Fair,Isaac to Enhance RiskManager

Fair, Isaac and Company, through its recent acquisition of Risk Management Technologies (RMT), today announced its commitment to further enhance RMT’s RADAR(TM) RiskManager enterprise-wide credit risk management model to fully meet regulatory norms for safety and effectiveness. More sophisticated models will help financial institutions make better use of capital and increase their risk-adjusted return.

The new initiative combines Fair, Isaac’s industry leading experience in data analysis and predictive modeling with RMT’s proven enterprise risk analysis framework and its forward-looking bank simulation model. RADAR RiskManager application environment models the effects of interest rate changes on credit portfolio behavior. RADAR RiskManager will fully integrate credit and market risk management enterprise-wide.

RMT CEO David LaCross said, “Only Fair, Isaac’s ‘gold standard’ approach to discrete credit risk management provides the rich, multidimensional framework needed to accurately model most of the firmwide credit risk in an integrated bank. Fair, Isaac is now uniquely positioned to merge the best retail and wholesale risk evaluation methodologies into a single, effective view.”

The initiatives in development have the potential to improve the internal credit risk management process and allow a less restrictive regulatory regime for capital allocation. Fair, Isaac Executive Vice President Robert Heller said, “With more precise forecasts of credit losses, financial institutions will be able to reduce the risk premiums they apply to the prices of products. This will produce several improvements: Banks will price more competitively, enjoy better profit margins, and may reduce hedging activities used to mitigate risk. They also may be able to reduce the amount of capital they must allocate to most credit portfolios.”

The solution will encompass two analytical approaches for different parts of the balance sheet. For wholesale credit — investments and relationships involving large, publicly held companies — Fair, Isaac is adopting an extended implementation of JP Morgan’s CreditMetrics(TM) analytical framework. Fair, Isaac’s 40 years of experience with consumer and small business credit risk management will provide the remaining domain expertise and analytical technology needed to provide a comprehensive enterprise-wide solution.

Information and analysis from both Fair, Isaac and CreditMetrics are based on analyzing historical behaviors of customers and counterparties. The resulting analytical understanding is being incorporated into ongoing improvements to the dynamic credit risk submodel already running within RADAR RiskManager application. This enhanced functionality will be released progressively beginning in 1998. RMT clients can already take advantage of externally provided Fair, Isaac credit scores to differentiate market risk results according to customer credit quality.

These ongoing initiatives are being announced now to support recent calls by the Federal Reserve Board for improvements in the credit risk area. At the BAI Asset-Liability and Treasury Management Conference, November 3, Federal Reserve Governor Susan Phillips noted “the inadequacy of the existing risk-based capital regime, where such assets as loans are all treated as having the same risk.” She went on, “We are actively encouraging the development of more effective approaches to credit risk management” at the enterprise level.

Since 1956, Fair, Isaac has helped businesses maximize the value of data for strategic decision making. The company pioneered the commercial development of empirically derived predictive models for the credit industry and popularized their use in lending decisions. Today, Fair, Isaac and its subsidiaries provide data-driven decision making solutions such as customer and operational data management and modeling, information analysis, strategy design, and software to a variety of industries worldwide. Its subsidiary, Risk Management Technologies (RMT), provides complete asset-liability management solutions to large financial institutions. Headquartered in San Rafael, California, Fair, Isaac employs over 1,200 people and has offices throughout the United States and Europe as well as in Canada, Mexico, South Africa, and Japan. For the fiscal year ended September 30, 1997, the company reported revenues of $199.0 million, a 28 percent increase over the prior year.


Platinum Cards Drive Mail Volume

Propelled by the continued rise of platinum credit card offers, overall volume of direct mail solicitations from issuers during 1997’s second quarter reached a record high of 881 million pieces, according to Mail MonitorR, the direct mail credit card acquisition tracking service managed by BAIGlobal Inc., the market research firm headquartered in Tarrytown, N.Y.

