2Q/01 Portfolios

Despite the uptick in bankruptcies and chargeoffs, the second quarter earnings reports, due out this month, are expected to show solid performance by credit card issuers due to favorable funding costs. Early 2Q/01 portfolio data, collected by CardData, reveals positive performance even among smaller issuers. The major portfolios are projected to report double digit increases in profitability even though U.S. credit card portfolio losses hit a four-year high in April. However the higher 2Q profits may be short-lived as rising unemployment, high fuel costs, and a stagnant stock market, drive higher losses in the third and fourth quarters. Bankruptcy reform legislation may also produce an abnormal rise in filings, driving card losses even higherm for the second half of 2001.

EARLY 2Q/01 PORTFOLIO DATA
RECEIVABLES ACTIVES
ISSUER 2Q/01 1Q/01 2Q/01 1Q/01
Anheuser-Busch Employees CU $33,997,000 $33,093,500 17,504 17,491
Citizens Financial Group $ 9,155,407 $ 8,522,516 6,993 6,823
Clinton National Bank $ 1,024,493 $ 1,044,306 1,419 1,385
Source: CardData (www.carddata.com)

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ECHO U-Haul

U-Haul International has awarded ECHO a bid for the U-Haul ‘Check Fee Saver’ program. The program includes check guarantee, check re-presentment and check verification services for its independent dealers who participate in the U-Haul ‘Preferred Dealer Program’. ECHO developed and manufactured the software and hardware that provide inventory processing services for U-Haul dealers. ECHO also processes and supports the daily transaction activity for more than 15,000 dealers and was recently awarded the bid to offer credit card processing to U-Haul independent dealers who participate in the ‘Preferred Dealer Program’.

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Satisfusion MC

Los Angeles area-based SatisFusion, hasn sealed a deal to introduce merchants to the ‘MasterCard Exclusives Online’ program through its SmarterMall. This week, the developer of after-sales support and retentions infrastructure platform, announced that Maxon/Topaz3 will be among the first to offer exclusive promotions for MasterCard cardholders through SatisFusion’s SmarterMall. Through SmarterMall, MasterCard cardholders will receive up to a 20% discount on ‘Maxon/Topaz3’ products such as the ‘TruTalk’ family radio service personal communicators and ‘Legacy ProLine’ professional two-way radios.

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AGGREGATION CRM

724 Solutions Inc. and CashEdge, Inc. announced that they have teamed to deliver a powerful new financial aggregation solution for financial institutions that offers wireless accessibility, actionable alerts, and a range of customization options that provide financial institutions with greater control over system branding and implementation. Financial institutions will also have the option of hosting all or part of the solution themselves, and the ability to develop more extensive customer profile data. The new aggregation platform will be marketed by both companies.

“724 Solutions is developing innovative approaches for financial institutions seeking the ultimate in wireless aggregation capability. By combining CashEdge’s advanced aggregation technology with our aggregation experience and wireless and actionable alerts capabilities, we have created what we believe is the most feature-rich aggregation product in the market today,” said John Sims, Chief Executive Officer, 724 Solutions.

“The combined solution includes tools and normalized data to power actionable alerts, financial advice engines, and customer relationship management (CRM) platforms — which we view as crucial for financial institutions who are looking to achieve a positive return on investment from their aggregation offering,” he added. “Adopting CashEdge’s aggregation technology and investing in the company gives 724 Solutions the freedom to focus on our core strengths of enabling secure mobile transactions, while allowing us to deliver a highly functional and valuable aggregation product.”

Features of the combined product include

— Financial Dashboard CashEdge’s account management tool gives consumers a single view of all of their key relationship information — including account balances and transaction histories — regardless of how many financial institutions they do business with;

— Personalized actionable alerts powered by 724 Solutions’ alerts technology, consumers can be notified by phone or on the Internet-enabled device of their choice when transactions have been completed, or when their credit card balances hit pre-set highs or lows, etc.;

— Mobile access because consumers are increasingly mobile and are accessing the Internet and Internet-based services using everything from PCs to digital mobile phones, personal digital assistants and pagers, 724 Solutions has developed award-winning wireless capability that allows consumers to access the offering over virtually any Internet-enabled device;

— Rapid deployment the solution is available today in a hosted environment, enabling financial institutions to get up-and-running quickly; both companies are collaborating on offering an enterprise version of the solution that will be available shortly.

