Fraud Ring

A ring of small merchants in the Jackson Heights and Sunnyside sections of Queens, New York were charged last week with processing more than $5 million in phony credit card transactions. Under the scheme, cardholders would open credit card accounts and then have merchants charge large, non-existent purchases. The merchant would keep 25% to 35% of the transaction and then hand over the rest to the cardholder in cash. More than 50 consumers and eight merchants were allegedly involved in the fraud. Card issuers, victimized by the fraud, uncovered the scheme after noticing that a number of charged-off accounts had large transactions from a small number of merchants.


US Airways MasterCard Incentive

US Airways Vacations is offering a free three-piece set of Samsonite Streamlite II luggage worth $239 to travelers booking their vacations to Bermuda, the Caribbean or Mexico, by July 16, and paying in full with their MasterCard. Valid destinations are Antigua, Aruba, Barbados, Bermuda, Cancun, Cozumel, Dominican Republic, Grand Cayman, Jamaica, Puerto Rico, St. Lucia, St. Martin/St. Maarten, The Islands of The Bahamas (Grand Bahama Island, Nassau and Paradise Island) and the U.S. Virgin Islands (St. Thomas/ St. John and St. Croix). US Airways Vacations’ Caribbean packages include round trip air; hotel accommodations; round trip airport/hotel transfers; hotel taxes and service charges; and international travel taxes of up to $97.50.


1Q/02 Delinquency

While charge-offs soared by more than 22% over the past twelve months, delinquency rates among the top U.S. issuers increased only half as much. Sub-prime issuers Providian, Direct Merchants, and Household led the top ten issuers with the highest delinquency rates and the largest increases during the first three months of 2002, compared to 1Q/01. Fleet and Bank One/First USA reported lower delinquency than year ago levels, according to CardData ([][1]). Over the past twelve months, delinquency (30+ day) among the nation’s top issuers, has increased 60 basis points, from 5.74% to 6.34%. Meanwhile, Discover reported a 30+ day delinquency rate of 6.75% for the quarter ending 2/28/02, compared to 6.34% for the year-ago quarter. American Express delinquency rate stood at 3.4% for 1Q/02, compared to 2.9% for 1Q/01.

DAYS 1Q/02 4Q/01 3Q/01 2Q/01 1Q/01 4Q/00 Y/Y
Citigroup: 90+ 2.17% 1.98% 1.82% 1.72% 2.00% 1.46% +8.5%
2. MBNA: 30+ 4.97% 5.09% 4.90% 4.57% 4.60% 4.94% +8.0%
3. First USA: 30+ 4.27% 4.46% 4.25% 4.10% 4.33% 4.51% -1.4%
4. Chase: 90+ 2.29% 2.22% 1.95% 1.90% 1.99% 2.07% +15.1%
5. Cap One: 30+ 4.80% 4.95% 5.29% 4.92% 4.72% 5.23% +1.7%
6. Providian: 30+ 10.22% 8.81% 8.66% 8.04% 7.64% 7.54% +33.8%
Household: 60+ 4.39% 4.10% 3.91% 3.60% 3.68% 3.49% +19.3%
9. Fleet: 30+ 3.97% 4.05% 4.13% 4.40% 4.75% 5.00% -16.4%
10. Dir Merch: 30+ 9.80% 9.70% 8.90% 8.30% 8.40% 8.30% +16.7%
30+ DAY AVG*: 6.34% 6.18% 6.02% 5.72% 5.74% 5.92% +10.4%
NR- not reported
* 60+ day and 90+ day are not meaningful

SOURCE: CardData ([][2])



Online Gambling

The New York Attorney General said Friday that Citibank has agreed to block online gambling transactions with its credit cards. Under the agreement, Citibank will block transactions that are identified by transaction code as casinos and Web sites as online gambling. Bank of America, Fleet, Direct Merchants Bank, MBNA, and Chase Manhattan Bank have already begun blocking such transactions. While there have been several law enforcement actions combating online casinos in New York, the Attorney General’s agreement with Citibank is the first case to address financial entities that process gambling transactions. In 1999, the Attorney General won a lawsuit charging that an Antigua-based casino that accepted bets from New York residents had violated New York’s gambling laws.


AmEx & Fidelity

American Express has lost the Fidelity Investments corporate card account presumably out of retaliation for hiring away four key Fidelity mutual fund managers earlier this year. The corporate card account which involves cards issued to nearly half of Fidelity’s 30,000 employees, has been moved to Bank One’s commercial banking division. The switchover took place early this month. Fidelity also moved its travel agency account from American Express to WorldTravel BTI. In February, AmEx opened a branch office in Boston for its money management unit and hired Fidelity fund managers, Doug Chase, Telis Bertsekas, Nick Thakore, and Robert Ewing.


