Y2K Fraud

In testimony this week before a joint hearing of the House Subcommittee on Consumer Protection, and the House Subcommittee on Finance, the Federal Trade Commission said that identity theft is becoming more sophisticated as fraud artists prey on consumers’ fears about Year 2000 computer bugs. The FTC says an emerging ruse is for someone to claim they represent the consumer’s bank and instructing the consumer to reveal personal information and account information about the consumer’s account in order to ensure the bank can comply with Year 2000 requirements. The FTC testified that identity thieves also use personal information to open a new credit card account under someone else’s name, take over an existing credit card account, take out loans in another person’s name, and write fraudulent checks or transfer money from another person’s bank or brokerage account.

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Fair Isaac Beats Expectations

Fair, Isaac and Company, Incorporated reported quarterly net income of $7.46 million or $.51 per share (diluted) for the three months ended March 31, 1999, compared with the $5.49 million or $.38 per share recorded in the same period last year. Consolidated revenues of $68.9 million, an all-time high, were up 15 percent over the $59.7 million posted in last year’s March quarter.

For the first six months of its fiscal year, Fair, Isaac earned $14.51 million or $1.00 per share (diluted), compared with $9.46 million or $.66 per share posted in the first half of 1998. Six-month revenues rose 21 percent, to $136.9 million.

President & CEO Larry E. Rosenberger said, “Fair, Isaac’s results for the first half of our 1999 fiscal year are somewhat better than we had anticipated at the beginning of the year. The market environment has been and continues to be difficult: Y2K issues on the part of our clients, consolidation in financial services and turmoil in international markets have slowed our growth. Nevertheless, continuing attention to controlling expense growth and increases in the percentage of credit and insurance revenues coming from usage-priced services have allowed us to maintain good margins despite a slower rate of revenue growth and the resources devoted to implementing the new strategic plan we announced last month.”

On March 8, 1999, Fair, Isaac announced that it was forming new business units to pursue opportunities in the electronic commerce and telecommunications industries. At the same time, existing business and service units are being realigned to support these new initiatives, to provide a more cohesive and comprehensive array of products and services to the financial services industry, and to continue the company’s ventures in healthcare information services.

Rosenberger added, “We are making good progress under our new strategic plan. Both employees and clients are enthusiastic about the new opportunities it holds. At the same time, the big increases in our R&D spending in fiscal 1997 and 1998 have resulted in an extensive list of new or enhanced products and services that have been introduced or will be introduced in fiscal 1999. The combination of external market forces and internal changes has, to be sure, injected some uncertainty into our immediate future, but we remain very optimistic about Fair, Isaac’s long-term prospects.”

Since 1956, Fair, Isaac has helped businesses maximize the value of data for strategic decision making. The company pioneered the commercial development of empirically derived predictive models for the credit industry and popularized their use in lending decisions. Today, Fair, Isaac and its subsidiaries provide data-driven decision support solutions to a variety of industries, worldwide, including financial services, direct marketing, personal lines insurance, retail, health care, and telecommunications. Primary areas of focus include customer and operational data management and modeling, information analysis, strategy design, and software. Headquartered in San Rafael, California, Fair, Isaac employs nearly 1,600 people and has offices throughout the United States and Europe as well as in Canada, Mexico, Brazil, South Africa, and Japan.

FOR MORE 1Q/99 DETAILS PLEASE VISIT CARDDATA ([www.carddata.com][1])

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

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Cash America 1Q/99

Cash America International, Inc. announced Thursday that consolidated net earnings for the first quarter ended March 31, 1999 increased 6% to $4,800,000 (18 cents per share) compared to $4,534,000 (18 cents per share) for the same period in 1998. Included in the consolidated earnings is an after tax loss from the Company’s check cashing subsidiary, Mr. Payroll Corporation, of a net $1.4 million in the first quarter of 1999 and $1.1 million in the first quarter of 1998. Consolidated total revenue increased 14% to $95.7 million for the three months ended March 31, 1999 versus $84.2 million in the prior year.

Cash America completed a strategic alliance during the first quarter of 1999, which included the sale of an equity interest in its subsidiary Mr. Payroll Corporation to Wells Fargo Bank (NYSE: WFC). The terms of the transaction called for Wells Fargo’s contribution of cash and assets in exchange for an ownership interest in the subsidiary. Cash America recognized a gain net of tax on the transaction of $1.1 million that effectively reduced the net loss after taxes from activities of Mr. Payroll Corporation from $2.5 million to $1.4 million in the first quarter of 1999.

