Standard Chartered Buys Korea First Bank

Standard Chartered has signed an agreement to acquire Korea First Bank for approximately US$3.3 billion in cash. Korea First Bank will also represent approximately 22% of Standard Chartered’s assets post acquisition, using pro forma data as at 30 June 2004, making it Standard Chartered’s second largest market, by assets, after Hong Kong.
Korea First Bank is the seventh largest banking group in Korea by
assets, with a market share of approximately 6% and over 3 million
retail customers. Korea First Bank has a strong track record of credit
quality with one of the lowest ratios of non-performing loans. The deal is expected to be completed by the end of April.

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A-P Consumer Confidence Mostly Optimistic

The latest “MasterIndex of Consumer Confidence” survey has found that 9 of 13 Asia/Pacific markets had an optimistic outlook, compared to 11 in the preceding survey conducted six-months ago. The bi-yearly MasterCard survey reveals that, overall, consumer confidence in Asia/Pacific withstood the tumultuous 2003-2004 period despite the series of external shocks of SARS, Iraq War, avian flu, and the spiking of the world price of oil. In the latest survey, Indonesia, Vietnam and China topped the list of markets with a highly positive outlook; other optimistic markets included Hong Kong, Malaysia, New Zealand, Australia, Thailand and Singapore. Markets with a pessimistic outlook over the next six months are Korea, the Philippines and Japan. Indonesia took the lead from Vietnam and tops the region with a near record high consumer confidence of 94.7. Consumer optimism in Vietnam looks set to prevail, with a “MasterIndex” score of 90.8 remaining relatively unchanged from six months ago (91.6) and a year ago (91.0). China (81.3) remains highly optimistic for the next six months, with the latest “MasterIndex” improving from six months ago (78.9). Over the “MasterIndex” score for the region was 63.2 compared to 65.8 in the last six-month period and compared to 68.4 one-year ago.

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Metris Licenses Katz Call Center Technology

Metris Companies has licensed financial services call processing from Ronald Katz Technology Licensing. These services, including customer service provided to consumer and business accounts, are delivered through automated systems as well as the combination of automated systems and live agents. Other terms of the license were not disclosed. Metris Companies Inc. (NYSE: MXT), based in Minnetonka, Minn., is one of the largest bankcard issuers in the United States.

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Internet is a Separate Channel, nor Business

A new research report has found that there are as many active cardholders online now as there were active online banking users in 2002. Celent Communications says its study shows that most card issuers have not put significant effort into their online cardholder services and it is evident in relatively low adoption. However, card issuers that have excelled in online sales and services have treated the Internet as a separate channel rather than a separate business. Moreover, they have leveraged it not just as a passive channel but also as a proactive marketing channel. They have discovered that at numerous points along a customer’s life cycle-from the information-intensive customer attraction and acquisition phases to the customer service phase-the Internet channel not only improves results but also lowers cost. By building better online sales and service, issuers are finding-as did their counterparts in the retail bank-that more customers will come and that active online customer rates over 30% percent are achievable.

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Banks Miss Online Card Cross-Sell Opportunities

Online banking and bill payment have become a leading driver influencing consumers’ selection of banks and their perception of bank brands. According to the Keynote Systems’ study, National City, Washington Mutual and Bank of America were the banking sites providing the best online customer experience. More than 56% of consumers in the study said online banking and bill payment services were a very important factor in choosing a bank; ahead of considerations such as the physical location of bank branches (45%) and ATMs (52%). Keynote says that despite the growth and improvements in online banking, most banks have failed to use the online channel successfully to cross sell or grow their wallet share with their customer base. Often, an institution’s banking services, credit card offerings and other services will be messaged on the homepage, and are not easily accessible when a customer is logged into their banking account. Customers express the most interest in credit cards (38%), savings accounts (21%) and mortgages (21%) offered by their banks.

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PSCU Financial Services Renews Two Large CUs

PSCU Financial Services announced that Pentagon FCU and MN-based Wings Financial FCU have signed contract extensions for credit card support programs. Pentagon FCU extended their contract for CreditAbility(TM) and DebitAdvantage(TM) programs through 2009. CreditAbility provides flexible credit card processing and servicing for the credit union’s 240,000 credit cardholders, while the DebitAdvantage program supports more than 91,000 offline debit cardholders. PSCU Financial Services is the nation’s largest Credit Union Service Organization (CUSO). As a non-profit cooperative, the company is owned by more than 500 member credit unions nationwide, representing more than 8 million cardholder accounts and 200,000 online bill payment subscribers.

