Yields and Payment Rates Stand at 16.7%

After reaching a peak of 21.1% in March 2001, yield, among card-backed bonds, declined to 16.7% in January due to the continuing low interest rate environment. The monthly payment rate, also at 16.7%, increased 10 bps in January after a 110 bps increase in December. According to Standard & Poor’s “Credit Card Quality Index,” which tracked $425 billion in securitized credit card loans for Janury, the data are relatively mixed. The January monthly charge-off rate of 6.8% was a 20 bps improvement from December and is the lowest charge-off rate reported by the index since September 2002. Although charge-offs are still relatively high compared to historical averages, S&P expects charge-off levels to decline during the second half of this year. During January, 30-plus delinquencies increased marginally by 10 bps, while 60-plus and 90-plus delinquencies remained unchanged from the prior month at 5.1%. The overall trend for 30-plus delinquencies continues to be relatively stable, averaging 5.2% over the last 6 months. After peaking in May 2003 at 4.4% and 2.9%, respectively, the 60- and 90-plus delinquency buckets have moved down to more modest levels of 3.5% and 2.0%, respectively. The base rate, which remains at historical lows, decreased marginally by 10 bps to 3.5% during January. During the month of January the excess spread rate decreased by 60 bps to 6.4%. With charge-off levels and the base rate improving by 20 bps and 10 bps, respectively, during January, excess spread did not suffer the full effect of a 90-bps decrease in yield during the month and declined instead by 60 bps. The decrease during January returns excess spread to November 2003 levels, both of which are the lowest excess spread levels reported since May 2003.

Credit Card Quality Index
Jan01 Jan02 Jan03
Yield (%) 18.7 17.3 16.7
Payment rate (%) 16.9 16.5 16.7
Charge offs (%) 6.8 7.2 6.8
Delinquencies (%) 5.5 5.5 5.1
Weighted base rate (%) 4.4 3.9 3.6
Excess spread (%) 7.5 6.2 6.4
Source: Standard and Poor’s

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American Bankcard Offers a Small Business Package

Woman-owned American Bankcard Corporation, which processes through NPC, has a launched the “Small Business Advantage” program. Along with NPC’s credit and debit card processing services, ABC offers small business owners POS hardware and software, 24-hour merchant support, electronic check processing, EBT processing capability and secure e-commerce solutions. The program also offers discounted rates on commercial equipment leasing, business insurance, overnight delivery, car rentals, long-distance phone service, employee leasing, office products and computer equipment, and a variety of perks for business owners. ABC is also a SBA “Preferred Lender.” After just one year of operation, the company services over 220 national accounts. Andrea Deno is the founder and president.

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MBNA Canada Launches a Competitive Travel Rewards Card

MBNA Canada has ramped-up competition with the roll-out of a travel
rewards card that enables consumers to accumulate points on multiple cards
for the price of one. The new “MBNA Canada TravelRewards Platinum Plus
MasterCard” carries an $89 annual fee, compared to the $399 annual fee
charged for the recently launched “American Express AeroplanPlus Platinum
Card,” and the $120 annual fee for the “CIBC Aerogold VISA.” CIBC also
charges $50 for each additional card while extra MBNA cards are free. The
new “MBNA TravelRewards” credit card offers 5,000 bonus points the first
time a customer uses the card to make a purchase, plus an annual bonus of
2,500 on the anniversary of the date the account was opened. Redemption
levels for free flights begins at 15,000 points. Points may be used on more
than 75 airlines. MBNA is charging an interest rate of 18.99% for
purchases. The new “American Express AeroplanPlus Platinum Card,” launched
in January, is a charge card. The “CIBC Aerogold VISA” carries a 19.50% APR.

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Asset Acceptance Profits Up 73% in Q4

MI-based Asset Acceptance Capital reported fourth quarter revenues of $44.3 million, a 53.1% increase compared to 4Q/02. Net income for the fourth quarter increased to $11.1 million, a 73.2% increase compared to $6.4 million in the same period of 2002. During the fourth quarter, the Company paid $24.6 million to purchase consumer debt portfolios with a face value of $1.5 billion, for a blended rate of 1.68% of face value. Purchases during the fourth quarter consisted of 20 pools from 11 sellers. This compares to the fourth quarter of 2002, when the company purchased consumer debt portfolios with a face value of $1.6 billion for $33.0 million for a blended rate of 2.05% of face value. The company said all purchase data is adjusted for buybacks. During the fourth quarter, cash collections rose to $54.0 million, an increase of 61.5% from $33.4 million for the same period last year. For complete details on Asset Acceptance Capital’s 4Q/03 results visit CardData ([www.carddata.com][1]).

