How the Us-China Trade War Is Affecting Credit Card Issuers

www.cardsinternational.com Issue 571 / september 2019

IMPACT ASSESSMENT

HOW THE US-CHINA TRADE WAR IS AFFECTING CREDIT CARD ISSUERS

INSIGHT FEATURE COUNTRY SNAPSHOTS

A fundamental shift to Contactless payments are Key payments market data green-conscious habits in the new normal, but are and analysis for Hungary, many parts of society there hidden dangers? Greece and Romania

CI September 2019 571.indd 1 08/10/2019 14:46:41 contents this month

COVER STORY NEWS 14 05 / EDITOR’S LETTER 06 / DIGEST • BRC calls for government intervention on rising card fees • GoCardless launches in the US with new debit solution • SIA powers contactless payments in Rome subway and rail stations • Wirecard and UnionPay form global strategic partnership • Mastercard and R3 develop blockchain cross-border payments • Western Union and True North collaborate on tuition payments • Canadians aware of benefits are more satisfied: JD Power • Société Générale, Mastercard introduce card for gamers US-CHINA TRADE WAR

Editor: Group Editorial Director: Director of Events: Douglas Blakey Ana Gyorkos Ray Giddings +44 (0)20 7406 6523 +44 (0)20 7406 6707 +44 (0)20 3096 2585 [email protected] [email protected] [email protected]

Senior Reporter: Sub-editor: Head of Subscriptions: Patrick Brusnahan Nick Midgley Alex Aubrey +44 (0)20 7406 6526 +44 (0)161 359 5829 +44 (0)20 3096 2603 [email protected] [email protected] [email protected]

Junior Reporter: Publishing Assistant: Sales Executive: Evie Rusman Asena Değirmenci Jamie Baker +44 (0)20 7406 6701 +44 (0)20 3096 2633 +44 203 096 2622 [email protected] [email protected] [email protected]

Customer Services: +44 (0)20 3096 2603 or +44 (0)20 3096 2636, [email protected] Financial News Publishing, 2012. Registered in the UK No 6931627. ISSN 0956-5558 07 Unauthorised photocopying is illegal. The contents of this publication, either in whole or part, may not be reproduced, stored in a data retrieval system or transmitted by any form or means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publishers. For more information on Verdict, visit our website at www.verdict.co.uk. As a subscriber you are automatically entitled to online access to Cards International. For more information, please telephone +44 (0)20 7406 6536 or email [email protected]. London office: John Carpenter House, John Carpenter Street, London, EC4Y 0AN Asia office: 1 Finlayson Green, #09-01, Singapore 049246 Tel: +65 6383 4688, Fax: +65 6383 5433 Email: [email protected] follow CI on twitter @Payments_News

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COUNTRY SNAPSHOTS 16 / HUNGARY 18 Cash remains the preferred mode of payment in Hungary, accounting for 62.5% of the total transaction volume in 2018. However, payment cards registered strong growth in terms of transaction volume and value 18 / GREECE Greece was severely affected by the eurozone crisis. As a result, it had to enact a number of capital-control measures in June 2015 to arrest the outward flow of money, curb tax evasion and encourage electronic payments 20 / ROMANIA Although debit cards are the dominant card type, penetration remains low in Romania due to the country’s large unbanked population, lack of trust in the financial FEATURES system, and limited consumer awareness 10 / CONTACTLESS RISK 14 / US-CHINA TRADE WAR In a time where ‘tap and go’ payments are China’s credit card market appears to be on normal in everyday lives, it seems inevitable the losing side of the country’s increasingly that we are moving towards a cashless society, fractious trade war with the US – at least when but is this really the best idea? Evie Rusman viewed by the number of late payments sitting looks at the dangers of contactless on banks’ balance sheets, argues Ivan Castano 12 / ARGENTINA In little over a month the Argentine peso has 12 lost more than a quarter of its value, leading the government to place currency controls on businesses. But how is the crisis impacting the credit card sector? Ivan Castano reports 10

20 INDUSTRY INSIGHT 22 / GEMALTO From cutting back on plastic to reducing carbon footprints, there has been a fundamental shift to green-conscious habits in many parts of society. Howard Berg, SVP and MD at Gemalto UK and Ireland, writes

