Sub-Prime Charge-Offs Hit a Four Year Low

Chargeoffs among sub-prime credit card-backed securities have plummeted to the lowest level in more than four years. However, the delinquency rate has been rising for two months after nine consecutive monthly declines and the full impact of the recent bankruptcy surge has yet to hit. For the August collection period, Fitch’s 60 days or more delinquency index for sub-prime issuers registered an increase of 16 bps to 6.58%. Charge-offs fell to 11.16% compared to 14.70% one-year ago and 16.80% in September 2003. Metris recently reported that its managed 60-day delinquency rate for the third quarter was 8.0%, compared to 9.7% for the year-ago quarter. The Metris managed net charge-off rate was 12.0% for the third quarter, compared to 14.6% for the third quarter of 2004. Providian reported that its securitized charge-off ratio for August was down about 400 basis points compared to one-year ago. On a managed basis, charge-offs dropped to 7.10%, compared to 7.42% in July and 10.09% one-year ago. (CF Library 9/15/05; 10/25/05)

SUB-PRIME ABS CHARGE-OFFS
Sep 01: 12.57%
Sep 02: 15.22%
Sep 03: 16.80%
Sep 04: 14.70%
Sep 05: 11.16%
Source: FitchRatings

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CNP Card Fraud Rises 29% in the U.K. in 05

While payment card fraud due to counterfeit, lost/stolen, mail non- receipt and ID theft has plummeted in the U.K. since the migration this year to “Chip & PIN,” fraud due to Internet, phone and mail order transactions has risen sharply. “Card-Not-Present” fraud jumped 29% in the first six months of this year to $158 million, compared to the same period one-year ago. As a result, APACS has introduced a new fraud awareness campaign and is encouraging British consumers to use “Verified by Visa” and “MasterCard SecureCode.” APACS is the UK payments association.

CARD FRAUD MID-YEAR 2005
Card-Not-Present 41%
Counterfeit 21%
Lost/Stolen 20%
Non-Receipt 10%
ID Theft 8%
Source: APACS

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Consumers Prefer General Purpose Gift Cards

A new survey by Discover Card has found that 80% of Americans are pleased to receive a general purpose gift card. And by a 7-to-3 margin, Americans prefer getting a gift card they can use anywhere rather than a store-specific gift card. The survey also found that 85% of consumers use gift cards for themselves, while those who receive cash are more apt to pay bills with that money. Additionally, 60% of Americans consider gift cards a top option for last-minute holiday shopping. Of Americans who ship gifts to friends and relatives, 35% report they purchase a gift card for such gift giving, exceeding the 29% who send a check or cash. Other findings: 45% of Americans find gift cards good to give people who are difficult to shop for and one-in-five Americans consider people who give gift cards “thoughtful.”

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Wincor Nixdorf Introduces iBISTRO QSR

Wincor Nixdorf has enhanced its “BEETLE/iPOS” system with Intel “Pentium 4” technology and has introduced its “iBISTRO QSR” solution for the quick-service restaurant industry. The BEETLE /iPOS includes an integrated power supply, customer display and TFT touch screen in a small-footprint, splash-proof design that is well suited where space is at a premium. The BEETLE /iPOS supports both Windows and Linux-based operating systems. Wincor Nixdorf is a supplier of POS systems and automated teller machines with net sales of EUR 1,744 million last fiscal year.

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Bifurcated Holiday Season Forecast for 05

High debt burdens, reduced mortgage refinancing and persistently high energy prices are expected to crimp consumer budgets this holiday season. A new research paper says total retail sales may rise 5.7% from a year ago in November and December, but it is a fairly sharp slowdown from the pace of spending in 2004, especially after adjusting for inflation. Chicago-based Mesirow Financial found that shoppers will make more trade-offs in their spending decisions this year. For example, shopping more at discounters/warehouse clubs than traditional department stores and purchasing gift cards instead of actual gifts, which allow recipients more choice and an edge at getting their gifts during the after-holiday sales. Mesirow say the result is a sort of bifurcated holiday season with middle- and low-income households struggling to heat their homes and put gifts under the tree, while high-income households continue to live it up.

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PAYPASS MERCHANTS

Wellcome Supermarkets, HiLife convenience stores, and IS Coffee are the latest merchants to join the MasterCard “PayPass” program in Taiwan. In conjunction with the merchant launch in Taiwan, MasterCard also launched its latest “Priceless” TV commercial to support its rollout of MasterCard PayPass in the region. The spot shows a
young man scrambling to prepare for his dinner date. The spot highlights
the man running from the cinema to the convenience store, each time
enjoying the ease of the “MasterCard PayPass” card to “Tap & Go.” Upon
returning home, his “MasterCard PayPass” card provides him the speed and
convenience he needs once again when he realizes that his specially
prepared dinner has been burnt. He manages to salvage the situation by
buying a roasted chicken from the supermarket before his date turns up,
and finds that with the time saved using his “MasterCard PayPass” card, he even has some spare time to fix his hair. The narrator concludes by
stating, “A moment to spare: Priceless.” The “MasterCard PayPass” program is the largest contactless program in the world. The Kaohsiung Government transportation project for Southern Taiwan recently incorporated with the world’s first MasterCard “OneSMART PayPass
Chip Combi Card.”

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Northwest Airlines & AmEx Come to Terms

Northwest Airlines says it has reached a settlement with American Express after AmEx strong-armed the struggling domestic airline by holding $63.4 million in payments. Details of the agreement are likely to surface this week. Northwest Airlines filed a lawsuit against AmEx TRS seeking compensatory and punitive damages for withholding credit card payments on the day it filed for bankruptcy. Bankruptcy Judge Allen Gropper issued a temporary restraining order to force AmEx to release the funds. Northwest says 30% of its revenues flow through the AmEx network. The airline filed for Chapter 11 bankruptcy on September 14th. (CF Library 9/28/05)

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Axalto Dominates U.S. Contactless Cards

Smart card specialist, Axalto, says it will provide approximately five million of its contactless smart payment cards to top banks in the USA by the end of this year. The smart payment cards are manufactured in Maryland and in Orleans in France. Axalto’s contactless smart cards have an optional embossing capability that allows issuers to use all four available lines for embossing on the front of the card. Issuers use this fourth line to add a company name and for other marketing purposes. MasterCard’s “PayPass” is the leading US contactless payment program.

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Card-Less Black Friday a Merchant Disaster

VISA-funded Americans for Consumer Education and Competition says a recent blog calling for “A Day With Cash” on “Black Friday” would be a disaster for retailers. “A Day With Cash”, championed by blogger site WayTooHigh.com is encouraging consumers to use only greenbacks for shopping the day after Thanksgiving. Americans for Consumer Education & Competition advocates for financial literacy and consumer rights initiatives. ACEC serves as a clearing-house for information on financial issues, as the organization monitors, tracks and provides analysis of financial legislation and litigation that has a direct impact on consumers.

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