SmarTalk CEO Departs

SmarTalk TeleServices, Inc. Friday announced the departure of Erich Spangenberg as Chief Executive Officer and as a member of the Board of Directors. Mr. Spangenberg will continue as a consultant to the Company at the request of the Board. Separately, SmarTalk also announced that Jeff Lindauer is no longer serving as President and Chief Operating Officer, having departed the Company to pursue other interests.

The Board of Directors of the Company will be working with SmarTalk’s remaining senior management team to oversee the Company’s day-to-day operations, pending the closing of the Company’s previously-announced sale of substantially all its assets to AT&T. The Board of Directors may appoint an interim Chief Executive Officer in the near future and anticipates that SmarTalk’s operations will continue in the ordinary course without disruption.

SmarTalk Teleservices, Inc. is a leading provider of prepaid calling cards and prepaid wireless services. Based in Dublin, Ohio, SmarTalk maintains distribution agreements with the U.S. Postal Service and leading mass merchandisers, consumer electronics retailers, supermarkets, hotels, home office superstores and convenience stores throughout North America and the U.K. Visit the SmarTalk website at [][1].



Blue Moon

An ATM at the Workington branch of NatWest in the U.K. was pumping out twice the cash cardholders requested last week. Apparently a bank employee stocked the 10-pound bill slot with 20-pound bills. The error was discovered Friday by an honest customer who reported the problem. Meanwhile the Philadelphia Inquirer reported that last week’s MAC network glitch affected some 10,000 customers who were charged or credited three times for each withdrawal or deposit. MAC cardholders at 80 financial institutions along the East Coast were affected.


STAR 60% Y2K Ready

Star System Inc., the nation’s largest shared electronic payments company, continues critical testing processes to ensure it meets Y2K deadlines.

To date, the organizations which contribute 60 percent of the STAR transaction volume have been successfully tested. Testing will reach 80 percent by March 31, with completion of all remaining organizations expected by June 30, 1999.

Like other industries, electronic financial service providers have been working hard to address year 2000 computer concerns. Star System(R) got an early start in May 1996 in order to meet the Federal Financial Institutions Examination Council’s (FFIEC) June 30, 1999, deadline for completion of Y2K testing.

“Our goal is to ensure smooth access and operation for all our members and their customers when the calendar reads ‘double zero,'” said James McCarthy, executive vice president of Star System.

Because electronic payments networks are complicated, Star System’s Y2K approach has been extensive and complex. Star System’s three main components have included:

1) processing of on-line transactions through the Star System engine or “switch” and upgrading of the operating system; 2) the settlement system for funds owed between institutions, and 3) the transaction exception processing system.

Current testing includes running samples of future-dated ATM and POS transactions through the switch. To date, tests reveal no processing difficulties with dates into the next millennium.

Star System staff is also utilizing a Y2K test tool or “simulator” that allows testing of on-line applications at Deluxe EPS, a processing service provider, from Star System’s San Diego office. The simulator will continue to be used by staff to test and retest the Star System switch as future software updates are applied.

Because of the myriad interrelationships, detailed communication and coordination with other network administrators such as FIserve, Deluxe EPS and EDS has been critical. Efforts also include organizing meetings with other regional and national networks to share common Y2K concerns and solutions. In addition, Star System has sought out phone companies, electrical companies, terminal manufacturers, modem suppliers, and other third-party processors to determine the status of their Y2K efforts toward securing the electronic banking infrastructure in the new millennium.

STAR STATION(SM), the communication, information and exception processing system for all Star System participants, was designed and developed by GE Information Services Inc. to be Y2K ready. Three one-week test windows will be available during the first quarter of 1999 for STAR STATION users to validate their own Y2K readiness. Testing will verify the functionality of transaction research and exception processing on the dates of Dec. 31, 1999, Jan. 1, 2000, Feb. 29, 2000 and March 1, 2000.

Internally, 13 dates are being tested that were identified by the FFIEC to ensure readiness. The system will allow the user to execute a sample script of exceptions and receive confirming e-mail.

