MasterCard Business Debit Card Use Up 61%

MasterCard reported yesterday that more than 50 financial institutions now issue its debit card for small businesses. As a result, the number of cards-in-force and purchase volume have risen 61% in the first half of this year, compared to 2002. MasterCard says its research reveals that debit business cards are commonly used for office supplies (70%), business travel and entertainment (58%), equipment (53%), inventory (48%) and other basic expenditures. MasterCard also reported Monday that increasing numbers of consumers are using debit cards to make automatic recurring payments. According to a MasterCard survey, debit cards experienced the greatest growth in use as 26% of all U.S. households now link automatic payments to a debit card, a 30% increase since 2000. MasterCard says it found that debit card recurring payments account for almost half of their automatic payments among debit card users and that 48% would consider using debit cards for additional recurring payment industries.

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ECHO Raises $2.8 Million in a Private Placement

Electronic Clearing House has inked a deal for a $3.0 million private placement of its common stock. Electronic Clearing House Inc. has entered into definitive agreements to sell 437,957 shares of its common stock in a private placement at $6.85 per share to institutional investors resulting in gross proceeds to Electronic Clearing House Inc. ECHO provides a complete solution to the payment processing needs of merchants, banks and collection agencies. ECHO’s services include debit and credit card processing, check guarantee, check verification, check conversion, check re-presentment, check collection, and inventory tracking.

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Euronet Triples Revenues in Third Quarter

Euronet reported third quarter revenues of $53.1 million, nearly tripling its revenues compared to the third quarter of 2002. Net income for the third quarter was $1.4 million, compared to a net loss of $2.5 million one-year ago. The EFT Processing Segment posted third quarter revenues of $12.9 million, compared to revenues of $13.8 million for 3Q/02. The period-over-period decrease in revenues was attributable to the January 2003 sale of the U.K. ATM network, partially offset by growth in the segment; the increase in operating income resulted from business growth and expense management over the past year, partially offset by the effects of the U.K. ATM network sale. The EFT business ended the quarter with 3,254 ATMs owned and/or operated as compared to 2,951 ATMs at the end of the third quarter 2002. Euronet owns and/or operates ATMs in Hungary, Poland, Germany, Croatia, the Czech Republic, the U.K., Greece, Kosovo, Slovakia, Egypt and India. The Prepaid Processing Segment reported third quarter revenues of $36.5 million. Total transactions processed in the third quarter were 26.3 million. The Prepaid unit processes electronic prepaid transactions at approximately 75,000 point-of-sale terminals located in 29,000 retail locations in the U.K., Australia, Malaysia, Indonesia, New Zealand, Poland, Ireland and the United States. For complete details on Euronet’s 3Q/03 performance visit CardData (www.carddata.com).

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NetSpend Wins a National Award

Austin, TX-based NetSpend Corporation, issuer of 300,000 “All-Access prepaid MasterCard” cards, has been named 2003 “Portfolio Company of the Year” by the National Association of Small Business Investment Companies. NASBIC is the national trade association of the Small Business Investment Company industry. Some of the country’s largest and most successful companies, including Intel Corp., Apple Computer, Federal Express, Staples, and Outback Steakhouse, received critical early-stage financing from Small Business Investment Companies. NetSpend Corporation is the proven leader for prepaid stored value platforms, offering an end-to-end approach that is unique in the prepaid payments industry.

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American Express Profits Up 10% in the Third Quarter

American Express Travel Related Services reported third quarter net income of $606 million, a 9.7% gain over 3Q/02, but $28 million lower than the second quarter. AmEx reported that marketing, promotion, rewards and cardholder services expenses rose 26% from year-ago levels, primarily reflecting the expansion of card-acquisition programs and cardholder loyalty program participation. AmEx’s U.S. gross dollar volume increased nearly 14% and managed card loans increased by nearly 11.5% during the third quarter, compared to one-year ago. Card spending volume contributed to a 13% rise in discount revenue to $2.2 billion. Credit quality improved as charge-offs fell from the previous quarter and the year-ago quarter. However, delinquency (30+ days) rose 10 basis points to 2.8% from the prior quarter, but remain below last year’s 3.2% level. Charge-offs declined 70 basis points to 5.00% for the third quarter, compared to one-year ago. For complete details on AmEx’s third quarter performance as well as prior quarters visit CardData ([www.carddata.com][1]).

American Express U.S. Card Portfolio Snapshot
3Q/03 2Q/03 1Q/03 4Q/02 3Q/02 Ann Chng
Volume $66.3b 64.6b 58.9b 62.9b 58.2b +13.9%
Loans $35.9b 36.0b 34.6b 34.3b 32.2b +11.5%
Cards 36.2m 35.7m 35.4m 35.1m 34.8m +4.0%
Delinq* 2.8% 2.7% 3.1% 3.1% 3.2% -40 bps
Losses 5.0% 5.4% 5.5% 5.5% 5.7% -70 bps
Yield** 8.9% 8.9% 9.4% 9.8% 9.7% -80 bps
* 30+ days past due; ** net interest yield
Source: CardData (www.carddata.com)

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

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American Express and Air Canada Finally Come to Terms

