Cash Dinosaur

With the widespread acceptance of credit cards, debit cards, and electronic money, cash is going the way of the dinosaur, says a new market research report from INSIGHT RESEARCH. And smart card systems may prove to be the best method for secure, convenient low-value transactions between businesses and their customers.

According to INSIGHT’S report, Beyond Payphones: Vending, Low-Value Transactions and the Information Age 1998-2003, telecom service providers have the opportunity to rejuvenate the long stagnant payphone calling market with smart card technology. With its own data processing capabilities, a smart card can store both customer profiles and electronic money. This e-cash is added and subtracted directly from the card — making transactions more secure and convenient for the vendor and the customer. Plus, expanding smart card usage beyond payphones could result in an e-cash system for all low-value transactions, including vending machines, transit fares, or even Internet payments.

“Look at where payphones are located — in airports, at gas stations, in the shopping malls — all places where the consumer has the opportunity to or needs to make other low-value transactions,” says Robert Rosenberg, president of INSIGHT. “We see payphones as a way of jump starting the widespread use of multifunctional smart cards in the US,” Rosenberg concludes.

According to INSIGHT, global spending on smart cards will grow from $1.1 billion in 1998 to nearly $2.8 billion in 2002, with prepaid phone cards representing about 35 percent of the market by the end of the forecast period.

Further insights into the smart card and payphone markets, including five-year revenue forecasts segmented by application, vendor, and region, are published in Beyond Payphones: Vending, Low-Value Transactions and the Information Age 1998-2003, a 120-page market research study now available from INSIGHT RESEARCH for $3,495.

INSIGHT RESEARCH, based in Parsippany, NJ, is a respected source for telecommunications market research reports, competitive analysis, and custom research. INSIGHT can be reached via the web at , and an excerpt of this study is on the page.


Fraud Trend

The card industry continues to have the upper hand on bank credit card fraud this year. According to CardData U.S. fraud as a percentage of gross volume has declined from 12 basis points to 9 basis points during the first four months of this year. Nevertheless, total U.S. fraud will most likely top $1 billion for 1998. Account takeover fraud continues as the fastest growing fraud while counterfeit fraud is showing signs of new life. Based on issuer reported data, account takeover fraud will top $120 million this year in the U.S. while counterfeit fraud will top $140 million.

                          FRAUD 1998 ESTIMATES
                     Lost & Stolen           $270,000,000
                     Application             $220,000,000
                     Not Recv Issued       $190,000,000
                     Counterfeit             $140,000,000       
                     Acct Takeover          $120,000,000
                     Other                   $ 60,000,000
           Source: CardWeb’s forthcoming CardData service


New Fair, Isaac Partners

Fair, Isaac announced two new strategic alliances yesterday at its InterACT ’98 conference. Fair, Isaac president Larry Rosenberger named Hewlett-Packard as a customer relationship management partner and Prime Response as a customer marketing management partner. As part of the new alliance, Fair, Isaac and HP’s Financial Services Business Unit will make the ‘TRIAD’ adaptive control system, available on the HP-UX operating environment. This is the first time that ‘TRIAD’, which until now has been available only on mainframes, will run in a UNIX system environment. The alliance, though non-exclusive, will leverage Fair, Isaac’s key strengths in predictive analytics and decision-making software and HP’s core strengths in enterprise computing and services to deliver a suite of business solutions, including customer valuation, customer risk management, and customer marketing management. Marketing automation leader Prime Response, with 100 employees worldwide, will partner with FI through its data services subsidiary DynaMark. The core product of Prime Response’s marketing automation suite is its campaign management software, ‘Prime Vantage’. Prime Response currently has the largest installed base of any campaign management software in the world.


Wells + Norwest

The latest bank megamerger between Wells Fargo and Norwest, announced Monday, will give Wells a top four market share in 16 of 21 states across the Midwest, Rocky Mountain and Western regions. The move will also produce the nation’s 14th largest bank credit card portfolio with more than $9.3 billion in card loans. Currently ranked 15th in credit cards, Wells will unseat Providian which reported $8.7 billion in receivables at the end of the first quarter. Overall, the combined company will have $191 billion in assets, more than 90,000 employees, approximately 20 million customers, and 5,777 financial services stores in all 50 states, Canada, the Caribbean, Latin America and elsewhere internationally. The transaction is valued at approximately $34 billion.

