OTI 1Q/03

Contactless smart card specialist OTI reported first quarter revenues of $4.7 million, a 14% gain over the year-ago quarter. Gross profit for first quarter was $2.4 million, up 24% from $1.9 million in the first quarter of last year. Operating loss for first quarter decreased 49%, to $654,000. OTI says it saw significant progress in its petroleum payment management and micropayments products. Since the end of the quarter, OTI announced that it is providing integrated point-of-sale solutions to Loews Cineplex as part of MasterCard’s “PayPass” trial in Orlando, Florida. The Company also recently announced that ABSA, the largest commercial bank in South Africa, had joined OTI’s “FuelMaster Express Program” geared towards private motorists.

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5/3 Cardinal Centinel

Today, CardinalCommerce Corporation and Fifth Third Bank announced that they have signed an agreement to provide Fifth Third online merchants with CardinalCommerce’s payment authentication software, Cardinal Centinel.

CardinalCommerce will enable MasterCard® SecureCode(TM) and Verified by Visa® to authenticate cardholders during online transactions at participating merchants. The service requires cardholders to enter their private password in a pop-up window on their PC before their online transaction can be approved and completed. With these extra security measures, members can be confident that their account is protected, and Fifth Third Bank merchants gain greater assurance about the identity of the person completing the transaction.

CardinalCommerce is the leading provider of online merchant payment authentication for securing online transactions. Cardinal Centinel is designed for financial institutions, merchant service providers and their merchants. The software reduces the level of online fraudulent transactions and guarantees payment to online merchants who use it, while protecting the accounts of cardholders.

“Fifth Third Bank is one of the leading merchant acquiring banks in the United States,” stated James Butler, Executive Vice President for Cardinal Commerce. “Fifth Third’s selection of CardinalCommerce as their provider of payment authentication services is a great compliment. Their merchants will gain immediate benefits with our software by eliminating their fraud liability, gaining guaranteed payments for the first time, and increasing the security and confidence of online customers.”

Robert A. Sullivan, Fifth Third Bank Executive Vice President, offers, “Payment authentication is very important to our online merchants–they want an easy to use, reliable system and CardinalCommerce was able to provide that. Cardinal Centinel has the leading-edge technology Fifth Third customers have come to expect and we are thrilled to have the opportunity to partner with CardinalCommerce.”

CardinalCommerce Corporation is a leading provider of a technology-neutral authentication platform for securing electronic and wireless commerce, thus ensuring that individuals, businesses and government agencies can process electronic transactions and access confidential information safely, securely and privately. Cardinal’s proprietary technology provides consumers, merchants, credit/debit card issuers, and processors the ability to conduct fully authenticated Internet-based e-commerce, while protecting the transactions from fraud. Cardinal Centinel has been chosen as the solution for merchants by more acquirers, processors, gateways and merchants around the world then any other 3D Secure product. CardinalCommerce is based in Cleveland, Ohio, and has partners throughout the United States, Europe, Africa, the Middle East and India. For more information, visit [www.cardinalcommerce.com][1].

Fifth Third Bank processes 8.2 billion ATM and POS transactions per year for more than 185,000 retail locations and financial institutions worldwide, including The Kroger Co., Abercrombie & Fitch, Nordstrom, Inc. and The Finish Line. Fifth Third processes $83 billion in credit card sales annually. Fifth Third Bank is the fifth largest bank acquirer according to The Nilson Report (March, 2003).

Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio. The Company has $84 billion in assets, operates 17 affiliates with 941 full-service Banking Centers, including 132 Bank Mart® locations open seven days a week inside select grocery stores and 1,880 Jeanie® ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee and West Virginia. The financial strength of Fifth Third’s affiliate banks continues to be recognized by rating agencies with deposit ratings of AA- and Aa1 from Standard & Poor’s and Moody’s, respectively. Additionally, Fifth Third Bancorp continues to maintain the highest short-term ratings available at A-1+ and Prime-1, and was recently recognized by Moody’s with one of the highest senior debt ratings for any U.S. bank holding company of Aa2. Fifth Third operates four main businesses: Retail, Commercial, Investment Advisors and Fifth Third Processing Solutions. Investor information and press releases can be viewed at [www.53.com][2]. The company’s common stock is traded through the Nasdaq National Market System under the symbol “FITB.”

