Sears Improves

Declining charge-offs and aggressive cost containment contributed to a strong quarter for the Sears & Roebuck credit card despite continued erosion. Sears reported yesterday that its domestic full year, charge-off rate declined from 7.35% to 6.44% and delinquency (30+ day) decreased from 9.28% to 7.58%. However domestic credit card receivables dropped from $28.3 billion to $26.7 billion, a 6% change, during 1999. The domestic credit card yield also nosed down last year, from 20.18% to 19.58%. The effective financing rate and net interest margin also declined. The effective financing rate edged down from 6.00% to 5.77% and the net interest margin dropped from 14.18% to 13.81%. Overall Sears’ revenues from its credit division slipped 6% last year, from $4.6 billion to $4.3 billion. For more details on Sears, visit CardData ([][1]).



ACE Buys Cash Banc

ACE Cash Express, Inc., the nation’s largest check-cashing chain and a significant provider of retail financial services announced this week the purchase of 13 Cash Banc stores, all located in Houston, Texas.

“The acquisition of Cash Banc’s 13 locations brings the Houston area market total for ACE to 100 stores, which is now second only to the Dallas-Ft. Worth store count of 119,” said Jay B. Shipowitz, president and chief operating officer of ACE Cash Express, Inc. “The Cash Banc stores will bring over 100,000 new customers to the ACE system. We are very excited about the prospect of introducing them to ACE’s newest services including ACE Bill Pay and Instant Auto Insurance.”

Mike Salhoot, president of Cash Banc, said, “ACE is the future of this industry. Their financial strength, market penetration and their reputation for being straightforward is very well deserved. We were able to complete the sale much faster than I had anticipated.”

ACE Cash Express, Inc. is headquartered in Irving, Texas and is the largest owner, operator and franchiser of check-cashing stores in the United States. Founded in 1968, the company currently has a network of 964 stores, consisting of 817 company owned stores and 147 franchised stores in 29 states and the District of Columbia. ACE offers a broad range of financial and check cashing services and is one of the largest providers of MoneyGram wire transfers. In addition, ACE offers money orders, small consumer loans, bill payment services, and prepaid local and long distance telecommunication services. The company’s website is found at [][1].



Nature’s Sunshine to Market ECHO

Electronic Clearing House Inc. announced a relationship with Nature’s Sunshine Products to market credit card processing merchant accounts to their 190,000 active distributors.

Provo, Utah-based Nature’s Sunshine Products, one of the nation’s largest direct marketing organizations, is a 27-year old publicly traded company that offers an extensive line of nutritional and health products.

“We’re extremely excited about this marketing opportunity and look forward to working with Nature’s Sunshine’s staff of professionals,” stated Jack Wilson, ECHO’s vice president.

ECHO’s processing services will be promoted through direct mail to the distributors and by ECHO’s attendance at Nature’s Sunshine’s special events and seminars for its distributors.

Electronic Clearing House provides credit card processing, cash advance services, check guarantee, check verification, check conversion, inventory tracking and/or various Internet services to more than 41,000 retail merchants, U-Haul dealers and casinos across the nation.

ECHO also designs, develops and integrates software and point-of-sale hardware that is utilized as credit card processing terminals, automated money order dispensers, inventory tracking devices and casino cash advance systems.


ACE EBITA Tops $6 Million

ACE Cash Express, Inc., the nation’s largest check-cashing chain and a significant provider of related retail financial services, recorded revenue gains from nearly all of its product categories and services during its second fiscal quarter ended December 31, 1999, resulting in a 26 percent increase in net income and a 27 percent increase in earnings per share from the second quarter of the prior fiscal year.

During the second quarter of fiscal 2000, total revenue increased 13 percent, to $32.3 million from $28.7 million in the second quarter of fiscal 1999. The increased revenue and net income produced diluted earnings per share of 14 cents, a 27 percent increase over diluted earnings per share of 11 cents in last year’s second quarter. Earnings before interest, taxes, depreciation and amortization increased 25 percent, to $6.2 million for the fiscal 2000 second quarter from $5.0 million for the fiscal 1999 second quarter.

ACE’s core revenue categories showed continued growth in the fiscal 2000 second quarter compared to the fiscal 1999 second quarter; check cashing fees increased 12 percent to a record quarterly high in excess of $20 million, and loan and bill payment fees each increased 11 percent. The ACE network expanded by 13 company-owned stores and 11 franchised locations during the second quarter. Same store sales recorded a 7 percent increase over last year’s second quarter.

