NEWS

Settlement Cost MasterCard $721 Million

MasterCard International posted a $425.4 million loss in the first quarter of 2003 compared with income of $78.3 million in the same period last year, according to a recent filing with the Securities and Exchange Commission.

The credit card association attributes the loss to its April settlement with retailers in the class-action antitrust lawsuit over debit card fees. MasterCard said the settlement cost it $721 million. Under the proposed settlement terms, MasterCard will make payments of $125 million in 2003 and $100 million from 2004 through 2012.

However, some good news for the organization: Total revenue was $512.2 million, up from nearly $393 million the previous year.

Online Retail Sales Fell 13% in Q1 2003

The U.S. Department of Commerce reported in its U.S. Census Bureau quarterly estimate of e-commerce statistics that Q1 2003 retail e-commerce sales (not adjusted for seasonal, holiday and trading-day differences) totaled $11.921 billion, an increase of 25.9% from the same period last year but a decrease of 13.4% from the previous quarter.

Online retail sales accounted for 1.5% of total retail sales in Q1 2003. Total retail sales were $772.2 billion, down from $864.7 in the previous quarter but up from $740 billion in Q1 2002. The department began tracking e-commerce sales in 1999.

Consumers Thinking Small with Debit

More consumers are using their debit cards to make purchases of less than $25, according to a recent study by Concord EFS, Inc.'s payment network STAR Systems. The most popular "small-value" purchases are movie tickets (24%), fast food (20%), pay phone calls (19%), public transit (18%), parking meters (16%), vending machines (13%) and laundromats (13%).

STAR surveyed more than 11,000 consumers between September 24, 2002 and December 1, 2002. The survey also found:

• 82% of U.S. account holders have an ATM/debit card

• 86% of them used the card to make a purchase in the previous 30 days

• 51% prefer to validate their debit card purchase with a PIN

• 28% prefer to validate their debit card purchase with their signature

According to NACHA-The Electronic Payments Association, consumers sharply increased paying their bills online during the first three months of 2003. NACHA estimates that during Q1 2003, consumers made more than $48 billion online bill payments through the Automated Clearing House (ACH) Network.

That figure is half of the amount of $96 billion for all of 2002. NACHA estimates that the dollar amount of online bill payments may exceed $200 billion in 2003. According to Gartner, Inc., the most popular use of online bill payment is viewing and paying credit card bills.

Sears To Get Opening Bids for Credit Card Program

Preliminary offers for Sears, Roebuck & Co.'s credit card portfolio are expected to come in from Citigroup Inc., General Electric Co., HSBC Holdings Plc, J.P Morgan Chase & Co. and Royal Bank of Scotland Group Plc.

Sears announced in March 2003 that it was putting its credit card business up for sale to focus efforts solely on retail ("Come Buy the Costly Side of Sears," The Green Sheet, April 28, 2003, issue 03:04:02).

Sears' credit card portfolio, the eighth largest in the U.S., is valued at nearly $31 billion and includes nearly 25 million credit card accounts consisting of both co-branded Gold MasterCard cards and Sears' own store card.

Analysts expect Sears to get as much as $6 or 7 billion for the portfolio. Any buyer of the division will become a partner of Sears, based in Hoffman Estates, Ill. A deal is expected to close in the third quarter 2003.

ANNOUNCEMENTS

Hypercom Gets Class A Certified by Datamark

Datamark Technologies, Inc. Class A certified its gift and loyalty application on Hypercom Corp.'s standard 07A card payment terminal software. Datamark is planning to offer Hypercom's T7Plus terminals to its U.S. retail customers through various partnerships with distributors.

Global Payments One of Best in Atlanta

The Atlanta Journal-Constitution recently honored Global Payments Inc. as one of Georgia's 100 best performing companies. The newspaper ranked Global Payments number 30 in its 10th annual "Best of Business" rankings.

Global Payments was listed among companies such as Coca-Cola, Home Depot and UPS. The criteria that helped determine the rankings were return on equity, return on investment, change in profit margin, change in revenue over previous year and revenue from continuing operations.

Smart Card/PIN Pad Device Certified

SCM Microsystems, Inc.'s SPRx32, a smart card device combined with a PIN pad, has received EMV 2000 certification. In addition to EMV level one certification, the SPRx32 is also PC/SC (personal computer/smart card) compliant and Microsoft Windows Hardware Quality Labs (WHQL) certified.

Free White Paper on RF Contactless Payments

ViVOtech is offering a free white paper called "RF-based Contactless Payment: a More Convenient Way to Pay." The white paper describes how RF-based contactless payment systems work, which retail applications can be implemented as RF-based contactless transactions, how retailers can benefit from using this system, and opportunities available for acquirers and ISOs to take advantage of this new technology. To download the white paper, visit www.vivotech.com/white_paper or phone 408-248-7001, ext. 107.

