ACG’s Payments Expectations Index Inches Higher on Moderating Compliance Cost
October 14, 2014
(New York, NY): The second quarter 2014 Payments Expectations Index reflects two interesting developments. First, we noted a moderation in the cost of compliance for our issuer reporting group. Although over 40% of the issuers reported increasing expense of compliance, the majority reported no change or a reduction in this area. This has been a long time coming, but we did eventually expect to see a gradual leveling off of the rate of increase in compliance costs. The CARD Act is now several years old and issuers have adapted to the business process changes mandated by the change in law. Beyond The CARD Act there are other legal and regulatory changes that we expect to have impact in future quarters, hence this modest improvement in regulatory climate may in fact be short lived.
The second development we noted was the continued improvement of our credit metric component of the index. This is astonishing because the industry credit experience has been exceptionally good for such a long period and we are somewhat surprised that the forward outlook continues to signal strong performance. While we do expect an eventual “reversion to the mean”, we have not yet detected a sign of this.
The PE Index, launched in February 2013, combines four key performance indicators – profitability, credit risk, consumer sentiment, and regulatory compliance – into one index designed to measure and forecast the outlook for the credit card industry.
The PE Index at Q2 2014 is now 70.41. We continue to see the card business as healthy and remain optimistic about the industry through the remainder of 2014.
About Auriemma Consulting Group and the PE Index
Auriemma Consulting Group (ACG) is a boutique management consulting firm with specialized focus on the Payments and Lending space. We deliver actionable solutions and insights that add value to our clients’ business activities across a broad set of industry topics and disciplines. Founded in 1984, ACG has grown from a one-man shop to a nearly 50-person firm with offices in New York and London.
The PE Index is based on ACG research and is informed by both public and proprietary data. For more information, please contact John Costa at (212) 323-7000 or email@example.com.