Outstandings Flat Y/Y with a Strong Q1 Dip

The seasonal contraction in bank credit card outstandings was unusually strong this year compared to prior years, as 1Q/05 outstandings of $658.9 billion were exactly the same as one-year ago. Compared to the fourth quarter, this year’s contraction was 3.8%, compared to 2.7% in 1Q/04. The slowdown is evident in monthly payment rates which are hovering at record levels of 18%+. Home equity loans and rising debit card use are siphoning off much of the growth. For the first quarter of this year, VISA’s credit card outstandings were $290.8 billion, followed by MasterCard at $281.1 billion. American Express reported first quarter U.S. credit card outstandings (card loans) of $39.3 billion, which excludes about $26 billion in charge card outstandings. Discover posted $47.7 billion in outstandings for the quarter ending February 28th. For complete details on credit card outstandings, visit CardData ([www.carddata.com][1]).

BANK CREDIT CARD OUTSTANDINGS
4Q/03: $677.0 billion
1Q/04: $658.9 billion
2Q/04: $672.1 billion
3Q/04: $662.0 billion
4Q/04: $684.9 billion
1Q/05: $658.9 billion
note: excludes AmEx 30-day or charge card outstandings
Source: CardData (www.carddata.com)

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

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Ingrian Offers a PCI Compliance Solution

Ingrian Networks has launched a new program in conjunction with AmbironTrustWave to assist merchants and card processors achieve PCI compliance, offering a 30-day free trial of the “DataSecure Platform”. The PCI Data Security Standard outlines best practices for securing credit card data that is stored, processed and transmitted. PCI is a consolidated security standard backed by American Express, Discover, MasterCard, and Visa, among other card issuers. PCI lists 12 guidelines that many retailers, online merchants, data processors, and other businesses that handle credit card data will have to meet by June 30. Ingrian Networks provides complete data privacy through DataSecure, featuring a dedicated security appliance and specialized software that enables organizations to encrypt critical data in applications and databases. AmbironTrustWave provides data security and compliance services to businesses that process, store and/or transmit credit card data, serving more than 25,000 clients.

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7-Eleven to Offer MasterCard PayPass by 06

7-Eleven has agreed to accept “MasterCard PayPass” in its 5,300 U.S. locations by early 2006. The world’s largest convenience retailer has already deployed “PayPass” readers in 170 test-market stores. Last month 7-Eleven announced an agreement to accept “VISA Contactless” payments at all of its U.S. stories. In April MasterCard and MD-based Ritz Camera Centers expanded MasterCard “PayPass” acceptance to each of the more than 1,100 Ritz Camera Centers and 114 Boater’s World Marine Centers. PA-based c-store operator, Sheetz, deployed “PayPass” system-wide in March of this year. In February, MasterCard teamed with MBNA, the Seattle Seahawks and Baltimore Ravens Football Clubs to integrate its “PayPass” contactless payment technology into the Seahawks and Ravens “Extra Points” credit card programs. In August 2004, McDonald’s inked a deal to accept MasterCard “PayPass.” (CF Library 1/4/05; 2/22/05; 4/26/05; 5/19/05)

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WaMu to Acquire Providian for $6.45 Billion

Providian, the nation’s 9th largest general purpose credit card issuer with an $18 billion card portfolio, is being acquired by Seattle-based Washington Mutual for $6.45 billion. After nearly collapsing in 2001 with a $55 million loss, Providian has reinvented itself from a major sub-prime issuer to a significant middle-market player, doubling its profits over the past three years. Under terms of the deal announced this morning, WaMu will pay 89% in stock and 11% in cash. Providian will become WaMu’s fourth major business unit and will continue to operate out of in San Francisco. Joseph Saunders, who led the Providian turnaround since November 2001 as chairman and CEO, will continue to run the credit card business after the merger. WaMu also indicated it plans to retain all of Providian’s management team and infrastructure. In the first quarter, Providian posted a 41% increase in net income to $133.0 million. Last year, Providian posted net income of $381.2 million, compared to $219.4 million in 2003 and $179.7 million in 2002. Prior to its near collapse in 2001, Providian posted net income of more than $600 million in 1999 and 2000. According to CardData, Providian had $18,089,000,000 in credit card outstandings as of March 31st, and 9.9 million accounts. WaMu currently has assets of $319.7 billion. The PVN/WaMu deal is expected to close in the fourth quarter. (CF Library 11/26/01; 4/26/05)

PROVIDIAN NET INCOME HISTORICAL
1999: $614.5 million
2000: $667.4 million
2001: -$54.6 million
2002: $179.7 million
2003: $219.4 million
2004: $381.2 million
Source: CardData (www.carddata.com)

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5MM Web-Driven Businesses Now in the USA

A new joint study from MasterCard and Warrillow has found that Web-driven businesses now represents 25% of the U.S. small business market, accounting for more than 5 million businesses. When compared to their traditional counterparts, Web-driven entrepreneurs are more likely to be women and university educated. Warrillow says Google is a big key to the success of these Web-driven businesses when it enables tiny businesses to buy a sponsored link. The report is being released today in conjunction with the “The Warrillow Summit,” which gets underway this morning in Chicago.

