Article

RBR research reveals new payment card leader, growth in debit, prepaid sectors

The forecast for credit cards shows a decline, particularly in the U.S. market.

August 14, 2011

The results of Retail Banking Research's latest global payment cards research, including 66 markets worldwide, provides several findings, including surpassing the eight billion cards worldwide mark, a fall in the number of cards in North America and more than 10 percent growth in the prepaid and debit card sectors.

Another major finding is that China’s UnionPay is now the largest payment card scheme in the world, its brand appearing on three in every ten cards worldwide.

Visa, which was the largest, is still well ahead in terms of usage and spending, owing to the fact that most UnionPay cards are found in China.

The new RBR research shows that there is still plenty to play for, with 20 percent of cards worldwide belonging to domestic bank card or private label schemes.

This share however is falling, according to the research, so competition for these cards in addition to efforts to persuade large issuers to change their scheme allegiances will only intensify.

Debit and prepaid card sectors drive card growth

The global market is projected to expand from 8.0 billion in 2010 to 10.1 billion by 2015, as a slowdown in card issuance in the mature North American and western European regions is more than offset by rapid growth elsewhere.
 
The prepaid and debit card sectors each grew by more than 10 percent in 2010, while the credit card sector decreased by 6 percent.

"In the U.S., the world's largest prepaid market, a vast number of Electronic Benefits Transfer and general purpose prepaid cards have been issued, and this trend is expected to continue. Unbanked customers are among the main user groups," said Chris Hebert, RBR. "In Italy, Europe's largest prepaid market at present, they have proved popular with young people, those without a fixed monthly income and for secure Internet purchases. Prepaid card numbers in Italy are expected to continue to grow steadily over the next few years."

Prepaid cards currently represent just 3 percent of the global total, but their numbers are increasing. They are perhaps most commonly viewed as a payment instrument for the under and unbanked populations and as a means of paying salaries and benefits, as is the trend in Brazil and Colombia.  

This type of card has also found favor with foreign workers in countries such as Saudi Arabia and the UAE, where they are used to make remittances back to family members in foreign countries. Prepaid cards have also been rolled out in significant numbers in some countries where bank account holding is high, and this trend looks set to continue.

For example, in New Zealand, hosting the 2011 Rugby World Cup has given rise to the issuance of prepaid cards for use at stadiums during the competition. The share of prepaid cards is expected to rise to 5 percent by 2015.

Although debit cards make up 62 percent of the card base worldwide — a share that has risen by four percentage points since 2009 — there is still considerable potential for further growth.

Government campaigns to promote financial inclusion and the increasing tendency for employers to pay salaries electronically will drive bank account holding, boosting debit card issuance. The share of debit cards is forecast to increase by a further percentage point by 2015.

Immediate credit card forecast shows continued decline, especially in U.S.
 
According to the research, credit cards are likely to see a revival, but their share will continue to decline.

The share of credit cards declined by four percentage points to 28 percent in 2010, mainly due to the large fall in numbers in the U.S., where many accounts with overdue debt were closed and large numbers of inactive cards were taken out of circulation.

There are various factors that will continue to restrict growth in credit card numbers. In immature markets, there is a scarcity of central credit bureaus, and a reluctance of banks to issue credit cards where they consider the risk too great.

Greater regulation of the sector, such as in Brazil and Mexico, will lead to a rise in transparency and therefore make customers more comfortable with holding and using such cards.

"In the UK, for example, the contraction of the credit card sector has been a result of consumers' wariness of using credit and issuers' rationalization of portfolios to preserve capital. In Poland and India, meanwhile, the number of credit cards has declined of late as issuers have become more risk averse," Hebert said.

Even though credit card numbers are likely to rise over the next five years, the share of payment cards is forecast to fall by one percentage point to 27 percent by 2015.

For more information, visit our trends/statistics research center.