WESTPAC RISK-FINDER

Westpac New Zealand is deploying MasterCard’s new fraud-risk management tool, “RiskFinder.” The state-of-the-art system uses a unique neural network system, which is able to instantly access historical fraud data from around the world when each card transaction is being processed electronically. This happens in near real time, with each transaction – based on a 1-999 evaluation system – assigned a degree of risk that is then sent back to the issuer, who then determines what to do next. In the Asia-Pacific region, PT ANZ Panin (in Indonesia), EON Bank, and Alliance Bank (both in Malaysia), have implemented “RiskFinder.”

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Mail Discounts

A three-year “Negotiated Service Agreement” between the U.S. Postal Service and Capital One was approved yesterday by the Postal Rate Commission. Under terms of the proposed deal, Capital One will receive volume discounts between 3 cents and 6 cents per piece, depending on mail volume. The deal caps the discount at $40.6 million for the three year term. The proposed agreement also requires Capital One to receive address corrections electronically instead of having undeliverable mail returned. The deal, if approved, is unprecedented and will likely produce a number of similar deals for major direct mail users such as MBNA, Bank One, and Citibank. The Capital One agreement still needs the approval of USPS Board of Governors which meets in early June. Reportedly, Capital One is the largest producer of First-Class mail and the USPS’ fourth-biggest customer. Capital One mails out more than 1.2 billion pieces of mail annually, and currently pays 29 cents for First-Class mail. Industry wide, nearly five billion credit card solicitations were mailed in the USA last year, according to CardWatch ([www.cardwatch.com][1]).

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

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Providian Notes

Providian yesterday sold $250 million of five-year convertible notes after announcing on Monday plans to issue $150 million of the notes. The securities will bear interest at the rate of 4.00% per annum. Providian says it plans to use the funds for general corporate purposes including debt buybacks. The announcement of the convertible notes has sent the company’s stock down from a 52-week high on Friday of $9.28 to about $8.00, or approximately 16%. The stock opened this morning at $8.13 per share. Two rating firms downgraded Providian stock within the past four trading days. Merrill Lynch lowered Providian from “buy” to “neutral” and Legg Mason moved Providian from “buy” to “hold.” Providian reported 1Q/03 net income of $4.7 million and added approximately 600,000 new accounts in the first quarter. Managed loans for the first quarter were $18.47 billion according to CardData ([www.carddata.com][1]). (CF Library 4/25/03)

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

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Virgin Start

Virgin chief executive Richard Branson has rattled the Australian credit card market as his new co-branded MasterCard produced more than 50,000 applications in its first week. Branson says the combination of its low interest rate, no annual fee, and instant rewards hit the hot buttons of Aussies, similar to the success of the “GM MasterCard” in the USA during 1992. The response is unprecedented in Australia’s credit card industry, according to The RAM Report ([www.ramreport.com][1]). In January 2002 Virgin launched a credit card in the UK, which has since attracted more than 300,000 cardholders. The new “Virgin MasterCard” for Australia is being issued by Westpac Banking in association with Virgin Money Group, a joint venture between Virgin and AMP. The new card features the “Mates Rates” rewards which offers cardholders automatic, instant discounts when using the card at participating merchants. The “Virgin MasterCard” offers a six-month 4.9% intro rate followed by ongoing interest rate of 11.9%. There is no annual fee and a 55 day grace period. (CF Library 5/15/03)

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

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Card Detective

UK-based Lake Image Systems has introduced a system which verifies and proves the integrity of plastic card data, magnetic stripe data, and carrier document information, while ensuring the matching of these personalized components as they are merged on a card attacher, mailing base or inserter. The new “Plastic Card Detective” enables comparison of piece production to the print file information, in real time, to identify any missing, duplicate, out of sequence or mismatched pieces as they occur. It provides an audit trail for applications containing sensitive personal information such as HIPAA related applications. The solution’s reporting structure provides detailed, networkable reports of all pieces produced and all pieces which need to be remade.

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SMART CARDS 2002

Brussels-based Eurosmart reported that banking/retail smart cards grew 16% last year worldwide, reaching 175 million units. The industry group predicts that smart cards in this category will grow 17.1% in 2003 to hit 205 million units. Overall, more than 700 million microprocesor-based smart cards were shipped last year, with telecom making up 430 million of the total shipments. Eurosmart also reported that shipments of smart cards containing a memory chip with read/write capability and in some cases hardwired security functions totalled more than 1 billion last year, with 95% used in telecom. Memory cards are not considered smart cards by many. Eurosmart is the main international smart card association, representing the “Voice of the Smart Card Industry” for multi-sector applications. Its members include ASK, Ascom Monetel, Atmel, Cyber-COMM, Datacard, ELVA, Emosyn, FNMT, Fujitsu, Gemplus, Giesecke & Devrient, Hitachi, Incard, Infineon Technology, Ingenico, INSIDE Technologies, Microelectronica Esp., MCO, NEC, Oberthur Card Systems, ORGA, Philips Semiconductors, PPC Card Systems, Rafsec, Sagem, Samsung, SchlumbergerSema, Setec Oy, Sharp, STMicroelectronics, Thales e-Transaction, Wave Systems and Xiring.

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April Card Bonds

Charge-offs among credit card-backed securities rose 18 bps in April, the highest level since January 1998. According to the Fitch credit card index charge-offs hit 6.73% last month. However, delinquencies moved in the opposite direction falling 8 bps to 3.63%, a possible sign that deterioration in credit quality may give way in the months to come. Although bankruptcy filings declined month over month for the first time in 2003 falling 0.54%, year-to-date filings were up 9.3% from levels one year ago. Fitch expects bankruptcies to increase by roughly 8.0% in 2003 to 1.65 million.

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