“ACE had a strong second quarter of fiscal 2000,” said Jay B. Shipowitz, president and chief operating officer of ACE. “We expanded our total credit facility to $165 million, continued to build our management team with the addition of a chief marketing officer, and announced an alliance to provide prepaid internet services through the ACE retail network.”

Three-Month Financial Highlights
(in thousands, except per share data)

Three Months Ended Increase in Fiscal 2000
December 31, from Fiscal 1999
1999 1998 $ %
Revenues $32,284 $28,656 $3,628 13%
Net income $ 1,403 $ 1,116 $ 287 26%
Earnings before
interest, taxes,
depreciation and
amortization $ 6,212 $ 4,987 $1,225 25%
Diluted earnings
per share $.14 $ .11 $ .03 27%

Six Month Results

Since the 2000 fiscal year began on July 1, 1999, revenue has grown 15 percent, to $62.9 million from $54.7 million for the first six months of fiscal 1999. Similarly, before reflection of ACE’s adoption of a new accounting standard, net income increased 27 percent, resulting in earnings per share growth of 26 percent and earnings before interest, taxes, depreciation and amortization growth of 25 percent.

ACE opened 31 company-owned stores and acquired 3 stores during the first six months of fiscal 2000. In addition, 25 new franchises have opened in the same six months. Same store sales increased by 7 percent in the first six months of fiscal 2000 over the first six months of fiscal 1999.

“Overall, I am very pleased with the first half of fiscal 2000,” said Donald H. Neustadt, chief executive officer of ACE. “We have opened or acquired 102 new stores in the previous 12 months and increased our trailing 12 months EBITDA to $29.7 million.”

Six-Month Financial Highlights
(in thousands, except per share data)

Six Months Ended Increase in Fiscal 2000
December 31, from Fiscal 1999
1999 1998 $ %

Revenues $62,872 $54,679 $8,193 15%
Net income $ 2,426 * $ 1,912 $ 514 27%
Earnings before
interest, taxes,
depreciation and
amortization $11,556 * $ 9,282 $2,274 25%
Diluted earnings
per share $ .24 * $ .19 $ .05 26%

* Before cumulative effect of change in accounting

ACE Cash Express, Inc. is headquartered in Irving, Texas and is the largest owner, operator and franchiser of check-cashing stores in the United States. Founded in 1968, the company currently has a network of 963 stores, consisting of 817 company-owned stores and 146 franchised stores in 29 states and the District of Columbia. ACE offers a broad range of financial and check cashing services and is one of the largest providers of MoneyGram wire transfers. In addition, ACE offers money orders, small consumer loans, bill payment services, and prepaid local and long distance telecommunication services. The company’s website is found at [][1].

For more information on ACE Cash Express pleaee visit CardData ([][2])



Steady Wachovia

Despite the brutal competition and irrational pricing among the nation’s top 25 issuers, Wachovia remains a steady ship. According to portfolio results released yesterday and gathered by CardData, Wachovia chipped out a slight increase in card receivables and added more than 500,000 accounts during 1999. However volume remained flat and the percentage of active accounts declined from 49% to 40%. Many of these same trends are evident among others issuers in the $1 billion to $8 billion category. Wachovia is renowned for its flexible, competitive pricing and tight risk management. Just before Christmas, Wachovia announced the acquisition of the Partners First portfolio from Harris Bank and Bank of Montreal. The sale includes more than 1.2 million accounts and $1,985,000,000 in card outstandings. Wachovia is paying an 8.3% premium for the portfolio. The purchase agreement includes a 5-year agent relationship between Wachovia and Harris Bank. Wachovia indicated it wants to align its credit card business with regional brands. For complete current and historical stats on Wachovia’s credit card portfolio, visit CardData ([][1]).

Wachovia Snapshot

EOY 1998 EOY 1999

RECV: $6,511,228,734 $ 6,592,384,955 +1.2%
VOL: $7,896,785,002 $7,878,863,092 -0.2%
ACCTS: 5,026,940 5,602,817 +11.5%
ACTIVES: 2,449,729 2,257,030 -7.9%
CARDS: 7,424,877 7,802,917 +5.1%
Source: CardData (



