ISSUE #818

SEPTEMBER 2004

FOR 34 YEARS, THE LEADING PUBLICATION COVERING CONSUMER PAYMENT SYSTEMS WORLDWIDE

U.S. Credit and Debit Cards Projected thru 2008

CARD PURCHASES TOPPED $2 TRILLION IN 2003 Purchases of goods and
services generated by 1.55 billion general purpose and proprietary credit and debit
cards issued in the U.S. reached $2.059 trillion in 2003 — $1.470 trillion on credit cards
and $588.70 billion on debit cards. Credit cards accounted for 71.4% of spending at
merchants, down from 74.0% in 2002. By 2008, credit card spending at merchants is
expected to grow to $2.282 trillion, including spending
on commercial cards, but account for only 65% of Purchase Transactions
spending at merchants — losing ground to debit card on Credit & Debit Cards
purchase volume which is … (turn to page 5)
1998: 17.95 Bil.
Visa
TECHTREX POS HARDWARE Internet proto- 19% Credit & Debit
col (IP) devices that connect dial-up stand-alone POS MasterCard
Credit & Debit
terminals or integrated systems to card-authorization 40% 10% EFT Systems
networks by way of the Internet let merchants speed 10% Store
up card authorizations while saving … (turn to page 5) 8% Amex
13%
the rest
STUDENT CARD MARKETING Student
2008: 55.63 Bil.
Monitor's latest college campus survey completed in
March ranked Capital One first in brand awareness Visa
Credit & Debit
with 22%, followed by Visa Platinum (21%), Amex 24% EFT Systems
Blue (19%), MasterCard Platinum … (turn to page 5) MasterCard
43% Credit & Debit
17% Amex
UNIVERSAL AIR TRAVEL PLAN The
Store
corporate air and rail travel payment network of 8%
5% 3% the rest
Universal Air Travel Plan is owned by 21 carriers in © 2005
The Nilson Report
Europe, Asia/Pacific, North and South America, and
the Middle East. Founded in 1936, … (turn to page 10)
INSIDE: Fast Facts — 2, 3, 4
RENESAS SMART CARD PLATFORM Last
year Hitachi and Mitsubishi Electric merged their semiconductors businesses to form
Renesas Technology. In its first fiscal year ended April 2004, Renesas had revenue of
nearly $9.00 billion. It is the world’s largest provider of microcontrollers, and a top
provider of microprocessor chips to the automotive and mobile telecom … (turn to page 10)

