Providian Rolls-Out a Reader’s Reward VISA

Providian and Bookspan have rolled-out a new co-branded card for members of Bookspan’s more than 35 book clubs. The new “Reader’s Reward” card enables individuals to earn points for dollars spent, which they can use toward the purchase of books and other Bookspan merchandise. Customers will also receive a $25 “free book” reward certificate the first time they use the card. Marketing will include Bookspan channels such as new member welcome packets and club catalogs, as well as direct mail. Bookspan has more than 8.5 million members, and its book clubs include Book-of-the-Month Club, The Literary Guild, Quality Paperback Book Club, Doubleday Book Club, and more than 35 others. Bookspan is a partnership between Doubleday Direct and Time’s Book-of-the-Month Club Holdings.

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Discover Profits Steady as its Portfolio Contracts

Morgan Stanley reported this morning that its Credit Services division, including the “Discover Card,” posted $298 million in pre-tax profits for the quarter ending May 31st, compared to $302 million for the year-ago quarter. Merchant and cardholder fees declined 11% to $467 million, and interest revenue declined 9%. MS says the decline in fees reflected sharply lower credit card delinquencies. Managed credit card loans of $46.8 billion at quarter end were 8.1% lower than a year ago, mainly due to a decline in balance transfer volume and an increase in payment rates. However, MS says that managed net interest income decreased $69 million, as the interest rate spread widened 28 basis points to 9.06% from a year ago, as a lower cost of funds more than offset a lower yield. Total transaction volume increased 1.6% to $24.4 billion. The account base contracted during the second quarter by 0.9% year-over-year, down 400,000 accounts since the prior quarter. Active accounts declined nearly 9% from 2Q/03 to 19.9 million. The credit card net charge-off rate was 6.48%, 2 basis points lower than a year ago, but up 17 basis points from the prior quarter. The over-30-day-delinquency rate declined 133 basis points from 2Q/03 to 4.88%, and the over-90-day-delinquency rate declined 61 basis points over the same period to 2.40%. During the quarter, Discover enrolled 294,000 new merchants, a new quarterly record. For complete details on Discover’s second quarter performance visit CardData (www.carddata.com).

DISCOVER CARD PORTFOLIO SNAPSHOT
2Q/03* 3Q/03* 4Q/03* 1Q/04* 2Q/04* Y/Y CHNG
Outstandings: $50.9b $50.0b $48.4b $47.3b $46.8b -8.1%
Volume: $24.0b $24.8b $23.0b $24.2b $24.4b +1.6%
Accounts: 46.4m 46.3m 46.1m 45.9m 46.0m -0.9%
Actives: 21.8m 21.3m 20.8m 20.3m 19.9m -8.7%
Chargeoffs: 6.50% 6.90% 6.87% 6.31% 6.48% – 2bps
Delinquency: 6.21% 6.05% 5.97% 5.80% 4.88% -133bps
Yield: 11.97% 11.94% 12.05% 12.20% 11.88% – 9bps
2Q/03 ended 5/31/03; 3Q/03 ended 8/31/03; 4Q/03 ended 11/30/03;
1Q/04 ended 2/29/04; 2Q/04 ended 5/31/04.
Source: CardData (www.carddata.com)

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BofA and Choice Hotels Launch a Co-Branded VISA

Bank of America and Choice Hotels have teamed to launch the “Choice Privileges VISA Platinum” credit card. The new no annual fee card enables cardholders to earn bonus points at almost 3,000 Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion and MainStay Suites brand hotels throughout the U.S., as well as points for everyday spending. Cardholders can earn five points per dollar spent when they use their “Choice Privileges VISA” card to pay for stays at the company’s mid-scale brand hotels. These points are in addition to the 10 points per dollar spent for eligible stays, for a total of 15 points per dollar at Choice Hotels’ mid-scale brands. This enables members to earn enough points for a free night after staying just seven nights at most Choice Privileges locations. The new card also allows “Choice Privileges” members to earn two points per dollar spent for everyday retail purchases. In addition cardholders get 6,000 points when they use their card for the first tim e anywhere. In addition to free nights, “Choice Privileges” points may be redeemed for airline miles/credits with participating airline programs or for gift certificates from more than 100 national and 400 regional retailers and restaurants.

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OLYMPIC VISA

Chang Hwa Bank has unveiled a new VISA card to support the Chinese Taipei Olympics team. The new “Olympic Decathlete VISA” card offers a points-based rewards program. To boost the launch, Chang Hwa Bank is running a special promotion through July 20th. New cardholders will receive baseballs with signatures from the Chinese Taipei Olympic baseball team, plus 3,000 bonus points. Chang Hwa Bank also says cardholders may participate in the “Summer Joy Charge” raffles which offers top prizes of a new Mitsubishi van and NT$300,000 in cash.

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KeyBank Targets the Unbanked

KeyBank has unveiled the “Key Checkless Access” account to provide immediate access to direct deposit paychecks via Key’s nationwide ATM network. This electronic account is an alternative to costly check cashing facilities, providing customers with the convenience of a regular checking account without the hassles of writing checks and balancing a checkbook. Key Checkless Access accepts deposits of non-government payroll checks from employers who offer direct deposit. KeyCorp is one of the nation’s largest bank-based financial services companies, with assets of approximately $84 billion.

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Q Comm Lands Tesmer on its Board

Thomas Tesmer, current SVP of ITC Financial Services and former EVP of Front End Systems for Heartland Payment Systems, as joined Q Comm’s board. Tesmer comes to Q Comm with over 25 years in the transaction processing industry and with in depth technical competence in all areas of transaction data processing. He has particular expertise in high-volume transaction applications relating to the electronic funds transfer industry and point-of-sale payments. Q Comm International provides proprietary prepaid transaction processing and information management systems that facilitate electronic recharge or distribution of prepaid products from service providers or their distributors to retail points of sale.

