Retailer Reaction

The National Retail Federation gloated over this week’s settlements reached with VISA and MasterCard. The NRF says it’s a victory for both retailers and consumers because high fees have driven up the price of every product sold. The trade association says that VISA and MasterCard have charged merchants more than $1 extra on every $100 spent whenever a debit card user signs for a purchase. The NRF says the settlement will eliminate that extra charge and save American consumers billions of dollars. Under settlements reached with the card associations this week, the fees for signature transactions will be substantially reduced between now and January 1, 2004. In addition, merchants will no longer be required to accept VISA or MasterCard debit cards unless they choose to do so, although most are expected to continue to accept the cards at competitive prices negotiated between the two card companies and the retailers. The MasterCard settlement includes damages of approximately $1 billion while the VISA settlement includes damages of approximately $2 billion. The damages will be divided among the retailers represented in the suit, based on a percentage of the debit card transactions they have conducted.

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Oberthur 1Q/03

Oberthur Card Systems reported that sales for the first quarter, a traditionally weak quarter, reached 103.8 million Euros, a slight increase over 1Q/02. Nearly 29 million smart cards were shipped during the quarter, a 39% gain over the year-ago quarter. Compared to 1Q/02, smart card sales increased by 10.8% as a result of both a volume increase, and a 20.5% average selling price decline. Banking smart cards shipments have increased by 26.9% on a year-on-year basis, totaling 11 million cards delivered. Oberthur says growth in this segment came essentially from the UKIS migration program currently taking place in the United Kingdom. Sales of SIM cards hit 13.4 million cards for the first quarter, a 28.5% gain on a year-on-year basis. For complete details on Oberthur’s first quarter results visit CardData ([www.carddata.com][1]).

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

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Bank Reaction

The Independent Community Bankers of America said Thursday that the VISA and MasterCard debit card settlements, after millions of dollars of legal fees, will only serve to devalue and potentially “Balkanize” the United States’ efficient payment processing systems. The ICBA says that Wal-Mart’s ceaseless expansionist appetite goes far beyond just card litigation, as the retail behemoth continues to try to acquire its own banking charter. Its current focus is the industrial loan company and Wal-Mart supports national legislative efforts underway to expand this charter and accord it full interstate branching powers. The ICBA says the unfortunate court-engineered decision supporting Wal-Mart’s efforts to tear down the payments system that has built consumer credit in America should sound an alarm.

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EURONET 1Q/03

Euronet Worldwide reported revenues of $33.1 million for first quarter compared to $17.0 million for 1Q/02. The quarter included the sale of Euronet’s U.K. network and its acquisition of e-pay Limited. e-pay contributed $17.4 million in revenues for the quarter. Net income for the first quarter was $15.4 million. The EFT Processing segment posted first quarter revenues of $11.9 million. The EFT Processing segment processed 23.4 million transactions in the first quarter compared to 15.6 million
transactions for the same period last year. The segment completed the quarter with 2,994 ATMs owned or operated, compared to 2,548 ATMs at the end of the first quarter of last year. Euronet owns and/or operates ATMs in Hungary, Poland, Germany, Croatia, the Czech Republic, U.K., Greece, Kosovo and Egypt. The Prepaid Processing segment reported first quarter 2003 revenues of $17.4 million and operating income of $1.5 million, reflecting the operating results of e-pay from the beginning of February 2003 through the end of the quarter.

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AEROPLAN DEAL

Bankrupt Air Canada has received an unsolicited and non-binding expression of interest for a credit card agreement in regard to its “Aeroplan” frequent flyer program. Reportedly, MBNA has made an offer to be the exclusive credit card partner of Air Canada, replacing Canadian Imperial Bank of Commerce. MBNA currently issues a co-branded “Aeroplan” credit card in the USA. Earlier this month, Air Canada and CIBC agreed to extend their “Aeroplan” air miles contract from 2009 to 2013. Under terms of the deal, CIBC agreed to boost its prepayment to Air Canada for air miles from $200 million to $350 million, and agreed to pay Air Canada a higher price per “Aeroplan” mile. CIBC purchases “Aeroplan” miles to issue to CIBC “Aerogold VISA” credit card customers. As at March 31st, CIBC carried the payment at $181 million on its balance sheet. In February, Air Canada and MBNA launched the “Air Canada Aeroplan Platinum Plus MasterCard.” The program enables “Aeroplan” members, resident in the USA, to accumulate one “Aeroplan Mile” for every dollar spent on eligible purchases. There are 400,000 “Aeroplan” members in the USA. Since its inception in 1984, Aeroplan has generated more than six million members in over 200 countries and has signed over 90 partnerships. In January 2002, “Aeroplan” became a wholly-owned subsidiary of Air Canada. Since then Air Canada recently agreed to let Onex Corporation acquire a 35% equity interest in “Aeroplan” for $245 million.

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