FDC 2Q/02

First Data reported this morning that second quarter revenue increased 9% while earnings per share grew 21% on a recurring operations basis, or 11% on a pro forma basis. Thanks to strong growth from Western Union, revenue for the payment services segment increased by 17% to $780 million, and profits of $246 million increased by 21% over 2001 pro forma profits of $204 million. The card issuing services segment reported a 5% decrease in revenues to $462 million due to prior year de-conversions. However, card issuing services has more than 70 million retail, debit and bank card accounts in the pipeline for conversion, with approximately 13 million accounts scheduled for conversion during the second half of 2002. CIS operating profits of $91 million were up 1% from 2001 pro forma profits of $90 million. The merchant services segment showed a 15% increase in revenue to $647 million. Profits of $194 million rose 14% over 2001 pro forma profits of $170 million. Merchant processing transactions grew 14% for the second quarter to 2.5 billion. The emerging payments division, First Data’s eONE Global business, which accounts for 2% of total revenue, reported $41 million in revenue for the quarter, a growth rate of 98% due primarily to acquisitions. For complete details on First Data’s 2Q/02 performance visit CardData ([www.carddata.com][1]).

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

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Vital Nabs Marshall

Vital Processing Services has hired former Hypercom executive John Marshall as EVP, with responsibility for Sales and Client Relations and for leadership of Vital’s affiliates, Vital Merchant Services and Golden Retriever Systems. Marshall has built a career in technology-related and transaction-intensive businesses in Canada, New Zealand, Australia and the US. In New Zealand, he served as a senior level sales executive for Eagle Technologies as well as Computer Resources. Subsequently, Marshall held a senior leadership role at Austnet, the first independent ATM-driving company in Australia. Later, he moved to US where most of his work was with Hypercom prior to joining Vital.

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Starbucks Enhancement

Starbucks announced Tuesday it will now replace unused balances of lost, registered Starbucks Gift Cards. The stored value card was introduced in November and to-date has activated more than 4 million cards. Starbucks previously reported that it issued 2.3 million cards by year-end 2001. Customers loaded a total value of $32 million onto the new Starbucks Card and redeemed $9 million in 2.2 million transactions between Thanksgiving and the end of 2001. Under the new replacement card enhancement, a customer must have registered his or her Starbucks Card via Starbucks’ Web site or toll-free number. Registered customers need not retain a receipt. In the event a card becomes misplaced, customers call to report the missing card and the balance will be frozen and a new card, loaded with the remaining balance, will be sent to the customer. Starbucks Card users who registered prior to July 3 will need to update their account information with their city of birth. Starbucks is sending registered cardholders an e-mail notification to request the additional information. (CF LIbrary 1/25/02; 4/18/02)

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Diners’ Gaines Cited

Diners Club North America president Brenda Gaines has been named one of the “50 Most Powerful Black Executives in America” in the July 22 issue of FORTUNE magazine. Gaines joined Citibank in 1988 and has held a series of senior leadership positions culminating in her current role as president of Diners Club in 1999. Among her achievements as president, Ms. Gaines integrated the Diners Club North American business, broadened Card acceptance beyond traditional T&E channels to include more retail and other types of establishments, and launched two new Cards, including the first Diners Club U.S. based revolving credit card product. Her accomplishments have resulted in Diners Club winning the “Best Frequent Traveler Affinity Charge/Credit Card Program” (Americas) award for the fifth consecutive year.

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Yellowstone VISA

U.S. Bank and the Yellowstone Park Foundation have launched an affinity VISA card. The Yellowstone VISA card is issued by Elan Financial Services, features a picturesque scene of Yellowstone, and is available in a classic and platinum card. More than three million people visit Yellowstone each year. Bozeman, MT-based Yellowstone Park Foundation is a non-profit organization created by a group of concerned citizens, working with the National Park Service, to protect, preserve, and enhance the park. The new card carries no annual fee if used at least once a year, otherwise the fees are $20 for classic and $40 for platinum The intro APR is 5.9% fixed, for six months with the go-to APR of 8.74% to 14.74% depending on credit risk.

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FDC & Chase

First Data has signed a multi-year agreement to produce and mail statements and letters for several retail lines of business within J.P. Morgan Chase, including credit cards, home finance and auto finance. FDC currently partners with Chase through its Chase Merchant Services joint venture. FDC also provides card processing and plastics production for Chase’s credit card business since 1989. First Data serves approximately 2.8 million merchant locations and 1,400 card issuers. At the end of the first quarter, Chase had $48.3 billion in bank credit card outstandings and 17 million active accounts, according to CardData ([www.carddata.com][1]).