People’s Integration

People’s Bank announced late Thursday it is integrating its consumer lending department into the credit card division. The issuer says the action will enable it to build more long-term, profitable customer relationships through the synergy between consumer lending and credit cards. The decision follows several national and international pilots conducted last year. Meanwhile People’s reported that managed credit card yield for 4Q/99 increased 23 basis points compared to 4Q98 but decreased 39 basis points compared to 3Q99. The yield reduction from 3Q99 was due to 4Q asset growth at introductory interest rates. However managed credit card fees increased $3.7 million, or 12%. Credit card net charge-offs (as a percentage of average managed receivables) equaled 4.24%, increasing 53 basis points compared to 4Q98 and 12 basis points compared to 3Q99. Delinquencies as a percentage of quarter-end managed receivables (2.84%) declined 22 basis points from 4Q98 and decreased 4 basis points from 3Q99. Overall the average managed credit card portfolio increased $274 million or 7% compared to 4Q98 and increased $162 million from 3Q99. United Kingdom receivables accounted for $84 million of the year-over-year growth. For complete current and historical stats on People’s credit card portfolio, visit CardData ([][1]).




MBNA now has a 12% share of the U.K. credit card market. Yesterday MBNA and AOL (U.K.) announced the launch of a new co-branded credit card and joint marketing program. Under the multi-year agreement, MBNA will be the exclusive issuer of both AOL and CompuServe branded credit cards in the U.K., and MBNA’s credit card services will be marketed through the AOL (U.K.) Service. AOL and CompuServe have a combined U.K. membership of more than 1 million. MBNA International Bank, established in the U.K. in 1993, now has more than 3 million cardholders. MBNA also has signed more than 750 affinity card deals, such as the Royal College of Surgeons, and sporting groups such as Manchester United.


Drexler Income Top $1 Million

Drexler Technology Corporation manufacturer of LaserCard optical memory cards, LaserCard reader/writers, and related software, announced results for its fiscal 2000 third quarter and nine months ended December 31, 1999.

Net income for the three months ended December 31, 1999, was $1,378,000, or 14 cents per share diluted, versus $1,003,000, or 10 cents per share diluted, for last year’s third quarter. Revenues for the fiscal 2000 third quarter increased to $4,321,000 from $4,056,000 for the year-earlier quarter.

For the nine months ended December 31, 1999, net income was $3,610,000, or 37 cents per share diluted, compared with $2,971,000, or 30 cents per share diluted, for the nine months ended December 31, 1998. Revenues for the first nine months of fiscal 2000 increased to $12,314,000 from $11,563,000 for last year’s first nine months.

Net income for the quarter and nine months included recognition of a portion of the Company’s accumulated income tax benefits under Statement of Financial Accounting Standards No. 109 (SFAS 109), “Accounting for Income Taxes,” in the amount of approximately $660,000 for the third quarter and $1,740,000 for the nine months.

At December 31, 1999, the Company’s cash, cash equivalents, and short-term investments totaled approximately $6,691,000 versus approximately $8,066,000 at March 31, 1999. The Company has no debt.

Other Information:

— On December 20, 1999, the Company announced that it received a $6.8 million order for digital identity optical memory cards to be used primarily for the U.S. Department of State (DoS) “Laser Visa” program and also for the U.S. Immigration and Naturalization Service (INS) Permanent Resident Card “Green Card” program. Deliveries of the LaserCard(R) optical memory cards are estimated at approximately 250,000 cards per month over an eight- to nine-month period beginning January 2000.

— The U.S. government has issued a request for proposal (RFP) for a five-year, competitively bid contract for up to 20.6 million optical memory cards. It is anticipated that this procurement contract may be awarded in May of 2000. This RFP, for INS “Green Cards” and DoS “Laser Visa” cards, states that to qualify, the bidder must be capable of delivering 500,000 optical memory cards per month. The Company believes that it is presently the only qualified bidder for this program.

— In China, a value-added reseller purchased 1,000 optical memory cards for a pilot program involving a “VIP Health Care Card” system.

— The Company sold four of its LaserCard Development Kits during the third quarter, to companies in Silicon Valley, New York, Singapore, and China. The $2,200 kit, designed to enable rapid, low cost, product evaluation and application development, is being offered to application developers, value-added resellers, and end users. (See

Based in Mountain View, Drexler Technology Corporation is the world’s leading manufacturer of optical memory cards — credit-card sized, portable, data storage devices with a user data capacity of up to 2.8 megabytes of digital data, including text, graphics, and images. Applications include digital identification, automated border clearance, electronic commerce, portable clinical records, customer loyalty, logistics management, and point-of-sale. Drexler’s wholly owned subsidiary, LaserCard Systems Corporation, produces LaserCard read/write drives and related software.