GLOBAL ANALYTICS OUTSOURCING The inventor of HNC Software’s Falcon

neural-network-based antifraud software has formed a new company to provide analytics
and predictive and statistical model development on a low cost outsourced basis.
Potential customers include smaller financial institutions that have large … (turn to page 5)
© HSN Consultants Inc. 2004 THE NILSON REPORT Reproducing or allowing reproduction or dissemination of any portion of this newsletter in any
manner for any purpose is a copyright violation subject to substantial fines. Yearly Subscription: 23 issues—$995 Worldwide. ISSN 1087-8718
THE NILSON REPORT: 300 Esplanade Drive, Suite 1790, Oxnard, CA 93036 USA • FAX (805) 983-0792 • PHONE (805) 983-0448 • info@nilsonreport.com
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CITIBANK is offering select cardholders the luggage trans-
portation service of Universal Express at no charge for one
trip within the U.S. each year. The service includes one-
way, two-day delivery of 2 bags or up to 7 pounds of lug-
gage, and lets the cardholder travel luggage-free with no
waiting for airport check-in. Cecilia Vesnesky is Director,
Luggage Express at Universal Express, (561) 367-6177
x226, cvesnesky@usxp.com. Marcia Borden is SVP at Citi,
(718) 248-5879, marcia.borden@citigroup.com.
FIRST DATA CORP. will add more than 9 million active
Dillard’s and Mervyns accounts recently acquired by GE
Consumer Finance to the GE-owned private label accounts
for which it already provides processing services. James
Schoedinger heads card-account processing at FDC,
(402) 222-4556, jim.schoedinger@firstdatacorp.com.
Margaret Keane is CEO Retail Consumer Finance at GE
Consumer Finance, (203) 585-6150,
margaret.keane2@ge.com.
ATMEL and ON TRACK INNOVATIONS will supply micro-
controllers, an operating system, application support, and
inlay technology for contactless smart cards to issuers par-
ticipating in MasterCard’s PayPass program. Jeff Katz is VP
Mktg. at Atmel, (408) 436-4205, jkatz@atmel.com. Ohad
Bashan is CEO at OTI America, (408) 252-0333 x101,
ohad.bashan@otiamerica.com.
NATHAN ASSOCIATES specializes in expert economic
studies and testimony in antitrust litigation and class action
lawsuits internationally, including protecting the intellectu-
al property rights of innovators and analyzing economic
investments in large-scale infrastructure projects. Douglas
Young is Principal, (703) 516-7700, dyoung@nathaninc.com.
BOSCOV’S DEPARTMENT STORES has installed the
SmartClixx prepaid card-processing platform to handle
issuance of gift cards in-house. Dean Sheaffer is SVP
Credit at Boscov’s, (610) 929-7351, dsheaffer@boscovs.com.
Gary Dinkin is CEO at SmartClixx, (561) 998-8515,
gary@smartclixx.com.
Job Mart — Positions Available
Subscribers pay $500 per 100 words
(nonsubscribers $600) for Job Mart listings.
EDGAR, DUNN & COMPANY (EDC) in Atlanta seeks a Senior
Consultant with 2-3 years of
strategy consulting experience and/or payments services
experience. Consulting experience in the payments
industry is strongly preferred. The Senior Consultant
must have a BA/BS and an MBA. MBA from a Top 25
program is preferred. Specific responsibilities include:
conducting internal and external research; defining,
structuring, and performing appropriate analysis; assist-
ing in the development of recommendations; creating and
assisting with the delivery of presentations; managing
project budget and schedule; and interacting with both
client personnel and assigned EDC staff. Please forward
resume and cover letter to recruiting@edgardunn.com.
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THE NILSON REPORT
NUMBER 818 • SEPTEMBER 2004
MANN BRACKEN is a law firm that specializes in creditor
advocacy. Services provided to financial institutions
nationwide include legal collections, arbitration, litigation,
legal-claim forwarding, portfolio management, and
collection-technology development. James Branton is
Partner, (678) 523-0645, jbranton@mannbracken.com.
TECHNOLOGY CREDIT UNION has sold its $34-million
credit card portfolio to MBNA Corp. Kessler Financial
Services was the broker. Steven Fuld is SVP at Kessler,
(617) 262-7500, steven_fuld@kessler.com. John Zavoyna is
EVP at MBNA, (302) 432-0405, john.zavoyna@mbna.com.
MERCURY PAYMENTS’ two-second IP gift- and prepaid-
card transactions are now available to POS and ECR systems
using Datacap’s DSIClientx Payment interface. Gale Peters
is VP Sales and Marketing at Datacap, (215) 997-8989,
gale.peters@dcap.com. Jeffrey Katz is President at Mercury,
(970) 247-5557 x3160, jbkatz@mercurypay.com.
BANK OF THE WEST is converting its nearly 450,000 Visa
debit cards to the MasterCard brand. Robin Lundgren is VP
Payment Products Manager, (925) 942-8926,
rlundgren@bankofthewest.com.
STORED VALUE SYSTEMS, a wholly owned subsidiary of
Comdata Corp., has acquired a minority interest in
ProfitPoint, provider of integrated gift-card and loyalty pro-
grams to small- and medium-sized retailers and restaurants.
Gary Krow is President at Comdata, (615) 370-7144,
gkrow@comdata.com. Vaden Landers is CEO at ProfitPoint,
(615) 661-0781, vadenl@rewardforloyalty.com.
SOLUTIONARY has become certified as a security
assessment vendor for the MasterCard Site Data Protection
Program. The company is already certified under the Visa
Cardholder Information Security Program (CISP). Earle
Humphreys is EVP Product Management at Solutionary,
(402) 361-3000, earlehumphreys@solutionary.com.
TRUSTCOMMERCE will provide payment processing for
Internet transactions to the merchant customers of
Columbia Bank. Diane Wasalino is SVP at Columbia Bank,
(253) 589-2120, dwasalino@merchantcardsvcs.com. John
Allen Tharpe is EVP at TrustCommerce, (949) 387-3747
x820, ja.tharpe@trustcommerce.com.
BITPASS, provider of access-control and micropayment-pro-
cessing services to sellers of digital content has received
$11.8 million in a second round of funding. Investors
include Worldview Technology Partners, RRE Ventures, and
Steamboat Ventures, the venture unit of Walt Disney
Company. Kurt Huang is CEO at BitPass, (650) 354-1889,
kurt@bitpass.com.
ZEBRA TECHNOLOGIES’ P520i dual-sided color and card
printer is designed to produce high-quality, secure, laminat-
ed photo ID cards on site and on demand for medium- to
large-volume applications. Jacqueline Durazo is Product
Marketing Manager, (805) 578-1238, jdurazo@zebra.com.
