Financial Cards and Payments in Mexico

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Overview

Discover the latest market trends and uncover sources of future market growth for the Financial Cards and Payments industry in Mexico with research from Euromonitor's team of in-country analysts.

Find hidden opportunities in the most current research data available, understand competitive threats with our detailed market analysis, and plan your corporate strategy with our expert qualitative analysis and growth projections.

If you're in the Financial Cards and Payments industry in Mexico, our research will save you time and money while empowering you to make informed, profitable decisions.

The Financial Cards and Payments in Mexico market research report includes:

• Analysis of key supply-side and demand trends  
• Historic volumes and values, company and brand market shares
• Five year forecasts of market trends and market growth
• Robust and transparent market research methodology, conducted in-country

Our market research reports answer questions such as:

• What is the market size of Financial Cards and Payments in Mexico?
• What are the major operators and issuers in Mexico?
• How will regulation impact the market?  
• What is the current state of emerging payment technologies such as mobile commerce?

Why buy this report?

• Gain competitive intelligence about market leaders
• Track key industry trends, opportunities and threats
• Inform your marketing, brand, strategy and market development, sales and supply functions

Euromonitor’s industry reports, including Financial Cards and Payments in Mexico, originate from our database within our Consumer Finance market share and market size database, Passport, a platform which analyses Consumer Finance in 46 countries and globally.

Sample Analysis

Market performance boosted by the entry of new players

Over the review period several new players entered financial cards. Also, existing companies explored other categories within the market, in which they previously had no presence. Many of these movements were driven by the desire to attract the large unbanked population, which remained unattended for many years. As a result of this constant activity in the market, dynamic growth was seen in financial cards, including the development of new products and the rearrangement of categories and market players.

Pre-paid cards increase in popularity amongst consumers

Pre-paid cards stood out in financial cards during the review period. These cards offer consumers the benefits of card payment, such as security in case of loss or theft, the convenience of not having to carry cash, acceptance in a large number of stores and establishments, cash withdrawals and the possibility to make online purchases. In addition, pre-paid cards also allow users to have better control of their expenses, and the flexibility to establish their own limits. Over the review period an increase was seen in the popularity of pre-paid cards; this has shown the potential to become a tailor-made solution which can adapt to the needs of both issuers and consumers.

Merger of Grupo Financiero Banorte and Banco IXE

In 2011 the authorities approved the merger of Grupo Financiero Banorte and Banco IXE. This move rearranged the shares in financial cards and positioned the new company Grupo Financiero Banorte (the name of the company after the merger) as the third biggest bank in the country. The company is also the strongest national bank, as it is owned and controlled in its majority by Mexicans. Over the forecast period product innovation and interesting activity are likely to be seen from this company.

Regulation authorities increase the minimum payment of credit cards

The regulatory authorities have made clear their position about not establishing a cap on the annual payment rates of credit cards, as it would create market distortions. However, a different regulation was established in order to increase the minimum payment and reduce the risk of non-performing loans. This regulation came into force in 2011, and it will gradually increase the floor rate over the next two years. By increasing the minimum payment, consumers are covering the interest charges and also part of the actual balance, which translates into a healthier use of credit, and benefits both consumers and issuers.

Expected performance driven by the unbanked population

Over the forecast period the performance of the financial cards market is likely to be driven by an increase in the consumer base. The unbanked population represents a very attractive segment for issuers and operators of financial cards, which have identified the opportunity that this segment represents to expand their businesses. There are many services and products which can be offered to the unbanked population; however, pre-paid cards and credit cards with low credit limits will probably be the most popular. The market is also expected to see the entry of more players and the development of new products.

Financial correspondents drive the expansion of banking services

During 2011 several companies operated as financial correspondents. The model of correspondents allows banks to use other companies’ infrastructure in order to reach more people and provide them with financial services. However, the National Commission of Banking and Securities (CNBV) considered that companies were not exploiting this possibility to the full, and in June 2011 it released a document encouraging companies to consider other types of companies as correspondents.

Current Impact

Increasing the banked population has become a priority for policy makers, which have agreed that financial services are fundamental for the development of the economy. It is easier for companies to operate with bank accounts, and it is convenient for consumers to save their money in bank accounts and use financial cards for payments instead of cash. According to the National Bank of Financial Services (BANSEFI), one third of the country’s municipalities have no access to financial services. In addition, companies have explained that expanding their services to cover all the country requires heavy investment in infrastructure, and it is not always profitable. This situation led policy makers to encourage companies to expand their services to non-banked areas.

As a result, the National Commission of Banking and Securities (CNBV) authorised the existence of financial correspondents in December 2008. Financial correspondents allow companies to provide financial services through already existing chained stores which have important geographic coverage. In June 2011 the CNVB published a study called “Business Models for Financial Inclusion”. In this document, the Commission mentions the possibility of including retail companies such as Coca-Cola, Pepsi and Bimbo to act as financial correspondents. The Mexican Banks Association is already analysing this possibility. At the moment banks are operating with financial correspondents such as supermarkets, convenience store chains and restaurants. Some of the services available through correspondents are cash withdrawals, deposits and the payment of loans and services.

Outlook

Financial correspondents are likely to become a key part of the operation and delivery of financial services. An increase in the number of correspondents and in the type of financial services performed through them is likely to be seen. Correspondents will allow banks to expand their services and offer their customers convenient alternatives without having to spend much on infrastructure. Also, the unbanked population might find it easier to open an account at their local store than going to the nearest bank, which might not be close to their community.

The biggest challenge for companies might be to develop an attractive business model for correspondents without cannibalising their own businesses. On the other side, correspondents will have to ensure that engaging in such a scheme will not damage their core business. The latest recommendation from the CNBV to include companies such as Coca-Cola, Pepsi and Bimbo might be interesting, because these companies have total geographic coverage of the country. However, even with the expansion of financial services, companies might face a different challenge, which involves the informal economy and the reluctance of many people to use financial services at all. As a result, over the forecast period new product developments with very flexible criteria may be seen, aiming to attract this type of consumer.

Future Impact

Over the next five years the development and evolution of financial correspondents is likely to be seen, which will result in the expansion of the base of consumers. By reaching more people, banks can distribute many more products, including financial cards. In the future, companies may make alliances with as many correspondents as possible in order to expand their points-of-sale and offer their customers more points of contact. However, an important challenge for banks and correspondents might be to deliver financial services to all these people without compromising quality and security. Therefore, over the forecast period closer relationships can be expected between banks and correspondents in order to meet customers’ needs. These alliances might result in the development of new products, such as loyalty cards or rewards programmes. In terms of correspondents, they might also benefit from the increasing affluence of customers, as this will probably have a positive impact on sales.

Immediate rewards are attractive to consumers

In 2011 a considerable number of companies offered immediate rewards or gifts for customers who opened a savings account, signed up for a credit card or increased their balance. This practice has proved to be attractive to consumers, and it is being used as an effective tool to approach the unbanked population.

Current Impact

The unbanked segment is currently the main target for many companies in financial cards and payments. The unbanked population is usually people in the middle/low- and low-income segments, and these people are also usually financially illiterate. This has become a challenge for companies which want to offer their financial services to an audience which is not familiar with interest rates, balances or minimum payments. As a response, companies decided to offer more tangible incentives for people to acquire financial products. Over the review period companies offered gifts which included electronics and home appliances, football shirts and event tickets, amongst many others. This strategy was used mostly to sell debit cards and credit cards, and to encourage people to open bank accounts. An example was Banamex Citigroup, which offered t-shirts of the Mexican Football League for customers who opened an account with them or increased their account balance by at least Mx$10,000. Another example was HSBC, which offered film tickets and access to a raffle for electronics for people who opened an account with the bank.

Outlook

Consumers are fond of receiving gifts or rewards for their actions, and when companies offer such tangible incentives, it becomes easier for them to make decisions. These strategies are usually directed towards the unbanked population, which is estimated to be around 58% of the economically active population. The above-mentioned practices are likely to be seen in the future, as banks continue to address this segment.

Immediate rewards might evolve towards more specific benefits which could provide customers with more value. In 2011 Banco Wal-Mart launched a credit card which gives back 3% of the total purchase in cash, and this is at the time of payment. This practice has been very attractive to customers, who perceive this as a real tangible benefit, and it is one which is not offered by other players in the market. Other rewards might include discounts on event tickets or access to exclusive events. In 2011 HSBC offered its cardholders 50% discount on theatre tickets, whilst Banco Santander offered the pre-sale of Michael Buble’s concert.

Future Impact

Over the forecast period immediate reward strategies are likely to be the main promotional tools of companies aiming to reach the unbanked population. Electronic products such as cameras, multimedia players and consumer appliances will remain popular rewards. This strategy might also encourage the acquisition of several debit or credit cards which will not necessarily be used. However, over the next five years an increase in the financial literacy of the average consumer is expected, which will probably lead to the closer analysis of products, and an increase in comparisons between interest rates and benefits. As a result, players will tend to move away from offering immediate rewards towards offering more sophisticated products which might provide substantial benefits to consumers. Derived from this, over the next five years a decrease in annual interest rates may be seen, and an increase in clients’ mobility. Customers will constantly compare and evaluate the benefits offered by different financial cards, shifting from one to another until they find the one which suits them best.

Pre-paid cards increase in popularity in financial cards

Pre-paid cards have become an attractive alternative for several purposes, including the allocation of resources by the government, as a payment method for transportation services, and as a payment alternative for the unbanked population. This popularity is mainly driven by the flexibility of pre-paid cards in terms of issuing and allocation of resources.

Current Impact

In 2011 pre-paid cards represented 14% of the total number of financial cards in circulation. This was 17 million cards, 12% more than the number of cards in circulation the previous year. The rapid growth of this category can be explained by several factors. First was the introduction of non-contact card readers in several transportation systems in the main cities in the country. Second was the decision of local governments to allocate welfare subsidies through pre-paid cards, and third was the decision of several companies to deliver employees’ benefits using this type of card.

Pre-paid cards offer both issuers and cardholders different benefits which have proved convenient. Issuers can allocate resources to specific purposes, such as petrol, food or home improvements, amongst many others, whilst cardholders can use pre-paid cards in many different establishments, and do not necessarily have to be present themselves. There are many uses for pre-paid cards; the automotive company Peugeot, for example, offers a promotion whereby with the purchase of a car it gives the customer two full tanks of petrol. The first one is in the car at the time of delivery, and the second is given on a pre-paid card which can only be used for this purpose. BBVA Bancomer offers the pre-paid card Mi Despensa, which allows users to receive their food vouchers this way instead of through paper vouchers.

Outlook

Pre-paid cards offer consumers greater control over their spending; they allow people to assign a certain budget for one specific purpose, for example petrol or groceries, and ensure that they will not spend more than planned on it. Also, by using pre-paid cards, issuers can create loyalty programmes and offer discounts (store cards) if the card is used at the co-branded retail outlet. These characteristics are highly valued by customers, and will probably remain important in the future. Pre-paid cards are also used as debit cards, but without the link to a specific bank account. These cards offer customers all the benefits of any other financial card, such as cash withdrawals, card payments and online purchases, without the limitations of personal use only, minimum balance or the need to be associated with a specific bank.

