2004 to be Banner Year for U.S. Smart Cards

Oberthur’s top executive predicts that 2004 will be a growth year for the smart card industry, after a lousy 2003. CEO Philippe Tartavull says that smart card companies that have large multi-site issuance capabilities will enjoy particular success as government agencies and banks seek third-party assistance in the management and distribution of cards. Tartavull predicts financial institutions will invest in new card designs and technologies to a greater extent this year, to differentiate their products. Having noted the warm consumer reception for striking designs such as the “VISA Mini Card,” the “MasterCard SideCard” and the Oberthur-manufactured “Discover 2GO Card,” banks will increasingly seek to use custom form factors as a marketing tool. Tartavull believes the most important development in the US payment industry for this year will be the expansion of contactless payments cards in the U.S. market, following the very positive feedback MasterCard has received from its “PayPass” pilot in 2003.

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Euronet’s PaySpot Acquires Precept

Euronet’s PaySpot subsidiary has acquired the California-based prepaid service provider Prepaid Concepts. The acquisition will add 4,500 POS terminals to PaySpot’s prepaid network. Precept distributes prepaid products for all the major U.S. wireless carriers, including ALLTEL, AT&T Wireless, Cingular, T-Mobile, Tracfone and Verizon Wireless, as well as several regional carriers. Precept also provides electronic recharge services for three current “Boost Mobile” master agents. PaySpot was launched in the USA during 2002, and features a state-of-the-art switching engine offering billing, customer service, trouble reporting, credit management, settlement and reconciliation. The system supports online electronic top-up at retail locations via a range of POS terminals or through integrated electronic cash registers for retailers with multiple locations and multiple checkout points. Euronet Worldwide has two other prepaid services subsidiaries, e-pay and Transact, which collectively provide services in 8 countries.

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Diebold Buys its Local Sales and Service Distributor

Diebold has acquired its sales and service distributor in Taiwan. Since 1999, Licent Information Technology has been a Diebold partner. With headquarters in Taipei, Diebold will now have more than 60 professionals and more than 100 combined years of banking automation experience with 24-hour service centers in Taipei, Taichung and Tainan, and a depot repair center in Taichung.

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Monoline Card ROA Jumps 42 BPS Last Year

HIGHEST ROA EARNINGS FOR BANKCARDS SINCE 1988

West coast investment bankers and credit card portfolio brokers, R. K. Hammer, released their model for 2003 credit card industry earnings.

Comparative Pre-tax Net Income Among Competitors, & Trend From Prior Year

Credit Unions: 1.05% ROA (down 5 basis points)
General Bank Cards: 4.53% ROA (up 25 basis points)
Monolines (pure-plays) 4.25% ROA (up 42 basis points)

Monolines, in real dollar earnings, not ROA percentages, still have the vast lion’s share of industry earnings, as they have held for many years.

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Wausau Financial Promotes Director of Marketing Communications

WI-based Wausau Financial Systems has named Mona Roth to its Executive Committee and promoted her to EVP/Professional Development. Roth will be responsible for associate development, education and development services, and corporate communications. Additionally, she will be responsible for the oversight for customer communications and events such as the company’s user group conference, newsletters and websites, all geared to enhancing the customer experience with WFS. Wausau Financial Systems (WFS) is the recognized leader in the development and implementation of knowledge-based products for the payment and transaction processing industry.

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Hilton and VISA Launch a Winter Points Promotion

Hilton and VISA have launched a promotion to award 500 bonus points to “HHonors” members using VISA cards to book their stays through April 15th, and automatic entry into a sweepstakes to win one million bonus points. Membership in HHonors is free. Travelers may enroll online by visiting [www.hiltonhhonors.com][1]. Or, to enroll instantly in the program and make reservations, consumers in the U.S. and Canada may call 1-800-HHONORS. Outside the U.S. and Canada, travelers may call the Hilton Reservations Worldwide office in their area. Hilton HHonors is a guest reward program that gives frequent travelers a faster way to earn the rewards they want most. Hilton Hotels Corporation (NYSE:HLT) and Hilton International, a subsidiary of Hilton Group plc, have a worldwide alliance to market Hilton, the world’s best-known hotel brand. Collectively offering more than 2,500 hotels in over 60 countries worldwide, both companies are recognized as leaders in the hospitality industry.

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

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PrivateServer HSM Integrated with CommerSafe ACS

Petach Tikva-based AR Ltd announced that its “PrivateServer” hardware security module has been integrated with iBIZ Software’s “CommerSafe ACS,” a 3-D Secure compliant solution for the payment card industry. AR’s “PrivateServer HSM” is used to protect personal information from fraudulent eavesdroppers and ensures that the person making subsequent transactions is indeed the authorized user, significantly reducing the possibility of fraudulent eCommerce transactions. To complete the transaction, the integrated iBIZ and AR solution also offers the ability to digitally sign the online transaction, thereby eliminating the possibility of repudiation of the electronic purchase by the consumer. “CommerSafe ACS” allows payment card issuers to fully authenticate their cardholders in real-time, while the cardholder is making a purchase online. iBIZ Software is based in Bellaire, Texas and has customers and channel partners in the United States, Russia, Central and Western Europe and the Middle East.