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OMNITURE provides analytics software and services that give
financial services companies a comprehensive view of activity
on Web sites including historical (data warehouse) and real-
time analysis and reporting. Clients include A.G. Edwards,
JPMorganChase, Discover Card, and eLoan. Josh James is
CEO at Omniture, (801) 722-7000, jjames@omniture.com.
DIGITAL ENVOY technology uncovers information about
Web buyers based solely on their IP addresses such as loca-
tion, ISP, and domain name. The company’s IP Inspector
Fraud Analyst uses this information and a rules-based engine
to allow suspicious transactions to be dismissed in real-time or
flagged for further review. Susan Daw is Marketing Director,
(678) 258-6300, susan.daw@digitalenvoy.net.
NAVIGANT INTERNATIONAL’S TQ3Navigant unit, the sec-
ond largest provider of corporate travel-management services
in the U.S., will market American Express commercial cards to
its clients. Edward Adams is CEO at TQ3Navigant Travel
Solutions, (303) 706-0800, ed.adams@tq3navigant.com. Anre
Williams is EVP U.S. Commercial Card at Amex,
(212) 640-8809, anre.williams@aexp.com.
CARDWORKS, provider of customer service, collections
support, and risk management to card issuers, will use
Incurrent to deliver Web-based online bill payment and state-
ment presentment for clients’ cardholders. Donald Berman is
CEO at CardWorks, (516) 576-0404 x2290,
donb@cardworks.com. Bill Kinnelly is Chief Marketing Officer
at Incurrent, (973) 781-9012 x270, bkinnelly@incurrent.com.
TRUSTWAVE is certified by both MasterCard and Visa to con-
duct payment-industry-security-compliance assessments. The
company’s TrustKeeper scanning and compliance engine has
already completed over 50 on-site and many merchant remote
compliant assessments. Kevin Bradford is CEO,
(480) 481-0051, kevin.bradford@trustwave.com.
Conferences & Seminars
CARDS AFRICA 2004: October 19–21, 2004. The Sandton
Convention Centre, Johannesburg, South Africa. Estimated
attendance: 80. Cost for the three-day conference is $1,915.
Contact Richelle Sher at Terrapinn, 27 (11) 516-4052,
richelle.sher@terrapinn.co.za.
Register online at www.worldofcards.biz/2004/cards_za.
STORED VALUE FALL 2004: October 21–22, 2004.
Atlantic City Hilton Resort Casino, Atlantic City, New Jersey.
Estimated attendance: 150. Cost for the two-day conference
is $1,395. Subscribers to The Nilson Report will receive a 20%
discount by contacting Greggory Blundell at Pelorus Group,
(908) 707-1121, gblundell@pelorus-group.com. Register
online at www.pelorus-group.com/pelconf.htm.
ELECTRONIC PAYMENT SOLUTIONS CONFERENCE
2004: November 17–18, 2004. The Manchester Town Hall,
Manchester, U.K. Estimated attendance: 325. Cost for the
two-day conference is $625. Contact Peter Gittins at
Purchasing Card News, 44 (161) 928-0485, peter@purchas-
ingcardnews.com. Registration information at
http://www.purchasingcardnews.com/conference/.
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KXEN ANALYTIC SOFTWARE applied to screening of
new applications for credit uses proprietary data-mining
technology to predict the likelihood of fraud. The com-
pany has offices and partners in several countries.
Financial service clients include JPMorganChase,
Washington Mutual, and Fidelity Investments. Disbank
in Turkey just implemented a KXEN credit card fraud-
detection system. Joerg Rathenberg is VP Marketing,
(415) 904-4168, joerg.rathenberg@kxen.com.
JAPAN ASIA AIRLINES and JCB are marketing a
mileage rewards card in Taiwan issued by Macoto Bank.
Osamu Hino is Gen. Mgr. at JCB Int’l in Taiwan,
886 (20 2531-0055, hino@jcbcard.com.tw. Chang Jih
Cheng is Head of Planning Dept. at Macoto Bank,
886 (2) 8792-8808, changjihcheng@macotobank.com.tw.
WESTERN UNION’S 2,280 locations in the U.K. are
now cash-acceptance outlets for consumers wanting to
pay for tickets to fly to the U.S. on Continental Airlines.
Joe Jackson is President at WU Commercial Services,
(720) 332-3575, joe.jackson@firstdatacorp.com.
Mark Bergsrud is VP Mktg. Programs & Distribution at
Continental Airlines, (713) 324-2825, mbergs@coair.com.
EURO 6000, payment network processor for 35 savings
banks in Spain, will add JCB card acceptance to the
250,000 merchant outlets it supports by the end of
March, 2005. Santiago Ballesteros Estevez is General
Director at Euro 6000, 34 (91) 596-5284,
sballest@euro6000.es Shunji Yoshioka is SVP at JCB Int’l,
81 (3) 5778-8370, shunji.yoshioka@jcb.co.jp.
OBERTHUR CARD SYSTEMS will provide 500,000 chip
cards with photo and fingerprint identification to the
largest bank in Ivory Coast, Caisse d’Epargne et des
Chèques Postaux (CECP). The bank will compare the
prints on a biometric reader deployed at its branches
with a reference print stored in the card’s chip. Xavier
Drilhon is Mng. Director, SEMEA-LA(2) at Oberthur Card
Systems, 33 (1) 4785-5644, x.drilhon@oberthurcs.com.
FIN-FORCE, a joint venture of KBC Bank and EDS that is
a third-party processor of cross-border payments, will use
technology from Data4S as part of a comprehensive anti-
money-laundering and embargo strategy. The filter
product lets Fin-Force screen all transactions in real time
against lists of names. Eddy Bex is CIO at Fin-Force,
32 (2) 207-2031, eddy.bex@fin-force.com. Herman
Verrelst is CEO at Data4S, 32 (16) 687-890,
herman.verrelst@data42.com.
IDEA USA develops payment technologies for vertical
markets including prepaid cards for cellular phones as
well as long distance and Internet access, telco top-up
solutions, loyalty programs, gift cards, and money orders.
IDEA’s applications use DSL, Ethernet, GPRS, CDMA, and
WiFi to reduce operational costs. Israel Hernandez is
CEO, 52 (55) 5331-4433, israel.hernandez@idea.net.mx.
THE NILSON REPORT
NUMBER 818 • SEPTEMBER 2004
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Management Changes
Debra Janssen, formerly at eFunds, has been appointed
President of First Data Debit Services at First Data Corp.,
(302) 791-8055, djanssen@concordefs.com. Alejandro
Santelises, EVP at Banco Popular Dominicano, has been
appointed Chairman of the Board of Directors for the Latin
America and Caribbean Region at MasterCard Int’l,
(809) 544-5944, asantelises@bpd.com.do. Phaedra Saylor,
formerly at CyberSource, has been appointed Director Business
Development North America at Retail Decisions,
(401) 228-2355, psaylor@red-usa.com. Peter Wolf, formerly
at Triversity, has been appointed VP Sales at MobileLime,
