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Jason Oxman CEO – Electronic Transactions Association [email protected] www.electran.org

Mike Strawhecker VP / Director of TSG Metrics – The Strawhecker Group [email protected] www.TheStrawGroup.com

© Copyright 2014. Electronic Transactions Association/The Strawhecker Group. All Rights Reserved.

US Economic Indicators Report

This report is a compilation and analysis of US economic data. Its intent is to provide a deeper understanding of the US economy and therefore, the ability for ETA members to better assess their position in the current economic climate. This is the 21st edition of the quarterly released report. Please reference cited sources for more detailed statistics. The views expressed are those of ETA/TSG and are subject to change. They are shared for educational purposes only. The information is based upon information we consider reliable, but its accuracy and completeness cannot be guaranteed. This report is a member benefit provided to the Electronic Transactions Association’s 500+ worldwide member companies.

With special introduction: What is Average? A look at market rates around the U.S.

Q1 2014 – 21st Edition

mailto:[email protected]

http://www.electran.org/


http://www.thestrawgroup.com/

2 Confidential. For discussion purposes only.

© Copyright 2013. The Strawhecker Group. All Rights Reserved.

INTRODUCTION: What is Average?

Click to be Directed to: Table of Contents * Payments * Macro * Micro * Volumes

In 2013, there was

$4.9 Trillion of Volume on Cards in the U.S.

$408 Billion Per Month

$13 Billion Per Day

$560 Million Per Hour

$9 Million Per Minute

$155 Thousand Per Second

In 2013, there were

82 Billion Transactions on Cards in the U.S.

7 Billion Per Month

224 Million Per Day

9 Million Per Hour

156 Thousand Per Minute

2.6 Thousand Per Second

ETA members (electronic payments companies) are the driver of commerce in the U.S.

U.S. Consumer Spending:

$10.5 trillion (2013)

For context

U.S. GDP:

$16 trillion (2013)

Federal Government: collected $2.5 trillion in taxes

(2012)

Card Volume & Transactions includes purchases made on consumer and commercial credit, debit, and prepaid cards. SOURCE: TSG Estimates




TSG Database Market Averages (2009 = 100) 2009 2010 2011 2012 2013

Total Volume per Active Merchant (000s) 100 106 113 118 125

Total Average Ticket 100 99 99 97 97

Total Net Processing Revenue 100 94 92 96 98

Fee Revenue per Account (monthly & annual) 100 109 119 128 125

Net Revenue 100 96 94 99 98

Source: TSG MPPS Database of 2.1 million merchants

The chart shows various performance metrics of a collective merchant portfolio of 2.1 million merchants from 2009 – 2013. All of the metrics are indexed to 2009 = 100. • Key Finding: Although the average account size has grown 25%, and the industry has absorbed interchange regulatory changes during this period as well

as a long economic recovery, the Net Revenue Index (as a percent of volume) only declined 2% from 2009 - 2013

Net Revenue – sum of total bankcard and PIN debit gross revenue plus sum of total monthly and annual legacy and emerging account fees and equipment related and other income less sum of total bankcard and PIN debit cost of sales and other cost of sales (gateway fees, processor fees, sponsor bank fees)





Where and what are the highest and lowest priced merchants in the U.S.? TSG looked at merchants across the U.S. to find out their cost of acceptance

• Cost of Acceptance to Merchant: The all in cost of card acceptance (processing + fees); aka gross revenue to the merchant acquirer • Size of merchants: Volume between $100,000 and $250,000 in annual processing volume • Sample: At least 50 merchants • Index: Average Cost of Acceptance in U.S. Market = 100 (TTM Q4 2013)


#1: San Diego, CA Eating, Drinking, & Hospitality

Cost to Merchant: 130

#2: Houston, TX Construction Services


#3: San Jose, CA Eating, Drinking, & Hospitality Cost to Merchant: 120

#4: Los Angeles, CA Transportation Services


#5: Dallas, TX Construction Services


Average – Atlanta, GA Business & Personal Services


Highest Priced

#1: El Paso, TX Business & Personal Services


#2: Las Vegas, NV Health & Medical Services


#3: Orlando, FL Auto, Boat, Mobile Repair/Dealers


#4: Jacksonville, FL Auto, Boat, Mobile Repair/Dealers


#5: Charleston, SC Business & Personal Services


Lowest Priced

1

2

3

4

5 A

1

2

3 4

5

Cost of Acceptance




1 2

3 4 5

A


Where and what types of merchants have the highest and lowest attrition in the U.S.? TSG looked at merchants across the U.S. to find out their attrition rates

• Attrition: Merchant account attrition = net revenue in the beginning of the measurement period but without net revenue at the end of the measurement period • Size of Merchants: Volume between $100,000 and $250,000 in annual processing volume • Sample: At least 50 merchants • Index: Average Attrition Rate in U.S. Market = 1 (TTM Q4 2013)