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AmEx Offers Advance Odd Couple Show Tickets

American Express has launched a promotion to offer advance purchase tickets of Broadway’s upcoming “The Odd Couple” to AmEx cardholders via the new AmEx/Yahoo Broadway Web site. For the Early-on-Sale period, starting June 6 and continuing through July 4, tickets will be available only to American Express Cardmembers and can only be purchased through American Express’ newly-minted Broadway Web site, American Express presents Broadway, Live at Yahoo! or by calling Ticketmaster. American Express Company is a diversified worldwide travel, network, and financial services provider founded in 1850.

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Lipman Adds GPRS Wireless Capabilities

Lipman is now offering a GPRS wireless communication option on its “Xplorer,” “Secura Integrated” and “Xtreme Integrated” payment systems. The additional GPRS functionality further enhances the versatility of the Xplorer, Secura and Xtreme systems. Based on SecuraCell technology, both Xplorer and Secura systems have received EMV approval as well as widely recognized security certifications such as Visa PED and ZKA. Lipman is a leading worldwide provider of electronic payment systems and develops, manufactures and markets a variety of handheld, wireless and landline POS terminals, electronic cash registers, retail ATM units, PIN pads and smart card readers, as well as integrated PIN and smart card solutions.

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Exante Lands a Former MasterCard/AmEx Exec

Connecticut-based UnitedHealth Group has hired Philip Philliou, former VP/Advanced Payments & Technologies at MasterCard and former director of strategy and marketing at American Express, as chief strategy officer for Exante Financial Services. In his new role, Philliou will direct strategy for one of the only financial services institutions in the country dedicated solely to the health care industry. UnitedHealth Group is a diversified health and well-being company and serves approximately 55 million individuals nationwide. Exante Financial Services is focused on enhancing the health and well-being industry for insurers by offering health savings accounts, card technology and a host of electronic solutions.

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Mega-Players to Dominate Banking by 2010

By 2010, the global banking scene may be dominated by less than a dozen mega-players that have the power to rapidly and dynamically deploy resources to shifting high-growth markets. The prediction comes from TowerGroup who also says that forces are now converging to bring long-discussed trends to fruition, where financial institutions are able to fully leverage the enterprise vision. Among other “mega-trends” identified by TowerGroup: a wide range of niche-focused players of varying sizes will thrive by specializing and providing superior customer value to captive or highly-targeted markets; regulatory compliance will become accepted as an inherent cost of doing business, and will be leveraged by successful financial institutions as an important means to gain and maintain customer trust; winners in the financial services industry will take advantage of precise predictive analytics and automated decision support tools to manage business more effectively and deliver higher customer value; and, IT spending across all financial services vertical sectors globally will reach $361 billion in 2005, and will grow to close to $450 billion by 2010.

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E-PAYMENT BEHAVIOR

Credit cards remain the most important e-payment method in Europe, but
its share of all online purchase transactions is declining, from 93.0%
in 2003 to 81.5% last year. On the other hand direct debiting
processes, especially the electronic direct debit in Germany, have
increased market share strongly from 6.5% in 2003 to 17.0% in 2004. A
new study to be released by Pago next week also shows that offline
payment methods (invoice purchases, cash on delivery and pre-payment)
still have only a single digit share, but, the online bank transfer, a
new payment method available to German consumers, has taken more than
0.5% of market share from scratch. Pago research also found that UK
consumers and those from Non-European countries continue to use credit
card payment for 100% of their transactions, but, credit card share for
consumers from the rest of Europe, excluding Germany and the UK, amounts
to 88.6%. Pago says it is proving difficult for the credit card to
really conquer the German consumer: only 28.7% of transactions were made
using a credit card versus 35.0% in 2003 while electronic direct debit
has grown from 56.7% in 2003 to 64.0% last year. The research was based
on an analysis of 20 million purchase transactions processed through the
Pago platform. Pago is a Deutsche Bank and Beisheim Holding Schweiz company.

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