(617) 243-2735, pwolf@mobilelime.com. Anna Richards,
formerly at Equifax, has been appointed Senior Director
Account Services at Cohorts, (303) 893-8600 x24,
arichards@cohorts.com. Mike DeSimone, formerly at Travelex,
has been appointed SVP Sales and Marketing at E4X,
(212) 299-3500 x595, miked@e4x.com. Deborah Finnamore
has been appointed Director Marketing at ProfitPoint,
(615) 661-0781, debf@rewardforloyalty.com. Mark
Harrington has been appointed SVP Marketing at Ecount,
(610) 941-941-4600, mharrington@ecount.com. Gordon
Cooper has been appointed Country Manager for Vietnam,
Cambodia, and Laos at Visa Int’l, 84 (8) 823-6350,
cooperg@visa.com. Clifton Miller, formerly at Fidelity Federal
Bank, has been appointed SVP and Client Services Manager at
TNB Card Services, (972) 391-6418,
clifton.miller@tnbcard.com. Julie Pantiskas, formerly at Walt
Disney Co., has been appointed VP Customer Delivery at
Oberthur Card Systems, (310) 884-7989,
julie.pantiskas@oberthurusa.com. Margaret Georgiadis,
formerly at McKinsey & Co., has been appointed Chief
Marketing Officer and EVP at Discover Financial Services,
(224) 405-1065, margaretgeorgiadis@discoverfinancial.com.
Keith Stock, formerly at Capgemini, has been appointed
President of MasterCard Advisors at MasterCard Int’l,
(914) 249-4644, keith_stock@mastercard.com. Jim Harrow,
formerly at Visa EU, has been appointed Director U.K. at
euroConex Technology, 44 (7909) 912-766,
jim.harrow@euroconex.com. Ketil Fridheim, formerly at
Europay Norge, has been appointed CEO at euroConex
Nordic, 47 (98) 211-101, ketil.fridheim@euroconex.com.
Doug Kilgour, formerly at Catuity, has been appointed VP Sales
Western Region at ViVOtech, (408) 248-7001 x106,
dkilgour@vivotech.com. James Wood has been appointed VP
Sales Global Outsourcing Division at eFunds,
(480) 629-7700, james_r_wood@efunds.com. Steven Shaver
formerly of Risk Management Alternatives, has been appointed
SVP Operations at CBE Group, (319) 833-1092,
shshaver@cbegroup.com. Thomas Chapman, CEO at
Equifax, will retire sometime in late 2005. Dale Laszig, for-
merly at Hypercom, has been appointed Senior Account
Executive at VeriFone, (973) 249-0332,
dale_laszig@verifone.com. Ray Hood has been appointed
Chairman of the Board and Pres. at ATM Direct Int’l,
(214) 742-6746, rhood@atmdirect.com. Chris Truelson,
formerly at TSYS, has been appointed VP Sales at The
Aimbridge Group, (303) 662-1600,
chris.truelson@aimbridge.com.
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THE NILSON REPORT -4-
NUMBER 818 • SEPTEMBER 2004
ORDER EXPRESS, operator of a money-transfer system
between the U.S. and Mexico, will buy more than 700
VeriFone Omni 3750 POS terminals for its network. The
company is also distributing 50,000 mag-stripe cards for
senders and receivers of remittances. Bill Nichols is VP at
VeriFone, (305) 671-6564, bill_nichols@verifone.com.
Jorge Miranda is Pres. at OE, 52 (447) 478-0000,
jorge.miranda@orderexpress.com.mx.
LEVEL FOUR SOFTWARE’S Network Stress Tester simu-
lates high volumes of actual ATM transactions rather than
simple message traffic. NST incorporates differences in
ATM hardware and software, and is able to replicate mul-
tivendor networks. Martin Macmillan is CEO,
44 (207) 661-9537, martin@levelfour.com.
COLLECTIVE-POS, a provider of merchant services includ-
ing point-of-sale hardware, software, and credit/debit
transaction processing to merchants in Canada, has
licensed Smart Chip Technologies end-to-end loyalty, pre-
paid/gift card program management system. Michael
Back is President at Collective-POS, (905) 264-5520 x221,
mback@collectivepos.com. David Simon is CEO at SCTN,
(702) 837-3594 x709, dsimon@sctn.com.
SOCIEDADE INTERBANCARIA DE SERVICOS (SIBS) in
Portugal will buy EMV-compliant bank cards from
Gemplus. Nathalie Murat is Field Marketing Manager at
Gemplus, 33 (4) 4236-4256, nathalie.murat@gemplus.com.
Raul Carvalho das Neves is Director of Card Business Unit
at SIBS, 351 (21) 791-8956, raul.neves@sibs.pt.
EST, provider of payment services used by banks in Turkey
and Poland, has licensed iBiz Software’s CommerSafe ACS
payer-authentication technology to authenticate cardhold-
ers in compliance with MasterCard SecureCode, Verified by
Visa, and JCB’s J/Secure. Gülsen Durmaz is VP at EST,
90 (212) 281-7417, gdurmaz@est.com.tr. Yaron Charka is
CEO at iBiz, (713) 667-7778, yaron@ibiz-software.com.
GLOBETEL COMMUNICATIONS will market Lighthouse
Card, a prepaid Cirrus ATM network product, to the more
than 200,000 Filipino seafarers who make up 25% of the
world’s maritime workers. Anton Romulo is Country
Manager, Philippines at GTEL, (305) 579-9922,
aromulo@globetel.net.
CARDSELECT INT’L, a provider of consulting services to
the banking, telecom, and card industries, has received a
Canadian Patent for its “Gateway Apparatus for Designing
and Issuing Multiple Application Cards.” The company
received a U.S. patent for this process in 1999. A few
months ago it won similar legal coverage in Japan. Alex
Goldsleger is Pres., (610) 470-6904, agoldsleger@cs.com.
HSBC in Malaysia will buy EMV-compliant bank cards
from Gemplus . Wee Teng Tan is Marketing Manager at
Gemplus, (65) 6317-3735, wee-teng.tan@gemplus.com.
Allan Khoo is Head of Marketing at HSBC,
60 (3) 2270-0744, allansakhoo@hsbc.com.my.
TechTrex (from page 1) … money on telecom costs and upgrades to an
IP-based terminal. TechTrex, which has installed over 20,000 of its
Convertrex IP devices in Korea and Japan, is beginning to market
them in North America after receiving network certification from
American Express, First Data Corp. (North, South, Nashville,
and Concord), Paymentech, NPC, Vital, Heartland, and First
Horizon. ConverTrex devices are available in single-port
($150 per unit) and four-port ($275 per unit) models. Prior
POS
issues: 801, 745, 738, 735. Terminal
Also available in the U.S. from TechTrex is the
PrimeTrex point-of-sale terminal with a thermographic printer
that produces up to 22 lines per second. It has clear ConverTrex SP4
backlit keys and a large LCD backlit display. The
14.4 kbps modem provides full downloads of the
terminal application in about 10 minutes. Units
sell for less than $200 each. Network certifica-
tion includes Vital, Global Payments and First
Data Corp. (Nashville platform), with Certegy and FDC’s CardNet pending. Charles Lee is
President at TechTrex, Inc. in Mississauga, Ontario, Canada, (905) 629-0411,
charles@techtrex.com.

