B C OCR Diner s Club American Express Diner s Club American Express T&E Travel and Entertainment Bank Americard Master Charge Visa Master Card Diner s

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2 B C OCR Diner s Club American Express Diner s Club American Express T&E Travel and Entertainment Bank Americard Master Charge Visa Master Card Diner s Club American Express

3 ATM Visa MasterCard Disposable Personal Income: DPI % Morgan Stanley Dean Witter % Fed Visa % DPI Visa USA % % % % Fed

4 GDP GDP Fed

5 DPI Call Report Credit Research Center % % Credit Research Center Survey Research Center

6 Survey of Consumer Finances

7 The Truth in Lending Act annual percentage rate: APR Truth in Lending Act credit rating Consumer Reporting Agency CRA Credit Bureau CRA Equifax PO Box, Atlanta, GA Experian PO Box, Allen, TX EXPERIAN Trans Union PO Box, Chester, PA

8 Fair Credit Reporting Act CRA CRA CRA CRA CRA CRA CRA CRA CRA CRA CRA CRA CRA CRA CRA CRA Equal Credit Opportunity Act Fair Credit Billing Act Electronic Fund Transfer Act

9 Fair Credit Billing Act ATM ATM Electronic Fund Transfer Act Fair Debt Collection Practices Act POS authorizationvisa MasterCard merchant acquirer Visa American Express Discover

10 American Express % Citibank % First USA / Banc One % MBNA America % Discover % Bank of America % Chase Manhattan % Household Bank % U.S.Bancorp % Capital One % % % Banc One First Chicago Travelers Bank AmEx charge card NationalBank CardWeb Morgan Stanley Dean Witter Research Chase Merchant Services National City Bank Paymentech Nova Information Services BA Merchant Services Fifth Third Bank First Data Corp. U.S.Bancorp. Wells Fargo First National Bank of Omaha Faulkner & Gray s Credit Card Issuers Guide, Merchant acquirer First Data Merchant Svcs. a-d NA Total System Services b,c NA Vital Processing Services a,c,e NA First Data Credit Svcs. a-e NA Global Payment Sys. a-e EDS Card Processing a-c Paymentech NA NA National City a,c,e NA Alliance Data System a-e NA NA Faulkner & Gray s Credit Card Source Directory,

11 $100 payment Outsourced Card Processing Network routes to card issuing bank Issuing Bank 1. Visa / lvlastercard 0.2% Transaction data sent to VISA/Master Card Authorization Authorilation is Authorization sent back to merchant. Transaction is Merchant settled in 1-3 days. Acquiror 0. Authorization Outsourced Mcrchant Processing Transaction sent to processor for authorilation Cardholder On-line point of sale terminal Off-Iine paper receipt $100 credit card purchase Merchant Source, First Data, Morgan Stanley Dean Witter Research discount association discount merchant acquirer Visa MasterCard association Visa Visa American Express discount Amex Visa/MasterCard Visa/MasterCard Discover American Express Discover merchant acquirer association American Express Visa MasterCard Sherman Visa/MasterCard American Express/Discover Visa MasterCard Joint Venture/Association

12 duality Visa MasterCard American Express Visa MasterCard Civil Action No.civ. Visa MasterCard American Express Discover Diners Club JCB Visa MasterCard American Express Discover Diners Club JCB Visa MasterCard Visa MasterCard American Express Visa MasterCard Visa MasterCard AssociationVisa MasterCard Visa MasterCard Visa MasterCard Visa % % MasterCard % % American Express % % Discover % %

13 Visa MasterCard Visa MasterCard Consumer Action Visa MasterCard S&L Visa MasterCard Visa MasterCard Worthen Visa MasterCard duality Visa MasterCard Visa MasterCard Master Card Visa APR APR

14 Visa MasterCard MasterCard Visa MasterCard Visa Morgan Stanley Dean Witter MSDW The Internet Credit Card Report: A Primer on the Industry and Its Role in E-Commerce e-cash ACH American Express Discover Visa MasterCard

