Web Buyers Unconcerned About Card Security

A comprehensive, three-part Ernst & Young study reveals that while industry experts continue to focus on sales predictions as the key indicator of Internet commerce, they are overlooking the Web’s unmatched power in driving consumer purchases to other channels of distribution.  The study also highlights the Internet’s potent ability to influence sales of a wide growing range of products and services.

“Internet Shopping,” a special report produced by Ernst & Young and the National Retail Federation, reveals that nearly one-third of consumers (32 percent) with online access have purchased products or services on the Internet.  Yet, only four percent make more than 10 purchases a year. Sixty-four percent of those with Internet access research products online and later buy them through traditional channels — double the percentage of consumers who research and buy the same products online.  Overall, 90 percent of consumer respondents said their online research is valuable to future purchasing decisions.

“The Internet is much more than a passive advertising vehicle,” said Stephanie Shern, Vice Chairman, Industry Services of Ernst & Young.  “Our research shows that the Internet appears to be accelerating purchase decisions.  Retailers and manufacturers must understand this to unlock the incredible value of the Internet.”

Try It… You’ll Like It

Findings suggest that Internet shopping satisfaction continues to grow among a majority of Web purchasers.  Fifty-six percent said they like the Internet’s ability to offer comparison shopping, 52 percent are happy with online merchandising, and 50 percent enjoy the ease of navigation and the overall speed of process on the Web.

Clearly, the main reason consumers shop on the Internet is the convenience (53 percent) it provides.  At the same time, a large percentage of Web purchasers said that variety (46 percent) and cost savings (45 percent) were key factors in buying on the Internet.  Internet security remains the biggest hurdle to prospective Web purchasers, with almost 70 percent reporting that they are uncomfortable sending their credit card number through cyberspace. Yet, satisfaction appears to grow with experience, as 52 percent of current Web buyers said they are happy with credit card security.

“As retailers search for new and innovative ways to expand their markets and keep their customers happy, they will look increasingly to cyberspace for ideas and answers,” said National Retail Federation President Tracey Mullin. “As the Ernst & Young study indicates the sky’s the limit for this exciting channel.”

Neither Nerd Nor Neophyte

Dispelling a popular myth, the cyber-shopper profile is neither a teenager nor a computer “nerd.”  Instead, findings indicate that Web buyers are well-educated, well-paid, and in their prime earning years; 64 percent of online shoppers are between 40 and 64 years of age.  Sixty-eight percent of online shoppers are male.  “Many retailers should take keen notice of these findings as these demographics represent their ideal online customer,” added Shern.

Cyber-shoppers also have active lifestyles with numerous hobbies. Fifty-one percent are avid moviegoers, 48 percent are gardeners, 36 percent do some kind of charity and volunteer work, and 32 percent attend concerts, plays and museums.  On the whole, Web shoppers engage in these activities more frequently than consumers.

The Internet is having its most profound impact upon men, who seem to have found a shopping channel uniquely suited to their needs.  Men outnumber women as primary PC users by a five-to-three margin and spend more time online than women.  Eighty-three percent of men with Internet access go on-line on a regular basis, compared with 64 percent of women.  “Most women still prefer more traditional shopping channels,” continued Shern.  “But because they are often loyal to both brand and style, a clear opportunity exists in such brand-driven areas as apparel and consumer electronics.  Web sellers need to heighten their marketing and sales efforts towards women.”

The New Millennium  Great Expectations Among Retailers & Manufacturers

Both retailers and manufacturers are extremely optimistic about the growing importance of the Internet as a future sales channel.  By the year 2000, half of online sellers expect to generate at least 20 percent of their total sales on the Web.

Retailers are extremely optimistic on the profitability of their Web sites, with more than two-thirds (67 percent) predicting profitability in the first year of operation.  A staggering 81 percent of retailers project profitable Web sites within two years.  Manufacturers are more cautious than retailers with only 40 percent expecting profitability on their sites within a year of operation.

Fifty-four percent of retailers have established an online presence for marketing and image development but have no plans to utilize the Internet as a sales medium citing the unsuitability of their products for Web sales.

