CONSUMER DEBT UP

Household credit rose by 7.6% during the year ending October 2002, the
fastest pace of growth in 11 years. Also, for the first time since mid-2001
consumer credit is rising faster than mortgage credit. Mortgage debt rose
by 7.6% during the year ending October 2002, a significant acceleration
from the 6% growth observed earlier in 2002. During the same period,
consumer debt expanded by more than 8%. Growth in credit card debt is also
rising by over 13% year over year. Even with the very strong growth in
borrowing, personal bankruptcies are trending downward, falling by 1.5% in
the first eleven months of 2002 compared to the same period last year. The
main improvement is in Quebec, with Ontario still seeing rising
bankruptcies – reflecting the sensitivity of the province to developments
south of the border.

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Shell MasterCard

Citibank announced this morning the official re-launch of the “Shell MasterCard” featuring a double rebate to kickstart the program. The “Shell MasterCard” was originally launched by Chemical Bank, now Chase, in October 1993, and has grown to become the largest gasoline co-branded card in the USA. Chase lost the Shell co-brand contract last year. The new “Shell MasterCard from Citi” is doubling the card’s regular 5% rebate on Shell gas purchases as part of an introductory program for those that apply for the new card by March 31st. New cardholders will receive a 10% rebate on each Shell gasoline purchase made within the first 60 days of the card’s activation. Thereafter the rebate reverts back to a 5% rebate on Shell gasoline purchases and 1% on all other retail purchases wherever the card is used. All rebates are applied as credits toward future Shell gasoline purchases. The card has no annual fee for the first year. And the $20.00 annual fee is waived after that, provided the cardholder makes 9 Shell gasoline purchases per year. Citi is charging a prime +9.99% interest rate on purchases. Balance transfers are 0% for the first six months followed by the prime +9.99% APR. Citi says the launch of the new Shell card will be supported by an integrated-marketing campaign, including direct mail, point-of-purchase, advertising, Internet marketing and public relations. (CardTrak11/93)

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ESC & Witness eQuality

Atlanta-based Enhancement Services Corporation has implemented the “eQuality” software from Witness Systems to become the first in the card reward industry to record all calls. eQuality Balance is used by ESC to record conversations on 100% of all client calls including those from BMW Financial Services, Citibank and JPMorgan Chase. A customer service representative’s (CSR) corresponding computer desktop activities can be recorded as well. This dual recording solution allows managers to more efficiently evaluate CSR performance and process effectiveness, thereby increasing the amount of feedback and coaching available to the CSR.

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BofA ATMs

Bank of America and Valero Energy Corporation announced Friday they have expanded their ATM contract. By the end of the first quarter, BofA will have installed its enhanced ATM software on more than 1,100 of Valero Energy-owned ATMs, which are located in the company’s retail stores. Valero’s retail brands include Diamond Shamrock Corner Stores, Stop N Go, Ultramar, Valero, Beacon and Total. This new agreement expands upon BofA’s previous contract with Valero for approximately 300 ATMs in Stop N Go convenience stores. The agreement increases the number of ATMs that Bank of America operates in Arizona, Arkansas, California, Colorado, Louisiana, New Mexico, Oklahoma and Texas. More than half of the ATMs will be located in Texas, expanding BofA’s current ATM network by more than 700 locations, giving it a total of 1,900 statewide. At the end of December, Bank of America had installed its software on approximately 900 ATMs in Valero’s network of 1,300 company-operated convenience stores. The deal between BofA and Valero has created the single largest ATM contracts in U.S. banking history.

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CARDS EUROPE

Banks, retailers, telcos will be assembling next week in London to discuss
smart moves with EMV, secure payments and commerce, point of sale, Europe’s
hot markets, mobile payments, and, loyalty and multi-application cards.
“Cards Europe” has signed the following major sponsors and exhibitors for
the event including MasterCard International, Thales e-Security, Thales
e-Transactions, Gemplus, Schlumberger SEMA, Pegasystems, ACI Worldwide, and
First Data Europe. The event is scheduled for February 3-5 at the Royal
Garden Hotel.

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Certegy 4Q/02

Certegy reported Friday net income of $29 million on revenues of $263 million for the fourth quarter. During the fourth quarter, domestic card issuing transaction volumes increased by 6.8%, driven primarily by growth in debit card transactions. Certegy added approximately 500,000 cards, increasing its international card base to 24.2 million and its global card base to 46.7 million. For the full year 2002, the number of cards processed globally increased by approximately 5.0 million, or 11.9% over 2001. Card Services produced revenue of $163.6 million in the fourth quarter, an increase of $1.0 million, or 0.6% over the prior-year quarter, driven by a 7.2% increase in North American card revenue and strong international card revenue growth outside of Latin America. However, merchant processing revenue declined by 4.7%, due to the previously announced deconversion of a large customer and the company’s focus on improving the overall quality and profitability of the portfolio. For complete details on Certegy’s 4Q/02 performance visit CardData ([www.carddata.com][1]).

