Competition drives growth in European cards market

Competition among banks to gain new customers, and campaigns to replace low-value cash transactions with card payments, have driven significant levels of card issuance and rising card usage in the European cards market, according to RBR’s new report “Payment Cards Issuing and Acquiring Europe 2014”.

A 20% rise in the number of cards in circulation between 2008 and 2012 (to reach 1.4 billion) was by far surpassed by a 40% increase in payments over the same period, as consumers used their cards more frequently for everyday purchases.

Central and eastern Europe (CEE) accounted for two thirds of new cards across the region between 2008 and 2012, with the number of cards in Russia alone doubling to 240 million. Debit cards make up the largest proportion of the European card base, but growth was also spurred by a massive increase in the number of prepaid products, particularly in Russia and Italy.

Contactless penetration varies widely

The desire to migrate some of the huge volume of low-value cash payments to cards has also led to the issuance of contactless cards, although the implementation of contactless technology varies widely between countries.

In the UK, which already has the largest number of such cards, Transport for London’s plan to extend contactless acceptance from buses to trains in 2014 will provide a significant boost to contactless transaction volumes. Other countries with large contactless card bases include Poland and Turkey, while a number of markets – in both CEE and western Europe – have no such cards at all or are in the early stages of issuance.

European Issued Card Base, 2008-2012 (billion)

Source: Payment Cards Issuing and Acquiring Europe 2014 (RBR)

Card acceptance more developed in western Europe

In terms of card acceptance, western Europe has a more developed infrastructure and accounts for by far the highest proportion of terminals in the region. Recent growth in CEE has been very strong (17% increase in the number of terminals in 2012 vs 7% in western Europe), boosted in some markets by recent legislation encouraging card payments in order to reduce non-declared income among merchants. In western Europe, growth in the acquiring sector tends to be driven by increasing acceptance levels among small merchants, as declining fees mean that it is less costly to accept low-value card payments.

Through a combination of innovation and regulation, banks and governments are – albeit slowly in some cases – succeeding in changing customer habits, and it seems clear that the European cards market will continue to grow, even in the face of newer payment methods, for several years to come.

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