State of the Payments Industry: Q3 Quarterly Update

THE STATE OF PAYMENTS QUARTERLY UPDATE THE FIRST HALF OF 2014 marked a rise in springtime credit spending and interesting advancements in global mobile wallet and payment technologies. In the United States, what will this increased e-commerce activity and the upcoming back-to-school and winter shopping seasons hold for the rest of the year? CREDIT CHECK: How Much are Consumers Spending and Borrowing? INDEX OF CONSUMER SPENDING 2013 2014 Q1 Q2 03 Q4 Q1 Q2 6.3% 7.8% 6,1% 5.7% NON-REVOLVING 5.5% 5.3% 8.8% 5.4% 8,1% TOTAL PERCENTAGE CHANGE 8.5% 8.0% 7.3% 6.6% (ANNUAL RATE) 2.0% 1.3% 1.0% 0.9% REVOLVING -0.4% $3,211.20 $3,056.70 $3,097.40 $3,141.30 TOTAL DOLLAR CHANGE $2,968.40 $3,009.10 (ANNUAL RATE) $2,239.80 $2,284.60 $2,338.10 $2,118.90 $2,157.60 $2,203.40 NON-REVOLVING $849.40 $851.50 $853.30 $857.50 $856.70 $873.10 REVOLVING Q1 Q2 оз Q4 Q1 Q2 2013 2014 The 02 2014 Consumer Credit Index reveals that U.S. consumer credit grew at a 7.75% SEASONALLY ADJUSTED ANNUAL RATE DURING Q2 2014. Revolving credit increased to $873.1 BILLION, the largest percentage increase since Q2 2011. CH-CH-CH-CHARGES Year-Over-Year Credit Card Spending Volume Increases: Following a long winter, travel and home improvement sales drove 4.9% extensive growth in early Q2, 4.3% 3.9% trailing off in June. APRIL MAY JUNE 2$ THE MOBILE WALLET: Trends and Highlights in Mobile Payments BEACONS Barely on the radar a year ago, beacons have now gained tremendous traction in the market. The beacons installed base is expected to reach a 287% COMPOUNDED ANNUAL GROWTH RATE over the next 5 years. 287% CAGR By the end 2018, retailers are expected to employ approximately 3.5 MILLION BEACONS. RETAILERS USING BEACONS WITH FEATURES SUCH AS... %24 .experience up to 16.5X INCREASED in-store app usage and 6.4X INCREASES in-app user retention. INDOOR MAPS LOCATION-BASED TARGETED PRODUCT PAYMENT OPTIONS COUPONS RECOMMENDATIONS NEAR FIELD COMMUNICATION Although many people believe near field communication's viability has come and gone, the payment technology still boasts numerous large-scale backers, including Google and SoftcardTM. Mass quantities of NFC-enabled phones are still shipped globally. 400M+ 2014 ~1B 2018 Merchants across the country will be updating their point of sales devices and payment terminals for NFC-enabled technology. INFORMED INSIGHT: Predictions for the Coming Months BACK TO SCHOOL The back-to-school season is expected to top $74.9 BILLION in retail sales during 2014. The average family with children in grades K-12 is estimated to spend $669.28 on apparel, shoes, supplies, and electronics during 2014-A 5% INCREASE FROM 2013. of back-to-school of these shoppers, however, 85% 91% would shop elsewhere if offered a promotion or reward. shoppers return to the same stores yearly. YET ONLY 3 IN 10 BUSINESS OWNERS RAN LOYALTY PROGRAMS DURING 2013. WINTER HOLIDAY SEASON Back-to-school season leaves retailers with limited turn-around time to prepare for the winter holiday season. NOVEMBER DECEMBER FROM BLACK FRIDAY S M T W т F S W T F s TO CHRISTMAS, THE 2014 HOLIDAY SHOPPING SEASON HAS 26 DAYS-5 DAYS LESS THAN 2012. THE QUINTESSENTIAL QUALITY E-COMMERCE EXPERIENCE Retailers expanding their e-commerce, mobile, and omni-channel capabilities can directly impact their winter holiday season success. In 2011, consumers spent an average of $121.38 online in November In 2013, these figures jumped to $132.71 and $122.46, while time and $108.39 online in December. spent onsite fell by a full second between 2011 and 2013. $121.38 $132.71 $122.46 $108.39 NOVEMBER DECEMBER NOVEMBER DECEMBER 2011 2013 Mobile devices are estimated to account for 20% OF SITE SALES and 43%+ OF SITE TRAFFIC in November 2014. 38.2% 20% 43% Mobile site traffic reached 38.2 percent in March 2014 – up from 13% in Nov. 2012. INDUSTRY PULSE: Trends and Regulatory Updates ALIPAY: Chinese e-commerce sales tripled from 2006 to 2013, surpassing the U.S. with $294 billion in transactions last year. The driving force behind this growth is AliPay. ALIPAY: ~50% of China's total e-commerce PAYPAL: 30% of U.S. total e-commerce transactions CHINA AMAZON: 20.6% anticipated market share in 2016 $519 BILLION processed in 2013 CURRENTLY, E-COMMERCE ACCOUNTS FOR 7.8% OF CHINA'S RETAIL SALES AND IS EXPECTED TO COMPRISE MORE THAN 10% BY THE END OF 2014. M-PESA: Kenya currently boasts the highest rate of mobile payment technology adoption, as more than 80% of the country's population pays for goods and services on their smartphones. HOW IT WORKS: Like buying minutes on a pay-as-you-go phone plan, M-PESA users purchase "mobile money" that allows them to transfer funds 31% ΚΕΝΥA to individuals or businesses via text. >17 MILLION KENYANS USE M-PESA this is equal M-PESA makes up 31% of to nearly 40% of the country's total population. the country's GDP. BEYOND EASE OF USE, THIS TECHNOLOGY IS ALSO IMPROVING 24 INCOMES. RURAL KENYAN HOUSEHOLDS THAT ADOPTED M-PESA, SAW A 5%-30% RISE IN INCOME. SOURCES: BusinessWeek.com, MPESA.in/portal, Economist.com, Business Insider Merchant Warehouse Intelligence, InMarket.com, CardNotPresent.com, Forbes.com, WSJ.COM, BusinessWeek.com, TheNextWeb.com, qz.com THE STATE OF PAYMENTS CHANGES QUICKLY. WE'RE HERE TO KEEP YOU UPDATED.