CIBC to Drop its AmEx Card in the Fall

CIBC, Canada’s largest VISA issuer, is putting an end to “Entourage,” its co-branded venture with American Express, on October 31. CIBC says that “Entourage” failed to meet financial expectations. The company will instead refocus on its core VISA business. “Entourage” was introduced in January 2002, AmeEx’s first card-partnership in Canada, and made CIBC the first Canadian bank to issue both American Express and VISA. At the time, American Express referred to Canada as a “critically important credit card market” for the company. The venture had also been a milestone for American Express because CIBC was the first bank in either Canada or the U.S. to partner with the company for a co-branded card. Since then, however, MBNA has signed with American Express to offer co-branded cards in both countries, and that agreement awaits the Supreme Court’s decision on whether to uphold two lower courts’ nullification of VISA and MasterCard’s exclusionary rules. Under terms of the agreement between American Express and CIBC, CIBC issued the cards, held the accounts and handled all customer service functions. The company marketed three versions of the “Entourage” card. The “Entourage American Express Card” was Canada’s first smart chip credit card, offering consumers tighter security for online transactions; the “Entourage Platinum American Express” offered exclusive features for consumers; and the “Entourage Business American Express” offered features for the business card holder.

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Global Rewards for Consumers in the Works

Global Vision Holdings and BSP Rewards have signed an agreement to launch “Global Rewards,” a consumer purchases incentive program. BSP currently has enrolled more than 4,000 restaurants and chain restaurants as well as more than 400 merchants in the program. The merchants include department stores (such as Target and Macy’s), office supply stores (such as OfficeMax), drug stores (such as Eckerd), grocery stores, specialty stores, sporting goods stores and travel services providers. Under the terms of the agreement, GVHL will function as the mass-distribution marketer of the program and set up major channel distributors. GVHL is a developer and wholesale marketer of a new generation of prepaid (also known as “Stored-Value”) financial services.

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Thales and iBIZ Make 3D Secure In-House

Thales and iBIZ Software have partnered to launch a joint
product offering to help banks and financial services providers migrate
to the new “3D Secure” standard. Developed by VISA, then co-sponsored by
MasterCard and followed recently by JCB, “3D Secure” helps make the Internet a secure place to trade while also reducing charge-backs and increasing card usage. To date, most of these implementations were made
through outsourced services, at the expense of sharing vital customer
data with third parties and implementing complicated key management
schemes. The partnership between Thales and iBIZ allows financial
institutions to efficiently and cost-effectively implement this
protocol, making it possible for them to choose a more secure and
manageable in-house implementation.

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iBill Funder Mercator Invests into Penthouse

Mercator Advisory Group, which assisted Penthouse International in its acquisition of iBill, has made a $2.75 million private placement in Penthouse. Penthouse is using the net proceeds for investment purposes. Penthouse also issued three-year warrants to Mercator Advisory Group and its designated funds. Mercator Advisory Group, through its designated managed equity funds, specializes in direct equity investments in public companies.

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VASCO Revenues Climb 21% in the Second Quarter

VASCO Data Security International reported that revenues for the second quarter increased 21% to $7.2 million. Net increased 10% to $888,000. During the second quarter VASCO won 115 new customers with 244 year-to-date new customers including 33 new banks and 211 corporate customers. The Company also signed HSBC Brazil to use its “Digipass GO3.” VASCO also launched four new products: “VACMAN Middleware 2.2,” “Digipass 585,” “Digipass 850 Integration Toolkit for PKI” and “Digipass Plug-In for RACF. The Company says the third quarter is normally its weakest quarter due to vacations, but the company has a backlog of firm orders to be shipped in the third quarter of $5.6 million.

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PayPal Transactions Decline; Fees Flat Q-Q

eBay yesterday reported that gross payment volume for its PayPal business leveled off during the second quarter, up less than 1% compared to the prior quarter. In further signs of maturity, the number of quarterly transactions fell for the first time, and transaction fees were flat. One-year ago PayPal’s second quarter volume of $2.8 billion grew 8% sequentially. During the second quarter of this year, PayPal handled $4.35 billion of gross payment volume, a 53% increase over 2Q/03. PayPal produced $161.5 million in transaction fees for 2Q/04, a 59% jump over the year-ago quarter, but only a 0.2% increase over the first quarter of 2004. At the end of the second quarter, PayPal had 50.4 million accounts, compared to 31.1 million one year ago. During the second quarter, PayPal handled 77.2 million payments, a 2% decline over the prior quarter, but up 45% from 2Q/03. PayPal continued to capture 54% of eBay’s total $8.0 billion in total sales volume during the quarter. PayPal’s transaction revenue rate was 3.64%, compared to 3.50% one-year ago. The processing expenses rate for the second quarter was 1.34%, compared to 1.30% for 2Q/03. PayPal’s transaction loss rate came in at 25 basis points compared to 32 basis points one-year ago. For complete details on eBay/PayPal’s Second quarter performance visit CardData ([www.carddata.com][1])

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

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FTC Takes on a Group of Canadian Fraudsters

The FTC has charged a group of Canadian telemarketers with operating a bogus consumer protection service that promises to protect consumers against telemarketing and unauthorized bank activity, then perpetrates that very fraud. The FTC’s complaint against Montreal, Canada-based International Protection Center states that since at least February 2003, the defendants have telemarketed various bogus services, which they claim will protect consumers from fraud by blocking telemarketing calls and preventing unauthorized charges to consumers’ bank accounts. The defendants allegedly target elderly and infirm consumers, often claiming to represent banks or the U.S. government, including the FTC. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them.