Debit Drivers

The remarkable growth of debit cards, at the POS in the USA, is being driven by consumers who want to eliminate checkwriting hassles. The second driver of consumer debit card usage is the reduction of cash carrying. According to a new homepage poll, 40.3% of consumers say they want to avoid the hassles of writing a check, while 32.4% say the need to carry less cash is the #1 reason they use a debit card for purchases. Nearly 21% say the primary reason they use a debit card at the POS is to avoid credit card interest. Less than 7% indicated that expense tracking via a debit card was their main reason for using a debit card. More than 1,000 consumers participated in the poll.


AAMS Signs Hotel Group

ABN AMRO Merchant Services has inked a deal with Arlington Hospitality, Inc. to provide authorization and settlement services for all VISA and MasterCard transactions accepted at 78 corporate-owned and managed hotel properties in 16 states including 66 AmeriHost Inn hotels. Arlington Hospitality is a publicly traded company engaged in the development, construction, ownership, operation and management of AmeriHost Inn hotels and other mid-price hotels.


High Speed Check Conversion

MagTek has released an upgraded model of its MICRImage check reader and image scanner with an integrated V.34 high-speed modem, enabling a retailer to transfer check image data to a remote archive at high speed directly from the POS. In addition to its integrated modem, the MagTek MICRImage check reader/scanner also comes equipped with a standard RS-232 serial port for transmitting the MICR data to a POS terminal for check authorization. Additionally, the MICRImage provides an intuitive, efficient command interface to facilitate integration into any POS application.



Toronto-based Oasis Technology has named David Pasieka to the position of president and CEO. Pasieka replaces departing president, chief executive officer and co-founder Ashraf Dimitri, who has led Oasis since its inception in 1989. Pasieka brings more than 23 years of global operations, senior management and business development experience at several technology companies, including World Gaming PLC, AT&T Canada, MetroNet Communications Corporation, 724 Solutions Inc., and Bell Canada. Oasis also noted it expects to close a round of funding with an aggregate value of US$5.8 million this month.


Charge-Offs 1Q/02

Charge-offs among the top ten issuers of VISA and MasterCards increased by slightly more than 22% during the first quarter compared to 1Q/01. Providian and Citigroup continued to report the largest jump in losses, while Bank One/First USA and Fleet reported decreasing charge-offs over the past twelve months. Discover and American Express also posted significantly higher losses during 1Q/02, surging 35.5% and 27.4%, respectively. American Express’ charge-off rate increased from 5.1% one year ago to 6.5% for 1Q/02. For the fiscal quarter ending Feb 28, 2002, Discover reported a charge-off rate of 6.49% compared to 4.79% for fiscal 1Q/01. Among the top ten VISA and MasterCard issuers, the average for the first quarter came in at 7.30% compared to 5.98% one year ago. If Discover and AmEx are included the average for the top issuers would be 7.17% for 1Q/02 compared to 5.81% for 1Q/01. For complete portfolio details on the top U.S. issuers visit CardData ([][1]).

1Q/02 4Q/01 1Q/01 4Q/00 ANN CHNG
1. Citigroup: 6.41% 5.91% 4.84% 4.22% +32.4%
2. MBNA: 5.00% 4.86% 4.25% 3.87% +17.6%
3. First USA: 5.69% 5.59% 5.81% 5.41% – 2.1%
4. Chase: 5.87% 5.48% 5.05% 4.86% +16.2%
5. Cap One: 4.00% 4.42% 3.75% 3.98% + 6.7%
6. Providian: 15.05% 12.70% 9.34% 8.49% +61.1%
7. BofA: 5.43% 4.90% 4.37% 4.32% +24.3%
8. Household: 7.17% 6.69% 6.27% 5.83% +14.4%
9. Fleet: 5.42% 5.38% 5.55% 4.97% – 2.3%
10. Dir Merch: 13.00% 10.90% 10.60% 9.70% +22.6%
AVERAGE: 7.30% 6.68 5.98% 5.57% +22.1%
Source: CardData (



Lipman & EXS

Electronic Exchange Systems has signed an agreement with Lipman for the purchase of 20,000 POS terminals. The agreement reflects EXS’ decision to primarily sell NURIT solutions, and in particular the NURIT 3020 and NURIT CAPTURE signature capture solution. Powered by NURIT APPS Value Added Applications, Lipman features both landline and wireless POS solutions under the NURIT brand. This complete product line includes traditional POS terminals, ECR, ATM, Scrip and Kiosk solutions for the retail, restaurant, mobile commerce, direct marketing, and fleet markets.