Sixty-nine percent of retail respondents viewed market expansion and 61 percent believed customer retention are the two primary goals of having an online presence.  Fifty-eight percent said the Internet has allowed them to differentiate themselves from their competition and to expand their market. “Retailers should use the Internet to drive sales, reduce costs and bolster marketing efforts,” stated Shern.  “Our study shows that brand names and retailer familiarity exert the most impact on Web buying decisions.  Retailers need to be well positioned for the time when the Internet becomes a mature sales opportunity.”

Judging by manufacturers’ plans, direct-to-consumer online sales do not pose an immediate threat to retailers.  Only nine percent are currently selling products on the Web and 12 percent more have plans to begin to sell. The majority (71 percent) have no intention of selling online.

What’s Hot & What’s Not

Some products may be better suited for online sales than others. Information intensive items such as computers, software, books, travel, music, and magazine subscriptions are the most popular online products at present. Apparel is emerging as a viable online category.

The study conducted comprehensive interviews with 850 consumers, 150 retailers and 150 consumer products manufacturers about their current and future Internet buying and selling activities.

Ernst & Young LLP provides assurance and advisory business services, tax services and consulting solutions for domestic and global clients.  The firm has 27,000 people in 89 U.S. cities.  Visit the Ernst & Young Web site at .


ATM Backlash

A new study released this morning shows 78% of ATM consumers actively avoid ATMs with fees. The Opinion Research Corporation study also revealed that 67% of ATM customers say ATM fees discourage them from considering the fee-charging bank for other products and services. Of consumers using ATMs outside their own bank’s branch system and incurring surcharges, 47% say it “makes them mad” while 38% say it “bothers them somewhat”. Other ORC findings 57% have used an ATM at a non-bank location, 48% have used ATMs at the branch of another bank and 44% have used their ATM cards for retail purchases.


CheckFree Signs Huntington

CheckFree , the nation’s leading provider of electronic home banking and bill payment processing, announced a three-year agreement with The Huntington National Bank, to provide home banking and bill payment processing for the bank’s customers.

Beginning the first quarter of 1998, The Huntington will use CheckFree’s home banking and bill payment processing engine for Huntington’s online banking customers that bank from home using Quicken or Money.  The Huntington will also offer its small business customers the ease and flexibility of electronic banking and bill payment through Quickbooks software.

“This nicely augments our existing Internet banking service, Huntington Web Bank,” said Chet Thompson, senior vice president and manager of Electronic Commerce at The Huntington National Bank.  “It extends our online options to reach the businesses and consumers who prefer a banking solution through Quicken, Quickbooks and Money software.”

“The rapid growth of electronic commerce is clearly being driven by industry leaders like The Huntington,” said Peter J. Kight, chairman and CEO of CheckFree Corporation.  “It’s their commitment to providing the best in customer convenience and service that is making the move to online financial management a valuable choice for customers.”

Based in Columbus, Ohio, The Huntington is one of the largest financial institutions in total assets in the country, with retail banking offices in Ohio, Florida, Indiana, Kentucky, Michigan and West Virginia.

To date, CheckFree has contracts for home banking and bill payment transaction processing for 284 financial institutions, including 23 of the top 25 and 35 of the top 50 banks in the country.  These institutions represent more than 2 million online banking subscribers.  CheckFree currently processes more than 7 million transactions per month.

About The Huntington National Bank

With over 131 years of serving the financial needs of its customers, Huntington Bancshares Incorporated (http//www.huntington.com) is a regional bank holding company headquartered in Columbus, Ohio, with assets in excess of $25 billion.  The Huntington provides innovative products and services through its 531 offices in Ohio, Florida, Georgia, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Pennsylvania, South Carolina, Virginia and West Virginia.

About CheckFree

Founded in 1981, CheckFree (http//www.checkfree.com) is the leading provider of electronic commerce services, software and related products for more than 2 million consumers, 1,000 businesses and 850 financial institutions.  CheckFree designs, develops and markets services that enable its customers to make electronic payments and collections, automate paper-based recurring financial transactions and conduct secure transactions on the Internet.


SCIA Security Initiatives

The Security Committee of the Smart Card Industry Association (SCIA) has launched a two-part effort to help the industry manage security issues.

