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PORTLAND, Ore. – Interest among monoline credit card issuers in acquiring credit unions’ card portfolios will continue and likely intensify in 2003, according to a card executive who has moved from VISA International to the Portland-based Asset Exchange. Asset Exchange is a leading broker of credit union’s card portfolio sales, as well as trade in loan participations. Until recently, Karl Barth served Visa International as Vice President in the Consumer Market and Segment Development Group. He joined Asset Exchange as a Senior Vice President focusing on new business development and credit card portfolio consulting. Barth said the continued interest in credit unions’ card portfolios would spring from the continued competitive pressure in the direct mail market for credit cards, along with ongoing consolidation in the card industry. Monoline card issuers are hungry for new ways to compete for credit card customers, he explained. “From the seller’s point of view, the problem with direct mail is that the process is entirely too seller-driven,” Barth said. The card issuer might drop a card offer into a consumer’s mailbox on May 5, for example, but the customer might not be interested in a card on May 5, he explained. But in an agent relationship with a credit union, for example, when the customer walks in and says `I am interested in a different credit card, can you help me’ the process becomes buyer driven, he said. This dynamic means the industry will likely see more consolidation even as it appears to be diversifying more, Barth said. The few monoline banks that issue the most cards will continue to grow, Barth explained, but it will appear that there are more cards available than ever as different organizations and groups make agent deals to capitalize on their branded relationships, he explained. For example, cards issued by retailers have largely declined for years, but now a number of retailers have either entered into agent relationships with card issuers or have managed to offer their own cards, Barth pointed out. He pointed out as well that these agent relationships generally were good all around. “The consumer receives better and more targeted offers from their primary institution,” Barth said. “The institution provides better value products that still carry their brand identity and the issuer has a new and complimentary access channel to reach consumers as a complement to their direct mail, phone, Internet, event and alternative marketing strategies.” Barth also predicted that credit card rewards programs will continue to drive credit card use in at least part of the market, but said that the attractiveness of card-based mileage reward programs could suffer even more if cash-strapped airlines begin to increase the numbers and types of restrictions on the redemption of their miles. “We know from experience that restrictions like blacking out dates, putting certain routes off limits and making consumers jump through hurdles to redeem their miles really takes the shine off mileage reward programs,” Barth noted. Debit cards will continue to gain an enthusiastic response and dominate even further the so-called “pay now” market, Barth said, at the expense of both cash and checks. He noted that while, so far, there was no evidence that debit cards were eating into credit card usage, more time would have to pass before the industry could be sure that did not happen. “We know that people’s spending habits change over time and as they age,” Barth said. “We will need to watch the baby boomers and echo boomers to see if they start switching their card usage from credit to debit.” Automated Teller Machines will complete their evolution from being a perk of the financial services industry to being a staple service, part of the minimum offerings institutions will have to offer in 2003, Barth forecasted. He noted that as more time passes, the burden would grow on the manufacturers of the machines to prove that their machine’s technology has not simply outstripped consumer demand. Barth contrasted, for example, the widespread and fairly rapid consumer acceptance of cellular phone technology with that of the ATM machines, which have been modified to offer other products ranging from stamps to commuter-train tickets, movie tickets and other services. Cellular telephone technology came along and everybody wondered how he or she got along without a cell phone before, Barth noted. But there hasn’t been a similar demand for the new ATM services. The pressure to find new places to put ATMs will also continue, Barth predicted, and will likely lead deployers to search even more diligently for niches that need machines and strategies that will enable them to make money even on machines with relatively low transaction volume, he said. Barth described his work before joining Asset Exchange as helping VISA International facilitate cooperation and communication between its different around the world. “So that when you use your VISA card, issued in the U.S., in Singapore it still works,” he said. He moved from San Francisco-based VISA International to Asset Exchange in order to simplify his life, he said. He had been living in Portland and traveling weekly to work at VISA in San Francisco, he said, and he had kept up a friendship with Willie Koo, CEO of Asset Exchange from a former job. “So when I heard that Asset Exchange might have an opportunity opening up, I was definitely interested,” he said. [email protected]

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