For more information on Drexler Technology please visit CardData ([][1]).



Proton World Gets Frosted

Proton World announced today that Mr Graham Frost is appointed Deputy Managing Director of the company, with immediate effect.

Mr Frost has 28 years’ experience in the computer industry working over five continents. After completing his Computer Science degree in the UK, he worked for Honeywell for 6 years, then spent 9 years with Prime Computer, before becoming founding Managing Director of Silicon Graphics Australia Ltd (SGI) in 1987. Four years later he became General Manager, Asia-Pacific Region and then Director of Global Business Development, based in California. In his eight years with SGI, he saw its turnover grow from USD 50 million to USD 3,000 million.

In 1995, Mr Frost returned to Australia as President of Tandem Computers, Pacific Region, leaving in 1997 when the company was taken over by Compaq. Since 1997, he has been a specialist business adviser to start-up companies in Australia.

As well as acting as Deputy to Proton World’s Managing Director, Mr Armand Linkens, Mr Frost will act as Executive Vice-President, Sales and Services, and will direct strategy for the Sales and Customer Services departments.

Mr Frost holds both British and Australian citizenship, is an alumnus of Stanford University and is married, with three children.

Armand Linkens, Managing Director of Proton World said: “Given the world-wide success of our technology in a market that is moving faster every day, we need somebody with Graham’s market knowledge to cope with our ambitions. He will be a key contributor to the continued success of Proton World and I sure we will quickly benefit from his experience and enthusiasm as our company’s rapid expansion continues.”

Graham Frost, Deputy Managing Director, Proton World, said: “It is a rare privilege to be invited to join the executive of a key player in a massive new emerging market. I look forward to the challenge of helping Proton World enhance its reputation as the world’s leading smart card solutions provider.”


Providian Nears $20B

Providian reported $19.0 billion in managed credit card loans for fourth quarter 99, a stunning 58% increase over 4Q/98. Providian also reported Thursday that revenues from membership services nearly tripled last year from $238.5 million to $674.9 million. Overall fourth quarter net income totalled $159.4 million, an increase of 68%, over $94.9 million, for the fourth quarter of 1998. During 4Q/99, Providian added 1.1 million net new accounts bringing total customer accounts to 12.4 million. For the full year, the sub-prime specialist added 4.5 million net new accounts, a 57% gain over the 7.9 million total accounts at year-end 1998. The managed net credit loss rate increased to 6.78% in the fourth quarter, compared to 6.40% in the third quarter of 1999, and was better than expected. For the full year, the managed net credit loss rate was 6.94%, compared to 7.58% for 1998. The 30+ day managed delinquency rate was 5.66% at year-end 1999, compared to 5.20% at the end of the third quarter of 1999 and 5.33% at year-end 1998. For complete current and historical stats on Providian’s credit card portfolio, visit CardData ([][1]).

98-4 99-1 99-2 99-3 99-4
CARD LOANS: $12.1b $13.1b $14.8b $16.6b $19.0b
TOTAL ACCTS: 7.9m 9.0m 10.1m 11.3m 12.4m
Source: Providian 4Q/99 Earnings Report



CardSelect Patent

CardSelect International, a provider of consulting services to the banking, telecommunications and smart card industries, announced this week that it has received a United States Patent for its “Gateway Apparatus for Designing and Issuing Multiple Application Cards”.

This invention essentially provides an Internet-based apparatus and method to link card issuers, service providers and consumers in the effort to create multiple applications from different vendors on one card. Services can include credit, debit and loyalty, which can be combined on virtual cards, magnetic stripe cards and/or smart cards. Applicants choose from a menu of services on a network, thereby generating a data file that is used to issue their personalized card.

According to Holger Mackenthun, president of CardSelect International, the Internet is changing the way customers purchase their goods and services, and as a result, card issuers must rethink the way they attract new customers. “Low interest rates on credit cards are no longer enough because there are too many offers out there and margins are squeezed to the limit,” Mackenthun says. “Tailored programs on the Internet that deliver added value to specific customers will achieve success, from which banks and merchants will benefit.”

CardSelect has developed a business strategy that parallels the growing trend in the industry to utilize the Internet to build vertical sales channels, thus bringing customers, service providers and card issuers together. When CardSelect’s plans to create an e-commerce network are fully implemented, customers will be able to customize their own preferred services and vendors on virtual cards or ones they receive through the mail. Other Internet developments for adding more value to cards include Citibank’s “CitiWallet” and the “KlickReward” program as well as the Internet credit card from NextCard, which allows personalized photos on cards.

