UK Card Yields Decline as Interest Rates Rise

Delinquency and charge-offs for credit card-backed securities, during the second quarter in the UK, remained steady sequentially, but are noticeably higher than one-year ago. Yields have steadily declined over the past twelve months as interest rates have edged up, and the monthly payment has headed north. Delinquency (60-180 days) ticked upward to 2.60% in the second quarter, compared to 2.50% in the first quarter of 2004, and in the second quarter of last year. According to FitchRatings, charge-offs remained at 4.40% for the first two quarters of this year, but are significantly higher than 2Q/03’s 4.00%. Yield dropped to 18.17% in the second quarter, compared to 19.18% in the previous quarter, and 20.10% one-year ago. The monthly payment rate increased to 17.88% in the second quarter, compared to 17.50% one-year ago,and 17.30% in the first quarter of this year. For the Royal Bank of Scotland yield decreased during the second quarter, falling to 17.2% in June from 18.9% in the previous quarter. MBNA’s yield stayed stable around 20.5% but delinquencies increased to 3.0% and charge-offs rose to 4.1%. For Egg, delinquencies and charge-offs were slightly higher during the second quarter than in the beginning of the year. Capital One’s yield remained steady above the 22% level for the second quarter, the highest level for UK ABS. Capital One’s delinquency and charge-off rates fell to 3.1% and 4.9% from 3.4% and 5.3%, respectively, between the first and second quarters of this year.

UK ABS CARD METRICS
Charge-Offs Delinquency Yield MPR
2Q/03: 4.00% 2.50% 20.10% 17.50%
3Q/03: 3.90% 2.20% 18.30% 16.50%
4Q/03: 3.90% 2.20% 18.50% 17.40%
1Q/04: 4.40% 2.50% 19.18% 17.30%
2Q/04: 4.40% 2.60% 18.17% 17.88%
MPR-monthly payment rate
SOURCE: FitchRatings

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MasterCard’s PayPass Takes Off for Atmel and OTI

Atmel and On Track Innovations have received the first commercial quantity orders of contactless microprocessors developed for the MasterCard “PayPass” contactless payment program. PayPass will provide a simpler way to pay for small transactions when speed and customer flow are essential. In addition to the card’s magnetic stripe, the PayPass contains a secure contactless microprocessor chip and antenna.

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NOVA and EuroConex Technologies Expand in Europe

SEB Kort AB and Europay Norge AS have signed a definitive agreement for the sale of their merchant acquiring business to a Norway-based affiliate of NOVA Information Systems. EuroConex Technologies will manage the processing services for all new and existing merchant customers, and will market merchant services under the euroConex brand. SEB Kort’s portfolio in Euroline Norge (owned by Europay Norge) consists of more than 45,000 points of sale for MasterCard and VISA in Norway. Europay Norge established its financial services in 1972, and the acquiring business was renamed Euroline after it was purchased by SEB Kort AB in 2003. Europay Norge currently has approx. 50 percent market share of the international card market (merchant volume) in Norway. In 2003 the overall acquiring market in Norway amounted to NOK 42 billion (Euro 5 billion) distributed over 93 million transactions, and the use of cards is increasing steadily.

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Diebold’s Opteva ATMs Invade Australia

Australia’s largest building society, Heritage, announced a $1.2 million refurbishment of its fleet of ATMs that includes the first-ever use of digital surveillance cameras by an Australian building society. Forty-seven new Diebold “Opteva” ATMs will be deployed throughout Heritage’s network of branches and mini branches, bringing the total number of devices in the Heritage ATM network to 82. Ten of these units will be installed in new sites. The advanced “Opteva” terminals are being deployed with digital surveillance cameras, alarms, consumer awareness mirrors and many exclusive security enhancements designed to deter such criminal activity as card-skimming, in which personal information is duplicated from transaction cards.

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Citibank and Shell Ramp Up MasterCard Marketing

Citibank mailed out a high octane offer, enticing consumers for its “Shell MasterCard” with $50 in Shell gift cards just for applying and making a balance transfer. Cardholders also receive an ongoing 5% cash rebate on Shell purchases and a 1% rebate on all other purchases. In the direct mail piece captured by CardWatch(R) ([cardwatch.com][1]), Citibank is offering two $25 Shell gift cards to applicants who apply by August 31st. The first $25 gift card is activated within three days of applying over the phone. The second $25 gift is activated if you request to make a $1,000 balance transfer during the application call. The cards can be used for any type of purchase at Shell stations including food. The “Shell MasterCard” carries a 10.49% variable interest rate, and a $20 annual fee. The annual fee is waived for the first year and is waived in subsequent years if the cardholder makes at least nine Shell transactions per year.

[1]: http://cardwatch.com

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PayPal Signs One Link 4 Travel

One Link 4 Travel has linked up with PayPal to provide the payment mechanism for its integrated booking and settlement service for the global travel industry. One Link 4 Travel offers the travel industry the first integrated booking and financial settlement service for non-air products. PayPal will provide the global banking infrastructure to assure prompt and low-cost settlement of transactions.

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MBNA’s International Cards Soften in Q2

MBNA’s international credit card portfolio has grown approximately 17% over the past twelve months to $15.9 billion, slowing down as the U.S. dollar strengthens and the Canadian market weakens. Account acquisition also slowed, as MBNA added 550,000 new international accounts during the second quarter, compared with 720,000 new accounts for same period one-year ago. MBNA’s total managed foreign loans were $22.0 billion for 2Q/04, the same as the prior quarter but up 24% compared to 2Q/03’s $17.7 billion. Currency fluctuations decreased second quarter foreign loans by $350 million while first quarter foreign loans were boosted by $380 million. In Europe, total managed loans grew 28% year-on-year reaching $18.6 billion. Approximately 420,000 new accounts were added during the second quarter in Europe. In Canada, total managed loans grew 6% to reach $3.4 billion. Approximately 140,000 new accounts were added during the second quarter in Canada. MBNA signed several new foreign affinity agreements during the second quarter including Arsenal Football Club, (U. K.), Reader?s Digest Canada, and Halfords (U. K.). Among foreign affinity agreements renewing during 2Q/04 were PGA (U. K.), Bradford & Bingley (U. K.), and, Golf Digest (Canada). Globally, MBNA signed more than 50 new affinity agreements and renewed more than 350 during the second quarter. For complete details on MBNA’s international growth visit CardData ([www.carddata.com][1]).

MBNA INTERNATIONAL SNAPSHOT
2Q/04 1Q/04 2Q/03
U.S. Card Loans: $83.5b $82.9b $80.8b
Non-U.S. Card Loans: $15.9b $16.2b $13.5b
Total Card Loans: $99.4b $99.1b $94.3b*
* 2Q/03 loans adjusted for commercial cards
Source: CardData (www.carddata.com)

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

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UK Issuers Launch a Memory Campaign for Chip & PIN

The UK’s “Chip and PIN” program has introduced its campaign to help people memorize their PINs. Most consumers have no trouble forgetting their pinch but for those who do struggle with their four-digit PINs, a guide featuring hints, tips and memory tricks is now available from the chip and PIN Web site. Recent research reveals that Brits find remembering people and important days more difficult than remembering PINs, with 43.8% struggling with names, 36.7% with birthdays and anniversaries, and 28.7% with PINs and code numbers. More than two in five UK cardholders has been issued a “chip and PIN” card by the end of May. The card requires a PIN for debit and credit transactions. When a similar system was introduced in France, card fraud fell by 80%.

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