Credit and debit card usage globally

In developed markets, like the US and Europe, according to the latest statistics, cards still dominate the ecommerce market, while in emerging economies, cards have found a good ally in digital wallets. For example, payments interfaces like UPI in India make it easier for consumers to link their cards with their e-wallets account. In the Americas and Europe, payment cards dominate with a share of 53% and 49%, respectively. Card infrastructure is not very well established in certain emerging economies from APAC, LATAM, and Africa, where there is also a high percentage of unbanked consumers. In addition, lack of consumer confidence and growing concern around card fraud has restricted the growth of payment card usage for ecommerce purchases in these countries.

China and India are leading ecommerce expansion, but low penetration of debit and credit cards has made it challenging for merchants to access these markets. As in other emerging economies, here merchants need to work with PSP that offer local payment methods. In Singapore, more than 50% of online payments go through credit and debit cards, in China 50% of ecommerce is accounted for by e-wallets, while in the Philippines, cash still accounts for the majority of online purchases.

India

Debit cards are still the most preferred payment method for online shoppers, according to a report by Financial Software and Systems (FSS), one of the largest payment processors in India. In June 2018, the number of debit cards increased to 944.3 million, with 19.2 million new cardholders, while a total of 39.37 million credit cards were in operation, with the addition of 0.76 million cards, according to the Reserve Bank of India. Between October 2018 and January 2019, a total of 67 million debit cards went out of circulation due to RBI’s direction to replace old magnetic-strip debit and credit cards with the more secure, chip-based EMV cards. Certain government initiatives (like smart city projects, for example Smart Cities Mission, launched in 2015) offer significant potential for card networks such as Visa and Mastercard, which can tap the transit opportunity. In December 2018, Visa issued more than 20 million Visa contactless cards in the country, with nearly 1.1 million of the 3.6 million POS terminals accepting contactless payments. Later in May 2019, Visa partnered with Paytm Payments Bank to launch Visa debit cards.

In India, credit and debit cards compete with Unified Payments Interface (UPI) payments in terms of usage. UPI is an instant real-time payment system developed by National Payments Corporation of India aimed to facilitate inter-bank transactions. The interface is regulated by the Reserve Bank of India, and works by instantly transferring funds between two bank accounts on a mobile platform. As of March 2019, there are 142 banks live on UPI with a monthly volume of 799.54 million transactions and a value of INR 1.334 trillion (USD 19 billion). In January 2019, the aggregate volume of transactions through the UPI has surpassed that of credit and debit card transactions, according to the National Payments Corporation of India (NPCI) and Reserve Bank of India (RBI).

More and more Indians are now in possession of a payment card thanks to the governments efforts to digitise the country. However, serious investments in payment card security from the banking sector are lacking. Due to a booming cybercrime scene, India is expected to surpass the UK in 2019 and become the second-most targeted country for payment card fraud, behind the US. According to Gemini Advisory, over 3.2 million Indian payment card records have been compromised in 2018, an increase from 2017, when 800,000 Indian payment cards’ details had been posted on cybercrime forums.

China

In the Chinese market, domestic card networks are dominant. In 2017, there were nearly 6.7 billion credit and debit cards in circulation, according to a research by GlobalData. The research predicts that China will overtake the US as the largest bank card market in the world in 2019.

Western card networks Visa, Mastercard, and American Express have been campaigning to enter China for years. In 2017, the Chinese government opened the door for US card companies to apply for licenses, but the applications are still under review.
State-controlled China UnionPay has solidified its hold on the bank card industry, controlling more than 90% of the market. With over seven billion cards accumulatively issued worldwide, UnionPay global network has extended so far to 174 countries and regions, covering 52 million merchants and over 2.6 million ATMs worldwide. Visa and Mastercard can only issue co-branded cards, typically offered in partnership with the driving force behind card payments in the country, UnionPay. American Express appears to be furthest along, the company confirming that its application was formally accepted by the Peoples Bank of China, Chinas central bank.

As Euromonitor International suggests, in the entire APAC region, the diversification of card products is driving card payments growth. The region has seen the emergence of specific card products for particular consumer segments that is driving growth of card payments. For example, in South Korea, various cards are marketed to medical professionals and other types of consumers. Prepaid cards are also being used as ‘common mobility’ cards in multiple transport systems as well as in retail outlets. Future growth in the global cards market is expected to be driven by the APAC region, which will increase its market share in the total number of cards worldwide from 52% (in 2018) to 57% (in 2023).

LATAM

Credit cards are the most used online payment method in LATAM, but in some countries, the card transactions register a low approval rate. In Brazil, the main cause for this is related to the fact that international merchants cannot process local credit cards. Less than 20% of the payments market in Brazil goes through international credit card brands. To enter this market, a merchant needs to move to local acquiring and be able to accept local cards, such as Elo and Hipercard, as well as local Visa and Mastercard cards. Most credit cards in the region are not enabled for international transactions, which has a negative impact on cross-border transactions, while most wallets do not offer an enhanced experience over cash or EMV cards.

US

Tap and go payments have taken so long to hit the US, where the rollout at scale is happening in 2019, giving card-issuing banks a chance to grab market share. In 2017, according to the Federal Reserve, US consumers made USD 6.6 trillion in payments on credit, debit, and prepaid cards, 8% more than in 2016. Due to the market complexity (thousands of banks, tens of millions of merchants, a fragmented payment industry, the Target data breach in 2013), issuers moved to issue cards with chips, which are harder to counterfeit.

Once terminals that accept cards with chips are in place, the move to contactless only requires updated cards. However, the delay on chip cards put the US way behind on contactless. Fortunately, in November 2018, JP Morgan Chase announced that all of its credit and debit card holders would be moved to contactless by the end of 2019. Also, Visa says that it expects 100 million contactless Visa cards to be issued in the US by the end of 2019.

This editorial was first published in our Payment Methods Report 2019 – Innovations in the Way We Pay, which provides a comprehensive overview of the up-to-the-minute trends, updates, and innovations in the payments space worldwide, depicting the key developments in the way people pay.

About Ana Pastravanu 

Ana is Content Editor at The Paypers and has been actively involved in covering digital payments and ecommerce related topics. She is passionate about finding the latest trends and developments in cross-border ecommerce, payment methods, and fintech startups.