#1: Jacksonville Eating, Drinking, & Hospitality

Attrition Rate: 2.26

#2: El Paso, TX Eating, Drinking, & Hospitality Attrition Rate: 1.93

#3: Miami, FL Grocery, Food, & Liquor


#4: Tampa, FL Auto, Boat, Mobile Repair/Dealers


#5: Miami, FL Eating, Drinking, & Hospitality Attrition Rate: 1.77

Average – Allentown, PA Wholesale

Attrition Rate: 1

Highest Attrition

#1: Rochester, NY Education & Non-Profits


#2: Tulsa, OK Business & Personal Services


#3: Seattle, WA Entertainment & Recreation


#4: Riverside/Ontario, CA Entertainment & Recreation


#5: Columbus, OH Education & Non-Profits


Lowest Attrition

1

2

3

4

5

Rate of Attrition





How have Emerging Players Impacted the Merchant Acquiring Market? • Looking at attrition by tier can help understand the impact of Square and other “emerging players” who focus on the micro-merchant market • The chart below shows that overall, the three smallest merchant size tiers have all improved in regards to gross dollar volume attrition since July 2010,

when Square was entering the U.S. market • However, the smallest tier’s attrition has increased since March of 2012, perhaps indicating some gains in this tier by Square and other emerging players • OVERALL: Average Gross Dollar Volume Attrition has improved from -13.7% in 2010 to -11.5% in 2013 (not shown in chart – see page 10 for more

detailed attrition metrics)

-21.5%

-15.7% -16.4%

-23.8%

-17.1% -18.1%

-28.1%

-20.7%

-25.7%

-30.0%

-25.0%

-20.0%

-15.0%

-10.0%

Jul-

10

Au

g-1

0

Sep

-10

Oct

-10

No

v-1

0

Dec

-10

Jan

-11

Feb

-11

Mar

-11

Ap

r-1

1

May

-11

Jun

-11

Jul-

11

Au

g-1

1

Sep

-11

Oct

-11

No

v-1

1

Dec

-11

Jan

-12

Feb

-12

Mar

-12

Ap

r-1

2

May

-12

Jun

-12

Jul-

12

Au

g-1

2

Sep

-12

Oct

-12

No

v-1

2

Dec

-12

Jan

-13

Feb

-13

Mar

-13

Ap

r-1

3

May

-13

Jun

-13

Jul-

13

Au

g-1

3

Sep

-13

Oct

-13

No

v-1

3

Dec

-13

Tier 9 ($50k - $100k) Tier 10 ($25k - $50k) Tier 11 ($0 - $25k)

Monthly Attrited Account Gross Dollar Volume Attrition – 3 Month Rolling Averages

Square reaches 1 million merchants

Square reaches 2 million merchants

Square finishes pilot test of 50,000 merchants

Square processes $15 billion annually




Confidential. For discussion purposes only. © Copyright 2014. The Strawhecker Group. All Rights Reserved.

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Federal Reserve’s Beige Book: 12 District Overviews Page 13

Retail Sales by Segment from the Census Page 16

Total Same Store Sales from TSG Database Page 17

Same Store Sales from TSG Database by SIC Code Page 18

Credit Card Data Page 20

Debit Card Data Page 21

Credit/Debit Average Ticket Sizes Page 22

VISA/MC Credit & Debit Cards in Circulation Page 23

VISA/MC Volume per Card Page 24

Table of Contents

Payments Companies Vs. S&P 500 Page 8

Acquisition Multiples Page 9

Merchant Portfolio – Average Attrition Page 10

Payments Indicators

Card Volumes

Manufacturing & Non-Manufacturing Activity / Industrial Capacity Utilization & Prices Page 11

New Home Sales by Region & Consumer Credit Page 12

Macroeconomic Indicators

Microeconomic Indicators

7 Click to be Directed to:

Table of Contents * Payments * Macro * Micro * Volumes



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Payments Indicators: Payments Companies Vs. S&P 500 Updated

8

$289

$131

Q1 Q2 Q32007

Q4 Q1 Q2 Q32008

Q4 Q1 Q2 Q32009

Q4 Q1 Q2 Q32010

Q4 Q1 Q2 Q32011

Q4 Q1 Q2 Q32012

Q4 Q1 Q2 Q32013

Q4 Q1*

TSGPX S&P 500

Key Finding: The chart below displays the performance of a $100 investment in an index of selected payments companies which represent the “TSG Payments Index” - this index is calculated on a value weighted basis using market capitalization and is compared to the S&P 500 which is also calculated using the same methodology. A $100 investment in the TSGPX in Q1 2007 would now be valued at $289, as compared to $131 if invested in the S&P 500.

VS.