LML Awarded Patent

LML Payment Systems Inc. subsidiary LML Patent Corp. was awarded Patent No. 6,547,129 for electronic check processing. The new patent is related to LML's patents 5,484,988, 6,164,528, 6,283,366 and 6,354,491, which are related to electronic check processing methods and systems.

PARTNERSHIPS

Amex and Hypercom Partner at Drive-Thru

American Express Co. and Hypercom Corp. have joined forces to test their payment technology at McDonald's drive-thru lanes in three New York restaurants (North Babylon, North Lyndhurst and West Islip).

Hypercom is using its HFT 500 outdoor card payment terminal and ICE 5500 payment terminals with a HyperSafe operating system to provide McDonald's customers the option to pay with their credit or debit cards.

CrossCheck Signs 3 New Retailers

CrossCheck, Inc. announced several new customers: 17 Master Tile stores in Texas, Oklahoma and Florida; a chain of 11 Sleep America stores; and seven Ashley Furniture Industries, Inc. locations are using CrossCheck's check guarantee services. In addition, Merchant Direct Processing is marketing CrossCheck's services as part of its private-label merchant offerings.

Wild Oats Picks CheckAGAIN

Wild Oats Markets, Inc. selected CheckAGAIN's Centralized Returns check management services for handling returned checks at all of its U.S. store locations. CheckAGAIN's service allows Wild Oats to consolidate returned checks at one bank regardless of the fact that the checks have multiple depository banks.

CardWorks To Mange Spiegel Cards

CardWorks' Cardholder Management Services (CMS) will service Spiegel, Inc.'s private-label credit card portfolio, which contains four million accounts, valued at approximately $2 billion. The portfolio includes Spiegel, Eddie Bauer, and Newport News private-label cards. CMS will take over servicing of the accounts from First Consumers National Bank.

Fifth Third Helps Online Customers Fight Fraud

CardinalCommerce Corp. will provide Fifth Third Bank's online merchant customers with CardinalCommerce's payment authentication software, called Cardinal Centinel. The software is designed to reduce fraudulent transactions and guarantee payment to online merchants while protecting cardholder account information.

CashWorks Adds 2 Distributors

CashWorks, Inc. added two new distributors: Billings, Mont.-based ATM Express, Inc. and Los Angeles-based National Link, Inc. These two companies will offer CashWorks' check-cashing solution to their merchants.

Who Loves Chocolate?

Global Payments Inc. will provide all of Swiss chocolate retailer Lindt & Spr�ngli Inc.'s U.S. stores with card processing services. In addition, United Merchant Services, Inc. extended its contract with Global Payments for front- and back-end payment processing services and BIN sponsorship. United Merchant Services specializes in serving minority-owned businesses and retailers and provides bankcard, gift and loyalty and check processing services and support for merchants and resellers.

Global eTelecom for ECC

Global eTelecom, Inc. was selected as the back-end processor for Merchant Services Network's Electronic Check Conversion (ECC) Program, Convert-A-Check, which allows merchants to accept and process paper checks electronically.

Ingenico under U.K.'s Golden Arches

McDonald's Restaurants Ltd selected Ingenico to supply all software and hardware for a new chip and PIN card payment system for its restaurants in the United Kingdom. Scotland will be a test market. Ingenico says the deal is valued at a potential seven-figure sum over the next three years.

MIST's NBS and Bell ID Integrate Products

MIST Inc. subsidiary NBS Card Technology has partnered with Bell ID B.V., a subsidiary of London-based Bell Group plc to jointly market Bell ID's ANDiS smart card management products and NBS Card Technology's card-issuance products as a combined solution.

PayPass in Mobile Phones

Nokia and MasterCard International are testing phones in a pilot program in Irving, Texas, with snap-on covers containing an embedded Radio Frequency (RFID) chip technology in conjunction with MasterCard's PayPass technology. The RF chip has a cardholder's MasterCard account information in it. This new product allows consumers to pay for food, gas and other items by tapping or waving their mobile phones.

Pitney Bowes Extends Moneris Offering

Pitney Bowes will offer Moneris' credit and debit card payment processing services to its small business customers. In addition, Moneris will equip those businesses with hardware, software and customer service.

SPS Signs U.S. Merchant Services

U.S. Merchant Services will offer Secure Payment Systems, Inc.'s check guarantee processing services - including SPS' "PayDay" program, which offers a "90 days same as cash" payment option - to all retailers through its independent sales offices and agents.