“We are seeing a dramatic increase in demand for aggregation platforms that can go beyond the basic ability to passively monitor accounts on a desktop screen. Financial institutions realize that aggregation services can be profitable, but only if they are combined with a range of other attractive features that add value and functionality in the eyes of the retail customer,” said Sanjeev Dheer, Chief Executive Officer of CashEdge.

“This new aggregation service we have developed with 724 Solutions is a major step toward our vision of creating advanced technologies that provide people with comprehensive and secure personal financial management services.”

About CashEdge

CashEdge is a leading provider of personal finance management solutions to financial institutions worldwide. CashEdge’s technology combines the power of financial information aggregation with transaction capability, allowing consumers to transfer funds between accounts, at over 23,000 financial institutions throughout the U.S. CashEdge is the first aggregator to offer a multi-lingual, multi-currency platform currently supporting financial institutions in the U.S., Canada and the U.K. CashEdge was founded in November 1999, and has offices in Milpitas, California, New York City, and Toronto, Canada. CashEdge’s clients include Laurentian Bank of Canada, Royal Bank of Canada, The Vanguard Group and Yahoo!Finance. For more information, please visit www.cashedge.com.

About 724 Solutions Inc.

724 Solutions Inc. is a leading global provider of Internet infrastructure software that enables the delivery of secure financial services applications and mobile transaction solutions across a wide range of Internet-enabled devices. The 724 Solutions suite of products and services enables companies to realize value through the mobile Internet by building, deploying, and integrating personalized and secure mobile commerce and lifestyle applications. With dual headquarters in Toronto, Canada, and Austin, Texas, the company has development and sales offices around the world. 724 Solutions’ common shares are listed on the NASDAQ National Market (SVNX) and The Toronto Stock Exchange (SVN). For additional information visit www.724.com.

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Leapfrog Funding

Leapfrog Smart Products, Inc. announced that it is close to finalizing a significant private placement with accredited investors. The investors are completing necessary due diligence work required before funding can be completed.

Proceeds from the private placement will be used for working capital, debt reduction, and to expand sales and marketing in the healthcare and security industries. In June, Leapfrog secured the fifth hospital contract for its Smart card-based healthcare product.

“We have worked for over a year to complete this endeavor,” said Co-Chief Executive Officer, Dale Grogan. “We believe that the investment will reinforce Leapfrog’s competitive position in our industry. As a leading supplier of Smart card and Biometric software, we intend to aggressively pursue our strategy of targeting our core markets of Healthcare, Security and Government in the North America. After years of research and development, we have identified the business areas that will be early adopters of Smart cards and will provide a good return to our investors.”

About Leapfrog Smart Products, Inc.

Leapfrog Smart Products, Inc. is a world-class leader in Smart card software development, biometrics and system solutions integration. Located in Maitland, Florida, Leapfrog is dedicated to creating wide sweeping applications for Smart cards. Smart cards are credit card-sized pieces of plastic with a computer microprocessor embedded within. Current applications of Smart card software include personal identification, e-purse transactions, loyalty point storage, physical and logical access, as well as portable storage of medical records. Leapfrog, through its General Services Administration (GSA) master contract, is also certified as a contractor with the United States Federal government. Leapfrog Smart Products, Inc. is publicly traded on the Over-the-Counter Bulletin Board under the symbol “FROG.”

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NOTTINGHAM CENTER

Experian, the global information solutions company and one of Nottingham’s largest employers, has announced plans to build a new state-of-the-art data processing center in Nottingham. The new purpose-built computer processing center will be sited at Ruddington Fields Business Park and operate in conjunction with Experian’s existing data processing facilities within the City. The building – which is due for completion in two years – will extend over 100,000 square feet and cost more than £25 million to construct. It will accommodate up to 120 computer specialist personnel.The new data center will increase Experian’s overall data processing floor area within Nottingham by 100 percent, and provide IT and processing support to Experian’s clients in over 50 countries. It will furnish Experian with a technology facility to underpin the company’s future business growth needs for the next 15 to 20 years. The announcement follows a land purchase agreement with Wilson Bowden Developments, developers of Ruddington Fields Business Park, for £2.4 million. The Business Park has been specially tailored for hi-tech business and the site for the new IT building is already serviced with fibre optic links that will connect to Experian’s existing IT facilities in other parts of Nottingham. John Saunders, Chief Executive of Experian International, commented “The new purpose built data processing center will provide Experian with essential IT support for the continued expansion of its business into and beyond the next decade. At Ruddington Fields, we plan to build a showpiece data processing center in which to demonstrate to clients from all parts of the world Experian’s unique solutions for managing customer relationships.””Ruddington Fields Business Park will provide an excellent working environment for our employees. Situated in a purpose built hi-tech business park, the site commands views of Rushcliffe Country Park, which is in easy walking distance, and offers convenient vehicle access to Nottingham’s ring road, along with its own parking.” Experian is an information solutions company. It uses the power of information to help its clients target prospective customers, manage existing customer relationships and identify opportunities for profitable growth. Through multi-channel delivery of its web-based products and services, Experian enables its clients to conduct secure and profitable e-business. Experian is a subsidiary of The Great Universal Stores P.L.C. and has headquarters in Nottingham, UK, and Orange, California. Its 12,000 people support clients in over 50 countries. Annual sales are in excess of £1 billion. For more information, visit the company’s web site on www.experian.com.