Global Analytics (from page 1) … amounts of data but lack the staff to develop analytics
and build models in-house, also larger companies that can’t stretch their in-house
resources to include data and outcomes not previously modeled. Global Analytics can
build and implement predictive models for credit risk, marketing, collections, and other
outcomes on a project or retainer basis using a team of statisticians and software engi-
neers based in Chennai, India. Services can be provided to any company worldwide.
Krishna Gopinathan is CEO at Global Analytics Inc. in San Diego,
California, (858) 692-0832, krishna@global-analytics.com.
Student Monitor Survey
Results 2004
Student (from page 1) … (13%), Amex Student Card (11%), and Reasons for applying:
Discover Platinum (11%). Average age among students surveyed No annual fee . . . . . . . 22%
Low annual rate . . . . . 20%
was 20.5 years … 46% had one or more general purpose cards in Good credit limit . . . . . 19%
their own name led by Visa (56%), MasterCard (37%), Discover Pre-approved . . . . . . . . 14%
(8%), and Amex (5%) … 63% paid monthly balances in full … 37% Cash back . . . . . . . . . . 11%
Frequent flyer points . . 8%
had an average balance of $549. Debit cards were owned by When obtained first card:
68%, up from 55% two years ago, and 79% used them weekly or Freshman . . . . . . . . . . . 32%
more often to make purchases. High school . . . . . . . . . 24%
An introductory executive summary of Student Monitor’s Sophomore . . . . . . . . . 14%
Junior . . . . . . . . . . . . . . . 5%
campus survey is available for $2,500. The complete package, Senior . . . . . . . . . . . . . . . 2%
which includes an on-site personal presentation accompanied by Average amount charged:
digital and printed versions, costs $16,000. Eric Weil is Publisher American Express . . . $197
of Student Monitor in Ridgewood, New Jersey, (201) 612-8100, Visa . . . . . . . . . . . . . . . $158
Discover . . . . . . . . . . . $126
weil@studentmonitor.com. Prior issues: 809, 703, 603, 598, 597
MasterCard . . . . . . . . . $116
Reasons for choosing:
Credit & Debit Cards (from page 1) … projected to more than No annual fee . . . . . . . 45%
Low interest rate . . . . . 36%
double to $1.231 trillion. Use at ATM . . . . . . . . . 26%
U.S. credit and debit card purchase volume per 110.5 million Lower annual fee . . . . 23%
Rewards . . . . . . . . . . . . 20%
U.S. households at the end of 2003 equaled $18,624 — up from High credit limit . . . . . 13%
$11,018 five years before. Credit cards per household dropped to Cash rebate . . . . . . . . . . 8%
11.6 last year reflecting the decline of proprietary … (turn to page 6)
-5- THE NILSON REPORT
NUMBER 818 • SEPTEMBER 2004
 Purchase Volume per Account Credit & Debit Cards (from page 5) … cards. The
number of credit cards per household is expected to Purchase accounted for 52.6% of these trans-
CREDIT CARDS 1998 2003 2008
remain unchanged over the next five years. Credit actions for goods and services, Purchase Volume on Credit Cards
Visa
MasterCard
$1,989 $2,647 $3,605
$1,541 $1,877 $2,666
Transactions 1998 Market Shares 2008
Amer. Express $7,566 $9,336 $14,440 card spending per household reached $13,302 last on Credit vs. down from 56.1% the prior year.
CREDIT
Discover $1,214 $1,634 $2,051 year, up 4.2%. Outstanding card debt per household Debit Cards 45% By 2008, debit cards will account for Visa
Store $220 $324 $382
at $7,116, essentially unchanged from 2002, reflected 55.3% of purchase transactions. 22%
DEBIT CARDS 1998 2003 2008
© 2004 MasterCard 26%
Visa $1,478 $2,758 $4,699 continued consumer use of home equity loans to pay The Nilson 40% 17% Amex 39%
MasterCard $1,157 $1,718 $2,598 off card debt.
Report Credit Cards Store
22%
EFT Systems $341 $1,153 $2,703 11%
Debit card spending per household reached CREDIT There were 1.28 billion general 10% 6%
the Rest7%
Purchase Trans. per Account $5,322 last year, up from $1,620 five years before. In 53% purpose (Visa, MasterCard, ©2004 The Nilson Report
CREDIT CARDS 1998 2003 2008
another five years, debit card purchases volume per DEBIT American Express, Discover, and
Visa 24.99 31.55 39.03 55%
MasterCard 20.13 22.68 29.01 household will have nearly doubled over current lev- Diners Club) and proprietary (store, gasoline, airline, etc.) credit cards in cir-
Amer. Express 67.80 85.68 120.64 CREDIT
Discover 18.27 22.98 28.85 els to $10,545. 73% culation in the U.S. at the end of last year, up 4.0% versus year-end 2002.
DEBIT
Store 3.66 4.69 4.89 Last year, credit and debit cards generated 34.25 47% Proprietary cards, which are usable only at select outlets, totaled 636.3 million
DEBIT CARDS 1998 2003 2008
billion transactions (including “card not present”) at 27% and accounted for 49.5% of all credit cards in the U.S., marking the first time
Visa 39.58 70.96 112.27
MasterCard 28.09 41.09 58.87 merchants, up 10.7% over 2002. Credit cards in the history of the credit card industry that general purpose … (turn to page 8)
EFT Systems 11.57 36.59 72.89
1998 2003 2008