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Cards Capture 10% of China’s Retail Purchases

Ireland-based Research and Markets has issued a new report that found that Chinese banks have issued over 140 million credit cards since 1985. R&M says the number of cards issued by Chinese banks has increased by 64% each year. The total sum of transactions has increased by 76% per year, and the number of retailers who accept the cards has grown by 51% per year. The number of card-issuing banks has increased from the initial four state-owned commercial banks to over 20 banks. Meanwhile, the percentage of retail purchases using bankcards also has been on the rise. Last year, it grew to nearly 10% of all retail sales revenue. China launched its first credit card in 1985, the “Great Wall Card.” The “Great Wall Card” became a member of VISA in 1987 and began issuing the first international credit cards in China in 1988.

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STMicroelectronics Revenues Up 28% in Q2

Geneva-based STMicroelectronics reported net revenues for the second quarter of $2.17 billion, up 7.0% sequentially, and up 27.6% over
last year’s second quarter. Gross profit was $812 million, up 13.2% sequentially from the prior quarter, and 33.8% above last year’s second quarter gross profit. As anticipated, the Automotive, Consumer, and Industrial markets were the strongest contributors. Telecom, including wireless and networking ASICs, was up over 2004 first quarter levels, but softness in hard disk drive applications caused Computer to
post a moderate sequential decline. Flash memory product sales increased 9.7% sequentially to $304 million. During the second quarter, STM became the first silicon manufacturer to be certified by MasterCard’s “CQM” (“Card Quality Management”) program as an approved supplier of secure microcontrollers for its chip-based debit and credit cards.

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Metris Posts Q2 Loss; Predicts 04 Profitability

After posting two consecutive profitable quarters, Metris Companies (Direct Merchants Credit Card Bank) posted a $70 million loss for the second quarter. The loss was due to the impact of costs associated with funding transactions. However, the Company predicted the adjustments, along with improvement in cardholder performance, will position the issuer to be profitable for 2004 because of a reduction in securitization transactions and higher excess spreads in the second half of 2004. The managed net charge-off rate for the second quarter was 17.0%, compared to 17.8% in the previous quarter and 19.1% for 2Q/03. The managed delinquency rate was 9.4% as of June 30th, compared to 10.4% at the end of the first quarter, and 11.2% one-year ago. The “Metris Master Trust” reported a delinquency rate of 9.5% as of June 30th, the lowest level since January 2002. The Company’s managed credit card loans for 2Q/04 were $7.1 billion, compared to $8.1 billion as of December 31, 2003. For complete details on Metris’ second quarter results visit CardData ([www.carddata.com][1])

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

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Certegy’s Second Quarter Revenues Climb 15%

Certegy reported second quarter revenue of $284.1 million and operating income of $42.7 million, up 14.8% and 14.0%, respectively. Card Services produced revenue of $173.4 million, an increase of 8.2% above year-ago quarter. Merchant processing revenue increased 11.5%, driven by strong retail sales and revenue from the acquisition of Crittson. International card issuing revenue declined 0.4%, caused primarily by the purging of inactive cards by certain customers and prior year pricing adjustments in the Brazilian marketplace. Card Services operating income of $36.1 million increased 13.2%, compared to $31.9 million in the second quarter of last year. Check Services generated revenue of $110.7 million in the second quarter, an increase of 27.2% above the 2003 quarter. For complete details on Certegy’s second quarter results visit CardData ([www.carddata.com][1])

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

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Rewards Network Growth Slows; Revises Forecast

Chicago-based Rewards Network reported sales for the second quarter of $90.6 million, a 3.3% increase year-on-year. Operating revenue climbed to $26.2 million, an increase of 8.7%. The Company closed the quarter with 3.5 million active members and approximately 21,160 total participating merchants. The Company noted that its restaurant merchant base is growing more slowly than originally projected. As a result, the Company lowered its full year target growth in total operating revenues to 8% to 12%, and growth in net income to 5% to 8%. Rewards Network provides loyalty and rewards programs for restaurants and hotels via its registered credit card platform. The network has 10,499 restaurants and 10,577 hotels participating in its rewards programs. For complete details on Reward Network’s second quarter results visit CardData ([www.carddata.com][1])

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

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