+3.8% CAGR

The chart above displays the performance of $100 investment in an index of the following listed companies which represent the “TSG Payments Index” - this index is calculated on a value weighted basis using market capitalization and is compared to the S&P 500 which is also calculated using the same methodology. This analysis does not include affects of re-invested dividends. While some of the companies listed in TSG’s Payments Index do not meet the requirements to be a S&P 500 listed company (S&P listed companies have a market cap of at least $3 billion), the S&P 500 served to be the best comparable index to TSG’s Payments Index since it is one of the most commonly used benchmarks for the overall U.S. stock market. In fact, many consider it to be the definition of the market. The companies included in TSG’s Payments Index met the criteria that at least 50% of their revenues were produced from electronic payments products or services. Ingenico and Gemalto have been removed due to inclusion of NetSpend and Cardtronics as well as their being traded on non-US exchanges. As of Q4 2011 Fundtech has been removed due to an acquisition and Tier Technologies’ name has been changed to Official Payments. Vantiv was added to the index as of Q1 2012. 3PEA International was added in Q1 2013. LML Payment Solutions and Transaction Network Services were removed as of Q1 2013 due to acquisition. *Calculated using closing data through March 28, 2014.

+15.8% CAGR




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Payments Indicators: Acquisition Multiples

9

- 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00

95% of multiples ranged from 0.57x to 6.0x

68% of multiples ranged from 1.00x to 5.6x

16% > 5.6x 16% < 1.00x

.05% > 6.0x .05% < 0.57x

AVERAGE: 3.3x

$150bil

$50bil

$300bil

Data Set: 90 Transactions

Purchase Prices: $300K - $30B

An

nu

al S

ale

s V

olu

me

- $

Bill

ion

s

Net Revenue Multiple (Annual)

• No sales channel/force included in sale • Stagnant or declining growth • High attrition ( > 20% per year) • Low net revenue margins • No merchant account portability

• No competitive sales strategy • High losses • Little or no profitability • Few cost synergies to buyer

Low Multiple Characteristics

• Sales channel/force included in sale • Solid sales growth ( > 10% per year) • Low attrition ( < 15% per year) • Solid net revenue margin • Strong management team

• Ease of merchant account portability • Sustainable strategy or market niche • Low losses • Good profitability • Good cost synergies to buyer • Technology

High Multiple Characteristics

Cost of the Transactions: • Interchange • Assessments and network fees • Residuals paid to sub-ISOs • Third Party Processing Costs

Net Revenue = Gross Revenue + Other Income – Cost of the Transactions

Other Income • Equipment revenue • Lease revenue • Additional service revenue • Monthly fees

Net Revenue Multiples: Three Year Rolling Averages

3.1 3.0 2.9

3.1 3.0

3.3

3.4

3.9 4.1 3.3

3.2

3.1

3.5

3.6

Red Plots = 2010 - 2013

Acquisition Multiples - Review of Payments Industry M&A Transactions - A Historical Perspective: Industry Enterprise and Merchant Portfolio Net Revenue Multiples

Timeframe: 2000 – 2013

Updated

Source: TSG internal records




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Payments Indicators: Attrition Summary Key Findings: • Account Attrition has remained flat from 2010 – 2013 (-24.6% to -24.5%) • Dollar Volume Gross Attrition has improved from 2010 – 2013 (-13.7% to -11.5%) • Net Revenue Gross Attrition has improved from 2010 – 2013 (-18.4% to -15.7%) Definitions: Merchant Account Attrition – attrited active accounts defines as those with net revenue in the beginning of the measurement period but without net revenue at the end of the measurement period Gross $ Volume Attrition – dollar volume of attrited active merchant accounts as a percent of total dollar volume at the beginning of the measurement period Gross Net Revenue Attrition – net revenue of attrited active merchant accounts as a percent of total net revenue at the beginning of the measurement period

MIKE

10

Source: TSG database of 2.1 million merchants

-24.6% -23.3% -23.3% -24.5%

-13.7% -11.9% -11.5% -11.5%

-18.4% -16.9% -16.5% -15.8%

2010 2011 2012 2013

Account Attrition $ Volume Gross Attrition Net Revenue Gross Attrition

Annual (TTM) Average Account, Volume Gross, Net Revenue Gross Attrition: 2010 – 2013




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86 88 90 91 92 93 93 94 95 97 97 97 98 99 99 100 101

70 72 74 75 76 76 76 77 77 78 78 77 78 78 78 78 78

Q42009

Q1 Q2 Q3 Q42010

Q1 Q2 Q3 Q42011

Q1 Q2 Q3 Q42012

Q1 Q2 Q3 Q42013

Industrial Production Index Industrial Capacity Utilization

Production, Utilization and Prices (Capacity Utilization in % of total capacity – quarterly average, PPI & CPI S.A. 12 mo. % change at end of Qtr.)

