I would like to know whether Visa profits from the holograms put on
Visa cards.  Specifically, I want to know how much issuers of credit
cards pay for each hologram, and who receives these payments.

For example, the American Bank Note Holographics (ABNH) annual report
states that Visa and MasterCard have different types of arrangements,
but does not elaborate.

---

Request for Question Clarification by larre-ga on 06 Nov 2002 21:49 PST

In order to fulfill your request for information, it would be helpful
to confirm that we're using the same vocabulary to refer to the same
concepts.

First, by profit, do you mean the benefits Visa receives from the use
of holograms, or do you mean a financial profit from the sale of the
holograms used? In the latter case, Visa is ultimately a buyer of the
holograms, not the seller. Are you asking if Visa receives some sort
of kickback from its own suppliers?

Second, In specific reference to American Banknote Holographics and
the information contained in the SEC10K Annual Reports:

Visa is a private corporation, not a publicly held entity regulated by
the SEC. As such, it is not required to publicly disclose its
suppliers and vendors, sales figures, or other proprietary information
relating to specific transactions with other business entities. Visa's
vendors or suppliers might be discovered from outside sources by
disclosures in the SEC mandated documents of those companies, as is
the case with American Banknote Holographics. However, there are no
other EDGAR filings which identify visa as a buyer of holograms.

It IS possible to calculate the yearly sales figures for American
Banknote Holographics sales to Mastercard and to the Visa authorized
card manufacturers. Mastercard is the direct manufacturer of its
cards, Visa contracts this function out to approximately 50 suppliers,
who purchase the holograms from American Banknote Holographics, or
possibly a second undisclosed hologram manufacturer alluded to in the
ABHC annual report. The sales price of individual holograms is
proprietary information. Neither ABHC or VISA or Mastercard have
chosen to make that information public. Only internal company
documents from one of the involved parties (buyer or seller) would
provide any sort of verification. Companies don't allow such documents
to be published or linked externally.

Given the above limitations, can you think of another approach angle
that might address your information requirements regarding the value
of individual holograms?

As it stands, from the information available, we can:

Provide yearly sales figures for ABHC hologram sales to Mastercard and
Visa card suppliers
Explain the purchase process, as outlined in the SEC filings.

We'd like to find a way to help. The more we understand about your
needs and the background of your questions, the better we'd be able to
do so.

=l=

---

Clarification of Question by b0253-ga on 07 Nov 2002 13:19 PST

Thanks for the clarification request, and the initial comments.

I am not interested in the financial benefits from the use of
holograms on credit cards.  I am interested in the following 2 pieces
of information:

First, I would like to know how much issuing banks pay per hologram. 
If the exact numbers are not public, I would be comfortable with an
estimate of the hologram costs (to within a factor of two or so).  I
assume that there may be news articles, interviews, or bank financial
reports that mention the approximate costs of manufacture or card
issuance.

Second, I am interested in the purchase process for holograms. 
Specifically, do the issuing banks pay the vendor directly, or do they
pay Visa or another party as an intermediary?

Please let me know if you need any more clarification.

---

Request for Question Clarification by larre-ga on 08 Nov 2002 18:47 PST

Thank you for responding. The additional information makes your
requirements very clear. It may take a bit of digging into financial
reports and databases, but I feel certain we can locate figures that
are reasonably accurate.  You will receive notification via e-mail as
soon as your Answer is posted.

=l=

---

Clarification of Question by b0253-ga on 11 Nov 2002 11:15 PST

Thanks for the update.  I have upped the price I will pay for the
answer to reflect the increase in effort.

---

Request for Question Clarification by czh-ga on 22 Nov 2002 17:16 PST

Hello b0253-ga,

I did a preliminary sweep of the issues involved with your questions
based on the information you gave. I'd like to have a better idea of
the purpose of your questions to be able to determine if I'm on the
right track.

Are you interested in the pricing and purchase process of credit card
holograms because you're interested in the credit card market?

Are you looking for information as it relates specifically to the
activities of American Banknote Holographics?

