Fraud Referral Decisions

Fair Isaac this morning announced a new solution to reduce the number of ‘false positives,’ or transactions incorrectly flagged for investigation, at the point of sale. The new “Strategy Science for Fraud Referral” will enable lenders to simulate various fraud referral strategies and test their financial impact before deploying them in real time. Experiments in realigning referral strategies to reduce fraud losses or false positives can be conducted in a measured, controlled environment to provide the lender with a snapshot of how each strategy will affect overall profitability. Fair Isaac says the decision to refer a transaction at the point of sale for further cardholder verification or investigation based on the score and other metrics has until now been made on a judgmental basis or with the aid of ad-hoc data analysis. The new “Strategy Science” solution represents a much more holistic approach to portfolio fraud management. Fair Isaac says this new empirical approach to developing fraud referral strategies will bring a dramatic increase in profitability to issuers who are seeking the right balance between creating positive customer experiences and containing fraud losses.

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CHARGE-OFFS

Bad credit card debt continues to soar in Singapore as charge-offs reached a record $15.6 million in April. In March card issuers lost $13.60 million, in February $13.70 million, and during January $12.10 million. According to the Monetary Authority of Singapore, the credit card loss rates for this year are running 70% over 2002 figures. However, card volume for the first four months of this year has fluctuated between $2.4 billion and $2.5 billion. The total number of cards in the country at the end of April was 3.3 million, which included 2,283,126 primary cards and 979,846 supplementary cards.

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Cap One May Data

Capital One reported yesterday that charge-offs for May increased to 6.40% compared to 6.36% in April, and that its delinquency rate (30+days) declined from 4.86% in April to 4.82% in May. The Company’s ‘managed’ consolidated financial statements reflect adjustments made related to effects of securitization transactions qualifying as sales under GAAP. The Company generates earnings from its ‘managed’ loan portfolio which includes both the on-balance sheet loans and off-balance sheet loans for which the Company has retained significant risk and rewards.

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Business ExtrAA

American Airlines and American Express have teamed to issue a co-branded corporate card for mid-sized companies this fall. The “American Express Business ExtrAA Corporate Card” will offer a quarterly cash rebate on airline tickets and a points program for all AA-related card purchases. Companies will be able to earn up to a 10% quarterly cash rebate on first, business, or full coach American Airlines tickets charged to the card. Discounted leisure fares do not qualify. Companies will also be enrolled automatically as members in American’s “Business ExtrAA” program and earn points for total spending with American on the Card. Points can be redeemed for free tickets, upgrades, and “Admirals Club” memberships. AmEx and AA said a typical mid-sized company that charges $100,000 of travel on American to the new card can save as much as $10,000 annually, plus earn as many as 12 free tickets per year. American Airlines has a long-standing co-branded credit/debit bank card relationship with Citibank.

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PATH & MetroCard

San Diego-based Cubic Corp. has received a $37.1 million contract to provide a new high-tech automatic fare collection system for the PATH rapid-transit rail system that will ultimately allow rail commuters to pay for their PATH rides with the soon-to-be-available smart New York City Transit “MetroCard”. Under the terms of the contract, Cubic will be providing new “open system” Smart Card technology that will be integrated with New York City Transit’s (NYCT) MetroCard system.

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Papa John’s & BEETLE

Papa John’s International has selected Wincor Nixdorf’s “BEETLE/NetPOS” POS terminals as its next generation hardware platform for its 2,794 restaurants. The BEETLE /NetPOS configuration includes the Linux operating system for a lower total cost of ownership and maximum performance, and a Wincor Nixdorf touch screen for operator ease of use. Papa John’s selected Wincor Nixdorf because of the company’s proven expertise with Linux and its ability to assist Papa John’s in migrating its text-based application to a GUI-based, touch-screen version designed to increase user efficiency and reduce training time.

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Processor for Nonprofits

Chicago-based Moneris Solutions has been selected as the Association Forum’s exclusive provider for credit card processing and related financial services for its 1,600 nonprofit organizations throughout the USA. The organizations contribute more than $11 billion to the local and national economy. Under the terms of the agreement, Moneris will deliver advanced payment processing through point-of-sale hardware, software, e-commerce solutions and web-based financial reporting. Moneris will also offer gift cards and card-based customer loyalty programs.

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VeriFone TDES & PED

VeriFone has received VISA “TDES” and “PED” accreditation for its “Omni 3750,” “Omni 3600,” “Omni 7000MPD”, and “SC 5000 PINpad”. . Additionally, the devices have all received EMVCo Type Approval Terminal Level 1, based on EMV 4.0 specifications for global smart card acceptance. VeriFone also has applications that have received EMVCo Type Approval Terminal Level 2, based on EMV 4.0.

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Maestro 1Q/03

While MasterCard does not release info on its domestic “Maestro” program, the network’s online, PIN-based global debit brand mark now appears on 466 million cards worldwide, a 10% increase over one year ago. Europe continues to be the largest cardholder base for “Maestro,” with 226.4 million cards, an almost 7% increase over year ago figures. There was a 41.7% increase in the number of merchant terminals accepting “Maestro” in Europe in the first quarter. With over 144.1 million “Maestro” cards, Asia/Pacific was the second largest “Maestro” region for the first quarter, as the number of cards in the region rose 14.4% over first quarter 2002. With 34.1 million “Maestro” cards in circulation within Latin America, the growth for first quarter of 2003 was close to 21% over the same period in 2002, and the number of merchant terminals in the region increased close to 22%. In South Asia, Middle East/Africa, “Maestro” acceptance grew 40.3% in merchant terminals in 1Q/03 compared to 1Q/02. There were close to 16.1 million “Maestro” cards in circulation in the region during the first three months of this year. Worldwide, “Maestro” is now accepted for purchases at more than 7.8 million merchant terminals in 93 countries and territories, and at 892,800 “MasterCard/Maestro/Cirrus” ATMs.

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ACH Costs

For the third consecutive year the number of checks processed by the Federal Reserve has decreased as the number of ACH transactions increases. Furthermore, the cost to the Fed to process a check remained at 4.5 cents per item in 2002, whereas its cost to process an ACH payment decreased to 1.3 cents per item. In its annual report to Congress, the Federal Reserve System reported that it processed 16.59 billion checks in 2002, a 1.9% decline from 2001. By contrast, the Fed’s commercial ACH volume increased by 12.1% last year to 4.99 billion items. Since 1995, the unit cost for an ACH transaction has decreased from 3.5 cents to 1.3 cents, while the unit cost for a check has increased from 3.6 cents to 4.5 cents.

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REPLACE-TO-EMV

Seoul-based CyberNet has launched a trade-in program, developed in cooperation with VISA, that enables VISA members worldwide, to migrate to EMV at a cost of about US$200. The “Replace-to-EMV” program applies to CyberNet’s “JADEBreakthrough” EMV terminal, that was announced In January, and which is powered by a 32 bit processor, the CyberSoft operating system, and supported by a JAVA development toolkit. VISA members who acquire “JADEBreakthrough units” wil receive a credit for each non-EMV terminal that the member retrieves from its retailers and sends back to CyberNet. The acceptance device program is part of the “VISA Smart Breakthrough” global initiative designed to support EMV migration. CyberNet began in 1998 in Korea as CyberNet Information System. Today, the company has regional offices in the USA, Australia, UK, Russia, Poland and Brazil.

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