Production, Utilization & Prices (Q4 2009 – Q4 2013)

*CPI & PPI seasonally adjusted, the Industrial Production & Capacity Utilization indexes are monthly averages for the quarter


PPI & CPI: As of December 2013, the PPI has decreased 0.1% YOY while the CPI has decreased 0.3%. Growth in these inflation measures has been fairly consistent since Q2 2012 with slightly above average deceleration in Q3 readings. Contraction on both the CPI and PPI has been largely attributed to energy prices, primarily gasoline among the CPI index. Industrial Production & Capacity Utilization: Industrial capacity utilization is up slightly in Q4 2013 and has increased every quarter since Q4 2012. Industrial production does not include service sector output, the largest component of the U.S. economy. Capacity Utilization has been very steady at an index of 78 which is just below the average dating back to 1972 of 80. Below average levels of utilization is likely to keep inflation rates below Fed target rates of around 2% which in turn will likely prevent the central bank from tightening monetary policies to any strong degree. Source: Federal Reserve, BLS.gov

11

NMI: an index of non-manufacturing activity based on indicators with equal weights: business activity, new orders, employment and supplier deliveries.

Manuf. & Non-Manuf. Activity (Feb 2011 – Feb 2014)

PMI: an index of manufacturing activity based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.

50% = Manufacturing Economy Breakeven Line

41.2% = Overall Economy Breakeven Line

61.4

52.4 54.2

53.2

59.7 57.3

56.0

51.6

40.0

50.0

60.0

Manufacturing & Non-Manufacturing Activity PMI NMI

Manufacturing: Activity in the manufacturing sector continued to accelerate for the ninth consecutive month in February 2014 and the overall economy grew for the 57th consecutive month. The February PMI registered 53.2%, an increase of 1.9% over January’s reading. Contacts mentioned weather conditions as a factor impacting February, but optimism continues to be seen going forward. 14 of the 18 manufacturing industries reported growth in February, the four industries that contracted are apparel, leather & allied products, petroleum and cola products, and miscellaneous manufacturing. Non-Manufacturing: The non-manufacturing sector continued its trend above 50 at a lower pace in February 2014 with 10 of the 18 industries reporting growth. Survey respondents’ comments indicate a slowing in the rate of growth month over month of business activity and are cautious regarding business conditions and the economy going forward. Source: Institute for Supply Management

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4.5% 3.9% 4.7% 1.4% 1.3%

2.8% 1.4% 3.0% 1.8% 1.5%

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50100150200250300350400

US New Home Sales (bars, by Region) & Construction Seasonally Adjusted Annual Rate (Thousands) Northeast Midwest South West

713

969 907

New Construction (thousands)

February 2012 Totals: New Home Sales: 366,000 Construction Starts: 713,000

February 2014 Totals: New Home Sales: 440,000

Construction Starts: 907,000

New Home Sales (Feb 2012 – Feb 2014¹)


Revolving vs. Non-Revolving Credit Q1 2008 to Q4 2013

New Home Sales: Sales of new residential homes have been relatively flat in recent reports, as sales have decreased 1% from February 2013 to February 2014; and have decreased 3% from Jan 2014. According to the National Associate of Home Builders (NAHB) the bad weather took a toll on February sales, however builders are continuing to increase their inventory of homes for sale as they anticipate a relatively strong spring. New Home Construction: New home construction decreased approximately 6% in February 2014 from the year prior to an annual rate of 907,000, however still in-line with January 2014 only decreasing .2%. According to NAHB builders are in a holding pattern due to the weather keeping many from getting into the field. Spring is expected to see an improvement following the winter lull. Source: US Census, National Association of Home Builders

Consumer Credit & Debt Service: The bar chart(s) represents the seasonally adjusted annualized percent change in outstanding consumer credit, both revolving and non-revolving credit types. The line chart represents the household debt service ratio which is the ratio of debt payments, including mortgage and consumer debt, to disposable personal income and is estimated by the Federal Reserve. Most notable for 2013 Q4 numbers is the expansion in revolving consumer credit, an indication consumer confidence is higher and consumers are charging purchases to credit. This is the highest it has been since mid-2008. Growth in non-revolving consumer credit has been slowing since Q4 2011 but remains at well above average rates since 2008 due to the continued historically low interest rates. Debt service ratio is at its lowest level in the data presented as of Q4 2013 and is likely to continue its decline given the slowdown in both revolving and non-revolving credit balances. This is a positive for consumers’ personal budgets and free cash flow. Sources: BLS.gov, BEA.gov, Federal Reserve.gov

*Feb 2014 data is preliminary

12

Revolving & Non-Revolving Credit, Debt Service Ratio

-12.5%

-7.5%

-2.5%

2.5%

7.5%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2008 2009 2010 2011 2012 2013

Revolving consumer credit Non-revolving consumer credit

13.05

9.96

DSR

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District #4: Cleveland

Overall

Business activity continued at a moderate pace early in 2014

Consumer Spending

Disappointment in January sales and down YOY

Banking

Business credit showed little movement while consumer credit demand grew

Manufacturing

Steady demand to growing at a robust pace over the last six weeks, production higher compared to a year ago

Fed’s Beige Book Regional Comments (Districts 1 - 6)

Current Economic Conditions by The Federal Reserve Board: Commonly known as the Beige Book, this report is published eight times per year, most recently on March 5, 2014. Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources. This and the following page are a graphical interpretation of each district’s report (selected information only). The ‘last report’ referenced (report prior to 03/05/2014) was released on January 15, 2014.

