ETA/Strawhecker report: Reason for optimism

A joint report from the Strawhecker Group and the Electronic Transactions Association indicates the payments industry has reason to be optimistic despite the ongoing recession and new legislation that will regulate card interchange.

"Though the payments industry is not immune to the economy and outside factors such as retail sales and consumer spending, two major drivers of payments related revenue, the industry as a whole continues to be more resilient than the overall market," the report states. "This resiliency comes from the still increasing use of debit cards and consumers' affinity for e-commerce transactions."

According to the report, e-commerce sales totaled $38.7 billion in the first economic quarter of 2010, up from $38.1 billion during the fourth quarter of last year. In the first quarter of 2009, e-commerce sales totaled $33.9 billion.

Alternative payments seem to be doing particularly well, perhaps a mixed blessing that bodes well for e-commerce overall but may pose a threat to conventional payment card players in the space. In the first quarter of 2010, PayPal Inc. and Bill Me Later Inc. – which are both owned by eBay Inc. – totaled $21.3 billion, roughly the same level as in the fourth quarter of 2009. But they totaled only $15.9 billion in the first quarter of 2009.

Meanwhile, total dollar volumes for Visa Inc. and MasterCard Worldwide have both dropped slightly in 2010. Visa's totals fell from $201 billion in the fourth quarter of 2009 to $182 billion in the first quarter of 2010, while MasterCard totals slid from $123 billion to $110 billion, respectively. In the first quarter 2010, Visa's sales volumes were 45.1 percent credit card-based and 54.9 percent debit card-based, while MasterCard's were 54.3 percent credit based and 45.7 percent debit.

"Credit card losses at major U.S. card issuers remain at above average levels while delinquencies began to slow, signaling future decreases in uncollectable accounts," the report says. "Chargeoff rates declined among four of the five largest issuers."

The report also ranked the top 10 U.S. acquiring firms in 2009 based on dollar volume. Number one was Bank of America Merchant Services, with a 19.3 percent share of the acquiring market, with First Data Corp. and Chase Paymentech Solutions LLC rounding out the top three.

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