The use of pre-paid cards is likely to endure, as it becomes a payment alternative for the unbanked population, or for people who want to limit their spending in a certain area. This trend is expected to remain viable because it offers customers flexibility and convenience. With the increase in online purchases and the constant risk of fraud (especially skimming linked to online activities), pre-paid cards might become a good alternative for consumers who do not want to risk their information by entering it online. Services might also become an important driver for the use of pre-paid cards in the future.

Future Impact

Over the forecast period pre-paid cards will probably become a common payment method for small amounts. This will be triggered by the aim of consumers to better control their budgets. Pre-paid cards might also become promotional tools for companies, offering loyalty programmes, discounts and rewards. This strategy might be attractive for customers, as they will be receiving benefits without paying any fees or commission, as is the case with other financial cards.

In addition, pre-paid cards might be used to provide services to communities which are not being reached at the moment. It is usually complicated for service companies to take the decision of investing in infrastructure, when the possibility of non-payment is high. By implementing pre-paid services, companies encourage users to pay for services such as electricity, gas and water in advance. This strategy provides companies with more certainty about their income, and therefore encourages them to invest in infrastructure. In the future it is also likely that closer attention will be paid by the authorities to the performance of this category. Pre-paid cards have been associated with money laundering, and although regulations have already established maximum balances for pre-paid cards of approximately Mx$6,000 and limit monthly cash flows to approximately Mx$15,000, an increase in surveillance in this category during the next five years may be seen.

Demographics likely to boost the use of financial cards

Financial cards are directly related to spending, which is usually concentrated amongst a certain age group of economically active citizens. The younger end of the range of 15-65 is significant and is approximately 33% of the entire population is between the ages of 15 and 34 years old. This demographic segment will be instrumental in driving the use of financial cards over the forecast period.

Current Impact

At the moment 66% of the population is aged between 15 and 65 years old. This means that economically active citizens represent over half the population of the country. Financial cards are mostly used by this segment, which comprises working people who have constant incomes and spread it through their spouses and children to acquire goods and services. The younger end of the age range 15-65 will encourage the development of new products, as they are interested in technology and fresh trends such as social media and online purchases. Banamex Citigroup, for example, already has the B-Smart credit card which targets the young population, offering discounts on concert tickets, information through e-mail and constant activities and communication through social networks such as Twitter and Facebook. Young people are eager to try new products, and they usually look for very practical solutions. Online banking and the use of financial cards instead of cash are being driven by this younger segment of the population, which is expected to increase over the forecast period.

Outlook

Demographics are expected to drive the growth of financial cards over the forecast period. Young people will continue to enter the working population and demand financial services. By 2016 there are expected to be 78 million people between 15 and 65 years old; this will represent 68% of the total population. This represents a very interesting base of consumers for issuers and operators of financial cards. Younger people are willing to try different products and take more risks; they are not influenced by certain conventions, such as just having one credit card or contracting all banking services with the same bank. New players might benefit from this behaviour, which will allow them to attract customers by offering innovative and valuable products without being overshadowed by big corporations. The expected demographic composition might encourage greater competition between companies, which will result in greater benefits for consumers. This trend will gain steam over the next five years; however, after this period the number of people between 15 and 65 years old will start to decline, leading to a different demographic mix.

Future Impact

Over the next five years the development of new products targeting the young population is likely. Financial cards will probably increase the benefits targeting this segment, and might shift their promotional strategies towards online advertisements and social networks. Online banking will become a fundamental complement to financial cards, and online purchases are likely to increase. With the increase in online activities, illegal practices such as skimming and other types of online fraud might also increase and evolve. Companies are working together with the authorities in order to detect, control and reduce these practices; however, the best way to cope with these risks might be a shift towards different products. Over the next five years there might be an increase in the use of pre-paid cards for online purchases; this practice allows consumers to pay for goods and services without risking their personal information or their full balance.

Pre-paid cards are also likely to fully replace paper cheques and vouchers by 2016. The use of cash will remain important; however, financial cards and other payment methods will tend to replace it. Demographics will play an important role over the next five years, boosting the use of financial cards until 2016. After this period the percentage of people between 15 and 65 years old is expected to decrease, changing the focus of companies towards other emerging segments.

Migration of debit and credit cards with magnetic strips to chip cards

With the increase in the use of financial cards as a payment method, there has also been an increase in fraud in its many forms. In order to counteract these practices, the international community has developed the EMV standard. This standard was established by Europay, MasterCard and Visa, and it allows the worldwide interoperability between integrated circuit cards or chip cards and point-of-sale terminals capable of reading chip cards. The advantage of this standard is that it provides more security against fraud, and it allows better control of offline transactions.

Current Impact

Financial card fraud can take many forms; the main purposes are obtaining unauthorised funds from an account or obtaining goods or services without paying. Forms of fraud can range from lost and stolen cards which are used without the owner’s consent to more sophisticated practices, such as skimming. In 2010 the National Commission of Banking and Securities (CNBV) established 2013 as the date for banks to migrate all their cards to chip technology. In 2011 the Mexican Bank Association (ABM) estimated the fraud index as 0.024% for debit cards and 0.030% for credit cards. Although according to the Association this number is within international standards, it is working together with banks in order to accelerate the migration to chip cards.

Outlook

Several banks, such as Banamex Citigroup and HSBC, are already changing their cards to chip technology. According to trade sources, in 2011 60% of the credit cards in circulation used chips; however, debit cards are not migrating as rapidly. In the same year only 5% of the debit cards in circulation were using chip technology. This share is expected to change rapidly over the forecast period, driven by the latest legislation, which established 2013 for total migration. One of the main challenges posed by this change of technology in the financial cards market is the replacement of point-of-sale terminals in order for them to be able to read chip cards. This is an expensive and slow process which will probably be absorbed by the issuing banks. Although chip technology is not infallible, the migration of cards is expected to reduce fraud considerably, which is why issuers, operators and the government are encouraging the acceleration of this measure.

Future Impact

Over the forecast period the disappearance of magnetic strips and the evolution of card transactions are expected thanks to the possibilities offered by chip technology, which can store more complex and dynamic information. The chipped cards offer the convenience of conducting a transaction without entering a PIN on transactions within a range of $5 and $50 through contact interfaces. The chipped cards do not hold or maintain account balances and access to this information will require an ATM and a PIN code.

Using chip cards for different closed loop services is also a possibility. The local government of Mexico City is evaluating the possibility of launching a “city card”, which would allow users to pay for the different transportation options, for services such as electricity and water, and could also be used as ID. This is only an example of the possibilities that the use of chip cards or smart cards might trigger during the next five years.

This report analyses the market for Financial Cards and Payments in Mexico. For the purposes of the study, the market was defined as follows:

ATM Function

An ATM card (also called a cash card, cash dispenser card or cash machine card) enables access to an ATM machine in order to receive cash or monitor account activity. Functionality is limited to withdrawals and services available via an ATM machine.

Debit Function

Debit cards merge the functionality of both an ATM card and direct payment from a bank account (a cheque substitute in some markets). A debit card allows the cardholder to receive cash and monitor account activity at an ATM machine, as well as pay for goods and services. A debit card transaction involves the automatic withdrawal of funds from the cardholder’s demand deposit bank account (checking or giro). Since the funds are removed from a bank account, no interest is charged on payments.

Credit Function

Credit cards allow for purchases against a preapproved line of credit. The account holder has the choice of whether to pay off the entire balance or opt for monthly instalments with the balance serving as revolving credit. Credit cards can include affinity cards, reward cards and types of co-branded cards. Co-branded retailer cards—issued by retailers acting as financial institutions and without usage restrictions—are included in this category. Cards issued by a retailer with usage limited to a specific store within a predefined retail group fall under the store cards’ definition. Debit cards with an overdraft function are not counted as cards with a credit function.

Commercial Credit Cards

A commercial card is issued to a business for use in paying expenses such as travel and entertainment and supplies. Commercial credit cards provide companies with a revolving line of credit. Commercial cards allow employers to closely monitor how employees allocate company funds. The card statements also provide companies with a record-keeping benefit. Types of commercial credit cards may include small business, corporate, fleet and purchasing.

Charge Card Function

A charge card shares the “pay later” component with credit cards. However, charge card balances normally have to be paid off in full monthly and do not attract interest charges. Charge cards do not offer a revolving credit facility.

Commercial Charge Cards

A commercial card is issued to a business for use in paying expenses such as travel and entertainment and supplies. Commercial cards allow employers to closely monitor how employees allocate company funds. The card statements also provide companies with a record-keeping benefit. Types of commercial charge cards may include small business, corporate, fleet and purchasing.

Open Loop Pre-paid Function

The open loop pre-paid card/function category contains General-Purpose Reloadable (including electronic purses), Payroll, and Travel, Remittance, Network Branded Gift, Insurance, Government Benefits, Healthcare, and Employee Benefits cards. Open loop pre-paid cards are network-branded cards or national e-purse chips and do not possess any acceptance point restrictions other than those of the network or e-purse brand.

Closed Loop Pre-paid Function

The closed loop pre-paid card/ function category includes Merchant Issued Gift, Transportation, Parking and Toll. Usage of these types of cards is restricted to a “closed” network of pre-defined acceptance points and locations. Note: This category does not include phone cards.

Store Cards

A store card (also known as a retailer or private label card) contains a “pay later” component similar to credit cards. However, store cards must contain usage limited to purchases at specific stores within a predefined retail group. Credit cards issued by retailers acting as financial institutions and without usage restrictions fall into the credit card category.

Pre-paid

General-Purpose Reloadable

Sometimes known as ‘e-purses’ or ‘e-wallets’, general purpose reloadable pre-paid cards serve as a general cash substitute for consumers and are not intended for a specific purpose such as a gift. They can be loaded and re-loaded with funds and used to make purchases at a POS terminal; some, but not all general purpose reloadable cards can be used to withdraw funds at an ATM. They can be either network-branded cards or a chip that is attached to another type of card (typically debit). Several markets have national chip-based e-purse or e-wallet schemes, including Germany’s Geldkarte and France’s Moneo.

Payroll cards

Payroll cards serve as a substitute to a check or direct deposit and provide employees with access to their salary or wages via ATM withdrawals and purchases. Payroll cards are most often used for the unbanked, itinerant and short-term hire/contract staff and expense payments, one-off and final salary payments, staff relocation cards and staff allowance cards.

Travel cards

Travel cards serve as an alternative to travelling with cash or travellers cheques. These cards are not linked to a bank account, but the loaded value can be accessed via ATMs. These cards offer a similar level of security to travellers cheques in that they can be easily replaced if lost or stolen. They should not be confused with charge cards which may be referred to as travel and entertainment cards.

Remittance payment cards

Money transfer cards used for sending funds primarily cross-border. Highest usage of these cards occurs in populations such as migrant workers looking to send money back to their families.

Network Branded Gift cards

Similar to merchant issued gift cards, network branded open loop gift cards (Visa, MasterCard or American Express) allow the cardholder to purchase goods and services up to the value of the card. Unlike retail merchant-issued gift cards, these cards offer an open loop provision which provides access to an operator's merchant network. They are marketed to be intended as gifts and their design characteristics often focus on occasions, such as birthdays or weddings.

