Slight Turn South

Fitch IBCA reported yesterday that charge-offs and delinquency edged up slightly during the June collection period. However both benchmarks remain well below last year’s figures. The real good news is that yields and three-month spreads continue to rebound. Fitch predicts that all performance measures will remain stable for the short-term.


May99 5.95% 19.71% 16.36% 3.03% 6.04%
Apr99 5.91% 18.65% 15.96% 3.02% 5.64%
Mar99 5.94% 20.24% 16.87% 3.14% 5.92%
Feb99 6.05% 19.49% 15.44% 3.25% 5.69%
Jan99 6.10% 19.23% 15.82% 3.28% 5.37%
May98 6.63% 19.02% 14.88% 3.23% 4.40%

CO-chargeoffs; GY-gross yield; MP-monthly payment rate; DL- 60+ day
delinquency rate; SP-3-month excess spread
Source: Fitch IBCA



The National Automated Clearing House Association (NACHA) is sponsoring a pilot program in which consumers can authorize, by telephone, electronic debits to their checking or savings accounts to pay for goods and services. Twenty-five financial institutions have enrolled in the pilot program, which is scheduled to run through March 31, 2000.

“Telephone authorizations will provide consumers with an easy and convenient method to make one-time payments,” said Elliott C. McEntee, President and Chief Executive Officer of NACHA.

In the pilot program, a participating financial institution signs up corporate customers, permitting them to offer this authorization method for debit payments. For example, a participating utility company could accept a telephone-authorized debit for an overdue bill rather than requiring a consumer to pay in person to prevent a cutoff in service. The debit is made using the Automated Clearing House (ACH) Network.

Operating rules for the ACH Network currently require debit authorizations to be in writing and signed or similarly authenticated. While useful for recurring bill payments for mortgages, insurance premiums, utilities and other recurring payments, a written authorization can be cumbersome for one-time, non-recurring payments. Under the pilot program, verbal authorizations take the place of written authorizations for these non-recurring payments. The authorization is either tape-recorded or a written confirmation notice is sent to the consumer.

The same consumer rights and protections that apply to recurring debits are retained for the pilot program. A separate authorization is required for each debit transaction, the originating company is required to keep a record of the authorization for two years, and consumers have 60 days to challenge debits they believe to be unauthorized. Significantly, the pilot program specifically prohibits companies from calling consumers with whom they have no previous relationship.

McEntee said, “Financial institutions and companies have previously been hesitant to accept telephone authorizations because of concerns about fraud. Sufficient fraud-detection and prevention technologies now exist that allow these transactions to be accepted while preventing the introduction of fraud into the payments system.”

The financial institutions that enrolled in the pilot are AFBA Industrial Bank, AmSouth Bank, Bank of America, Bank of Denver, Bank One, Capital City Bank, Chase Manhattan Bank, Citibank, First National Bank in Brookings, FNB of Central Texas, First Premier Bank, First Regional Bank, First State Bank, First Union, Florida Bank, Ft. Knox National Bank, Legacy Bank of Texas, Mellon Bank, Northern Trust Company, Oakland State Bank, Pacific Mercantile Bank, PNC Bank, Riverway Bank, Sears National Bank and Wells Fargo/Norwest. Companies must be enrolled by July 29, 1999 to participate.

The ACH Network is a nationwide, inter-bank payments system that has been in use for over 25 years. It is commonly used for Direct Deposit of payroll, Social Security and other government benefits, Direct Payment of recurring consumer bills, and business-to-business payments. In 1998 there were more the 5.3 billion ACH transactions valued at more then $16.4 trillion.

About the National Automated Clearing House Association (NACHA)

NACHA represents more than 13,000 financial institutions through its 34 regional ACH associations, six councils and corporate Affiliate Membership program. A leader in the payments industry, NACHA develops operating rules for the Automated Clearing House Network and for emerging electronic payment solutions in the areas of Internet commerce, bill payment and presentment, financial electronic data interchange, cross-border transactions, electronic checks, and electronic benefits transfer. Visit NACHA on the Internet at [][1].



Y2K Okay

The Alliance for Telecommunications Industry Solutions announced yesterday that no Y2K-related anomalies were discovered during recently-completed internetwork interoperability testing, conducted to determine Y2K’s impact on frame relay networks, and specifically credit card transactions and financial data transfer. The internetwork interoperability testing was conducted by the ATIS-sponsored Internetwork Interoperability Test Coordination Committee in partnership with the Y2K Financial Networks Readiness Consortium. The FNRC is comprised of American Express, Bank of America, First Data, JP Morgan, MasterCard, MBNA America, Total System Services, VISA and Wells Fargo.


