Consumer Finance in South Africa
Euromonitor International's Consumer Finance in South Africa examines the impact of the economic downturn on payments and offers insight on global market evolution. The economic crisis dampened consumer spending and gave birth to a renewed cautiousness among consumers, particularly in developed markets. Even though the turmoil infected all payment instruments globally, card payments provided the most resistance to the downward pressure. The evolution of the consumer payment landscape remains tethered to a key question: how long with the newly minted consumer mindset last.
Tables: 45 | Publication date: Feb 2010
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Product coverage
Consumer Lending; Financial Cards and Payments
Executive summary
Strong growth as South Africans embrace cashless convenience
Financial cards saw strong growth in South Africa during the review period as a whole. Growth was underpinned by a sharp rise in the banked population, with this driven by an emergent black mid-income group and also by the leading players targeting lower-income consumers in the hope of expanding their customer bases. There was also widening merchant acceptance for financial cards, as retailers sought to modernise their outlets prior to the 2010 Football World Cup, which is expected to bring an influx of tourists.
Economic downturn brings sharp reversal
However, while the early part of the review period brought greater affluence to many in South Africa, the end of the review period saw a sharp economic downturn in the country, with growing unemployment and widening income disparity. Many of the consumers who obtained credit cards or store cards for the first time during the review period were inexperienced in handling credit facilities and struggled to control their finances. In addition, the National Credit Act was introduced in 2007, with this creating a national credit database and preventing players from lending consumers credit that they cannot afford to pay back.
The big four continue to dominate
The leading four South African banks continued to jointly dominate financial cards at the end of the review period, with overall card volume linked to customer volume. Standard Bank of South Africa was the leading player, due to its large overall customer base. Amalgamated Banks of South Africa (ABSA), FirstRand Bank and Nedbank Group Ltd followed. ABSA and Nedbank gained share in terms of card volume towards the end of the review period as they increasingly focused on attracting mid- and low-income consumers.
Open loop pre-paid cards offers strong potential
Open loop pre-paid cards saw striking growth towards the end of the review period. Players recognise that this product area offers a strong potential for growth, particularly following the introduction of debit-enabled open loop pre-paid cards in 2008. These cards target lower-income workers who are unable or unwilling to obtain a bank account. They also target more affluent teenagers and students, enabling parents to securely transfer funds to their children.
Economic downturn continues to dampen growth
The forecast period is expected to see a subdued performance for financial cards in comparison to the review period. During the review period, there was a huge influx of previously unbanked consumers. However, by the end of the review period many of these consumers were disillusioned with product areas such as credit cards and struggling financially. These consumers are expected to remain wary of financial cards during the forecast period, although they could well be attracted by open loop pre-paid cards, which offer less risk.
Table of contents
CONSUMER LENDING IN SOUTH AFRICA : MARKET INSIGHT
EXECUTIVE SUMMARY
Strong growth as South Africans embrace cashless convenience
Economic downturn brings sharp reversal
The big four continue to dominate
Open loop pre-paid cards offers strong potential
Economic downturn continues to dampen growth
KEY TRENDS AND DEVELOPMENTS
High percentage of unbanked consumers gradually reduces