About CardSelect International

Founded in 1997, CardSelect International (CSI) is a start-up organization that has developed a patented technology for personalizing and issuing financial transaction cards, credit cards, smart cards and multiple application cards over the Internet. Headquartered in the Great Valley Corporate Center near Philadelphia, PA, the company also provides a broad range of consulting services to the global banking, telecommunications and card industries. More information on CSI can be found on the company’s web site at [][1].



Aussie Smart Card Proc

Businesses in the UK and Ireland which trade via the Internet are being offered unprecedented levels of fraud and risk control by National Australia Bank Group, which includes Clydesdale, National Irish, Northern and Yorkshire Banks.

The Group has beaten-off competition from rivals and linked up with market-leading specialists Digital Courier Technologies, Inc. (Nasdaq: DCTI) to offer selected business customers and those who trade with them the chance to make payments via smartcards, including Mondex Electronic Cash.

National Australia business customers accepting payments via conventional credit and debit cards will also have the chance to enhance their security, thanks to the link-up.

Smartcards contain computer chips, rather than the magnetic strips of conventional credit and debit cards, and are the most secure means of on-line payment available.

National Australia customers accepting on-line payments via credit and debit cards will be offered Digital Courier’s transaction monitoring and fraud detection software, which contains information from credit card companies, card issuing banks and merchant banks. The software is easy to install and use, and works with a wide variety of hardware platforms and operating systems. It contains a range of tools which allow businesses to monitor and change transactions, at any point in their life-cycle, with data available in real time, and authorisation requests being answered in five seconds or less.

The Digital Courier link-up will also mean reports of transaction volumes and values being available to businesses, 24 hours a day, from a secure, password-protected Internet site. It is expected that businesses will find these useful for reconciling and managing accounts, as well as monitoring transactions for fraud.

Digital Courier currently manages half a million credit card transactions a month for merchant banks and Internet-based businesses. It aims to make credit card transactions safe and profitable for its clients, from card authorization, through transaction settlement, to robust fraud control.

Mr. Don Marshall, president of Digital Courier Technologies, Inc. said, “Digital Courier’s agreement with National Australia Group brings us a very important partner in our emerging Internet payment’s business.

“Developing this relationship, with one of the world’s leading banks, further solidifies the important role Digital Courier plays in the global market for Internet payment solutions that emphasize risk control, affinity marketing and smartcard technology innovations”.

Mr. Andrew Douglas, Head of Payments, Europe, National Australia Group, said, “National Australia Group has recognized the specialized capability which Digital Courier brings to select merchants and clients.

“Our respective strengths in the financial and Internet industries will deliver significant benefits for our customers”.

Mr. Brent Skeffington, Head of Smartcards Europe, National Australia Group, said, “National’s agreement with Digital Courier brings us an important partner in emerging areas of our Internet payments business. We expect our joint smartcard program to offer our customers a solution that lowers payment costs, reduces chargeback exposure and creates an affinity relationship between merchant and consumer.”

National Australia Bank Group is an international financial services group providing a comprehensive and integrated range of financial services across four continents and 15 countries including Australia, the United States, the United Kingdom, New Zealand and throughout Asia. National Australia Group has an asset base of over A$250 billion, assets under administration of over A$400 billion, almost nine million customers globally and is ranked as one of the 50 largest banks in the world. National Australia Group Europe Limited includes four regional banks (Clydesdale Bank PLC, Yorkshire Bank PLC, National Irish Bank Limited and Northern Bank Limited). For more information, visit the National web-site at [][1].

Digital Courier is a payments organization supplying financial institutions, businesses and Internet merchants with sophisticated e-commerce and payment processing software as well as customized services to meet their needs. Data feeds, data management and business intervention are combined to provide a complete real time suite of Internet and physical payment services. Digital Courier specializes in risk management including chargeback and fraud control. Digital Courier’s broad array of software tools and database information is unmatched in enabling merchants and merchant banks to aggressively pursue electronic commerce opportunities. Digital Courier helps reduce the merchant cost of doing business by limiting incremental merchant discount and bank reserve increases. Merchant banks are given assistance to satisfy their fiduciary need to control and limit merchant risk. Beyond risk control services, payment authorization is available and merchant acquiring and settlement. This complete solution provides an unparalleled platform to the electronic commerce environment and because it is based on new technology, it is reliable, secure and cost-effective. For more information about this product, visit [][2].