u.s. economic indicators report · note 2: paypal volume includes volume from a bank account, a...

U.S. Economic Indicators ReportTRANSACT 17 Edition

This report is based upon information we consider reliable, but its accuracy and completeness cannot be guaranteed. Information provided is not all inclusive. All information listed is as available. For internal use only. Reproducing or allowing reproduction or dissemination of any portion of this report externally for any purpose is strictly prohibited and may violate the intellectual property rights of The Strawhecker Group. All sales are final, nonrefundable, and nontransferable.

© Copyright 2017. The Strawhecker Group & Electronic Transactions Association. All Rights Reserved.

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2U.S. Economic Indicators © Copyright 2017. The Strawhecker Group & Electronic Transactions Association. All Rights Reserved.

Report Introduction

The Electronic Transactions Association, in partnership with The Strawhecker Group, is pleased to release this special reporton the U.S. economy, focused within the context of the electronic payments ecosystem.

This report is a member benefit provided to the Electronic Transactions Association’s member companies worldwide.

REPORT CONTENTS▪ U.S. Macroeconomic Outlook (Page 3)▪ Payment Network Size & Growth (Page 4)▪ Performance of Public Payments Companies (Page 5)▪ Payments Versus Sports: Perspective in Valuations (Page 6)▪ Consumer Survey Results

• Payment Method Sentiment (Page 7 - 8)• Card Brand Use & Sentiment (Page 9)• Mobile Wallet Usage (Page 10)

The Electronic Transactions Association is the leading trade association for the payments industry, representing 500 companies worldwide who offer

electronic transaction processing products and services. The purpose of ETA is to influence, monitor and shape the payments industry by providing

leadership through education, advocacy and the exchange of information. ETA’s membership spans the breadth of the payments industry. ETA member

companies touch, enrich and improve the lives of every consumer while making the global flow of commerce possible. For more information please

visit electran.org.

The mission of The Strawhecker Group (TSG) is to provide the electronic payments ecosystem and its investors with unmatched

advisory services. TSG’s unique offering is built on decades of focused expertise, powerful data, and the combined intangible

value these provide. Our vision is to be admired for our people, partnership, and performance. TSG clients include merchant

acquirers/ISOs, issuers, the card networks, technology and mobile companies, VARs and ISVs, payments processors, global retail

merchants, bank specialty lenders and private equity firms, as well as banks and financial institutions. For more information

please visit thestrawgroup.com.

http://www.electran.org/

http://www.thestrawgroup.com/


Electronic Payments - The Engine The Runs The Economy

Snapshot – U.S. Macroeconomic Outlook

Consumer Spending Is A Key Ingredient In The Economy• Consumer spending is one of the most vital components of any economy.

Depending on an economy's breadth, consumer spending can range anywhere from 50% - 75% of gross domestic product (GDP).

Since the start of 2017, U.S. political issues have dominated the economic headlines and there appears to be more uncertainty about when and if Congress can deliver on policy changes. Despite these uncertainties, consumer and business sentiment surveys have presented an upbeat assessment of the economy. Economic trends currently suggest that 2017 will be a growth year when it comes to consumer spending. Retail sales (minus gas) are predicted to jump 4.1% this year, which would mark the best growth since 2014.

Payment Cards Play A Crucial Role In Stimulating Economic Growth• Increased use of electronic payments boosts consumption and GDP. Many

economists have suggested that a 1% increase in usage of electronic payments produces, on average, an annual increase of approximately $100 billion in the consumption of goods and services.

• Increased use of electronic payments makes the economy more efficient. Increased usage reduces transaction costs, improves the flow of goods and assists consumers by making purchasing more convenient.

• Electronic payment usage benefits governments which can collect more tax revenue due to more transparent transactions that can be taxed more readily.

• Encouraging the growth of electronic payments provides consumers and merchants a choice and increases competition. Policy measures that promote electronic payment solutions improve the economic environment.

Electronic payments are a major force in economic development and significantly impact spending

behavior and consumption.


The growth opportunity in the U.S. consumer payments processing market continues to be attractive. Total estimated U.S. Visa, Mastercard, Discover, PayPal, and American Express payment volume exceeded $5 trillion in 2016.

Payment Network Size & Growth

Note: PayPal 2012 figures represent eBay’s U.S. “Merchant Services Net Total Payment Volume”. 2013 – 2016 PayPal figures represent PayPal’s U.S. most recently available/estimated % share of “Total Payment Volume” (TPV)Note 2: PayPal volume includes volume from a bank account, a PayPal account balance, a PayPal Credit account, a credit or debit card or other stored value products such as coupons and gift cards. As such, some of this volume may be included in other networks as well.Source: TSG estimates, company financial records

Est. Payment Network Dollar Volume in the U.S. (Volume in billions, debit is signature and PIN)+9% CAGR

$959 $1,078 $1,212 $1,345 $1,367

$1,096$1,186

$1,270$1,374

$1,647$524

$560$608

$653

$693

$443$491

$535

$581

$619

$590

$637

$688

$721

$700

$128

$136

$139

$147

$278

$51

$97

$122

$155

$195

2012 2013 2014 2015 2016

Visa Credit Visa DebitMastercard Credit Mastercard DebitAmerican Express Total Discover TotalPayPal Total

$3,791

$4,185

$4,574$4,976

$5,353


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 2011 would now be valued at $306, as compared to $180 if invested in the S&P 500.

