Bright future for European payment cards sector
RBR’s new report, Payment Cards Issuing and Acquiring Europe 2016, shows that the European payment cards market is still growing despite some markets in the region approaching maturity, and that significant potential remains. The increase has been mainly in debit cards, as a result of more people entering the banking system, but growth has been notably strong in the prepaid sector in western Europe and in charge cards in central and eastern Europe (CEE). At a regional level, bank cards are continuing to gain share at the expense of private label cards.
Maturing of markets does not necessarily lead to a slowdown
By the end of 2014, a total of 1.5 billion payment cards were in issue across Europe – up 2% on the year before. Growth was relatively widespread, even in some of the more mature markets. Of the 31 countries covered by RBR’s report, 23 saw an increase in the number of cards in circulation over this period – 12 in western Europe and 11 in CEE.
The Czech Republic and Norway were the fastest-growing markets – with an 8% increase in cards in both, mainly as a result of rapid growth in the debit card sector. The number of cards in Turkey has been increasing quickly for several years, and is expected to continue to grow significantly given the size of its unbanked population. Sweden, often considered a relatively mature market, also saw strong growth, partly driven by an increase in credit card issuance among young people.
Number of Cards, by Region, 2013 and 2014 (million)
Source: RBR (Payment Cards Issuing and Acquiring Europe 2016)
Prepaid cards thrive in western Europe, while charge cards grow in CEE
The number of cards in issue grew by 2% in both CEE and western Europe between end-2013 and end-2014. However behind these numbers were some striking differences between different card types. For example, RBR’s research shows prepaid cards grew by 21% in western Europe but their number declined in CEE. The number of such cards more than doubled in Portugal as a result of companies distributing prepaid meal cards among employees to pay for travel and food expenses. In Turkey, prepaid cards are used as part of financial inclusion programmes, helping to reduce the size of the unbanked population. The fall in the number of prepaid cards in CEE can be largely attributed to Russian cardholders adopting electronic wallet solutions as an alternative.
The picture was the opposite for charge cards which saw a 7% increase in CEE, but a fall of 2% in western Europe. Slovenia’s already well-developed charge card sector witnessed strong growth as a result of the introduction of interest-free payment in instalments for specific, high-value payments on many of these cards. Bulgaria also saw strong growth in the number of charge cards, albeit from a small base, as some issuers began offering them as an alternative to debit cards for commercial clients. However, credit cards remain much more common than charge cards in CEE. In western Europe, new legislation in Portugal caused a significant migration from charge cards to debit cards, while in other markets charge cards are often replaced by credit cards.
Migration to international branding causes ongoing decline in private label cards
The study shows that the number of private label cards in issue in Europe declined by 3%, despite a slight return to growth in CEE in 2014. The main cause of this decline is the reissuing of a large number of private label cards with international branding. Issuers have adopted this strategy across the continent in order to take advantage of a wider acceptance network, including outside the country of issuance.
Potential for development remains even in more mature markets
RBR’s report suggests that there is significant room for expansion in a number of fast-growing, underdeveloped markets such as Kazakhstan and Turkey, while more mature markets such as Sweden may take advantage of technological developments such as contactless. Despite a multitude of differences between countries, it seems clear that a positive future awaits the European payment cards market, particularly in the pay-now sector, which will be less affected than pay-later cards by regulations capping interchange fees which came into effect in December 2015.