ECHO 3Q

Electronic Clearing House Inc. Monday announced record revenues and earnings for its fiscal year ended Sept. 30, 1998.

Revenue for the fiscal year 1998 totaled a record $21,063,000, a 13 percent increase over revenues of $18,623,000 for fiscal year 1997. Net income for the fiscal year 1998 rose to $1,154,000, $0.077 per basic share and $0.053 per diluted share, resulting in a 252 percent increase over comparable net income of $328,000, $0.025 per basic share and $0.017 per diluted share, in fiscal year 1997.

Revenue from bankcard processing and transaction processing increased from $16,007,000 in fiscal 1997 to a record $18,773,000 in fiscal 1998, a 17 percent increase. Terminal sales and lease revenue decreased from $2,348,000 in fiscal 1997 to $2,055,000 in fiscal 1998, a 12 percent decrease.

ECHO is a national transaction processor serving thousands of small- to medium-sized merchants and several thousand U-Haul dealers under a contract with U-Haul International. ECHO’s transaction-based services generate ongoing revenue each month that provides a consistent and growing income stream. ECHO transaction services include credit card processing, electronic check generation, cash advance services to casinos, Internet settlement services and inventory tracking.

ECHO’s Internet settlement services include direct acceptance of transactions over the Internet from a customer, a merchant or an Internet Service Provider (ISP) who serves many merchants. ECHO was one of the first and still one of the few processors who can directly and confidently accept Internet-based credit card transactions and electronically settle all funds distribution for both the customer and merchant without any active involvement by the merchant.

ECHO’s Internet suite of products includes fulfillment monitoring and the ECHOlink service which allows a merchant to access and respond to all transaction activity, including chargeback and retrieval requests, using the Internet.

ECHO is also a system design specialist and develops software and proprietary hardware for major accounts who wish to automate their transaction processing activities. In addition to its own transaction processing systems, ECHO has designed transaction processing systems for American Express (money order issuance and tracking applications), U-Haul International (inventory and dealer payment tracking applications) and the United States Postal Service (money order issuance and daily accounting tracking systems).

“Our growth in earnings can be directly attributed to ECHO’s proven ability to design, integrate, manage and sell services based on point-of-sale, Internet, and host-based financial transaction processing systems,” stated Joel Barry, CEO of ECHO, “and we believe ECHO’s growing technical capabilities in these areas gives ECHO a distinctive advantage over other less technical processors.”

Electronic Clearing House provides credit card processing, check guarantee, inventory tracking services and various Internet services to more than 17,000 retail merchants and U-Haul dealers across the nation. Through its subsidiary, Computer Based Controls, ECHO designs, develops and manufactures software and point-of-sale hardware that is utilized as credit card processing terminals, automated money order dispensers, utility bill payment systems, and inventory tracking devices.

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AmEx Online Offers

American Express confirmed Monday it has made a minority investment in SaveSmart Inc., a provider of interactive promotions technology headquartered in Mountain View, CA. AmEx and SaveSmart have been working together on a pilot program launched last June, which provides San Francisco Bay Area residents and visitors with an easy and seamless way to redeem special offers. Called ‘American Express Online Offers’, cardholders can enroll in the service for free via the Web. Once enrolled, they can select special discount offers from nearly 1,000 participating San Francisco Bay Area retailers and restaurants simply by clicking on the appropriate promotions on the Web site. The discount is automatically credited to the cardholder’s account and appears on their monthly billing statement after the qualifying purchase is made.Cardholders do not have to print the promotions or present any documentation at the point of purchase. SaveSmart says it will expand the service to other markets next year.

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Calif Xmas

As American consumers prepare to rack up $110 billion on credit cards and debit cards for the holiday shopping season, Californians will be the most active card users, charging more than $14 billion. Cardholders in the Northwest will lead the nation by posting $20.7 billion to their charge plates. CardData ([www.carddata.com][1]) released figures yesterday projecting consumers will rack up $97.3 billion on credit cards and $13.2 billion on off-line debit cards between Thanksgiving and Christmas. CardData estimates Americans will swipe their cards about 1.8 billion times during the 28 shopping days.