I've found some information to answwer either question. I'd like your
input before I go any further.

czh

Hello b0253-ga,

I was fascinated by your question and I’ve been gathering information
for you to help sort out how credit card processing works in relation
to the cost of the holograms on them. I found that the credit card
processing business is very complicated and competitive – as well as
secretive about its operations. I’ll answer your two questions in
reverse order because I think this makes the topic more
understandable. I hope that this research will meet your needs. Please
ask for clarification if you need additional information. I appreciate
that your question helped me learn about the credit card industry in
much greater depth than I was familiar with as a consumer.

czh

====================
YOUR SECOND QUESTION
====================

------
Second, I am interested in the purchase process for holograms. 
Specifically, do the issuing banks pay the vendor directly, or do they
pay Visa or another party as an intermediary?
------

Visa and Master Card are associations of banks and other depository
financial institutions. These banks and financial institutions issue
credit/debit cards as a member of either the Visa or Master Card
association. Banks also sign up/acquire merchants who accept their
credit cards. Visa and Master Card are the hub of all activities in
the processing of payments. They license member banks to issue credit
cards with the Visa/MC labels. There are complicated agreements on the
fees involved in card issuance and transaction processing.

When a bank decides to issue a Visa card they have to go to a card
manufacturer that has an agreement with Visa such as American Banknote
Holographics or Oberthur Card Systems. They choose the card program
that suits them and the cards are manufacture to their specifications.
After manufacture (where the hologram is affixed along with the other
steps in the manufacturing process) the card goes to Visa to have the
identifying information encoded. Despite all my research, I have not
been able to identify the exact flow of payment from the issuing bank
to the credit card manufacturer to Visa. I think the sequence is that
the issuing bank pays for the manufacturing process and then Visa pays
an additional licensing fee to the card manufacturer. The cost of
producing the hologram in this sequence is well under a dollar per
card.. The credit card manufacturers own various patents for their
technologies and Visa owns the trademark for the hologram and there
are complicated licensing and payment agreements as to when the card
changes ownership and payment is due.

My research shows that there are two systems of credit card
processing. See the files I’ve uploaded. You can pick them up at these
links:
http://www.lucidmatrix.com/uploads/Holo%207-1.jpg
Holo 7-1
http://www.lucidmatrix.com/uploads/Holo%207-2.jpg
Holo 7-2
As you can see from Figure 2, the Visa and Master Card open-loop
systems require coordination among many parties. Paying with Plastic:
The Digital Revolution in Buying and Borrowing is the source of these
diagrams.

http://usa.visa.com/personal/about_visa/who/who_we_are_history.html
Who We Are – Visa history and timeline

http://www.reconnaissance-intl.com/pdfs/IndustryReport120202.pdf
Holo-pack•Holo-print Industry Survey & Market Report (2001-2007)™
$3,330 – Published by Reconnaissance International 
This 4-page brochure gives you a detailed overview of the contents of
this market report.
This is a 300+ page quantitative report based on original survey data
and provides a detailed analysis of the volume, size and capacity of
the holographic industry on a global, regional and sector-specific
basis.

http://www.applicationsforcreditcards.com/history_of_credit_cards.html
Part 1 - History of Credit Cards
Part 2 - Credit Cards and Credit Card Issuers
Part 3 - Credit Card POS Transactions and Transaction Processing

http://www.paymetric.com/credit_card_101.htm
Paymetric is an enterprise payment system
Credit Card 101 is slide presentation of the two major processes
involved when a merchant accepts credit card transactions --
authorization and settlement.

http://www.aaaccess.com/merchant_account_101.html
Merchant Accounts 101
This is a detailed description of the step-by-step processing of
credit card payments from the merchant’s perspective.

http://www.chase.com/cm/cs?pagename=Chase/Href&urlname=chase/sb/creditcards/processing/payment101
Payment Processing 101
This is a review of the payment process from the bank’s perspective.

http://www.abnh.com/productsvcs/prodsrvcs/transact.html
American Bank Holographics
Transaction Cards

http://www.oberthurusa.com/pns-sc-prod-pmt-gal-solutions.asp
Oberthur Card Systems – Visa Solutions
#1 supplier of Visa cards
http://www.oberthurusa.com/pns-mfg-generics.asp
Card manufacturing process 

===================
YOUR FIRST QUESTION
===================

------
First, I would like to know how much issuing banks pay per hologram. 
If the exact numbers are not public, I would be comfortable with an
estimate of the hologram costs (to within a factor of two or so).  I
assume that there may be news articles, interviews, or bank financial
reports that mention the approximate costs of manufacture or card
issuance.
------