Wildcard Wins Major Order for Terminals

Wildcard Wireless Solutions, Inc. announced it received an order from Card Ready International, Inc. to purchase its TransAKT cellular telephone-based point-of-sale terminals. The order is valued at CDN $184,745. TransAKT terminals are targeted toward mobile businesses such as pizza franchisees, restaurants with home-delivery capabilities, taxi and limousine drivers, and home-repair services.

ACQUISITIONS

ADS to Acquire Stage Stores' Portfolio

Houston-based retailer Stage Stores, Inc. plans to outsource the operations of its private-label credit card business to Alliance Data Systems Corp. (ADS) for at least 10 years. As part of the deal, ADS will acquire Stage Stores' portfolio of 2.2 million private-label credit card accounts and will assume the outstanding balances of those accounts during this time.

In addition, Alliance Data will employ the 220 employees of Stage Stores' Credit Support Center in Jacksonville, Texas. The transaction is subject to regulatory approvals.

CyberStarts Buying Billserv

Atlanta-based CyberStarts, Inc. announced plans to acquire certain assets of Billserv, Inc. for $4.8 million, including the Australian joint venture between Salmat and Billserv. CyberStarts is a financial services technology holding company. Billserv provides outsourced electronic bill presentment and payment (EBPP) services. CyberStarts said it plans to keep using the Billserv name because it is a recognized brand in the marketplace. Billserv shareholders must approve the deal; it is expected to go through in late June 2003.

Diebold Expands Presence in India

Diebold, Inc. will acquire from HMA Data Systems Private Ltd. the remaining 50% in equity of its joint venture Diebold HMA Private Ltd. This deal expands Diebold's presence in India, adding multiple sales offices and service locations. Diebold HMA will become a subsidiary of Diebold, headquartered in Chennai.

APPOINTMENTS

MasterCard Canada Picks 2 for Board

MasterCard Canada selected Tom W. Jones as Chair and Kathy P. Silmser as Vice Chair of the MasterCard Canada Board of Directors. Jones is President of Citi Cards Canada and a 19-year veteran of Citibank's credit card business. His previous positions with Citibank include President of Citibank South Dakota and General Manager at Citibank Canada. Silmser is Senior Vice President, Cardholder Services, Personal & Commercial Client Group, BMO Bank of Montreal. She has 20 years' experience with BMO Bank of Montreal; most recently she served as Vice President, Cardholder Services, and Vice President, Deposit Services.

Judd Promoted at NYCE

NYCE Corp. promoted James S. Judd to Executive Vice President. Judd's previous title at NYCE was Senior Vice President. He also serves as NYCE's Chief Legal Officer, overseeing legal affairs, and will continue to hold that position along with his new one. Judd joined NYCE in 1995. Before joining the company, he served at the law firm Hinkley, Allen & Synder.

Knutson Elected to ETA Board

Marla Knutson, President of TransFirst's Agent Bank Services, was elected to serve on the 2003-04 Electronic Transactions Association Board of Directors. Knutson has more than 20 years' experience in banking and financial services. She has worked in all aspects of the business, from sales and marketing to product research and executive management.

Sterling Hires Credit Card Veteran

Sterling Payment Technologies, LLC appointed David Meyer to the position of Senior Vice President and Merchant Acquiring Partnerships Officer. Meyer has more than 30 years' experience in the banking and merchant credit card industries. He was President for 12 years of APEX Merchant Services, an ISO recently sold to Paymentech. He also served as Executive Vice President and Credit Card Manager for Landmark Bank and C&S Bank. Meyer most recently was President and founding principal of PSCU Service Centers, Inc.

White Promoted at Bank One

Randy White is Bank One Corp.'s new Treasurer. White joined Bank One six years ago as Asset/Liability Manager and has been the Head of Treasury Analytics since late 2000. Before joining Bank One, White led Balance Sheet Management at Huntington Bancshares in Columbus, Ohio, and served in a range of Treasury and corporate finance functions at First RepublicBank Corp. in Dallas.

BOTTOM LINES

• The Conference Board's U.S. Consumer Confidence Index rose almost three points in May 2003, from 81.0 the previous month to 83.8.
• Walt Disney Co. is closing at least 87 of its North American chain stores, which have been losing money.
• Federated Department Stores Inc. is adding "Macy's" to its Bon Marche, Burdines, Lazarus and Goldsmith's department stores on Aug. 1. The stores will then be known as The Bon-Macy's, Lazarus-Macy's and Goldsmith's-Macy's. All regional credit cards will be reissued at that time.
• Mothercare PLC, a mother and baby product retailer, will close 15 of 173 town-center stores (8%) during the next year.
• Staples, Inc. has agreed to pay an $850,000 fine in a settlement with the FTC concerning rules for communicating with customers about delayed shipments.