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CI September 2019 571.indd 3 08/10/2019 14:47:16 [email protected] editor’s letter

visa fights back with global revolut deal

Douglas Blakey, Editor

or some time it has seemed that Mastercard is The Revolut-Visa deal is also worth a closer look. Revolut trumping Visa hands down when it comes to will hire 3,500 staff as part of its expansion plans, taking its F winning new deals. headcount to around 5,000 by this time next year. Monzo, Starling and TransferWise – among the challengers, Hiring the equivalent of 15 new employees every working for example – all signed up with Mastercard. And then day for the next year will bring its own challenges. It also faces Mastercard followed up in the incumbents sector with its TSB the challenge of entering markets where local regulators tend deal – albeit since delayed – and then Santander. Other Visa to be less supportive of new fintech challengers. In Revolut’s UK debit card customers include Clydesdale/Yorkshire and existing markets, there have been allegations that customer Metro Bank. As a result, once the TSB deal finally goes live, service has, at times, been inadequate. In addition, Revolut has Mastercard will have almost 20% of the UK debit card market. faced negative press resulting from staff being expected to While Mastercard has agreed a number of major deals, and push referral links aggressively. gives every impression of being ahead of the curve in agreeing Revolut’s total users now exceed seven million, up from fintech deals, Visa has also been active: in the past year alone, 1.1 million and 3.6 million at the end of December 2017 and it has announced fintech deals with N26, Razer, Remitly, December 2018 respectively. In fiscal 2018, despite revenue Currencycloud and Flutterwave. Now Visa has won a major rising by 354%, Revolut lost around £9 ($11) per customer – international deal with Revolut. According to Visa, around 75% that is, however, an improvement on losing £13 per customer of Revolut’s business in new regions will be with Visa. in 2017. Specifically, Revolut lost £32.8m after tax in fiscal In due course, Visa expects to become Revolut’s majority 2018, more than double the £14.8m lost in 2017. partner globally. In addition, Revolut plans to launch in 24 Looking ahead, Revolut forecasts that revenue will treble in new markets with Visa-branded credit cards. Its ambitious fiscal 2019, driven by further customer growth, new product expansion plans include roll-outs initially in Australia, Brazil, launches, product optimisation and market expansion. Canada, Japan, New Zealand, Russia, Singapore and the US. Accordingly, Revolut may reasonably expect to reduce losses The next wave includes further markets in South America and per customer to around £5 per year by end 2018, assuming Asia such as Argentina, Hong Kong and Indonesia. that it can contain its cost-of-sales growth to somewhere around 250%. Visa Fast Track Revolut’s ambitions and expansion plans, together with a Visa’s deal with Revolut forms a key part of its global fintech number of eye-catching senior hires, are impressive. There strategy. In July, for example, Visa announced the expansion of are only a few areas where, just to play devil’s advocate, the its Fast Track programme to the US. writer would perhaps take exception. A market valuation of Visa says its Fast Track initiative speeds up the process $10bn? That is Revolut founder Nikolay Storonsky’s ambition, of integrating with Visa, enabling start-ups to more easily and seems to this observer to be wildly premature. But thanks leverage the reach, capabilities and security of VisaNet, the to a timely piece published by the Financial Times’s Alphaville firm’s global payment network. The aim is to help fintechs column, we know that a number of Revolut executives scale more quickly. Existing partners include Alloy, BBVA Open have been cashing in some of their shares since its Series D Platform, Cross River Bank, Galileo, Green Dot, Netspend, fundraising in August. Stripe, TSYS, Q2 and Very Good Security. The second query relates to Revolut’s realistic prospects in a number of the new markets it is targeting. Take just one: Mastercard, Visa shares soar Canada, for example. We have witnessed over the years a To be fair, both Mastercard and Visa are enjoying an extremely number of international raiders entering the Canadian retail strong 2019. For the year to date, Mastercard’s share price has banking market with deep pockets and grand ambitions; soared by 42%; meantime, Visa’s share price for the year to perhaps Revolut will prove the exception and make a real go of date is ahead by 30%. taking on the incumbents. <