According to Mail Monitor, volume in this year’s second quarter increased 39 percent over the first quarter and 34 percent over figures a year ago during the same period. The rise was driven by platinum card offers which jumped to 41 percent of the total mail volume in the second quarter, up from 21 percent in the first quarter and five percent a year ago.

Platinum offers continued to fuel mail volume during the first two months of the third quarter as well, according to Mail Monitor.

“The blitz of platinum card offers might be viewed as a way of trying to wake up consumer interest,” said Lisa Itzkowitz, director of marketing for BAIGlobal. “The platinum card is positioned as a premium product with a potentially very high credit line and some enhanced services. It is filling the position historically held by gold cards — which in recent years has deteriorated to a commodity product.”

The huge second quarter volume was also driven largely by a single issuer which accounted for nearly one third of the solicitations mailed and a majority of the platinum offers. Eight other issuers were tracked also offering platinum cards.

While second quarter mail volume was huge, overall response to offerings for the quarter was a low 1.2 percent. Product-wise, response to platinum offers generated the weakest response — 1.0 percent.

“The poor response to platinum solicitations may be due to consumers not seeing the difference between them and gold card offers,” observed Itzkowitz. “Or perhaps, some consumers find the potential for a very large credit line — the one differentiating feature of the platinum offers — to be daunting rather than enticing. Additionally, the intense clutter of similar looking platinum card offers was a likely contributor to the poor response.”

Nevertheless, the prominence of platinum mail offers has spilled over into this year’s third quarter. The trend continued to drive total mail volume in all product categories to reach 494 million pieces during July and August. This number represents an increase of 23 percent over the same period a year ago. If volume continues at this level, third quarter mail offers may exceed 700 million pieces, according to Mail Monitor.

Mail Monitor is a competitive tracking service available to all credit card issuers.

Founded in 1969, BAIGlobal is a full-service, international market research and consulting firm. Its clients include a broad list of major companies and financial institutions in the United States and around the world. The firm is an independent subsidiary of Market Facts, Arlington Heights, I11., the nation’s 11th largest market research and information company.


DataCard Art Cards

When Jane Anfinson attended the National Art Museum Membership Conference this summer, her new Walker Art Center membership card drew rave reviews from other attendees.

Anfinson is the Membership Director for the Walker Art Center in Minneapolis, one of the country’s leading contemporary venues for visual arts, performing arts, film/video and educational programs. In January 1997, she began providing her members with high-quality plastic membership cards that feature a full-color image of one of the Walker’s most famous works of art, the Spoonbridge and Cherry, the fountain-sculpture by Claes Oldenburg and Coosje von Bruggen on view in the Minneapolis Sculpture Garden.

In addition to the full-color Spoonbridge and Cherry, the card also features the Walker’s logo, important phone numbers and hours for the galleries, restaurant, gift shop and ticket office.

“The image quality on the personalized membership cards is superb,” Anfinson said. “Clearly that’s important to us, because everything we produce must reflect the quality of the Walker Art Center.”

The Walker Art Center currently boasts 9,000 members and enjoys strong support from the community. “This card certainly strengthens the relationship we have with our members,” Anfinson said. “It tells them that we value their support and that they’re important to our success.”

The high-resolution printing technology used to create the full-color cards was initially developed by DataCard Corporation for financial card issuers. Many of the world’s leading card issuers use DataCard systems to print cardholders’ images or cardholders’ favorite photos on credit and debit cards.

“The image quality and flexibility of our desktop plastic card printers have created a tremendous demand for full-color plastic cards outside the financial market,” said Dave Gilbert, director of marketing for DataCard’s instant issuance business unit. “Applications include membership cards, affinity cards, driver’s licenses, national IDs and health care cards.”

“Designing and printing the membership card for the Walker Art Center has certainly been a lot of fun,” Gilbert added. “We look forward to other interesting applications as the world learns about the full-color printing capabilities of our systems.”

DataCard Corporation, a privately held company based in Minneapolis, Minn., is a world leader in innovative plastic card solutions. The company offers a spectrum of card-related products and services, including digital photo ID systems, badging services, card personalization systems, systems integration services and transaction terminals.