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Mileage Fight

After protracted litigation, passing twice through the U.S. Supreme Court and the Illinois Supreme Court, American Airlines has settled two separate class action lawsuits involving its frequent flyer program. The total relief for the cases has been estimated to exceed $100 million and will affect some holders of Citibank’s ‘AAdvantage’ co-branded credit card. American introduced the ‘AAdvantage’ program in 1981 and subsequently instituted capacity controls on miles already earned by members of the program. Plaintiffs claimed that the miles vested when they were accrued and American diminished the value of the miles by limiting the availability of seats for frequent flyer tickets. Then in 1995, American raised the number of mileage credits needed to claim a domestic ‘Plan AAhead’ coach awards from 20,000 to 25,000 mileage credits. Plaintiffs alleged the change breached the program contract because American was obligated to keep the rules the same as to each of those members for as long as the members held miles in their accounts. The claim affected only miles accumulated in 1992 and 1993. The settlement, announced this week, affords both class members the opportunity to claim the type of awards they allege they were denied as a result of changes to ‘AAdvantage’ program. About four million ‘AAdvantage’ members are affected by the settlement.

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BLUEFISH ENGINEERS

Bluefish Technologies a leading supplier of SIM cards and wireless solutions has made two key appointments at its newly established Asia Pacific operation headquartered in Singapore.

Andy Chew who joins Bluefish as Technical Manager has a degree in Electronic Engineering and over 6 years experience working with smart cards. Well known to wireless operators in the region Andy until recently worked for Giesecke & Devrient where he was responsible for GSM product and project management, a technical department that grew under his direction. This department was responsible for the development of SIM based applications for network operators including Wireless Internet Browsers. Prior to this Andy worked for Asia Chip Card as an application engineer for smart cards including contactless cards. Andy’s team will provide project management support and application development facilities to Bluefish’s customers in the region.

Benjamin Wee who joins Bluefish as Technical Consultant has a degree in Computer Science and Software Engineering. Formerly with Giesecke & Devrient Benjamin has several years experience developing applications for the GSM sector. Benjamin will provide direct technical support to the sales team and act as a direct link to Bluefish’s customers on technical issues.

“Bluefish is committed to being able to offer network operators throughout the region a wide range of SIM based solutions on a variety of open, non-proprietry platforms including Java and MULTOS. We now have the technical team in place to deliver on this commitment and to provide network operators with the innovative applications that will secure tomorrow’s revenue streams.” Said Anthony Ong, General Manager of Bluefish Asia.

Bluefish Technologies is a SIM solutions provider founded in 2000, with backing from ACG AG, and is the only smart card supplier to focus entirely on the wireless telecommunications industry. With offices in Germany and the UK, and more to follow worldwide, Bluefish pioneers a “virtual” approach to SIM card production and draws upon over 150 years experience of the GSM sector.

SIM applications are currently in their infancy but are already a key differentiator and revenue generator for network operators. As mobile networks progress from providing predominantly voice based services (2G) towards third generation (3G) technology the nature of applications and services will change radically. It will be these SIM enabled applications at the heart of the wireless future, operating on open platforms with high levels of security.

ACG AG with its headquarters in Wiesbaden and Munich is a high-tech broker for chips and chip cards as well as technology- and market leader for contactless chip applications. The company’s turnover in the business year 2000 up to December 31st amounted to 362.8 million Euro. The operating profit (EBITDA) amounted to 13 million Euro. ACG has more than 500 employees and is represented in 32 international locations in 17 countries. ACG achieved in the first three months of the fiscal year 2001 a turnover of Euro 105.69 million. EBITDA rose in the same period to 3.94 million Euro.