American Express has agreed to pay Air Canada more than US$60 million to become a partner in Air Canada’s “Aeroplan” frequent-flier plan. Under the five-year contract, the one-time cash advance will be repaid as AmEx purchases air miles from “Aeroplan” to reward it charge cardholders. The AmEx contract has been approved by Ernst & Young, which is serving as Air Canada’s court-appointed monitor. CIBC issues the “Aerogold VISA” card in Canada. In August, negotiations between Air Canada and American Express for a definitive contract were extended beyond the July 31st deadline. On June 3rd, Air Canada announced it had signed a letter of intent with American Express with respect to a new co-branded consumer and corporate charge card program and Aeroplan’s participation in American Express’ Canadian and International “Membership Rewards Programs.” During the second quarter, Air Canada reached an agreement with CIBC on a new contract with respect to the “CIBC Aerogold VISA” card program. Under the new contract, which extends the Air Canada’s agreement with CIBC to 2013, CIBC will pay an additional 24% for each “Aeroplan Mile” purchased.

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Givex and SIVA Team to Target Restaurants

Gift card provider Givex Corporation has inked a deal with SIVA Corporation, a provider of enterprise restaurant operations technologies, to fully integrate Givex’s gift card and loyalty services into the “iSIVA” point-of-sale and back office suite. Using Givex solutions, restaurateurs can easily add to their bottom line with a real-time gift card program that is marketable and in great consumer demand. In addition, capturing detailed customer transaction information translates to increased customer loyalty and repeat visits with more targeted marketing. Givex Corporation () processes gift card and loyalty transactions and provides payment processing gateway services for a wide range of industries including hospitality, retail, grocery and petroleum. SIVA Corporation is the creator of products and services that use next generation Internet technologies to improve operational efficiency and reduce the cost of technology ownership for multi-unit restaurant owners.

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Bank of America to Become 6th Largest Card Issuer

Bank of America and FleetBoston this morning announced a definitive agreement to merge, creating a bank with a footprint in every region of the USA. The merger will also combine the credit card portfolios of the nation’s #8 issuer and #11 issuer. The new Bank of America credit card portfolio will have approximately $48.3 billion in outstandings, making it the sixth largest U.S. issuer of bank credit cards and the fifth largest issuer of VISA and MasterCards. At the end of the third quarter, BofA reported $33.6 billion in managed card loans, while Fleet reported $14.7 billion in managed card outstandings. BofA has about 23 million credit cardholders and Fleet has 10.5 million. The new BofA will have nearly 5,700 retail banking offices and more than 16,500 ATMs.The company will have 9.8% of the banking deposits in the USA and have the first, second or third largest market shares in 21 of the 29 states in its retail footprint, including significant market shares in 21 of the nation’s 30 largest metropolitan areas. The transaction is valued at $47 billion and is expected to close in the first half of 2004.

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Napster to Offer a Prepaid Gift Card Next Month

Napster is launching a prepaid gift card for music downloads this week, that will be available for sale in nearly 14,000 retail outlets by mid-November. The new “Napster Card” will offer 15 downloads for $14.85. InComm is partnering with Napster on the first mass-distributed music download card. Participating retailers include: Best Buy, CompUSA, Kroger, Safeway, RiteAid, ExxonMobil, Duane Reade, Diamond Shamrock and Speedway/SuperAmerica. A scratch-off surface conceals a PIN that recipients use to activate 15 credits for permanent downloads from the Napster service. Napster offers access to the largest catalog of online music with more than 500,000 tracks spanning all genres and artists. The company is a division of Roxio, Inc.

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Capital One Metrics Improve for 4th Straight Month

Capital One reported that charge-offs and delinquency continue to decline for the fourth consecutive month. With $67.3 billion in managed loans, and approximately $45 billion in U.S. credit card loans, the issuer reported that charge-offs dropped to 5.24% in September, compared to 5.34% in August, 5.75% for July, and 6.20% in June. Delinquency declined to 4.65% during September, compared to 4.74% in August, 4.92% for July and 4.95% in June. At the end of third quarter, Cap One had 46.4 million accounts, including domestic and international credit cards and auto loans. For complete details on Capital One’s 3Q/03 performance visit CardData ([www.carddata.com][1]).

Capital One 2003
Month Charge-offs Delinquency
Apr 03 6.36% 4.86%
May 03 6.40% 4.82%
Jun 03 6.20% 4.95%
Jul 03 5.75% 4.92%
Aug 03 5.34% 4.74%
Sep 03 5.24% 4.65%
Source: CardData (www.carddata.com)

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

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VeriFone Says Quarterly Revenues are Up 12%

Privately-owned VeriFone released some details on its financial performance Friday. The payment card terminal provider reported that revenues for the quarter ending October 31st are expected to be $90 million, a 12% increase over the same period a year ago. VeriFone also said that revenues for the year ending October 31st are now expected to exceed $335 million, an 8%+ increase over the same period last year. The company also expects that EBITDA will exceed $50 million for the same one-year period. VeriFome said it released the information because both of its competitors are reporting year-over-year revenue declines, asset sales, and management shakeups. The company was purchased from Hewlett-Packard 27 months ago.

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