District #1: Boston

Overall Modest increases in revenues and sales

Manufacturing Most reported higher sales and a positive outlook

Retail

Most report 2013 YOY sales increases ranging from 3 percent to mid-single digits; prices remain steady

Residential Real Estate

Mixed results for sales of single family houses and condos

District #2: New York

Overall

Modest decline at the beginning of 2014 due to inclement weather

Real Estate

Weather and difficulty obtaining credit created a mixed report

Retail Sales below YOY levels to start 2014 due to weather

Finance & Banking

Decrease in demand for consumer loans/mortgages, no change for commercial

District #3: Philadelphia

Overall Slight decline due to weather, outlook remains optimistic

Retail

Moderate decline due to snow storms and power outages; Valentine’s Day Sales weak

Finance & Banking

Little overall change in total loan volume, bankers remain optimistic

Manufacturing

High optimism but deteriorating levels of activity due to weather

District #5: Richmond

Overall

Increased modestly on balance despite business closings due to weather

Retail

Modest revenue growth slightly restrained by winter storms

Banking

Consumer borrowing slowed while commercial lending remained strong

Labor Markets

Mixed results as hiring slowed for some sectors, while others saw demand

District #6: Atlanta

Overall

Slow expansion, but outlook remains positive and growth is expected near-term

Retail

Declining sales due to weather and increasing healthcare premiums

Labor Market

Job growth remained muted; businesses relied on tech to enhance output

Manufacturing

Moderate expansion, improvements in new orders and production


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District 11: Dallas

Overall Economic activity grew at a moderate pace over the past six weeks

Labor Market Held steady or increased slightly at most firms

Retail Slightly weaker due to bad weather, but YOY growth remained positive

Energy Demand for oil field services remained healthy over the past six weeks

District #7: Chicago

Overall Economic activity slowed due to severe weather, contacts remain optimistic

Manufacturing Slowed to a modest pace, contacts remain cautiously optimistic

Business Spending

Growth slowed to a modest pace, several contacts reported expansion plans

Consumer Spending

Slowed due to poor winter weather after necessities were purchased

District #10: Kansas City

Overall Remained stable and expected to improve in coming months

Consumer Spending

Declined moderately due to weather and softening in consumer confidence

Banking Steady loan demand, improved loan quality, stable deposit levels

Agriculture Crop conditions waned; livestock strengthened

District #12: San Francisco

Overall Expanded modestly from late Dec. through mid-Feb., limited price pressures

Real Estate Housing demand advanced as home prices rose further and commercial trended upwards

Retail Recent reports indicated that both in-store and online sales were soft

Manufacturing Mixed activity from late Dec. through mid-Feb.

District #8: St. Louis

Overall Economy expanding at moderate pace; activity positive in many sectors

Manufacturing Positive activity - plans to add workers, expand operations and facilities

Real Estate Home sales increased on a YOY basis, commercial and industrial improved

Agriculture Red meat production was 1.2 percent higher than in 2012

District #9: Minneapolis

Overall Moderate economic growth specifically in spending, construction, manufacturing

Consumer Spending

Moderate Increase in consumer spending since last report

Labor Market Slight tightening with moderate overall wage increases

Manufacturing Activity increased moderately increasing particularly in Minnesota and Dakotas


Fed’s Beige Book Regional Comments (Districts 7 - 12)

14

Current Economic Conditions by The Federal Reserve Board: Commonly known as the Beige Book, this report is published eight times per year, most recently on March 5, 2014. Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources. This and the following page are a graphical interpretation of each district’s report (selected information only). The ‘last report’ referenced (report prior to 03/05/2014) was released on January 15, 2014.

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Overall Conditions: 6 Weeks Ending

Sept 2010

Dec 2010

Mar 2011

Jun 2011

Sept 2011

Dec 2011

Mar 2012

June 2012

Sept 2012

Dec 2012

Mar 2013

June 2013

Sept 2013

Dec 2013

March 2014

District #1: Boston

District #2: New York

District #3: Philadelphia

District #4: Cleveland

District #5: Richmond

District #6: Atlanta

District #7: Chicago

District #8: St. Louis

District #9: Minneapolis

District #10: Kansas City

District #11: Dallas

District #12: San Francisco

Below is a chart representing the overall movement in economic/business conditions in each of the Federal Reserve districts over the past 3 years

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-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

$- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000

Avg. Sales Volume: $35 Bil.