Earnings from Cash America’s lending operations increased 10% in the first three months to $6.2 million in 1999 compared to $5.7 million in 1998. Commenting on the results for the first quarter of 1999, Chairman and Chief Executive Officer, Jack R. Daugherty said, “Our lending operations posted an increase in year over year comparisons against a first quarter in 1998 that was up 44% over 1997. The investment Cash America made in additional lending locations during the previous year led to a 13% increase in our average loan portfolio that drove the improvement in earnings in 1999.”

Additionally, the Company announced that the Board of Directors, at its regularly scheduled quarterly meeting, declared a $0.0125 (1.25 cents) per share cash dividend on common stock outstanding. The dividend will be paid to shareholders of record on May 4, 1999 and will be paid at the close of business on May 18, 1999.

Cash America International, Inc. is a diversified provider of specialty finance services to individuals in the United States, United Kingdom and Sweden. Cash America is the largest provider of secured non-recourse loans to individuals commonly referred to as pawn loans, through 461 locations in 16 states and two foreign countries. In addition, the Company provides check cashing services through 135 franchised and company owned “Mr. Payroll” manned check cashing centers and rental services through its wholly owned subsidiary, Rent-A-Tire, Inc.

FOR MORE 1Q/99 DETAILS PLEASE VISIT CARDDATA ([www.carddata.com][1])

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

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Paymentech 1Q/99

Paymentech reported first quarter net income of $5.9 million compared to $4.3 million last year. For the first quarter, Paymentech processed approximately $15.9 billion in bankcard sales volume and approximately 617 million total transactions, including third-party authorization and capture transactions. Bankcard sales volume increased 35% and total transaction volume increased 33% over the prior-year quarter.

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GS Buys ATTM Card

GS Telecom, Ltd. announced it has received an executed definitive Agreement with World Netcom Services, Inc, thereby acquiring all intellectual property, including patents pending, proprietary hardware and software – and all current business relationships surrounding – the ATTM Universal Card, for a consideration of 333,333 restricted shared of GS Telecom, Ltd. common stock.

The Agreement is subject to a 28-day “due diligence,” during which GS Telecom, Ltd. retains the right to cancel.

World Netcom Service, Inc. will act under an exclusive licensing agreement as a distributor of ATTM Universal Card products to network marketing companies in the United States only.

The ATTM Universal Card technology can be used to create a preloaded hybrid “Smart-Card,” that may enable transactions in 53 currencies, throughout the world, including the Pacific Rim and the Former Soviet Union. The card can also be used as an anonymous currency card, designed to make possible instantaneous, anonymous transactions over the Internet.

The execution of the final agreement was delayed from an expected date in late March, due to a redrafting as a technology acquisition instead of a simple marketing and development license. Andrew Castle, GS Telecom President, explains.

“Initial negotiations for this acquisition focused on only the licensing and marketing rights (of the ATTM Universal Card.) When the opportunity presented itself to acquire the exclusive IP, we were pleased to restructure the final document to take advantage of the offered acquisition of the proprietary technology and in-place distribution agreements.

“We look forward to developing these alliances, and to forming new strategic partnerships to enhance and deliver ATTM technology- based products to a global market.”

GS Telecom, Ltd. is a U.S. high-tech development and marketing company with offices in San Francisco and London. For more information on the company’s vision, visit GS Telecom, Ltd. on the web, at [www.gs-tele.com][1].

Please note: GS Telecom, Ltd. is not affiliated in any way with GST Telecommunications, Inc. of Vancouver, Washington and no inference of any relationship is suggested in any area of industry.

[1]: http://www.gs-tele.com

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GM Price Hike

The nation’s second largest co-branded program, the ‘General Motors MasterCard’, is beefing up pricing next month, according to CardWatch (www.cardwatch.com). Household Bank, the card’s issuer, has notified U.S. cardholders, that effective May 1, it is adding an annual fee for closed accounts with outstanding balances, raising the minimum cash advance fee and increasing its punitive interest rate. Cardholders opting to close an account but continuing to make payments on an existing balance will now face a $29 annual fee. Household also increased the minimum cash advance fee from $3.00 to $15.00. The ‘GM MasterCard’ cash advance fee is 3% with no maximum. Household has also ratcheted up the punitive interest rate from prime +12.4% to prime +15.4%. Household states it has expanded its punitive interest rate policy to include cardholders who have become delinquent on other non-related accounts and cardholders with a significant change in credit worthiness. The Household punitive rate policy mirrors the current policies of other major players, notably Capital One and Discover.