Holiday Card Purchases By Region ($billions)
                Major Card     Store Card     Debit Card     Total Card
Southeast         $17.5           $3.0           $2.7          $23.2         
Northeast         $17.6           $3.1           $2.8          $23.5
Great Lakes      $14.4           $2.5           $2.3          $19.2
Great Plains      $ 5.4           $0.9           $0.9          $ 7.2
Mountain          $ 5.3           $0.9           $0.8          $ 7.0
Pacific           $15.9           $2.7           $2.5          $21.1
Southwest         $ 6.9           $1.2           $1.2          $ 9.3

Holiday Card Purchases By State ($billions)
                Major Card     Store Card      Debit Card     Total Card
California        $12.0           $2.1            $2.1          $16.2
New York          $ 7.1           $1.2            $1.3          $ 9.6
Texas             $ 4.6           $0.8            $0.7          $ 6.1
Florida           $ 5.9           $1.0            $1.1          $ 8.0
Illinois          $ 4.2           $0.7            $0.7          $ 5.6
        SOURCE: CardData (www.carddata.com)

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

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Smart Card Projections

Dataquest released a new report, entitled “The Chip Card Evolution: Chip Cards Progress Towards Ubiquity,” which says chip cards are the highest-volume electronics end product in the world and smart cards constitute the largest and fastest growing segment of this market. Dataquest projects that smart card revenue worldwide will represent 70 percent of the chip card market by 2002, up from 56.2 percent in 1997.

The report also forecasts that Japan and the U.S. will be the two fastest-growing regions for chip card sales from 1997 to 2002, with sales increasing at a compound annual growth rate (CAGR) of 95% percent, from $14 million in 1997 to $390 million in 2002 for Japan, and 94 percent, from $19.5 million to $532 million for U.S. In the meantime, the European market will remain the largest region with 47.8% of global sales by 2002.

Dataquest defines chip cards as smart cards that include embedded microcontroller silicon, and memory cards that include embedded silicon memory and possibly other logical functions.

“Chip cards have entered a stage of explosive growth, which will see sales expand more than fourfold over a five-year period,” said Jonathan Cassell, Dataquest analyst responsible for the report. “Driving this growth will be the worldwide proliferation of chip card technology, combined with expansion of chip cards into new, high-value, high-growth applications.”

“We at Gemplus certainly share Dataquest’s positive view of the smart card market’ growth through 2002,” said Dominique Trempont, president of Gemplus Americas. “The market for smart card solutions is no longer emerging, it is here, growing fast, and extends far beyond conventional smart cards to embrace a wide variety of exciting applications in a broad range of industries. As the leading smart card technology company worldwide, we offer a comprehensive range of end-to-end solutions that not only include cards, but also smart objects, software, development tools, readers, and services.”

Market Drivers

According to Dataquest, chip cards are evolving from fixed-function microcontrollers into smart card-based programmable systems, capable of downloading, managing, and running multiple applications. In the future, they will perform essential identification and security functions in computing and Internet access.

Gemplus recently announced GemSAFE, a network security solution that uses a smart card to provide this type of authentication and network security. It was designed for companies seeking to secure Internet-based services or corporate intranets and extranets, and for individuals who want to protect the digital exchange of information. It offers the highest level of transaction security by storing a user’s digital identity on a smart card.

Ultimately, chip cards will evolve into computers unto themselves, capable of not only storing and processing information, but also of interfacing and interacting on their own with users and other pieces of electronic equipment, according to the report.

Regional Growth

According to the report, Europe had 76.8 percent of worldwide chip card revenues in 1997, and by 2002, Dataquest expects considerable growth to take place in the Asia Pacific and Americas.

The report forecasts that, by 2002, the Asia Pacific will account for 30.1 percent of worldwide sales, the Americas (excluding the U.S.) will account for 8.6 percent of sales, and the U.S. will account for 7.8 percent of sales. The Japanese market is expected to account for 5.7 percent of sales by 2002. Europe will still account for 47.8 percent of sales by 2002.

About Gemplus

Gemplus ([www.gemplus.com][1]) is the world’s leading provider of plastic and smart card-based solutions. Gemplus sells magnetic stripe cards, memory and microprocessor-based smart cards, smart contactless cards, electronic tags and smart objects. The company designs and markets software, development tools and readers. Gemplus also provides consulting, training and personalization services to deliver the industry’s most comprehensive and flexible card-based solutions to its developers, distributors, partners and customers.

With sales of over US$590 million in 1997, Gemplus employs more than 4,100 people in 10 manufacturing facilities, five R&D centers and 41 sales and marketing offices located in 27 countries around the world. Founded in 1988, Gemplus has successfully implemented portable and secure smart card-based solutions to simplify applications such as public and wireless communications, financial transactions, loyalty, transportation, education, healthcare, identity, physical access control, Pay-TV, electronic commerce, Internet security, logical access control and information technology.

About Dataquest

GartnerGroup’s Dataquest is the recognized leader in providing market Intelligence on global IT markets for semiconductors, computer systems and peripherals, document management systems, interactive information systems and networks, multimedia, business and technical software, telecommunications, and IT services. For more information on the report, call 1-800-419-DATA, or 408-468-8009.

