The global market for network-branded payment cards continues to grow at a healthy rate, as the number of cards issued worldwide in 2014 will exceed 10 billion, up from 7.4 billion in 2009, new research suggests.
Retail Banking Research, a United Kingdom-based consulting and research company, during the first half of this year surveyed financial institutions and other issuers in 65 countries in Western Europe, North America, Latin America, Central and Eastern Europe, Middle East and Africa, and Asia-Pacific. The company collected the data from phone interviews and online questionnaires.
The number of debit, credit and open-loop prepaid cards in the areas surveyed increased 5.7%, to 7.4 billion in 2009 from 7 billion the previous year, the survey data suggest. The company did not include closed-loop prepaid cards because it did not want to include cards with a specific retail brand.
Based on past growth and the information collected in the interviews, the total number of cards on issue will reach 10.1 billion by 2014, a Retail Banking Research spokesperson tells PaymentsSource.
In 2009, payment card transactions worldwide reached 132 billion, up 7.7% from 122.6 billion in 2008. Regionally, North America accounted for almost half the total, while 26% of payments originated from Western Europe. Despite being the largest region in terms of cards on issue, Asia-Pacific, only accounts for 17% of the global transaction total, according to the report.
Retail Banking Research expects the number of worldwide card payments to increase by an average of 7.7% per year, reaching 191 billion in 2014, as cardholders become more comfortable using cards instead of cash. Additionally, the volume of card payments will continue to increase each year with the rollout of more cards supported by contactless technology and increases in the number of outlets that accept card payments, the company contends.
The overall value of card payments totaled $9.2 trillion in 2009, with North America, Asia-Pacific and Western Europe accounting for 94% of total card spending, according to the research. Based on its findings, the company predicts the value of card payments will increase by 6.1% per year, reaching $12.3 trillion by 2014.
Because the issuance of payment cards continues to grow, Retail Banking Research predicts the number of point-of-sale terminals worldwide will increase by an average of 6.8% per year, to 44.5 million in 2014 from 32 million terminals worldwide in 2009. The “spread of card acceptance to rural areas and among smaller merchants will drive the rise in the number of terminals,” the spokesperson says.
Moreover, “as interchange rates fall and have a direct effect on merchant-services charges, the number of merchants willing to accept cards will increase, therefore increasing the number of terminals needed,” the spokesperson adds.
Of the three payment card types reviewed, debit cards continued to increase at the fastest rate and accounted for 62% of cards globally, according to the report. The company attributes the growth to ATM-only cards now including point-of-sale functionality as well as the issuance of open-loop prepaid cards, Retail Banking Research explained in the report.
Additionally, debit card payments will continue to grow over the next few years, especially for lower-ticket items, the spokesperson says. “Many consumers now use their debit cards to purchase goods on a day-to-day basis instead of cash,” he adds.
Moreover, debit card sales and transaction volume will increase as more financial institutions issue debit cards to the underbanked as governments encourage such consumers to use payment cards, the company noted in the report.
And as many institutions issue first-time cardholders a debit or prepaid card instead of a credit card, the credit card market will experience a decrease in the number of cards in circulation, the research company contends.
This credit card sector, however, has the potential to grow as consumer and lender confidence is restored as the economy continues to improve.
Retail Banking Research did not provide PaymentsSource with similar data on prepaid cards.
Indeed, the use of plastic is beginning to take over and surpass cash payments, Adil Moussa, an analyst for Boston-based Aite Group, tells PaymentsSource. Many consumers now reserve cash for lower-ticket items under $10, he adds.
Moussa agrees that the underbanked sector is a growth area for debit cards. “The underbanked need to have some type of card to pay for big purchases like airplane tickets, and if they don’t get a debit card they will be issued a prepaid card,” he says.
However, the debit card market may have remained strong during the past three years, but as the credit market reopens, the credit card sector may make a comeback, Moussa notes.
“I am seeing more credit card solicitations in the market and more consumers opening lines of credit,” he says.
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