Components included in these tests are the STAR STATION server platform, third-party applications residing on the server (operating system, database applications and e-mail host applications) and the GE Information Service-developed applications (STAR STATION and data repository applications).

While Star System’s work has been extensive and inclusive, it primarily has been focused on the switch and service platforms. It is the responsibility of each participating organization to renovate and test internal systems and determine the readiness of their terminals, card systems, telecom facilities and other components under their control.

Because of the many interrelated systems and parties, contingency plans for all mission critical systems will be in place, said McCarthy.

Star System intends to continue testing and adjusting for Y2K factors, and keep services running smoothly while counting down to a safe and secure 2000.

Participation as a member of the Star(SM) network is available to all insured financial institutions in the 12 western states of Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, New Mexico, Nevada, Oregon, Texas, Utah, Washington and Wyoming. The company’s services are now enjoyed by 45 million people through the STAR(SM) ATM network and the STAR(SM) Point-of-Sale Service at nearly 300,000 locations.

Recognized as a leader in electronic payment fraud prevention, Star System helped create the industry’s first ATM security laws and introduced other proactive measures to ensure the privacy, accuracy and security of electronic financial transactions. For more information, visit the Star System Web site: [][1].



Wireless Super Bowl

Paynet Transaction Services and BellSouth Wireless Data provided wireless credit card transactions at yesterday’s Super Bowl. Paynet provided portable, wireless credit card terminals for use at the novelty shops inside Miami’s Pro Player Stadium and in the parking lot during the big game. The wireless solution enabled the souvenir vendor at the Super Bowl to have over 40 POS card locations. Pro Player Stadium is normally equipped with less than 10 standard hook-ups designated for terminals that process credit cards.


Sears Changes

Sears, Roebuck & Co. announced this week it will change its accounting methods for its credit card unit to more closely mirror the accounting practices of other card issuers. The decision will result in a $200 million increase in loan loss reserves for the next one and half years. Sears currently charges off bad card accounts at 270 days. Under the new system Sears will charge-off at 240 days. Sears also currently does not classify accounts as delinquent until the account is 90 days past due. The company will adopt the 90-day cutoff.  The changes will be fully phased-in by the end of the second quarter. If the changes had been in place for 4Q/98 the company indicated delinquency would run more than 9.0%. For Sears 4Q/98 earnings report please visit CardData ([][1]).




Los Angeles-based PayPoint Electronic Payment Systems announced a comprehensive dial-up payment processing solution for retailers. ‘PayPro’ utilizes VeriFone’s ‘Omni 396 CheckPak’ payment terminal. The ‘CheckPak’ solution consists of the ‘Omni 396’ POS terminal bundled with a ‘CR 600’ check reader. The solution offers merchants debit, credit, check, EBT and prepaid gift card processing all in one system. ‘PayPro’ is currently used by more than 100 merchant locations. PayPoint is a subsidiary of ARCO.


TYME Y2K Ready

Since 1996 TYME has been focusing on its Year 2000 readiness to ensure that January 1, 2000 is simply just another uneventful day.

“We are on target – in fact, somewhat ahead of schedule – in the Y2K race,” said James H. Martin, Tyme Corporation president. “Our more than 3,000,000 cardholders should have no problem performing transactions at TYME machines as we ring in the year 2000. It should be business as usual come January 1, 2000.”

On December 8, 1998 TYME’s new Y2K compliant switch software was successfully installed. The software controls more than 15,000 ATMs and POS (point-of-sale) terminals and processes over 7,000,000 TYME transactions per month.

TYME will now focus its attention on testing the network’s endpoints, such as processors and interchanges with other networks, for Y2K readiness. When that is completed by June 1, 1999, Martin said “it will represent the culmination of three years worth of effort and the successful completion of TYME’s YEAR 2000 PREPAREDNESS PLAN.”

The switch software used by Tyme Corporation was developed by Deluxe Electronic Payment Systems of Glendale, Wisconsin and is operated by Brown Deer, Wisconsin- based M&I Data Services.

TYME is one of the largest regional networks in the country with more than 500 participating financial institutions operating ATM and POS terminals in Wisconsin, Michigan, Illinois and Minnesota.