                           First Quarter 1998 Snapshot

                  RECEIVABLES          YTD VOLUME     
Wells Fargo     $8,115,836,073         $2,581,877,396 
Norwest         $1,161,371,624           $  503,685,422 
TOTAL           $9,277,207,697           $3,085,562,818 
                   GRS ACCTS       ACTIVES         CARDS
Wells Fargo      5,821,064        2,737,025        6,518,758
Norwest            1,319,402          715,232        1,617,401
TOTAL              7,140,466        3,452,257        8,136,159

     Source: CardWeb’s forthcoming CardData service


Check Washing

The National Automated Clearing House Association warned consumers yesterday to avoid being victims of check washing. NACHA says the best way to protect yourself is to switch to paying bills electronically. Check washing is an emerging crime in which thieves steal checks out of people’s mailboxes and use a chemical solution to erase the ink while leaving the pre-printed information intact. The checks are usually bill payments for utilities, insurance, mortgages and other services.  The criminals then make out the checks to themselves. Reportedly check washing losses will top $2 billion this year.


VeriSmart Mondex Approved

VeriFone, Inc., the leading global provider of secure electronic payment technology, announced Monday that its VeriSmart multi-application smart card architecture and Personal ATM appliance have received Mondex type approval for use in global Mondex Electronic Cash implementations. Mondex approval is an important milestone in establishing the VeriSmart architecture as a standards-based platform for organizations delivering multiple smart card services through a variety of smart card appliances.

“Through this approval, organizations that utilize the VeriSmart solution to deliver Mondex Electronic Cash are assured that it meets our requirements,” said Gillian Chard, Head of Procurement and Licensing at Mondex International Ltd. “With the VeriSmart architecture, Mondex franchisees can quickly implement consumer loading capabilities, while maintaining the flexibility to support the evolving technical requirements and new applications of tomorrow.”

“The VeriSmart system allows service providers to easily and seamlessly offer multiple smart card applications to consumers,” said Thomas J. Kilcoyne, vice president and general manager of VeriFone’s Consumer Systems Division. “Mondex is established as a leading solution for electronic cash, and this approval further confirms the value of the VeriSmart platform for companies deploying Mondex.”

Mondex type approval ensures that the VeriSmart System and the Personal ATM appliance adhere to the specifications required for Mondex transactions. The VeriSmart system is a flexible client/server software architecture that enables financial institutions, telecommunications companies and other service providers to centrally manage multiple smart card applications and host interfaces. The VeriSmart system also provides the flexibility for integrating future smart card capabilities into the existing architecture.

The Personal ATM appliance is a palm-sized smart card reader/writer that offers consumers the ability to access smart card-based services via phone lines in the convenience of their home or office. VeriFone also offers the PayPortTM appliance, which plugs into a personal computer’s serial port and provides functionality similar to that of the Personal ATM. The Personal ATM appliance has already been deployed to deliver electronic cash to consumers’ homes via phone lines, and the PayPort device is designed to add the security of smart cards into consumer Internet applications.

About Mondex International

Mondex International is a subsidiary of MasterCard International. MasterCard International acquired 51% of the company in February 1997 and has decided to adopt Mondex International’s technology as its future choice of strategic chip platform. Mondex International grants licences to franchisees to allow them to exploit the Mondex electronic cash technology in a given territory. Since its incorporation in 1996, Mondex has issued 30 licenses across 6 continents. Mondex is being developed by franchisees in over 50 countries.

Mondex is the only electronic cash system in the world to operate with a single global technology allowing for cross-border payments. It allows up to five different currencies to be carried on the card at any one time in separate electronic pockets. Mondex is currently being used in 23 implementations around the world including Australia, Canada, Hong Kong, Costa Rica, Philippines, UK and USA.

The following companies are shareholders (directly or indirectly) in Mondex International: MasterCard International, National Westminster Bank, Ulster Bank, Midland Bank, Scotiabank, Credit Union Central of Canada, The National Bank of Canada, Bank of Montreal, Canada Trust, Le Mouvement des caisses Desjardins, Toronto-Dominion Bank, Royal Bank of Canada, Canadian Imperial Bank of Commerce, The Hongkong and Shanghai Banking Corporation, Wells Fargo, Citibank NA, Chase Manhattan, First Chicago NBD, Australia and New Zealand Banking Group, Commonwealth Bank of Australia, National Australia Bank, Westpac Banking Corporation (Australia), ANZ Banking Group (New Zealand), Bank of New Zealand, Countrywide Banking Corporation, The National Bank of New Zealand, ASB Bank and Westpac Banking Corporation (New Zealand). Further Information regarding Mondex is available on their web site at:

About VeriFone

VeriFone, Inc. (), a wholly owned subsidiary of Hewlett-Packard Company, is the leading global provider of secure electronic payment solutions for financial institutions, merchants and consumers. VeriFone has shipped more than six million electronic payment systems, which are used in over 100 countries.


