Gift Card Fee Regulation Could Limit Growth

Gift card dollar volume was about $45 billion last year, a 50% gain over 2002, and is now projected to hit $90 billion by 2007. However, a new report says potential regulation of gift card fees is not appropriate for bank-issued gift cards and could dampen growth. TowerGroup says that considering bank-issued gift cards have global acceptance and carry all the rights and protection afforded to credit cards, issuers should be permitted to add fees as needed. TowerGroup says that without charging fees to help support card benefits, institutions simply could not afford to offer the product. The report says that bank-issued gift cards are poised for the greater percentage growth over the next five years compared to retailer-issued cards. Several states have already moved to regulate gift card fees.

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Fletcher Named to Orbitz Board

Denise Fletcher, former EVP/CFO of MasterCard has been named to the Orbitz board of directors. Fletcher has been on the board of Unisys Corp. since 2001 and is a member of its audit committee and nominating and corporate governance committee. From 2000 to 2003, Fletcher was executive vice president and chief financial officer of MasterCard, a global payment solutions company, where she was responsible for finance, planning, internal audit, new markets, investments and procurement. Orbitz is a leading online travel company that enables travelers to search for and purchase a broad array of travel products, including airline tickets, lodging, rental cars, cruises and vacation packages.

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KeyBank Renews STAR Contract

First Data’s new Star Systems unit has renewed its agreement with KeyBank. Under the terms of the long-term agreement, the “STAR” network will continue to provide PIN-secured debit access at retailers and ATMs, and ATM and signature debit card processing for KeyBank’s 2,200 ATMs and 4.6 million credit and debit cards. Last year, the “STAR” network served 1.26 million ATM and POS locations nationwide. It processed nearly 7 billion transactions in 2003 at 6,100 participating financial institutions.

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FDC Earnings Projection Revised Upward

First Data yesterday revised its 2004 EPS guidance upward by $0.17 due to the recent sale of GCA. The change is due to the gain that resulted from the March sale of the company’s 67 percent ownership interest in GCA. The impact of these events will be accounted for through First Data’s continuing operations, and will result in a new 2004 EPS range from continuing operations of $2.17 to $2.35. First Data Corp., with global headquarters in Denver, helps power the global economy.

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CHARGE-OFFS

Credit card losses for February increased more than 10% compared to one-year ago, as credit card balances grew nearly 19% during the same period. However, compared to five years ago, credit card losses have more than tripled, while card volume increased 36%, and card loans grew 74%. According to the Monetary Authority of Singapore, charge-offs for February came in at $16.1 million, compared to $14.6 million for February 2003, and $5.2 million for February 2000. Total card volume for February was $1024.1 million, compared to $861.2 million one-year ago, and $751.2 million five years ago. Total card loans for February were $2,517 million, compared to $2,479 million one-year ago, and $1,445 million five years ago. At the end of February there were 3,558,720 credit cardholders in the country including 2,564,364 main cardholders, according to the MAS.

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Lightbridge Completes Authorize.Net Acquisition

Lightbridge completed its acquisition of Authorize.Net Corporation last week for $82 million exclusive of transaction related costs. Authorize.Net provides payment solutions that enable online merchants to authorize settle and manage electronic transactions. Authorize.Net generated 2003 revenue of $27.8 million and segment income of $6.9 million as reported by InfoSpace, the seller of Authorize.Net. Lightbridge plans to retain the Authorize.Net management team and brand name as well as facilities in American Fork, Utah and Bellevue, Washington.

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RBC Tees Off with a Masters Champion Card

As Masters champion Mike Weir seeks to defend his title this week, Canada’s RBC Royal Bank has launched a credit card to honor the Canadian hero. The new “RBC Mike Weir VISA” card rewards cardholders with bonus points for every victory Weir earns on the PGA Tour. Cardholders receive 500 “RBC Rewards” points for a Mike Weir PGA tour win, and 1,500 points should he win either the “Bell Canadian Open” or one of the four “Majors.” Cardholders also earn one point for every dollar they charge to the card. Among the rewards offered to holders of the “RBC Mike Weir VISA” card are preferred offers to Taboo Resort, Golf and Conference Centre, Mr. Weir’s home course in Gravenhurst Ontario. TaylorMade, Weir Golf, and Bell Canada are also offering cardholders special benefits and privileges. The new card joins other new cards recently launched by RBC. Last week, RBC rolled out a no annual fee rewards card targeted at consumers with lower-to-moderate monthly spending. The new “RBC Rewards VISA Classic” awards one point for every two dollars spent, instead of the typical one-for-one rewards offered on RBC cards. The points carry a nominal value of one cent each. Reward redemptions start at 2,500 points and include travel and merchant gift certificates. The card carries an 18.5% interest rate. RBC Royal Bank also offers the “RBC VISA Classic II” for $35 annually, “RBC VISA Platinum Preferred” at $110 per year, and, the “RBC VISA Platinum Avion” for $120 a year. All three of these cards offers one point for each dollar charged. Additionally, the issuer offers a “RBC U.S. Dollar VISA Gold” card for those desiring to avoid fluctuations in the exchange rate. The “U.S. Dollar” card awards 1.5 points for each dollar charged and carries a USD$65 annual fee. The “RBC Rewards” program was launched in April 2003.