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Optimal Group Acquiring Detroit-based NPS

Montreal-based Optimal Group has inked a deal to acquire Detroit-based National Processing Services, an ISO, for US$15 million in cash. NPS’ portfolio, and two other portfolios that will be merged into NPS prior to closing, will have approximately 4,500 small merchant accounts that generate in excess of $1 billion in annual credit and debit card processing volume. Laith Yaldoo, the President of NPS, will enter into an employment agreement with Optimal and will continue to operate NPS on a full-time basis. Upon the completion of the NPS acquisition, Optimal Payments will have annual electronic check and credit card processing volume of approximately $2 billion. The deal is expected to close on July 1st.

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Fair Isaac Introduces a New Score for Marketing

Fair Isaac has launched a new product to enable marketers to identify and select specific prospects to include in solicitations based on their likely response to an offer, delinquency risk, and overall profitability potential, without reliance on traditional credit bureau scores for prescreening. The new “Qualify” score is powered by data from multiple sources and vendors to deliver reduced acquisition costs for invitation-to-apply mailings. Traditionally, marketing campaigns that solicit new customers without extending pre-approved offers have suffered from adverse selection because the lowest-performing consumers are the most likely to respond. To counter this, the “Qualify” score helps lenders suppress both non-responders and prospects unlikely to be approved from their customer acquisition campaigns. Innovative modeling techniques developed by Fair Isaac produce a delinquency-adjusted response score that reduces the unwanted correlation between response and delinquency. In addition, “Qualify” also uses a delinquency suppression score to further reduce adverse selection. In preliminary validations linked to invitation-to-apply offers, the “Qualify” score improved businesses’ booking rates by 20% and improved the quality of booked portfolios by 15%, while reducing mailing and underwriting costs by more than 50%. Fair Isaac says conservative projections show an increase in the lifetime value of the booked portfolio of 40%.

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Advanta and BofA Reach a Settlement

Advanta’s book value will increase by approximately $2.45 per share following a settlement with Bank of America over Fleet litigation. Advanta expects to record a net after tax gain from the settlement of approximately $61 million when approved by the court. At that time, Advanta will also have approximately $18 million of unused tax deductions for which it has not yet recorded a benefit for financial reporting purposes. Under the agreement, BofA will pay Advanta $63.8 million in cash which represents a return of the payments that Advanta made to Fleet in the Delaware state court litigation earlier this year. That payment will be made following IRS approval of the settlement of the tax disputes. At that time, the parties will dismiss all outstanding litigation. Advanta and Bank of America have agreed to resolve the tax disputes between Advanta and Fleet by allocating approximately $125 million of the disputed $508 million of partnership deductions to Advanta and by Advanta recognizing for tax purposes approximately $600,000 of the disputed $47 million partnership taxable gain.

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TNS and Fidelity Express Renew

Transaction Network Services has signed a multi-year contract renewal with Fidelity Express, a top provider of walk-in bill payment services and one of the top five money order companies. Fidelity Express’ network currently extends to 16 states with over 5,000 locations such as convenience store and grocery store merchants in the Southeastern U.S. Under the agreement, TNS, one of the leading providers of business-critical, cost-effective data communications services for transaction-oriented applications, will continue as Fidelity Express’ exclusive network provider for in-person bill payment transactions. Fidelity Express is a full-service financial services company that was established in 1988 to fill the void in service to the independent merchant. Transaction Network Services is one of the leading providers of business-critical, cost-effective data communications services for transaction-oriented applications.

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Over-Limit Fees Rise 17% Over the Past 3 Years

Over-limit fees, largely non-existent 15 years ago, have increased 17% over the past three years, with the average fee among top issuers currently at $33.50. Additionally, some issuers, such as Chase now impose a fee if the balance exceeds the credit line anytime during the billing cycle, instead of the closing day of the billing cycle. Some issuers formerly considered over-limit fees bad business. One major program, the General Motors MasterCard, launched in 1992, was devoid of any over-limit fees until 1996. A decade ago, issuers would typically assess over-limit fees only if you exceeded the credit line by 5%-10%, according to CardData ([www.carddata.com][1]).

CREDIT CARD OVER-LIMIT FEES

2001 2004
1. Citibank $29.00 $35.00
2. MBNA $29.00 $39.00*
3. Bank One $29.00 $34.00
4. Chase $29.00 $35.00**
5. Discover $29.00 $35.00*
6. Capital One $25.00 $29.00
7. Am Express $29.00 $29.00
8. Bnk of Amer $29.00 $35.00
9. HSBC/HH $29.00 $29.00
10. Providian $29.00 $35.00***
AVERAGE $28.60 $33.50

* for balances over $1,000.00 ** when non-preferred rate is in effect
*** for balances exceeded by 2% or more
Source: CardWatch (www.carddata.com)

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

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Profit Series POS Adds 180 New Features

Hospitality Solutions International has released a new version of its “Profit Series Point of Sale” that includes the introduction of over 180 new feature and functionality enhancements. Featured in this latest release is Terminal Offline functionality. This exciting new feature allows customers continued use of their individual POS terminals during planned or unplanned network or server outages. Terminal Offline warns users of network communication loss by making the current screen flash in bright red and leaving the background screen red through the duration of the outage. MICROS Systems, Inc. provides enterprise applications for the hospitality and retail industries worldwide. Over 150,000 MICROS systems are currently installed in table and quick service restaurants, hotels, motels, casinos, leisure and entertainment, and retail operations in more than 130 countries, and on all seven continents.

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