CyberCash 2Q/99

CyberCash, Inc., the world leader in e-commerce technologies and services for merchants, Wednesday announced that its net loss per share for the second quarter ending June 30, 1999 will be greater than anticipated. Management says this is due principally to changes in the rapidly-evolving market for digital wallets, which has caused a delay in the recognition of revenues from its new Agile Wallet Platform(TM) and InstaBuy(TM) “one-click” shopping service. CyberCash is placing an increased emphasis on the distribution of the Agile Wallet, and has dedicated considerable resources to its aggressive promotion and distribution. The Agile Wallet serves as the platform for the InstaBuy service and provides a foundation for other value-added e-commerce services designed to help merchants grow their revenues. The company indicated its net loss per share for the second quarter would be between $(0.53) and $(0.56). Analysts’ estimates for net loss per share range between $(0.36) and $(0.42).

“As we said during our annual meeting in June, management is heavily focused on pursuing market share for our Agile Wallet,” said James J. Condon, president and chief operating officer. “The Agile Wallet technology is the platform for a growing number of services for consumers, merchants and banking partners. We will invest aggressively in the development of this technology, the distribution of wallets and the development of new services to assist merchants in growing their business. Given the company’s new initiatives, we anticipate that it will take several quarters to achieve predictability of revenues.

“Our core e-commerce business demonstrated another strong performance this quarter, bringing in more than 1,000 merchants per month to our online CashRegister service. Earlier this month we announced a definitive agreement to acquire Tellan Software. We expect that Tellan’s products will add significant value to our software business and strengthen our industry-leading technology. Given this progress, we have full confidence that CyberCash is well-positioned to capitalize in the expanding e-commerce market,” Condon said.

About CyberCash, Inc.

CyberCash is a world leader in e-commerce technologies and services, enabling commerce across the entire market spectrum from electronic retailing environments to the Internet. CyberCash provides a complete line of software products and services allowing merchants, billers, financial institutions and consumers to conduct secure transactions and other e-commerce functions using the broadest array of popular payment forms. Credit, debit, purchase cards, cash, checks, smart cards and alternative payment types (e.g., “frequent buyer” or loyalty programs) are all supported by CyberCash payment solutions. Leading brands of CyberCash include InstaBuy(TM), AgileWallet(TM), ICVERIFY(R), PCVERIFY(TM), CashRegister, NetVERIFY(TM), CyberCoin(R) and PayNow(TM).


US Bancorp 2Q/99

U.S. Bancorp yesterday reported record operating earnings of $383.8 million, or $.53 per diluted share, for the second quarter of 1999, compared with $358.2 million, or $.48 per diluted share, in the second quarter of 1998. Operating earnings on a cash basis increased from $.52 per diluted share in the second quarter of 1998 to $.58 per diluted share, or 11.5 percent, in the second quarter of 1999. Return on average common equity and return on average assets, excluding nonrecurring items, were 24.4 percent and 2.02 percent, respectively, in the second quarter of 1999, compared with returns, excluding nonrecurring items, of 23.2 percent and 2.01 percent in the second quarter of 1998.

Including nonrecurring, merger-related charges of $9.5 million, after-tax, the Company recorded net income for the second quarter of 1999 of $374.3 million, or $.51 per diluted share, compared to $320.6 million, or $.43 per diluted share, in the second quarter of 1998.

U.S. Bancorp Chairman, President and Chief Executive Officer John F. Grundhofer said, “Our second quarter results reflect our continued focus on profitable revenue growth. Our second quarter core loan growth was strong, net interest income improved, and fee income grew more than 18 percent from the first quarter of 1999 on an annualized basis. Our profitability ratios continue to be among the best in the industry, and we are dedicated to continuing to deliver strong results. I am very pleased with the progress we have made growing our existing businesses. This week’s announcement that Lockheed Martin Corporation selected U.S. Bank as its exclusive purchasing card provider — the largest such commercial account ever awarded — is just the latest evidence of the strong financial solutions we offer.

“I am also excited by our new opportunities to strengthen and diversify our Company. With the acquisition of Western Bancorp, we will expand our banking franchise in fast-growing Southern California. The addition of Bank of Commerce will make us a national leader in SBA lending, and the acquisition of Mellon Network Services will fortify our electronic funds transfer processing business.”

