Credit

Anticipating that Discover Financial Services will report very little change in charge-offs and delinquency rates for its credit card loan book during May, Stifel Nicolaus analyst Christopher Brendler on Wednesday suggested that the economic stimulus checks will have a scant impact on cardholder payments.

Continental Airlines will receive a $413 million initial payment from an updated co-brand credit card deal with Chase Bank USA, the airline disclosed today in a filing with the U.S. Securities and Exchange Commission. Continental's agreement with Chase extends its co-branded credit card deal through the end of 2016. Of Chase's initial payment to Continental, $235 million relates to Chase's advance purchase of frequent-flyer mileage credits, and the two parties consider part of that advance purchase a loan to Continental, according to the SEC filing. Houston-based Continental will report the loan in its financial filings as a long-term debt, a debt that will begin decreasing in 2016 based on mileage credits flyers redeem. Continental says in the filing it expects to have access to between $3.2 billion and $3.3 billion at the end of the second quarter in the form of unrestricted cash and short-term investment balances. The extra cash could come in handy for severance pay and other restructuring costs. Continental in July plans to cut 6.5% of its employees and 11% of its domestic flight capacity.

Americans' adverse financial health has a significant negative impact on their physical health, the results of a recent survey suggest. Seventy percent of the respondents to the Associated Press-AOL Health Poll, whose results were released Monday, were cardholders. Sixty-two percent of the cardholders pay off their card balances in full; 9% failed to make the minimum payment on at least one card over the past six months; 32% had balances of at least $3,000; and 10% said they had reached their credit limit on one or more cards. For the group of cardholders who carry debt, 10% said they worry about their overall debt "all of the time," and 14% said they worried "most of the time." Consumers also were quizzed on the relationship between their debt load and stress levels. Nine percent of respondents reported "a great deal of stress," and 12% said they felt "quite a bit of stress" over their total debts. Ten percent of respondents said the total debt they have taken on will be "an extreme" or "large" problem over the next five years. Fifteen percent of respondents said they were "very" or "quite" concerned that they would never be able to pay off their debts. Respondents with higher stress over debt had an average 18 percentage-point increase in combined health problems compared with respondents with lower debt-related stress. Among the health problems cited were increased rates of insomnia, migraines, severe anxiety, depression, high blood pressure, heart ailments and ulcers. Abt SRBI Inc conducted the AP/AOL phone interviews with 1,002 adults, including 778 who have credit cards, from March 24 through April 3.

Alternative payment methods are more likely to displace credit card transactions than debit card volume, according to Aric Morrison, author of a Packaged Facts report on alternative payment systems and owner of New York-based Cogitamus Consulting Inc. Alternative payment forms, such as PayPal, are electronic payments that circumvent traditional payment forms, such as cash, check, credit or debit cards, says Morrison. Debit card payments and most alternative payments are similar because, unlike credit, the funds exist and are drawn from users' accounts, he says. Additionally, most alternative payment growth is occurring in online transactions, where most purchasers historically have used credit cards, says Morrison. "The threat is really more against credit than anything," he says, adding that the threat is small now but appears likely to grow as more consumers use alternative payment methods.

More than 90% of Nautilus Hyosung America Inc.'s customers buy ATMs through a Web-ordering system, Chan Park, company president and CEO, told CardLine sister publication ATM&Debit News at the company's second annual Users' Conference in Grapevine, Texas. The Coppell, Texas-based company began accepting orders online in June 2007. "Web-site ordering is more convenient, replacing faxes and e-mail, and Web-site ordering builds the company's customer database," Park says. "We have a record of customers. We see their history. We know how many machines they are ordering." The company provides distributors and ISOs with an account and PIN to place orders. The site also has photographs and specifications of each model Nautilus Hyosung manufactures. The company would like all of its distributors and ISOs to order through the Web site, but Park says companies that buy one or two machines probably will continue to fax orders or send them by e-mail.

Wells Fargo & Co. earlier this week added two functions to its browser-based commercial mobile-banking service. The service, CEO Mobile, now features wire-transfer services and image positive pay, which enables users to view check images. The San Francisco-based bank added the services because customers requested them, says Megan Minich, a senior vice president who leads the CEO Channel team for the Wholesale Internet and Treasury Solutions group. CEO Mobile, which the company launched in April 2007, supports account-activity and balance monitoring. Wells plans to offer additional services, Minich says. "We continue to look at services on our [online] CEO platform that we think would be valuable to a mobile worker," she says.

