FINANCIAL STABILITY

A new report has found that credit card exposures accounted for over 30% of UK-owned banks’ charge-offs on their domestic household lending last year. This proportion has trebled since 1998, reflecting
both the sharper rise in the credit card write-off rate and the growing stock of such lending. As discussed in some banks’ recent trading statements, the scale of the increase has surprised some lenders.
However, the Bank of England “Financial Stability Report” notes that the credit card business generally remains profitable and that the effective interest rate on credit card lending is currently around 11 percentage points above the cost of banks’ funds. But, the BOE says the general rise in unsecured debt may mask a sharper increase among a minority of households. As discussed in a recent House of Commons Treasury Committee report, some households have borrowed so much that they might struggle to meet future debt repayments even in the absence of a major income shock. This credit may have been available because lenders have an incomplete picture of customer characteristics. In addition, a good payment history may well be sufficient to encourage lenders to provide new loans, even though the debt may place a heavy burden on the
household. Greater credit availability may help to explain the
quadrupling over the past ten years in the number of
insolvencies among the employed.

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Cyota Enhances ScamBlocker to Fight Fraud

Cyota has signed a deal to provide data to enhance EarthLink’s “ScamBlocker” to provide immediate protection from fraudulent financial phishing sites. ScamBlocker warns users before they access known or suspected phishing sites, and redirects them to an EarthLink-generated Web page that provides additional information about phishing and similar online scams, and what actions subscribers can take to further protect themselves. Cyota is the leading provider of online security and anti-fraud solutions for financial institutions. Over 400 million account holders are protected by Cyota’s systems.

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Experian Launches B2B Marketing Triggers

Experian has launched the first commercial triggering solution that utilizes both credit and marketing data to maximize campaign results for credit card issuers targeting the SMB market. The new “B2B Marketing Triggers” assists users in identifying changes in a business’ demographic information as well as significant changes in its credit behaviors. Experian also delivers monthly changes in a business’ attributes such as business address, phone number or contact name so that users can update their lists in a more timely manner without having to wait for the long list processing cycle.

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Triversity Introduces FraudWatch 3.0

Toronto-based Triversity has released “FraudWatch 3.0,” a loss prevention software solution that meets the requirements of the PCI standards for protecting cardholder data. FraudWatch 3.0 includes full encryption of credit/debit card information, audit trails when data is accessed, advanced password management, masking of sensitive data when displayed and restriction of information. FraudWatch is a Web-based system that can be accessed from any location via a Web browser. Triversity is an international provider of retail business solutions.

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MBNA Shareholder Lawsuit Moves Back to 03

Connecticut-based law firm Scott + Scott has expanded its MBNA shareholder lawsuit back to October 16, 2003. The complaint alleges that during the Class Period, defendants made false and misleading statements regarding the growth and direction of MBNA loan receivable assets and used false and deceptive means to present a healthy picture of growth for its loan receivable assets, to conceal several serious quarter over quarter declines. Scott + Scott specializes in complex litigation including securities fraud and represents foundations, individuals, corporations and pension funds worldwide.

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Citi Moves Sears Processing to First Data

After a 15-month evaluation process, Citigroup has decided to move the processing of its Sears consumer MasterCard and private-label accounts from TSYS to First Data. The deconversion is expected to be completed by the second quarter of 2006. The signing of the long-term processing agreement with Citi is a major victory for First Data. In October, TSYS finalized an agreement with JPMorgan Chase to service the combined card portfolios of Chase and Bank One. First Data formerly processed for Chase. In August, Bank of America decided to move its credit card processing for the FleetBoston card portfolio from First Data to TSYS. TSYS said it expects to continue supporting commercial-card accounts for Citibank and Sears as well as Citibank’s California Commerce consumer accounts, according to the terms of the existing agreements for those portfolios. (CF Library 8/19/04; 10/14/04)

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TNB Adds 3 More Processing CU Clients

Dallas-based TNB Card Services has gained the credit card processing business of three more credit unions. The new processing clients are WySouth Federal Credit Union of Wyandotte, MI; Dowell Federal Credit Union of Tulsa, OK; and Shell Federal Credit Union of Deer Park, TX. In March, TNB won the credit card processing business of three West Coast credit unions. The clients included United Health Services CU of Spokane, WA, GaPac Employees FCU of Bellingham, WA and Horizon CU of Fresno, CA. TNB provides full-service credit and debit card processing, serving more than 450 financial institutions and managing more than 1.6 million cards. (CF Library 3/7/05)

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BofA Prowls for More Prime Portfolios

Bank of America’s CEO indicated it may consider more credit card acquisitions and possibly an acquisition of an entire company. However, Kenneth Lewis said the Company has no desire to enter the subprime credit card arena. When pressed about a possible acquisition of MBNA, Lewis refused to confirm or deny an interest in the Company. BofA, the second largest U.S. bank, is the fourth largest bank credit card issuer. Bank of America’s credit card loans grew 7.8% in the first quarter ending with $57.9 billion. The issuer opened 1.3 million new credit card accounts during the quarter as pre-tax card income hit $750 million. (CF Library 4/18/05)

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Financial Emails Post a Strong Response

First quarter email communications campaigns for financial service firms ranked as the #2 highest performing category. Bigfoot Interactive says total emails attempted, minus all failures, for financial services firms in Q1 was 96.8%. Online account service messaging such as bill payment/presentment and balance transfers continue as primary drivers of high success rates. In fact, service messaging had an average click-through rate of 22.8% (up 3.1% versus Q1 04 and 9.2% from Q4 04). Multi-card offers and year-end statements round out the quarter’s top campaigns

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Acacia Licenses Sterling Jewelers and Too

Acacia Research has entered into non-exclusive licenses covering a patent that applies to credit card fraud protection technology with Sterling Jewelers, Limited Too and Justice stores. The technology relates to a computerized system for protecting retailers and consumers engaged in card related transactions. The system includes an electronic card reader and the generation and use of a transaction number, which specifically identifies each transaction processed within the system. eliminating the need to print detailed information on the customer’s receipt. The Acacia Technologies group develops, acquires, and licenses patented technologies.

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Metavante Acquires TREEV for $19.5MM

Metavante has acquired Virginia-based TREEV, a provider of software solutions and consulting services to the financial industry, for $19.5 million. TREEV delivers browser-based document and report management software and has enabled over 1,500 financial institutions to revamp paper-intensive operations into more efficient electronic and automated processes. Metavante Corporation provides banking and payment technologies to financial services firms and businesses worldwide.

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Avg Ticket Up 5% for Credit; +4% for Debit

While debit card volume and issuance has grown dramatically over the past decade, the average purchase transaction has increased a modest 4% over the past three years, compared to a 5% increase for bank credit cards during the same period. During the first quarter the average V/MC debit card purchase transaction was $40.16 compared to $38.67 for 1Q/02. According to CardData ([www.carddata.com][1]), the average 1Q/05 V/MC bank credit card purchase transaction was $85.62 compared to $81.51 for 1Q/02. The modest growth in average debit tickets is most likely linked to the strong growth in under $10 transactions such as QSR and parking. Between 2002 and 2005, debit card dollar purchase volume increased 80% and transactions rose 73%. During the same period bank credit card dollar purchase volume increased 31% and transactions grew 24%.

PURCHASE TICKET Q1 HISTORICAL
(VISA/MasterCard only)

Credit Debit
2002: $81.50 $38.67
2003: $83.25 $39.17
2004: $85.36 $39.47
2005: $85.62 $40.16
Source: CardData (www.carddata.com)

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

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