Commercial companies include retailers, oil companies, airlines, travel and entertainment agencies, hotels, and telephone companies. Less than 1,000 commercial companies offer credit card programs to retailers. Commercial companies frequently use commercial vendors to accomplish authorization services.

Oil companies are beginning to use retail companies (e.g., Sears, J. C. Penney) networks to deliver credit and authorization services.

Telephone companies are increasingly promoting the use of credit cards to make long distance calls. Authorization is accomplished through commercial credit card vendors.

Commercial companies conduct a major portion of credit card authorization and processing services directly with their own retailers. Such services are considered “in-house” and are not included in the information services expenditure forecast in this study.



• Nationwide, value-added networks (VANs) are the key to the successful marketing of any financial transactions service including CCAS and CGS.

Sears and J. C. Penney are entering the marketplace by piggybacking CCAS/CGS on existing networks.

TYMNET has made arrangements with MasterCard for VAN services for MasterCard electronic transactions.

AT&T-lnformation Services has enormous potential for becoming a significant market participant.

• To reach into the retail marketplace, networks have many entry nodes.

Data entry nodes must be capable of handling a variety of terminals, protocols, and message formats.

Programmable communications intelligence in newer terminals has proved very effective.

• CCAS and CGS data networks must interface with each other and with interchange networks to effectively route transactions. Little standardization exists; message-protocol conversion is a must at each interface which creates unnecessary overhead.

• Nevertheless there is a growth trend toward network integration. Visa and MasterCard are comtemplating integrating their national interchange networks (were this to happen they would reap enormous cost savings benefits).


• Multiple Entry Points Critical

– Terminals

– Protocols

– Message Formats

• Message/Protocol Convention at the Interface

• Trend Toward Network Integration

– Transaction Interchange

– Credit/Debit Card

– Voice/Data



• Expenditures for voice-related check verification/guarantee information services currently represent the major portion (62%) of the total market.

Dial-up voice with operator voice-response comprises 38%.

Voice with audio response represents another 24%.

• Three factors will compound to produce a significant shift in service delivery modes over the forecast period:

Fraud is growing rapidly, particularly in credit cards, and is threatening the profit margins of card companies (i.e., Visa, American Express, MasterCard). There is therefore every incentive to facilitate CCAS at the retail level.

An aggressive program by market participants, financial institutions, third party information services vendors, value added network (VAN) vendors, retailers, and terminal vendors to install credit authorization, POS, and ECR terminals capable of handling both credit card and check transactions.

The expansion, integration, and interfacing of credit card data, check guarantee data, and interchange networks handling a wide variety of terminals, protocol, and message formats for both credit card and check authorization/guarantee transactions.

• Expenditures for electronic delivery will become the dominant (54%) component of all authorization/guarantee expenditures in 1990; with the most significant increase coming from POS/ECR originated electronic transactions that will rise from 22% of the current market to become its largest component, approaching 40% of the total



• Check guarantee and credit card authorization services are expected to grow at a combined average annual growth rate (AAGR) of 20% over the next five years, barring economic recession. However, market forces and economic conditions could combine to raise this compound growth to exceed 30% annually during the last half of the forecast period. Annual 1990 expenditures will reach $1.65 billion.

Credit card authorization services (CCAS) currently comprise nearly 55% of the current market. Although credit card transaction volume will increase less than 3% annually, the portion of total transactions processed by authorization services will rise from approximately 25% to in excess of 50%.

• Increases in the proportion of total transactions which are processed electronically (as opposed to voice), heavy competition, and economies of scale resulting in transaction price and volume discounts will limit total expenditure growth to 17% annually.

• Expenditures for check verification/guarantee services (CGS) will capture the major portion (51%) of total expenditures in 1990. CGS will benefit from the rapidly increasing base of credit card authorization terminals, which are designed to handle both credit card and check transactions.

• Competition and economies of scale similar to those for credit card authorization services will limit expenditure growth to 23% annually over the forecast period.



• Credit Card Authorization Service (CCAS):

– 7 Billion Annual Transactions

– $300 Billion in Total Spending

– Market Less than 25% Penetrated

• Check Guarantee Services (CGS):

– Over 20 Billion Transactions

– $500 Billion in Total Spending

– Market Less than 3% Penetrated



• The potential market for offering credit card authorization/check guarantee information services to retailers, financial institutions, and other companies is statistically awesome.