Get in touch with the editor at: [email protected]

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news digest BRC calls for government intervention on rising card fees of £0.0585, a 17% increase from £0.0498 in 2017. These were largely attributed to the fees paid by businesses to credit and debit card companies, which increased by over 50% in 2018. The BRC is calling for action over card cost, and wants to improve regulation of card payment fees. Its plan is to expand and simplify the regulation covering the full range of transactions, and also prevent abuse by card companies. The BRC is also concerned about the UK’s departure from the EU, and believes The British Retail Consortium (BRC) has transactions in 2013 to under 40% in the move will result in UK retailers paying called on the UK government to take 2018; furthermore, the value of cash more to accept foreign-issued cards, and action on rising card fees. transactions dropped from 28% to 20% increase wider costs for business. The appeal comes as the retail lobby over the same period. Andrew Cregan, payments and group launches its latest payment survey, Total UK retail sales slightly rose by 4.1% consumer credit policy adviser at BRC, which shows that credit card spending to reach £381bn ($475bn) from £366bn said: “With card payments accounting for overtook cash spending in 2018. However, the previous year. In addition, there were almost 80% of retail sales, it is vital that debit cards remain the most popular 20.1 billion transactions in a single year, up the government takes action to tackle the method and account for almost three-fifths from 19.8 billion in 2017. soaring costs that card companies charge of all transactions. Despite these increases, card costs also retailers. Without action, we will see Cash transactions in the UK have been continued to rise. Retailers spent £1.3bn businesses put under further pressure, and falling slowly. According to the BRC, with third parties, up £70m from 2017. it will be consumers who are forced to pay cash use has fallen from over half of all Each transaction cost retailers an average the price.” < GoCardless launches in the US with new debit solution GoCardless has entered the US by launching to help our customers focus on growing Sarah Grotta, director at debit and alter- a solution on its platform supporting debit their business without worrying about how native payments advisory service Mercator payments on the Automated Clearing House they’re going to get paid. Adding ACH to Advisory Group, said: “Consumers and busi- (ACH) network. the GoCardless platform will give businesses nesses have continued to find new uses for Using the ACH debit network, merchants across the globe access to the world’s largest ACH payment transactions, despite the fact can pull payments directly from their cus- market, helping them unlock new revenue ACH is a 40-year-old, batch-based solution. tomers’ bank accounts. This is at a lower cost streams. We find that there is strong growth recently than credit cards, and without the overheads “With the launch of our ACH solution, for ACH in bill payments and online and of cash or cheques. we now cover 70% of recurring payments mobile payments, and also person-to-person Furthermore, businesses using the worldwide across more than 30 countries, (P2P) transactions. GoCardless ACH debit solution will gain including the US. We’re excited for our cus- “When making payments, particularly increased visibility over their payments flow tomers to harness our unique global debit recurring payments for bills or subscription through an automated collection system. network, helping them to drive down costs, transactions, consumers may not always This also includes a range of information reduce failure rates and decrease involuntary want to pay with their credit card as they to help manage and reconcile payments in- churn every time they get paid.” don’t want to run the risk of interest rate cluding due dates, successful payments, and There is a significantly growing demand charges.” failed payments. As a result, GoCardless has for ACH debit; in 2018, the system saw 23 Grotta added: “Merchants and billers like completed its unique global debit network, billion transactions, of which 13.4 billion to encourage the use of ACH as it can be covered over 30 countries and accessed were debits. an economical payment choice and bank through a single API and platform. According to research from GoCardless, account details change less frequently than Hiroki Takeuchi, CEO of GoCardless, one in five US customers prefer to pay for card numbers, reducing the amount of pay- said: “Our aim is – and always has been – subscription services by bank debit. ment maintenance.” <