Total Volume Purchase Volume Purchase Transactions Total Transactions

28
EFT Systems +4.34 Visa Credit +$342.58 Market Shares Visa Debit Visa Debit +7,667.4
26 1999 – 2004
Visa Debit +2.70 24
Visa Debit +$304.56 ems EFT +6,883.9
Amex +1.69 22 Syst
20 EFT
MC Debit -0.61 EFT Systems +$291.09 Visa Credit Visa Credit +3,140.7
18
Visa Credit -0.98 5-Year Changes 5-Year 16 5-Year
Amex +$243.86 MasterCard Amex +1,804.2 Growth
Store -1.75 in Market Share Growth 14 Credit
Percentage Points Billions 12
Millions
MC Credit -3.40 2003 – 2008 MC Credit +$186.46 2003 – 2008 MC Credit +1,536.3 2003 – 2008
10

5-Year 5-Year 5-Year 5-Year 5-Year 5-Year 5-Year 5-Year

Billions 2003 Change 2008 Change Billions 2003 Change 2008 Change Millions 2003 Change 2008 Change Millions 2003 Change 2008 Change
Credit Cards $1,734.81 +50% $2,603.52 +50% Credit Cards $1,469.85 +53% $2,282.03 +55% Credit Cards 18,030.5 +37% 24,851.0 +38% Credit Cards 22,335.9 +28% 29,058.3 +30%
Visa $649.70 +37% $1,035.28 +59% Visa $540.93 +41% $883.51 +63% Visa 6,448.4 +34% 9,566.3 +48% Visa 6,561.6 +32% 9,702.3 +48%
MasterCard $514.60 +87% $708.86 +38% MasterCard $404.80 +91% $591.26 +46% MasterCard 4,891.8 +77% 6,434.8 +32% MasterCard 4,972.7 +75% 6,509.0 +31%
Amer. Express $262.10 +58% $506.11 +93% Amer. Express $261.41 +59% $505.27 +93% Amer. Express 2,399.0 +63% 4,221.3 +76% Amer. Express 2,400.0 +62% 4,204.2 +75%
Discover $94.64 +61% $121.45 +28% Discover $73.54 +57% $94.35 +28% Discover 1,034.0 +46% 1,327.0 +28% Discover 1,078.2 +47% 1,370.6 +27%
Diners Club $9.17 –17% ----- -100% Diners Club $9.17 –17% ----- -100% Diners Club 35.8 -18% ----- -100% Diners Club 35.8 -18% ----- -100%
Store $132.79 +24% $145.88 +10% Store $132.79 +24% $145.88 +10% Store 1,921.6 +8% 1,869.5 -3% Store 1,921.6 8% 1,869.5 -3%
Oil Co. $48.07 +29% $63.54 +32% Oil Co. $42.52 +26% $55.72 +31% Oil Co. 1,288.7 -16% 1,420.1 +10% Oil Co. 1,343.6 -15% 1,495.05 +11%
The Rest $23.74 –5% $22.40 –6% The Rest $4.69 –7% $6.04 +29% The Rest 11.3 -13% 11.9 6% The Rest 4,022.5 -2% 3,907.6 –3%
Debit Cards $819.80 +245% $1,630.16 +99% Debit Cards $588.70 +252% $1,231.36 +109% Debit Cards 16,216.8 +237% 30,780.6 +90% Debit Cards 18,442.4 +224% 33,935.7 +84%
Visa $454.30 +234% $867.12 +91% Visa $304.40 +254% $608.96 +100% Visa 7,831.95 +240% 14,548.5 +86% Visa 9,578.7 +217% 17,246.1 +80%
MasterCard $122.30 +248% $176.65 +44% MasterCard $81.60 +226% $128.65 +58% MasterCard 1,952.0 +222% 2,915.5 +49% MasterCard 2,430.9 +221% 3,372.9 +39%
EFT Systems $242.43 +273% $585.69 +142% EFT Systems $202.06 +267% $493.15 +144% EFT Systems 6,413.8 +243% 13,297.7 +107% EFT Systems 6,413.8 +243% 13,297.7 +107%
The Rest $0.77 –40% $0.70 –9% The Rest $0.64 –42% $0.60 –6% The Rest 19.0 –40% 19.0 +0% The Rest 19.0 –40% 19.0 +0%
TOTAL $2,554.61 +83% $4,233.68 +66% TOTAL $2,058.55 +82% $3,513.39 +71% TOTAL 34,247.3 +91% 55,631.6 +62% TOTAL 40,778.4 +76% 62,994.0 +54%

NOTES: Numbers may not sum due to rounding. The Rest under Credit Cards includes telephone cards, UATP (United Air Travel Plan), car rental (cards issued for renting autos), proprietary cards for business aviation, hotels, airlines, restaurants,
and clubs. The Rest for Debit Cards are store cards issued by supermarkets such as Safeway, Vons, Ralphs, etc. Under Debit Cards, EFT Systems are cards issued by financial institution members of regional and national switches such as Star,
Interlink, Nyce, Pulse. Figures exclude activity at ATMs. Purchase Volume and Purchase Transactions excludes telephone card figures because transactions are processed exclusively by phone companies, not by credit card payment processors.
They also exclude cash advances/withdrawals at ATMs, from convenience checks, from cash back at retailers, and from cash advances/withdrawals at bank branches. © 2004 The Nilson Report