PRICING SAMPLER

ISSUER CAF MIN CAF PUNITIVE APR
B of A 2.5% $20.00 Prime +12.99%
Household 3.0% $15.00 Prime +15.4%
Wells Fargo 4.0% $10.00 23.90%
First USA 2.0% $10.00 22.99%
Wachovia 4.0% $ 5.00 Prime +12.9%
Citibank 3.0% $ 5.00 Prime +12.9%
Fleet 4.0% $ 5.00 Libor +16.302%
Providian 5.0% $ 3.00 23.99%
Capital One 2.5% $ 2.50 24.99%
Chase 3.0% $ 3.00 Prime +13.99%

CAF-cash advance fee; MIN CAF-minimum cash advance fee;
Source: CardWatch (www.cardwatch.com)

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Coinstar Europe

Coinstar Inc. yesterday announced that it has installed its first machines in stores operated by the two largest grocery retailers in the United Kingdom.

Coinstar(R) self-service coin counting machines are now available in seven London-area Sainsbury’s Savacentre stores and one London-area Tesco store, marking the initiation of Coinstar’s European operations.

“We are really pleased to be working with Coinstar,” said Paul Wilson, retail innovation manager for Sainsbury’s. “We hope that existing and new customers will see Coinstar machines as an attractive new service which saves them time. So far, customer reaction has been very positive.”

Sainsbury’s operates 398 supermarkets and 13 Sainsbury’s Savacentres and Tesco operates 639 stores in the United Kingdom. Together, these two retailers account for more than 40 percent of all U.K. grocery sales.

“We are encouraged by the early market acceptance we are experiencing in the U.K.,” said Jens Molbak, CEO of Coinstar Inc. “British consumers are confirming what our research told us: coin hoarding is a problem in the U.K. because, until now, there hasn’t been an easy way to cash in coins.”

Coinstar’s patented coin counting mechanism was adapted to count the full range of British coins, including the (pound)1 and (pound)2 coins. Coinstar’s device is easily adapted to the currency sets of most countries.

“One of the challenges of entering a new market is determining how best to work within the retailers’ operational needs and the logistics of the banking system,” continued Molbak. “I am pleased to report that our service is functioning very smoothly from an operational perspective. This is a positive first sign as we expand our presence in the U.K. and position ourselves for future euro conversion opportunities.”

Coinstar Inc. and its subsidiaries provide consumers and retailers with value-added services that increase customer loyalty and retailer profitability. The Coinstar network currently delivers the company’s self-service coin counting product to more than 5,300 leading supermarkets in 38 U.S. states, the United Kingdom and Canada. The company’s new Coinstar Shopper product is designed to bridge the gap between the Internet and the store. Consumers can call 1-800-928-CASH, or visit for the location of the nearest Coinstar machine.

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CTST 1999

More than 10,000 professionals from 80 nations will attend the 1999 CardTech SecurTech (CTST) conference from May 11-14 at the McCormick Place South Convention Center in Chicago to learn about a host of practical innovations in the smart card, biometrics and cryptography industries through seminars, tours of the exhibit hall and interaction with experts and peers. The conference will cover more than six acres, and feature more than 1,000 high-tech booths and 200 expert presentations focusing on financial, transportation, security, government, health care and communications sectors. The exhibition is nearly twice as large as any other card event in the world.

CardTech/SecurTech 99 workshops, each of which has five to eight presentations, include:

— Microsoft’s SmartCards for Windows(tm),

— Developing Applications with Java Card,

— Changing the Face of Money,

— Foundations in ID Technology,

— Biometrics Technology,

— Retail & Loyalty Applications,

— Government Applications,

— Telecommunications Platforms,

— Transportation Applications,

— Large-Scale ID Applications,

— Cryptography Technology,

— University Applications,

— Health Care Applications,

— Practical Biometrics Applications

Hands-on Application Developer Workshop

s An exciting new feature of this year’s conference will be a series of hands-on workshops for SmartCard application developers and programmers presented by Microsoft, Sun Microsystems and MULTOS. “These sessions offer unique opportunities for technical professionals to learn the `How to’ of developing applications on smart card platforms,” said Benjamin Miller, CTST founder & conference chairman.

Smart Cards for Windows(tm) application developers will get to run live desktop and card-based applications with hands-on instruction. The Developers’ Workshop will show you how to include smart cards in applications such as secure network access, e-commerce, payment and loyalty, and medical solutions. The sessions will include lecture and lab work, and attendees will receive smart card developer kits, including smart cards and sample applications on both the PC (host) and card sides.

Cryptography

From massive corporate systems to individual Internet browsing, new ways are needed to ensure that data and identities are protected in cyberspace. The cryptography technology used for this task is called public key infrastructure (PKI). PKI generates digital signatures that prove who sent an e-mail or made an Internet purchase. Building the infrastructure to support this process is one of the most important subjects in the evolution of the network economy.

