The Green Sheet Online Edition

December 28, 2009 • Issue 09:12:02

Research Rundown

Black Friday trimmed in green

A November 2009 study from Capital Access Network Inc.'s Data Services Division found that business owners nationwide reported same-store credit and debit sales rose 0.95 percent on 2009's busiest shopping day. In Black Friday on Main Street, a special issue of CAN's Small Business Credit Sales Report, it was also noted that restaurants experienced a 4.06 percent increase over Black Friday 2008.

Other brick-and-mortar retailers that saw sales climb included jewelers, boutiques, gift shops, and toy, clothing, electronic goods and sporting goods stores. The report, which covers shopping trends and information from Nov. 27 to Nov. 29, 2009, also found the following:

• The smallest businesses - those with less than $250,000 in annual revenues - saw the biggest lift, with card sales up 16.98 percent from the previous year.
• Businesses with yearly revenues under $500,000 experienced a 13.44 percent increase.
• Merchants generating under $1 million annually averaged a 3.63 percent increase; those with over $1 million in revenues saw sales climb 4.34 percent.

"Not only were shoppers out buying in greater amounts than they did on Black Friday 2008, but it seems they were also stopping for lunch or dinner more often and spending more in those establishments," said Mark Lorimer, CAN's Chief Marketing Officer. "We are hopeful that the improvement we saw during this shopping period points to a promising holiday season overall for the nation's smaller merchants."

For more information, visit www.capitalaccessnetwork.com/resources.html.

Health care sector diagnosis

The health care industry recognizes the advantages the payments industry can bring to the health care payment process. A December 2009 report from Aite Group LLC, Health Care Payments: Opportunities for Card Networks, provides a high-level overview of each market opportunity and is organized by amount of potential dollars gleaned. Additionally, the report examines the various opportunities in the health-care payment space.

Aite estimates revenue opportunities from consumer directed health care, patient-to-provider and payer-to-provider payments will amount to approximately $10.5 billion in 2012. According to Aite, as demand for such programs grows, card networks that aggressively pursue partnering with payment solutions vendors will benefit tremendously from transaction-based revenue opportunities.

For more information, visit www.aitegroup.com.

Compliance still top priority

Research and advisory firm TowerGroup indicated that it is no surprise risk management and compliance will remain top priorities for companies, given the massive risk management failures the global securities and investments business has experienced in recent years.

In a December 2009 report entitled Forecasting Global Risk Management and Regulatory Compliance IT Spending over 2009 -2012, TowerGroup projects the growth rate of information technology (IT) spending for compliance and risk management solutions. Additionally, it identifies trends in risk management IT by region and line of business: capital markets, investment management, and brokerage and wealth management.

TowerGroup also reported:

• Of the different categories of IT spending on risk, external spending on software will grow the most, from $2.1 billion in 2009 (33 percent of overall risk expenditures) to nearly $3.3 billion by 2012.
• While aggregate IT spending in the global securities and investments business will grow by only 3 to 4 percent between 2009 and 2012, risk management IT and compliance expenditures will rise at a compound annual growth rate of 13 percent.
• IT spending will be fastest in Asia, comprising 25 percent of global IT expenditure by 2012.
• Risk management and compliance will dominate business priorities at securities firms in 2010 and 2011.

For more information, visit www.towergroup.com.

Looking back at loyalty and rewards

According to Mercator Advisory Group, consumers have spoken, and their electronic payment method of choice is the debit card. Yet that popularity comes with a price in the form of a more competitive, mature market for traditional debit card issuers, Mercator said. A point of differentiation can be achieved through loyalty and rewards programs, the advisory added. Since 2004, Mercator has examined programs from the top 50 U.S. debit card issuers.

A December 2009 study from Mercator, Top 50 Debit Card Issuers' Loyalty and Rewards Programs 2009 - Year in Review, not only serves to examine the current market, but also discusses the changing nature of these programs over time, as well as what some of the emerging trends indicate for the future.

Mercator also discusses the results of issuers that have bucked the trend by not offering rewards programs and how they differentiate themselves.

Migration from credit to debit

The advisory also examined past studies and consumer trends related to the apparent migration of payment volume from credit to debit in Switching From Credit to Debit: A Long-Term Trend Gets a Boost from the Recession, published in December 2009.

The report discusses the warning signals projected for credit card issuers and introduces new consumer survey data highlighting the magnitude and drivers of switching payment behavior for dual credit/debit cardholders.

Additional findings include:

• Declining credit card payment volumes and consumer credit card debt statistics show consumers on a new, lower trajectory of credit card use.
• Mercator's survey data from May and June 2009 affirms a widespread and voluntary shift toward debit use among consumers, especially those with the ability to immediately switch from credit to debit.
• Payment behavior appears to be widespread demographically.
• Rewards programs have significant influence in shaping consumers' desire to switch from credit to debit.

Prepaid predictions

In a November 2009 report entitled Prepaid Market Forecast 2009 to 2012, Mercator identifies trends and forecasts the growth of the prepaid card market. It suggests the prepaid industry will continue to attract new players and investments and will remain "extremely dynamic."

Network branded, or open-loop solutions, continue to significantly outpace closed-loop options and have proven critical in maintaining positive growth in the market.

Mercator predicts open-loop volume will exceed that of the closed-loop sector in 2012 by $41.8 billion. The report, which covers all 33 prepaid market segments, also found that:

• New corrections and innovations continue to increase the size of the open-loop market.
• All prepaid markets combined will reach approximately $525.8 billion by 2012.
• In 2008, $8.7 billion was loaded onto general purpose reloadable products. Mercator estimates this market's load in 2010 will be nearly $36 billion and will continue to escalate to 2012.

For more information, visit www.mercatoradvisorygroup.com.

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