One Million Personalized Smart Cards

Gemplus Corporation today announced that its smart card personalization center in Shakopee, MN, has personalized its 1 millionth smart card. Personalization is the process by which smart cards are formatted according to a card issuer’s specifications. When a card is personalized, information about the issuer’s services as well as information pertinent to the user is programmed into the smart card’s chip.

Shakopee is the only North American smart card facility certified to personalize GSM, Visacash, and Mondex cards. Gemplus, in keeping with certification guidelines, must adhere to strict production procedures and meet special quality and security standards.

“Personalization services throughout the world have become a core competency for Gemplus, and our dedication to this business ensures a commitment to complete customer satisfaction,” said Scott Rau, vice president of the North American financial transactions business division for Gemplus. “Gemplus continues to focus energy and business strategy towards personalization services particularly in the Americas, to ensure competency and excellence in a variety of customer business disciplines.”

About Gemplus

Gemplus Corporation is the North American subsidiary of Gemplus Group, the world’s leading producer of plastic and smart cards. It manufactures and sells memory cards, microprocessor cards (both contact and contactless), magnetic stripe cards, as well as electronic tags. It also designs and markets software, terminals and systems; and provides personalization, consultancy and training services to offer its customers comprehensive solutions.

In 1996, Gemplus Group’s total sales were $440 million. By the end of 1997, the company will have a production capacity of 900 million plastic and smart cards.

Gemplus sells its products worldwide for such applications as public and cellular telephony, financial transactions, loyalty, transportation, education, healthcare, gaming, identity, access control, pay TV, security for computer networks and electronic commerce. Information about Gemplus’ products and services can be found on the World Wide Web at: .

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US Treasury/VA Smart Card Test

The U.S. Department of the Treasury’s Financial Management Service (FMS) and the U.S. Department of Veterans Affairs (VA) announced the beginning of a one-year pilot to test the use of stored value card technology to improve service to citizens, reduce government costs and streamline Federal operations.

The Treasury-initiated program will test a variety of smart card applications at the Bronx Veterans Affairs Medical Center located in New York City. The trial represents the Treasury’s first use of this technology as a Federal collection mechanism. NationsBank will operate the elaborate program as Treasury’s financial agent and will utilize Visa U.S.A. stored value technology. The pilot will place Visa Cash in the hands of patients, physicians, visitors, volunteers and employees of the VA facility.

“The Treasury is conducting several electronic money initiatives to test the viability of using emerging electronic technologies to make Federal transactions,” said FMS Commissioner Russell D. Morris. “FMS is also implementing a series of pilots on military bases to test stored value cards as a Federal Payment mechanism. Stored value technology may prove useful in managing government operations on a wide scale and in eliminating the need to handle currency in many types of Federal facilities.”

“The VA’s goal is to improve service to its customers and employees and make VA facilities more efficient,” said Bronx Medical Center Director MaryAnn Musumeci. “We believe this partnership with Treasury will help the VA improve operations.”

During the pilot, an estimated 25,000 cards will be issued and used to test numerous applications, including the combination of identification badge and electronic purse; vending machine acceptance; integrated cash registers and terminals; reloadable cards; and cashless ATMs that transfer cash value onto reloadable cards, rather than distribute currency.

Up to 4,000 reloadable cards will be used as identification badges and meal tickets, as well as personal patient checking accounts at the VA’s Bronx Medical Center. The stored value cards will be accepted at all operations run by the onsite Veterans Canteen Service, a division of the VA that supplies retail, food, clothing, other goods, and vending services in all 172 VA hospitals.

“NationsBank has had significant experience with chip card technology,” said Terri Hayden, NationsBank Stored Value project manager. “We expect to learn a great deal from this program, and we view it as evidence of our commitment to stay in the forefront of chip technology development.”

“Our program with the Treasury and NationsBank illustrates how chip cards can provide a diverse range of services in any environment,” said Diana P. Knox, vice president of chip card products for Visa U.S.A. “The experiences we gain from this important program will result in additional solutions that deliver exceptional value to cardholders, governments and businesses.”