THE NILSON REPORT -6- -7- THE NILSON REPORT

NUMBER 818 • SEPTEMBER 2004 NUMBER 818 • SEPTEMBER 2004
 systems such as Star, Interlink, Nyce, and Pulse,
Credit Cards (from page 7) Credit Cards per Household totaled 249.0 million at the end of 2003 and are Purchase Volume on Credit Cards
cards outnumber proprietary cards. 1998 2003 2008 expected to reach 283.2 million by 2008. Of 1998 Market Shares 2008
U.S. Households (mil.) 102.5 110.5 116.7
By 2008, proprietary cards are projected to decline these, 199.0 million also displayed the signature- Visa
No. of Cards per Household 22%
to fewer than 600 million, and their share of total credit Total 12.1 11.6 11.7 based Visa and MasterCard brands with MasterCard 26%
cards in circulation will decrease to 43.9%. Visa, General Purpose 4.9 5.9 6.5 holograms, which are expected to reach 233.5 40% 17% Amex 39%
Visa & MasterCard 4.1 5.0 5.6 million by 2008. The remaining 50 million gen-
MasterCard, American Express, Discover, and Diners Store 6.0 4.9 4.4 22%
Store
Club general purpose cards, usable at a wide variety of eral purpose debit cards in the U.S. last year car- 10%
11%
6%
Annual Purchase Transactions per Household the Rest 7%
merchants, totaled 648.6 million at year-end 2003, and Total 128 163 213 ried only a PIN-based brand. Proprietary debit ©2004 The Nilson Report
accounted for 50.5% of all credit cards in circulation. General Purpose 96 134 185 cards, almost all of which are issued by super-
Visa & MasterCard 74 103 137 markets, totalled 11.2 million in 2003 and are expected to decline to 10.1 million by 2008.
That share is projected to reach 56.1% by 2008 when Store 17 17 16
general purpose cards will total 763.4 million. Outstandings per Household
When debit cards carry a bank card brand and hologram as well as an EFT system
Purchase Volume on all credit cards totaled $1.470 Total $5,508 $7,116 $8,268 brand, transactions are cleared and settled through the EFT system’s network if the card-
trillion in 2003, up 7.1% over 2002. General purpose General Purpose $4,614 $6,227 $7,348 holder enters a personal identification number. If no PIN is used, transactions are cleared
Visa & MasterCard $3,949 $5,261 $6,089
cards generated $1.290 trillion, up 7.8%. Over the next Store $819 $808 $837 and settled through the Visa or MasterCard networks.
five years, Visa should continue to lead among all credit Annual Purchase Volume per Household Purchases . General purpose and proprietary debit cards generated $588.70 billion in
brands, with growth from consumer cards supplemented Total $9,398 $13,302 $19,553 purchases of goods and services last year, up 22.5%
by volume tied to commercial cards. American Express, General Purpose $7,976 $11,673 $17,774 over 2002. This purchase volume is expected to Debit Cards per Household
Visa & MasterCard $5,809 $8,559 $12,636
helped by new bank issuers, should see the largest per- Store $1,042 $1,202 $1,250 more than double to $1.231 trillion by 2008. The 1998 2003 2008
cent increase over 2003. Total = proprietary and general purpose cards. number of purchase transactions in 2003 totaled U.S. Households (mil.) 102.5 110.5 116.7
Proprietary = store, oil company, airline, car rental, and
Purchase Transactions on all credit cards totaled any other single-purpose cards. General Purpose = Visa, 16.22 billion, up 21.0% over 2002, and is expected to No. of Cards per Household
MasterCard, American Express, Discover, and reach 30.78 billion in 2008. Visa and MasterCard Visa & MasterCard 1.0 1.8 2.0
18.03 billion last year, up only 2.8% over 2002. These Diners Club. © 2004 The Nilson Report EFT Systems 2.0 2.3 2.4
transactions debit cards generated 60.3% of debit card transac-
tions at merchants in 2003, down from 60.8% the Annual Purchase Transactions per Household
are projected Visa & MasterCard 28 89 150
45% to reach 24.85 billion by 2008. General purpose prior year. By 2008, their share is expected to EFT Systems 18 58 114
Visa credit cards generated 14.81 billion purchase decline to 56.7%.
40% Annual Purchase Volume per Household
transactions last year and accounted for 82.1% of all Cash . Debit card transactions in the Visa and Visa & MasterCard $1,083 $3,493 $6,320
credit card purchases. By 2008 they will be MasterCard systems generated $190.61 billion in EFT Systems $537 $1,829 $4,225
35%
MasterCard contributing 86.7%. cash, mostly from automated teller machines (ATMs)
30% Outstandings , the unpaid balances on all credit in the MasterCard/Cirrus and Visa/Plus systems, but also over the counter at banks. In the
cards, grew to $786.28 billion last year, up 3.0%. checkout lanes of supermarkets and at other merchant outlets where POS terminals have
25% Outstandings Card debt is PIN pads, debit
20% Market Shares expected to grow card transactions
1998 – 2008 by 23% to $965.00 Cardholders ( Millions ) Cards ( Millions ) Accounts ( Millions ) settled through
15% billion over the Pct. of Pct. of 5-Year 5-year 5-Year 5-year shared regional
Store 2003 Adults 2008 Adults 2003 Change 2008 Change 2003 Change 2008 Change
and national EFT
next five years. CREDIT CARDS 164.2 75% 176.1 77% CREDIT CARDS 1,284.9 +4% 1,362.4 +6% CREDIT CARDS 950.2 +1% 975.0 +3%
10% Amex systems generat-
Proprietary cards Visa 96.8 44% 102.5 45% Visa 283.7 +14% 365.4 +29% Visa 204.4 +6% 245.1 +20%
5% accounted for only MasterCard 95.8 43% 100.0 44% MasterCard 272.6 +55% 287.5 +5% MasterCard 215.7 +57% 221.8 +3% ed $1.37 billion
12.5% of outstand- Amer. Express 26.8 12% 32.4 14% Amer. Express 36.4 +31% 50.6 +39% Amer. Express 28.0 +29% 35.0 +25% in cash paid out
ings at year end Discover 39.7 18% 43.2 19% Discover 54.4 +16% 59.9 +10% Discover 45.0 +16% 46.0 +2% from the till.
5-Year 5-Year
Billions 2003 Change 2008 Change 2003. Diners Club 1.5 1% with MasterCard Diners Club 1.5 –4% with MasterCard Diners Club 1.3 –13% with MasterCard Cash with-
Store 114.9 52% 114.2 50% Store 541.5 –12% 509.8 –6% Store 409.9 –16% 382.3 –7% drawals from
Credit Cards $786.28 +39% $965.00 +23% Oil Co. 85.9 –24% 80.4 –6% Oil Co. 39.4 –30% 38.0 –4%
Visa $288.09 +20% $377.03 +31% Debit Cards Oil Co.
The Rest
72.9 33%
6.6 3%
68.7 30%
6.4 3% The Rest 8.9 +3% 8.8 0% The Rest 6.6 +5% 6.9 +4%
ATM transac-
MasterCard $293.20 +77% $333.63 +14% General pur- tions settled
DEBIT CARDS 170.4 77% 179.1 78% DEBIT CARDS 262.6 +21% 293.2 +12% DEBIT CARDS 338.5 +36% 366.4 +8%
Amer. Express $59.52 +75% $91.94 +54% pose debit cards Visa 124.5 56% 145.8 64% Visa 145.6 +96% 177.8 +22% Visa 110.4 +90% 129.6 +17% within regional
Discover $46.33 +41% $54.98 +19%
displaying the MasterCard 50.7 23% 52.4 23% MasterCard 53.4 +99% 55.7 +4% MasterCard 47.5 +120% 49.5 +4% and national
Diners Club $0.94 –32% with MasterCard
EFT Systems 249.0 +21% 283.2 +14% EFT Systems 175.3 +8% 182.4 +4% PIN-based EFT
brands of regional EFT Systems 169.3 77% 178.1 78%
Store $89.30 +6% $97.63 +9%
and national PIN- The Rest 11.2 5% 10.1 4% The Rest 11.2 0% 10.1 –10% The Rest 5.3 –29% 4.8 –10% systems are not
Oil Co. $5.79 +29% $6.72 +16%
The Rest $3.11 –4% $3.07 –1% based EFT EFT Systems are debit cards issued by financial institution members of regional and national switches such as Star, Interlink, Nyce, Pulse. Nearly 80% are the same pieces of
counted here.

plastic as Visa and MasterCard debit cards. The total debit card figure shown here does not include duplication. © 2004 The Nilson Report

THE NILSON REPORT -8- THE NILSON REPORT

NUMBER 818 • SEPTEMBER 2004 -9- NUMBER 818 • SEPTEMBER 2004
Renesas (from page 1) … industries. Renesas is also the second largest supplier of inte-
grated circuits for smart cards. For financial industry
clients, Renesas provides enhanced security with up to
128KB EEPROM memory and a 2112-bit encryption co-
processor. Renesas microchips incorporate specifications
Renesas Technology Contacts for both Java-card and Multos.
Europe Hitachi had been providing the central processing unit
Joachim Huepper is Marketing
(CPU) technology used by POS terminal manufacturers
Specialist in Feldkirchen, Germany, including KeyCorp since 1994. The Renesas Advanced
49 (89) 380-700, Solutions Group leveraged Hitachi’s smart card expertise to
joachim.huepper@renesas.com. further develop that technology, creating the industry’s first
Americas POS terminal architecture combining a CPU with embed-
Kenzo Funatsu is Bus. Devel. Dir. in ded security technology. Its ePOS platform is compliant
San Jose, California, (480) 382-7710, with open-standards software including GlobalPlatform,
kenzo.funatsu@renesas.com. STIP (Small Terminal Interoperability Platform),
Asia/Pacific
Consortium, JEFF (from J Consortium), and FINREAD.
The platform also complies with EMV standards and with
Daisuke Nomura is Sales Manager in
Tokyo, Japan, 81 (3) 5201-5238, Visa Smart POS, software that significantly shortens the
nomura.daisuke@renesas.com. length of time needed to develop EMV applications.
Renesas’s calls the ePOS platform tamperproof.
Manufacturers can use it as a single core solution for all terminal products they sell.