Government benefit cards

Government benefit cards include any public welfare benefits such as Social Security or child benefit payments.

Insurance claim cards

Insurers issue these cards to claimants as a means to help replace lost, damaged and stolen goods. Exclusions may apply including the type of stores available for use and the type of merchandise available for purchase.

Healthcare cards

This card provides cardholders access to their health insurance accounts without the need to fill out claim forms for reimbursement of expenses. The card is limited to payment to medical providers, prescriptions and approved over-the-counter items. Despite these restrictions on purchasing, these cards are catalogued as open loop due to the presence of the network branding and ability to purchase from a somewhat limited variety of merchants.

Employee benefits cards

Employee benefits cards function as part of an employee’s compensation and cover areas such as food and fuel. These are not to be confused with corporate gift cards which serve as part of an employee incentive or reward programmes. Cards intended to acknowledge employee achievement or act as an incentive are counted as gift cards.

Merchant Issued Gift cards

A closed loop pre-paid card issued by a retail outlet that allows the cardholder to purchase goods and services up to the value of the card. These gift cards are only redeemable at a specific retail outlet or limited to a specific retail group.

Transportation cards

Transportation cards are foremost e-tickets that allow access to public transportation. These cards serve as substitutes for bus tokens and train tickets. Funding occurs through a link to a credit or debit account or through vending machines/kiosks typically located on-site at the bus or train stations. Innovative players have expanded the functionality to include use as a substitute for small ticket items usually reserved for cash transactions. As such, multipurpose cards such as Oyster and Octopus, which serve primarily as a means to gain access to public transportation, are considered transportation cards.

Parking and toll collection cards

Parking and toll collection cards afford drivers convenience and speed in not having to locate coins and small paper denominations. Parking cards typically fund electronic meters, while radio frequency identification (RFID) enabled cards allow drivers to pass quickly through tolls. These cards are funded either by a pre-set credit or debit account or using machines located at terminals or other varied locations such as supermarkets. If toll payment occurs via a contactless plastic device attached to the car’s windshield instead of via a plastic card, as long as the transaction runs over a card payment network, it can still be considered a prepaid card and its transactions can be considered pre-paid card transactions.

Contact Smart Card

A smart card contains an integrated circuit—either a memory or microprocessor—used for identification, data storage and processing. While a card reader is required to transfer data to and from a central computer, smart cards offer enhanced security by carrying the information on the card itself instead of accessing a remote database. Magnetic stripe cards are vulnerable to tampering and identity theft through equipment readily accessible to fraudsters. Smart cards are also referred to as “chip cards.” Contact smart cards typically possess a gold plated contact plate on the surface which must come into contact with a smart card reader in order to facilitate communication of data and commands.

Contactless Smart Card

Both the contactless card and the reader employ antennae to transmit data back and forth via radio frequencies. This allows the contactless card to function within a range of the reader (typically inches) instead of requiring contact between the two devices. Alternate payment instrument forms such as key fobs, mini cards attached to key chains and toll payment devices are included in this category.

Card Expenditure by Location

Card holder Present

Transactions accompanied by the cardholder or card at the point-of-sale.

Card holder not present

Transactions which occur without the card or cardholder present at the point-of-sale. Examples include orders over the internet, by mail, telephone or fax.

Card Expenditure by Sector

Food, Beverages, Tobacco

Expenditure on food, non-alcoholic and alcoholic beverages and tobacco brought into the home.

Operation of personal transport

Consumer expenditure on operation of personal transport equipment consists of consumer expenditure on spare parts and accessories for personal transport equipment, fuels and lubricants for personal transport equipment, maintenance and repair of personal transport equipment and other services in respect of personal transport equipment.

Household goods and services

Expenditure on furniture and furnishings, carpets and other floor coverings, household textiles, household appliances, glassware, tableware and household utensils, hardware and DIY goods, household and domestic services.

Transport

Expenditure on: purchase of cars, motorcycles and other vehicles, operation of personal transport equipment and transport services. Purchases of transport services are generally classified by mode of transport: rail travel, buses, coaches and taxis, air travel and other travel. Costs of meals, snacks, drinks, refreshments or accommodation services have to be included if covered by the fare and not separately priced. If separately priced, these costs have to be classified in consumer expenditure on catering. School transport services are included, but ambulance services are excluded (consumer expenditure on outpatient services).

Clothing and footwear

Expenditure on clothing and footwear.

Leisure and recreation

Expenditure on audio-visual, photographic and information processing equipment, other major durables for recreation and culture, other recreational items and equipment, gardens and pets, recreational and cultural services, newspapers, magazines, books and stationery and package holidays.

Domestic Versus Foreign

Domestic spend

Any purchase made in the country where the card has been issued

Foreign spend

Any purchase made outside the country of issuance

Value Lost To Fraud

Counterfeit cards

Counterfeit cards include the following: a dummy or fake card that has been printed, embossed or encoded so as to appear to be a legitimate card; a card that has been validly issued but subsequently altered or re-encoded; a card which has been subsequently embossed or encoded without the authority of the issuer. Counterfeit cards are also referred to as cloned or skimmed cards.

Card stolen or lost in the post

This includes any card that is stolen in the post and used without the authority of the issuer.

Card not present

Unauthorised transactions that occur without the merchant having access to the physical card such as mail order and telephone orders. Examples include phishing and any other method whereby the fraudster uses the card information without ever taking possession of the card.

Card lost or stolen

Any card that is stolen or lost and used without the authority of the issuer.

ID fraud

The unauthorised use of an individual’s information in order to obtain financial cards in their name and saddle them with the debt obligation. ID fraud must involve the opening of a new card account with a stolen ID, not the unauthorised use of an existing account or card. Any fraud that occurs with an existing account or card does not belong in this category.

Explanations of words and/or terminology used in this report are as follows:

• Comisión Nacional para la Protección y Defensa de los Usuarios Financieros (CONDUSEF)

• Asociación de Bancos de México (ABM)

• Comisión Nacional Bancaria y de Valores (CNVB)

• Banco de México

• CNN Expansión

• El Universal

• El Economista

• El Financiero

• Merca 2.0

• Milenio

Sources used during research include the following:

STRATEGIC DIRECTION

• BanCoppel started operations in 2007 as the financial arm of Almacenes Coppel SA de CV. The company targets the mid/low- and low-income segments. Its strategy is to provide consumer credit through its retail stores, banking services and specialised mortgages. The mortgages division is operated by Credito y Casa, which specialises in house loans of Mx$230,000 on average. The main challenge the company faces is the entry of new players which are also targeting the low-income segment.

KEY FACTS

COMPANY BACKGROUND

• BanCoppel is the financial arm of Almacenes Coppel SA de CV, a department store which targets low- and middle-income consumers. BanCoppel started commercial operations in 2007. The ownership of the bank resides in the corporate holding Grupo Coppel, which is managed by the Coppel family.

• BanCoppel operates purely in financial cards and payments; nevertheless, Almacenes Coppel, which owns BanCoppel, also operates in retailing and mortgages. Almacenes Coppel was the leader in store cards in terms of the number of cards in circulation in 2010.

• The overall strategy of BanCoppel is to offer financial services and consumer credit to the low-income segment in Mexico.

• Grupo Coppel is a family-owned business from Culiacán, Sinaloa. Enrique Coppel Tamayo passed the control of the company to his son, Enrique Coppel Luken, who after 25 years as CEO passed the control of the Group to his brother Agustín Coppel Luken in 2008. Enrique Coppel stayed as CEO of Coppel Capital, which comprises the pension funds division, BanCoppel and the mortgages division Crédito y Casa. Grupo Coppel has an important presence in retailing, banking services, pension funds and mortgages; the latter through the acquisition of the mortgage company Crédito y Casa in 2007. Crédito y Casa remains the third biggest company in mortgages.

• According to a study published by the Central Bank (Banco de México) in February 2011, BanCoppel was ranked as the bank offering the most expensive annual interest rate.

• BanCoppel has announced its plans to expand to cities with 30,000 inhabitants; this represents a shift from its previous strategy, which limited its business to cities with more than 50,000 inhabitants.

COMPETITIVE POSITIONING

• The overall share of Almacenes Coppel in terms of cards in circulation is 2% in 2010, which positions the company in sixth place in the overall market. Concerning overall financial cards in value terms, the company was in ninth place with a 2% value share. In store cards in value terms the company was positioned in second place with a 22% share.

• The company’s share of the market decreased in 2010 when compared with the previous year; this can be explained by the entry of new players. The market has expanded, and therefore the share of the previous players declined. However, the company has increased its presence in the country, and might grow faster over the forecast period through BanCoppel.

• The company followed other players which entered the market targeting the low-income segment. Its main competitors are Banco Azteca, Banco Ahorro FAMSA and Banco Wal-Mart. Almacenes Coppel is also following in the footsteps of Grupo Elektra (owner of Banco Azteca), with its expansion to South and Central America. In December 2010 BanCoppel launched its online banking services.

• BanCoppel offers several financial products, including debit cards and credit cards, savings accounts, investment funds and personal loans. Almacenes Coppel has a strong presence in the store cards category, and Grupo Coppel has an important presence in mortgages, and also owns a small pension fund company.

• The company is positioned amongst the fast growing low-income segment, which demands financial services. This is currently the most dynamic area of the market, and this is expected to continue over the forecast period.

• BanCoppel is well-positioned for growth by targeting the unbanked population. Its stores attract a large number of low- and middle-income consumers who are not familiar with financial services. The company ensures that its financial services are easy to understand and acquire.

• Although the company faced a difficult situation after the economic crisis in 2009 and 2010, it managed to recover during 2011. According to the company during this year, it reduced the number of non-performing loans and increased its client portfolio. The company’s growth was sustained by aggressive marketing campaigns within Coppel stores and heavy investment in expanding the bank’s geographic coverage. Grupo Coppel has plans to open 130 new stores during 2011; this is twice the number of stores opened in 2010, with an investment of Mx$1,000 million.

• The company is positioned in the low-end of the market, which represents a big market in volume terms. However, one of the main challenges of the company will be to make such a market profitable. BanCoppel is positioned amongst the banks offering the lowest credit available in the market. Credit cards are offered with a credit limit of Mx$1,500.

STRATEGIC DIRECTION

• Banco Wal-Mart de México Adelante is a multiple banking institution which targets the middle- and low-income segments. Part of the company’s strategy includes offering financial cards to the unbanked population, and pushing the offer of consumer credit through its more than 2,000 commercial units in the country. The bank plans to increase its market share over the forecast period, aiming to position the bank amongst the leaders in financial cards and payments.

KEY FACTS

COMPANY BACKGROUND

• Banco Wal-Mart de Mexico Adelante belongs to Wal-Mart de Mexico SAB de CV, which is part of Wal-Mart Group. The approval to operate the bank was obtained in November 2006, and it began operations in November 2007 with initial capital of US$25 million. It offers debit and credit cards, savings accounts and small loans.

• The bank operates only in financial cards and payments; nevertheless, it is part of a much bigger group which operates more than 2,000 commercial units in the country, which include supermarkets, hypermarkets, restaurants and retail stores.