RapidAdvance LLC, a Bethesda, Md.-based merchant cash-advance company, has acquired Merchant Cash Express Ltd. The United Kingdom-based cash-advance company will operate as a subsidiary of RapidAdvance, according to the companies, which did not disclose terms of the deal. "The UK market has many similarities to the U.S. market," says a RapidAdvance spokesperson on why the company is expanding overseas. "Small businesses need more financing options, and bank lending is tightening in the UK as well. Therefore, we believe the UK is a logical next step for our growth," the spokesperson tells CardLine sister publication ISO&Agent Weekly. In a cash advance, merchants take a lump sum against their future credit card receivables to finance improvements at their businesses. The merchants pay back a share of the advance to RapidAdvance until the entire amount is paid back, including a fee the merchant cash-advance company charges the merchants. RapidAdvance's expansion into the UK follows its foray into Canada less than four months ago in a deal to offer its services to Canadian merchants through Advantex Marketing International Inc., a Toronto-based merchant-services company (CardLine 2/22). RapidAdvance has no plans to expand outside the United States, Canada and the UK, the spokesperson says.

NetSpend Corp. announced Tuesday it has promoted James DeVoglaer to senior vice president of information technology, Paige Ellis to vice president of human resources, Lisa Henken to vice president of partner services, Andrew Byala to software development manager and Todd Ginsbert to application architect.

Standard Chartered India has begun issuing a platinum version of its "Manhattan" credit card, a bank official tells CardLine Global. The bank hopes to gain more customers between the ages of 30 and 35 who earn at least 500,000 rupees (US$11,700 or 7,500 euros) annually, says R.L. Prasad, the bank's general manger for credit cards and personal loans. The bank has issued some 250,000 regular Manhattan cards and hopes to issue 100,000 platinum cards by 2009, Prasad says. The platinum cards offer 5% cash-back rewards for purchases made at supermarkets and department stores. Cardholders pay an annual fee of 2,000 rupees. Standard Chartered has issued 1.6 million cards in India, Prasad says.

Cam Commerce Solutions Inc., a Fountain Valley, Calif., provider of payment processing systems for small and midsize merchants, said Tuesday that it has agreed to sell itself to Great Hill Partners LLC, a Boston private-equity company.

MIAMI — Despite a slowdown in the growth of international remittance volumes that began last year, Wells Fargo & Co. said its remittance business achieved triple-digit growth in the 12 months through May, reflecting what it sees as an ongoing shift to banks from nonbank providers.

JPMorgan Chase & Co. has started offering a reward program that lets people earn points on multiple accounts.

Equifax Inc. and Fair Isaac Corp. have agreed to market new FICO score analytic products jointly, ending a legal dispute.

In one of the latest efforts to reach out to environmentally conscious cardholders, two organizations have launched a test in the United Kingdom during which consumers can use debit and credit cards to track their carbon emissions. The Royal Society for the Encouragement of Art, Manufactures and Commerce, based in the UK, and France-based card processor Atos Worldline say they are testing a personal carbon-emissions calculator that uses Nectar-branded loyalty cards. The test is scheduled to last five months and will involve up to 1,000 participants, the Royal Society says in a statement. Test participants will receive carbon credits, though the amount was unspecified. Carbon credits give financial value to the cost of polluting the air. They are used in an effort to reduce greenhouse gas emissions. Each time a participant uses a Nectar card to buy fuel at a BP petrol station, Atos will deduct carbon credits from that participant's online account. Cardholders can track their carbon use online and trade surplus carbon credits through an online trading system. Atos is providing the technology for the immediate carbon calculations. Neither Atos nor the Royal Society responded to CardLine Global requests for comment. The trial will help show how a personal carbon-trading scheme could operate in practice, Matt Prescott, director of the society's CarbonLimited project, says in a statement. Adil Moussa, an analyst for United States-based Aite Group LLC, tells CardLine Global the card effort represents a "really interesting" addition to environmentally friendly card schemes already offered in Europe. "This one is clever in the sense that this carbon card is being tied into a credit card or prepaid card," Moussa says. "It's giving you a reason to use it." Other "green" credit cards, such as Barclaycard's Breathe Easy card, offer discounts on purchases of "green" merchandise such as household cleaners. (CardLine Global, 27 Nov. 2007). MBNA Canada Bank enables cardholders to earn points the bank uses to buy carbon-offset credits that support environmental projects (CardLine Global, 15 Nov. 2007). Moussa says such cards are about marketing. Companies "find a segment of the population and come up with products to cater to them," he says. "These products really strike a chord with some people." The U.S. Federal Trade Commission earlier this year said it was working to clarify carbon-offset claims made by issuers and other companies.