Universal Air Travel Plan (from page 1) … most accounts have been non-card “lodge” or
“ghost” accounts, although the network’s 16 airline issuers have promoted card issuance
more aggressively in recent years. Both cards and ghost accounts can make purchases at
more than 200 airlines worldwide, either over-the-counter,
online, or from travel agents. Merchant airlines pay lower UATP Card Spending
card-acceptance fees to UATP issuers than they do to issuers of 10
($Billions)
American Express, Visa, MasterCard, JCB, and Diners Club 8
cards — 1.65%, of which UATP receives 0.13%.
6
Last year, 56% of UATP’s $7.20 billion in purchase volume
was generated by cards issued in Europe 25% came from cards 4
issued in the U.S., and 19% from cards issued in Japan and
2
New Zealand. This year, spending
UATP Card Issuers Aer should reach $8.0 billion. UATP now 0
1999 2000 2001 2002 2003
Lingus • Air New Zealand offers multiple settlement solutions for © 2004 The Nilson Report
• Alitalia • American merchant airlines. Larger carriers con-
Airlines • Austrian Airlines
• British Airways tinue to make settlement through the automated clearing house sys-
• Continental Airlines tem in the U.S., and through the International Air Transport
• Delta Air Lines • Japan Association. Airlines and travel agents can also be paid through
Airlines (PassAge) • KLM
Royal Dutch Airlines UATP’s in-house settlement system.
Lufthansa (AirPlus) Corporations using UATP products can get information about
• Qantas Airways
• Scandinavian Airlines UATP spending over the Internet, and can download that data into
System• Swiss • United their accounting system. UATP has co-brand agreements with Visa
Airlines • US Airways and MasterCard. Airline and rail travel is billed through UATP, and
other charges are settled within the bank card systems. Ralph
Kaiser is CEO at Universal Air Travel Plan, Inc. in
Washington, D.C., (202) 626-4087, rkaiser@uatp.com. Prior
issues: 801, 786, 755, 722, 713, and more than 12 others

David Robertson, Publisher

THE NILSON REPORT - 10 -
NUMBER 818 • SEPTEMBER 2004
 Visit the companies mentioned in this issue by clicking here.
American Express euroConex NPC
www.americanexpress.com www.euroconex.com www.npc.net
ATM Direct Fidelity Investments Oberthur Card Systems
www.atmdirect.com www.fidelity.com www.oberthurcs.com
Atmel Fin-Force Omniture
www.atmel.com www.fin-force.com www.omniture.com
Bank of the West First Data Corp. On Track Innovations
www.bankofthewest.com www.firstdatacorp.com www.otiglobal.com
BitPass First Horizon Order Express
www.bitpass.com www.fhmsi.com www.orderexpress.com.mx
Boscov’s Department Stores GE Consumer Finance Paymentech
www.boscovs.com www.ge.com www.paymentech.com
CardSelect Int’l Gemplus ProfitPoint
www.cardselect.com www.gemplus.com www.rewardforloyalty.com
CardWorks Global Analytics Renesas Technology
www.cardworks.com www.global-analytics.com www.renesas.com
CBE Group Global Payments Retail Decisions
www.cbegroup.com www.globalpaymentsinc.com www.redplc.com
Certegy GlobeTel Communications Smart Chip Technologies
www.certegy.com www.globetel.net www.sctn.com
Citibank Heartland Payments SmartClixx
www.citigroup.com www.e-hps.com www.smartclixx.com
Cohorts HSBC Sociedade Interbancaria
www.cohorts.com www.hsbc.com.my www.sibs.pt
Collective-POS iBiz Software Solutionary
www.collectivepos.com www.ibiz-software.com www.solutionary.com
Columbia Bank Idea USA Stored Value Systems
www.columbiabank.com www.idea.net.mx www.storedvalue.com
Comdata Corp. Incurrent Tech Trex
www.comdata.com www.incurrent.com www.techtrex.com
Continental Airlines JCB Int’l The Aimbridge Group
www.continental.com www.jcbinternational.com www.aimbridge.com
Data4S JPMorganChase TNB Card Services
www.data4s.com www.jpmorganchase.com www.tnbcard.com
Datacap Kessler Financial TrustCommerce
www.datacap.com www.kessler.com www.trustcommerce.com
Digital Envoy KXEN Software TrustWave
www.digitalenvoy.net www.kxen.com www.trustwave.com
Diners Club Level Four Software Universal Air Travel Plan
www.dinersclub.com www.levelfour.com www.uatp.com
Disbank Macoto Bank Universal Express
www.disbank.com.tr www.macotobank.com.tw www.usxp.com
Discover Financial Services Mann Bracken VeriFone
www.discoverfinancial.com www.mannbracken.com www.verifone.com
E4X MasterCard Visa
www.e4x.com www.mastercard.com www.visa.com
Ecount MBNA Corp. Vital Processing
www.ecount.com www.mbna.com www.vitalps.com
eFunds Mercury Payments ViVOtech
www.efunds.com www.mercurypay.com www.vivotech.com
Equifax MobileLime Washington Mutual
www.equifax.com www.mobilelime.com www.wamu.com
EST Nathan Associates Western Union
www.est.com.tr www.nathaninc.com www.westernunion.com
Euro 6000 Navigant Int’l Zebra Technologies
www.euro6000.es www.tq3navigant.com www.zebra.com