The Financial Management Service, a bureau of the U.S. Department of the Treasury, is the Federal Government’s cash manager. The Service issues over 850 million payments each year and manages the collection of Federal revenues. The Financial Management Service is responsible for developing and implementing secure and efficient methods to manage the Federal Government’s cash flows.

The Department of Veterans Affairs (VA) is responsible for providing Federal benefits to veterans and their dependents. The VA operates nationwide programs of health care, assistance services and national cemeteries to an estimated veteran population of 26 million.

NationsBank is the fifth-largest banking company in the United States with a retail banking franchise in 16 states and the District of Columbia. As of September 30, 1997, NationsBank had total assets of $242 billion.

Visa is the largest consumer payment system worldwide. It advances new payment products and technologies to benefit its 21,000 member financial institutions, their cardholders and the global economy. Visa’s nearly 600 million cards are accepted at more than 14 million worldwide locations, including 370,000 ATMs in the Visa/Plus Global ATM network.

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Ticketmaster Platinum MC

First USA and Ticketmaster Group rolled out the ‘Ticketmaster Platinum MasterCard’ yesterday offering five Ticketmaster Reward Points for every dollar spent at Ticketmaster and one point for each dollar spent elsewhere. Points are redeemable towards Ticketmaster gift certificates, event tickets, merchandise and fantasy entertainment experiences. First USA is offering a five-month intro APR of 5.9% followed by a 14.99% fixed APR.

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New ATM Surcharge Study

Study on ATM Usage Shows That Relatively Few Pay Majority of Optional Surcharges; Most Consumers Pay None; Research Also Reveals That Banking Relationships Are Unaffected

Research findings on consumer usage patterns of automated teller machines (ATMs) where surcharges exist show that a relatively small percentage of consumers pay the majority of the fees, those who do pay choose to at their option, and the vast majority of the public pays no convenience fees at all.

A 1997 study conducted over seven southern and southwestern states by Rice University Marketing Professor Dr. Richard R. Batsell through Analytica, a Houston-based research organization, combined with usage information collected by PULSE EFT Association from its Texas customers, revealed the following:

— Among 1,000 adult consumers, the convenience access fees would have been paid by barely 30 percent.

— Almost 70 percent of adults have never paid such fees.

— About 18 percent of cardholders pay 60 percent of the total convenience fees collected.

— Of those who have paid convenience access fees, only 27 percent say they have paid more than $1. That translates to only 8.5 percent of the total adult sample.

— An overwhelming majority of ATM users, more than 80 percent, say they avoid ATMs where they know convenience fees are charged.

— Nearly 90 percent of ATM users feel they are sufficiently informed by their financial institutions on the ATM fees they are charged.

The research also showed that among those who use ATMs, 61.2 percent of consumers judged the fees they paid to be either “just right,” “a bargain,” or “a real bargain.”

On a question regarding the effect of convenience fees on banking relationships, the study shows that fewer than 2 percent of consumers ever have switched their accounts to another financial institution either solely or partly because of such fees.

The Analytica research was commissioned by PULSE EFT Association, one of the nation’s oldest and largest shared electronic funds transfer networks.

Batsell, who does extensive consumer research on ATMs and point-of sale (POS) installations, said that the findings demonstrate that the public is making informed choices.

“It is evident that the free market is functioning with regard to ATM use,” he said. “The data shows that consumers are clearly aware of their options, and they adjust their behavior when presented with the fees. Those who want to avail themselves of the extra convenience do so with frequency. And the majority who avoid ATMs which impose convenience fees obviously seek out and take advantage of the other options available to them.”

Those choices include the use of non-charging ATMs, the availability of getting cash back with no charge at point-of-sale locations and conventional banking and check cashing options.

Stan Paur, president of PULSE, said that the finding of the mass of empirical data collected by his company surprised him.

“It is understandable that some are concerned about the impact of these fees,” he said. “When our association was advised in a judicial proceeding that PULSE should allow optional convenience fees, we presumed there would be disastrous results for our network.

