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The Great Debate: PIN-Based Debit, Versus Signature-Based Debit

U.S. Bancorp Piper Jaffray Analyst Expects Debit Card Payments to Continue

To Take Market Share

MINNEAPOLIS, June 28 /PRNewswire-FirstCall/ -- U.S. Bancorp Piper Jaffray Senior Financial Technologies and Services Analyst Jeff Baker says that the heated debate pitting PIN-based (online) debit, versus signature-based (offline) debit at the point of sale tends to distract investors from the most important issue regarding debit payments. In a recently issued report titled, The Debit Debate: Focusing On The Big Picture, Baker outlines the most important issue, which is transaction growth for debit card payments.

We believe the most important 'big-picture' issue investors should be focusing on is the penetration opportunity for debit payments to continue taking market share away from cash and check transactions, said Baker. We believe the recent emergence of a new breed of payment processor, those that acquire transactions and own Electronic Funds Transfer (EFT) networks, will aggressively promote PIN-based debit at the point of sale and drive higher penetration at merchant outlets.

In his report, Baker states that paper-based payments still dominate the U.S. retail payment system. He writes, according to The Nilson Report, paper- based payments represented 63 percent of the dollar volume and 69 percent of the transaction volume of purchases at the point of sale in 2001. This represents an enormous opportunity of 81.4 billion transactions per year for the stakeholders of both PIN-based debit and signature-based debit to realize future gains in transactions, dollar volumes and revenues, said Baker.

Baker points out that PIN-based debit payments are only accepted at

26 percent of the U.S. merchant outlets that currently accept credit card payments today. This in turn creates a long runway for continued growth of PIN-based debit payments. Baker says Concord EFS, Inc. (CEFT - $29.40, Strong Buy, #), owner of the STAR network, is the single best way for investors to play the high-growth trend of debit payments, followed by First Data Corporation (FDC - $36.58, Outperform, #), which owns 64 percent of the NYCE network.

We believe that the outlook for the continued high growth of debit payments remains favorable, as both PIN-based debit and signature-based debit transactions continue to take market share from checks and cash transactions, said Baker. We expect the continued mix shift of payments toward electronic transactions, aided in large part by debit growth, will provide solid growth opportunities for payment processors for the foreseeable future.

U.S. Bancorp Piper Jaffray, a subsidiary of Minneapolis-based

U.S. Bancorp (NYSE: USB), provides a full range of investment products and services to businesses, institutions and individuals. The company's investment banking business has grown significantly in the last several years by focusing on the needs of growth companies in the health care, technology, financial institutions, consumer and communications growth sectors. U.S. Bancorp Piper Jaffray has a national reputation for its expertise in fundamental research and equity and debt financing. U.S. Bancorp offers a comprehensive range of financial solutions through U.S. Bank, U.S. Bancorp Asset Management, U.S. Bancorp Investments and U.S. Bancorp Piper Jaffray.

The following disclosures apply to stocks mentioned in this report if and as indicated: (#) U.S. Bancorp Piper Jaffray (USBPJ) makes a market in the company's securities. (ˆ) USBPJ analysts who follow this company, or members of their household, have a beneficial interest in the company's securities. USBPJ analysts or members of their household may sell such positions while a Strong Buy, Outperform, or Market Perform rating is maintained; however, they may do so only upon appropriate USBPJ management approval. (>) USBPJ analysts who follow this company, or members of their household, have a beneficial interest in the company's securities that were acquired in a private transaction pre-IPO. USBPJ analysts or members of their household may sell such positions while a Strong Buy, Outperform, or Market Perform rating is maintained; however, they may do so only upon appropriate USBPJ management approval. (@) Within the past three years, USBPJ was managing underwriter of an offering of, or dealer manager of a tender offer for, the company's securities or the securities of an affiliate. (˜) A USBPJ officer, director, or other employee is a director and/or officer of the company.

This material is based on data obtained from sources we deem to be reliable; it is not guaranteed as to accuracy and does not purport to be complete. This information is not intended to be used as the primary basis of investment decisions. Because of individual client requirements, it should not be construed as advice designed to meet the particular investment needs of any investor. It is not a representation by us or an offer or the solicitation of an offer to sell or buy any security. Further, a security described in this release may not be eligible for solicitation in the states in which the client resides. U.S. Bancorp and its affiliated companies, and their respective officers or employees, or members of their families, may have a beneficial interest in the company's securities and may purchase or sell such positions in the open market or otherwise. This report is a communication made in the United Kingdom by U.S. Bancorp Piper Jaffray to market counterparties or intermediate customers and is exclusively directed at such persons; it is not directed at private customers and any investment or services to which the communication may relate will not be available to private customers. In the United Kingdom, no persons other than a market counterparty or an intermediate customer should read or rely on any of the information in this communication. Additional information is available upon request.

Nondeposit investment products are not insured by the FDIC, are not deposits or other obligations of or guaranteed by U.S. Bank National Association or its affiliates, and involve investment risks, including possible loss of the principal amount invested. Securities products and services are offered through U.S. Bancorp Piper Jaffray Inc., member SIPC and NYSE, Inc., a subsidiary of U.S. Bancorp.   (5/99-0679)

U.S. Bancorp Piper Jaffray Inc. is a member of the National Association of Securities Dealers, CRD number 665.



SOURCE  U.S. Bancorp Piper Jaffray

    -0-                             06/28/2002

/CONTACT:  Susan Beatty, Public Relations of U.S. Bancorp Piper Jaffray, +1-612-303-5680/

/Web site:  http://www.piperjaffray.com  /


CO:  U.S. Bancorp Piper Jaffray; U.S. Bancorp; Concord EFS, Inc.; First Data


ST:  Minnesota

-- MNF002 --
8049 06/28/2002 09:37 EDT http://www.prnewswire.com

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding U.S. Bancorp's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.

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