Comparisons to the second quarter of 1998 are affected by the May 1, 1998, acquisition of Piper Jaffray Companies Inc. (“Piper Jaffray”). Net interest income on a taxable-equivalent basis in the second quarter of 1999 was higher by $45.4 million, or 5.8 percent, than the second quarter of 1998. Noninterest income increased by $94.8 million, or 16.9 percent, from the second quarter of 1998, primarily reflecting both the acquisition of and growth in Piper Jaffray and higher service charges on deposit accounts, offset by the loss of a portion of the U.S. Government purchasing card business. Noninterest expense, before nonrecurring items, was higher than the second quarter of 1998 by $72.7 million, or 10.9 percent, principally due to acquisitions. The banking efficiency ratio (the ratio of expenses to revenues without the impact of investment banking and brokerage activity), before nonrecurring items, for the second quarter of 1999 was 42.4 percent, compared to 45.1 percent in the second quarter of 1998.

Net charge-offs in the second quarter of 1999 were $140.3 million, slightly higher than the first quarter of 1999 net charge-offs of $139.6 million and higher than the second quarter of 1998 net charge-offs of $106.7 million. The increase in net charge-offs from the second quarter of 1998 was due to an expected increase in losses on several consumer loan portfolios purchased in 1998 and higher consumer fraud losses. Net charge-offs were .93 percent of average loans in the second quarter of 1999, compared to .96 percent in the first quarter of 1999 and .77 percent in the second quarter of last year. Nonperforming assets declined from $325.8 million at March 31, 1999, to $320.2 million at June 30, 1999. The ratio of allowance for credit losses to nonperforming loans continued to indicate strong reserve coverage of 327 percent at June 30, 1999.

On May 19, 1999, the Company announced an agreement to acquire Newport Beach-based Western Bancorp (Nasdaq: WEBC). With $2.5 billion in assets at March 31, 1999, Western Bancorp has 31 branches in southern California in Los Angeles, Orange and San Diego counties. Pending regulatory and Western Bancorp shareholder approvals, the acquisition is expected to close in the fourth quarter of 1999.

On February 18, 1999, the Company announced an agreement to acquire San Diego-based Bank of Commerce (Nasdaq: BCOM), one of the nation’s largest Small Business Association (SBA) lenders. Regulatory and shareholder approval has been received and the acquisition is expected to close on July 15, 1999.

The Company also announced the acquisition of Mellon Network Services’ electronic funds transfer (EFT) processing unit and the Investment Banking division of The John Nuveen Company (NYSE: JNC). The acquisition of Mellon Network Services’ EFT processing unit was completed June 30, 1999, while the acquisition of the Investment Banking division of The John Nuveen Company is expected to close during the third quarter.


P-Card Award

One Valley Bank was awarded a symbolic “Certificate of Savings” by the West Virginia Governor Wednesday for saving the state $16.8 million. The savings are attributed to the ‘State Purchase Card’ program or ‘P-Card’ program. The certificate represents savings that the state government would realize by writing 350,000 less checks for the fiscal year with use of the ‘VISA Purchase Card’. The amount of the “Certificate of Savings” was computed using the lowest industry standards of $50 savings for every transaction. The ‘State VISA Purchase Card program’ was enacted by the legislature in 1996


Garth Brooks Card

MBNA America and the Garth Brooks Touch ’em All Foundation announced yesterday the establishment of a credit card program for the Foundation. The five-year agreement includes an initial $1 million payment to the Touch ’em All Foundation with the potential for additional revenues based on the success of the program.

The Touch ’em All Foundation, established in January 1999, is a non-profit corporation which contributes financial resources to selected non-profit organizations that effectively serve and benefit children with an emphasis on health, education and inner city needs. The Foundation will enlist the participation of Major League Baseball players who will contribute a predetermined sum based upon selected categories of on-field performance. Each player will then be paired with “Celebrity Teammates” who will match the players donations. Seventy major league baseball players have already agreed to participate in the program.

“Garth is passionate about doing all he can do to help kids. The Foundation is excited that now everyone can join us as `teammates’ in this great cause,” said Bo Mitchell, co-founder and President of the Touch ’em All Foundation. “We are honored to be associated with such a fine institution as MBNA America Bank.”

“The Touch ’em All Foundation is the type of organization we are proud to work with,” said John R. Cochran, MBNA’s Chief Marketing Officer. “Customers will be very enthusiastic about the program and it will benefit some terrific causes.”