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

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Canadian Debt

Household credit in Canada rose by 7.6% during the year ending October 2002, the fastest pace of growth in 11 years. Also, for the first time since mid-2001 consumer credit is rising faster than mortgage credit, according to CIBC’s latest “Household Credit Analysis.” Mortgage debt rose by 7.6% during the year ending October 2002, a significant acceleration from the 6% growth observed earlier in 2002. During the same period, consumer debt expanded by more than 8%. Growth in credit card debt is also rising by over 13% year over year. Even with the very strong growth in borrowing, personal bankruptcies are trending downward, falling by 1.5% in the first eleven months of 2002 compared to the same period last year. The main improvement is in Quebec, with Ontario still seeing rising bankruptcies – reflecting the sensitivity of the province to developments south of the border.

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EURONET CONTRACTS

Euronet has recently signed two significant ATM outsourcing agreements and
software agreements. The first outsourcing agreement is with a Western
European independent ATM deployer, which plans to start rolling out ATMs in
second quarter. The IAD plans to implement 1,700 ATMs by the end of 2006.
Traditional ATM transactions will be combined with value-added transactions
that allow consumers to purchase prepaid mobile air time and other items,
such as cinema tickets, directly from the ATM. The second agreement is with
a South African-based company that plans to build a shared network in
Uganda, offering ATM operating and card issuing services. Euronet will
provide processing services out of its Budapest center together with the
professional services for training and development, while the contracted
company will handle all local services. This project will also integrate
ATM processing services with the area’s mobile operators, making available
electronic payments for prepaid mobile air time.

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Be There Winner

Boston-based Sovereign Bank says one of its VISA cardholders has won the top prize in VISA’s “Be There” promotion, which ran last year between August and November. This was the first time ever that Visa featured its five world-class sponsorship properties in one compelling promotion. Visa cardholders of Sovereign Bank were given the opportunity to enter automatically for a chance to win a trip to attend all five of these premier events by using their Visa card for purchases last fall. Every single time cardholders used their Visa card for purchases between Aug. 1 and Oct. 31, 2002, they were automatically entered to win.

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CITIGROUP GLOBAL CARDS

Citigroup reported a 32% increase in international cards, reflecting
strong balance growth across all markets except Latin America, as well as
the adverse impact in the prior year of Argentina pesification. The
increase in the international cards provision for credit losses is
primarily due to higher credit costs in the Hong Kong and UK markets,
although credit losses have stabilized from the preceding quarter. At
year-end 2002, Citigroup had 13.5 million international cards, a 5% gain
over 4Q/01. Fourth quarter volume was up 10% to $9.1 billion. Average
managed loans for international cards was $11.3 billion.

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Experian Acquisition

Experian has acquired Credit Data Services of Springfield, Mass. which operates in the territories of western Massachusetts, Vermont and Connecticut. CDS will continue to serve current and prospective clients as a Sales Agent of Experian. This relationship will provide clients with a seamless interaction with Experian including access to additional products and services designed to optimize customer relationships.

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Chase Gas Card

Chase responded this morning to the new “Citibank Shell MasterCard” will the unveiling of the “Chase Freedom Card” that offers rebates on all gasoline purchases at any gas station, plus a smaller rebate on all other purchases. The new card, targeted at Chase’s current “Shell MasterCard” customers, will offer an automatic 3% rebate on all gasoline purchases, regardless of the brand, and a 1% rebate on all other purchases. For a 90-day introductory period, the new “Chase Freedom” card offers a 6% rebate on all gasoline purchases. There is no annual fee for the first year. The $19 annual fee is waived thereafter if the cardholder makes at least nine purchases in the prior year. The card will carry a prime +9.99% APR for most customers, but a prime +11.99% or prime +15.24% rate will be charged to higher risk consumers. The defensive move by Chase to introduce a replacement card for a co-branded card is reminiscent of Citibank’s 1997 decision to end its co-branded program with Ford Motor Company. Six months later, in early 1998, Citibank introduced the “Driver’s Edge VISA/MasterCard” that offered rebates toward the purchase or lease of any new vehicle, regardless of make or model. (CardTrak 6/30/97; 1/7/98)

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