Americans are spending, but within their means:
US consumers continue to more frequently use debit as a method of payment. In addition we also saw growth in credit products outside the United States particularly in emerging markets.
Credit cards grew 6% to 812 million cards while debit rose 14% to 864 million cards. Importantly international growth of 16% remains very healthy.
While payment volume and average ticket sizes are moderating in the face of much more difficult economic times our transaction counts which are an important component of our net revenue are growing very well as the underlying secular shift to electronic payments and more precisely to Visa continues.
Our transactions are up and they appear to be up because we appear to be taking share from cash and checks in categories in the quick service restaurants, in the bill paying categories which are often larger dollar amount transactions, in supermarkets and wholesale retail chains and so forth and so on.
Notable growth rates in other categories of spend like recurring bill pay, quick service restaurants and health care. All of these categories tend to favor debit over credit in this environment which underlies some of the resilience of that product.
Quick service restaurants and categories like that are increasing more rapidly than high end retail or travel or airlines.
Not everyone benefits from falling oil prices:
[Gas prices] are around $1.70 a gallon right now, so there’s a huge drop in the price of gas and gas accounts for about 10% of our total payment volume across both categories... So you have 10% of your volume where the cost of a gallon of gas is off by 40%, 45%. That obviously will not be the case in 2010 assuming everything stays the way it is.
Lower advertising costs across the board:
Q: Can you characterize the level of your marketing spend that’s tied to contractual obligations versus what’s completely discretionary?
A: The majority of our marketing spending is discretionary not non-discretionary… The traction that we’re getting on marketing spend is mostly related to the efficiency of what we’re doing today as opposed to what we did a year ago… and frankly the lower cost of different types of media.
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