“Instead, those revenues have fueled the enormous growth in ATM deployment at nonfinancial institution sites which would not be economically feasible without such fees. This includes airports, sports facilities, shopping malls, hospitals, supermarkets and gas stations. As a result, consumers are enjoying unprecedented convenience in obtaining cash almost on impulse.”

Paur said that the growth in ATM deployment is not limited to any one segment of the financial services marketplace. He cites the case of a small town banker who initiated a 50 cent convenience fee to help him turn a money-losing customer service into a break-even proposition. He said that the banker reported to him several months later that the convenience fees had enabled him to install two more ATMs to better serve his rural area customers. Paur noted that the 700-member Independent Bankers Association of Texas has formally endorsed allowing ATM owners to choose whether to levy such fees.

He also pointed out that more than 40 percent of ATMs sold last year were to operators outside the financial institutions industry. Diebold, Incorporated, a leading manufacturer of ATM equipment, estimates investment in technology and facilities of more than $617 million for 1996 alone, with that total approaching almost $2 billion over the past four years.

PULSE, based in Houston, is a not-for-profit association with more than 2,000 members in eight states, ranging from banking giants to independent community banks, credit unions and savings and loans. It serves participants in Arkansas, Colorado, Louisiana, Mississippi, New Mexico, Oklahoma, Tennessee and Texas with more than 30,000 ATMs and 122,000 PULSE PAY point-of-sale terminals.

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CyberGold Signs Online PC File Backup Firm

Atrieva(tm) Corp., provider of an online PC file back up and retrieval service, announced today that it will pay people for their time.

CyberGold members will earn $1 for reviewing information about the Atrieva Service and an additional $4 for using the service over a one month free trial period.

The Atrieva Service allows subscribers to send their files over the Web for safekeeping. It’s automatic, easy, and secure. New subscribers simply download the service at http://www.atrieva.com, then subscribe electronically, or via the telephone at 1-888-ATRIEVA. And now, Atrieva Corp. pays CyberGold members to use the service. Any new subscriber to the Atrieva Service can use the service free of charge for one month and begin backing up data simply by selecting files, entire directories, or both, for safe storage and easy access.

Once selected, files are scanned for viruses, and the data is compressed and encrypted for transmission to the Atrieva SafeStation(tm), a site offering complete protection of the data. The frequency and timing of backups can be set to meet subscriber needs, allowing for scheduled backups any time of day or night, as well as file backup on subscriber command. Data is stored on highly reliable, redundant disk arrays, and Atrieva Corp. maintains tape backup of the data offsite. Atrieva customer support has an Emergency Response Team available 24 hours a day, seven days a week to assist with any problems with backing up or accessing PC files.

CyberGold is an Internet-based electronic currency that rewards consumers for their attention. Consumers earn CyberGold by viewing ads, volunteering information, completing purchase transactions, and fulfilling other advertiser requests. Because CyberGold is a one-to-one cash equivalent, it can be, among other things, transferred to a bank account, donated to a non-profit organization, or credited to a personal Visa card.

“Every 15 seconds a computer hard drive crashes, taking important information with it,” said Al Higginson, CEO of Atrieva Corp. “The majority of home and business users have no effective backup plan, and we need to reach them before disaster strikes. CyberGold offers us the perfect opportunity to reach and reward its members, who are typically progressive, inquisitive people.”

“We are delighted that Atrieva Corp. understands the value of the attention of CyberGold members and generously rewards them with $4,” said Nat Goldhaber, CEO of CyberGold.

CyberGold members can subscribe to the Atrieva Service immediately. The Atrieva Service is also available through Atrieva Corp. as a risk-free, 30-day trial period at no charge. Pricing after the trial period is $14.95 per month for unlimited storage.

CyberGold is a privately held company in Berkeley, California. It was founded by Nat Goldhaber with backing from Jay Chiat, Regis McKenna, and Peter Sealey. For more information, visit .

Atrieva Corp., headquartered in Seattle, provides easy, safe, and valuable online PC file backup and retrieval. Founded in 1993, Atrieva is backed by private and venture funding. For additional information, contact Atrieva at 1-888-ATRIEVA or visit .