MBNA America, a subsidiary of MBNA Corporation (NYSE: KRB), is the largest independent credit card lender in the world with more than $60 billion in managed loans. MBNA is the “Official Credit Card Issuer of Major League Baseball” marketing its products to the fans of all 30 teams. MBNA also provides retail deposit, consumer loan and insurance products.


@Home Joins SCF

@Home Corporation has joined The Smart Card Forum (SCF), a multi-industry organization working to accelerate the widespread acceptance and application of smart card technology, as one of the Forum’s newest Principal Members, it was announced yesterday. Additionally, Louis Gasparini, vice president of Information Technology for @Home, has joined the Forum Executive Committee as Assistant Treasurer. As a leading innovator in the development of high speed Internet connections, @Home’s participation in the largest smart card organization demonstrates the value smart card applications bring to today’s emerging Internet economy.

“@Home brings to the Forum much insight and expertise on the rapid growth of the Internet and online service industry. The need for high-speed Internet connections will be increasingly important as smart card technology becomes more widely accepted,” said SCF President and CEO Donna Farmer. “We are thrilled to have @Home on board, and also to have Louis Gasparini’s participation on our Executive Committee. We are pleased to see the trend of Internet focused organizations such as @Home Corporation participating actively within the Smart Card Forum.”

As a Principal Member, @Home is entitled to privileged access to The Smart Card Forum Consumer Research, other Forum sponsored research and documents, along with attendance at the Technical Working Group sessions, Smart Card Forum Educational Institute programs, and the Annual Meetings.

About @Home

Based in Redwood City, CA, @Home Network (NASDAQ: ATHM) distributes high-speed, openly accessible Internet and Web services to residences and businesses using its own network architecture and a variety of transport options including the cable industry’s hybrid-fiber coaxial infrastructure. The cable connection provides users significant increases in speed over conventional Internet services. Leveraging the “always on” attributes of cable, @Home allows for unique multimedia applications that go beyond current Web experiences. Since its founding in 1995, @Home Network has reached affiliate agreements with 21 leading cable companies-worldwide, including AT&T Broadband and Internet Services, Cablevision Systems Corp., Cox Communications, Garden State Cable, and Midcontinent Cable Co., among others. More information is available at the @Home Network Web site at

About The Smart Card Forum

The Smart Card Forum is a non-profit, multi-industry organization of nearly 200 members working to accelerate the widespread acceptance of multiple application smart card technology by bringing together, in an open forum, leading users and technologists from both the public and private sectors. The Smart Card Forum is the leading organization for education and awareness of topical issues associated with the use and adoption of smart card systems. The Smart Card Forum also operates the Smart Card Forum Educational Institute, the industry-leading course dedicated to providing smart card education that has set the standard in the industry. The curriculum is based on leading edge educational models and methodologies utilizing experienced instructors who are experts in the smart card industry. For more information about The Smart Card Forum, log on to the organization’s website at [][1].



Hush Money

A popular Australian radio personality admitted yesterday he agreed to stop bashing banks on-the-air in exchange for more than one million Australian dollars. The bizarre story comes from, Inc. president Robert McKinley who is visiting Sydney this week. As part owner of an advertising agency, Australian radioman John Laws came up with the idea in response to an initiative by the Australian Bankers Association to improve banks image. Laws regularly criticized banks, including their credit card programs, on a morning program airing on the 2UE radio station. After the deal was sealed, Laws, with two million listeners, ended his bank lambasting. Laws insists it was just a private business deal and since he is an entertainer, not a journalist, it does not matter. The Australian Consumers Association was not amused.


Hypercom & BP Agree

Hypercom Corporation Tuesday announced an agreement to provide BP with Hypercom’s ‘Ascendent Advanced Transaction Processor’. BP will use Hypercom’s ATP software to centralize, streamline and enhance the authorization and settlement of BP gas and fleet card transactions in Singapore and Malaysia. ‘Ascendent’ enables merchants and banks to offer advanced payment products, such as chip cards, and value-added services, such as loyalty programs.


Super ATM Patents

Capital Security Systems yesterday announced that it has received approval for three more patents on features of the Super ATM(TM) development platform, the ATM PowerBuilder, a powerful toolkit that will ultimately provide automated banking customers with a means for accessing 17 different banking functions from an ATM terminal.