The new seminar on Public Key Infrastructures Integrating with Smart Cards and Biometrics will address authenticating the identity of the user, securely storing electronic certificates and generating digital signatures. The seminar will also answer the question of what it will take to achieve widespread deployment of PKI enhanced by biometrics and smart card readers. Biometrics

The use of biometrics continues to expand across a wide range of applications throughout the world. From banking to welfare, user organizations increasingly recognize that precise identification and user authentication are key requirements for reducing fraud and for increasing information and enterprise security. After decades of limited use, sales have begun to soar as the number of applications for biometric devices measuring hand, finger and face geometry continues to expand. Major electronics manufacturers are incorporating the technology into their keyboards, ATMs, PCs and other portable devices for increased user flexibility and security.

Biometrics seminars will examine the latest industry changes and the status of the industry’s efforts to create a generic standard for the easy integration and interchangeability of biometric devices. The current state of biometric applications in banking, welfare, immigration and information security will then be examined. Issues related to personal privacy and the “friendliness” of various legislative environments also will be explored.

Keynote Presentation

The keynote presentation will be delivered on Wednesday, May 12 at 8:30 a.m. by James Burke, author of “The Day the Universe Changed” and host of the British Broadcasting Corp.’s “Connections” television series about the impact of technology on society. Burke, who writes a monthly column for Scientific American, will discuss the roles of information and personal technologies as they relate to empowerment of the individual.

CardTech/SecurTech (CTST), founded in 1991, is the world’s most comprehensive conference and exhibition covering advanced smart card and security technology. Purchased by Faulkner & Gray Inc., publisher of Card Technology, ID World and Smart Card Alert, CTST focuses on applications of card and related technology solutions for banking, the Internet, telecommunications, mass transit, security, retail, loyalty, government and health care. Information about the organization, sponsors, program topics and exhibition can be found at [www.ctst.com][1].

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

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AirTouch Prepaid

San Francisco-based AirTouch Communications announced a rate cut yesterday for ‘AirTouch Cellular Prepaid’ cardholders. AirTouch cut prices for prepaid service across all its cellular markets in 17 states to as little as $0.35 a minute. The company also announced major distribution deals with 7-Eleven, Circle K, Radio Shack and Best Buy stores. AirTouch prepaid service cards are now available in denominations of $30, $50 and $100. The life of the cards has also been extended from 60 days to 90 days. AirTouch says only about 5% of U.S. cellular customers are prepaid, compared to 35% in Europe. European cellular carriers now count on prepaid for two-thirds of all new customers. In the USA, on the other hand, service providers still typically turn away a third or more of walk-in customers because they lack credit or are too young to sign a contract. AirTouch serves 8 million U.S. cellular customers.

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Currency Exchange

After a steady stream of negative publicity, First USA is reportedly holding off implementing its policy of surcharging for currency exchange transactions. First USA began notifying cardholders in March, that effective April 1, it will charge an extra 2.0% of the dollar amount on foreign transactions requiring conversion into US dollars. The currency exchange transaction fee is in addition to the standard 1.0% to 2.0% fees charged by VISA and MasterCard. Citibank reportedly instituted a similar policy late last year. According to CardWatch (www.cardwatch.com), Travelers Bank, a Citigroup unit, also charges an extra 1.5% for currency exchange transactions.

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Smart Move

Barclaycard told the London Financial Times yesterday it will save more than US$50 million annually as the result of its ongoing migration to smart cards. The savings will largely be produced by reducing losses from counterfeit cards used outside the UK. The UK’s largest card issuer has already converted 500,000 of its 17 million cardholders to smart cards and upgraded more than 400 of its ATMs. Barclaycard says it has plans to convert another 2.5 million cardholders to smart cards by year’s end. The issuer will also upgrade another 700 ATMs to accept smart cards and replace more than 20,000 Barclaycard-owned terminals in small businesses this year. The Times says the biggest consumer complaint so far has been the extra processing time required at the point-of-sale.

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FDC Up 10%

First Data Corp. reported Wednesday afternoon that first quarter net income margins were 11.1%, up from last year’s 10.8%. First quarter revenues from continuing operations hit nearly $1.3 billion producing net income of $141 million. Card Issuer Services worldwide revenues increased 5% in the quarter to $351 million producing an operating profit of $59.8 million. Volume trends remain positive with total accounts on file up 13%, to 214.6 million. Merchant Processing Services revenues grew 10% in the quarter to $346 million as compared to $313 million in 1998. Total domestic merchant card dollar volume for the quarter grew 17%, from $54 billion last year to $63.3 billion Payment instrument transactions or Western Union money transfers soared over the past twelve months from 14.2 million to 17.5 million. For additional information on First Data’s first quarter 1999 financials visit CardData ([www.carddata.com][1]).

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

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