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Hi-Tech Names Signature Exec CEO

The Hi-Tech Group — a privately-held, provider of direct response merchandise and club services has announced the appointment of Alan F. Portelli as President and Chief Executive Officer.

Mr. Portelli had previously served as Executive Vice President of Finance and Admininstration of The Signature Group, Mr. Portelli was the Chief Financial Officer and also had primary responsibility for acquisitions, data base marketing and the Dining à la Card business unit, as well as other administrative duties. Prior to joining The Signature Group in 1989 as Senior Vice President/Finance, Mr. Portelli had been employed by Montgomery Ward for eleven years, where he held positions of increasing responsibility in finance and planning and analysis. He served as an audit supervisor with Touche Ross & Co. before joining Montgomery Ward.

Mr. Portelli earned a Bachelor of Science degree (1969) and a Master of Science degree (1970) in Accounting from the University of Illinois in Champaign. He earned his CPA certification in 1969 and was born in Chicago Heights, Illinois. Mr. Portelli currently resides in Naperville.

For more than 30 years, The Hi-Tech Group has grown its business in the direct response marketing of merchandise and travel and motor clubs, as well as providing telemarketing services and specialized data processing. Headquartered in Chicago, Illinois, The Hi-Tech Group is the leading direct response provider of specialized merchandise for the oil industry. With four locations in Chicagoland, The Hi-Tech Group has annual sales through credit card issuers in excess of $100 million.

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Sluggish Third Quarter

As CardWeb, Inc.’s ‘CardData’ third quarter portfolio survey continues, it appears that many issuers realized little, if any, growth in card loans and an actual decline in the number of active accounts since the second quarter. An analysis of nine issuers with receivables in excess of $1 billion, representing about 10% of the industry, shows a 3Q/97 contraction in receivables of 1.4% versus a gain of 2.7% for 3Q/96. Active accounts slipped 1.5% compared to a 1.1% gain last year. CardData’s quarterly portfolio surveys covering receivables, volume, gross accounts, active accounts and cards-in-force, are published in Bankcard Update.

ISSUER 3QRECV 2QRECV CHG 3QACT 2QACT CHG
Household $16.0b $16.6 -3.9% 7.3m 7.5m -2.7%
Wells Fargo $7.4b $7.4b +0.1% 3.7m 3.8m -2.6%
Wachovia $5.4b $5.4 +1.2% 2.1m 2.1m +1.0%
Bank NY $4.2b $4.1b +0.8% 1.8m 1.8m -2.9%
USAA FSB $3.6b $3.5b +1.6% 1.7m 1.6m +1.5%
Travelers $1.2b $1.2b NC 0.5m 0.5m +1.4%
Norwest $1.2b $1.2b +1.6% 0.7m 0.7m +0.7%
Crestar $1.1b $1.2b -5.1% 0.5m 0.5m -6.5%
Mercantile $1.1b $1.1b -4.7% 0.5m 0.5m -6.7%
TOTALS
3Q RECV: $41,095,287,528 3Q ACTIVES: 18,767,298
2Q RECV: $41,675,997,994 2Q ACTIVES: 19,059,690
CHANGE: -1.39% -1.5%
Source: CardData/Bankcard Update

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Calif Bankruptcy Down

Bankruptcy filings declined slightly in California during the third quarter, ending a three-year series of increases, a public records information service reported.

Third-quarter filings totaled 50,650, up 13.4 percent from 44,565 for the same period last year, and down 5.5 percent from 53,624 for this year’s second quarter, according to CDB Infotek.

Bankruptcy filings in the state followed a nationwide trend of increases and rose consistently from quarter to quarter starting in fourth-quarter 1993 with 26,625, eventually doubling in volume by this year’s second quarter.

“One reason for the increase of the past few years is that declaring bankruptcy doesn’t have the negative impact on personal finances that it use to. That shift in underlying factors may be playing itself out now,” said Rick Rozar, CDB president and CEO.

CDB Infotek, a ChoicePoint company, provides on-line access to public records nationwide. In addition to bankruptcy information, the company provides access to court records, real estate records, business filings and more. The numbers above include Chapter 7 and Chapter 13 bankruptcy filings, the vast majority of which are personal.

