Brave New World Order:
The Recent Mega-Mergers, the Economy, and Their Impact on the Payments Industry
Several of the largest commercial banks in the United States are currently involved in mergers that stand to have a significant impact on the payments industry. The recent merger activity and consumer payment trends are driven by an economy in recession. All of the major key indicators are pointing to a steep recession just in its beginning stages, providing a dramatic backdrop for the mergers. NEW RESEARCH REPORT BY MERCATOR ADVISORY GROUP
Boston, MA (PRWEB) December 14, 2008 -- Several of the largest commercial banks in the United States are currently involved in mergers that stand to have a significant impact on the payments industry. The recent merger activity and consumer payment trends are driven by an economy in recession. All of the major key indicators are pointing to a steep recession just in its beginning stages, providing a dramatic backdrop for the mergers.
Within the payments space, observers and operatives have noticed a movement toward debit payments and away from credit. This shift coupled with the tightening credit environment will accelerate consumers' already increasing adoption of prepaid and debit payment instruments, including cards and checks, and cash payments will likely also see a resurgence. Financially stressed consumers are trying to gain greater control over their budgets and increasingly protect themselves from overdraft and other retail banking fees. Households are focusing on aggressive spend management and account balance monitoring. The movement back to cash-based payments could also create more transaction volume for EFT networks. The flight to the relative safety of debit and prepaid will include even larger ticket items that would previously have been charged to credit cards.
Tightening credit coupled with rising unemployment, however, may not bode so well for overall consumer spending. As consumers' finances are further squeezed, personal consumption may fall to the point where all payment categories feel the sting of a recessionary economy, even debit. Though the secular trend in the payments space has been toward a general electronification of both consumer and business payments of all kinds (credit, debit, and prepaid), decreased spending could impact overall electronic payments growth, not just the trend line for credit cards.
Regardless of the danger of declining volume growth or even shrinking volume, it is Mercator's firm belief that payments will continue to provide no small measure of insulation against market and economic volatility, both for the new mega-banks as well as the smaller financial institutions deeply involved in the payments industry.
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