Visa Europe has introduced a payment card that enables consumers to enter one-time passcodes designed to reduced fraud for online transactions, a Visa Europe spokesperson tells CardLine Global. Visa says the technology is suitable for chip-based debit or credit cards. "Visa is now offering this to members as a pilot," the spokesperson says, declining to discuss which banks have expressed interest in the technology, how long the tests will last and how many of the "Visa PIN cards" issuers will distribute. Visa wants consumers to use the cards while making an online transaction or logging in to online-banking sites. A cardholder would press a button on the card to start the authentication process and, when prompted, enter the appropriate PIN. The card's display panel provides a one-time passcode, which the cardholder enters into the site's Verified by Visa window, the spokesperson says. "This is then forwarded to the issuing bank, which validates the passcode," the spokesperson says. "For online banking, once you've logged in and put in your account number, the passcode would be in place of the password. Again, it would be the issuing bank that validates."

Shanghai Rural Commercial Bank plans to issue its first credit card in China later this year, a bank spokesperson tells CardLine Global. "Our first credit card will be issued in Shanghai, and initial customers will be from our existing debit cardholders," the spokesperson says. The bank, founded in 2005, has issued more than 3 million debit cards. Australia-based ANZ Bank bought a 19.9% stake in the bank in 2006, and that investment should help the Chinese bank in its credit card efforts, an analyst says. "One of the major strategic cooperation areas between Shanghai Rural Commercial Bank and ANZ is retail banking, of which the credit card is an important part," Wenli Yuan, a senior analyst at the China office of United States-based Celent LLC, tells CardLine Global. "The [Chinese] bank will, however, face a challenge in attracting people who already have credit cards from other banks."

Woori Bank may slow the expansion of its credit card business to maintain profitability, a spokesperson for the Seoul, South Korea-based bank tells CardLine Global. The spokesperson declined further comment, but published reports indicate the bank's incoming CEO, Lee Chonghwi, is worried that rapid growth has eroded profit margins. The bank previously announced plans to issue debit cards in China and establish more than 50 branches in that country (CardLine Global, 4 Feb.). "Woori Bank has chosen long-term growth instead of short-term revenue," Yumiko Manchu, a Tokyo-based analyst with Celent LLC, tells CardLine Global. "Card companies need to be keen on market demands and should be flexible enough to adjust their strategy according to them."

South Korea's household debt, which includes credit card bills and loans, reached 640.5 trillion won (US$623.1 billion or 402.8 billion euros) by the end of the first quarter ended 31 March, up 9.2% from 586.5 trillion won in the same period a year earlier, according to the Bank of Korea, the country's central bank. Payments for goods made with credit cards increased to 35.5 trillion won during the quarter, up 13.8% from 31.2 trillion won in the same period last year. Bank officials were unable to offer immediate comment to CardLine Global.

Bank of America Corp. announced today that more than 1 million customers are using the bank's mobile-banking service. "They are definitely a leader in the space," says Gwenn Bézard, senior analyst for the Aite Group, a Boston-based consultancy. Mobile-banking users can check account balances, pay bills, transfer funds and view transactions using cell phones and other mobile devices. BofA's mobile-banking users performed more than 4 million mobile sessions in May, and two-thirds of the active users are younger than 35 years old, according to the Charlotte, N.C.-based bank. Residents of large cities, such as Los Angeles, Atlanta and Washington, D.C., are among the fastest adopters of mobile banking, according to BofA. Bézard suspects the bank's high rate of mobile-banking adoption stems from its "already large base of online banking users." The bank has nearly 25 million online-banking customers, according to BofA, which introduced mobile banking as one of its online-banking services in May 2007. "It's a pool they can tap into to market mobile banking," he says. BofA is "at the forefront of offering this service," contends a BofA spokesperson, who declined to compare BofA's mobile-banking numbers with those of industry competitors.

Credit card reform is emerging as a key issue on the campaign trail for presumptive Democratic presidential nominee Sen. Barack Obama, D-Ill., who is touting industry reform at public appearances this week. Kicking off his general campaign in Raleigh, N.C. on Monday, Obama promised new laws to curb what he calls abusive credit card practices. At another stop on his two-week, cross-country tour, Obama met today in Chicago with hard-pressed borrowers and consumer advocates. Obama vowed legislation that would prohibit credit card issuers from retroactively raising cardholders' interest rates on balances without their approval. He also promised to establish a federal credit card-rating system to help inform consumers of credit card choices. Obama last fall introduced the Credit Card Safety Star Act of 2007 with Sen. Ron Wyden, D-Ore. The legislation, which was referred to the Committee on Banking, Housing and Urban Affairs, would create a federal five-star rating system for credit cards (CardLine, 11/28/07). Late last year on the campaign trail, Obama began advocating a Credit Card Bill of Rights that would crack down on issuers that use what some consider deceptive practices (CardLine, 12/5/07).