Avg. Change: +4.0%

Motor Vehicle & Parts Dealers

Non-Store Retailers

Building Materials &

Garden Supplies

Gasoline Stations

General Merchandise

Stores

Food & Beverage Stores

Food Service & Drinking Places

Clothing & Accessories

Stores

Health & Personal

Care Stores

Sporting Goods, Hobby, Book & Music Stores

Electronics & Appliance Stores

Furniture & Home Furnishing Stores

Sales Volume ($ millions)

CAGR % Change (February ’11 – February ’14)

Size of circle represents share of total retail sales

The chart below provides an overview of US Retail and Food Services, shown according to the twelve major NAICS codes. From February 2011 to February 2014¹, the two highest growth retail segments, excluding Gasoline Stations and Motor Vehicle & Parts Dealers, were Non-Store Retailers and Building Materials & Garden Supplies. The two lowest growth retail segments for this period were Electronic & Appliance Stores and General Merchandise. Source: US Census 1: January 2014 data is advanced


Retail Sales by Segment

Non-Store Retailers – mail order houses, vending machine operators, home delivery sales, door to door sales, party plan sales, electronic shopping, portable stalls (e.g. street vendors, excluding food), direct sales of products, such as home heating oil dealers and newspaper delivery. 81% of these non-store retailers were made up of electronic shopping and mail order houses as of December 2011.

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An average of the quarterly year-over-year growth rate of sales for TSG’s 14 Standard Industrial Classification (SIC) codes representing the U.S. Market provides a high-level look at the economic climate in recent history. The contraction in Q1 2013 can be largely attributed to the number of processing days in Q1 2013 vs. Q1 2012; there were 4% less days in Q1 2013. Same store sales growth in Q2 and Q3 2013 accelerated consecutively, while Q4 slowed down a bit to 1.59% growth over the same quarter previous year. Following pages illustrate same store sales trends among the fourteen SIC groups within TSGs 2.1 million SMB merchant acquiring database. Please see these links for more information on TSG’s MPPS: Overview / Ex. Report

U.S. Same-Store Sales (Q1 2010 – Q4 2013)

17

0.33%

2.03% 1.87%

3.69% 3.99%

3.28%

4.03% 4.17%

5.82%

3.53%

1.75%

3.50%

0.57%

2.74%

3.72%

1.59%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

Q1 2

010

Q2 2

010

Q3 2

010

Q4 2

010

Q1 2

011

Q2 2

011

Q3 2

011

Q4 2

011

Q1 2

012

Q2 2

012

Q3 2

012

Q4 2

012

Q1 2

013

Q2 2

013

Q3 2

013

Q4 2

013

Same Store Sales of TSG’s MPPS Database: Average Total Growth Rates of All SIC Codes

(2.1 M merchants; average of individual SIC groupings on following pages)

Complete Chart

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http://origin.library.constantcontact.com/download/get/file/1111273965379-355/TSG+SIC+Code+Grouping+Detail.pdf

http://origin.library.constantcontact.com/download/get/file/1111273965379-321/MPPS+Marketing+Doc+-+Member+Benefits+Aug+2013.pdf

http://origin.library.constantcontact.com/download/get/file/1111273965379-320/MPPS+Portfolio+Example+Report+2013.pdf



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18

The following charts show the quarterly year-over-year growth rate of each SIC group for each quarter from Q1 2010 through Q4 2013. In Q4 2013 ten of the fourteen SIC groupings experienced annual increases in same store sales volumes. Transportation Services, Wholesale, and Construction Services led the way with all having annual growth of at or above 6 percent. Health & Medial Services, Construction Services, Business & Personal Services, Auto, Boat, & Home Dealers, and Entertainment & Recreation each saw near or above a 2 percent jump YOY. For more information on the divisions and inclusions of each code, please see this link: SIC Category Detail

-4%

-1%

3%

6%

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

-3%

0%

3%

5%

8%

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

-6%

-3%

-1%

2%

5%

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Retail SIC 2

Business & Personal Services SIC 3 Wholesale SIC 7

Home Furnishing, Supply & Auto SIC 6

Auto, Boat, & Mobile Home Dealers & Repair Shops SIC 5

0%

5%

10%

15%

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

0%

4%

8%

12%

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Andrew - Done

-2%

1%

4%

6%

9%

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

-2%

0%

2%

4%

6%

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Eating, Drinking & Hospitality SIC 1

