OCC Criticizes Credit Card Marketing Practices

The Acting Comptroller of the Currency said yesterday that certain credit card marketing practices are unacceptable because of the compliance, legal and reputation risks they present. Julie Williams said that even though these practices may not be prohibited – or even addressed – by “Reg Z,” the OCC believes they are not consistent with sound banking practices. She asked her audience at the Women in Housing and Finance and The Exchequer Club if they “have been dazed by the detail and fine print of a credit card agreement?” She also asked “How many could tell her under what circumstances their credit card company is allowed to change their rate and what their options are if that happens?” Williams also took on consumer advocacy groups for not berating the OCC to do consumer testing to find out what consumers really want and think is important in disclosure.

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Peppercoin Completes VISA/MC Security Compliance

The “Peppercoin Small Transaction Suite” has become the first small payments solution to receive “Visa CISP” and “MasterCard SDP” certification. With the business model flexibility offered by Peppercoin’s Small Transaction Suite, merchants will increase revenue and profits via small payments in the digital, mobile and physical point-of-sale markets. As a result, Peppercoin will drive significant additional volume over the existing payments network. Peppercoin enables profitable new business models for low-priced digital content and physical goods. Ambiron provides data security and compliance services to businesses in the financial services vertical.

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The Discover and PULSE Merger Completed

Discover Financial Services and PULSE EFT Association have completed their merger following approval by PULSE’s financial institution members. The merger joins PULSE(R) and its 4,100 member banks, credit unions and savings institutions with Discover(R) Network and its 4 million merchant and cash access locations to create a new competitor in the electronic payments field. Discover Financial Services, a business unit of Morgan Stanley, operates the Discover Card and the Discover Network for its more than 50 million Cardmembers. PULSE is one of the nation’s leading ATM/debit networks currently serving more than 4,100 banks, credit unions and savings institutions across the country.

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Card Use at Vending Machines Provides a 76% Lift

An analysis of more than one million purchases made at vending machines shows the average purchase was $1.87 when a credit or debit card was used, compared with $1.06 for a cash purchase at the same machine. PA-based USA Technologies conducted the survey of vending machines using its “e-Port” technology. On 450,000 occasions, consumers preferred to use their credit and debit cards when making purchases from vending machines, and they made many more multi-purchases for example, buying an average 1.75 20 oz beverages with every swipe of their card. USTT says that one hotel in Phoenix reported that average transactions had also risen from $1.32 to $3.39, with 75% of all vends being multi vends. The market analysis of USA Technologies showed that the combination of cashless transaction capability and the associated data visibility to improve operations, increased sales by 140% through vending machines located in Regal cinemas, representing 30% of all sales, and by 79%, or one-third of all transactions, at a Paramount amusement park in 2004.

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DuoCash Names a New CEO

FL-based DuoCash has named Albert Case, former SVP at Gartner, as its CEO. Case, a 30-year veteran of the information technology industry, has held numerous senior positions including division president and senior vice president of Gartner, Inc., the global IT consulting and advisory service firm based in Connecticut, president and managing director of Stamford Research, and has held senior executive positions with Ryder System, Inc., HSBC Bank, M&T Bank, Nastec Corporation and Transform Logic, Inc. DuoCash is a unique merchant network that allows consumers to use prepaid cards (such as DuoCash branded prepaid phone cards and gift cards) to buy products, services and subscriptions on the Internet.

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GO Software Upgrades its RiTA Server

GA-based GO Software has released “RiTA Server 3.0,” which features new support for “Purchasing Card Level III” transactions on both the FDMS and Vital processing networks. Processing line item detail enables merchants, particularly in business-to-business environments, to provide added value to their business customers. GO Software, a subsidiary of Return On Investment Corporation (OTCBB: ROIE), is a leading provider of point-of-sale (POS) payment processing software. More than 150,000 businesses use GO Software’s solutions to process payments at high speed, expand their tender types, and lower credit card costs.