NFCC Holiday Guide Part 3

The decorations are up; the carols are playing and shoppers are making a mad dash for the stores. This year, consumers are expected to spend an average $813 on holiday related items, according to the International Mass Retail Association. But for some consumers, holiday spending will push them deeper into debt.

“Consumers without a holiday spending plan are the most likely to encounter serious debt problems when the January bills arrive,” says Durant Abernethy, president of the National Foundatation for Consumer Credit (NFCC). NFCC is offering a four-part series called Holiday Spending: A Plan for the Season designed to help consumers avoid the “January spending hangover.” The first two installments covered budgeting and inexpensive gift ideas. This third installment brings smart shopping tips.

Part Three: Smart Shopping Strategies

• Set spending limits: Put in place a spending limit for each person on your list to fit within your budget. Disciplining yourself to not exceed these limits is the key to avoiding unmanageable bills.

• Set aside shopping time. Running around when you don’t have much time or when you’re preoccupied or distracted is not very productive. Arrange for a day or half-day to shop by yourself. Also, try to plan your shopping time for early in the day and week. Stores tend to be less crowded in the mornings and on Mondays, Tuesdays and Wednesdays.

• Be efficient. Call stores to see if they have items on your list to avoid wasting time. Read newspaper ads and flyers for sales and specials to comparison shop to get the best buy. Also go where you have a choice of stores to shop. If you plan to return to a store, write down the item you want and the store. You’d be surprised how easy it is to forget where you saw an item.

• Track your spending. Take a predetermined amount of cash when you shop to keep from overspending. If you use credit cards, limit card purchases to the one or two cards with the lowest interest rates. Clip an index card to each credit card and write down your purchases to track how much you’ve charged.

• Beware of “buy now, pay later” offers. Sure it sounds appealing, but if you cannot afford an item in December, will you really be able to in March?

• When you have fininshed shopping, STOP! Always carry your gift list with you and cross names off once you’ve bought their gifts. When you’ve purchased items for everyone on your list, stop shopping. The festive atmosphere at malls and stores during the holiday season tempts many people to make unnecessary purchases.

Look for part four of of the NFCC Holiday Spending: A Plan for the Season series soon, which will offer last-minute tips to prepare for the holidays.

The National Foundation for Consumer Credit is the nation’s oldest and largest non-profit organization providing education and counseling services on budgeting and credit. NFCC members, located in 1,300 offices across the United States, Puerto Rico and Canada, can be identified by the NFCC member seal. This seal signifies standards that include agency accreditation, counselor certification and policies that ensure confidential services that are free or low-cost. Many offices operate under the name Consumer Credit Counseling Service.

To contact the NFCC office nearest you, check your local phone directory under Consumer Credit Counseling Service, call toll-free from a touch-tone phone 1-800-388-2227 or visit the NFCC web site at . Spanish-speaking consumers can call 1-800-682-9832.


Equifax Update

Equifax confirmed yesterday it will acquire the collection services business of Computer Sciences Corporation which has annual revenues of about $40 million. Equifax also announced Wednesday it will acquire GA-based Goldleaf Technologies for its Card Solutions group. Goldleaf offers the ‘CustomerLink’ family of electronic banking products including telephone banking, ACH origination, cash management, home banking and internet banking software. Goldleaf will become an Equifax wholly owned subsidiary. In yet another announcement Equifax has formed a joint venture in India to become the country’s only third party card services provider for issuing and processing.


MSFDC Signs Pilots

The six-month old joint venture between Microsoft and First Data signed its first banking institutions to pilot its electronic bill presentment and payment service yesterday. Wells Fargo and KeyBank have agreed to test MSFDC’s new service on their respective online banking platforms. MSFDC has set mid-1998 as the target date to launch its bank-branded, Internet e-bill service nationally. Other players with the intent to commit to the MSFDC pilot include Chase, GE Capital, Advanta and Payment Systems for Credit Unions. Participating billers pay MSFDC a fee for electronic delivery of a each bill. The company says the cost is “roughly equivalent to the cost of postage”.