• Banco Wal-Mart has announced that its strategy for 2011 includes opening 65 new offices, which would add to the 240 offices already operating in the country. The company is also planning to reach 500,000 cardholders by the end of the year; at the moment the company has almost 200,000 cardholders. Working on product differentiation is also amongst Banco Wal-Mart’s strategies for 2011.

• José María Urquiza González is the CEO of the company; he took this position in 2008. Previously he was Corporate Banking Director of Banamex Citigroup, where he worked for 25 years.

• In 2011 the company reached one million customers, after four years of operation.

COMPETITIVE POSITIONING

• Banco Wal-Mart accounted for a 1% share of store cards in value terms, and for a negligible share of the total number of financial cards in the market.

• Its share has been growing in terms of the number of clients, cardholders and offices. With only four years in the market, the company has 240 offices and one million customers. The recovery of the economy certainly boosted the category, but targeting the low-income segment, which is usually unbanked, was part of the strategy which drove the company’s growth over the review period.

• The company has followed the trend of other retail stores which offer financial services. Given the size of the Wal-Mart Group, it is taking it more time to organise and coordinate its strategy. However, its size is also an advantage, as the group can leverage all its resources in order to promote the bank.

• Banco Wal-Mart targets the low-income segment. It derives its share from people who recognise the brand from its retail stores. Wal-Mart Group has a strong presence in retailing and restaurants in the country. Concerning its product mix, the company offers only banking services. At the moment the company has no plans to enter other types of lending services.

• The company targets the fastest growth segment, which is the low-income population. Although there are several companies targeting this segment already, the potential market is wide, and there are still many opportunities to be explored.

• Banco Wal-Mart’s competitive advantage includes customer service, convenient locations and a wide network of supermarkets, hypermarkets and restaurants which can complement and support the bank’s operations through promotion, attention to clients and loyalty programmes.

• Banco Wal-Mart faces many challenges in financial cards and payments. There is strong competition from department stores and other retail outlets. The establishment of new banks focusing on the same population segment, such as Banco Ahorro FAMSA, will be a strong threat as competition intensifies in the sector. In addition, Banco Azteca was the pioneer in offering credit to the low-income segment, based on the 50 years of experience of its parent company, Grupo Elektra.

• Banco Wal-Mart is positioned in the low-end of the market. This segment is short of financial services, and has great potential.

STRATEGIC DIRECTION

• Grupo Financiero Banorte has just become the third biggest bank in the country, thanks to its merger with Banco IXE. It is now positioned as the biggest national bank, and it plans to expand considerably during the next three years. Amongst the company’s future plans, it has announced the addition of 2,000 ATMs during 2011 in order to become the bank with the biggest network of ATMs in the country.

KEY FACTS

COMPANY BACKGROUND

• Grupo Financiero Banorte is owned by Mexican stakeholders. It is the result of the merger of IXE Banco and Grupo Financiero Banorte in March 2011. The bank started operations in 1899 as Banco Mercantil de Monterrey, and in 1986 the bank merged with Banco Regional del Norte. Later, in 1992, with the bank privatisation in Mexico, it was acquired by the actual stakeholders.

• In addition to banking services such as credit cards, debit cards, insurance products, savings accounts and mortgage financing, the company provides brokerage, factoring, stock and leasing services.

• Its recent strategy includes a stronger positioning in the market as the biggest national bank in the country. In addition, the company is investing in technology in order to enhance its services and reach a bigger number of customers. In 2011 the company plans to increase its ATM infrastructure by 2,000. Concerning offices, the company intends to open 200 new offices during the next three years.

• Although the company started operating in the northern region of the country, it now has national coverage. Its geographic distribution is 40% in the northern region, 40% in the centre region and 20% in the southern region.

• With the merger of Banco IXE with Grupo Financiero Banorte, Alejandro Valenzuela del Río remains the CEO of the company. Alejandro Valenzuela became CEO in 2008 after working for five years for the company; he has more than 20 years of experience in the industry. The shares of stakeholders changed as follows: Roberto González Barrera kept 15% of the existent shares, Banco IXE’s stakeholders kept 11% of the new shares, and a few other Mexican stakeholders helped to conform 30% of the control group of the company. The rest of the titles are spread in the market between more than 4,000 different investors.

• The merger of IXE Banco and Grupo Financiero Banorte represents the most important activity in the market in the last 10 years. With the merger, Grupo Financiero Banorte became the third biggest bank in the country, and the biggest national bank.

• Grupo Financiero Banorte announced a strategic alliance with Cardtronics to increase its ATM infrastructure. During 2011 the company plans to install 2,000 new ATMs in the country. Cardtronics is the biggest non-financial institution owner of ATMs in the world. Currently the company operates more than 34,000 ATMs in several countries.

COMPETITIVE POSITIONING

• Grupo Financiero Banorte’s overall share of financial cards in circulation was 5% in 2010, which positioned the company in fourth place after BBVA Bancomer, Banamex Citigroup and Santander.

• The company’s share has already increased since then, with the merger of Grupo Financiero Banorte with Banco IXE; the merger was approved in March 2011. Over the forecast period the bank expects to increase its share of the market by strengthening its positioning as the biggest national bank in the country.

• The company is a leader responsible for innovation. It has launched several successful products targeting women, and medium- and small-sized companies. In addition, Banco IXE operates a successful online strategy which focuses on providing banking services without clients’ presence, for example delivering cash to clients’ addresses. Banco IXE was also the first bank to target the private medical practices in the country in order to increase the acceptance of financial cards.

• The company derives share from its product mix; it has a presence in several categories, such as financial cards, all types of consumer loans, insurance services, banking services and loans for businesses.

• The biggest competitive advantage of the company is that it is owned and operated in the majority by Mexican stakeholders. This is an advantage because it appeals to the collective sentiment of supporting national companies. In addition, the company constantly launches innovative products targeting specific market segments.

• The company’s current position is sustainable and strengthening thanks to the merger with Banco IXE. It is a consolidated company which enjoys strong brand recognition and national market coverage.

• The company is positioned in the middle of the market; however, it has also managed to develop attractive products for the high-end and low-end segments.

STRATEGIC DIRECTION

• Prestaciones Universales expects to increase its share in pre-paid cards over the forecast period. In order to do this, it allocates an important amount of resources to developing different and innovative products which will meet its customers’ needs. Prestaciones Universales will have to face the increasing number of players entering the category. Amongst these new players there are well-positioned financial companies. However, being a specialist in the dispersion of resources gives Prestaciones Universales a competitive advantage.

KEY FACTS

COMPANY BACKGROUND

• Prestaciones Universales SA de CV, also known as Sí Vale, started as a Mexican-owned company in 1998. Later, in 2008, it was acquired by the holding company Monex Holding Group.

• The company specialises in pre-paid cards for the dispersion of resources including welfare, work related expenses, incentive plans and gift cards, amongst others.

• Its recent strategy consisted of expanding the business by promoting the use of pre-paid cards as a common payment method. In order to do this, the company partnered with other organisations to create new products. In 2011 Prestaciones Universales launched a pre-paid card together with QueremosComer.com, which is an online restaurant guide. The card offers special benefits and access to information about more than 4,000 restaurants around the country.

• The company has national coverage, and it has contracts with several local governments to provide the service of pre-paid cards used by these local governments to disperse welfare resources.

• José Antonio García León is the CEO of Prestaciones Universales.

• In 2011 Prestaciones Universales launched the pre-paid card Sí Vale Mis Compras together with MasterCard. This product is designed to allocate the benefits established by the law of social welfare; through this product companies will be able to manage perks and benefits online.

COMPETITIVE POSITIONING

• Prestaciones Universales was in fourth position in pre-paid cards in value terms in 2010, with a 7% share. In terms of number of prepaid cards it was in 3rd position with a 13% share

• The share of the company has been decreasing. This change can be explained by the several new players which entered the category during the review period. However, the current economic situation positively impacted the company, which increased its value sales considerably during the year.

• The company is a leader in the market, and is also responsible for innovation. It has launched many pre-paid cards together with other companies and associations in order to facilitate the use and control of resources. Depending on the client, the company can develop a specific product to meet its needs.

• Prestaciones Universales derives share from more than 10 years in the Mexican pre-paid cards category. It is a specialised company which has developed strong relationships with clients in both the private and public sectors.

• Pre-paid cards are expected to see important growth over the forecast period. The company has been operating in this category for several years already; therefore it is very well-positioned to face the new challenges which might come with the expansion of the category. Pre-paid cards are expected to increase its base of consumers considerably by targeting the unbanked population.

• The company’s main advantage is its capacity to react to market requirements. After many years in pre-paid cards, it has created strong relationships with its clients.

• The company is supported by the holding group Monex, which acquired Prestaciones Universales in 2008. Following the acquisition, Prestaciones Universales became a more solid company, which was leveraged by Monex’s resources in order to enhance its performance.

• The company targets large organisations and local governments, which are the most likely to be interested in pre-paid card systems. However the cards cover the low, middle and high end of the market. Depending on the product, the company has to adapt its communication, distribution and execution strategies in order to fulfil clients’ requirements.

HEADLINES

• During 2011 ATM transactions increases by 9% in current value terms when compared with the previous year. In volume terms, the number of transactions increases by 4%

• ATMs are now able to provide a great number of services, which contributes to the increase in the number of transactions. In addition the number of ATMs has become a competitive advantage for banks, because it allows them to offer a greater number of service stations which charge no commission to their customers

• Although the number of ATMs is growing, banks are focusing their expansion efforts on promoting online banking and the use of plastic money

• In order to provide added-value to customers, banks are equipping ATMs with many service options. This, in addition to the number of ATMs, has become an on-going marketing tool to attract customers

• During the forecast period ATM transactions are expected to increase, along with the growing banked population. The CAGRs expected in the forecast period are 5% in both transaction volume and constant value terms

TRENDS

• During 2011 several banks upgraded their ATM software in order to increase security. Dynamic passwords were introduced, whereby in addition to the usual PIN number, customers had to type a dynamic password that is determined by the user.

• There was also an increase in the number of services available at ATMs. In addition to conventional services, which include cash withdrawals, balance consultations, bank-to-bank transactions, pre-paid phone recharges and service payments, during 2011 other services were available, such as purchasing event and plane tickets, insurance and tax payments and tuition fee payments, amongst others.

• Cash remains the most important method of payment in the country. In 2011 cash payments accounted for 61% of consumer transactions in terms of value and 90% in terms of number of transactions. This provides important insight into the fact that cash withdrawal is the most important function of ATMs; many consumers use their cards only to have access to cash.

• Consumers are slowly moving away from ATM cash withdrawal towards cash back at points-of-sale. However, there are many sales points, such as street markets and small businesses, which do not have point-of-sale terminals. This represents a challenge for banks trying to increase the use of financial cards.

• There was an important increase in ATM infrastructure during the review period; however, there are still many places with no or few ATMs in the country, mostly in rural areas. This represents an important opportunity for banks to expand their services.

• In the hierarchy of plastic functions, the ATM function remains the most important. In response, during 2011 several banks decreased their commission for credit card cash withdrawals in order to encourage the use of credit cards for this purpose.

