POLCARD ACQUISITION

Warsaw-based Innova Capital Sp. z o.o. and Rhode Island-based GTECH
Holdings Corporation have teamed to acquire PolCard S.A., debit/credit card
merchant transaction acquirer and processor for approximately $60 million,
and the assumption of $2 million in debt. Following the closing, GTECH will
hold a 62.8% equity stake in PolCard, 36.9% will be held by Innova, and the
remaining 0.3% will be retained by one of the current owners, the Polish
Bank Association. The PolCard business is being acquired from a group of
Polish banks and a travel services company, ORBIS S.A. PolCard has a
nationwide retail network of 34,000 POS terminals and established
relationships with many of the country’s leading card-issuing banks.
PolCard’s most recent annual revenues were $60 million. GTECH has been
operating in Poland since 1991, providing products and services to
Totalizator Sportowy, the National Lottery, including 6,500 POS terminals
and the largest wireless POS network in Central Europe. Currently, less
than 17% of bank-card transactions in Poland are cashless transactions
originating at the POS as compared to 40% for its Western European neighbors.

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Bank One Goes In-House

Bank One announced this morning it is moving its credit card processing back in-house in 2006 with the help of TSYS. In an unusual arrangement, Bank One plans to move to the “TS2” technology platform when its contract with First Data ends in June, 2004. Under terms of the deal, TSYS would maintain all card processing functions, such as account transaction information, for two years. In 2006, Bank One would transfer the processing services in-house under a license of the “TS2” software. Bank One said its decision to handle credit card processing in-house will produce the most cost-effective infrastructure in the marketplace, allowing the bank to introduce innovations faster and deliver individualization. Bank One, the nation’s third largest bank credit card issuer, has 50.3 million cardholders and $74 billion in credit card outstandings at EOY 2002, according to CardData ([www.carddata.com][1]). Last year, Bank One decided to dump the “First USA” name on its credit card products.

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

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LG CARD & MICROSTRATEGY

LG Card has deployed the “MicroStrategy Business Intelligence Platform” to
leverage qualified customer data from its 18.6 million credit card
customers. LG says the new software enables end users to analyze credit
risk for delinquent customers, track credit card usage to up-sell to
existing customers, and analyze significant amounts of customer-interaction
information. LG Card is also enhancing operational efficiency by letting
end users create and run reports they need without IT involvement. LG Card
was formed in 1988 and has a 40% market share of the Korea credit card
market. The firm has 2,750 associated stores, 50 branches nationwide and
6.5 trillion won in revenue.

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Freddie Mac Corporate Card

U.S. Bank Corporate Payment Systems, the largest issuer of VISA-branded commercial card programs, has signed Freddie Mac to a “VISA Corporate Card” program. U.S. Bank Corporate Payment Systems offers clients a full suite of solutions for commercial, fleet and B2B payment needs. U.S. Bank was the first to offer corporate bankcard, purchasing and relocation card programs, the first to offer a private-label fleet card and is one of the largest merchant acquirers in the world.

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Midwest Miles

Midwest Airlines, which has a co-branded program with Juniper Bank, has re-launched its frequent flyer program under the name “Midwest Miles,” and is unloading partnerships with Northwest Airlines and Virgin Atlantic, and adding new partnerships with American Airlines and Air Jamaica.  The program relaunch coincides with the February 28 delivery of the first of 25 new Boeing 717 aircraft, featuring a quieter cabin and newly designed Recaro seats with headrests and footrests for additional comfort.

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Experian & CardCops

Experian has teamed with CardCops.com, whereby the Internet will be monitored daily by CardCops to detect whether any credit cards issued by participating Experian clients appear to have been compromised.  As cards are detected in the daily search, the information will be deposited in secure FTP (File Transfer Protocol) sites established for each credit card issuer enabling them to monitor usage to determine if the cards have been stolen.  Credit card grantors will then determine the appropriate course of action.

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ComNet 1000

NJ-based NexTran, a subsidiary of South Korea’s Chungho ComNet Co., has launched the “ComNet 1000” countertop ATM which offers additional services, such as pre-paid wireless recharging, pre-paid long distance, wire transfers, check cashing, and the sale of movie tickets, beyond basic ATM functions. The ComNet 1000 provides the functionality of a large floor-model ATM in a countertop device, said Park. It can also be configured as a through-the-wall terminal or as a freestanding device using optional set-up kits.

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NHL Promotion

MasterCard and Best Western have partnered to offer MasterCard cardholders the chance to win trips to a 2003 NHL “Stanley Cup Finals” game and the option of earning quadruple airline miles on partner airlines during March. To win, simply stay at a Best Western hotel between March 1 and April 15. Pay for the stay with your MasterCard and receive a scratch-and-win game piece.  Or, request a free game piece by mail.  Game pieces are available while supplies last.

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SameDayPay.com

San Francisco-based BankServ has rolled-out “SameDayPay.com,” to enable consumers to make contributions to universities via electronic ACH transactions.  The way this product works, says Kvederis, a donor simply registers on-line at http://www.SameDayPay.com, chooses a user ID and password, then registers the checking or savings account from which the payment will be made. The school, which also has registered with SameDayPay.com, is notified the same day the payment is made, and the donor is likewise notified.

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Bankruptcy 2003

A credit ratings firm has predicted that bankruptcies will increase by roughly 8.0% in 2003 to a level of 1.65 million. Fitch Ratings also expects consumer credit quality to be challenged in the months to come. Meanwhile, for the December collection period, credit card chargeoffs and serious delinquencies moved in opposite directions. Fitch’s 60 days or more delinquency index posted a five-basis-point decline to 3.49%, its lowest level since October, yet 8 bps above prior-year levels. On the other hand, chargeoffs continued their upward movement for the fourth consecutive month. Chargeoffs increased 23 bps to 6.51%, the highest level since April 2002 and 68 bps higher than prior year levels. Sub-prime chargeoffs increased for the fifth month in a row to a level of 18.61%, up 199 bps from the November 2002 collection period and 24.7% from prior-year levels.

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Card Premiums

Premiums paid for smaller credit card portfolios, mostly credit unions, have been rising due to better credit quality than larger portfolios. So far during 1Q03, 16 larger deals have occurred, with an average premium price of 18.94%, up 44 basis points from year-end 02. According to investment bankers R.K. Hammer, 120 smaller deals (as little as $1MM or less) traded hands during 2002. Hammer says portfolios in the $15 million to $30 million range have commanded average premiums of nearly 22%.

Sale Portfolio Size Ave. Premiums Paid

< $7.5MM 15.1% $7.5-15MM 19.9% $15-30MM 21.8% $30-40MM 19.5% $40-50MM 18.3% $50-60MM 19.0% $60-70MM 19.5% $70-80MM 19.7% $80-90MM 18.9% $90-100MM 18.2%

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