Online Credit Card Fraud Guarantee

Public Eye, organizer of The Alliance of Certified Safe Shopping Sites, launched a new program aimed at reducing the risk for on-line consumers. Starting today, on-line holiday shoppers, who make credit card purchases from Public Eye Platinum Certified Merchants, will be insured against fraudulent use of their credit card. Public Eye’s Credit Card Fraud Protection Program promises to reimburse on-line shoppers for any unauthorized use of their credit card which occurs as a result of shopping with a select group of over 1000 Public Eye Platinum Certified Merchants. The program covers fraudulent charges, not waived by the credit card company, that occur through no fault of the consumer.

“This is the most extensive offering of its kind on the Internet. We’ve taken a sweeping guarantee and applied it to an expansive and diverse list of merchants. From travel services to jeeps accessories and stockings, on-line holiday shoppers will be able to find what they want from a long list of Certified Safe Sites, all protected by the Public Eye Guarantee,” said Errol Smith, Managing Partner of Public Eye.

Public Eye Platinum Certified Merchants are monitored for customer satisfaction 24 hours a day. Participating merchants display a seal linked to a data base that allows consumers to file and retrieve reports on these merchants around the clock. Free to the public, the service allows consumers to have instant access to a subscribing merchants customer satisfaction record, at the point of purchase.

“Public Eye’s Credit Card Fraud Protection Program, combined with our listing of Certified Safe Shopping sites, provides consumers the highest possible assurance of a safe on-line shopping experience,” says Smith.

About Public Eye

Launched in May of 1996 Public Eye is the first consumer service to test and certify Internet businesses for reliability. The service maintains a registry of companies who have been audited by undercover shoppers, and have performed exceptionally well in the areas of Service, Accessibility, Warranties, References, and Stability. Public Eye allows Internet consumers to access useful performance reports on these companies, so they can find out about Internet businesses before they buy. On January 1, 1997, Public Eye launched the Internet’s first Certified Merchants Program and began offering 24 hour monitoring services to participating on-line retailers. Public Eye’s rapidly growing data base of Certified Safe Shopping Sites can be viewed at .



ARKSYS announced Safe-ACCESS, a smart card security system that combines hardware and software security techniques to protect Internet and/or intranet financial data transmissions.

Safe-ACCESS, when combined with ARKSYS’ Commercial-ACCESS, a cash management system, or Personal-ACCESS, a home banking system, allows banking customers secure access to private financial data. With a combination of proven hardware and software security techniques, security risks for financial institutions are reduced.

“Internet usage is gaining popularity and creating similar growth among intranet users. Today’s technology allows not only for business, educational and media information to be transmitted over public and private lines, but private financial data, as well,” said Mary Rose, Vice President of Marketing with ARKSYS. “A combination of hardware and software security can eliminate security infringements and breaches almost entirely, while providing valuable services to banking customers.”

According to Rose, the added element of a “key”, the smart card, restricts unauthorized users, even if the password, or a “back door”, is discovered. Key aspects of the smart card security include data encryption and digital signatures.

ARKSYS is a privately-held software company headquartered in Little Rock, Arkansas, USA and is a premier provider of effective payment and financial transaction delivery systems. The company offers comprehensive ATM, POS and debit card packages, EFT network solutions, interactive voice response, smart card consulting, international credit card systems, and Internet and intranet banking offerings for cash management and home banking.

ARKSYS’ home page address is .

ARKSYS, Integrated Transaction Management and ITM are trademarks of Arkansas Systems, Inc.


CreditDesk WWW Interface

Financial institutions can now extend the use of Fair, Isaac’s CreditDesk(R) application processing software to remote or in-house sites with a new Fair, Isaac Web browser-based interface. The graphical user interface allows institutions with multiple branches to maintain control over loan decisions and provide faster decision notification. Fair, Isaac announced that the interface is the first of a wide range of Internet and Intranet application processing solutions the company plans to offer to credit grantors.

