Looking across spending as a whole in 2008, we can see a phase change beginning in the summer. After a bump in the May/June time frame from tax refunds and credits, we see spending declined by $400 / month / household. Spending eroded even further (a $200 drop) in November along with consumer confidence, bouncing back only slightly for the holidays.
After the market close today, American Express announced its financial results for the fourth quarter of 2008.
Overall Amex cardholder spending declined 10% year over year - or 5% when adjusted for foreign exchange rates. In the US, card billed business (including cash advances) declined 8% year over year, falling from $123 billion to $112.7 billion in the fourth quarter 2008. In terms of average cardholder spending, Amex reported it declined 15% to $2,792 for the quarter. The average merchant discount rate remained essentially unchanged at 2.53%.
Unfortunately, it's not a pretty picture.
For that to happen, all the players will have to work together to define standards, determine revenue-sharing, expand the network of electronic readers and think through the other parts of what he calls “this 2,000-piece puzzle.”
With all of the news this week surrounding the payment card data breach at Heartland Payments Systems, we've added a new section to the Payments News Bookstore with several new books covering the topic of PCI-DSS (Payment Card Industry-Data Security Standard) compliance. If you're aware of any we've missed, please send us Feedback and we'll add them to the bookstore.
In addition to these books about the subject, the PCI Security Standards Council website is a great starting point for learning more about PCI-DSS.
It's not clear to me that either the politicians or the retailers understand how sensitive some new opportunities are to interchange calculations, so a reduction in interchange will inevitably mean a reduction in innovation. If that's the goal, fine.
Following Dave's theme, in our Payments Boot Camps we speculate about what might happen to innovation in payments if interchange were to suddenly be significantly reduced or eliminated. What do you think?
Update: Aneace Haddad blogs about why the interchange wars are over...for now - noting that...
...Retailers are happier than ever to have a customer come in and buy something, even if they must pay interchange, which now seems like a pittance in comparison to the huge discounts that they are giving."
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