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

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Rush to Ruth

MasterCard International announced Monday the appointment of David Ruth as senior vice president for global communications, effective Dec. 1. Ruth, vice president of public affairs at MasterCard since 1997, replaces Charlotte Rush, who is leaving MasterCard to become senior vice president of communications at Ziff-Davis. Ruth will be responsible for all of MasterCard’s global communications activities, including media relations, member communications, employee communications, government relations, consumer affairs, philanthropic and community efforts, and thought leadership platforms.

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Concord-EPS Merger

Concord EFS, Inc and Electronic Payment Services will hold a news conference this morning to announce they have entered into a merger agreement. The tax-free transaction would be structured as a pooling of interests. Concord will issue 32 million shares of common stock, worth roughly $900 million to conclude the deal. Executives said Monday that Concord has been a marketing and service company focusing on growth while EPS has tremendous processing capabilities through the ‘MAS’, ‘MAC’ and ‘BUYPASS’ groups. The merged company will now broaden each of its markets by expanding into new industry segments of the transaction processing business. EPS, which will be a wholly-owned subsidiary of Concord, is currently owned by Bank One, First Union, KeyCorp, National City and PNC Bank. Publicly-traded Concord’s primary activity is card services, including credit, debit and EBT card transactions to supermarket chains, grocery stores, convenience store merchants and other retailers. Concord also provides electronic payment, banking products and payroll services to trucking companies, truck stops and other niche segments of the market. EPS currently processes 2.7 billion EFT transactions annually which includes 1.2 billion POS transactions and 1.5 billion ATM transactions.

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Dell 0% VISA

Dell Computer Corporation is offering several flexible payment options to help make it easier to buy personal computers this holiday season.

The options include a new Dell Platinum Visa credit card, the new Dell Gift Certificate and an improved personal leasing program.

“Imagine buying a PC this year and not having to pay for it until next year,” says Dave Hood, vice president and general manager of Dell Home Systems. “Now customers can do that with the new Dell Platinum Visa credit card.”

The Visa card is offered by Dell, the world’s leading direct computer systems company, in association with First USA, a leading credit card issuer. It enables customers of Dell Home Systems Co. to buy Dell PCs with no payment or interest for 120 days on the initial Dell purchase(1). After that, customers will pay a 9.99% fixed rate on their purchase..

With every card purchase, users earn Dell Dollars(SM) which they can use to buy a new Dell system in the future(2). With some of the latest instant credit approval technology, card applicants can be reviewed in one online visit to www.dell.com/applynow or one toll-free phone call to 800/BUY-DELL.

Dell’s new gift certificate enables customers to give high performance, customized Dell computers and accessories at great prices for the holidays.

“The gift certificate is a perfect present for those who don’t know exactly what to buy, and the recipient can build the PC they choose,” says Hood.

The gift certificates, which can be purchased online, come in increments of $100, are personalized and can be sent directly to the recipient..

Additional information is available at www.dell.com/buyagift or by toll-free phone call to 800/BUY-DELL.

“Dell is making holiday shopping easy for customers,” Hood says. “Rather than being strapped for money this holiday season, these new payment options give customers flexibility when buying technology products. They are designed to fit our customers’ different needs.”

Dell’s personal leasing program, available through Dell Financial Services, is slashing rates by as much as 10% for leases beginning in the month of December. For example, those consumers who lease the Dell Dimension XPS R450 system(3), that recently won PC Computing’s 1998 MVP State of the Art desktop award, can save more than $300 over the life of a 24-month lease(4).

Also, during December, consumers who lease any Dell system from Dell Financial Services make no payment for 60 days — hopefully helping those who are feeling the holiday season squeeze. The Dell personal lease program, introduced by Dell Financial Services in August 1997, offers lease terms of 24 or 36 months with no payment for 30 days, no upfront cost and the ability to easily upgrade to the newest technology when the lease term ends.

For extra convenience and easy access, Dell’s new payment options are available online this holiday season at www.dell.com. (5) And, Dell, who does more than $10 million daily in Internet sales, is poised to meet the needs of shoppers this holiday season..

Ranked No. 125 among the Fortune 500 companies and No. 363 in the Fortune Global 500, Dell Computer Corporation is the world’s leading direct computer systems company, based on revenues of $16.8 billion for the past four quarters. Dell designs, manufactures and customizes products and services to customer requirements and offers an extensive selection of software and peripherals. Information on Dell and its products can be obtained through its toll-free number 800/388-8542 or by accessing the Dell World Wide Web site at [www.dell.com.][1] Dell is a registered trademark of Dell Computer Corporation. Fortune 500 is a registered trademark of Time Inc.

The Dell Platinum Visa card offer and Dell Dollars redemption is available only through Dell Home Systems Co.

The Dell Gift Certificate is available and redeemable only through Dell Home Systems Co.