• Innovative services available at ATMs include the purchase of event and plane tickets, as well as the possibility to pay tuition fees. ATMs are no longer just an outlet that can only perform financial functions. ATMs are becoming an attractive alternative for certain companies, which can shift from offices with employees towards a self-service scheme through ATMs. Some ATMs have enabled consumers to purchase cinema tickets and a human resources company even installed ATMs to gather and publish data. It will be interesting to see if partnerships with banks arise that will result in ATMs offering more than just access to money or accountholder information.

• High cash cultures use their cards only for cash withdrawals; ATM cards are seen as a cash access tool instead of a payment method.

• Regulation concerning the display of information at ATMs came into force in the middle of 2010. Customers’ awareness about the commission being charged by banks increased, and this was reflected in an increase in the average transaction value; consumers’ strategy was to use ATMs less and avoid paying too much commission.

COMPETITIVE LANDSCAPE

• In terms of ATM infrastructure the leading companies are BBVA Bancomer and HSBC, followed by the newly merged Banorte-IXE. The latter has announced that part of its future strategy includes the expansion of its ATM network in order to enhance its services.

• Innovation in terms of ATMs depends to a great extent on the products launched by each bank. At the beginning of 2011 IXE Banco, which has now merged with Grupo Financiero Banorte, launched its service of cash deposits through ATMs. This was a service which was not being offered by any bank in the country. Other marketing strategies used by IXE Banco are the availability of new bills of small denomination, which is highly appreciated by customers.

PROSPECTS

• During the forecast period an increase in the number of ATMs is expected in the country as part of the banks’ expansion strategy to increase their consumer base. In addition, the possibility to charge commission to smaller banks which have a much more limited ATM infrastructure is an important incentive for bigger banks to invest in ATMs. The CAGRs expected in the forecast period are 5% in terms of both transaction volumes and in constant value terms.

• ATMs are likely to become a sort of substitute for bank offices; this represents an opportunity for banks to integrate a great number of services. During the forecast period an increase in the number and type of services available through ATMs is expected.

• The forecast for cash usage is likely to remain very high during the forecast period. One of the main reasons for this is the number of people earning their income in the informal sector of the economy. This is likely to reinforce the use of ATMs as cash withdrawal facilities.

• There are many possible uses for ATMs which have to be exploited by the banks that operate them. It is likely that the number of services offered through ATMs will increase during the forecast period, as this represents a marginal increase in costs for the already developed infrastructure.

• The main opportunity for ATM cards is in the growing banked population. As the latter increases, ATMs will become more important in order to meet their needs. In addition, although online banking represents a threat to the use of ATMs, the low-income population which has no access to online banking services is likely to adopt ATMs as the main contact point with their banks.

CATEGORY DATA

HEADLINES

• In 2011 charge cards sees an increase of 2% in terms of volume transactions and a 7% increase in current value terms

• The number of cards in circulation also increases, from 1.85 million to 1.91 million, which represents growth of 4% when compared with the previous year

• The most important factor impacting the category during 2011 is consumers’ awareness of their credit card debt, which encourages some of them to exchange credit cards for charge cards

• The average transaction value increases during 2011. Remarkably, the increase in personal charge cards is higher than that observed in commercial charge cards

• At the moment, the only company with significant participation in charge cards is American Express

• Over the forecast period charge cards is expected to increase by a CAGR of 3% in terms of volume transactions and by a CAGR of 4% in constant value terms

TRENDS

• During 2011 charge cards became an attractive option for customers who wanted to avoid interest charges. In terms of commercial charge cards, companies realised that this product offers greater control of expenses.

• The average transaction value of personal charge cards increased more than the average transaction value of commercial charge cards during 2011. The latter increased by only 3%, whilst the average transaction value of personal charge cards increased by 6% when compared with the previous year. This difference might be explained by the fact that some users of personal credit cards cancelled their credit cards and shifted to charge cards, preferring to make full payment, therefore increasing the average transaction value.

• Personal charge cards are seen as safer, in the sense that debt cannot mount up. After so many cases of over-indebtedness in recent years, charge cards became an alternative for customers who needed short term consumer credit.

• Commercial charge cards provide flexibility for users, in the sense that they can pay for unexpected expenses. This is a reason for companies to approve charge cards amongst their employees; however, many companies are choosing alternatives which allow better control of expenses, leaving charge cards as an emergency resource.

• The use of charge cards increased very slowly during the review period. Credit cards are the main barrier to the growth of this category. Given the similarity with the latter, companies prefer to offer credit cards, because they can charge more commission for such products.

COMPETITIVE LANDSCAPE

• As previously mentioned, the only issuer and operator of charge cards in the country is American Express. During 2011 charge cards grew by 2% and 7% in terms of volume transactions and in current value terms respectively.

• There are no competitors expected to enter this category over the forecast period. Charge cards are little-known products in the country, and there has been no interest from other issuers or operators in competing in this category.

• American Express targets the middle/high- and high-income segments. Although it certainly deals with unprofitable customers, most have high purchasing power and are loyal to the company for its benefits.

• The company has a successful and well-known rewards programme which offers points according to the value spend. These points can be exchanged for flights, trips, consumer appliances and electronics, jewellery, films, magazine subscriptions and gift certificates, amongst others.

• Commercial charge cards are usually used for travel expenses and unexpected purchases. Companies are trying to avoid unexpected expenses; however, it is important to empower employees, and charge cards are an ideal product for this.

• American Express is a multinational company. There are no relevant national companies offering charge cards in Mexico.

PROSPECTS

• Over the forecast period moderate growth is expected in this category, which might be driven by the expansion of American Express as an operator. Over the forecast period charge cards is expected to increase by a CAGR of 3% in terms of volume transactions and by a CAGR of 4% in constant value terms.

• Growth rates are expected to increase at 4.1% CAGR in constant value terms and 3% CAGR for number of transactions over the forecast, because there is an opportunity to expand such a small category. However, over the forecast period this category will probably face competition from other payment methods, such as credit cards and personal loans.

• Potential forecast threats to growth include the increasing number of players entering the credit cards category. This market segmentation will probably pose a challenge to charge cards, which will have to stand out in order to be considered by consumers.

• The charge cards category in the Mexican market seems to have evolved into an exclusive membership rewards programme, which is the result of the strategy used by the only player, American Express, in order to attract customers. Other strategies could be used by new players entering the category in the future; however, there are no companies showing interest in this category at the moment.

CATEGORY DATA

• Credit cards sees an important recovery during 2011, with an increase of 5% in terms of volume transactions and a 7% increase in current value terms

• The number of cards in circulation increases by 3% when compared with the previous year. During 2011 customers who stopped using their credit cards in 2009 and 2010 because they could not afford them, start to use them again in 2011

• The most important factor impacting the category during 2011 is the noticeable recovery of the economy. This is observed in terms of an increase in the employment rate, and therefore the economic stabilisation of many households

• The average transaction value grew 2% in value per transaction in 2011; however, there is a tendency to use credit cards for smaller payments and increase the frequency of use

• Several new players enter credit cards in 2011; many of the new cards are co-branded with already consolidated banks

• Credit cards are expected to see important growth during the forecast period. A CAGR of 8% is expected in terms of transaction volumes, and a CAGR of 9% in constant value terms

• In 2011 important economic recovery was seen amongst households, which was reflected in an increase in the use of credit cards. People who had stopped using their credit cards after being seriously indebted during the economic crisis started to use them again.

• During the year a shift was also observed from debit cards towards credit cards in order to obtain the benefits offered by the latter, which are usually more attractive. Sometimes benefits are offered by distributors, not necessarily by the bank; for example department stores offer payment deferrals for 6, 12 or 18 months with no interest if the customer pays with a credit card.

• The credit bureau is increasingly being used by financial institutions in order to analyse customers’ credit records. This encouraged people who have no credit history to start using their personal credit cards in order to create a credit history. Credit history is always considered by lenders when evaluating house or car loans. During 2011 personal credit cards increased by 5% in terms of volume transactions and by 7% in current value terms when compared with the previous year.

• Commercial credit cards are often used to pay for travel expenses; this is a way for companies to keep track of operating costs. Although pre-paid cards are also increasingly being used for this purpose, during 2011 this category observed important growth, with an increase of 4% in terms of volume transactions and of 8% in current value terms.

• The use of credit cards is evolving towards a common payment method. Both issuers and operators encourage customers to use their credit cards as much as possible by creating rewards programmes and contests which are directly related to the frequency of use.

• Usually credit cards were mainly used for big ticket purchases such as electronics and consumer appliances; however, given the constant encouragement from issuers, operators and retailers, credit cards are increasingly being used for small payments, such as for groceries, haircuts and eating out, amongst others.

• The operator with the biggest increase in share in credit cards during 2010 was Visa, which invested considerably in advertising, and increased the number of issuers working with Visa as an operator.

• The biggest increase in share from an issuer was seen by Grupo Financiero Banorte, after the merger with IXE Banco.

• Credit card usage is relatively low when compared with debit card usage; in 2011 there were 23 million credit cards in circulation compared with 75 million debit cards. However, it is the second biggest category within financial cards. Some factors which limited the wider use of credit cards were the stringent criteria, which leave a large proportion of the population without the possibility to even apply for a credit card, and a recent aversion to debt resulting from questionable practices used by private companies in order to recover their investments. Concerning criteria, it is very common to ask for proof of one year working for the same organisation, which would necessarily be part of the formal economy. This requirement can be highly restrictive in a country where the informal economy plays such an important role.

• Companies are constantly competing for cardholders by launching credit cards which offer special benefits to the user. Co-branded credit cards with special discounts on first purchases, plane tickets and events, and cards branded with football teams, which offer access to activities related to the football team, are some of the most common examples.

• Companies have implemented several criteria in order to avoid attracting unprofitable customers. For example, credit cards for customers with no credit history are now limited to a small amount of credit until the user creates a positive credit record of at least six months. In addition, companies are spending more resources on checking references and evaluating potential customers.

• Annual percentage rates oscillate from 20% to 50% in the market. There was a decrease in rates during the review period; however, consumer credit offered through credit cards remains expensive in the country. There are no caps on the maximum rate, and regulatory bodies have made clear that they do not have plans to establish a cap, as this could result in market distortions. Concerning annual fees, during 2011 there was a general increase in the cost of ownership, which encouraged users with more than one credit card to cancel the ones which were not essential.

• In order to offer an attractive credit card in the market, companies are expected to focus on segmentation and the benefits attached to credit cards. Loyalty and rewards programmes have proved to be highly appreciated by customers, and are used by many companies, such as BBVA Bancomer, Banamex Citigroup, Santander, Scotiabank and Banorte, amongst others. Attached benefits, such as discounts, events and contests, are also attractive to customers. There are many different credit cards offered in Mexico – Banamex Citigroup offers 34 different credit cards, whilst Santander and BBVA Bancomer offer 22 and 18 respectively.

• During 2011 several campaigns encouraged people to increase the use of credit cards in different ways. Banamex Citigroup, for example, launched a campaign explaining how credit cards can be used to withdraw money at ATMs. BBVA Bancomer focused on deferred payments and minimum fixed charges as a way to offer control to its customers, and Banco Wal-Mart displayed advertisements for Wal-Mart credit cards all over its more than 2,000 stores around the country.