“This interface can support consistency in loan decisions while simultaneously helping branch loan officers streamline operations,” said Fair, Isaac Product Line Manager Bill Barnes. “Instead of branches receiving applications by telephone or fax and then retyping them into the system, the data goes directly to the central office, where risk managers can make sure accept/decline decisions are being made consistently.”

CreditDesk is Windows-based software that automates the processing and evaluation of consumer and small business credit applications. The new CreditDesk interface improves the flexibility and cost-effectiveness of the application process, Barnes said. Since every computer with a compatible Web browser can support the interface, a credit grantor can use existing machines to expand a network to incorporate any number of data entry sites. In addition to branches, third parties and loan prospects themselves can also be granted access to the CreditDesk interface.

The interface runs on any Java-enabled Web browser, such as Netscape Navigator or Microsoft Internet Explorer. The web-browser interface is available as a CreditDesk system option.

Since 1956, Fair, Isaac has helped businesses maximize the value of data for strategic decision making. The company pioneered the use of credit scoring in consumer and commercial lending. Today, Fair, Isaac provides data-driven decision making solutions such as customer and operational data management and modeling, data warehousing and information analysis, strategy design, and software to businesses in financial services, direct marketing, personal lines insurance, retail, and health care. Headquartered in San Rafael, Calif., Fair, Isaac employs more than 1200 people in 16 offices worldwide. For the fiscal year ended September 30, 1997, the company reported revenues of $199.0 million, a 28 percent increase over the prior year.



Global Payment Systems has announced a new “all-in-one” merchandising service that helps merchants set up and maintain a virtual storefront on the Internet. It also gives them the ability to accept credit cards in a secure environment. The announcement was made yesterday at the BAI Retail Delivery Show in New Orleans.

Known as MerchantWAVE, the comprehensive, turnkey package, allows businesses to create an on-line catalog for their products and services. To set up the catalog, merchants simply key in product information, based on a pre-established format or “template.” Or if they choose, they can submit paper or digital files to Global for assistance in creating the on-line catalog. Photos can also be incorporated into the storefront. The software used in Global’s Internet service was developed by CommerceWAVE, Inc., an Internet merchant transaction software developer based in Carlsbad, California. It is being resold by Global Payment Systems to its banking customers for their merchant base.

In addition, merchants can accept credit card payments and authorize transactions in real-time through an encryption system that fully meets the financial industry’s security requirements.

“Our service offers merchants an easy and affordable method to establish an Internet presence and expand their products and services in the international market,” said David K. Hunt, Global Payment Systems’ president and CEO. “Once the merchant’s Internet store has been set up on our MerchantWAVE host computer, managing product inventory and transaction processing is as simple as a point-and-click of the mouse.”

MerchantWAVE reduces merchants’ startup and maintenance costs since no software or hardware is required — other than a PC and access to the Internet.

Consumers shop the merchant’s store on the Internet where they can purchase goods or services 24-hours-a-day, seven-days-a-week with credit cards in a secure environment. Using MerchantWAVE, businesses also can offer shoppers traditional payment methods using phone or fax order processing. Payment authorization information is captured for settlement, using MerchantWAVE’s administrative menu functions.

“By offering this innovative Internet business solution we are continuing to meet our bank customers’ evolving needs,” said Hunt. “MerchantWAVE expands our product offerings for our banks’ customers and epitomizes our flexibility in response to customer demand.”

Global Payment Systems is a major provider of transaction processing products and services for financial and corporate organizations worldwide. Global provides services to more than 1.2 million merchants in North America and processes in excess of 2.7 billion transactions annually. While well- known for its card services, Global also serves more than 700 financial institutions and 12,000 corporations in 44 countries through its cash management and financial EDI services.

National Data Corporation (NYSE: NDC) is a leading provider of information services for the payment systems and health care markets.

