THE "R" WORD

No one likes to say it, but there are whispers that a "recession" is in the cards for 2001. The sluggish holiday sales and the bearish stock market seem to indicate we are heading into an economic downturn for this year. The colder than usual weather and high fuel prices may be forcing some consumers to decide between staying warm or staying current with their credit card payments. A surprise rate cut this month will provide some relief but it may not be enough to prevent a long overdue and full blown recession. All three indicators of bank credit card performance: delinquencies, chargeoffs, and personal bankruptcies are already pointing upward. Last month the American Bankers Association reported a sharp rise in delinquencies, from 2.99% for the second quarter to 3.21% for the third quarter, based on the number of accounts past due. Based on dollars past due, delinquencies jumped from 3.54% in 2Q/00 to 3.93% in 3Q/00. The only good news is that the 3Q figures remain lower than 1999's numbers. There is a consensus among card issuers that as the economy further slows this year, consumer loan portfolios will start to show signs of significant deterioration as delinquencies, chargeoffs, and personal bankruptcies move upward.

THE "F" WORD

It's the dirtiest word in the credit card vocabulary. No one likes to experience it but credit card "fraud" is rearing its ugly head again. Just before the Christmas holiday Egghead.com was hit with a hack attack. The direct marketer of software says that reports from the credit card companies affected, suggest that fewer than 7,500 credit card accounts that appear in its database have shown suspected fraudulent activity. Egghead says this number represents a fraction of the approximately three million credit card numbers in its database at the time of the attack. Egghead also insisted that its investigation suggest the possibility that the fraudulent activity may be related to credit card theft elsewhere. The company says evidence gathered by Kroll Associates suggests that neither these, nor any other credit card numbers, were obtained from its site. However on Dec. 21 Egghead notified credit card issuers about the hacker attack which it says it interrupted while it was in progress. Meanwhile, Los Angeles-based Creditcards.com was also hit by credit card hackers in December. According to published reports, more than 55,000 valid credit card account numbers were stolen from the Internet company's database during late summer. The hackers, believed to be from Russia, then tried to extort money from Creditcards.com, threatening to post the credit card accounts numbers on the Internet unless a fee was paid. Since Creditcards.com refused to give in to the extortion attempt, the accounts numbers were posted briefly online. The FBI is pursuing both the Egghead and Creditcards.com cases.

THE "J" WORD

It's been nearly ten years since a credit card issuer has taken the market by storm. However a new online and wireless bank is setting records in card issuance. "Juniper" Bank has joined the ranks of the AT&T Universal VISA/MasterCard and the General Motors MasterCard as the fastest growing bank credit card issuer in the U.S. The new issuer, a division of Columbus Bank and Trust Company, says it has generated more than $100 million in credit card receivables and 50,000 accounts in less than two months of operation. Juniper Financial, founded in January by former First USA and WingspanBank.com executives Richard Vague and Jim Stewart, commenced operations through Juniper Bank's web site on Oct. 24. The transparent Juniper MasterCard features no over-limit fees, low late fees, and the ability for cardholders to manage their accounts and pay their bills online or via wireless devices. The new MasterCard offers a 2.9% four-month intro APR followed by a prime +4.49% on-going APR. Late payment fees are $19 compared to an industry average of $26, according to CardData. Juniper says customers will soon be able to view their account balances, pay bills, transfer funds between Juniper and non-Juniper accounts and receive Juniper notifications through a variety of wireless devices, including Web-enabled phones, PDAs and pagers. Juniper's banking customers can withdraw cash from ATMs worldwide and will be reimbursed up to $6.00 per month for ATM fees charged by other banks. Customers will also be able to walk into most of Mail Boxes Etc.'s 3,400 U.S. locations and overnight their banking deposits free of charge.

THE "P" WORD

Of all the emerging technologies coming into the payment card industry, the "Palm" technology appears to be the most promising. Palm announced this month an eWallet initiative that includes VISA, VeriFone, and Ingenico as partners. The new technology uses an infrared beam to conduct payment transactions. After selecting a purchase and agreeing to the price plus tax, a user points his Palm handheld toward an Ingenico or VeriFone POS terminal and activates the eWallet by pushing a short-cut button. The user selects a payment method, then enters a PIN. A VISA card is embedded in the Palm eWallet application. In addition to replacing the standard payment-card swipe at retail outlets, Palm believes that over time, the users of handhelds with infrared beaming capability will be able to better manage expenses through accurate and automatic record-keeping; receive eCoupons for products and services; get automatic prompts about personally relevant entertainment or purchases; and always know the status of their loyalty programs, such as those for airline mileage or hotel stays. Ingenico predicts that when the system is fully running, the outlets that will make the most use of virtual card payments will include hotels, restaurants, car-rental companies, clubs, and department stores.

THE "W" WORD

Another company to watch this year is WearLogic which has developed an electronic "wallet" that is actually a leather wallet and not a virtual one. The WearLogic device combines a physical wallet with a PDA and personal M-commerce tools. The new SmartWear product line integrates a leather wallet with a display, keyboard, and the technology necessary to work with PCs, mobile phones, smart cards, and the Internet. SmartWear uses proprietary technology that enables the display and other electronics in the wallet products to fold, twist, crush, and adapt to any desired form. Using one single password and the option of smart cards for additional security, consumers will be able to determine what information in their wallet is public, like their emergency information, and what is private, like their social security number. WearLogic will be one of the first companies worldwide to utilize Bluetooth technology, meaning that the SmartWear Wallet will communicate with an array of wireless devices including PCs, mobile phones, PDAs, and point-of-sale-terminals using the cable-free convenience of the new protocol.

THE "C" WORD

The charge card to watch in 2001 is the resurrected Carte Blanche card from Diners Club. The new card carries a $300 annual fee and offers top end card enhancements. For example, complimentary same-class tickets for a traveling companion on British Airways. Cardholders are also automatically enrolled in the Club Rewards program which enables cardholders to earn two Club Rewards points for every eligible dollar charged, with no expiration date and no limit to the points earned. Points may be redeemed for miles on all major U.S. and selected international airlines, hotel stays, car rentals, resort vacations, name-brand merchandise, and more. Carte Blanche cardholders also get access, for up to three guests, to many of the world's finest private, semi-private and public golf courses. Traveling or busy cardholders who cannot make the monthly payment also have the option of paying the account in the next billing period, for two full billing cycles (from 55 to 62 days)of interest-free float.