Diebold & FDC to Certify IFX for ATMs

Diebold and First Data announced they are certifying their new “Interactive Financial eXchange” for ATMs. IFX is an XML-based message protocol, which can become the communication standard across a financial institution’s delivery channels. Because IFX fosters interoperability among banking systems, it’s capable of providing another layer of openness within the realm of financial service solutions. First Data also offers a variety of payment services to businesses around the world. Diebold, Incorporated is a global leader in providing integrated self- service delivery systems, security and services.

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EIPP is Poised for Explosive Growth

A new study has found that two out of every three companies with annual revenues exceeding $500 million now use some form of “Electronic Invoicing Presentment and Payment” system. The “B2B Spend Management Survey,” jointly sponsored by MasterCard and Ariba, also found that 66% of respondents currently use some form of EIPP; 62% rely on such technology to make electronic payments to suppliers; and, 35% use the technology to receive payments from customers. More than half the respondents cited the reduced processing time and resulting lower costs as the primary benefits of using EIPP. The research revealed th at despite the growing utilization and popularity of EIPP, barriers to its adoption still persist. Survey respondents cited cost (25%), complexity (22%), and aversion to making changes to their IT systems (19%) as the top reasons for not deploying an EIPP system. Nevertheless, MasterCard believes eight out of 10 respondents from companies that don’t currently have EIPP are planning to implement it within the next two years.

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Debit Volume Up 19%; Transactions Soften

Gross dollar volume for off-line or signature debit cards during the second quarter continued to grow at a 19% annual rate. However, the growth in purchase volume slowed a bit to 20%, compared to 22% in the prior quarter, and the gain in the number of total transactions slipped from 19% to 17%. The number of signature debit accounts and cards maintained an annual growth rate of 11%-12%. During the second quarter, VISA and MasterCard processed $113.7 billion in purchase volume, compared to $95.0 billion one-year ago. Gross transactions for the second quarter increased 17% to 3.4 billion. Overall, gross dollar volume increased 19% to $170.0 billion. At the end of the second quarter, there were 207.6 million VISA- and MasterCard- branded signature debit cards in circulation in the USA, linked to 165.4 million accounts, according to CardData. Based on gross dollar volume, VISA’s share of the off-line debit card market is a solid 80%. For complete current and historical statistics on the U.S. debit card market visit CardData ([www.carddata.com][1]).

U.S. SIGNATURE DEBIT SNAPSHOT
2Q/03 2Q/04 Y/Y CHANGE
Gross Volume $142.7b $170.0b +19%
Purchase Volume $ 95.0b $113.7b +20%
Gross Transactions 2.97b 3.46b +17%
Total Accounts 148.0mm 165.4mm +12%
Total Cards 186.9mm 207.6mm +11%
Source: CardData (www.carddata.com)

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

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More Rate Hikes Likely Before Year End

As expected, the Fed yesterday afternoon raised the federal funds rate by 25 basis points to 1.5% and the the discount rate by 25 basis points to 2.5%, prompting many card issuers this morning to raise their prime rate to 4.50%. While many analysts previously believed further rate increases will be held at bay until after the presidential election, the Feds indicated more rate increases may be on the way before year’s end. The FOMC statement said “inflation has been somewhat elevated this year” and the “economy appears poised to resume a stronger pace of expansion going forward.” The likelihood of further rate hikes this year may force many issuers to abandon fixed rate cards in favor of variable rate pricing before or during the fourth quarter.

AUGUST RATE HISTORICAL
Prime Rate Card Rate
1992: 6.00% 18.04%
1994: 7.25% 17.22%
1996: 8.25% 16.35%
1998: 8.50% 16.76%
2000: 9.50% 17.66%
2002: 4.75% 15.02%
2004: 4.50% 15.57%
Source: CardData (www.carddata.com)

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CO-OP Network Signs NC-based Coastal FCU

CA-based CO-OP Network has signed one of the largest credit unions in the Southeast to provide full ATM, PIN POS and signature debit processing services. Under the agreement, CO-OP Network will provide full ATM, PIN POS and signature debit processing for Coastal FCU, providing its membership with surcharge-free access to 375 CO-OP Network ATMs throughout the Tar Heel state and more than 19,000 nationwide. CO-OP Network (www.co-opnetwork.org), established in 1981 and located in Ontario, Calif., is wholly-owned by its credit union shareholders and provides volume discounts on products and services that include risk management as well as debit and deposit access.

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MBNA Switches From Quarterly to Monthly

A second major issuer has tweaked its variable rate structure, enabling it to pass along future rate increases quickly to cardholders. This week, MBNA is notifying cardholders it is switching its variable rate structure, based on the prime rate, to monthly adjustments instead of quarterly adjustments. The change is effective with MBNA’s October statements. MBNA will now reset its rates using the WSJ prime rate published on the last day of the month. MBNA currently uses March 15th, June 15th, Sept 15th and Dec 15th as rate setting days, applying the rate after the closing date of the billing cycle. Effective August 1st, Bank One changed its index date, from the 22nd day of the month to two days prior to the closing date of the billing cycle. Among the top ten issuers only Capital One resets variable rates quarterly, however it predominately issues fixed rate cards.