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FDC Processing Glitch Hits Wal-Mart Last Week

First Data has apologized to Wal-Mart for a processing error last week. On Thursday, April 1, First Data says it experienced a computer hardware problem that affected MasterCard and VISA transactions at Wal-Mart. In some cases, the problem resulted in triplicate postings to consumer debit and credit card accounts. FDC says it processed corrections to the affected accounts on Friday. FDC also opened a toll-free customer hotline to assist consumers.

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MBNA Complete Sky Financial Acquisition

Sky Financial Group has completed the sale of its dental financing affiliate, Sky Financial Solutions to MBNA. SKY markets financial products and services to dental professionals, including financing for practice acquisition, equipment financing, and working capital. Nearly three-quarters of all dentists in the USA carry an MBNA card. Sky is endorsed by 33 dental associations and MBNA’s credit card products are endorsed by 39 dental associations. MBNA says the financing of dental practices is a good strategic fit with its affinity marketing strategy. MBNA said it will retain Sky Financial Solutions’ management team and employees. Sky Financial Solutions has outstanding loans of nearly $800 million.

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MasterCard Hires a Top Australian Policeman

MasterCard International has hired a former Director of National Investigations for the Australian Federal Police to spearhead its development of solutions to manage risks and enhance fraud control in Asia/Pacific. Tim Morris, who served with Australian Federal Police for 18 years, will become MasterCard vice president & regional head for Security & Risk Management for Asia/Pacific. He will be based in Singapore, working closely with law enforcement agencies to combat payment card crime, as well as work with government institutions to provide support in aid of legislation for card fraud. During his tenure with AFP, Morris created a new counter terrorism division and led the Australian contribution to the successful investigation into the bombings in Bali. He was also a member of the Australian Prime Minister’s business task force on critical infrastructure protection and a member of the inter-governmental committee on identity fraud.

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Capital One Ranks #1 in Online Experience

A new study has found that Capital One, American Express, and Discover provide the best overall online customer experience, while Fleet and MBNA customers are the least satisfied with their online experience. The research also found that one in four customers of Fleet, MBNA and Bank One experienced a problem finding or accessing customer support online. The findings are based on interviews with 2,000 credit card customers for the “Customer Experience Rankings for the Credit Card Industry” survey conducted by Vividence. The study shows that customers are motivated to transition to managing their accounts online primarily by the ease of paying their credit card bill and the ability to receive statements online. Customers are most likely to sign up for online services when applying for their card online. Vividence research also found that the ease of applying online, and Web site design and organization, were primary drivers in customer acquisition. Only the credit card offer itself (including annual fee and interest rate) had a stronger effect. American Express and Discover were the only sites to rate highly both among current and prospective customers-and although Capital One ranked last with prospective customers, the company ranked first among its own current customers. The Vividence study also looked at the reasons for increased card usage, finding that consumers use their credit cards primarily because of the convenience of doing so (49% mentioning as a factor); to earn travel and rewards points (29% mentioning); for purchase protection (25%); and to finance purchases (21%).

BEST OVERALL ONLINE EXPERIENCE
1. Capital One
2. American Express
3. Discover Card
4. Citibank
5. Wells Fargo
6. Bank of America
7. Chase
8. Bank One
9. MBNA
10. Fleet
Source: Vividence CE Rankings

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Utah CCCS Closed after Funds Go Missing

Washington, DC-based Consumers for Responsible Credit Solutions reports that the Utah Division of Consumer Protection seized control of Consumer Credit Counseling Service of Utah last week to investigate why more than $60,000 is missing from a trust account. Each month, an estimated 1,400 Utahns sent money orders or cashier’s checks to the company, which put the money in a trust account before paying clients’ bills. Beginning in January, however, checks written on the trust account started bouncing and clients’ bills went unpaid. Under the court order, the Utah CCCS President is forbidden from any contact with CCCS or its bank accounts. He also must return all CCCS assets in his possession, including cell phone, credit cards and a 2000 BMW.

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