Thursday, September 27, 2012
The TSG Payments Index (TSGPX) tracks the quarterly performance of $100 invested in a group of leading payment-related businesses and compares it with the performance of companies listed in the Standard & Poor's 500 Index (S&P 500). During the second quarter of 2012, the TSGPX grew 22.79 percent year-over-year and finished the quarter at $191; the S&P 500 finished at $94.
Electronic payment performance in the second quarter showed Visa Inc. up 9.8 percent in year-over-year credit card payment volume and MasterCard Worldwide up 4.7 percent. Debit card payment volume showed mixed results for the same period, with Visa reporting a decline of 9.5 percent and MasterCard reporting a gain of 13.3 percent.
According to Mike Strawhecker, Vice President and Director of TSG Metrics for The Strawhecker Group, one of the leading factors affecting long-term growth in the payments industry is the fact that more of the nation's 27 million small business owners are migrating to electronic payments as an option, especially within the last 18 to 24 months.
"The whole base of merchants to go after expanded drastically," Strawhecker said. "Not only are smaller-ticket item purchases being expanded, but also bigger tickets as well, because often those are B2B transactions, whereas before they were always paid with a check. Even if the economy remains flat, electronic payments will continue to rise."
Strawhecker also believes the merging of technologies will be beneficial in improving the value of merchant portfolios. For example, offering loyalty programs linked to merchants through mobile phone apps with acceptance at contactless terminals could prove to be a boon for many, he noted.
Another section in the report provides charts representing data compiled on 1.5 million U.S. merchants in 14 Standard Industrial Classification (SIC) codes. The data was collected from March 2010 to June 2012 as part of TSG's Merchant Portfolio Performance Study. The wholesale, transportation, and health and medical services categories showed the most consistent growth rates overall. Retail declined during the second quarter after rebounding in the first months of this year.
The petroleum industry appears to have taken the biggest hit in sales volume, according to the SIC code groupings illustrated in the report. "We found that volume in gas sales has dropped over 30 percent this year because of the increase in price," Strawhecker said. He added that the petroleum industry is also influenced by other variables, including OPEC, which tends to make this industry more volatile than most other sectors in the U.S. economy.
In the final analysis, Strawhecker highly recommends diversification within merchant portfolios to ensure against the economic extremes witnessed over the last four years. He predicts that with the upcoming elections, economic uncertainty will prevail until leaders take action on taxes, debt and other issues that affect the nation's economy.
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