(1) 0% APR for balance related to initial Dell purchase (Dell balance) for four billing cycles from date of such purchase (promotion period). Any balance that results from the initial purchase will be included in the Average Daily Balance on the first day of the fifth billing cycle after the cycle in which the charge is posted to your account. 9.99% APR for purchases and balance transfers and for Dell balance after the promotion period. 19.99% APR for cash advances. If payment is received late once during the promotion period on balances other than the Dell balance, the APR on the Dell balance will adjust to 9.99%. If at any time payment is received late twice in any six-month period, the APR on purchases and balance transfers will adjust to 19.99%. If you do not make payments for two consecutive months, the rate on all balances will adjust to 22.99%. The annual fee: NONE. A minimum monthly Finance Charge of 50 cents is payable if any Finance Charge is due. There is a Finance Charge for cash advances equal to or greater of 2% of the transaction amount or $5.00 for each transaction with a maximum of $25.00. Offer applies to Dell Home Systems purchases only; may not be applicable with other Dell System discounts.

(2) Not valid on balance transfers, convenience checks or cash advances. Dell Dollars expire after three (3) years. Complete terms and conditions included in Dell Platinum Visa Card introductory package.

(3) Award-winning configuration of Dell Dimension XPS R450 can be found at [www.dell.com][2].

(4) Leasing arranged by Dell Financial Services L.P, an independent entity, to qualified customers. Amount saved over the course of 24 months is based upon a 24-month personal lease. Above monthly lease payments exclude taxes which may vary (for example, for the award-winning Dimension XPS R450 configuration, the Hartford City, Ind., sales tax would be $2.45/month); shipping cost due with first payment; no security deposit required; subject to credit approval and availability. Lease terms are subject to change without notice. Business leases also available.

(5) Dell gift certificates are available for purchase online, but are currently not redeemable for online purchases.

[1]: http://www.dell.com
[2]: http://www.dell.com

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IVI/NCR $15M Deal

IVI Checkmate announced yesterday a three-year agreement with NCR Corp.estimated to be worth over $15 million. The agreement specifies that IVI Checkmate will manufacture and supply, using IVI Checkmate’s ‘GEN4’ fourth generation architecture, the key technologies of the ‘NCR 5945’ retail debit/credit terminal and the ‘NCR 5992 Signature Capture Plus’ electronic payment terminal. The terminal products and supporting software will be sold as part of NCR retail solution offerings through NCR’s direct and indirect sales channels, replacing existing electronic payment products in NCR’s retail product family.

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XMA$ 98 Purchases

American consumers will rack up $83.0 billion on major bank credit cards/charge cards, $14.3 billion on store credit cards and $13.2 billion on off-line, debit cards between Thanksgiving and Christmas according to data released this morning by CardData ([carddata.com][1]). During the 28 day period between the holidays, Americans will swipe their credit cards more than 1.4 billion times, charging an average of $3.5 billion purchases per day or $145 million each hour. For the peak shopping days of Nov 27, Nov 28 and Dec 24, consumers will use their credit cards more than 6,000 times per second generating charges of nearly $450,000 per second. VISA and MasterCard-branded off-line debit cards will increase in popularity this holiday season as purchase volume and transaction activity continues to grow more than 50% annually. Last year Americans used of-line or signature-based debit cards approximately 230 million times during the Christmas shopping season.

1998 Xmas Holiday Payment Card Statistics
(for period between 11/27/98 and 12/24/98 inclusive)
                                          
Purchases       Transactions       Avg. Ticket     
Major Credit Cards $ 83.0 billion 1,170 million         $70.94
Store Credit Cards $ 14.3 billion 240 million         $59.58
Natl Debit Cards       $ 13.2 billion 354 million         $37.29
Total:                 $110.5 billion 1,764 million         $55.94
Source: CardData (www.carddata.com)

[1]: http://carddata.com

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Online Hit

First Union customers using Microsoft’s ‘Money” software for bill payments had their payments deducted twice from their bank account. The problem occured last week and reportedly affected a minimum of 400 accounts. First Union indicated the problem was related to a telecommunications problem with VISA last Monday. The customers affected conducted their bill payments through a dial-up connection, not First Union’s Internet site.

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Debit Hit

Fidelity Bank in Wichita was forced to suspend its debit cards last week after being hit with fraudulent charges. The bank says about 1% of the bank’s debit card accounts were affected. MasterCard detected the bogus charges within two hours of the first bad incident. Hackers apparently working through the processor’s system probed for valid account numbers using algorithms. This is the second bank in Wichita to be targeted. Intrust Bank in Wichita was hit last summer after hackers working from Asia ran up bogus charges using a similar scheme.

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