VARIABLE RATE INDEX DATES
1. Citibank – Two days prior to the closing date of the billing cycle
2. MBNA – Last business day of the month.
3. Bank One – Two days prior to the closing date of the billing cycle
4. Chase – Last business day of the month
5. Discover – Last business day of the month
6. Capital One – March 25, June 25, Sept 25 and Dec 25: applies day after the closing date of the billing cycle
7. American Express – Higher of the 1st or the 20th of each month
8. Bank of America – Last business day of the month
9. Household Bank – Last business day of the month
10. Providian – 22nd day of each month
Source: CardWatch(R) ([www.cardwatch.com][1])

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

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InterCept Shareholder Settlement Approved

Atlanta-based InterCept has received final court approval on the previously announced settlement of the consolidated securities class action litigation filed against the company and several of its current and former officers. The shareholder class will receive a payment of $5.3 million, from which plaintiff’s counsel will be awarded attorney’s fees. InterCept will fund $3.95 million and its insurance carrier will fund $1.35 million of the settlement. Under the terms of the settlement, announced in February, the claims against InterCept and the individual defendants were dismissed without any admission of liability or wrongdoing. InterCept’s annual shareholders meeting is scheduled for September 14th. It is exploring strategic alternatives including a possible sale. (CF Library 2/19/04; 6/25/04)

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Bank One and United Reward Tuition Charges

Bank One and United Mileage Plus have expanded the “More Miles” program to award extra miles for using its co-branded VISA card to charge tuition. Between now and the end of this year, “VISA Mileage Plus” cardholders will earn two miles for every dollar spent exceeding $1,000 paid directly to schools. This includes tuition for colleges and universities, as well as public and private elementary and secondary schools, school bookstore purchases, season football tickets, school donations and more. Bank One and United also have a current promotion offering “extra credit” for purchases from special retailers through September 30th.

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CITI 2Q/04

Citigroup reported that its international cards business produced second quarter net income of $162 million, an increase of 49% over the year-ago quarter. During the quarter the issuer added a record 4.7 million net accounts to its open account base, outside North America, driven by a higher marketing investment. Charge volume for international credit cards was up 41%, to $12.7 billion for the second quarter. Total outstandings for international cards were $15.7 billion as of June 30th, a 29% gain over one year ago. In Japan, average credit card loans were flat sequentially, but up 20% over year ago figures. In the rest of Asia, credit card loans grew 30% to $8.2 billion. Citigroup holds $5.5 billion in card loans for the EMEA region and $500 million in Latin America, which grew 34% and 25%, respectively. Delinquency and charge-offs both decreased during the second quarter for international cards. Delinquency (90+ days) declined from 2.04% in 2Q/03 to 1.55% for 2Q/04. Delinquency was down 25 basis points compared to the prior quarter. Charge-offs declined from 4.60% in 2Q/03 to 3.25% for the second quarter. Charge-offs dropped 60 basis points from the first quarter of this year. Citigroup noted that its advertising and marketing expense for international cards was up 45% compared to the year ago quarter. Citi targeted Singapore, Turkey, Hong King, and Malaysia during the second quarter of 2004. For complete detail’s on Citigroup’s international cards performance visit CardData (www.carddata.com).

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RapidMoney Transfers to ScotiaCard

RapidMoney Corporation announced it will now make money transfers directly to a Mexican stored value card. Issued by Scotiabank Inverlat, the “ScotiaCard Mi Pago” enables recipients of RapidMoney transfers to withdraw funds from all the ATMs in Mexico and to make purchases without service charges at over 100,000 Mexican stores and restaurants. Senders of “RapidMoney” transfers in the USA request the “Scotiacard Mi Pago,” which is then delivered to the designated recipient in Mexico. Subsequent transfers automatically load the card and provide the transfer recipient continued access to Mexican ATMs, stores and restaurants.

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Merrick Bank Hits Second Quarter Milestones

CardWorks’ Merrick Bank subsidiary has topped $500 million in credit card outstandings for the second quarter, a 21% increase over 2Q/03. The sub-prime specialist also posted a 75% increase in volume with nearly $140 million in the second quarter. The issuer also crossed the 500,000 cardholder milestone during the second quarter. Merrick says the growth came from its ability to execute direct marketing plans and from some acquisitions. In 2002, Merrick Bank purchased a portion of the NextBank credit card portfolio from the FDIC. CardWorks is also the parent company of CMS, a third-party bankcard servicer that also provides servicing and support to Merrick Bank. For complete details on Merrick Bank’s second quarter performance visit CardData ([www.carddata.com][1])

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

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MasterCard Second Quarter Revenues Up 16%

MasterCard reported second quarter net income of $65.7 million compared to $32.3 million one-year ago. Revenues for the first quarter were up 16% to $647.3 million, compared to 2Q/03. Advertising and market development expenses for the quarter were up 17% at $285 million. Authorization, settlement, and switch revenues increased 12% to $31 million for the quarter. Assessments revenue grew $46 million, or 23% to $250 million for 2Q/04. For complete details on MasterCard’s second quarter results visit CardData ([www.carddata.com][1]).

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MasterCard Net Income Track Record
2Q/02: $36 million
3Q/02: $78 million
4Q/02: -$51 million
1Q/03: -$425 million
2Q/03: $32 million
3Q/03: $74 million
4Q/03: $67 million
1Q/04: $74 million
2Q/04: $66 million
Source: CardData (www.carddata.com)

[1]: http://www.carddata.com
[2]: /images/g/graphs/mcprofits2q04.jpg

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