High levels of income disparity shape user base
Focus on improvements for 2010 Football World Cup
Fraud likely to be increased by improved internet access
Growing focus on cost of bank fees
Retailer partnerships offer mutual benefits
Strategic base in South Africa appeals to foreign investors
MARKET INDICATORS
Table 1 Number of POS Terminals 2004-2009
Table 2 Number of ATMs 2004-2009
Table 3 Value Lost to Fraud 2004-2009
Table 4 Card Expenditure by Location 2009
Table 5 Card Expenditure by Sector 2009
Table 6 Financial Cards in Circulation by Type: % Number of Cards 2004-2009
Table 7 Domestic versus Foreign Spend 2009
MARKET DATA
Table 8 Consumer Payments: Value 2004-2009
Table 9 Consumer Payments: Number of Transactions 2004-2009
Table 10 Financial Cards: Number of Cards in Circulation 2004-2009
Table 11 Financial Cards Transactions: Value 2004-2009
Table 12 Financial Cards: Number of Transactions 2004-2009
Table 13 Financial Cards: Number of Accounts 2004-2009
Table 14 Financial Cards: Number of Cards by Issuer 2004-2008
Table 15 Financial Cards: Number of Cards by Operator 2004-2008
Table 16 Financial Cards: Card Payment Transaction Value by Operator 2004-2008
Table 17 Financial Cards: Card Payment Transaction Value by Issuer 2004-2008
Table 18 Consumer Payments Forecast: Value 2009-2014
Table 19 Consumer Payments Forecast: Number of Transactions 2009-2014
Table 20 Financial Cards Forecast: Number of Cards in Circulation 2009-2014
Table 21 Financial Cards Forecast: Value 2009-2014
Table 22 Financial Cards Forecast: Number of Transactions 2009-2014
Table 23 Financial Cards Forecast: Number of Accounts 2009-2014
DEFINITIONS
Summary 1 Research Sources
CONSUMER LENDING IN SOUTH AFRICA
EXECUTIVE SUMMARY
Strong growth as consumer lending becomes more available
Marked downturn seen in 2009 due to economic concerns
Consumers change their lending priorities
Limited credit providers result in stable shares
Return to growth as economy improves
KEY TRENDS AND DEVELOPMENTS
Economic concerns encourage consumers to spend less
Performance of mortgages/housing closely linked to economic performance
Black Economic Empowerment programme impacts leading players
Banks enter micro lending
Impact of National Credit Act continues
MARKET DATA
Table 24 Consumer Lending By Sector: Outstanding Balance: Value 2004-2009
Table 25 Consumer Lending By Sector: Outstanding Balance: % Value Growth 2004-2009
Table 26 Consumer Lending By Sector: Gross Lending: Value 2004-2009
Table 27 Consumer Lending By Sector: Gross Lending: % Value Growth 2004-2009
Table 28 Consumer Lending: Non-performing Loans 2004-2009
Table 29 Mortgages/Housing: Non-performing Loans 2004-2009
Table 30 Consumer Credit: Non-performing Loans 2004-2009
Table 31 Card Lending: Non-performing Loans 2004-2009
Table 32 Forecast Consumer Lending By Sector: Outstanding Balance: Value 2009-2014
Table 33 Forecast Consumer Lending By Sector: Outstanding Balance: % Value Growth 2009-2014
Table 34 Forecast Consumer Lending By Sector: Gross Lending: Value 2009-2014
Table 35 Forecast Consumer Lending By Sector: Gross Lending: % Value Growth 2009-2014
DEFINITIONS
Mortgages/housing
Consumer credit
Auto lending
Card lending
Home lending
Durables lending
Education lending
Other personal lending
Non-performing
Gross lending
Outstanding balance
Summary 2 Research Sources
CONSUMER CREDIT IN SOUTH AFRICA
HEADLINES
TRENDS
COMPETITIVE LANDSCAPE
PROSPECTS
SECTOR DATA
Table 36 Consumer Credit By Sector: Outstanding Balance: Value 2004-2009
Table 37 Consumer Credit By Sector: Outstanding Balance: % Value Growth 2004-2009
Table 38 Consumer Credit By Sector: Gross Lending: Value 2004-2009
Table 39 Consumer Credit By Sector: Gross Lending: % Value Growth 2004-2009
Table 40 Forecast Consumer Credit By Sector: Outstanding Balance: Value 2009-2014
Table 41 Forecast Consumer Credit By Sector: Outstanding Balance: % Value Growth 2009-2014
Table 42 Forecast Consumer Credit By Sector: Gross Lending: Value 2009-2014
Table 43 Forecast Consumer Credit By Sector: Gross Lending: % Value Growth 2009-2014