• There are several strategies used by companies in order to attract more customers; rewards, co-branded cards and premium cards were some of the most frequently observed during 2011. Rewards programmes offer points per purchase, which encourages customers to increase the frequency of use of their cards. Co-branded cards experienced unprecedented growth during the review period; co-branded credit cards were seen from most football clubs in the country, as well as retailers, sports facilities, clothing stores, automotive companies, airlines and social causes such as Teleton (a civil association which raises funds for physically impaired children), amongst others. Concerning premium cards, wide coverage insurance and concierge services are usually part of the benefits, access to premium waiting rooms at airports and discounts at hotels are also offered as benefits of premium credit cards.

• Commercial credit cards are mostly used for travel expenses, including flight tickets, car rental, accommodation and food. American Express has focused on this category, and it has been quite successful.

• During 2011 interesting new product developments were seen, such as the Wal-Mart credit card, which gives back 3% of the purchase value in cash at the time the payment is made. This is a tangible benefit which is highly valued by customers.

• Except for Grupo Financiero Banorte, which climbed to third place thanks to its merger with IXE Banco, the biggest issuers of credit cards are multinational companies. These companies enjoy important infrastructure in the country, and brand recognition from customers.

• During the review period there was conversion from store cards to credit cards; this happened a lot during and after 2008, when the authorities allowed the operation of SOFOMEs (Financial Societies of Multiple Objects). Several chained stores decided to seize this opportunity, and launched their own financial services, backed up by their already developed infrastructure. Some examples of this are Palacio de Hierro, El Puerto de Liverpool, Comercial Mexicana, Soriana, Coppel, FAMSA and Wal-Mart. By engaging in financial services, store cards became credit cards, and are now competing in this category.

• There were several changes implemented during 2011 concerning regulations. Some of them related to more efficient processes when signing contracts, cancellations and claims, others concerned security, and there was a very important one which involved the calculation of minimum payments in order to increase the payment of capital and avoid over-indebtedness.

• The most important company activity during 2011 was the merger of Grupo Financiero Banorte with IXE Banco. These are two national companies which decided to merge in order to create the strongest national bank operating in the country. After this move Grupo Financiero Banorte became the third biggest bank after BBVA Bancomer and Banamex Citigroup.

• During the forecast period an important increase is likely to be seen in the use of credit cards, driven by the newly banked population and already banked population seeking more sophisticated products. A CAGR of 8% is expected in terms of transaction volumes, and a CAGR of 9% in constant value terms.

• Growth rates are expected to rise in value terms for several reasons; first of all the newly banked population will probably drive the category for the next five years, together with the already banked population, which might shift from debit cards to credit cards. In addition, efforts from issuers, operators and retail companies encouraging the use of credit cards through deferred payments, loyalty and rewards programmes are likely to boost this category.

• Potential forecast threats to growth include a recently developed aversion to debt amongst people who went through bad experiences. During and after the economic crisis in 2009 and the first part of 2010, many issuers sold their debt portfolios to private companies, which started to use unorthodox methods in order to recover their investment. This created some aversion to the use of credit cards, which might be difficult to reverse during the forecast period.

• Credit cards might also be boosted by the country’s demographic changes over the forecast period. During 2011 approximately 65% of the population was aged between 15 and 65; by 2016 this is expected to increase by two percentage points, reaching 67%. Therefore, the greater number of people of working age is likely to boost the growth of the credit cards category.

• Credit cards will probably evolve towards more sophisticated products in terms of security and technology. Smart cards are already being used, but other approaches, such as mobile phones or electronic ID, are being analysed, and could eventually substitute plastic cards. In terms of the product itself, insurance, concierge services, deferral payments, loyalty and rewards programmes are common benefits offered by companies already; however, over the forecast period there may be a shift towards more tangible benefits, such as discounts and cash refunds.

• Opportunities in this category are amongst the unbanked population, which might start using financial services; they will demand basic products such as debit cards and credit cards. At the same time, the biggest challenge might be risk management, as this newly banked population might not be aware of the risks attached to the mishandling of credit.

• Over the forecast period an increase in the share of credit cards offered by retailers is likely; these companies have used their already existing infrastructure in order to provide financial services, but they might complement this business with their core business by offering exclusive discounts and promotions which encourage customers to acquire their credit cards.

• In order to capture share, companies are expected to offer attractive benefits and competitive rates without neglecting eligibility criteria. Given the segmentation of the category, consumers might be tempted to acquire more than one credit card in order to obtain more benefits; however, lenders will have to be very careful with this, as consumers might acquire debts which they cannot pay.

• Immediate tangible benefits can create big buzz, such as the Wal-Mart credit card, which gives back a percentage of the purchase amount in cash at the time of payment. Over the forecast period an increase in this type of benefit is expected, such as cinema tickets and invitations to exclusive events. However, this involves further segmentation and accurate placement of resources, as these benefits might not be attractive to everyone.

• Over the forecast period the strengthening of new players may be seen. Retailers are likely to gain share from the biggest players as they increase the consumer base. As a response, banks might offer more sophisticated products, linking accounts to investment portfolios and providing more sophisticated online services.

HEADLINES

• During 2011 debit cards sees a 6% increase in terms of transaction volumes, and a 9% increase in current value terms. This can be explained by the consumer shift towards the use of cards as an easier payment method

• The number of debit cards in circulation increases significantly, reflecting the increase in the banked population. The number of cards reaches 75 million during 2011, representing an increase of 8% compared with the previous year

• The stringent criteria imposed on granting credit cards, in addition to the previous experience of many credit card users, who had trouble paying their debts during the recent economic crisis, encourages the use of debit cards during 2011

• The average transaction remains stable when compared with the review period. The average transaction was Mx$531 in 2011, a 3% increase over the review period.

• Banks are aware of the size of the unbanked population, and they have developed specific strategies to address this segment. Part of their strategy includes the promotion of card payment through the increase of point-of-sales terminals available in small businesses. Debit cards are the most basic products offered by banks, and are also the most likely to be acquired by a first-time user of financial services

• During the forecast period debit cards is expected to increase by a CAGR of 7% in transaction volume terms and by a CAGR of 8% in constant value terms

TRENDS

• During 2011 the use of debit cards was boosted by new people joining the banked population; debit cards are the most basic products offered by banks when a new account is opened. Therefore almost every new customer is reflected in a new debit card in circulation.

• After the economic crisis many customers suffered a painful process in terms of catching up with their credit card payments. People went back to using debit cards as a way to control their spending, giving an extra boost to the use of debit cards during 2011.

• Currently cardholders use debit cards primarily for cash withdrawal at ATMs; however, there is a shift towards the use of debit cards as a payment method. The biggest factor preventing this practice is the limited number of point-of-sale terminals available at markets and small businesses.

• During 2011 there was an increase in the frequency of use, as well as an increase in the use of cards over cash as a payment method. This was the result of several players encouraging customers to pay with plastic. Banks increased the number of banked medium and small sized businesses, whilst supermarkets and hypermarkets offered rewards programmes together with specific banks.

• When competing with cash, debit cards are the most successful product offered by banks, because it allows users to limit their spending to whatever money they have. Debit cards are increasingly being used for micropayments and online purchases; however, credit cards are also looking to compete for micropayments, with rewards programmes which provide benefits with increased frequency of use, regardless of the amount of the transaction.

COMPETITIVE LANDSCAPE

• The leading companies in debit cards are the banks with the biggest number of account holders. During 2010 BBVA Bancomer was the leading company in terms of cards in circulation and in value terms, followed by Banamex Citigroup. After the merger of Grupo Financiero Banorte and IXE Banco in March 2011, the new bank became the third biggest bank in the country.

• The biggest increase in share in 2010 was seen by Visa, which invested heavily in advertising. During 2010 this operator increased its number of debit cards in circulation by 16% when compared with the previous year.

• Both Visa and MasterCard, the biggest operators of financial cards in the market, enjoy a good positioning in consumers’ minds. However, during the review period Visa managed to work closely with issuers, increasing its share of debit cards.

• The biggest increase in value share was seen by Grupo Financiero Banorte in 2011, after merging with IXE Banco. After the merger the new institution became the third biggest issuer of debit cards in the country.

• The leading issuer of debit cards in the Mexican market is BBVA Bancomer. This bank differentiates from the rest by offering its customers the biggest network of service offices and ATMs in the country. In addition BBVA Bancomer operates a very successful rewards programme called El Libreton, which has been operating for 14 years. The programme consists of several contests, whereby consumers’ participation is directly related to their monthly balance. Gifts range from consumer appliances and electronics to cars.

• Companies have developed several strategies in order to compete for cardholders; rewards programmes, gifts for opening accounts or increasing the balance of a savings account, and co-branded cards with football teams or social causes were some of the strategies observed during 2011.

• Rewards programmes have proven to be attractive to customers; the most popular in the market is El Libreton, offered by BBVA Bancomer. This programme consists of monthly contests for consumer appliances and electronics, whereby customers have one entry per Mx$3,000 in their savings account. Another successful programme is that operated by IXE Banco, which offers cinema tickets, dinners at exclusive restaurants and the possibility to attend exclusive events, such as new car presentations and private concerts organised by the bank for its customers.

• Advertising campaigns focus on different market segments; there are debit cards targeting children, women, university students, social activists and football fans. Promotions are advertised through magazines and television advertisements, as well as flyers.

• There are a few co-branded and premium debit cards on the market. Co-branded cards with football clubs are popular, because they offer discounts on products and access to pre-sales of tickets. Some other examples of co-branded cards are Invermatico Estados, which is a debit card issued by Banamex Citigroup and local governments in order to donate a certain amount of money related to the average balance of the debit card to public benefits. Regarding premium cards, IXE Banco and Visa offer the Platinum debit card which includes car and medical insurance, immediate replacement of the card in case of loss or theft and a cash advance feature if theft were to happen during a trip.

• The biggest banks in the country are multinationals; however, with the merger of Grupo Financiero Banorte with IXE Banco in 2011, the new company became the third biggest bank in the country. Other important national banks are Banco Inbursa and Banco del Bajio.

• In March 2011 Grupo Financiero Banorte merged with IXE Banco, becoming the third biggest bank in the country. This merger represented the most important company activity during the last 10 years. By getting together, the new bank, which will keep the name Grupo Financiero Banorte, became the biggest national bank in the country.

PROSPECTS

• The debit cards category is likely to see important growth during the forecast period, as the banked population increases. During the forecast period debit cards is expected to increase by a CAGR of 7% in transaction volume terms and by a CAGR of 8% in constant value terms

• Compared with the review period, growth rates during the forecast period are expected to fall as a result of the popularity of other financial products, such as pre-paid cards and credit cards, which can be substitutes for debit cards as a payment method.

• Debit cards regained popularity after the economic crisis, which left many customers with huge debts on their credit cards. Although many of these customers have paid their debts and could be eligible for credit cards again, many of them are likely to stick with debit cards during the forecast period as a way to limit their spending and avoid further debts.

• BBVA Bancomer launched a debit account called Express, which encourages the use of mobile phone transactions and balance consultations. This account can be opened with Mx$50 at the bank’s offices or OXXO convenience stores. The customer gets a debit card to use for payments and for cash withdrawal at ATMs. This product targets the low-income segment, with a monthly income of less than Mx$6,000.

• Debit cards are likely to remain the most used payment method after cash. Debit cards will probably gain share from cash during the forecast period thanks to the increase in point-of-sale terminals in medium- and small-sized businesses. In addition, the increase in the banked population will benefit the debit cards category.