“First, we want to help educate card developers about the many facets of card security,” said Committee Chairman Gilles Lisimaque of Gemplus. “Second, we’re forming a Fast Response Team of experts in security issues who will provide factual information to the media when card security becomes headline news.” The effort was announced at a committee meeting held December 9, 1997, prior to the start of CardTech/SecurTech ’97 West.

Smart card security should not be a competitive issue, Lisimaque said. Smart cards are only one part of the security issue, which involves readers, and other systems–both human and electronic. “We need to ensure that smart cards are a strong link in that system. Working cooperatively with everyone in the security loop will help optimize card protection from unauthorized access.”

The results of this kind of effort go to the heart of security issues–protecting brand equity in the marketplace. Product and service branding has become one of the few areas in which a company can create a sustainable competitive advantage and is often cited as a factor in a company’s strong stock price.

The Educational Effort

The committee’s educational effort will span the smart card industry, but focus on card developers. Developers need information on the importance of balancing such security issues as cost, level of protection and sophistication of barriers to unauthorized access, but aren’t getting all they should have, Lisimaque said.

Educational activities will include creating white papers on a variety of security issues, gathering and sharing information with members, and inviting security experts to talk at committee meetings.

The committee also will search the Internet and contact other organizations for information on security issues and share that with members. Information Technology Security Evaluation Criteria, for example, could be helpful to card developers, even though they do not specifically address smart cards.

In terms of inviting security experts to talk at committee meetings, an executive of a major banking credit card company presented his company’s perspectives on financial security to committee members at the meeting in San Jose. The executive presented the company’s security testing procedures for consideration as industry standards.

The Fast Response Team

The second part of the effort is forming a SWAT-style spokesperson cadre of industry experts who can satisfy media inquiries for factual information on smart card security issues.

“When a crisis hits, this Fast Response Team will help the media better understand card security issues so they can report on news developments more accurately,” Lisimaque said. Team members will be recruited from manufacturers, resellers and consultancies. Included in this activity will be an ongoing effort to identify rumors and other misinformation circulating in the industry and proactively defuse them.

Besides the education and the response team activities, the committee plans to study the need for a separate Privacy Committee within SCIA.

The Security Committee of SCIA serves as a “meeting place” for members to discuss smart card security issues and to share information so they can develop better security solutions within the card applications they help develop.


Diebold Earnings Up 24%

Diebold, Incorporated announced 1997 fourth quarter and year-end results that are the highest ever in the company’s 138-year history.

In the quarter ended December 31, 1997, Diebold had record net income of $35,037,000, or $.51 basic earnings per share, on record revenues of $341,348,000.  This compares with net income of $28,286,000, or $.41 per share, on revenues of $294,172,000 in the 1996 fourth quarter.  Earnings per share in the 1997 period were up 24 percent compared with the 1996 fourth quarter, while revenues were up 16 percent versus revenues for the 1996 period.

For the 12 months ended December 31, 1997, Diebold recorded the highest net income ever, $122,516,000, or $1.78 basic earnings per share, on revenues of $1,226,936,000.  This compares with net income of $97,425,000, or $1.42 per share, on revenues of $1,030,191,000 for the 12 months ended December 31, 1996.  Earnings per share for 1997 were up 25 percent versus 1996, while revenues for the year were up 19 percent.

“We are very pleased to have again achieved such outstanding earnings growth for the year,” said Robert W. Mahoney, chairman and chief executive officer.  “We achieved significant order growth in all of our businesses in the fourth quarter, which positions us well for the start of the new year.”

Diebold, Incorporated, headquartered in Canton, Ohio, is a world leader in providing card-based transaction systems, security and service solutions to the financial, education and healthcare industries.  Founded in 1859 as a security equipment company, Diebold currently provides integrated solutions incorporating its automated teller machines (ATMs), electronic and physical security systems, electronic payment systems, professional services and software.