Chapter 11 bankruptcy filings totaled 349 during the third quarter, down 15.9 percent from 415 for both the previous quarter and for last year’s third quarter. Chapter 11 filings are business reorganizations.

Residents of Riverside and San Bernardino counties declared bankruptcy at the highest rate, relative to population. Marin County residents had the lowest rate, CDB reported.

Number of Chapter 7 & Chapter 13
bankruptcy filings in California

County/Region 2nd Qtr 3rd Qtr Percent
1997 1997 Change

Los Angeles 16,836 15,990 -5.0%
Orange 4,582 4,231 -7.7%
San Diego 4,739 4,512 -4.8%
Riverside 3,119 2,979 -4.5%
San Bernardino 3,597 3,476 -3.4%
Ventura 1,324 1,188 -10.3%
Southern California Total(a) 34,353 32,540 -5.3%

Alameda 1,870 1,745 -6.7%
Contra Costa 1,402 1,342 -4.3%
Marin 227 198 -12.8%
Napa 109 111 1.8%
San Francisco 803 732 -8.8%
San Mateo 757 696 -8.1%
Santa Clara 1,801 1,805 0.2%
Solano 728 709 -2.6%
Sonoma 552 491 -11.1%
Bay Area Total 8,249 7,829 -5.1%

El Dorado 222 219 -1.4%
Fresno 963 909 -5.6%
Kern 994 875 -12.0%
Placer 365 316 -13.4%
Sacramento 2,339 2,185 -6.6%
San Joaquin 785 751 -4.3%
Stanislaus 734 662 -9.8%
Tulare 420 413 -1.7%
Yolo 168 161 -4.2%
Central Valley Total(a) 7,587 7,110 -6.3%

Monterey 657 642 -2.3%
San Luis Obispo 343 336 -2.0%
Santa Barbara 508 424 -16.5%
Santa Cruz 203 179 -11.8%
Central Coast Total(a) 1,711 1,581 -7.6%

Northern California Total(a) 1,155 1,057 -8.5%
Sierra/Foothills Total(a) 569 533 -6.3%

Statewide 53,624 50,650 -5.5%

(a) includes additional counties

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Cyberflex 2.0 Core Released

VISA has endorsed Java as the most flexible, secure and economical technology for its members. The ‘Open Platform’ will first focus on fundamental banking applications such as credit/debit and stored value. Future applications will include loyalty programs, home banking, and telecommunications services. Schlumberger also announced Friday the release of its second Java card product ‘Cyberflex 2.0 Core’. Schlumberger says the new card implements functionalities required for multiple applications and increases the amount of rewritable memory by more than 20%.

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Open Java Card

Following Friday’s announcement of the release of ‘Java Card API 2.0’, Schlumberger said today it has been selected by VISA International to develop a new generation of multiple-application smart cards based on Java. VISA has endorsed Java as the most flexible, secure and economical technology for its members. The ‘Open Platform’ will first focus on fundamental banking applications such as credit/debit and stored value. Future applications will include loyalty programs, home banking, and telecommunications services. Schlumberger also announced Friday the release of its second Java card product ‘Cyberflex 2.0 Core’. Schlumberger says the new card implements functionalities required for multiple applications and increases the amount of rewritable memory by more than 20%.

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Internet Banking for Community Banks

SPARAK Financial Systems and nFront today announced a licensing agreement that will allow community banks throughout the United States to offer secure financial services on the Internet. SPARAK, a Fargo, North Dakota-based core processing provider for community banks, will incorporate nFront’s flagship product, nHome(tm), as its Internet banking solution. Under the agreement, SPARAK will outsource Internet data processing to nFront’s data center in Athens, Georgia.

This agreement enables SPARAK to offer its 210 community bank customers full-service Internet banking, allowing their customers to open new accounts, apply for loans, view account balances and history, transfer funds, pay bills electronically, view personal information on record at the bank, generate reports based on customer activity, download Active Statements into personal financial management software, interact with customer representatives via e-mail, and have access to a bank that is open 24 hours a day, 365 days a year.

