Hypercom 1Q/03

Although Hypercom reported a larger loss in 1Q/03 than 1Q/02, the company continued to strengthen its balance sheet as cash balances increased to $42.9 million at the end of the first quarter, compared to $29.8 million at year-end 2002. The payment card terminal manufacturer says a significant reduction in working capital requirements plus current quarter operating results helped strengthen its cash position. Hypercom’s 1Q/03 loss, before discontinued operations, was $1.1 million compared to a loss of $900,000 in the same quarter last year. First quarter net revenues were $55.7 million compared to $70.8 million in 1Q/02. Hypercom says seasonal fluctuations, the soft global economy, and the ongoing conflict in Iraq contributed to lower first quarter revenues. The company says its projection for 2003, excluding the impact of discontinued operations, is net revenues between $265.0 million and $273.0 million, and income from continuing operations between $19.7 million and $24.0 million. For complete details on Hypercom’s 1Q/03 results visit CardData ([www.carddata.com][1]).

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

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ACH 2002

The number of ACH payments originated by financial institutions hit 8 billion last year, up 13.6% from 2001. The electronic payments handled by the ACH payments were valued at $21.7 trillion. The number of Direct Payments last year totaled 2.8 billion, a 10% increase over the previous year. The value of these payments was $2.0 trillion. E-Checks nearly tripled in 2002 with more than 490 million e-check payments made. Last year there were 233 million e-checks initiated via the Internet, up 213%. The number of e-checks at the POS was 167 million, up 89%. Over the telephone, there were 68 million e-check payments, up 680%. More than 24 million checks sent to remittance locations were converted to e-checks in 2002, the first year this application was available.

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Weblinking

Four financial services regulatory agencies last week issued guidance to assist financial institutions in identifying and managing the potential risks involved in the use of weblinks. Regulators says the primary source of risk is that financial institution customers may be confused about the role and responsibility of the institution with respect to products or services available from third parties through the weblink. For example the use of frame technology may give the impression to consumers that the bank and the third party are affiliated. Regulators also said the use of pop ups may raise disclosure issues. The guidance encourages financial institutions to use clear and conspicuous disclosures to explain their limited roles with respect to products and services offered by third parties. The regulatory agencies also encourage financial institutions to conduct appropriate due diligence of potential weblinking parties and monitor the activities of linked third parties.

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CardData 1Q/03

Mid-level bank credit card issuers posted solid gains in both outstandings and volume during the first quarter. Indeed, South Dakota sub-prime specialist First Premier Bank continues to defy gravity, posting a 29% increase in first quarter outstandings and a 30% surge in 1Q volume compared to the same period one year ago. First Premier offers low credit limit cards with high maintenance fees. First Premier’s average balance per account is $229 and average first quarter volume per account was $77, well below industry averages. But the sub-prime formula continues to deliver as the issuer now has more than three million accounts, 24% more than 1Q/02. As a group, a sampling of five mid-level issuers by CardData shows an average annual growth rate of 16% in first quarter outstandings. The peer group also delivered a 15% increase in 1Q/03 volume compared to 1Q/02. For the latest first quarter statistics on the nation’s top issuers visit CardData ([www.carddata.com][1]).

Issuer OUTSTANDINGS VOLUME
BB&T Bankcard $869MM (+13%) $468MM (+16%)
Associated Card $808MM (+26%) $165MM (+14%)
First Premier Bank $729MM (+29%) $246MM (+30%)
Commerce Bancshares $503MM ( +5%) $350MM (+14%)
SouthTrust Bank $336MM (NC) $151MM ( +3%)
TOTAL: $3.245B(+16%) $1.380B(+15%)

MM- million; B- billion;

Source: CardData ([www.carddata.com][2])

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

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D-Day

A major antitrust lawsuit filed in 1996 against VISA and MasterCard over debit cards finally gets its day in court this week. However in a stunning decision this morning, the presiding judge ruled that MasterCard is no longer a part of the trial. MasterCard, which has a 23% share of the off-line debit card market, asked the court on March 14th to sever the plaintiffs’ claims against MasterCard saying it would be prejudicial and could cause substantial jury confusion. Following jury selection this morning, the trial got underway in U.S. District Court for the Eastern District of New York in Brooklyn before Judge John Gleeson. The class action lawsuit, representing five million merchants in the USA, was filed by Wal-Mart, The Limited, Sears Roebuck, Safeway, Circuit City, and three trade associations. The lawsuit charges the card associations with violating U.S. antitrust law by monopolistic and uncompetitive business practices concerning debit cards. The merchants also claim that VISA and MasterCard and their member banks have forced merchants to accept their off-line signature debit card transactions under their “Honor All Cards” rule at rates five to ten times higher than on-line PIN debit card transactions. VISA and MasterCard say that despite several favorable rulings for the plaintiffs in Judge Gleeson’s April 1st Summary Judgment proceeding, the merchants have yet to prove there was any harm to competition and consumers from the “Honor All Cards” rule. The card associations point to the fact that PIN debit card transactions are growing faster than off-line debit and that their competitors control more than two-thirds of the PIN-based debit market. VISA and MasterCard also say that if the merchants prevail, the benefits of universal acceptance will be undermined and consumers will suffer by being denied their right to choose their preferred method of payment. MasterCard noted that its online debit mark, “Maestro,” is currently the least expensive online debit alternative. The trial is expected to conclude by August 1st.

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WLAN CONSORTIUM

Munich-based Giesecke & Devrient has become a member of the WLAN Smart Card Consortium. G&D joins VeriSign, Alcatel, Gemplus, Infineon Technologies, Oberthur Card Systems, Schlumberger, and VISA as members of the consortium.
The mission of the WLAN Smart Card Consortium is to define and promote smart card related specifications for WLAN across all market segments, including enterprise, public WLAN and home networks. The objectives are to produce specifications for industry adoption of smart cards for WLAN in regards to security, ease of use and credit/credential management. The consortium will produce submissions based on specifications for the appropriate standards bodies and promote general market adoption and credibility for the utilization of smart cards in WLAN networks.

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Advanta 1Q/03

Advanta reported that its “MasterCard Businesscard” portfolio hit $2,744,182,000 in the first quarter, compared to $2 billion one year ago, a 35% gain. Card volume for the first quarter increased more than 45% over 1Q/02, to $1,602,498,000. Business Card results for the first quarter included an approximate 160 bps decline in net principal charge-offs on managed receivables to 8.0%, on an annualized basis, as compared to 9.6% for 1Q/02. Over 30 day delinquencies on managed receivables declined 82 bps to 6.36%, and over 90 day delinquencies on managed receivables decreased 30 bps to 3.08%, as compared to first quarter 2002. For complete details on Advanta’s 1Q/03 performance visit CardData ([www.carddata.com][1]).

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

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HOME CAPITAL 1Q/03

Toronto-based Home Capital Group reported that its personal and credit card loans have grown 86% over the past year from $15.3 million to $28.5 million. At of the end of 1Q/03, the gross credit card receivable balance included $12.9 million in accounts secured by cash deposits or mortgage collateral, and $6.2 million in unsecured accounts. The total credit approved is comprised of $21.3 million in secured and $9.1 million in unsecured accounts. Security deposits on VISA accounts amounted to $10.8 million. “Equity Plus VISA” credit cards are secured by a collateral residential mortgage, and this product
amounts to $6.4 million of the credit card receivable balance.

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