                             DIEBOLD, INCORPORATED

                                   Three Months Ended    Twelve Months Ended
                                      December 31,            December 31,
                                    1997       1996         1997       1996
    Net Sales
      Product                     $236,482   $202,432     $825,125   $679,053
      Service                      104,866     91,740      401,811    351,138
      Total                        341,348    294,172    1,226,936  1,030,191

    Cost of Goods                  218,332    192,284      796,836    672,679
    Gross Profit                   123,016    101,888      430,100    357,512
          Percent of Net Sales        36.0%      34.6%        35.1%      34.7%

    Operating Expenses
     Selling, General and
       Administrative               54,152     48,490      191,842    166,572
      Research, Development
        and Engineering             15,641     13,824       54,397     50,576
      Total                         69,793     62,314      246,239    217,148
          Percent of Net Sales        20.4%      21.2%        20.1%      21.1%

    Income Before Taxes             53,087     42,542      185,659    146,504
          Percent of Net Sales        15.6%      14.5%        15.1%      14.2%

    Taxes on Income                 18,050     14,256       63,143     49,079
          Effective Tax Rate          34.0%      33.5%        34.0%      33.5%

    Net Income                     $35,037    $28,286     $122,516    $97,425
          Percent of Net Sales        10.3%       9.6%        10.0%       9.5%

    Average Shares Outstanding      68,979     68,834       68,939     68,796

    Basic Earnings Per Share         $0.51      $0.41        $1.78      $1.42

    Diluted Earnings Per Share       $0.50      $0.41        $1.76      $1.40

SOURCE  Diebold, Incorporated


ICVERIFY Supports ActiveX

ICVERIFY Inc., the worldwide leader in providing transaction processing software for merchants, announced its new ActiveX component.

The component is designed to streamline the process of integrating ICVERIFY with Internet storefront applications and Windows-compatible point-of-sale applications.

ICVERIFY software enables merchants to process VISA, MasterCard, American Express, Discover Card, Diners Club, Carte Blanche, JCB and private-label credit card transactions. In addition, the software enables retail merchants to accept debit (ATM) cards and checks using a PC or PC-based electronic cash register. ICVERIFY maintains over 250 processor certifications, allowing merchants to choose from more than 99% of all U.S. banks for their payment processing needs.

With ActiveX, software developers and integrators can choose from a wide range of tools to build interactive applications and Web content quickly and easily.

“The ActiveX option demonstrates ICVERIFY’s commitment to meeting the ever-changing needs of integrators, developers and their clients,” said Steven Elefant, chairman and co-founder of ICVERIFY. “It adds to ICVERIFY’s extensive array of integration options, giving developers and integrators the ability to quickly add payment processing to any Windows-compatible or Internet application.”

The ActiveX integration option for ICVERIFY will ship at the beginning of February. It will be available exclusively to members of ICVERIFY’s Integration Partnership Program.


ICVERIFY Inc. is a privately-held, venture capital-funded corporation with U.S. headquarters in Oakland, California, and European headquarters in Munich, Germany. The company is the leading provider of software solutions for authorizing credit, purchase, debit/ATM card and check guarantee transactions for merchants. Online stores and other Web commerce sites, Internet service providers, retail stores and catalog companies use ICVERIFY at more than 250,000 point-of-sale locations worldwide. For more information about ICVERIFY, visit [www.icverify.com][1] or call 800/666-5777.

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


Cool Cards for NHL All-Star

Hypercom Corporation and MasterCard International teamed for the second straight year to provide interactive “Cool Cards” enabling attendees of Pinnacle/NHL FANtasy to take home hockey-related prizes.

Pinnacle/NHL FANtasy is a fan fest leading up to the National Hockey League All-Star Game, which was played Sunday, January 18, at General Motors Place, the home arena of the Vancouver Canucks. MasterCard, along with more than 20 other sponsors and major NHL business partners, entertained attendees with hockey-related exhibits, games and souvenir stands.

MasterCard, the official card of the National Hockey League, is distributing special commemorative “Cool Cards” to those attending Pinnacle/NHL FANtasy, which runs for five days at GM Place — from Wednesday the 14th through Sunday the 18th. A number of the interactive chip cards are pre-programmed to allow attendees to win a variety of prizes. Attendees determine if they are a winner by inserting the card into Hypercom S7SC PIN Pads.

Hypercom and MasterCard International hope to build on the success of the promotion last January during Pinnacle/NHL Fantasy preceding the NHL All-Star Game in San Jose, CA.

