CTST Opens

The rapid advance of chip-based card technology (smart cards) and biometrics has spawned ambitious plans by corporations and government to link individuals more intimately to the “wired” world. At the juncture between what technology can do and how people will use it are a myriad of legal, regulatory and policy issues. The same technologies which make it easier and safer to function in cyberspace, potentially pose threats to: How consumer rights are protected How industries are structured How commerce is conducted How government oversees fairness for its citizens and competition among companies CardTech/SecurTech (CTST) ’98, which will attract nearly 10,000 attendees from more than 70 nations, will provide an intensive forum on these and other issues during the week of April 27-30, 1998. Located at the Washington Convention Center in Washington, DC, CTST will play host to many of the world’s leading authorities on electronic commerce, business law, privacy, and government regulation. These experts will discuss pressing issues currently weaving their way through the legislative and regulatory processes, as well as through the courts of law and public opinion. Some of the topics to be explored include: The liability and insurance issues associated with certificate authorities that will attest to the authenticity of people in their financial, legal and personal dealings over the net. The effect on law enforcement and taxing authorities as they cope with new environments in their efforts to suppress money laundering, fight organized crime and collect taxes. The ability of privacy regulation and compliance to keep pace with the ever increasing complexities of modern information networks. “One of the fascinating aspects of debates that arise when discussing personal technologies such as smart cards, cryptography, and biometrics is that the same tools that can protect people’s privacy and assets, can also be seen as intruding on their personal lives,” said Ben Miller, CTST founder and conference chair. “Discussion between the people building the systems and the people charged with safeguarding the public trust is the only way to ensure a future that is both beneficial and acceptable to everyone.”

With the rapid adoption of card and security technology in both domestic and international markets, concerns have been justifiably raised regarding user privacy and authentication. Recent cases of “identity” theft highlight the risks of using old fashioned paper documents, passwords and written signatures. Not only are these methods ill-suited to emerging electronic systems, they are easily foiled by criminals. The creation of sophisticated systems for replacing written signatures with digital ones is one of the most pressing requirements for electronic commerce and information sharing. Banks, governments, and information providers recognize that an all new infrastructure must be built to facilitate life in a “wired” world. While the technological challenges are daunting, the larger hurdles lie in structuring the systems to accommodate legal requirements and protect citizens.

In addition, cultural changes are occurring as use of the Internet penetrates deeper into the population. Since its early days, the Internet has been a place where many people assume a level of anonymity, at least in some of their electronic dealings. A higher level of security and trust can be provided by smart cards, digital signatures and biometrics, yet users may still feel uneasy about their identity being known. Recent studies have shown that, for the majority of people, security of electronic transactions is a prerequisite to their becoming regular “net” users.

Legal, Regulatory and Policy Issues Impact in Private Sector First To date, government bodies have primarily monitored the development of technologies and how industries are planning to use them. Private sector entities have regularly been warned by elected officials and regulatory bodies to be sensitive to consumer rights and attitudes. In response, a number of existing and newly formed industry groups have been setting guidelines for how the new technologies will be applied. Among these are the Smart Card Forum, Smart Card Industry Association, and the Banking Industry Technology Secretariat (BITS) of the Banker’s Roundtable. Representative of these organizations will participate in discussions at CTST ’98 as will luminaries from both the public and private sector including: Robert Pitofsky, Chairman of the Federal Trade Commission, will discuss government views on privacy and antitrust regulation in cyberspace. Thomas J. Smedinghoff, Chairman of the Electronic Commerce Division of the American Bar Association and partner of McBride, Baker & Coles in Chicago, will present at length the legal issues surrounding digital certificates and electronic authentication. Andrew Pincus, General Counsel at the U.S. Department of Commerce, will discuss international initiatives to create uniform laws and standards for electronic commerce. Jeff Ritter, Director of Document Authentication Systems and former Director of Ohio State University’s ECLIPS, will explore the legal aspects of electronic document origination and authentication. John Burke, Partner of Foley, Hoag & Eliot, will examine the issues of security and privacy associated with multi-application cards that provide access to the services of banks, travel companies, government agencies and other groups on a single smart card. Bob Litan, Director, Economic Studies Program at the Brookings Institution, will focus on balancing privacy policy with changing consumer perceptions. Stuart Baker, Partner at Steptoe & Johnson, will examine international issues associated with cryptography including domestic and export controls, digital signatures and certificate authorities. Columbia Law School Professor Alan Westin, Publisher of Privacy & American Business, will share guidance on consumer, employee and citizen privacy issues and how corporations should handle their interaction with government and consumer groups. Finally, Thomas Vartanian, Managing Partner of Fried Frank, Harris, Shiver & Jacobson’s DC office, and Chair of the American Bar Association’s Committee on Cyberspace Law, organized the legal, policy and regulatory track at CTST and will moderate the day-long program scheduled for Thursday, April 30.