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June Sales

Same-store retail sales grew 2.4% over the same period last year, according to data compiled by TeleCheck Services. The Mid-Atlantic region led the nation, followed by the Southeast, the Southwest, the West and the Midwest (tied) and the Northeast. The TeleCheck Retail Index is based on a year-over-year, same-store comparison of the dollar volume of checks written by consumers at more than 27,000 of TeleCheck ‘s 272,000 subscribing locations. Checks account for about one-third of retail spending and remain second only to cash as the most popular method of payment.

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COUNTERFEIT SMART CARD

Police have broken up a large criminal ring specializing in pay TV smart card fraud. Police in Hungary arrested five people, including one Briton, in connection with fraud that involved smart cards used for French pay TV. According to police reports, two French pay-channels, Canal+ and Viaccess, lost more than 64 billion forints last year due to the fraud. More than 800 counterfeit cards were confiscated in the search of the Briton’s house. The black-market value of the cards is 80,000 forints each. Those arrested have confirmed the cards were primarily sold abroad. They produced the cards in Hungary since it was outside the European Union. The group openly advertised the cards on the Internet. All five face up to eight years in prison for computer fraud.

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Diebold Promotes Finefrock

Diebold, Incorporated announced it has named Jack E. Finefrock vice president of its Retail Solutions Group, where he will be responsible for promoting Diebold solutions in the retail marketplace.

In May 2000, Diebold’s Board of Directors named Finefrock a corporate officer as vice president of North American Sales and Service, Central division. Five years prior, Finefrock was promoted to vice president of Diebold’s Midwest Division, where he supervised sales, service, systems and administrative functions for the Chicago-based operation.

Finefrock joined Diebold in 1977 as a systems analyst, and has held various other positions with the company, including manager of marketing research, sales representative, account manager, regional sales manager and re-engineering team leader.

A graduate of Capital University in Columbus, Ohio, Finefrock holds a bachelor’s degree in business administration. His new office will be located in Green. Family members include his wife, Kathy and their three children: Kyle, 21; Nicole, 18; and Scott, 14.

Diebold, Incorporated is a global leader in providing integrated self- service delivery systems and services. Diebold employs more than 10,000 associates with representation in more than 80 countries worldwide and headquarters in Canton, Ohio, USA. Diebold reported revenue of $1.7 billion in 2000 and is publicly traded on the New York Stock Exchange under the symbol ‘DBD.’ For more information, visit the company’s Web site at [www.diebold.com][1].

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

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724 2Q/01

724 Solutions Inc. announced preliminary results for the second fiscal quarter ended June 30, 2001. Revenues for the quarter will be approximately $14.1 million, a 255 percent increase compared to the same period of fiscal 2000. Pro forma loss per share for the quarter is expected to be $(0.27) to $(0.29), an improvement of approximately 30 percent compared to the same period of fiscal 2000. Pro forma loss is net loss for the period, adjusted for amortization of intangibles, equity in income (loss) of affiliate, stock-based compensation and certain non-recurring expenses, including one time costs incurred in connection with the integration of TANTAU Software, and the realignment of 724 Solutions’ business. These adjustments are expected to be in the range of $5.0-6.0 million. (All amounts in U.S. dollars.)

“Our global pipeline of opportunities is the strongest it has ever been, but the economic uncertainty is causing some of our larger license deals to take longer to close,” said John Sims, Chief Executive Officer, 724 Solutions. “Given the uncertain economic outlook — and the potential that this may continue to affect our sales cycle on large strategic contracts — we believe that it is prudent to adjust our revenue expectations for the year to $67.0 million.”

About 724 Solutions Inc.

724 Solutions Inc. is a leading global provider of Internet infrastructure software that enables the delivery of secure financial services applications and mobile transaction solutions across a wide range of Internet-enabled devices. The 724 Solutions suite of products and services enables companies to realize value through the mobile Internet by building, deploying, and integrating personalized and secure mobile commerce and lifestyle applications. With dual headquarters in Toronto, Canada, and Austin, Texas, the company has development and sales offices around the world. 724 Solutions’ common shares are listed on the NASDAQ National Market (SVNX) and The Toronto Stock Exchange (SVN). For additional information visit www.724.com.

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