top two pet peeves, followed by finding the item that they want is not carried or sold
out (11%), finding a parking spot (5%), and rude or unhelpful sales staff (3%). Only one in 12 (8%) Canadians don’t dislike anything about “Boxing Day” shopping. Only one in ten Canadians doesn’t look for deals when shopping for holiday gifts and 38% typically shop on “Boxing Day” to take advantage of special deals and promotions.

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BUSIEST DAY

New data show Canadians used their debit cards for 15.9 million transactions on December 23rd. According to INTERAC, that represents an increase over the 15.6 million transactions reported on December 21st, 2007, last season’s busiest holiday shopping day of the year. INTERAC statistics show that Canadians also power-shopped during the final 2008 pre-holiday period, swiping their cards nearly 40 million times between December 21st and December 23rd. INTERAC also reports that Canadians spent $219 million fare at grocery stores on December 23rd; $180.6 million in specialty clothing stores; $121.5 million in department stores; $64 million at gas stations; $30.8 million for restaurants/bars/fast food purchases; and $64.9 million for beer/liquor/wine purchases.

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OCT INDEX

The Conference Board announced that the leading index for Australia
declined 0.5% in October. Four of the seven components in the leading index
increased in October. The positive contributors to the index are rural goods
exports, money supply, gross operating surplus, and the sales to
inventories ratio. Share prices, building approvals, and yield spread
declined. Index levels were revised moderately lower from May to September
as new data for the sales-to-inventories ratio and gross operating
surplus for the third quarter of 2008 became available. The six-month
change in the leading index has continued to fall, dipping to 0.2% in
the period through October, down
from 1.6% between October 2007 and April 2008. In addition, the
strengths among the leading indicators have
been roughly balanced with the weaknesses over the past six months The
leading index now stands
at 188.3 (1990=100).

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OCT INDEX

The Conference Board announced that the leading index for Mexico
declined 5.7% The leading index declined sharply in October due to very large
drops in oil prices, the real exchange rate, stock prices and the net
insufficient inventories component. As a result, the leading index fell
9.3% during the six-month period ending in October, down significantly from the 3.3% rate of
increase between October 2007 and April 2008. Only one of the six components, the industrial production construction,
that make up the leading index increased in October. The US refiners’
acquisition cost of domestic and imported crude oil, the (inverted) real
exchange rate, stock prices and net insufficient inventories decreased
in October. The (inverted) federal funds rate remained unchanged. As a result of three consecutive declines in the leading index,
its six-month growth rate has turned sharply negative and is now the
largest decline since the 1994-95 downturn. At the same time, the
six-month growth rate of the coincident index has gradually slowed and
has now remained below zero since August 2008. Taken together, the
recent behavior of the composite indexes suggests that economic activity
should be weak going forward and that there are increasing risks of
further economic weakness in the near term. The leading index now stands at 158.1 (1990=100)

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Spamometer Rises with the Sinking Economy

Research commissioned by Ipswitch Messaging indicates a correlation with
the decline of the economy and the increase of cybercrime. With the
recent hit to Wall Street and the collapse of some big names in global
banking, spam attacks also took a strong Q4 dive. Cyber-crooks are now
targeting new sources of income. Instead of targeting the banking
industry, credit cards and passwords, spam campaigns are now
focusing on promoting services that contend to eliminate or leverage
debts, mortgages, and loan obligations. With the USA still leading the
pack in spam production with 53.49%, and
costing millions of dollars to enterprises each year, botnets,
spear-phishing, and insider attacks are just some of the threats on the
horizon for the coming year. The most effective solutions against spam
combine a strong reputation
system with a complete filtering system that includes heuristics,
statistical analysis, signature filters and multi-lingual detection.
Spam is wholly dependent on the level of awareness with respect to the
rising number of threats and on how proactive an organization is with
respect to security issues.

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MINT 2008

Prepaid provider Mint Technology has released results for year ended
August 31, 2008. Mint reported a net loss of
$2,790,745.00, down significantly from a net loss of $5,003,496.00 for the
period of August 31, 2007. The net loss reduction is due to a number of
factors, primarily a reorganization of the business since the new Board of
Directors was appointed in March 2008. Mint has taken a number of steps to
establish new projects while continuing the successful MuchMusic program. Other operational highlights include
a new contract signed with Transguard Group, U.A.E to manage prepaid payroll cards; a new contract
signed with Yep! Mobile, a Montreal based
mobile media company to provide prepaid cards through Facebook Platform applications targeted at the youth phenomenon of “social
gaming”; entered into an agreement with Silverback Media PLC to introduce
mobile technology for financial payments for existing MuchMusic MasterCard holders;
entered into an agreement with IMT Cards LLC for IMT to exclusively
manage Mint’s prepaid debit card programs in the United Kingdom and
UAE. Mint is in advanced stage negotiations for contracts with other
groups in Canada, United Kingdom and the U.A.E to roll out new
prepaid card programs

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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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