Performance of Public Payments Companies

Q12011

Q2 Q3 Q4 Q12012

Q2 Q3 Q4 Q12013

Q2 Q3 Q4 Q12014

Q2 Q3 Q4 Q12015

Q2 Q3 Q4 Q12016

Q2 Q3 Q4 Q12017

Q2*

+18.8% CAGR

+9.5% CAGR

S&P 500: $180

TSGPX: $306

$100

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. Updated through 4/26/2017.

VS.


This chart provides a comparison of public payments companies versus sports teams/organizations. For example, Square was founded in 2009, went public in November 2015, and is already more valuable than the combined value of the top 50 NCAA men's basketball teams. Mastercard and Visa went from membership organizations to publicly traded companies in 2006 and 2007, respectively; since that time, their value has increased drastically taking them well past the value of the NFL, NBA, and MLB.

Payments Versus Sports: Perspective in Valuations

1 The logos of the sports leagues represent the combined value of all of the teams within the league.

2 Represents the value of the top 50 most valuable college football programs.

Payments values are Market Capitalization of each given company on 3/28/17 or publicly released valuations. Logo placements are not exact. Neither ‘Payments’ nor ‘Sports’ lists are all inclusive.

DISCLAIMER: The Strawhecker Group (TSG) is not endorsed, sponsored by, or in any other way affiliated with the National Football League, Major League Baseball, National Basketball Association, National Collegiate Athletic Association, National Hockey League, The Barclays Premier League or their respective member teams shown. Click logo of company or team to be directed to their website - the trademarks shown are registered and their own. This document has not been prepared, approved, or licensed by any entity displayed. Sources: Yahoo Finance, Forbes, Wall Street Journal, Business Insider, Bloomberg.

PAY

MEN

TSSP

OR

TS

Value in Billions

http://www.nfl.com/

https://www.mlb.com/

http://www.nba.com/

http://www.ncaa.com/

https://www.nhl.com/

https://www.premierleague.com/


The Strawhecker Group has recently completed a market survey in order to gauge consumer sentiment of major U.S. card brands, and related technologies, in terms of trust and usage. Survey details are below, the next few slides provide a selectionof results from this survey.

Consumer Card Brand & Payment Method Sentiment Survey Results

Survey TimeframeMarch 29th, 2017 - April 3rd, 2017

Sample Size925 consumers that have at least one American Express, Discover, Mastercard, or Visa credit card

Sample Age18+ Years

Each respondent lives in the United States, has access to the internet, is 18 years of age or older, and has at least one American Express, Discover, Mastercard, or Visa credit card. The results of this survey are accurate at the 95% confidence level, ±3.2%. This survey sample is distributed across four age categories, with each category correlating with a difference of no more than ±7% with the actual age distribution of the U.S. population over the age of 18. TSG does not guarantee that this information will produce an outcome of any kind and does not assume any obligation for any outcome. Past results may or may not reflect future performance. The statements, views, and opinions shown in these results are not endorsed by The Strawhecker Group (TSG).

Which payment method do you feel is better?

13%

87%

Mobile wallet smartphone app

Plastic credit/debit card


Consumers feel that cards are more secure than mobile wallets. Those that prefer mobile wallets cite convenience as the top reason.


Why? (Results From Those That Selected Mobile Wallet Smartphone App)

3%

23%

56%

57%

63%

Other

Loyalty/Rewards

Security

Speed of Use

Convenience

Why? (Results From Those That Selected Plastic Credit/Debit Card)

18%

23%

25%

35%

59%

Other

Loyalty/Rewards

Speed of Use

Convenience

Security

Sample of Responses• “All of the above”• “Familiarity” • “Accepted at more places”• “I don’t have a smartphone”• “Chip technology”• “Not putting all my chickens in one

basket with a phone”• “Smartphones don't always work (dead

battery, no signal)”• “Not too knowledgeable about it”• “I don't know what the mobile app is or

how it works”• “Because it was the lesser of two evils, I

still prefer cash”

Sample of Responses• “Physical cards are owned by financial

corporations”• “Progress” • “Wish I knew how to use one”

Which payment method do you feel is better? Which payment method do you feel is better?


Most consumers would switch to a new card brand based on its reputation, very few choose a card based on customer service.


2%

5%

9%

19%

64%

Which card brand do you currentlyuse the most when shopping?

2%

2%

3%

7%

7%

7%

15%

15%

21%

23%

Better Fees

Bank Related

Convenience/Service

Security

Similar to Current Card

Rewards

Widely Accepted

Other/"No Reason"

Already Have It/Have Used It

Brand Reputation

If you had to switch from your current preferred brand, which brand would you switch to, and why?*

*Brands chosen by respondents are not shown. Full results are available from The Strawhecker Group.


Mobile payment adoption is still very low; though Starbucks has proven retailers can have a very strong mobile wallet/app.


Have you ever used a mobile walletapplication to shop in a physical store?

If so, which one? (select all that apply)

How many times have you used a mobile wallet application at checkout?

1%

2%

2%

9%

9%

9%

76%

Walmart Pay

Samsung Pay

Android Pay

PayPal

Apple Pay

Starbucks App

None

1%

6%

9%

8%

76%

Daily

Weekly

Monthly

Once

Never

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