For more information on CTST seminars and conference programs, please contact Liz Wenchel at (301) 654-0551.

About CardTech/SecurTech CardTech/SecurTech (CTST), founded in 1991, is the world’s most prestigious conference and exhibition covering advanced smart card and security technology. Recently purchased by Faulkner & Gray, Inc., publisher of Card Technology 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 via the Web at .

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Back in the Saddle

After a sluggish 97 Household Bank showed a strong first quarter. New card accounts originated were nearly double the level a year ago due to increased marketing initiative over the past few months. Household also noted yesterday that chargeoffs related to personal bankruptcies declined for the second consecutive quarter. According to Card Management Information Services’ 1Q Portfolio Survey Household added more than 700,000 accounts during the first quarter.

                     HOUSEHOLD  1Q  SNAPSHOT

                    1998-1Q             1997-4Q
     RECV       $17,336,014,000     $17,314,186,000
     Q VOL      $ 8,139,392,000     $ 9,689,549,000
     ACCTS          16,760,000         15,692,000
     ACTIVES         7,846,000           7,411,000         
     CARDS          22,627,000          21,184,000
     Source: Card Management Information Services

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Reloading Cards via Internet

Product Technologies Inc. (PTi) today announced that Internet revaluing of smart cards can now be accomplished using SmartCity 4, its turnkey smart card-based e-purse (electronic purse) application that also provides a multi-application development platform and tools to systems integrators. This enhancement makes it possible for SmartCity smart card holders to load cash to their e-purse(s) via the Internet from such devices as PCs and interactive kiosks.

To add more cash value, the user inserts a smart card into a PC/SC-compliant smart card reader. The user then accesses the participating financial institution’s Web site via a standard Web browser and selects the smart card revalue option. The application prompts the user for a smart card PIN and the amount of money the user wishes to add to the card’s purse. Pertinent account information is then securely read from the card and transmitted with the revalue request to the financial host for routing to the appropriate authorization network. If authorized, the cardholder’s account is debited or charged and the value loaded to the card’s purse. In addition to the revalue function, cardholders may also view purse balances and their last 10 transactions.

The availability of this new technology means that a user no longer needs to travel to a bank to load e-purse funds; the card can be revalued securely without the user ever having to leave home. The demand for this kind of convenience is evidenced by a new study from Killen & Associates which forecasts a smart card revaluing market of $26.5 billion by 2005.

“This advanced Internet-based technology that we have developed for SmartCity is a first, and it responds to a strong market need to provide the consumer with increased convenience, as well as security in electronic purse transactions,” said Bill Mangino, PTi’s president and chairman. “PTi remains committed to delivering these technological advances to our customers in anticipation of market demand.”

The Internet Revalue feature of SmartCity 4 will be demonstrated at CardTech/SecurTech `98 in Booth No. 1230. The show will be held at the Washington Convention Center in Washington D.C. from, April 28-30, 1998.

Pricing And Availability

The Internet Revalue feature of SmartCity 4 will be available in June 1998. Price varies according to customer’s existing SmartCity installation.

About PTi

PTi is a leading supplier to systems integrators of smart card-based e-purse applications that can be used in combination with loyalty and other applications. It is headquartered in Middletown, CT, with a branch office in Moscow, Russia. Further information on the company can be found at: .

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FDC TX Vol Up 19%

First Data reports net income for the first quarter was $131 million, down 4% from $136 million last year.  The quarter included a $28.5 million gain on the disposition of NTS and restructuring charges of $28.9 million, principally related to a restructuring and staff reduction program in the merchant card processing business, for a net charge of $0.4 million.  Merchant Processing Services revenues were up 10% in the quarter to $317 million.  The overall volume trends reflect increasing momentum, particularly in the merchant bank alliances.  Domestic merchant Visa and MasterCard volume increased 22% to $53 billion, and domestic transactions processed grew 19% to 964 million. Domestic Card Issuer Services revenues increased 8% to $286 million.  Total domestic accounts on file increased 25% to 170 million, as First Data’s account growth remains well above overall card industry growth.  Revenue grew more slowly than accounts on file as a result of the unusually high level of contract renewals and repricing during 1997, and as a result of exiting certain unprofitable relationships in the back office servicing certain unprofitable relationships in the back office servicing business.

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AmEx Yield Up

American Express reported this morning an improvement in net interest yield yesterday for the first quarter due to the expiration of introductory rates. Net interest yield for the AmEx U.S. card base rose to 9.6% from 8.7% one year ago. Meanwhile delinquency leveled-off but chargeoffs climbed for the first three months of 1998.

