While the financial crisis and conservative consumer spending has hindered growth across all card categories, the cards and payments industry in Spain is expected to recover by 2017, with prepaid cards expected to show the highest growth CAGR of 9.79%. The decline in both transaction value and card circulation volumes is likely to be eased by improved economic forecast indicators and stimulus injections from banks.
Online retail boom and tightened budgets drives movement towards closed-loop prepaid cards
Online retail sales in Spain increased from EUR6.07 million in (US$4.1 million) 2008 to EUR12.5 million (US$9.0 million) in 2012, at a CAGR of 20.01%, with 51% of shoppers preferring credit cards. Conversely, as unemployment rises and shoppers attempt to tighten household spending, customers will substitute cards with payment and dormancy fees with closed-looped prepaid (store-specific) cards. As a result closed-loop transaction value is expected to grow at a CAGR of 11.93%.
Decline in growth to be mitigated with fresh funds and improved economic indicators
Economic indicators such as inflation, total investments and GDP are expected to improve by 2017, easing the decline in card circulation. Banks’ attempts to inject fresh funds to stimulate growth are also expected to improve credit availability in the economy, improving the transaction value on cards. Consumers’ preference for limited spending and added rewards will be reflected in an increased demand for prepaid cards.
Interchange fee reduction to encourage competition and portfolio expansion
Spain’s interchange environment is characterized by year-on-year reductions in interchange levels for both credit and debit cards. In 2005, the Spanish ministry of industry’s intervention to reduce maximum interchange fees resulted in them falling from 1.75% in 2005 to 0.88% in 2009. This has encouraged many bank issuers to expand their product portfolios and target new customers to offset lost revenues. This is expected to improve the number of cards in circulation from 2013 – 2017.
Mobile payments to expected to grow rapidly
Mobile payments are expected to provide enormous scope of growth for card-based payments in the country, and mobile payments grew at a CAGR of 17.23% during 2008 – 2012.The proliferation of smartphones has led to double-digit growth in mobile payments. As a result, mobile point-of-sale (mPOS) providers including Research In Motion, iZettle and Telefónica Digital have entered the market. The further entry of new operators is expected to result in positive growth for mobile payments over the forecast period, increasing demand for payment cards.
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