“With the approval of these three patents,” stated Robin Gustin, president of CSS, “we are within sight of creating the ATM of the future — the ultimate in one-stop shopping for all of a customer’s electronic banking needs.” According to Gustin, the first patent covers signature verification in a terminal environment. Once verified, an ATM customer will be authorized to cash a check or money order, pay bills, create a money order, or perform a variety of other electronic financial transactions at an ATM location. The second patent covers the capability for a bank network customer to transfer funds from one ATM to any other ATM, in effect, emulating a Western Union wire order in an ATM environment. “It’s more convenient for the customer — and it will produce more fees for the networks, too,” explained Gustin. “Several things make our platform unique,” Gustin went on, “including check cashing technology that is 100% automated and the way we direct dollars and cents to a smart card, which is covered by the third patent.” Because Smart Cards enable more options and provide better security for the customer, Gustin believes that Smart Cards will eventually replace magnetic strip cards at ATMs. She says that the possibilities created by the powerful ATM PowerBuilder platform should help gain bank support for the conversion to a Smart Card-based, e-commerce society.

According to Gustin, the ATM PowerBuilder will enable banking networks to access three major electronic financial markets: conventional ATM banking, electronic benefits transfer, and unbanked customers. According to a recent government study, unbanked customers comprise one out of every eight homes in the U.S. — which means possibly another strong revenue source for the networks. CSS is currently talking to a number of large domestic and foreign companies that are seeking to secure a controlling interest in the ATM-based world of electronic commerce by owning the patents granted to the Super ATM(TM) — ATM PowerBuilder platform.

Details Preferred Card, the leading consumer brand of Getty Images, Inc., announced Tuesday an agreement with Visa U.S.A. which designates Visa the “Preferred Card” on the site, and will allow to develop marketing promotions that will be offered exclusively to Visa cardholders.

Under the terms of this agreement, will be included in Visa’s Value-Added Offers to millions of its cardholders, and promoted through statement inserts, direct mail, sweepstakes, e-mails and online mentions. These co-branding opportunities include Visa’s Back to School and Holidays promotions featuring — expected to generate one million impressions via’s website. is included in the Visa Rewards online program via jump page advertising on [][1] and hot links to financial member web sites and two exciting sweepstakes featuring Visa as a primary means for entry. Additionally, provides Visa’s cardholders exclusive offers when shopping at [][2].

“ is proud to name Visa as its preferred card. Our goal is to create the most satisfying and enjoyable consumer experience possible on our site, and Visa shares our commitment to excellent customer service,” said Bill Lederer, CEO of “With their international reach and focus on using technology to enhance customer convenience, safety and flexibility, they are a natural partner for us in the e-commerce arena.”

During the important holiday season, hopes to generate an estimated one billion impressions through co-branded online advertising. The partnership allows, the leading destination for art and art- related products on the web, to extend its marketing programs to include Visa’s extensive customer base. According to Visa, online purchases represent one of their fastest growing market segments.

“Online purchasing has become a regular part of our customers’ shopping habits, and Visa is very pleased to be working with a leading e-commerce brand such as,” said Jim Degrocici, SVP, E-commerce, Visa U.S.A. “Partnering Visa with creates a wonderful opportunity to provide products of high quality and value to Visa’s cardholders.”

About Visa

As the “World’s Best Way to Pay,” Visa is the leading payment brand and the largest consumer payment system worldwide with more volume than all other major payment cards combined. Visa plays a pivotal role in advancing new payment products and technologies to benefit its 21,000 member financial institutions and their cardholders. Visa has more than 70 smart card programs in 33 countries and on the Internet, with 23 million Visa chip cards, including over 8 million Visa Cash cards. Visa is pioneering SET Secure Electronic Transaction(TM) programs to enable and advance Internet commerce. There are more than 630 million Visa-branded cards, which generate over US $1.3 trillion in annual volume. Visa is accepted at more than 15 million worldwide locations, including at over 450,000 ATMs in the Visa Global ATM Network. Visa’s Internet address is [][3].

About ([][4]), the consumer brand of Getty Images, Inc., is an inviting and engaging e-commerce destination that makes buying art accessible, personal and fun by offering valuable information consumers need to learn about and purchase art. The site is an enriching and convenient source for art, offering many of the world’s great prints in one place.’s expansive galleries feature master works by world-famous artists, as well as original pop culture artists. In addition to everyday discounts, personalized product choices and a 100 percent satisfaction guarantee, offers three distinguishing features — framing visualization software, seasonal and featured galleries, and the ArtClique(SM) Saver’s Club. is the recipient of the respected Pinnacle Award for Overall Excellence and the eMarketer Web recognition Award. is the consumer brand of Getty Images, Inc. (Nasdaq: GETY), the leading, global provider of visual content. More information about Getty Images and its visual content brands can be found on the company’s Web site at .