An Improving Economy Buoys Volumes for Payments Players

Charge volumes for some major payments-industry players, including American Express Co. and U.S. Bancorp, grew by double digits in the first quarter, an indication that consumer spending is recovering and generating more revenue-producing transactions for merchant acquirers.

–American Express’s growth was especially strong. The company reported Wednesday that U.S. card-billed business jumped 15% to $124.1 billion from $108 billion in 2010’s first quarter. Volume increased even faster outside the U.S., up 20% to hit $63.8 billion. In all, AmEx processed $187.9 billion in charge volume in the first quarter, up 17% from $161 billion a year earlier.

New York City-based AmEx, whose original franchise is the travel-and-entertainment industry, said non-T&E spending in the U.S. grew 15% in the first quarter and now accounts for 71% of U.S. volume. T&E volumes grew 16%. U.S. airline volume, which represents 10% of charges, grew 19% on a 12% increase in transactions and a 7% increase in the average airline charge.

U.S. cards in force, however, grew only 1% to 49.4 million. In contrast, the international card count increased 10% to 43 million, bringing AmEx’s total cards to 92.4 million, up 5% from 88 million in 2010’s first quarter.

Total discount revenue generated by worldwide charge volume hit $3.9 billion, up 14% from $3.42 billion a year earlier. Credit quality in AmEx’s card portfolio improved, too. In all, revenues net of interest expense grew 7% to $7.03 billion from $6.56 billion in 2010’s first quarter, and net income hit a record $1.17 billion, up 33% from $885 million.

–U.S. Bancorp, whose Elavon subsidiary is one of the nation’s largest acquirers, generated $301 million in merchant-processing revenues in the first quarter, up 3.1% from $292 million in the equivalent period a year ago, according to the bank’s earnings reported released Tuesday. Merchant-acquiring volume hit $70 billion, up 10.3% from $63.4 billion a year earlier. Transactions totaled 734.5 million, a year-over-year increase of 6.1% from 692.3 million.

Debit card transactions came in at 11 million, up 11.7% from 9.83 million in 2010’s first quarter. ATM processing revenues grew 6.7% to $112 million. Minneapolis-based U.S. Bank’s combined consumer and commercial credit card portfolio generated $22.4 billion in charge volume, up 10% from $20.4 billion a year earlier. The company’s Payment Services segment, which includes its merchant, card, and ATM businesses, posted net income of $287 million in the first quarter, more than double the $111 million it earned in the prior-year period, with lower provisions for loan losses accounting for most of the increase.

–Cincinnati-based Fifth Third Bancorp reported Thursday that non-interest card and processing revenues rolled in at $80 million in the first quarter, up 10% from $73 million in the 2010 period. The increase “reflected higher transaction volumes as general improvement in the economy drove increased spending,” the bank said in its earnings report. Fifth Third sold a 51% interest in its Fifth Third Processing Solutions subsidiary to private-equity firm Advent International in 2009.

–Not all banks saw increases in card volumes. Wayzata, Minn.-based TCF Financial Corp., the nation’s 11th largest Visa debit card issuer, reported card revenues of $26.6 million, off 1.8% from $27.1 million in 2010’s first quarter. The revenue decrease flowed from a drop in volume. “Card revenues are pretty flat, and that’s again economy-driven and to some degree the number-of-account driven,” TCF chairman and chief executive William A. Cooper said during his earnings conference call Thursday.

TCF, which has about 808,000 active debit cardholders, is suing the Federal Reserve to challenge the constitutionality of the so-called Durbin Amendment in last year’s Dodd-Frank financial-reform law that will regulate large issuers’ debit card interchange. The bank says the Fed’s preliminary proposal could cut its card revenues by as much as 85%.