• The biggest challenge for debit cards is the increasing number of alternative payment methods. Online transactions, mobile phone transactions, charge cards, credit cards, store cards and pre-paid cards are all alternative options which might gain popularity during the forecast period. However, the possibility to service the unbanked population through debit cards represents an important growth opportunity for this product.

• The company best-positioned to gain share in this category is likely to be BBVA Bancomer, because it is already the leader, and owns the biggest infrastructure in the country. However, the merger of Grupo Financiero Banorte and Banco IXE might pose important competition, because the new group will probably leverage the fact that it is a national bank in order to attract new customers.

• Offering complementary financial products such as credit cards and loans is a good strategy to capture share of the debit cards category. Companies should also seek exposure through advertising in order to create consumer awareness.

• Most product launches in 2011 focused on the low-income segment; this trend is likely to gain steam during the short term, whilst banks try to increase the consumer base by targeting the unbanked population.

• Over the forecast period new players are likely to enter the debit cards category. Given the basic function of this product, every new company which is aiming to raise money from customers will probably offer debit cards, as this is the easiest way for customers to access their money.

CATEGORY DATA

HEADLINES

• During 2011 pre-paid cards sees important growth of 23% in terms of volume transactions and of 20% in current value terms

• The average transaction value of pre-paid cards decreases by 2% during 2011 in current terms. Concerning the number of cards in circulation, open loop pre-paid cards sees an increase of 10%, reaching 13 million, whilst closed loop pre-paid cards increases by 20%, reaching five million

• Concern about the use and regulation of pre-paid cards is an important subject during 2011. The possibility of these cards being used for money laundering is a serious worry which is likely to result in closer vigilance and further regulation

• There are few specialised companies leading this category at the moment; however, during the review period several new players are seen, which are likely to gain share in the future

• Over the forecast period pre-paid cards is expected to grow rapidly, reaching 47 million cards in 2016. In the forecast period 2011-2016 a CAGR of 31% is expected in terms of volume transactions and a CAGR of 27% in constant value terms

TRENDS

• During 2011 several movements were seen in this category. The most important was the growing interest in banking pre-paid cards, which are likely to gain popularity over the forecast period. These cards allow users to pay at point-of-sale terminals, and withdraw money from ATMs or banking correspondents.

• Pre-paid cards have been involved in several claims of money laundering. These types of cards are not linked to any account, can be used as many times as the user wants, and the user remains anonymous. This is clearly an attractive method for money laundering. The current regulations state that pre-paid cards can only be charged with approximately Mx$6,000; this is not a high quantity, but still provide an alternative option to carrying cash.

• Pre-paid cards have become an attractive alternative for the unbanked population. Being able to pay with plastic money is convenient, secure, and sometimes necessary in the case of online purchases. During the review period a significant increase in the frequency of use of this type of card was evident.

• Open loop pre-paid cards are mostly used by companies and governments (federal and local) to assign financial benefits. Productivity bonuses, food and petrol benefits and travel expenses are some of the most common uses for open loop pre-paid cards. During 2011 the category observed growth of 10% in terms of volume transactions and of 14% in current value terms. In terms of cards in circulation, the category reached 13 million, showing an increase of 10% when compared with the previous year.

• Companies have shifted from charge cards and credit cards to pre-paid cards, as they enable them to have better control of expenses. It is also a good way to make sure that resources are assigned to the desired purpose; pre-paid cards for petrol and food are very popular. In 2011 the company Tebca presented its Bonus Alimentación MasterCard pre-paid card for companies who wanted to offer food vouchers as a benefit for employees. During this year the proliferation of open loop pre-paid cards for banking purposes was also observed.

• Closed loop pre-paid cards have a very strong presence in transportation. During 2011 more than 79% of these cards were used for transportation purposes.

• In 2011, closed loop pre-paid cards increased by 24% in terms of volume transactions and by 34% in current value terms. The number of cards in circulation also increased, reaching five million, which represented an increase of 20% when compared with the previous year. The category was driven by the proliferation of non-contact card readers on the subway networks of the main cities and several bus service stations, and also by the promotion of the IAVE toll card, which increased considerably during this year.

• The cardholder base for pre-paid cards is expanding, as companies offer wider alternatives for customers. Banking pre-paid cards offer an important service for the unbanked population, which was previously not considered amongst the cardholder base for this product.

COMPETITIVE LANDSCAPE

• There are several experienced companies which have an important presence in this category. Some of these companies include Prestaciones Universales, Sodexo, Edenred (formerly Accor Services) and Efectivale. Together these companies represented the majority of the category in value terms in 2011.

• Companies are competing for cardholders through advertising and distribution. During the review period pre-paid cards were offered through companies or government institutions; however, there has been a shift towards offering these cards directly to consumers, which boosted marketing campaigns and the involvement of retail chains as distributors.

• Pre-paid cards can be used to pay for any goods or services. In order to differentiate their products, companies are labelling pre-paid cards with specific purposes, such as food, petrol or travel expenses. This might be attractive for users who want to limit or control their spending on specific products. Companies find this method very helpful, and it is also now becoming popular amongst consumers.

• In order to offer an attractive pre-paid product, companies offer acceptance and availability. In July 2010, Banamex Citigroup and MasterCard launched the pre-paid card Perfiles Ya. This card can be acquired at any of the 1,600 bank offices around the country, and is accepted by more than 450,000 points-of-sale.

• Pre-paid cards were offered by several banks during the review period. The most dynamic brand in terms of advertising during 2011was Perfiles Ya, issued by Banamex Citigroup and MasterCard. Another advertised brand during the year was the card Sí Vale Mis Compras, issued by Prestaciones Universales with the slogan “You decide where to buy”.

• New product developments included Banamex Citigroup’s open loop pre-paid card Perfiles Ya, which was launched in July 2010, and the closed loop pre-paid cards from electricity and water service providers.

• Amongst the leading multinational companies in the domestic market are the French companies Sodexo and Edenred (formerly Accor Services) and Prestaciones Universales, which was acquired by Monex Holding Group in September 2008. The leading national company is Efectivale.

• In June 2010 the company Accor Services announced a restructuring of its business, which would split the accommodation services business unit from the pre-paid services business unit. The latter became Edenred. Other activity observed during the review period was the acquisition of Prestaciones Universales by Monex Holding Group.

PROSPECTS

• Pre-paid cards is expected to grow rapidly over the forecast period, driven by the unbanked population, the use of this type of card for loyalty and rewards programmes, and the implementation of pre-paid services.

• Compared with the review period, the growth in the category is likely to accelerate over the next five years. In the forecast period 2011-2016 a CAGR of 31% is expected in terms of volume transactions and a CAGR of 27% in constant value terms. In terms of cards in circulation, the category is expected to reach 47 million cards by 2016.

• The forecast threats to growth in this category include further regulation in order to avoid money laundering activities, and competition from other financial cards, such as debit cards and credit cards as payment methods.

• Over the forecast period there is expected to be an increase in the popularity of pre-paid cards as a payment method for online purchases. Consumers are reluctant to provide too much information online, for fear of being traced or scammed, and pre-paid cards have become an excellent alternative for customers who want security and anonymity.

• Over the forecast period there may be an increase in pre-paid services such as electricity, water and gas. Pre-paid services will probably be operated through closed loop pre-paid cards, leading the category towards more diversification. Concerning open loop pre-paid cards; these are likely to become more popular amongst the unbanked population, which might find the possibility of making card payments without having to open an account convenient.

• There are many growth opportunities in this category. Pre-paid cards are convenient and easy to use, and they allow better control of resources both to companies and final consumers. Companies are already using pre-paid cards in order to increase consumer loyalty. A good example is Comercial Mexicana and its Monedero Naranja, which is a closed loop pre-paid card whereby consumers accumulate points and money through purchases, which can then be exchanged for premium products. An important challenge will be to differentiate and clarify the advantages of pre-paid cards when compared with debit cards or credit cards.

• The best-positioned companies in this category are chained retailers and banks which have a well-developed infrastructure. Availability and acceptance are fundamental for the performance of pre-paid cards; chained companies can provide service, product availability and attached benefits in a much easier way than other smaller companies. In addition they already enjoy credibility and brand positioning amongst consumers.

• In order to capture share, companies will probably have to work on product differentiation. With the proliferation of alternative payment methods, companies offering pre-paid cards will have to emphasise their advantages, and invest in advertising and promotion.

• New product launches might gain share in the short term by recruiting new unbanked customers; acceptance and availability are likely to play key roles in this category. However, open loop pre-paid cards faces important competition from debit cards and credit cards, which at the moment offer many more benefits. This competition might slow down the growth of the category over the medium and long term. Concerning closed loop pre-paid cards; these are likely to increase in number, volume and value, driven by new policies implemented by public administrations.

• Expected company activity over the forecast period includes the expansion of the pre-paid electricity service by CFE (Federal Commission of Electricity), which is already operating in a few regions, and the introduction of water and gas pre-paid services by the different companies and bodies which provide these services. More active participation from banks is also expected over the forecast period.

CATEGORY DATA

HEADLINES

• In 2011 store cards sees growth of 6% in terms of volume transactions and of 9% in current value terms

• The number of cards in circulation reaches nine million, which represents an increase of 4% when compared with the previous year

• During 2011 there is an increase in the number of stores offering their own cards to clients. However there is also an increase in cautiousness amongst consumers, who are becoming more careful with the type and number of financial cards they own

• Store cards have become an extra business for retailers which seek to earn extra money from consumer credit services. During 2011 several companies launch store cards and attract consumers with discounts on their first purchase

• Over the forecast period store cards is expected to increase by a CAGR of 7% in terms of volume transactions and by a CAGR of 6% in constant value terms. Concerning the number of cards in circulation, the number of store cards is likely to reach 11 million by 2016

TRENDS

• In 2011 there was an important recovery in the average spent per household; this triggered the offer of credit from several retailers, which have found that store cards can be an attractive complementary business which can also be used to reinforce loyalty amongst customers.

• After the economic crisis and several debt problems which followed, many customers decided to cancel some of their credit cards in order to gain better control of their spending. Store cards are usually the second or third credit cards owned by consumers, and therefore they are considered as non-essential products. During 2011 this was the biggest challenge for the store cards category.

• The use of store cards increased over the review period thanks to an increase in the offer. However, consumer awareness of the cost of owning these cards also increased, preventing the category from seeing accelerated growth.

• Store card holders are typically loyal customers who appreciate the benefits offered by the store when acquiring the card. However, due to questionable market practices there are many customers who are insistently encouraged to acquire the card for its benefits, without being fully informed of the responsibilities they are also taking on. This has resulted in many intermittent cardholders, who keep acquiring and cancelling cards, or just acquire them without being aware that they have to cancel their contracts if they do not want to be charged annual fees or commission.

• Several stores have realised that limiting their clients to using their cards only within their stores might be a disincentive. As a result, some stores are now issuing credit cards instead of store cards. However, this shift towards credit cards is limited to consolidated companies, as it involves much more resources from the company, which has to deal with bigger amounts of granted credit, and therefore higher risks.

