Research reveals payment habits of Europeans: credit, debit or prepaid cards?

 Retail Banking Research has released the results of its study on the payments cards usage across the Europe. The research found that Europeans have changed their habits in how they pay for their purchases and services with preference given to prepaid cards while debit and credit cards dropped in popularity as the crisis makes people rely mostly on real money than on debt. The study found that the largest and the fastest growing prepaid cards market is the Italian one with 8.2 million prepaid cards recorded in circulation at the end of 2008. Below Ecommerce Journal posts the whole report of RBR.

Retail Banking Research (RBR) has just published the latest edition of its highly respected biennial western European payment cards report, “Payment Cards Western Europe 2010”. Some of the key findings from the 17 country study are presented here.

The number of payment cards in Western Europe increased by 5% to 866 million between 2007 and 2008. The debit card sector has contributed by some distance the most to the increase in card numbers, not least due to the growing popularity of prepaid cards. There are now more than two payment cards per adult across the region.

Prepaid cards reach nine million across the region

Prepaid cards have become increasingly popular across western Europe, with such cards being issued in 14 of the 17 markets covered in the report. Prepaid card numbers reached more than 9 million at the end of 2008. These cards were responsible for a significant proportion of the growth in the number of debit cards in the region between 2007 and 2008.

Italy is by far the largest market for prepaid cards – the 8.2 million prepaid cards in circulation at the end of 2008 accounted for an impressive 9% of total cards in the country at the end of 2008. Cash is still generally used for low-value payments in Italy, but prepaid cards are seen as the most effective alternative, particularly by young people and those without a bank account. In no other western European market do such cards represent more than 2% of the total.

Share of Payment Cards in Western Europe by Type of Card, 200

Source: Payment Cards Western Europe 2010 (Retail Banking Research)

Pay-later cards static due to recession

The market shares of the three card types (debit, charge and credit) have remained broadly static since 2007. Over the past year, debit cards have gained a little market share, partially due to the growth in popularity of prepaid cards, while the shares of charge and credit cards have fallen marginally, but overall the mix has been fairly stable. The lack of growth in the share of pay-later cards can mainly be attributed to the financial crisis. 

The UK credit card market (which is still by some distance the largest in the region, accounting for 29% of credit cards) has continued to contract as a result of the credit crisis and the rationalisation of inactive accounts.

Card growth highest in Italy

Overall, the western European payment cards market grew by 42 million cards between 2007 and 2008, an increase of 5%. All of the markets surveyed saw an increase in total card numbers over this period, with the exception of the Netherlands where the number of cards fell because of the downturn of the economy and the closure of inactive card accounts.

Italy showed by far the highest growth its total card base amongst the markets surveyed – a surge in the number of prepaid cards in issue contributed to an overall increase in card numbers of 16%.

The other cards markets to see growth of 10% or more in 2008 were Norway, Turkey and Ireland. In the case of Ireland, growth was driven almost entirely by the debit card sector and a marketing campaign aimed at the 18-24 age group, which has traditionally had very low cardholding in the country.

Number of Payment Cards in Western Europe, 2004-2008 (million)

Source: Payment Cards Western Europe 2010 (Retail Banking Research)

UK and France account for 44% of card payments

The number of payments made with cards in western Europe totalled 33 billion in 2008, an increase of 8% compared to the total in 2007. This is higher than the growth in card numbers over the same period, as cards continue to replace cash and, to a lesser extent, cheques at retailers. Two countries – the UK and France – together accounted for 44% of all card payments in the region in 2008, with 7.8 billion and 6.6 billion transactions respectively. 

The average number of payments per adult in the region has also increased – adults made an average of 81 card payments in 2008, up from 77 in 2007, as cardholders are becoming more accustomed to using cards for more frequent, lower-value transactions, particularly on debit cards.

Number of EFTPOS terminals approaches 10 million

By the end of 2008, 9.6 million EFTPOS terminals had been deployed in western Europe, representing an increase of 10% on the year before. Turkey’s installed base of terminals grew the most in both absolute and percentage terms, mirroring the rapid expansion of the country’s card base. Greece has the highest density of EFTPOS terminals to population, due to its popularity as a holiday destination. Despite strong growth in smaller markets, the top six markets still account for 80% of the region’s terminals.

Drivers for the growth in the number of EFTPOS terminals include increased card acceptance in public administration sectors (such as in France), as well as in smaller retailers and kiosks (as is the case in Switzerland). The spread of hand-held terminals across the region in specific sectors (notably bars and restaurants) has also driven growth.

Number of EFTPOS terminals in Western Europe, 2004-2008 (million)

Source: Payment Cards Western Europe 2010 (Retail Banking Research)