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LG Card May Be Nationalized this Week

The fate of South Korea’s largest credit card issuer may be determined today as the company may run out of money within the next 24 hours. The 16 creditor banks have been unable to reach a compromise on how to keep the issuer afloat, according to CardFlash International. Kookmin Bank and Shinhan Bank say they are not prepared to back a $4.15 billion rescue plan proposed yesterday. There were rumors yesterday that the state-run Korea Development Bank would nationalize LG Card. This morning KDB is says it is proposing to take over 23% of LG Card to lower concerns by the other creditor banks. The South Korean Financial Supervisory Service reported that LG Card’s delinquency rate rose from 11.4% in October to 14.7% for November.

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Past-Due Card Accounts Hit an All-Time High

Credit card delinquencies, based on total dollars outstanding, moved upward to 4.66% during the third quarter, a 15 basis point increase over the prior quarter, and a 21 basis point jump over year-ago quarter. However, the number of past-due credit card accounts hit an all-time high of 4.09%. The data are based on statistics gathered by the American Bankers Association for its quarterly “Consumer Credit Delinquency Bulletin.” The ABA says the job market has been flying against strong head winds, lengthening the time between jobs and intensifying financial stress. Meanwhile, the composite ratio of closed-end installment loans 30 days or more past due dropped 5 basis points to 2.13% of all accounts from the second quarter. Home equity loan delinquencies rose to 2.52% from 2Q/03’s 2.48%, based on the number of accounts.

3Q CREDIT CARD DELINQUENCY HISTORY
(based on total dollars outstanding)

2003: 4.66% 1999: 4.25% 1995: 4.21% 1991: 4.54% 1987: 3.72% 1983: 2.75%
2002: 4.45% 1998: 4.63% 1994: 2.90% 1990: 4.01% 1986: 4.90% 1982: 3.92%
2001: 4.45% 1997: 5.31% 1993: 3.83% 1989: 3.45% 1985: 3.15% 1981: 2.37%
2000: 3.93% 1996: 5.03% 1992: 4.27% 1988: 3.40% 1984: 3.30% 1980: 3.40%
Source: American Bankers Association Delinquency Bulletin

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Rentcash Offering Western Union Services

A new deadline of 5:00pm Wednesday has been set for the bailout of South Korea’s largest credit card issuer. If the rescue plan for LG Card is not adopted by its 16 creditor banks, then LG Card will likely suspend cash-advance transactions on Wednesday and possibly seek court receivership or liquidation. The creditor banks have been unable to reach a compromise on how to keep the issuer afloat. Kookmin Bank and Shinhan Bank say they are not prepared to back a $4.15 billion rescue plan proposed Monday. There were rumors yesterday that the state-run Korea Development Bank would nationalize LG Card. This morning KDB is says it is proposing to take over 23% of LG Card to lower the concerns of the other creditor banks. However, some of the creditor banks want KDB to cover more of the losses and spread the rest evenly among the rest of the participants. If a liquidation of LG Card takes places it could produce losses of some $22.5 billion for the creditor banks. The South Korean Financial Supervisory Service reported that LG Card’s delinquency rate rose from 11.4% in October to 14.7% for November.

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AMDS Has Record December and Honors Top Producers

Memphis-based ISO American Merchant Data Services says it surpassed its new merchant account projections for December by more than 30% and has named Donna Chenney, Andree Abraham, and Natalie Adkinson as current top performers. Below are the top performers for AMDS during the last two months. These new hires were responsible for more than fifty percent of new merchant accounts for November and December. This strategic rise was due greatly to the aggressive recruitment of top market performers the last six months. American Merchant Data Service is a “value added” independent sales organization engaged in the commercial electronic processing industry.

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Travelocity and MasterCard Launch a Winter Promotion

Travelocity and MasterCard have partnered to award travelers a $150 prepaid MasterCard gift card for booking and paying for a minimum four-night qualifying “TotalTrip” flight+hotel, ski/snowboarding package, or “GoodBuy” hotel stay at Travelocity using a MasterCard through February 27th and completing the travel by April 15th. The special MasterCard promotional gift can be used for purchases at millions of MasterCard merchant acceptance locations worldwide for everything from ski apparel to another fabulous getaway. Travelocity pioneered the online travel space and continues to be the most popular travel service on the Web, giving consumers access to hundreds of airlines, thousands of hotels and cruise, last-minute and vacations packages, and best-in-class car rental companies, all backed by 1,000 customer service representatives staffed to provide 24-hour assistance. MasterCard International is a leading global payments solutions company that provides a broad variety of innovative services in support of our global members’ credit, deposit access, electronic cash, business-to-business and related payment programs.

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