Visa USA Introduces Commercial Consumption Expenditure (CCE) index

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 markets 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. 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. Visas Member financial institutions have not only recognized the opportunity, but have acted on it. As a result, the recent growth rate of Visas 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. 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 BEAs 2002 intermediate input values.