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

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Datakey Signs CMS Client

MN-based Datakey announced that a major U.S. bank is deploying its newly released Card Management System, purchasing 3,500 Datakey CMS user licenses and placed an initial order for 1,500 Datakey CIP kits, which include Datakey’s Model 330 cryptographic smart card, CIP client software and a smart card reader. Datakey CMS, announced in late April, is a web-based smart card and digital credential management solution for enterprises—used to issue, manage and support Datakey cryptographic smart cards throughout the organization for identity-based applications.

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Extreme Diners

Diners Club North America has launched an “Extreme Adventures” program for its Carte Blanche cardholders. Between July 8th and September 1st, cardholders can purchase specially created packages for skydiving, hot air ballooning, hang gliding, deep sea fishing, NASCAR driving, or Indy-style racecar driving. The sky diving package includes a 60-second freefall from 14,000 feet in the Chicago area. Activity prices range from $120 to $450 per person. Diners is also providing participating cardholders with a free leather pocket Traveler’s Atlas, according to CardWatch ([www.carddata.com][1]).

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[1]: http://www.cardwatch.com
[2]: /graphic/dinersclub/invitation.jpg

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Dress Barn & ADS

The Dress Barn has renewed its contract with Alliance Data Systems for a private label credit card program for Dress Barn’s 750 store locations nationwide. Under terms of the renewed agreement, Alliance Data will provide services that include account acquisition and activation; receivables funding; card authorization; private label credit card issuance; statement generation; remittance processing; customer service functions; and credit marketing support.

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7-Eleven Banks

NCR has inked a three-year, multi-million-dollar agreement with 7-Eleven stores to deploy Web-enabled “Vcom” kiosks in 1,000 convenience stores later this year. The agreement calls for 7-Eleven to use NCR’s Convenience Connexions solution and includes the purchase of 1,000 NCR Personas 78s, software and a complete set of services and support to expand Vcom, which have been tested in 98 7-Eleven stores in Texas and Florida. NCR’s APTRA open architecture software platform will permit a robust set of automated services in the three-foot-wide, self-service terminal. Through exclusive agreements with its Vcom partners, 7-Eleven currently offers customers ATM transactions, check cashing through Certegy Check Services, and Western Union money order purchases and money transfers. Customers already conduct some 100 million ATM transactions and purchase $4.5 billion in face value of money orders annually at 7-Eleven’s U. S. stores. Other Vcom offerings planned for the initial 1,000-store rollout are telecommunications services through Verizon Communications, Inc., and e-shopping using Cyphermint, Inc.’s secure cash-payment technology, called Pay Cash System, to access select e-commerce products, such as event ticketing, weather reports, lottery results and travel directions. In exchange for 7-Eleven granting strategic partners exclusive rights to offer their products through Vcom kiosks, the service partners pay placement fees, a percentage of the transaction fees and expense reimbursement. 7-Eleven says it has received more than $220 million in placement-fee commitments from its other service partners, most of which are funded as Vcom kiosks are deployed.

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Counseling Fees

A MA-based credit counseling firm launched an attack this morning on counseling fees. Armed with a research report it commissioned from Washington, DC-based Economists Incorporated, Cambridge Credit Counseling said its fees are lower than fees charged by NFCC-related Consumer Credit Counseling Services companies, AICCCA companies, and unaffiliated companies. For the comparison, the Economists report used the example of a client with $16,500 of debt that is paid back over a period of five years. Of the 16 NFCC-related Consumer Credit Counseling Services companies examined, average fees at the end of that five-year period were $1,520. Among the 17 AICCCA companies examined the average fee was $1,867. Unaffiliated companies’ average fees over the five-year period were $3,225. Cambridge Credit said its fees were $1,782 for the example. The report also found that using the same example of $16,500 paid over five years, Cambridge Credit’s total revenues from fees and fair share monies accrued to the company at 9% of client payments were only $3,668. For the NFCC/Consumer Credit Counseling Services companies the average was $3,411; for the AICCCA it was $3,717 and $5,116 for the unaffiliated agencies.

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DAIMLER-CHRYSLER VISA

Stuttgart-based DaimlerChrysler Bank has changed its legal form to a stock corporation, received a full banking license, and has begun offering new products such as deposit-banking services, as well as a new DaimlerChrysler VISA, both with the special rewards program “RoadMiles.” The DaimlerChrysler VISA is the first German credit card with an EMV chip and carries an annual fee of EUR 29. Those who pay their bills with the DaimlerChrysler Card automatically collect “RoadMiles”, which can be redeemed for attractive products and services. Gas purchases even get triple points. The bank will initially target its 4 million customers in Germany for the new products. The new banking products will not be offered at car dealerships, but instead via the Internet and the DaimlerChrysler Bank customer service center by telephone, fax, e-mail, or normal letter. The license for deposit-banking services is also valid for market entry into other European countries (Europapass).

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