VISTA Rolled-Out

Fair, Isaac and Company, Inc. and Experian jointly announced Thursday the Vista account management risk score service to help small business credit grantors better manage their customers. With Vista, credit grantors have a more complete view of small business customers’ credit performance to increase their ability to detect and react to delinquency. By combining the sophistication of Fair, Isaac’s predictive models and Experian’s extensive databases, Vista provides a comprehensive solution that helps control credit quality, minimize expenses and increase customer retention.

“We’ve developed Vista to provide credit grantors with a tool to detect that a customer may have become a higher risk before the small business stops paying,” said Latimer Asch, vice president of Commercial Markets at Fair, Isaac. “Vista allows streamlining of the annual review process while reducing unnecessary servicing costs.”

“Fair, Isaac’s predictive models pull data from Experian’s extensive databases offering users a broader view of account performance by looking at customers’ credit obligations,” said Scott Bronstein, director of product marketing for Business Information Services at Experian. “Experian’s strength in its commercial and consumer files are key to effectively assessing small business risk.”

Fair, Isaac ([][1]) helps businesses worldwide maximize the value of data to make more profitable decisions about their customers, operations and portfolios. Known for its pioneering work in credit scoring and its use of data in transaction-level decisions, Fair, Isaac now delivers data management services, analytics, software, and consulting to the financial services, direct marketing, personal lines insurance, retail, and healthcare industries. Headquartered in San Rafael, Calif., Fair, Isaac employs 1,500 people in 17 offices worldwide. For more information, contact Fair, Isaac at 800-999-2955.

Experian ([][2]) — a global information solutions company headquartered in Orange, Calif., and Nottingham, UK — is a leading supplier of consumer and business credit information, credit scoring and software solutions, and direct marketing services. Including recent acquisitions Metromail Corp. (April, 1998) and Direct Marketing Technology, Inc. (April, 1997), Experian employs nearly 11,000 worldwide with 7,500 employees in the United States. Annual sales are about $1.5 billion. Experian is a subsidiary of the Great Universal Stores P.L.C., a UK-based holding company that includes home shopping, retail, property investment, finance and information services businesses.



First Card to First Data

Bank One’s First USA subsidiary announced last night that it plans to convert the processing for its ‘First Card’ credit card portfolio to First Data Resources. ‘First Card’, formerly issued by First Chicago used proprietary processing systems for its card portfolio. First Chicago merged with Bank One last year. First Data has indicated it plans to offer jobs to many of the affected employees in the Elgin, IL location. Additionally, some employees will be eligible for transfer to other positions within First USA and Bank One.


Numero Uno ???

The answer to the question as to “Who is the biggest of them all?” was answered yesterday. Bank One is the undisputed number one issuer, based on card receivables. Bank One edged out Citigroup by more than $250 million. However Citigroup continues to lead in card volume and cards-in-force. Bank One released the breakout of its bank credit card business yesterday afternoon to CardData. CardData will release figures on the top 10 card issuers next week. Citigroup released its official U.S. bank credit card numbers to CardData on Wednesday.  For comprehensive quarterly and end-of-year statistics for more than 350 U.S. issuers visit CardData ([][1]).

Bank One $69,860,600,000   $28,685,400,000   $99,170,400,000       56,502,900
Citigroup    $69,600,000,000   $42,200,000,000  $140,600,000,000       69,700,000
                Source: CardData (



Erasing Credit Repair

The FTC announced Thursday the settlement of another four of the nineteen cases filed in March 1998 as part of ‘Operation Eraser’, a federal-state crackdown on fraudulent credit repair companies. The FTC alleged that all of the defendants operated deceptive credit repair schemes by promising consumers that they could restore their creditworthiness for a fee. The settlements announced yesterday included: Nationwide Credit Information Service, Inc. (NJ); Credit Corporation of America, Inc. and Credit Advisors, Inc., (LA); Cornerstone Wealth Corp. (TX); and Credit Report Counselors (OH). The FTC also issued a final order against Compass Northeast Credit Service (SC). As part of “Operation Eraser,” 31 companies were targeted by federal and state law enforcement agencies.