Euromonitor International took a look at the 5 markets that are expected to show the most card payment volume growth in 2012. Emerging markets tell the growth story. The list of fastest-growing countries includes both small card markets like Vietnam, which remains very much in its infancy stage of development, to China, which is growing fast into a major card player on the global stage. Debt-free products like debit and pre-paid cards are the two card functions carrying much of the growth in these markets.
- 2012-13 card payment volume: 28%
- 2012-16 card payment volume CAGR: 19%
- 2012 card payment volume: US$9.0 billion
- 2016 no. of cards in circulation: 54.9 million
Out of the countries researched by Euromonitor International, Vietnam is projected to be the fastest growing market for card payment volume over the next year.
Pre-paid cards are expected to be the strongest growth category in the short term with a 30% jump in volume over the next year as consumer demand for modern payment methods continues to rise. In fact, the Vietnamese government is expected to re-launch cards with closed loop pre-paid function in the form of transportation cards as it tries to modernise the transportation system. A metro system is being built in Ho Chi Minh and, as a result, a new modern electronic card-based payment system will be implemented on existing buses and trains in order to help consumers become accustomed to this form of payment before the metro system is operational.
Despite the overarching transition to card payment, cash remains by far the most popular method of payment and Vietnam remains one of the smallest card markets worldwide. Many consumers, even though they possess credit or debit cards, still prefer to use cash to make payments for purchases due to the country’s long attachment to cash. The popularity of cash transactions also remained strong because some retailers charge an extra fee to consumers who paid by card, which deterred some consumers. Furthermore, a lack of promotion by banks and retailers to raise consumer awareness of card transactions means that consumer preference for cash will remain strong.
- 2012-13 card payment volume: 18%
- 2012-16 card payment volume CAGR: 21%
- 2012 card payment volume: US$173.7 billion
- 2016 no. of cards in circulation: 158.8 million
Although cash remains the main tool for payment in Turkey, consumers are increasingly switching from cash to plastic products. Credit will remain the dominate card type in the coming years, but debit is expected to be the fastest growing category in terms of payment volume over the next year with a growth of 39%, according to Euromonitor International’s latest data.
Debit cards are still frequently used for cash withdrawal and consumers perceive it as another ATM card, especially in the smaller cities of Turkey. Cash is the main competitor of debit cards, especially in terms of small purchases made in rural cities of Turkey where small grocery shops do not have POS machines or agreements with banks. The penetration of debit card as a payment tool in small cities is lower than major cities. Consumers tend to use debit cards for small amounts that exceed the value of the cash in their wallet at the time of purchase. When it comes to large transactions, credit cards are the card of choice.
The awareness of using debit cards has become more popular due to strong marketing efforts by leading industry players. Banks have recently heavily promoted their debit cards and their related benefits such as collecting bonus money or special discounts, which has had a positive effect of using plastic cards against cash. E-commerce is expected to increase the use of debit cards in the coming years as consumers, who do not have a credit card but hold a debit card, will tend to use the debit card for such purchases.
- 2012-13 card payment volume: 18%
- 2012-16 card payment volume CAGR: 20%
- 2012 card payment volume: US$16.3 billion
- 2016 no. of cards in circulation: 119.3 million
Pre-paid cards have been and will continue to be one of the fastest-growing card types in the Philippines in 2012 thanks to the robust growth of remittance cards among the open loop pre-paid card category, according to Euromonitor data. Such growth is expected to continue in the upcoming years as the current administration shows no signs of discouraging Filipinos who want to work abroad and with a rise in overseas employment driving remittances further.
Open loop pre-paid cards have been growing faster than closed loop pre-paid cards in terms of number of cards largely because open loop pre-paid cards are newer to the market and hence have more room for growth. Moreover, consumers increasingly appreciate the usage and merchant flexibility of open loop pre-paid cards.
Besides remittances, pre-paid cards will also benefit from the continuous demand for transportation cards due to the convenience and travel time efficiency offered by rail transport systems. Transportation cards, which are largely issued by Metro Rail Transit Corp. (MRT) and Light Rail Transit Authority (LRTA), almost entirely make up the closed loop pre-paid card category in the Philippines.
- 2012-13 card payment volume: 17%
- 2012-16 card payment volume CAGR: 13%
- 2012 card payment volume: US$1.6 trillion
- 2016 no. of cards in circulation: 2.8 billion
Financial cards have been developing rapidly in China since 2002 when China UnionPay Co Ltd was established and a credit card system was set up. The initial strategy for both issuer and operator was to acquire as many customers as possible. As the expansion slows down, the strategy has shifted towards customer retention and profitability. Most issuers have launched promotional programs focused on activating cards, stimulating spending and waiving fees to retain the business.
In 2012, the credit function is expected to grow the most in terms of volume with a 19% jump, according to Euromonitor data. The main driver behind the potential credit card growth will be due to a consumption behaviour shift as Chinese people will get accustomed to carrying a fair amount of debt gradually in the coming years.
Debit cards, which will post the second-fastest growth rate for the period with a 16% hike, will continue to dominate China’s financial card market. Debit cards are expected to become a substitute for the conventional deposit check in the coming years and transactions will continue to grow as customers become accustomed to using debit on a daily basis.
Co-branding and cross-marketing will continue to be one of the most important strategies for debit cards and will focus on partnering with auto dealers and home appliances stores where debit cards are commonly used. In addition, debit cards targeting youth population will be another growth opportunity for banks. China Banking Regulation Commission recently announced that banks are not allowed to issue credit cards to people under age 18, thus leaving the debit card as the only financial card available to consumers who are under 18.
- 2012-13 card payment volume: 17%
- 2012-16 card payment volume CAGR: 14%
- 2012 card payment volume: US$6.0 billion
- 2016 no. of cards in circulation: 31.5 million
Despite recent card payment growth in the Ukraine, people still prefer paying with real money they have in their pockets rather than by cards. Lack of POS terminals, in independent stores in particular, is another factor why Ukrainians prefer cash. In addition, many consumers fear cards because of the possibility of fraud. Financial cards have begun to increase penetration in recent years.
In fact, debit is expected to post the strongest growth rate of any category in 2011 with a jump of 18% in one year, according to Euromonitor data, thanks to continued issuance of salary cards. The majority of card users are simply given the cards in a passive manner, usually via salary payment programmes, and thus are unsure how to use them effectively and as a result many employees and pensioners use the cards to withdrawal their salaries in the form of cash. Banks have started to introduce consumers to the possibility of making micropayments with debit cards, but this use of the debit card is not yet popular.
In the coming years debit has vast growth potential due to the small share of payments currently made with debit cards and their primary function as cards for withdrawing salaries and pensions. Between 2012 and 2016 the number of debit cards is expected to rise by 29% to surpass pre-crisis levels of debit cards in circulation, based on Euromonitor figures. In value and volume terms, debit card transactions are expected to post healthier growth rates as the developing culture of debit card use will drive growth in card payments.