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OPTILE Signs a Major ASCOM Contactless Deal

The transport companies of Outer Paris, grouped together under the association “OPTILE” have selected ASCOM to equip over 3,600 vehicles. The solution proposed by ASCOM will enable all the residents of Ile de France to use the contactless ticketing cards already in use at the RATP and the SNCF. Totally, ASCOM will install over 10,000 devices (validators, consoles, portable card reader-decoder) on 1,000 lines and 3,600 vehicles. The “OPTILE” transport operators include Connex, Keolis and Transdev.

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Asta Funding Hires a National Sales Manager

NJ-based Asta Funding has hired collections expert Nan Beilinson as National Sales Manager. Ms. Beilinson has 25 years of diversified experience in the financial services sector. Most recently, Ms. Beilinson was part of the sales team for one of the largest collection agencies in the U.S. Prior to that position, Ms. Beilinson was part of the collection and recovery team in the credit card businesses for Manufacturers Hanover Trust and Chemical Bank for 15 years. Asta Funding, Inc., is a leading consumer receivables asset management company that specializes in the purchase, liquidation and management of performing and non-performing consumer receivables.

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National City’s 4Q/04 Volume Up 6% Y/Y

Despite erosion in outstandings and in the number of active accounts and cardholders, OH-based National City posted a 6% gain in gross dollar volume, year-over-year, in the fourth quarter. The issuer added more than 20,000 accounts during 2004. For the fourth quarter, the issuer posted outstandings of $2.52 billion, compared to $2.56 billion one-year ago. Annual gross dollar volume increased to $5.703 billion, compared to $5.373 billion for 2003. The number of accounts hit 1,881,059 for 4Q/04. But, active accounts dipped to 1,118,145 from 1,143,036 one-year ago. The total number of cardholders also slipped to 1,410,064 from 1,434,964 in 4Q/03. For complete details on National City’s performance visit CardData ([www.carddata.com][1]).

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

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Federated to Use ReD’s ebitGuard for CNP

Federated Department Stores is deploying Retail Decisions’ “ebitGuard” risk management service to prevent online fraud in the “Card Not Present” sector. The Federated account comes on the back of other recent client wins for ReD that include The Finish Line, Inc., T-Mobile and Odimo, Inc. Other blue- chip ReD clients also include Walmart.com, Travelocity, GSI Commerce, RealNetworks and Register.com. Retail Decisions is an international electronic payment transaction services business that provides fraud prevention, enterprise-wide payment processing and value-added transaction and consulting services to the retail, finance, telecommunications and e-commerce sectors.

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Fee Income Surpasses 37% of Total Revenues

Issuer revenues derived from cardholder fees and interchange fees now comprise a record 37.3% of the total revenue stream, excluding fees from securitizations. Ten years ago, fee income represented 17.3% of total revenue, during a period when annual fees were fairly common. The significant rise in late payment fees, over-limit fees, and cash advance fees, coupled with new fees such as balance transfer fees, foreign currency exchange surcharges, and expedited payment fees have driven the overall increase. Since 1994, average late payment fees increased from $12.52 to $32.58. Average over-limit fees increased from $12.74 to $30.31 between 1994 and 2004. Total revenues last year topped $136 billion with nearly $51 billion flowing from cardholder and merchant fees. CA-based R.K. Hammer investment bankers estimated penalty fee income of $14.8 billion, cash advance fee income of $6.1 billion, annual fees income of $3.5 billion, and fee income from enhancements of $1.0 billion for 2004. Overall, penalty fee income increased more than 26% last year.

FEE INCOME AS A PERCENTAGE OF TOTAL REVENUE
1994: 17.3%
1995: 16.4%
1996: 16.1%
1997: 21.8%
1998: 24.5%
1999: 26.2%
2000: 27.9%
2001: 29.3%
2002: 32.8%
2003: 33.4%
2004: 37.3%

Note: Fee income includes merchant and cardholders fees but does not include fees from securitization. Ratio is calculated by dividing credit card fee income for the industry by the sum of the credit card interest income for the industry and the total credit card fee income. Source: CardData ([www.carddata.com][1])

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

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