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Industry News
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Charge-Offs Up Slightly, Set New High |
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Credit card charge-offs reached a new high of 7.74% in January, after 7.73% in December, and the increasing number of borrowers falling behind on payments means charge-off rates are almost certain to increase as the economy worsens, according to Moody's Credit Card Credit Indices.
Moody's predicted the charge-off rate index could move into double digits by the end of this year if unemployment keeps rising. The government releases the February unemployment rate, which could touch 8%, next Friday.
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Consumer Confidence Continues to Sag |
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The Conference Board, which tracks consumer confidence metrics, says the Consumer Confidence Index continued its record-setting downward trajectory this month.
The research organization said the February index stands at a record low of 25, down from 37.4 in January. Research company TNS conducts the monthly Consumer Confidence survey of 5,000 randomly selected U.S. households.
The percentage of respondents who said business conditions are "bad" increased to 51.1% from 47.9% who said so in January. Some 6.8% of consumers said business conditions are "good," up slightly from 6.5% last month.
Respondents anticipating business conditions will worsen during the next six months increased to 40.5% this month from 31.1% in January, while those expecting conditions to improve declined to 8.7% from 12.8%. The percentage of consumers anticipating fewer jobs in the months ahead increased to 47.3% from 36.9%, while those expecting more jobs fell to 7.1% from 9.1%, according to the survey.
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Study: Cards Continue to Replace Cash |
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Consumers’ use of cash is declining as they continue to embrace a range of card-based payment options, according to the 2008 Study of Consumer Payment Preferences, a nationwide study conducted by BAI Research and Hitachi Consulting, and sponsored by First Data, MasterCard Worldwide, Metavante, and PULSE.
Traditional card-based payment methods already have whittled away the base of check transactions in the United States, and are now impacting consumers’ use of cash, with 41 percent of consumers indicating they use cash less often today than they did two years ago.
“More and more consumers are substituting card-based payments in place of cash,” said Ajay Nagarkatte, managing director of BAI Research. “Of those who have reduced their cash use, 97 percent are shifting to credit, debit, or gift/prepaid cards instead.”
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New HIPAA Rules May Hit Payment Firms |
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The American Recovery and Reinvestment Act -- the formal title for the stimulus bill recently signed by President Barack Obama -- contains surprising modifications to HIPAA's Privacy and Security Rules, according to health care industry analysts. Some of those rule modifications may well change the way payment companies in the health care vertical market are regulated.
The new law, for the first time, requires business associates (including payment companies) to comply directly with many of HIPAA's rules and subjects business associates to HIPAA’s civil and criminal penalties. The Act increases the penalties for various HIPAA violations and dramatically expands other remedial actions (such as increasing federal government audits; granting attorneys fees in some HIPAA lawsuits; and allowing a method for individuals to recover penalties under HIPAA).
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Foiurth quarter 2008 ACH payments grew by 4.5 percent over the same period in 2007, topping 3.8 billion, according to statistics released by NACHA – The Electronic Payments Association.
Internet-initiated ACH payments (known as “WEB” entries) experienced robust growth, increasing 16.5 percent over 4th quarter 2007 volumes. Strong growth also occurred with certain business-to-business payments (known as “CTX” entries) in which remittance information is exchanged electronically.
“The continued growth of ACH transactions during a period of intense economic pressures speaks to the fundamental value that financial institutions, businesses, governments, and consumers recognize in the ACH Network,” said Janet O. Estep, NACHA president and chief executive officer. “The inherent safety, security, and efficiency of the ACH Network are resonating, as seen through the growth in specific market segments.”
The newest check conversion transaction – back-office conversion (known as “BOC”) - grew to over 39 million payments in 4th quarter 2008, from 3 million payments a year ago, as several national retailers are implementing BOC programs. BOC volume increased 49 percent from 3rd to 4th quarter 2008. Other ACH payment types tied directly to consumer check writing have leveled off as the use of checks continues to decline.
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