Auriemma Consulting Group’s Payments Expectations Index Remains Positive
March 24, 2014
(New York, NY): Auriemma Consulting Group (ACG) continues to expect 2014 to be a year of strength for the Card Industry. The PE Index, launched in February 2013, combines four key performance indicators – profitability, risk, consumer sentiment, and regulatory compliance – into one index designed to measure and forecast the outlook for the credit card industry.
Profitability remains extremely robust, even though the consumer sentiment and credit risk indicators declined slightly from the prior Q3 period. Virtually all of the change in the consumer sentiment component of the PE Index related to a drop in consumer’s reported sense of financial comfort compared to the year prior. However, the survey revealed no change in spending or borrowing patterns which suggests consumer worry is not influencing behavior.
The credit metric does foreshadow a possible deterioration in industry-wide credit quality (albeit from very low loss levels). While normally a negative movement in the credit indicator would be a cause of concern, given the continued low levels of loss we feel, this may simply reflect a reversion to the mean. We also see the beginning of the anticipated effect of credit easing in that there was a modest increase in credit risk. However, this small adjustment is likely to be more than offset by increased growth and profitability.
The graph on the following page indicates the PE Index at Q3 2013 was 66 and the Q4 2013 value was 63. We view this modest pullback as a “breather” before continuing a positive trend for 2014. We consider that both levels reflect a strong position for the industry compared to historical performance, and the small decline in index value does not change our overall view of the desirability of card assets.
About Auriemma Consulting Group and the PE Index
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.
Complementary to our core consulting business, ACG facilitates a series of Industry Roundtable groups focused on a variety of industries in which clients exchange information through activities managed by ACG, comparing and analyzing industry practices and benchmarks so that each member can optimize its own performance. Founded in 1984, ACG has grown from a one-man shop to a more than 35-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, contact John Costa at (212) 323-7000 or firstname.lastname@example.org.