I’ve found some figures on the cost of holograms. The technologies are
evolving and there are new patents issues regularly for new processes.
The price varies depending on the complexity of the hologram and the
quantity being purchased. I’ve included some links that cover the
yearly volume of credit cards issued.

http://www.holograms.cc/security/photopoly_secure/pricing/
Photopoly-Secure Holograms - Base Prices*
Range: From $0.50 ea for 500  to  $0.27 ea. for 50,000
Pricing is substantially lower for higher volumes.

http://www.holobank.com/ordsecur.htm
http://www.hmt.com/holobank/ordprod.htm
HOLOBANK STOCK SECURITY HOLOGRAM PRICING
HoloBank is the world's largest selection of stock image holograms
developed specifically for advertising and promotional use.
The price sheets provide a perspective on low-end hologram pricing.

http://www.intelecard.com/archives/archives_read.asp?A_ID=158
Intele-Card News
Pushing Plastic, July 2002
This article reviews the findings of ICMA’s "Third Annual Card
Manufacturing Survey," which analyzed global geographic and
card-specific statistics pertaining to the number of cards
manufactured and market volumes in 2000.
• In 2000, approximately 8.8 billion cards were manufactured; an 11.4
percent growth rate over the 7.9 billion cards manufactured in 1999.
•Financial hologram cards represent 11.8 percent of the global unit
card market and increased 11.2 percent in units and 2.5 percent in
dollars, which is impacted by lower average unit prices.

http://www.cardforum.com/cgi-bin/readstory.pl?story=20021202CCMG187.xml
The Closed-Loop Battle of Giants
San Francisco-based Visa U.S.A. is the largest card association in the
country with 14,000 members. It handled $591.9 billion in credit card
volume in 2001, or about 44% of all credit card volume, according to
Thomson Media’s 2003 Card Industry Directory, and another $205.3
billion in offline debit card volume. The Visa brand was on 376.6
million credit and 117 million debit cards last year.

http://www.sec.gov/litigation/admin/33-7994.htm
American Bank Note Holographics, Inc 
July 18, 2001, SEC fraud case 
Improper Recognition of Revenue on Consignment Sales and other
complaints.

=============================
INDUSTRY LINKS AND RESOURCES
==================================

http://www.icma.com/info/holograms5698.htm
Application of Holograms to Credit Cards
This article gives a good overview of the credit card hologram
manufacturing process.

http://www.ihma.org/
International Hologram Manufacturers Association

http://www.holographynews.info/
Holography News -- International Business Newsletter for the
Holographic Industry

http://www.holographynews.info/
Holo-pack•Holo-print® GuideBook (2nd Edition)!  ISBN 0 9524 5830 6
Softcover * 226 Pages, $ 80 US $7.50 shipping and handling. Total =
$80.50
Detailed case studies 
International Buyers Guide lists over 300 companies 

http://www.icma.com/info/quick-facts.htm
Quick Card Facts and Glossary
These quick card facts are responses to the ICMA's most commonly asked
questions about the plastic card industry. Drawn from a variety of
expert sources, the statistics will be updated periodically as new
industry information becomes available.

http://www.cardforum.com/index.htm
Thompson Publishing’s many trade magazines for the credit card
industry.

http://www.banktech.com/
Bank Systems and Technologies Online
Trade magazine for banking executives
http://hallprofessions.com/index.php/Mode/product/AsinSearch/0262550377/name/Paying%2520with%2520Plastic%2520%253A%2520The%2520Digital%2520Revolution%2520in%2520Buying%2520and%2520Borrowing/browse/2633/page/1
Paying with Plastic: The Digital Revolution in Buying and Borrowing
This book by two consultants from Visa gives a review of the credit
card industry. This site also provides a selection of related books on
banks and credit cards.

The holigrams have only minor value in attracting customers and
getting more charges put on credit cards, but they do make counterfit
credit cards more difficult.  My guess is banks etc that issue credit
cards are billed part of the loss, that occurs, when monthly payment
is late, or not made, or payment is cancelled so both banks and Visa
benefit from the holigrams, if they result in reduced losses. Losses
would be enourmous if millions of counterfit credit cards were in
customers hands.  Neil