[1]: http://www.cardinalcommerce.com
[2]: http://www.53.com

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Account Acquisition Stats

A new study has found that the break-even point for credit card account acquisitions is the lowest among accounts produced through a direct portfolio purchase or agent bank relationships. However, compared to other methods of account acquisition, direct mail delivers accounts with the highest activity and renewal rates. The study by CA-based RK Hammer Investment Bankers shows the break-even point for accounts picked up through portfolio acquisition is about 11 months, as compared to accounts acquired through pre-approved with telemarketing, which took up to 40 months. The lowest activity rates and renewal rates occurred with Internet acquired credit card accounts.

ACQUISITION TYPE ACTIVE RATES RENEWAL RATES BREAK-EVEN
Portfolio Acquisition NA NA 11 mos
Direct Mail 80%-90% 85%-90% 28 mos
Pre-Approved 70%-80% 80%-85% 24 mos
Telemarketing 60%-70% 65%-70% 36 mos
Pre.Appr+Tele 55%-60% 60%-65% 40 mos
Internet App 55%-60% 50%-60% 20 mos
Agent Bank 65%-75% 75%-85% 18 mos
AVERAGE 68% 82% 25 mos

Source: RK Hammer Investment Bankers

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DoCommerce

Japan’s NTT DoCoMo yesterday launched a new on-line shopping and payments service. “DoCommerce” will enable users of “i-mode” phones to conduct mobile shopping and pay online with their VISA, MasterCard or JCB credit cards. NTT DoCoMo has more than 46 million customers, with 38 million e-mail and Internet subscribers. The company says it hopes to sign up nearly one million “DoCommerce” subscribers in the first year. Initially, 10 virtual shops, including three malls and ten boutiques will be on the “DoCommerce” dedicated site. NTT DoCoMo is also offering an account aggregation feature that enables “DoCommerce” users to check simultaneously, and on one single screen, the balances of their various financial accounts with banks and credit card companies.

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EMEA POS

A new study shows the installed base of POS terminals in the EMEA region increased 6% last year. The research by TN-based IHL Consulting Group found nearly 1.6 million POS terminals are still running DOS as the primary operating system, which creates a major opportunity for replacement systems. IHL says that Linux is getting more and more interest as these retailers look to replace aging terminals. However, new releases of the “XP Embedded” operating system with a lower cost license fee for the retail market may slow that interest and sway that business towards Microsoft. The study was conducted in association with the Association for Retail Technology Standards of the National Retail Federation.

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Incard Acquisition

Italy’s Incard SpA, the sixth largest card manufacturer worldwide, has been acquired by Geneva-based STMicroelectronics. STM purchased the assets and business of Incard from IPM Group in a deal valued at US$88 million. Incard has 290 employees, a large part of which are technical experts working in R&D, product development and application support. Incard has a wide product range of cards, software and development kits covering several smart card applications, with a special emphasis on telecom prepaid cards and SIM modules. STM and IPM will also enter into a long term agreement to working together on smart cards, including terminals, security, WLAN, mobile business and telecom applications. The IPM Group’s activities span all aspects of the fixed network market from products – including payphones, multimedia kiosks, Internet appliances, smart cards, and network access systems – up to advanced global engineering solutions.

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Diners Club Retail Bonus

Diners Club and Gap, Banana Republic, and Old Navy Stores team up to offer Diners Club Cardmembers a chance to earn double Club Rewards points between May 1 and June 30, 2003, each time a purchase is charged to the Diners Club Card. Gap, Banana Republic, and Old Navy Stores are part of Gap, Inc., one of the world’s largest retailers with more than 4,250 stores and 165,000 employees worldwide. For more information on Gap, Inc., visit .

