Issuers Brace for a Charge-Off Spike in Dec

Due to the surge in bankruptcy filings in the final weeks leading up to the full implementation of the bankruptcy reform laws, charge-offs, as a percentage of managed outstandings, will likely breakthrough the 8% milestone and could breach the 9% level in January. Over the past 12 months, managed charge-offs have been hovering between 5.79% and 6.38%. The “pain is the gain” for credit card issuers who should realize lower charge-off ratios in the second quarter of 2006 and beyond as the bankruptcy process becomes more onerous for American consumers. Personal bankruptcy petitions in September set an all-time high, topping 200,000. It is expected that filings for the first two weeks of October may exceed 300,000. These filings will be reflected on card issuers’ books in December and January.

2005 MANAGED CHARGE-OFFS
Jan: 6.18%
Feb: 6.03%
Mar: 5.98%
Apr: 5.90%
May: 6.16%
Jun: 6.26%
Jul: 5.99%
Aug: 5.79%
Sep: 6.23%
Oct: 6.87%*
Nov: 7.39%*
Dec: 8.21%*
* projected
Source: CardWeb.com. Inc.

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Affluent Americans Tighten Holiday Spending

The latest consumer pulse indicates that affluent Americans think the economy is headed in the wrong direction and have little confidence in the future. More than four out of ten believe the economy will be worse in three months and more than six out of ten are “very concerned” about the impact of high oil prices on the U.S. economy. The latest quarterly “McDonald Financial Group Affluent Consumer Confidence Index” says the latest figures represent the lowest index level since April 2003. According to the survey, 41% believe the economy will be worse in three months. McDonald noted that the quarter’s response may have been influenced by a confluence of events including rising oil prices, Hurricanes Katrina and Rita, and the continuing situation in Iraq, which have left many affluent individuals feeling concerned about the future of the national economy. The American Affluence Research Center recently found that affluence spending will likely total $57 billion for December holiday gifts, about 1.6% below 2004 spending levels. Chicago-based Spectrem Group found earlier this year that the number of U.S. households with a net worth of $1 million or more increased 21% last year. A net gain of 1.3 millionaires were added to the segment during 2004, bringing the total number to 7.5 million. The measure excludes the value of the primary residence. (CF Library 5/25/05 and 10/31/05)

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S1 Corporation Hits Some Rough Waves in Q3

Atlanta-based S1 Corporation reported that revenue for the third quarterwas $57.9 million as compared to $60.3 million for the same quarter in the previous year. Loss from continuing operations for the third quarter $7.5 million. In the third quarter, the Company’s FI Segment signed 15 Enterprise contracts, of which 4 were new relationships and 11 were substantial purchases of additional licenses and services from existing Enterprise customers. S1 says it will suspend the practice of providing financial guidance. For complete details on S1’s third quarter performance visit CardData ([www.carddata.com][1])

[1]: http://www.carddata.com

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MobileLime Scores a Virgin Executive

Boston-based MobileLime, a specialist in payments via mobile phones, has named Jeff Yolen, formerly with Virgin Mobile, as VP/Business Development. Yolen brings more than ten years of senior level management and business development experience. Key accomplishments while at Virgin included his involvement in the launch of MVNOs globally, a successful investment in a pan-European WI-FI provider, along with Virgin Mobile’s Middle East project. He also held senior management positions at Kozmo.com and JP Kids. MobileLime, a service of Vayusa, is the first U.S.-based company to allow consumers to make purchases through any mobile phone at participating merchants.

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Hypercom Powers Wawa’s Contactless Payments

Pennsylvania-based Wawa has purchased and installed more than 2,000 “Optimum L4100” high-speed card payment terminals with contactless payment capability at 540 retail stores in Delaware, Maryland, Pennsylvania and Virginia. Wawa has also named Hypercom its preferred supplier of card payment devices. The Hypercom terminals are configured to Wawa’s specifications to accept magnetic stripe credit/debit cards and smart cards as well as contactless cards or key fobs that communicate with the terminal without any physical contact.

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Huntington Bancshares Tops 900 ATMs

Ohio-based Huntington Bancshares and Cardtronics have closed a deal that adds 77 Huntington-branded ATMs to CVS/pharmacy stores in Cincinnati, Dayton and Springfield, Ohio and Northern Kentucky, bringing Huntington’s total ATM coverage to over 900 machines. Cardtronics manages more than 26,000 ATMs across the United States, 10,000 of which are positioned in major merchant locations. Huntington Bancshares Incorporated is a $33 billion regional bank holding company headquartered in Columbus, Ohio.

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RBS Lynk Lands the Dari Mart Contract

RBS Lynk has been chosen by Dari Mart Stores to process credit, debit and EBT transactions for its 43 convenience stores and two Chevron fuel outlets in Oregon’s Willamette Valley. Dari Mart’s transition to RBS Lynk included certification of Pinnacle Corporation’s Palm POS and Pharoh applications with broadband communications support. Dari Mart Stores is a family owned company based in Oregon’s Willamette Valley.

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VISA USA to Add 8 Outsiders to its Board

To help mute criticism of its governance and fee setting practices, VISA USA yesterday announced plans to add a majority of independent directors to its board. The proposed new board will have 17 seats comprising eight independent directors, seven financial institution directors and two non-voting VISA management directors. The current board has 14 financial institution directors and two VISA management directors. VISA says the change is a result an comprehensive evaluation undertaken by its board and management beginning April 2004. VISA says the new board will strengthen the organization competitively, organizationally and legally. The full board will continue to govern business matters including operating regulations and rules, brand management and strategic planning. The independent directors will oversee core economic decisions such as pricing, member transaction processing and service fees and economic relationships. Financial institution members will retain responsibility for control and disposition of assets, membership eligibility requirements and corporate governance. Like MasterCard, VISA is facing a slew of recent lawsuits alleging price fixing, collusion and conspiracy in setting interchange. However, MasterCard is planning to go public early next year by selling 49% in an IPO, hoping to raise about $2.5 billion while changing its structure and governance. There is much speculation that VISA will eventually go public as well. (CF Library 9/1/05; 9/16/05)

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