When used in this report, press releases and elsewhere by management or the Company from time to time, the words ‘believes,’ ‘anticipates,’ ‘expects’ and similar expressions are intended to identify forward-looking statements concerning the Company’s operations, economic performance and financial condition, including in particular, the likelihood of the Company’s success in developing and expanding its business. These statements are based on a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the Company, and reflect future business decisions which are subject to change. A variety of factors could cause actual results to differ materially from those anticipated in the Company’s forward-looking statements, some of which include competition in the market for the Company’s services, continued expansion of the Company’s processing and payment systems markets, successfully completing and integrating acquisitions in existing and new markets and other risk factors that are discussed from time to time in the Company’s Securities and Exchange Commission (“SEC”) reports and other filings. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligations to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof, or thereof, as the case may be, or to reflect the occurrence of unanticipated events.


Electrifying MasterCard

While several U.S. electric/gas utility firms are mulling cobranding relationships with credit card issuers, DE-based Delmarva Power & Light Company became the first one out- of-the- chute yesterday. MBNA and Delmarva rolled out the ‘Conectiv MasterCard’ offering cardholders the ability to earn certificates, based on card purchases. Under federal and state regulations the certificates may not be used for direct payment of utility bills but rather the value may be applied to utility bills. The certificates are also good towards direct payment for non-regulated products and services. Delmarva is in the process of merging with NJ-based Atlantic Energy and will rename itself Conectiv after the merger. Conectiv will have one million electric customers and 100,000 gas customers.


Iris ID for ATMs

A revolutionary new personal identification system developed by Sensar, Inc. for use in electronic banking will soon allow financial institutions to offer customers higher-value ATM services beyond the withdrawal of small amounts of cash. Using a standard video camera and lighting techniques, as well as unique software, this virtually fraud-proof personal identification system validates a bank customer’s identity within seconds by imaging the iris (the colored portion of the eye), digitally encoding the image, and comparing it to a previously stored code already on file. If the codes match, ATM access is automatically approved. The technology has also proven highly reliable for identifying individuals wearing glasses or contact lenses.

With electronic transactions by consumers growing in popularity, particularly at ATM locations where over 30 billion transactions were processed worldwide last year alone, the need for a more secure, fraud- resistant, yet still user-friendly means of personal identification has become critical. Sensar’s patented new technology is several orders of magnitude more accurate and reliable than any other biometric solution available today, including voice, face, hand and fingerprint methodologies. System security can not be bypassed or compromised in any way. In addition, no active participation is required from the customer to operate the system and there is no inconvenience to the user. Many experts believe Sensar’s unique iris identification system will eventually eliminate PIN numbers for bank customers.

According to Rob VanNaarden, Vice President of Sales and Marketing for Sensar, “Although limitations on transactions and fraud at ATMs have prevented consumers from taking full advantage of electronic banking capabilities for many years, up until now no personal identification solutions were available that combined speed, reliability, high accuracy and user-friendliness.

“Sensar’s iris identification system will change all that by delivering a powerful, personal identification tool that will permit bank customers to access a broader range of high-value ATM services, such as deposits, higher- value cash advances, transfer of funds between accounts and bill payments,” VanNaarden says. “In addition, this technology will dramatically reduce ATM related fraud while providing heightened security for the ATM customer.

Founded in 1993, Sensar is a spin-off of the Sarnoff Corporation, an internationally-acclaimed advanced technology research and development organization. Sensar holds the exclusive rights to computer-vision technology developed at Sarnoff for use on a worldwide basis that is being incorporated into the company’s iris identification system. The company has a multi- million dollar development, distribution and supply agreement with Citicorp for direct marketing of its products into the financial services arena, as well as strategic partnerships with ATM manufacturers NCR, OKI Electric of Japan, and LG Electronics of Korea.

IriScan, Inc. of Mt. Laurel, New Jersey, USA, holds the exclusive worldwide patents on the iris identification concept developed by Drs. Leonard Flom and Aran Safir and the software and process technology invented by Dr. John Daugman, Cambridge University, England. Sensar uses, under license, the iris identification process developed and owned exclusively by IriScan.

IRISCAN is a trade mark of IriScan, Inc. of Mt. Laurel, New Jersey, and is used by Sensar, Inc. under license from IriScan, Inc.