• Over 240 million consumers, using over 700 million credit cards, currently initiate over 7 billion transactions annually at an average cost of over 20 cents per transaction. This places the current credit card authorization services (CCAS) market potential at $1.5 billion in revenues.

• Another way to assess the same market is as follows: consumers currently spend some $300 billion for retail purchases utilizing credit cards. At an average of 3% of the charge amount, total expenditures for all credit card services, including authorization, are $9 billion. The portion related to credit card authorization is 20%; therefore, the 1985 market potential is $1.8 billion (the same order of magnitude as above).

• The gap between the current market and the potential market is very large. INPUT believes that less than 25% of all credit card transactions receive voice or electronic authorization.

• The potential market for check guarantee services (CGS) is even more impressive. Consumers currently write over 20 billion retail checks, the aggregate of some $500 billiion in total annual spending. Expenditures for CGS average 3% of the check amount; this places the potential market at $15 billion.

The gap between the existing market and the market potential for check guarantee services is even greater than that for CCAS. INPUT believes that penetration is currently less than 3%.


This executive summary is designed in a presentation format in order to:

Help the busy reader to quickly review key research findings.

Provide a ready-to-go executive presentation, complete with script, to facilitate group communication.

Key points of the report are summarized in Exhibits II- 1 through 11-5. On the left-hand page facing each exhibit is a script explaining the contents of the exhibit.

In order to reduce repetition of the terms “check guarantee services” and “credit card authorization services,” the acronyms CGS and CCAS will be frequently used.


The primary research for this report came from a combination of interviews with processing services vendors; available market data; annual reports from VISA, MasterCard, National Retail Merchants Association, and American Banker; and INPUT reports outlined in Appendix C, Related INPUT Reports.

The base year (1985) is consistent with the base year for INPUT’S U.S.
Information Services Markets, 1984-1989, Industry-Specific Markets (Vol. I).

Interviews were conducted with Telecheck Services, Telecredit, Fundsnet, National Bancard, Corndata Network, National Data Corp, First Data Resources, Chilton, and Visa International,

The definitions of terms used in this report appear in Appendix A. A data base summarizing forecasts by delivery mode and industry sector appears in Appendix BL

The forecasts contained in this report include a 6% factor for inflation.

Inquiries and comments on the information presented in this report are invited from clients.


INPUT’S market focus report provides the following:

Strategic planning data on current user information services expenditures and forecasts by service type and delivery mode.

Issues that highlight emerging market opportunities and help the reader understand the changes taking place.

Emphasizes the critical importance of compatible financial transaction networks that interconnect financial institutions and commercial
companies with retailers utilizing authorization, POS, and ECR intelligent terminals.

The report also analyzes industry-specific user expenditures for credit card authorization and check verification/guarantee services. Cross-industry expenditures for services not unique to this market sector have been excluded.

The specific credit authorization/guarantee services analyzed in this report include the following applications:

Credit card authorization.

Credit card message switching (interchange) services.
Check verification.
Check guarantee.

INPUT recognizes Iha1 some vendors offer additional credit card related services in conjunction with credit card authorization services (such as credit card application processing, plastic card issuance, card transaction processing, billing, clearance, and settlement). These services are not included in this report.

The research in this report addresses the following issues:

The size and growth of the market for check/credit card authorization/guarantee services.

How the services are delivered.

Why the market is important and how it relates to other financial markets.

The key vendors and their market share.

The changes that are occurring in the marketplace and how these changes will affect services delivery.

The add-on opportunities that can be offered for related products and services.

Vendor market share data for the leading vendors is highlighted in Chapter V, Vendor Profiles.



Vendor Share of the U.S. Credit Card Authorization/Check Guarantee Market by Vendor Type in 1984
Vendor Share of the U.S. Credit Card Authorization Market by Type in 1984

Commercial Processing Vendor Share of the U.S. Credit Card Authorization Market in 1984
Commercial Processing Vendor Share of the U.S. Check Verification/Guarantee Market in 1984

Credit Card Authorization/Check Guarantee Information Services Segment Forecast: Industry Specific by Delivery Mode, 1985-1990

Credit Card Authorization/Check Guarantee Information Services Segment Forecast: Industry Specific by Services Type, 1985-1990

User Expenditures for Credit Card Authorization/Check Guarantee Information Services by Industry Sector in 1985