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

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VISA Names a New Head of Commercial Products for Asia Pacific

VISA Asia/Pacific has named a new General Manager of Commercial Products for the region. Michael Cannon, former SVP and Regional Head of Sales and Service for JP Morgan in Europe, Middle East and Africa, will be responsible for developing VISA’s suite of business products in the SME, Corporate and Government sectors. In Asia Pacific, VISA has a greater market share than all other payment card brands combined with 62% of all card purchases at the point of sale being made using VISA cards. There are currently 198 million VISA-branded cards in the region. During the twelve months ended September 30, 2003, US$428 billion was spent at point of sale or withdrawn from ATMs in Asia Pacific using VISA cards.

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Zinek Adds Banking Functionality to SMS Engine Server

Uppsala-based Zinek AB has upgraded its “SMS Engine Server” with secure “SMS Banking” functionality. The secure “SMS Banking” components run over HTTPS / SOAP, and can facilitate numerous banking commands over the mobile data network securely. With “SMS Banking” consumers can get a quick bank balance update, transfer money from one account to another, or get a quick check on the last 5 banking transactions. The “SMS Engine Server” is an out-of-the-box solution based on open Web services standards. It is designed to deliver high capacity, secure and reliable messaging, and can process more than 100 mobile messages per second. The “SMS Engine 1.4” is currently available through Zinek’s regional sales agents.

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International Payments Conference to Discuss Payments STP

Microsoft is joining this year’s “International Payments” conference and exhibition in London. Stephen Axelrod, Payments Industry Manager, Microsoft EMEA, will give presentations on both “Payments STP” and “The Role of Technology in Payments,” whilst Paul Shetler, Managing Director of Financial Services, Microsoft EMEA, will Chair the “STP” stream on the third day. Microsoft will be joined on its stand by key technology partners including Unisys, a Microsoft global payments partner. Delegates will also have the opportunity to view Microsoft’s own payments-specific solutions such as the “BizTalk Accelerator for SWIFT,” which was announced in October 2003. The International Payments conference and exhibition will be held at the Café Royal, London, April 5th to 8th.

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European Commission Explores Single Phone Number for Lost Cards

The European Commission is exploring the possibility of setting up one telephone number for consumers to report lost or stolen payment cards. Currently, Europeans have to dial different phone numbers for cancelling cards. In some countries consumers have to contact multiple parties. The EU is asking for public input through April 30th. A recent “Eurobarometer” survey found that 83% of EU citizens think that introducing a single number would be an effective measure. About half of those questioned were even prepared to pay for such a service.

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Smart Cards and ID Systems Report Released

The Smart Card Alliance has released a new white paper: “Secure Identification Systems: Building a Chain of Trust”. When properly implemented, an ID system’s chain of trust can guarantee the authenticity of the people, issuing organizations, devices, equipment, networks, and other components of a secure ID system. The chain of trust must also ensure that information within the system is verified, authenticated, protected and used appropriately. The Smart Card Alliance is a not-for-profit, multi-industry association working to accelerate the acceptance of smart card technology.

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North American Households are Fiscally Fit

A new report from RBC Economics shows that the popular perception that North American households are veering towards disastrous debt levels is totally unfounded. RBC Financial Group says this falsehood is based on the debt-to-income ratio, which measures the total amount that an individual owes compared to what they earn. This measure is flawed because it compares an individual’s total debt to a single year’s income, rather than over one’s lifetime of income. Borrowing patterns indicate that households usually borrow out of future income to satisfy housing and other spending needs, and do not borrow with the expectation that all of that debt has to be paid back out of that single year’s income. Furthermore, comparing debt to income does not take into account how debt is used. At present, North American households have about six times as much invested in assets compared to total debt. This suggests that the vast majority of debt is used to acquire assets such as real estate, rather than on expenses that do not provide potential returns. Indeed, debt as a percentage of total assets has remained remarkably stable over the decades. A rising debt-to-income ratio merely demonstrates that capital markets in North America have become much more efficient and have fed economic development in the process – in contrast to many developing economies.

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NOVA Renews UMB Contract for Ten Years

Atlanta-based NOVA Information Systems and Kansas City-based UMB Bank renewed their existing payment processing and alliance marketing agreement for ten-years which currently covers 9,000 merchants producing about $1 billion in annual card volume. UMB Bank offers complete banking and related financial services to both individual and business customers. The company owns and operates 156 banking centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma and Nebraska. NOVA Information Systems, a leader in the payment processing industry, is a wholly owned subsidiary of U.S. Bancorp. NOVA partners with financial institutions, independent sales organizations, associations, government agencies and community banks to offer integrated payment processing services to their merchants and retailers.

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