Chase & Bank One Merger a Done Deal

Yesterday, shareholders of both J.P. Morgan Chase and Bank One approved the merger of the two companies. The companies, with combined assets of $1121 billion, are expecting to complete the merger of their holding companies in mid-2004, subject to regulatory approvals. The deal is valued at $58 billion creating the nation’s second-largest bank. The combination will produce the second largest credit card issuer in the USA, with $125.2 billion in outstandings, based on first quarter results. The portfolio will have 87.2 million cardholders, and 71.8 million accounts, according to CardData ([www.carddata.com][1]). Earlier this month, Chase and Bank One announced that the combined company will have 16 board members, consisting of eight Directors from each company, with fourteen independent directors except for William Harrison, who will be Chairman and CEO, and James Dimon, who will be President and COO. (CF Library 5/4/04)

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

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SecureOMS ATMs to be Deployed

San Jose-based I-S-Cubed, in conjunction with Mosaic Software and Diebold, announced it will deliver “SecureOMS ATMs” to one of the nation’s largest credit unions to automatically update cryptographic ATM keys. The system will also simplify and streamline security audits, producing a menu of reports and key management activity. Mosaic Software is a global EFT software company with offices in the United States, the United Kingdom, South Africa, and Australia. Diebold, Incorporated is a global leader in providing integrated self-service delivery systems, security and services. I-S-Cubed Inc. is a global provider of secure cryptographic key management solutions for network-connected devices in the financial services, retail and enterprise markets.

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Online Retail Sales Top $100B in 2003

Online retail sales topped the $100 billion milestone last year, rising 51% from 2002. The $114 billion in online sales produced last year now represent 5.4% of all retail sales, compared to 3.6% in 2002. According to The State of Retailing Online 7.0, an annual NRF/Shop.org study conducted by Forrester Research, online sales are expected to grow 27% to $144 billion to represent 6.6% of all retail sales. Major drivers for online growth last year include online travel sales, up 91% to $52.4 billion; home and office with $11.1 billion in sales; and, computer hardware and software with $11.0 billion in 2003 sales. As online sales increase, some sectors are experiencing extremely high growth, with online sales expected to increase more than 40 percent in the health and beauty (61%); apparel (42%); and flowers, cards, and gifts (41%) categories. Forrester Research says it expects 12 sectors will experience a retail share of 6.0% or higher this year, compared with eight sectors last year.

ONLINE RETAIL SALES
2002 2003 2004
Volume: $75.0b $114.0b $144.0b
Share: 3.6% 5.4% 6.6%
Source: Shop.org/Forrester Research

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Fuel Volume to be Steady this Weekend

The rising cost of fuel will have little impact on Memorial Day weekend according to a new survey by Paymentech. The “2004 Memorial Day Survey” reveals that about one-third of Americans, roughly the same number as last year, plan to travel over Memorial Day weekend. Nearly half of motor travelers will pay for their gasoline with credit (26%) or debit (16%), and women are almost twice as likely as men to “fill ‘er up” using a credit card. Overall, high-income households of $90,000+, women 55 and older, and Americans who live in the Northern part of the United States are most likely to buy gasoline with credit cards this holiday weekend. Paymentech found that 20% of American travelers have put aside more than $400 to cover their Memorial Day vacation expenses with 12% setting aside more than $600.

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PassMark Vault Stops Phishing Problems

PassMark Security has released “PassMark Vault,” a secure user authentication appliance for bank and e-commerce Web site operators that prevents online phishing identity-theft scams. The Anti-Phishing Working Group reported 1,125 different phishing scams in April, almost triple the 402 reported in March. Research company Gartner Inc. estimates that 970,000 Americans have been victims of phishing attacks at a cost of about $1.2 billion to U.S. banks and credit-card issuers, according to an April study. PassMark Security specializes in secure authentication solutions for mass market deployment. A PassMark is a photo image that banks and e-commerce Web sites use as a two-way, two-factor shared secret between the institution and its customers.

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Heartland to Add More Jobs at IN Call Center

Heartland Payment Systems has expanded its call center in Jeffersonville, IN with plans to add 185 more jobs over the next 18 months. Of its current workforce, 175 live in Indiana and 120 live in Kentucky. Heartland Payment Systems Inc. (HPS) is a full-service payment systems solutions provider, handling merchant card and payroll processing services for merchants of all types and sizes. With more than 700 national sales professionals, HPS builds long-term business relationships in local sales territories providing merchants with enhanced technology tools that assist them in more effectively operating their businesses.

