Charles Marc Abbey of First Annapolis reports on the economic implications for merchant bankcard acquirers supporting national merchants.

For the early 1990s, First Annapolis estimates that national merchant net spread (gross revenue less interchange and assessments divided by sales volume) averaged about 30 basis points (0.3%), which dropped to 17 basis points by mid-decade and then dropped again to 13 basis points by early this decade. (There is no good industry data, but our educated guess is that the price competition in the national market˜the decline in net spreads˜is twice the rate of the rest of the industry.) This 13-basis-point net spread compares to an average for the rest of the industry in the 55- to 65-basis-point range. So though national merchants generate over half the volume in the industry, they account for less than 20% of revenue.

The FDIC has released a paper on Basel II.

This paper, the first in an FDIC series exploring Basel II, traces the broad history of post World War II views of bank capital adequacy, and places the new accord against that historical context. Our purpose in placing the accord in historical context is to give an appreciation of how and why the current regulatory capital regime came into being, and an understanding of the changes in bank risk profiles and banking market structure that are providing the momentum for Basel II. This review also demonstrates the significant ways the proposed capital framework represents a philosophical departure from past practice.

VeriSign announced this morning their analysis of online sales during the holiday season.

The post-holiday season analysis revealed that VeriSign merchants' total online payments transactions increased more than 75% in 2002. Overall for 2002, consumers spent nearly $13.7 billion on the Internet, according to Nielsen//NetRatings. High-volume VeriSign merchants also saw substantial increases in transactions processed. The average dollar amount per transaction for the top 50 VeriSign online merchants nearly tripled in 2002 increasing from $43.91 in December 2001 to $123.85 in December 2002.