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Penalty Fee Income Rises 26.5% in 04

U.S. credit card issuers produced an estimated $50.8 billion in fee income last year, an 18% increase over 2003. Penalty fee income for last year is expected to hit $14.8 billion, while the largest category of fee income, interchange income, should come in around $25.4 billion. According to R.K. Hammer Investment Bankers, other fee income for 2004 will include cash advance fee income of $6.1 billion, annual fee income of $3.5 billion, and fee income from enhancements of $1.0 billion. Hammer estimates interest income for 2004 to be $85.5 billion. He says that total income (including interest and all fees) will produce a 17.50% ROA in 2004, or $136.3 billion for the year, before expenses. Based on the Hammer analysis, fee income rose 2.5 times faster than interest income in 2004.

BANK CREDIT CARD FEE INCOME
($ billions)
2003 2004 CHANGE
Interchange: 21.6 25.4 +17.6%
Penalties: 11.7 14.8 +26.5%
Cash Advance: 5.6 6.1 + 8.9%
Annual: 3.4 3.5 + 2.9%
Enhancements: 0.9 1.0 +11.1%
TOTAL: 43.1 50.8 +17.9%
Source: R.K. Hammer Investment Bankers

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Computer Services Forms a Surcharge-Free Alliance

KY-based Computer Services has formed an alliance with its community bank clients to provide customers with access to surcharge-free ATMs. Banks do not have to be customers of CSI to join. This group of community banks is using the alliance as a “strength in numbers” approach to their big bank competitors. Although some CSI customers own dozens of ATMs, the average across the CSI customer base is significantly less than the thousands of ATM locations offered by the big banks. Computer Services, Inc. (CSI) provides service and software solutions for community banks.

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Credit Union Card Loans Up 12.5% in Q4

Credit unions, with credit card loans between $33 million and $104 million, posted an average 12.5% increase in outstandings during the fourth quarter, compared to one-year ago. However, the number of active accounts was flat year-over-year, with some credit unions reporting a 4% to 5% decline. According to CardData’s quarterly survey, gross dollar volume increased 9.8% in the fourth quarter for credit unions. Max FCU in Alabama reported a 19% jump in outstandings, and a 9% increase in active accounts. Alliant CU, formerly United Airlines CU, posted a 17% increase in outstandings, but actives slipped more than 5%. Randolph Brooks FCU, the largest credit union in the peer group, posted a 9.5% gain in outstandings. For complete details on fourth quarter performance visit CardData ([www.carddata.com][1]).

4Q/04 CREDIT UNION PERFORMANCE
ISSUER OUTS VOL ACTIVES
Randolph Brooks FCU + 9.5% +10.8% +1.9%
Alliant CU +16.6% +11.1% -5.2%
Anheuser-Busch Emp CU +13.2% +14.2% +2.3%
Max FCU +18.9% + 3.7% +9.0%
Sikorsky CU + 6.5% + 2.3% -4.5%
Group Average +12.5% + 9.8% +0.3%
Source: CardData (www.carddata.com)

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

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CMS Endorses Peppercoin Micropayments

Micropayments specialist, Peppercoin, got a big push today as Chase Merchant Services agreed to recommend the small-dollar transaction service. The “Peppercoin Small Transaction Suite” provides a transparent and scalable interface that easily integrates into existing payments networks. Peppercoin accepts preferred credit and debit cards and complies with the rules and regulations of the credit card associations to securely support a variety of business models. The Company targets digital, mobile and physical POS merchants with its service.

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MasterCard Tackles Tsunami Phishing

MasterCard and NameProtect have found 133 potential tsunami-related phishing sites that the federal law enforcement agencies are now investigating. Both companies are volunteering their services to help stop scam artists from stealing tsunami donations. In June 2004, MasterCard and NameProtect united to aggressively combat illegal online activities such as phishing, identity theft schemes and the brokering of illegally obtained credit card numbers in the online environment. The partnership calls for the companies to work together to identify sites established solely to steal personal information and then squash illegal activity before people’s accounts and information are compromised.

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Payment Rate Rebounds in November by 3%

After dipping sharply in October, monthly payment rates on asset-backed credit card bonds rebounded nicely in November. Payment rates, the amount that cardholders pay toward outstandings each month, set an all-time high in August, and remain more than 180 basis points above year ago levels. According to FitchRatings, the monthly payment rate for November among prime issuers was 17.09%, compared to 16.67% in the prior month, and 15.27% one-year ago. Moody’s reported this week that the monthly payment rate for November was 16.41% compared 14.63% one-year ago. Standard & Poor’s reported last month, that October’s MPR was 17.1%, compared to 16.9% for October 2003.

MONTHLY PAYMENT RATES
(Prime Credit Card-Backed ABS)
Nov 03: 15.27%
Jun 04: 17.28%
Jul 04: 17.33%
Aug 04: 17.56%
Sep 04: 17.22%
Oct 04: 16.67%
Nov 04: 17.09%
Source: FitchRatings

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