“MasterCard was extremely pleased with how the Hypercom hardware operated last year in terms of validating cards and quickly giving winners the good news. And Hypercom is excited to again be part of the team,” said John Marshall, Senior Vice President of Sales and Marketing, Hypercom POS US/Canada. “Also, the combination of Hypercom hardware and MasterCard “Cool Cards” served as a highly effective marketing tool, giving attendees an incentive to visit exhibitors’ booths.”

Marshall continued, “Hypercom builds POS products to satisfy current and future needs. The S7SC Smart Card PIN Pad, which will be deployed at exhibitors’ booths and the MasterCard booth, has both an embedded circuit card reader and a magnetic stripe card reader.”

How to Win

Upon arriving at Pinnacle/NHL FANtasy, the attendee receives a MasterCard “Cool Card” programmed specifically for the event. To determine if the card is a winner, a two-step process is required.

First, the attendee stops by exhibitors’ booths and inserts the “Cool Card” into the S7SC PIN Pad. The S7SC will electronically validate the card for those specific sponsors. Attendees are encouraged to validate their card at as many exhibitor booths as possible.

As the attendee leaves Pinnacle/NHL FANtasy, s/he stops by the MasterCard booth to determine if the validated card is a winner. There also, the card is inserted into one of four S7SCs. Some prizes include hockey skates, jerseys and the use of a luxury box at a Canucks’ game. Topping the list is a trip to the 1998 Stanley Cup Finals.

About MasterCard International

MasterCard International, a payments company with one of the world’s most recognized brands, is dedicated to helping more than 22,000 financial institutions around the world offer consumers a variety of payment options. MasterCard remains focused on helping to shape the future of money by expanding acceptance of its global brands (Mastercard(R), Maestro(R), Cirrus(R), the world’s largest ATM network) and maintaining reliable, secure networks facilitating global value exchange. MasterCard has nearly 370 million credit and debit cards that are accepted at more than 13 million acceptance locations worldwide. MasterCard can be reached through its World Wide Web site at .

About Hypercom Corporation

Hypercom Corporation is a leading supplier of point-of-sale (POS) payment systems, enterprise networking solutions and client/server software. Phoenix, AZ-based Hypercom markets its products in more than 50 countries worldwide. Hypercom Corporation consists of four divisions Hypercom POS US/Canada, Hypercom International, Hypercom Network Systems and Hypercom Manufacturing Resources. Hypercom’s common stock is traded on the New York Stock Exchange under the symbol “HYC”.

Certain matters discussed within this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although management of Hypercom believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from expectations include industry, competitive and technological changes; risks associated with international operations and foreign currency fluctuations; the composition, timing, and size of orders from and shipments to major customers; inventory obsolescence; market acceptance of new products and other risks detailed from time to time in Hypercom’s SEC reports, including the company’s prospectus dated November 13, 1997.

NHL FANtasy is a trademark of the National Hockey League. All other marks are property of their respective companies.


ProMark Gets Quality Award

ProMark One, a subsidiary of International Data Response Corporation (IDRC), recently received an MVP Quality Award for outstanding quality in telemarketing.

ProMark One, the 5th largest outbound telemarketing service agency in the nation, was recently awarded Telemarketing and Call Center Solutions magazine’s MVP Quality Award in the category “Outbound Business-to-Consumer Program”.  This is one of the highest honors attainable in the telemarketing industry.   To win the award, each applicant is required to provide documentation of a case study as well as details on procedures and policies that have been implemented to ensure telemarketing of the highest quality, including regulatory compliance, customer service, operations policies and procedures, work environment, technologies, and public relations efforts.  This is the first time that ProMark One has received this prestigious award.   Results will be published in the January issue of the magazine.

ProMark One specializes in providing customized outsourced solutions to the financial services and telecommunications industries, among others.  Alone, ProMark One currently has nearly 2,400 workstations and 4,000 employees in 15 locations nationwide.  Through our affiliation with IDRC (our parent company), we have comprehensive service offerings and resources, including access to a total of nearly 4,500 workstations and 31 locations throughout the United States and Canada.


Strong Finish

Household Bank surpassed 21 million cards-in-force at year’s end, adding more than 600,000 accounts and increasing receivables 8% during the fourth quarter. The data are based on Bankcard Barometer/CardData’s ‘Fourth Quarter 1997 Portfolio Survey’, now underway.