Grocery, Food & Liquor Stores SIC 4


http://paymentspulse.com/wp-content/uploads/2012/09/MPPS-Glossary.pdf







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19

0%

4%

8%

12%

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

-5%

-1%

4%

9%

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

-3%

2%

6%

10%

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

0%

3%

5%

8%

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

-1%

3%

7%

10%

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

-4%

0%

4%

8%

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Petroleum sales are up 5 percent for the first time since Q1 2013 as gas prices rose throughout the country. Manufacturing continues to remain flat or show small drops from the same quarter in the previous year. For more information on the divisions and inclusions of each code, please see this link: SIC Category Detail

Entertainment & Recreation SIC 10

Education, Non-Profits, Public Services & Interest Groups SIC 8

Petroleum SIC 14

Manufacturing SIC 13

Transportation Services SIC 12

Construction Services SIC 11

Health & Medical Services SIC 9

-10%

-3%

5%

13%

20%

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Andrew - Done









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$216 $199 $224 $229 $237 $223

$246 $250 $262 $244 $270 $277 $287

Q4 2010 Q1 Q2 Q3 Q4 2011 Q1 Q2 Q3 Q4 2012 Q1 Q2 Q3 Q4 2013

US Credit Card Payments Volume & # of Transactions (Columns show Volume in $ Billions, Line shows # of Transactions in Billions)

(Visa fiscal year Oct – Sept, data in chart reported on normal year)

$126 $115

$129 $130 $134 $124

$135 $134 $140 $127

$141 $144 $148

Q4 2010 Q1 Q2 Q3 Q4 2011 Q1 Q2 Q3 Q4 2012 Q1 Q2 Q3 Q4 2013

US Credit Card Payments Volume & # of Transactions (Columns show Volume in $ Billions, Line shows # of Transactions in Billions)

1.5 1.4

1.5 1.6 1.6 1.5

1.6 1.6 1.6

1.4 1.6 1.6 1.7

53.8%

48.6%

46.2%

51.4%

0% 50% 100%

+9.5% +9.7%

Q4 2012 to Q4 2013: Credit Card Payments

Volume: Transactions:

Payment Type Mix: $ Volume (Visa and MasterCard’s Q4 ‘13)

Credit Debit

* % may not calculate due to rounding

2.5 2.3 2.6 2.7 2.8 2.6 2.9 3.0 3.1 2.8 3.2 3.3 3.4

Card Volumes

+5.7% 6.2%

Q4 2012 to Q4 2013: Credit Card Payments


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$277 $278

$294 $288 $292

$284

$266 $271

$282 $285

$300 $298 $303

Q4 2010 Q1 Q2 Q3 Q4 2011 Q1 Q2 Q3 Q4 2012 Q1 Q2 Q3 Q4 2013

US Debit Card Payments Volume & # of Transactions (Columns show Volume in $ Billions, Line shows # of Transactions in Billions)

(Visa fiscal year Oct – Sept. Data displayed using normal year)

$88 $93 $98 $97 $104 $111 $111 $110 $116 $119 $122 $123 127

Q4 2010 Q1 Q2 Q3 Q4 2011 Q1 Q2 Q3 Q4 2012 Q1 Q2 Q3 Q4 2013

US Debit Card Payments Volume & # of Transactions (Columns show Volume in $ Billions, Line shows # of Transactions in Billions)

7.5 7.3 7.8 7.8 7.8 7.5 7.2 7.4 7.5 7.5 8.0 8.1 8.1

34.0%

29.8%

66.0%

70.2%

0% 50% 100% 2.2 2.3 2.5 2.5 2.6 2.7 2.8 2.8 2.9

2.9 3.1 3.2 3.3

Card Volumes

+7.4% +8.0%

Q4 2012 to Q4 2013: Debit Card Payments


+9.5% +13.8%

Q4 2012 to Q4 2013: Debit Card Payments



Credit Debit

Payment Type Mix: # of Transactions (Visa and MasterCard’s Q4 ‘13)

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$82

$84 $85 $84 $83 $85 $86 $85 $86

$88 $89 $90 $88

$85 $87 $87

$86 $84

$86 $85 $84 $84

$86 $85 $87

$84

Q4 2010 Q1 Q2 Q3 Q4 2011 Q1 Q2 Q3 Q4 2012 Q1 Q2 Q3 Q4 2013

MasterCard Visa

Visa: +2.3% 0.0%

Q4 2012 to Q4 2013: Credit Card Ave. Ticket

MasterCard:

$39

$41

$40 $39

$40

$41

$39 $39 $40

$41

$39 $39 $39

$37 $38

$37 $37

$37 $38

$37 $37 $38 $38

$37 $37 $37

Q4 2010 Q1 Q2 Q3 Q4 2011 Q1 Q2 Q3 Q4 2012 Q1 Q2 Q3 Q4 2013

MasterCard Visa

Visa: -2.5% -2.6%

Q4 2012 to Q4 2013: Debit Card Ave. Ticket

MasterCard:

