Charge-Offs and Delinquency Slip Up-Stay Low

Charge-offs and delinquency, among credit card-backed securities, edged upward in October, compared to September but remain comfortably lower than one-year ago. Meanwhile, monthly payment rates tapered off a bit as the yield jumped 100 basis points to 18.00%, compared to the previous month. According to Standard & Poor’s “Credit Card Quality Index,” charge-offs rose to 6.4% in October, compared to 5.9% in September, and 6.9% on October 2003. Delinquency increased to 4.5% during October, compared to 4.4% in September, and 5.2% one-year ago. The monthly payment rate slipped to 17.1% in October, compared to 17.3% in September, and 16.9% for October 2003. Yield rose to 18.0% in October, compared to 17.0% in September, and 17.6% one-year ago.

CARD ABS PERFORMANCE
Oct 01 Oct 02 Oct 03 Oct 04
Delinquency 5.2% 5.5% 5.2% 4.5%
Charge-Offs 6.8% 6.9% 6.9% 6.4%
Payment Rate 16.2% 16.3% 16.9% 17.1%
Yield 19.9% 18.7% 17.6% 18.0%
Source: Standard & Poor’s Credit Card Quality Index

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Rising Debt May Create Long-Term Problems

Total borrowing by British households continues to grow at
annual rate of 15%, raising household debt to 140% of aggregate income. The Bank of England says this is above the levels in the United States and most large European countries. According to the latest “Financial Stability Report,” unsecured borrowing by individuals, especially credit cards, may create “heightened long-term vulnerabilities.” The report found that 40% of mortgage holders agreed with the statement, “My house value has risen so much that I do not worry about other debts I may have.” The BOE cautioned that financing difficulties would be exacerbated if any fall in house prices were accompanied by a wider economic slowdown. Looking forward, the BOE says banks face a number of risk management challenges. One is managing the transition to the new personal insolvency law regime, which could have a long-lasting effect if it changes debtor behavior and thus the sensitivity of write-offs to adverse macroeconomic shocks. Another is managing the implications of the strong growth in unsecured lending over the past five years, especially where this has occurred through lending to new customers for whom the bank has no past current account information with which to supplement a credit assessment. Lending to customers with multiple borrowing relationships may also pose a challenge when the bank does not have complete information about the evolution of a customer ‘s total indebtedness over time.

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Cash Systems Signs a New Torguson Contract

MN-based Cash Systems announced a new, corporate contract with Torguson Gaming Group to provide check cashing, ATM and credit and debit card cash advance services at the Bacaran Bay Casino Resort located in Biloxi, Mississippi. The casino and resort is expected to have 1800 slot machines and 75,000 square feet of convention space. Cash Systems, Inc., located in Minneapolis and Las Vegas, is a provider of cash access and related services to the retail and gaming industries. Cash Systems’ products include its proprietary cash advance systems, ATMs and check cashing solutions.

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Washington Post Uses Paymetric Card Solution

Houston-based Paymetric is providing its SAP-integrated payment card solution to The Washington Post, its 100th client. The XiPay solution from Paymetric integrates credit card acceptance with native SAP workflows and infrastructure, streamlining sales and customer service. Businesses prefer to buy from firms that help them conduct business efficiently and accurately. Paymetric is the market leader in Enterprise Payment solutions with specific focus on SAP payment processing.

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MasterCard Holiday Transactions Up Nearly 10%

Card activity for the third holiday shopping weekend rose nearly 8% compared to one-year ago, however the growth rate was about half the pace of the previous weekend. On average, the number of payment card transactions over the first three shopping weekends of this year is up 10.8%, compared to last year. MasterCard says its cumulative growth in global transactions for the season, to-date, is 9.8%. For the weekend of December 10-11, MasterCard processed 67.7 million authorizations over its “Banknet” network, as compared to 62.8 million for the same period in 2003. Through December 11, MasterCard processed 483.1 million transactions, as compared to 439.9 million at this same time in 2003. On “Black Friday” MasterCard processed over 35.1 million transactions, a 10.1% growth over the 31.8 million authorization transactions it handled on the same day in 2003.

