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Oct
Visa USA Introduces First Metric to Standardize U.S. Business-to-Business Spend; Commercial Expenditures Represent $14.3 Trillion Payment Opportunity
SAN FRANCISCO–(BUSINESS WIRE)–May 18, 2004
Visa USA today unveiled the Commercial Consumption Expenditure (CCE) index, the first financial metric to standardize how business and government spending is tracked within the United States. The new index will enable the payment industry, including Visa and its Member financial institutions, to measure and forecast the actual and future penetration of commercial payments products in meeting the market’s needs.
Created by a team of Visa research and economic experts, CCE draws on government data in methods similar to the Personal Consumption Expenditure (PCE) index, which annually monitors consumer-related spending. By using the same source of measures from the Bureau of Economic Analysis (BEA) and the Census Bureau, including the Gross Domestic Product, CCE offers an unbiased and consistent way to monitor business expenditures within the U.S.
“CCE is a thorough and well reasoned metric that points to the opportunity in the commercial payments market for the financial services industry,” said David Robertson, publisher of The Nilson Report. “It will provide payment companies with the means to measure their own market share as well as to develop dependable forecasts of commercial expenditures.”
Commercial Spend Quantified
Using CCE, Visa estimates that total business and government spending will reach $14.3 trillion by the end of 2004 — a more than 13 percent increase over 2000 spending. When compared with consumer spending, CCE is nearly twice as large as the $8.2 trillion in annual PCE spending.
The new CCE metric identifies a significant business opportunity for financial institutions, especially when considering the relatively low penetration of commercial payment products and services. CCE estimates suggest that the penetration of all payment company-related products will represent only approximately two percent of all business-related payments in 2004, pointing to a significant opportunity to increase usage of B2B payment solutions among US companies.
“Since the inception of the consumer payments industry, PCE has been the industry’s benchmark for consumer spending penetration,” said Wayne Best, senior vice president, Business Research, Visa USA. “The potential of the commercial payments segment has been a ‘best kept secret’ because there has been no standard metric to track business expenditure — until now. Visa’s CCE metric comes at a time when it is more important than ever to recognize and track the commercial payment opportunity, as businesses and government agencies transition away from checks to more efficient forms of payment.”
Visa’s Member financial institutions have not only recognized the opportunity, but have acted on it. As a result, the recent growth rate of Visa’s commercial payment volume outpaces that of the market. In 2003 alone, Visa posted a 20.4 percent increase in commercial payment volume. This supported an ongoing trend that has seen Visa produce a compound annual growth rate of more than 19 percent since 2000, while the market itself, as defined by CCE, experienced a compound annual growth rate of 2.5 percent.
“Visa has long recognized the importance and size of the commercial payment market, launching the industry’s first card-based business payment solution in 1989,” said Michael Dreyer, senior vice president, Visa USA. “We are proud to be making yet another industry-defining contribution to frame and measure our Members’ success in claiming part of this $14.3 trillion opportunity.”
Calculation Methodology
CCE is comprised of four key data elements including intermediate inputs, wholesale and retail purchases, private fixed investment and government spending.
— Intermediate inputs calculate the annual dollar value of
purchases made from one business to another by capturing the
money spent to acquire the materials and services used in
production, as well as most business expenses.
— Wholesale and retail purchases are added to the CCE equation
because they are not captured through intermediate inputs as
these industries are handling final goods and not intermediate
goods.
— Private fixed investment, or capital business expenditures
such as computers and office equipment that are not captured
through intermediate inputs or purchases.
— Government spending split into two categories to account for
both durable and non-durable goods.
Visa will update its CCE forecast once a year, following the release of BEA and Census Bureau data. The next analysis will be published in July 2004 to reflect BEA’s 2002 intermediate input values.
About Visa
Visa is the world’s leading payment brand and largest payment system, enabling banks to provide their business, consumer and merchant customers with a wide variety of payment alternatives. Nearly 21,000 financial institutions worldwide rely on Visa’s processing system, VisaNet, to facilitate $2.5 trillion in annual transaction volume with virtually 100 percent reliability. Within the U.S., nearly 14,000 financial institutions issue 429 million Visa cards, accounting for more than $1.1 trillion in annual transaction volume. And for business and government agencies, Visa offers trusted, reliable solutions that meet their many commercial payment needs — for virtually any purchase type, any situation or any business process. Plus, Visa delivers comprehensive transaction data such as invoice-related line-item detail and enhanced data on airline, hotel and car rental payments. These core capabilities, plus other value-added Visa services, help businesses and government agencies streamline operations, reduce overall costs and improve cash flow for better management of their payment processes. Visa’s commercial solutions offer the best way for businesses and the public sector to pay and be paid. For more information about Visa Commercial Solutions, please visit www.visa.com/commercial.