15 U.S. Credit Card Industry Profitability: 1993, 1998, and 2003 Growing Fee Revenues Replace Net Interest Income Avg. Balances Outstandings Interest Income Interest Expense Net Interest Income Credit Charge-offs/Fraud Risk-Adjusted Margin 1993 $ Billions % of Assets 1998 $ Billions % of Assets CAGR $ Billions % of Assets $ % $ % 1 $ % More balance transfers, better deals for consumers $30.9 (12.3) 18.6 (9.2) % -4.0% 4.2% $64.5 (25.2) 39.3 (23.8) % 3.3% % 11% $82.3 ($34.3) $48.0 (34.9) % % CAGR % Saturated market, pressure from mortgage as substitute Interchange Income % Miscellaneous Fees Enhancements % % % 32% Total Net Revenues % % 13% Operating Expense (15.2) -6. (29.3) -6.2% (36.2) -5. Pretax Income $ $ % % Savings from online servicing, electronic bills Web cross-selling revenues; e-commerce stimulates interchange Note: Credit card industry composed of Visa, Master Card, American Express and Discover. Includes late, overlimit, cash advance, and annual fees. Includes cross-selling, targeted ads, and revenue sharing. Sources: Faulkner & Gray, MSDW Research estimates. Morgan Stanley Dean Witter U.S. Credit Card Industry Profitability : Historical and Forecast E 2000E 2001E 2002E 2003E '98/93 CAGR '03/98 CAGR Avg. Balances Outstandings % Change Interest Income Interest Expense Net Interest Income Credit Charge-offs/Fraud Risk-Adjusted Margin Interchange Income Miscellaneous Fees Enhancements Total Net Revenues Operating Expense Pretax Income As % of Avg Receivables Interest Income Interest Expense Net Interest Income Credit Charge-offs/Fraud Risk-Adjusted Margin Interchange Income Miscellaneous Fees Enhancements Total Net Revenues Operating Expense Pretax Income Year/Year % Change Interest Income Interest Expense Net Interest Income Credit Charge-offs/Fraud Risk-Adjusted Margin Interchange Income Miscellaneous Fees Enhancements Total Net Revenues Operating Expense Pretax Income $226.9 $30.9 (12.3) 18.6 (9.2) (15.2) % -4.0% 4.2% % 10.2% S % $35.3 (15.7) 19.6 (8.9) (18.0) % % -3.2% 3.9% 3.2% 2.3% 0.1% % 2-3% 1 NM 19% $ $47.0 (20.8) 26.2 (13.5) (22.3) % % % 2.2% 0.1% 9.1% % 33% 33% 52% % $ % $59.7 (24.6) 35.1 (21.0) (26.1) % % % 2.1% 0.1% % % 1 0% 1 $ $65.0 (25.0) 40.0 (24.5) (28.1) % % 2.1% 0.1% % 2. 9% 2% 1 9% 12% 10% 2 11% 19% $ % $64.5 (25.2) 39.3 (23.8) (29.3) % 3.3% 3.1%% % 9.0% -6.2% 2. -1% 1% -2% -3% 1% 22% 0% 20% $ % $67.6 (27.2) 40.5 (25.7) (30.6) % -5.2% 3.0% 3.3% % 9.0% -6.2% 2. 3% - 11% 12% -1% $ % $71.2 (28.8) 42.4 (28.0) (31.9) % % 9.0% -6.1% 2.9% 9% -3% 12% 4 9% $ % $74.9 (30.5) 44.4 (30.2) (33.3) % % 9.1% -6.0% 3.1% -2% 51% $ % $78.2 (32.3) 45.9 (32.6) (34.7) % % 4.1% % 9.2% -5.9% 3.3% 3% % $ % $82.3 (34.3) 48.0 (34.9) (36.2) % % % % 1 2 9% 19% % 11% 13% 10% -3% 32% 12% Note: The credit card industry is composed of Visa. Master Card, American Express. and Discover. Ú_ Includes late, overlimit, cash advance, and annual fees. Ú` Includes cross-selling, targeted ads, and revenue sharing. E = Morgan Stanley Dean Witter Research Estimates Sources: Faulkner & Gray, Company Reports, Morgan Stanley Dean Witter Research Morgan Stanley Dean Witter

16 American Express % % DM DM www. NextCard. com American Express CitiGroup Bank One Capital One MBNA Providian %%

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