Debit FraudWatch

Mellon Network Services said yesterday it is joining with Applied Communications and Nestor to provide ‘FraudWatch’, a debit card fraud monitoring system.  ‘FraudWatch’ utilizes ‘Predictive Risk Management’ technology from ACI and Nestor to monitor, predict and respond to fraud in off-line debit card portfolios. ‘FraudWatch’ employs neural network technology to learn usage patterns of individual cardholders and identifies potentially fraudulent debit card transactions within ten minutes.


Pager Promotion

Budget Rent a Car  and American Express have teamed up to offer a free $80 Motorola pager exclusively to American Express cardholders when they rent with Budget between now and the end of July. To receive the free Motorola pager, customers must dial the special toll-free number provided in their American Express statements following the month of their rental.  No activation fee is needed.  Advance purchase of a 12-month service contract is required.Cardholders are also invited to join Budget’s new frequent renter programs, ‘Perfect Drive’ and ‘Fastbreak’.


Fraud Catalog Available

The Fraud & Theft Information Bureau, the 15-year old Boynton Beach, Florida based, prize winning publishing and consulting company specializing in helping business and banks eliminate fraud and other losses, has just released its latest catalog.

The catalog contains the manuals and fraud-blocker data bases that help prevent losses from credit card and check fraud, chargebacks and termination of Visa/Mastercard merchant status.

The fraud & Theft Information Bureau was recently awarded the J. Edgar Hoover Memorial Award “for saving businesses, banks, and consumers millions of dollars with their publications and consulting services.”

The most popular of all the company’s manuals is Credit Card & Check Fraud: A Stop-Loss Manual, while the most popular of the data bases is the Directory of Mail Drop Addresses and Zip Codes, which identifies the addresses that are a popular shield for credit card and check criminals and their fraudulent purchases.

The company was founded by Larry Schwartz and Pearl Sax, publishers for 10 years of the Fraud & Theft Newsletter and authors for many years of a monthly column on direct marketing fraud prevention for DM News magazine. They are also founders and directors of CHECKS BY PHONE and CHECKS BY WEB, the worldwide instant payment by check services.

The entire catalog can be viewed at the company’s worldwide web site, . It is also available by phone at 561-737-5800; via their e-mail address, [][1], or by mail at Fraud & Theft Information Bureau, P.O. Box 400, Boynton Beach, FL 33487.



App Fraud Tool

Fair, Isaac and Trans Union of Canada announced Friday they have collaborated to develop ‘RAVEN’, a fraud detection system to help Canadian credit grantors detect fraud during application screening. RAVEN was developed on credit bureau data, Trans Union of Canada’s ‘HAWK’ fraud detection system data, and Canadian client application data. Fair, Isaac fused the strengths of multiple modeling technologies and techniques — its ‘ADVISE’ data mining tool and ‘INFORMPLUS’ along with neural networks — to optimize ‘RAVEN’s’ precision in recognizing application fraud.’RAVEN’ rank-orders the likelihood an application is fraudulent and focuses on identifying true-name fraud — those cases of stolen identity. RAVEN also helps detect other cases of application fraud, such as attempts to create or embellish an identity.


April Showers

After a strong March, revolving credit eased a bit in April as American consumers added 33% less debt this year than last year. According to April consumer credit figures released by the Federal Reserve Friday, Americans added $2.3 billion to total revolving debt during April. Revolving credit grew at a seasonally-adjusted rate of 5.2% this April compared to 6.9% one year ago. Overall consumer credit, exclusive of home mortgages, grew 5.3% for April 98 compared to 1.9% for March 98 and 9.0% for April 97.At the end of April American consumers were $1.250 trillion in debt.

                                 REVOLVING CREDIT HISTORICAL
       Apr98    Mar98  Feb98   Jan98   Dec97   Nov97  Oct97  Sep97  Aug97 Jul97      
%GRWTH: 5.2%    1.0%  8.4    4.7    2.3    -2.1   10.0    6.2    8.0 9.4             
$OWED: $539.4    537.1  536.6   532.9   530.8   529.8  530.7  526.4  523.7 520.2        
              Source: Federal Reserve; revised figures as of 06/05/98



VA-based Morph Technologies released its latest version of ‘DynaMorph’, a Web application engine.  The new release adds the ability to validate and authorize credit cards using CyberCash’s Internet merchant solution, and interact with Netscape’s LDAP server.  These new capabilities will enable designers of advanced Web sites to interface with corporate LDAP databases, and to construct fully e-commerce-enabled solutions. The company says it sees LDAP and TCP-based e-commerce solutions like CyberCash as critical to the next wave of business-to-business, membership oriented, and consumer Web systems.