& US Credit Card Average Tickets

& US Debit Card Average Tickets

Card Volumes

*Ave tickets may not match data in previous slides due to rounding * % may not calculate due to rounding

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269 267 256 258 261 263 265 270 273 277 278 280 285

172 171 170 173 175 176 176 176 177 178 178 177 176

Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 Q4 Q1 Q2 Q3 2013

Visa - Credit MasterCard - Credit

Visa: MasterCard:

Q3 2012 to Q3 2013: Credit Cards in Circulation

MasterCard:

399 419 395 397 394 441 426 412 425 439 428 428 428

117 123 126 129 130 133 136 134 135 142 144 144 151

Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 Q4 Q1 Q2 Q3 2013

Visa - Debit MasterCard - Debit

Visa:

Q3 2012 to Q3 2013: Debit Cards in Circulation

+11.9% +0.7%

+0.6% -0.6%

Card Volumes

& US Credit Cards in Circulation - millions

& US Debit Cards in Circulation - millions


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$667 $661 $704 $741 $731 $662 $667 $658 $664 $649

$701 $696 708 $675 $715 $738 $760 $746 $782 $816 $821 $859 $838 $847 $854 841

$-

$150

$300

$450

$600

$750

$900

Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 Q4 Q1 Q2 Q3 2013

Debit Vol./Crd - Visa Debit Vol./Crd - MC

$770 $809 $777 $868 $877 $901

$842 $926 $960

$881 $971 $989

$1,007

$709 $743 $676

$746 $743 $761 $705 $761 $791 $713 $792 $814

$841

$-

$200

$400

$600

$800

$1,000

Q3 2010 Q4 Q1 Q2 Q3 2011 Q4 Q1 Q2 Q3 2012 Q4 Q1 Q2 Q3 2013

Credit Vol./Crd - Visa Credit Vol./Crd - MC

Visa: MasterCard:

Q3 2012 to Q3 2013: Volume per Debit Card

-2.1% +6.6%

Visa: MasterCard:

Q3 2012 to Q3 2013: Volume per Credit Card

+6.3% +4.9%

Card Volumes

& US $ Volume per Credit Card

& US $ Volume per Debit Card


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The Electronic Transactions Association (ETA) is an international trade association representing companies who offer electronic transaction processing products and services. The purpose of ETA is to influence, monitor and help shape the merchant acquiring industry by providing leadership through education, advocacy and the exchange of information. ETA's membership spans the breadth of the payments industry, from financial institutions to transaction processors to independent sales organizations (ISOs) and equipment suppliers. More than 500 companies worldwide are members of ETA. Please visit www.electran.org for more information.

The Strawhecker Group (TSG), founded in 2006, is a management consulting company focused on the global electronic payments industry. TSG clients include merchant acquirers/ISOs, issuers, the card brands, technology and mobile companies, processors, major merchants, bank specialty lenders and private equity firms, as well as banks and financial institutions. The TSG team consists of proven industry leaders with extensive experience leading companies through explosive growth periods, mergers and acquisitions, technology-driven strategies, and data-driven decision making within the Payments Industry. TSG’s Service Groups Payments Strategy - Payments Strategy encompasses the full spectrum of advisory services within the Payments Industry. The depth of these services is built on deep industry knowledge - the Partners and Associates of the firm have an average of over 20 years of industry experience. With clients from card issuers to merchant acquirers, TSG has the experience and expertise to provide real-time strategies. Transaction Advisory - Whether buying or selling, seeking investment funding, or planning your company’s exit strategy, TSG’s experience can be critical to achieving success. TSG has performed more than 100 Payments Company Valuation and/or Business Assessments in the past three years - ranging in value from $1 million to $1 billion. TSG Metrics - TSG Metrics, the strategic research and analysis division of TSG, provides the Payments Industry with highly focused research and industry-wide studies. TSG Metrics takes data, boils it down to information, transforms it to knowledge and presents it to provide wisdom to its client partners. Other recent TSG reports and analysis include (Click for more information):

For more information, contact TSG at [email protected] Subscribe to TSG's NewsFilter * PaymentsPulse.com * Follow TSG on Twitter * Follow TSG on LinkedIn * TheStrawGroup.com

About ETA

About TSG

25

Should Merchant Acquirers Beware of

Square?

What Benefits Me By Paying a Credit Card

Swipe Fee

TSG Mobile Payments Infographic

TSG Analysis: Global Acquisition of PayPros

TSG Roundtable on Target Breach & EMV








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http://paymentspulse.com/wp-content/uploads/2012/11/TSG-Square-Infographic.pdf

http://paymentspulse.com/wp-content/uploads/2013/02/TSG-Infographic-Credit-Card-Swipe-Fees.pdf

http://paymentspulse.com/wp-content/uploads/2013/04/Pay-with-Phone-Infographic.pdf

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