COMPETITIVE LANDSCAPE

• During 2010 the company with the biggest decrease in share was El Puerto de Liverpool, which lost more than one percentage point of value share. This can be explained by the number of companies which have entered store cards targeting the middle/low- and low-income segments, segments in which El Puerto de Liverpool is not present.

• Companies are competing for cardholders by offering in-store benefits such as discounts on the first purchase, special offers, or rewards linked to loyalty.

• Some companies have explored shifting their store cards to credit cards in order to attract and retain customers. Large retailers such as Wal-Mart, Coppel and FAMSA have already launched their financial services businesses in order to offer more sophisticated products, including credit cards. Other companies have developed attractive and more sophisticated loyalty programmes which aim to increase customer retention. Benefits include permanent discounts, deferred payments, pre-sales and discounts in some other stores.

• In order to offer attractive products, companies have to offer permanent and exclusive benefits in order to encourage customer retention.

• Promotion of store cards is usually carried out in-store by promoters, who offer and sign up customers at the same place. Cards are also offered to customers at the time they are paying, with sales assistants mentioning the immediate discount they would obtain if they signed up immediately.

• Store cards are a very small category within the financial cards market; it represented only a negligible share in value terms and in terms of cards in circulation in 2011.

• Players typically market these cards to consumers by offering discounts on first time purchases. Over the review period there was an evolution towards more sophisticated marketing, which involved loyalty programmes and permanent benefits in order to retain and enhance the customer base.

PROSPECTS

• Over the forecast period the store cards category is expected to see moderate growth, driven mostly by the aim of stores to create loyalty programmes for consumers. Store cards are expected to increase by a CAGR of 7% in terms of volume transactions and by a CAGR of 6% in constant value terms. Concerning the number of cards in circulation, the number of store cards is expected to reach 11 million by 2016.

• Growth in the store cards category is expected to be 4% CAGR over the forecast period in terms of number of cards. This may be affected over the forecast as there is a trend to in which many companies are converting their store cards to credit cards in order to make them more attractive to customers. It is also the result of the bad reputation created by questionable market practices and very high interest rate observed by customers over the review period.

• Potential forecast threats to growth include the proliferation of credit cards, pre-paid cards and personal loans. These are all good alternatives for customers to obtain credit or control their spending without having to acquire specific financial products per store. Interest rates might also threat the growth of this category, as consumers realise that the rates charged by store cards are usually higher.

• Over the forecast period the move of store cards towards more sophisticated loyalty programmes is expected. An increase in benefits and rewards might be observed, as companies realise that customers need more incentives to acquire such specific financial cards.

• Depending on companies’ objectives, store cards might evolve to incorporate more complex loyalty programmes, or be eliminated in order to offer credit cards. This latter approach allows issuers to expand their consumer credit businesses by financing purchases in places outside their stores. Concerning customers, credit cards offer wider acceptance, which might be attractive for people who prefer to use only one credit card for all their purchases.

• Companies which offer a wide ranging portfolio might use store cards to create solid loyalty programmes. In order to do this, companies should be able to target the appropriate market segment and effectively communicate the benefits of their cards. The main challenge will probably be the increasing segmentation of the category.

• The best-positioned companies in this category include chained stores with wide product portfolios, which offer customers the possibility to use their store cards many times and obtain constant benefits. Amongst the best-positioned companies are supermarkets, department stores and chained companies with several brands, such as Inditex Group. The latter is a company which owns several apparel brands which complement each other.

• In order to capture share, companies are expected to offer attractive and on-going benefits for customers. Focusing on loyalty more than on the credit service itself will probably be the best strategy over the forecast period. In order to do this, smaller companies might have to group together with other companies to be able to offer attractive benefits without increasing their costs too much.

• Over the forecast period there may be an increase in store cards offered by groups of companies. By doing this, stores can increase the acceptance of their cards, offering this benefit to their customers, and consumers will have more incentive to acquire such store cards in order to have access to more benefits, such as discounts, pre-sales and special offers, in more than one store.

CATEGORY DATA

For each category and subcategory you will receive the following data in Excel format:

From Passport

• Market sizes
• Company shares
• Analysis by type
• Card expenditure by location
• Card expenditure by sector
• Domestic vs foreign spend

Market size details:

• Retail value retail selling price % growth
• Retail value retail selling price local currency, USD, EUR, GBP, CHF, JPY
• Retail value retail selling price per capita local currency, USD, EUR, GBP, CHF, JPY
• Retail value retail selling price real (constant 2008) prices % growth
• Retail value retail selling price real (constant 2008) prices local currency, USD, EUR, GBP, CHF, JPY
• Retail value retail selling price real (constant 2008) prices per capita local currency, USD, EUR, GBP, CHF, JPY
• Number of cards
• Number of cards % growth
• Number of cards per capita
• Number of accounts
• Number of accounts % growth
• Number of accounts per capita
• Transactions
• Transactions % growth
• Transactions per capita
• Retail value retail selling price nominal (current) prices % growth
• Retail value retail selling price nominal (current) prices local currency, USD, EUR, GBP, CHF, JPY
• Retail value retail selling price nominal (current) prices per capita local currency, USD, EUR, GBP, CHF, JPY

Global insight and local knowledge

With 40 years’ experience of developed and emerging markets, Euromonitor International’s research method is built on a unique combination of specialist industry knowledge and in-country research expertise.

This approach is what enables us to achieve our goal of building a market consensus view of size, shape and trends across the full distribution universe of each category. We factor in whichever channels are relevant, from large-scale grocery to direct sellers, from discount stores to local mom-and-pop outlets.

Industry specialists

Each industry we cover is managed by an Industry Manager and team of Industry Analysts who research and report on their specialist categories all year round.

Our collaborative approach to research means that these industry teams are in constant dialogue with industry players and opinion formers. The planning of our research programmes reflects latest market trends and industry events. In completing each update project, this provides invaluable input to the testing, review and finalisation of our data.

The specialist in-house teams bring together findings from all stages of the annual research process. They work closely with in-country analysts, assess and challenge data and exercise final editorial control over the publication of new data and analysis.

Country and regional analysts

Our in-country analyst network is managed by country and regional analysts in our offices around the world. Working closely with each in-country team, the regional research management team ensures that all country researchers are well schooled in best practices, from the information collected in store checks, to the dialogue we build in trade surveys. Our country analysts ensure that national reports explain the data trends and provide clear insights into the local market’s dynamics.

In-country research network

To deliver fresh insights every year in countries all around the world, we believe the strongest approach is to use analysts on the ground. They bring fluency in local language, physical proximity to the best sources, an ability to engage directly with local industry contacts, and an awareness of how the products and services we study are advertised, sold and consumed. These are essential parts of our ability to report incisively on these markets.

Our research methods

Each Euromonitor International industry report is based on a core set of research techniques:

Desk research

With industry events, corporate activity, trends and new product introductions tracked year round by our industry team, desk research provides a starting point for the in-country research programme. Our in-country researchers will access the following sources:

• National statistics offices governmental and official sources
• National and international trade press
• National and international trade associations
• Industry study groups and other semi-official sources
• Company financials and annual reports
• Broker reports
• Online databases
• The financial, business and mainstream press

Accessing sources is only the first step. The ability to interpret and reconcile often conflicting information across multiple sources is a key aspect of the added value we provide.

Store checks

Store checks are an integral part of our methods for product industries. Carried out on the ground across a relevant mix of channels, the information gained provides first-hand insights into the products we are researching, specifically:

• Place: We track products in all relevant channels, selective and mass, store and non-store
• Product: What are innovations in products, pack sizes and formats?
• Price: What are brand price variations across channels, how do private label’s prices compare to those of branded goods?
• Promotion: What are marketing and merchandising trends, offers, discounts and tie-ins?

Findings are cross-referenced with brand share data analysis. The results, combined with the findings of desk research, provide a strong basis for identifying key areas of questioning to take forward into our trade survey.

Trade survey

Interaction with global players at corporate HQ and regional levels is complemented by unique local data and insights from our in-country trade surveys around the world. Through the high profile of the Euromonitor International brand, we are able to talk directly to a wide range of sources and therefore inform our analysis with the knowledge and opinions of the leading operators in the market.

Trade surveys allow us to:

• Fill gaps in available published data per company
• Generate a consensus view of the size, structure and strategic direction of the category
• Access year-in-progress data where published sources are out of date
• Evaluate the experts’ views on current trends and market developments

In building our composite industry view, we engage with a variety of personnel in key players at all points of the supply chain: materials suppliers, manufacturers, distributors, retailers and service operators. We also interview desk research sources: industry associations; study groups; and third party observers from the trade and financial press.

Our objective is to engage in conversation with trade sources in which we exchange ideas and views on the industry, sharing our work-in-progress findings on supply/demand dynamics and potential. This dialogue enhances both parties’ understanding of the local market. The scope and reach of our trade survey also serves to eliminate bias (intentional and unintentional) from any single source.

Company analysis

At a global level, our company research combines our mix of industry interaction and use of secondary sources such as annual accounts, broker reports, financial press and databases. From a data perspective, the aim is to build “top-down” estimates of major players’ total global and regional sales.

At a country level, in line with local reporting requirements, we access annual accounts, national-specific company databases and local company websites. These are all invaluable sources as we build a view of each domestic player’s size and position within very specific categories of the industry.

Forecasts

Data projections and future performance analysis are key elements of Euromonitor International’s market intelligence. Working with historic trends of 15 years or more, a key aspect of our trade survey is to engage industry insider views of the next five years. Will volumes maintain their historic trend? Will price increases or falls of recent years continue, accelerate or slow down? Will increasing demand for one product cannibalise sales of another?

Forecasts represent many of the essential conclusions we have reached about the current state of the market, how it works and how it behaves under different macro and micro conditions. Our written analysis will state the assumptions and the trade opinion behind whether our predictions are optimistic or pessimistic, so that clients can use our statistical forecasts with confidence.

Data validation

All data is subjected to an exhaustive review process, at country, regional and global levels.

The interpretation and review of sources and data inputs forms a central part of the collaboration between industry teams and country researchers. Numbers are delivered to regional and global offices with an audit trail of sources and calculations to allow for a thorough evaluation of data sense and integrity.

Upon completion of the country review phase, data is then reviewed on a comparative basis at regional and then at a global level. Comparative checks are carried out on per capita consumption and spending levels, growth rates, patterns of category and subcategory breakdowns and distribution of sales by channel. Top-down estimates are reviewed against bottom-up regional and global market and company sales totals.

Where marked differences are seen between proximate country markets or ones at similar developmental levels, supplementary research is conducted in the relevant countries to confirm and/or amend those findings. This process ensures international comparability across the database, that consistent category and subcategory definitions have been used and that all data has been correctly tested. We make sure that possible discrepancies between different published sources have been reconciled and that our interpretation of opinion and expectation from each country’s trade sources has been applied to form a coherent international pattern.

Market analysis

Another integral part of all our research programmes is that all Euromonitor International data is accompanied by clear written analysis. From a research perspective, this explains and substantiates data findings. From a client perspective, this offers unique insights into local consumption trends, routes to market, brand preferences, channel dynamics and future trends.

Our country level analysis also provides invaluable input into the ability of our central industry specialist teams to marry local insights with strategic conclusions on the direction of the market regionally and globally.