MASTERCARD TRANSACTIONS
Holiday Weekend Transactions Growth
Nov 26-27 64.2 million +9.3%
Dec 3-4 64.6 million +15.8%
Dec 10-11 67.7 million +7.8%
TOTAL 196.5 million +10.8%
Source: MasterCard International

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Personal Debt Growth May Undermine UK Lenders

The Bank of England released its semi-annual “Financial Stability Report which says unsecured borrowing by individuals, especially credit cards, may create “heightened long-term vulnerabilities.” The BOE noted that total borrowing by British households continues to grow at annual rate of 15%, raising household debt to 140% of aggregate income. The BOE says this is above the levels in the USA and most large European countries. The report also found that 40% of mortgage holders agreed with the statement, “My house value has risen so much that I do not worry about other debts I may have.” The BOE cautioned that financing difficulties would be exacerbated if any fall in house prices were accompanied by a wider economic slowdown. Looking forward, the BOE says banks face a number of risk management challenges, especially those related to new bankruptcy laws.

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Sterling Jewelers Installs RealPOS Terminals

Sterling Jewelers, the world’s largest specialty retail jeweler, has installed NCR “RealPOS” POS terminals in all of its 1,141 U.S. locations. Sterling Jewelers Inc., which operates Kay Jewelers, Jared The Galleria Of Jewelry and a number of well-established regional names, recently completed installation of the new terminals that began in July 2004. NCR Corporation is a leading global technology company helping businesses build stronger relationships with their customers.

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Metavante Processes the Clout Mini VISA Card

Clout Financial Services is piloting VISA mini cards with Metavante providing account processing, card personalization and fulfillment services, as well as underwriting, compliance, customer service, collections, handling of disputes, chargebacks and fraud monitoring services. The Clout Visa mini card is an innovative payment tool, about half the size (1.5″ X 2.5″) of a regular credit card, and is being offered as a companion to full-sized credit cards. Clout is a financial services company dedicated to providing access to a wide array of financial products to career minded students and young professionals. Metavante Corporation delivers banking and payment technologies to financial services firms and businesses worldwide.

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Rewards Network Launches an Online Marketplace

Chicago-based Rewards Network has teamed with Allegiance Marketing Resources to launch a new “Shopping and Services Program.” Rewards Network members can now earn extra rewards when purchasing merchandise at retailers like Target, Brookstone, Dell and Best Buy. Members must use their registered credit card to earn “Cashback Rewards” while shopping. Rewards Network has 3.7 million active members, over 10,600 restaurants and more than 11,100 hotels participating in its rewards programs.

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TowerGroup Expands its Global Consulting Practice

TowerGroup has expanded the capabilities of its Global Consulting practice. Sam Radwan, a former PwC, IBM and Accenture senior leader who has spent his entire career serving the financial services industry, has joined TowerGroup as the new head of Global Consulting. Also, Tim Sharman has been named the new head of Banking & Payments for TowerGroup Consulting. TowerGroup’s Banking and Payments team says that next year promises to be the year when banking and payments industry participants will start to realize the objective of creating the flexible, diversified and responsive enterprise that customers demand. Beyond the challenges of regulatory compliance and merger integration, bankers will be completing past investments and introducing early-stage enterprise rollouts that together will drive organic growth and increased efficiency.

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Fraudulent TX Liability Shifts on Jan 1st

U.K. businesses that accept card payments are reminded that a liability shift comes into force on January 1st. After this date, fraudulent transactions on “chip and PIN” cards at the point-of-sale that could have been prevented using “chip and PIN” technology will become the responsibility of the outlet where the fraud took
place. Banks will no longer pick up the loss. There is no change at all
in liability for cardholders.

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