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Networks May Raise Regulatory Concerns

Over the past four years the number of debit card transactions has more than doubled from 8.3 billion to 17.0 billion. During the same period, the number of credit card transactions has increased a modest 23%, as the number of retail check transactions has declined 9%. A new study released by the FDIC says the changes in payment systems has risk implications that bank regulators need to be aware of. The research report noted that the ownership of funds transfer networks has changed dramatically as the number and proportion owned and operated by non-bank entities has increased, while those owned by joint ventures of banks have declined. Because the operation of these networks has a direct effect on the risk exposure of the banks, the risk management practices of the network providers may have important implications for the banking industry and the bank regulatory community. Additionally, further consolidation among network providers?especially those for ATMs, debit cards, and credit cards?raises concerns about pricing, service quality, and product innovation in a market for which bank regulators have no direct responsibility. The FDIC report was written by Dr. Neil Murphy, Professor of Finance in the Department of Finance, Insurance, and Real Estate, School of Business at Virginia Commonwealth University.

RETAIL PAYMENTS
Checks Debit Cards Credit Cards
1979: 32.8 billion 0.0 billion 5.3 billion
1995: 49.5 billion 1.4 billion 10.4 billion
2000: 42.5 billion 8.3 billion 15.0 billion
2003: 38.6 billion 17.0 billion 18.4 billion
Source: FDIC, FRB, and CardData

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VISA Teams with Priority Club Rewards

The “Priority Club Rewards” program is offering double points or miles to guests using a VISA card this summer. Priority Club Rewards is the world’s first and most global hotel loyalty program available in more than 3,500 hotels in nearly 100 countries. With more than 300,000 new travelers joining the program each month, Priority Club Rewards is also the fastest-growing hotel loyalty program in the hotel industry. Priority Club Rewards recently earned six first-place awards and eight second-place awards at the 2004 Freddie Awards, the most prestigious consumer- generated awards in the travel industry.

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Gemplus Joins 3G Americas’ Board of Governors

Gemplus has become the newest member of 3G’s Americas Board of Governors. The group supports the GSM family of technologies throughout the Americas. Gemplus is a leading provider of SIM cards in the Americas. 3G Americas’ Board of Governor members include AT&T Wireless (USA), Cable & Wireless (West Indies), Cingular Wireless (USA), Ericsson, HP, Lucent Technologies, Motorola, Nokia, Nortel Networks, Openwave Systems, Research In Motion, Rogers Wireless (Canada), Siemens, T-Mobile USA, Telcel (Mexico), Texas Instruments, and now Gemplus.

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CU Portfolio Sales Up 33% in Q1

Sales of credit union credit card portfolios are set to easily exceed last year’s pace, but the average size of the portfolios has declined about 19%. During the first quarter, 20 credit unions, with card loans of more than $1 million, sold their credit card portfolios with an average size $5.8 million. During 2003, 59 credit union deals were completed, averaging $6.9 million. NH-based Brookwood Capital says the CU portfolios changing hands this year are nearly always profitable. However, many smaller issuers are trying to find a way to issue a stronger product set while lowering their institutional risk profile and increasing the bottom line. Brookwood previously reported that nearly 100 banks and credit unions sold their credit card portfolios and signed agent partnerships during 2003. Atlanta-based InfiCorp led the charge, purchasing the largest bank portfolio and the top two credit union portfolios of the year. This year, InfiCorp has purchased Mid Missouri Credit Union’s credit card portfolio of 2,500 accounts and $3.5 million in receivables, and the credit card portfolio of La Habra, CA-based South Western FCU. Brookwood Capital assisted InfiCorp with both sales. (CF Library 1/13/04; 2/5/04; 3/23/04)

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U.S. Bank Names VISA NASCAR Winner

U.S. Bank this week announced the winner of VISA’s “Ultimate NASCAR Experience” sweepstakes. Simply by using his U.S. Bank Visa card, Neidenthal won Visa’s Ultimate NASCAR Experience promotion. Visa is the world’s leading payment brand and largest consumer payment system, enabling banks to provide their consumer and merchant customers with a wide variety of payment alternatives. U.S. Bancorp (NYSE:USB), with assets of $192 billion, is the 7th largest financial services holding company in the United States.

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Ameniti Cardholders Get Starwood Gold Status

United Airlines’ new “Ameniti” loyalty card is now offering complimentary “Gold” status in the Starwood “Preferred Guest Program”. Starwood Hotels & Resorts Worldwide, Inc. is one of the leading hotel and leisure companies in the world with more than 740 properties in more than 80 countries and 105,000 employees at its owned and managed properties. The Ameniti luxury travel program is owned and operated by UAL Loyalty Services, Inc.

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