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Kiwi Card

Kiwibank, the totally New Zealand-owned bank, last week launched an aggressively-priced MasterCard targeted at the country’s 1.5 million credit cardholders. The bank, which started operations one year ago, has 135,000 customers. The “Kiwibank MasterCard” carries a 12.9% interest rate and a $38 annual fee, according to The RAM Report ([www.ramreport.com][1]). However, there is no annual fee if a customer has a home loan or deposits with the bank of more than $50,000. The card also provides up to 55 interest free days on purchases. The new MasterCard also offers a no-fee balance transfer feature. The average credit card interest rate in New Zealand is about 20%. Kiwibank was established by the Government last year after larger banks closed branches in rural communities.

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

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OTI 1Q/03

Contactless smart card specialist OTI reported first quarter revenues of $4.7 million, a 14% gain over the year-ago quarter. Gross profit for first quarter was $2.4 million, up 24% from $1.9 million in the first quarter of last year. Operating loss for first quarter decreased 49%, to $654,000. OTI says it saw significant progress in its petroleum payment management and micropayments products. Since the end of the quarter, OTI announced that it is providing integrated point-of-sale solutions to Loews Cineplex as part of MasterCard’s “PayPass” trial in Orlando, Florida. The Company also recently announced that ABSA, the largest commercial bank in South Africa, had joined OTI’s “FuelMaster Express Program” geared towards private motorists. For complete details on OTI’s first quarter results visit CardData ([www.carddata.com][1]).

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

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AFCU ATMs

Andrews Federal Credit Union, which serves 99,000 members including personnel at Andrews Air Force Base, McGuire Air Force Base and U.S. servicepersons in central Germany, Belgium and The Netherlands, has chosen eFunds to provide ATM driving services and network access to their members in the USA and Europe. AFCU previously controlled the driving of their ATMs, but will now outsource that function to eFunds because it is one of the few vendors worldwide that has the currency conversion technology to support ATMs that dispense both U.S. dollars and international currencies from a single machine. AFCU was introduced to eFunds through an existing EFT services partnership with ENCORE Electronic Services Cooperative. ENCORE’s member base currently includes more than 110 credit unions of which more than 68 use eFunds EFT services.

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DO-COMMERCE

NTT DoCoMo announced it will launch a new on-line shopping and payments service on May 26th. “DoCommerce” will enable users of i-mode (2G and 3G SSL-compatible) handsets to conduct mobile shopping and pay online with their VISA, or JCB credit cards. NTT DoCoMo has more than 46 million customers, with 38 million e-mail and Internet subscribers. The company says it hopes to sign up nearly one million “DoCommerce” subscribers in the first year. Initially, 10 virtual shops, including three malls and ten boutiques will be on the “DoCommerce” dedicated site. NTT DoCoMo is also offering an account aggregation feature that enables “DoCommerce” users to check simultaneously, and on one single screen, the balances of their various financial accounts with banks and credit card companies.

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Fraud Profits

A lawsuit seeking class action status has been filed on behalf of card-not-present merchants against VISA, MasterCard, American Express, and Discover, alleging that the payment card networks have profited from fraud-related charges through charge-back fees. The lawsuit claims that merchants have paid virtually all of the costs associated with fraud and theft. The complaint further alleges that the payment card networks failed to disclose certain supra competitive transactional and penalty fees to Internet, telephone and mail order merchants and forced such merchants to pay such supra competitive fees with the abuse of their monopolistic powers. Moreover, the lawsuit says, many of these supra competitive fees were only stated in their unpublished rules and regulations, which were never disclosed to merchants at the time of contracting. The lawsuit was filed on behalf of a small group of merchants, and is being litigated by Mark Ishman of NC-based Triangle Law Center. Ishman is soliciting for class members via the Internet. The Triangle Law Center specializes in Internet law, ecommerce law, and cyberlaw. Meanwhile, Paycom Billing Services filed a lawsuit last week that alleges that MasterCard has established monopolistic rules that allow it unreasonable discretion to dominate Internet merchants, and it has exercised this power to illegally impose fines and penalties in the millions of dollars. Former Federal Prosecutors for the US Department of Justice, William Miller and Richard Crane were among those representing Paycom. (CF Library 5/13/03)

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