           HOUSEHOLD’S FOURTH QUARTER 1997 STATS (12-31-97)
          RECV      Q-VOL     YTD-VOL   ACCTS     ACTVS     CIF
HH       $17.3b     $9.7b     $34.2b    16.0m     7.4     21.2m
     recv-receivables; vol-volume; accts-accounts; actvs-actives;
cif-cards-in-force; Source CardWeb, Inc.’s Bankcard Update/CardData



IDRC (International Data Response Corporation), a leading provider of outsourced Teleservices and Internet based solutions, is pleased to announce the formation of IDRC USA and the appointment of John D. Weil as its President & CEO.

![][1] Weil’s involvement with IDRC started in the Spring of 1996 when he became a member of the IDRC Board of Directors.  He comes to IDRC USA with considerable professional experience in senior management positions in manufacturing and direct marketing.  He has had several senior management and board level assignments with McCown De Leeuw & Co. (IDRC’s principal shareholder) portfolio companies.  Weil is currently in the process of transitioning from his role at AmeriComm Holdings, Inc. where he has served as Executive Chairman for the past two years.  He has also served as a Director of publicly-held FiberMark Corporation, a converter of specialty papers and fibers and Sage Enterprises, Inc., a food service distributor.

Prior to Weil’s involvement with McCown De Leeuw & Co., he served for 13 years as the President & CEO of American Envelope Company.  Prior to this, he served for 7 years as the President of Kent Paper Company, a subsidiary of Williamhouse-Regency, Inc.  His educational background includes a BS in Economics from the University of Illinois and an MBA from Northwestern University.

In his new role as President & CEO of IDRC USA, Weil will be responsible for all of IDRC’s operations within the United States, with the ultimate goal of building a world-class organization.

“I am looking forward to the challenges of my new position and to being a part of the IDRC team that I believe will ultimately lead this industry. As a Director since 1996, I have had the good fortune to get to know my management team in advance of my appointment, so I have been able to hit the ground running.”

In conjunction with Weil’s appointment, IDRC is now organized geographically into two operating units, consisting of IDRC USA, based in Scottsdale, AZ and IDRC International, based in Toronto, ON.  ProMark One Marketing Services, IntelliSell Corporation and Telnet Systems operate as integrated business units of IDRC USA, while S&P Data Corporation is the operating unit of IDRC International. Through the combined resources of these companies, IDRC is able to offer a wide spectrum of fully integrated services to clients throughout North America.  The IDRC network of companies currently has nearly 6,800 employees, and nearly 4,500 workstations in 31 locations throughout the U.S. and Canada.

Based in San Diego, CA, IDRC specializes in providing inbound and outbound telephone and Internet based solutions that target businesses and consumers in a variety of industries, including telecommunications, financial services, and insurance, among others. IDRC uses customized, state of the art computer and telephone based technologies in its operations.  IDRC’s focus is to work with selected business partners, helping them and to maximize the lifetime value of their customers through the effective use of telephone and Internet-based support systems.  IDRC is dedicated to developing the combined potential of all of its operating companies by offering fully-integrated services to clients throughout North America. IDRC is a portfolio investment of Menlo Park, CA and New York, NY based McCown De Leeuw & Co., a private venture-banking firm, committed to building companies that make a difference in their respective industries. IDRC USA’s headquarters are located 7272 E. Indian School Road, Suite 350, Scottsdale, Arizona 85251.

[1]: /graphic/idrc/weil.gif


IVI Checkmate

Toronto-based International Verifact and Georgia-based Checkmate Electronics agreed to merge last Friday. The transaction is valued at $50 million. The combined entity will be called IVI Checkmate Corporation and will become the third largest firm in the electronic payment solutions industry. The company will also become North America’s number one firm providing check readers and multi- lane retail payment solutions. IVI Checkmate will have four operating subsidiaries including IVI Canada, IVI Checkmate U.S., National Transaction Network and IVI-Ingenico. L. Barry Thomson, current president/CEO of IVI will become president/CEO of IVI Checkmate Corp while Gregory A. Lewis, current president/COO of IVI will become president/COO of IVI Checkmate U.S.