                     AMEX  1Q  U.S. SNAPSHOT

                              98-1Q          97-1Q
          CARD LOANS         $14.2b         $12.9b
          VOLUME             $38.5b         $34.6b
          CARDS              23.3m          22.9m
          DELINQUENCY*         3.6%           3.6%
          CHARGEOFFS           6.3%           5.1%
          DISCOUNT RATE       2.74%          2.75%
          PER CARD VOL      $1600          $1498
          PER CARD FEE       $38            $39
               * delinquency rate is for 30+ days;

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Iris ATM Goes Online

Britain’s Nationwide Building Society introduced the world’s first PIN-less ATM yesterday.  The ATM system has been pioneered by NCR, using an iris identification system developed by Sensar Inc. of Princeton, NJ.  Using the NCR ATM, the customer simply puts in their ATM card and a camera mounted in the machine photographs the colored portion of the eye, the iris.  If the iris staring back matched the record on the databank, the ATM will allow instant access to your bank account without need for a PIN number.  The entire process can take as little as two seconds, and presents no danger to customer’s eye.

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LEO and PayCard Demo

ORGA Kartensysteme GmbH, will be showcasing a host of new applications for its innovative technology at CardTech/SecurTech ’98 in Washington, DC next week. ORGA will discuss and demonstrate its LEO (Loyalty and Electronic Purse) System to offer merchants worldwide a customized, fraud-resistant smart card payment and loyalty system they can use to attract new customers.  Because it has been designed as an open specification architecture, LEO should be able to utilize a diverse range of industry-available terminals, host computers and chip cards.  ORGA will also demonstrate Internet application.  There will be demonstrations of the company’s new “Paycard,” a smart card that features the best elements of both contact and contactless technologies, as well as a new biometric fingerprinting system for security/access control.

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Cap One Dividend

Capital One Financial Corporation today announced a quarterly dividend of $.08 per share payable May 21, 1998 to stockholders of record as of May 7, 1998. This is the Company’s thirteenth consecutive quarterly dividend since it became independent on February 28, 1995. Dividends declared by the Company are eligible for direct reinvestment in the Company’s common stock under its Dividend Reinvestment and Stock Purchase Plan. For additional plan information, stockholders should contact First Chicago Trust Company of New York at 800-446-2617.

The dividend declaration followed the Company’s fourth annual stockholders’ meeting. During the annual meeting, stockholders elected Nigel W. Morris and W. Ronald Dietz to serve three-year terms on the Board of Directors. Mr. Morris is President and Chief Operating Officer of the Company. Mr. Dietz is Chief Executive Officer of TARP, of Arlington, Virginia, and President of Charter Associates, Ltd. Both Messrs. Morris and Dietz have been Directors of the Company since February 28, 1995. In other business, stockholders approved an amendment to the 1994 Stock Incentive Plan and re-appointed Ernst & Young LLP as independent auditors.

Headquartered in Falls Church, Virginia, Capital One Financial Corporation () is a financial services company whose principal subsidiaries, Capital One Bank, and Capital One, F.S.B., offer financial products and services to consumers. Capital One collectively had 12.7 million customers and $14.0 billion in managed loans outstanding as of March 31, 1998, and is one of the largest providers of MasterCard and Visa credit cards in the world.

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VISA Helps Fight Hotel No-Shows

Yesterday at the American Hotel & Motel Association Annual Convention, Visa U.S.A. unveiled a national education and communication program to help the lodging industry solve the problem of no-shows, which experts estimate exceeds $100 million.  This program comes on the heals of a successful pilot study Visa completed earlier this year with Best Western International, Inc., Choice Hotels International and Holiday Hospitality.  Visa’s “Managing No-shows: Issues and Answers” program is a multi-faceted education campaign designed to help brand reservationists and hotel staffs understand the magnitude of the no-show problem and improve communications with consumers regarding hotel cancellation policies.  The program is available, free of charge, to hotel chains, as well as independent properties of any size.

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Paymentech TX Vol Up 38%

Paymentech, Inc. reported Thursday net income of $4.3 million for the third quarter ended Mar 31, 1998.  In the March 1998 quarter, Paymentech processed approximately $11.8 billion in bankcard sales volume and approximately 463 million total transactions, including third-party authorization and capture transactions.  Bankcard sales volume increased 16% and total transaction volume increased 38% over the prior-year quarter.

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Vietnam Cards

Vietnam’s largest commercial bank, Vietcombank, launched its first VISA card yesterday. The bank says its expects to issue about 1,500 cards this year or about the same number issued to date through its first Vietnam issuing member, Asia Commercial Bank. Vietcombank has issued about 1,200 MasterCards over the past two years. Vietnam has approximately 3,000 VISA/MasterCard merchant acceptance locations. Vietcombank requires a $400 monthly income to qualify for the card. The average per capita income in Vietnam is $300 per year.

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