“SPARAK is committed to delivering the latest technology to our customers, and we believe that Internet banking is an extremely valuable tool for community banks,” said Steve Anderson, Director of Marketing and co-Founder of SPARAK. “We selected nFront as our solution because of their Internet banking product and their knowledge of the banking industry. While there are a number of companies in the market talking Internet banking, nFront is delivering. By combining our skills, we will have the best solution for our customers.”

Tripp Rackley, President of nFront, said, “SPARAK will jointly market nHome on the national level while providing their customers a completely secure and customizable Internet banking solution. nFront is looking forward to a long prosperous relationship with SPARAK and working with their team of professionals.”

The first of SPARAK’s community banks to take advantage of the nHome offering is Bank of Versailles. Located in Versailles, Missouri, the bank has an asset size of $140 million and three branches. Bank of Versailles considers itself a “niche” bank that mostly targets retirees living near the Lake of the Ozarks region.

“We try to utilize technology whenever available so as to operate more efficiently,” said David Baumgartener, Executive Vice President of Bank of Versailles. “We hope to maximize our employee productivity by allowing our customers to access their accounts via the Internet.”

“We have had a good relationship with SPARAK and feel that their partnership with nFront provides us with an opportunity to expand our market at a fairly low cost and without having to add staff,” continued Baumgartener.

SPARAK was formed in 1984. The company began as a software house providing in-house software development and support to banks using NCR computers. Today SPARAK develops and markets the top rated SPARAK 3000(r) Software System (along with computer and proof hardware manufactured by NCR and others) to community banks across the United States.

SPARAK 3000(r) is a complete account processing system that includes a unique customer CIF database linking all banking modules to include DDA, Savings, C/Ds, Loans and G/L.

nFront provides full service Internet banking solutions for community banks with nHome, its premier Internet Banking software. From opening accounts to paying bills or transferring funds, nHome supports all the functionality of traditional brick and mortar branches and gives community banks the opportunity to do customer specific marketing. In addition, customers will have unlimited banking hours and more personalized service in a secure banking environment. nHome supports the highest level of data encryption available today and runs on the Windows NT operating system. nFront is also a Microsoft Solution Provider. Founded in 1996, nFront owns the registration rights of the www.banking.com domain name.

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Wachovia Opens New CC Center

Wachovia Bank Card Services today announced plans to open a credit card customer service center in Chesapeake, Va.

The center will be located in the Crossways facility at 1400 Crossways Boulevard, currently occupied by some Central Fidelity operational functions. The credit card center is expected to employ more than 100 by the end of 1998 and initially will occupy approximately one-fourth of the 50,000-square-foot building. Assuming consummation of its mergers with Central Fidelity Banks Inc. and Jefferson Bankshares Inc., Wachovia Bank Card Services expects to begin operations in Chesapeake in the first quarter of 1998.

“The decision to establish this center is indicative of the growth of our credit card function and the need for additional capacity for providing customer service to our credit card customers,” said Wachovia Chief Executive L.M. Baker Jr. “We are pleased to be able to locate the center in Chesapeake where we will be able to provide continuing employment opportunities for some employees of Central Fidelity and Jefferson.”

Wachovia expects to receive all required approvals and to complete mergers with Central Fidelity and Jefferson by year-end, and to merge their subsidiary banks into Wachovia Bank, N.A., effective March 20, 1998.

Wachovia Bank Card Services is a subsidiary of Wachovia Corporation (NYSE: WB), an interstate banking company with dual headquarters in Atlanta and Winston-Salem, N.C. Wachovia is the 20th largest bank holding company in the U.S. with assets totaling $48.5 billion. Upon completion of its mergers with Central Fidelity, Jefferson and 1st United Bancorp of Boca Raton, Fla., Wachovia will be the 17th largest bank holding company in the country with assets exceeding $60 billion. U.S. Banker magazine recently rated Wachovia Corporation the No. 1 banking organization in the U.S. for 1996 among banking organizations with assets of more than $25 billion.

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