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SIA powers contactless payments in Rome subway and rail stations Atac, Rome’s public transport agency, has partnered with Italian payment services group SIA to enable contactless payments at the subway and rail stations that the agency manages. Commuters can now use Mastercard, Visa and American Express contactless credit and debit cards to pay fares at POS terminals at entry turnstiles. They can also use smartphones and wearable devices to pay for tickets. The service can be used at the Rome-Li- do, Rome-Viterbo and Termini-Centocelle railway line stations, and on the A, B/B1 and C metro lines. Atac will be responsible for authorising and settling payments, as well as calculating the best fare based on the total number of journeys. The credit card will also serve as a monthly pass for the first time. SIA has also signed an agreement with Venice’s public transport company, AVM Holding, to enable digital payments on the city’s vaporetto boat service. in Italy thanks to SIA’s technology already “Our country is gradually accelerating the SIA marketing and sales director Eugenio adopted for contactless payments in the Mi- process of digitalisation of the public sector, Tornaghi said: “From today, Rome too can lan subway system and on board vaporetto and above all in the area of mobility and be counted among the most innovative cities boats in Venice.” public transport.” < Wirecard and UnionPay form global strategic partnership EVP for group business development at Wirecard. “We’re excited about the immense potential this partnership creates for both entities, and to deliver innovative solutions for current and future UnionPay cardholders globally. As a major tourist and business destination, China receives hundreds of millions of travellers every year, which means that the scope of our solutions will also address non-Chinese nationals and enable them to pay with UnionPay nationwide.” Larry Wang, VP at UnionPay International, added: “Through our global Wirecard and UnionPay have signed a such as digital wallets for tourists will also strategic partnership with Wirecard, we memorandum of understanding (MoU) to be developed. plan to continue driving our international form a global strategic partnership. The partnership between Wirecard and expansion forward. We are proud to have The agreement entails UnionPay’s UnionPay will initially focus on launching an experienced partner in digital financial international expansion and Wirecard’s products in Asia-Pacific, Europe and the technology and global payments by our growth in China and with Chinese US, where the firms have been working side to provide an even wider range businesses. As a result, a clear focus will together for several years. POS and issuing of innovative solutions for UnionPay be expanding the global acceptance of solutions will merge with the existing customers. We look forward to launching UnionPay as a digital payment method in online payment business. A consumer our partnership with Wirecard.” all channels. solution is also in development for the Wirecard recently signed an MoU with The partnership will also launch a 2022 Winter Olympics in Beijing. device lifecycle management company number of issuing projects, including “As the world’s largest card scheme Brightstar. The MoU’s aim is to increase corporate solutions such as payout in terms of card issuance, UnionPay collaboration in the digital space, with products, and supplier and commission will be one of our key alliances in Asia,” a focus on consumer lending, payment payments. Consumer-orientated products commented Georg von Waldenfels, acceptance processing and card issuing. <

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CI September 2019 571.indd 7 08/10/2019 14:47:29 News | Digest

Mastercard and R3 develop blockchain cross-border payments Peter Klein, EVP for new payment platforms at Mastercard, commented: “Devel- oping a new and better cross-border B2B payments solution by improving worldwide connectivity in the account-to-account space is central to Mastercard’s ambition. “Our goal is to deliver global payment infrastructure choice and connectivity, as demonstrated through our recent strategic acquisitions and partnerships, including our relationship with R3. It confirms our com- mitment to innovation, both home-grown and through partnerships and acquisitions, to support advances and innovation in the increasingly complex global payment infrastructure space.” R3 CEO David E Rutter added: “We are excited to partner with Mastercard to help shape the future of the digital payments ecosystem. “All institutions – large or small – rely on the ability to send and receive payments, but all too often the technology they rely upon is cumbersome and expensive.” He added: “Cross-border payments can be a particular pain point. Corda was designed specifically for enterprise use cases such as this, and we look forward supporting Mastercard in bringing blockchain-enabled payments businesses across the globe.” Mastercard recently completed the pre- Mastercard and blockchain software strategy to increase customer choice. viously announced acquisition of US-based provider R3 have collaborated to develop a Combining R3’s blockchain with Mas- cross-border payments company Transfast. cross-border payments platform. tercard’s payment systems assets, brand The acquisition is expected to strength- The pilot will focus on connecting global and distribution, the partnership aims to en Mastercard’s payment portfolio and faster payments infrastructures, schemes provide innovative, value-added services cross-border reach, and enable individuals and banks. The solution will also be sup- to customers. It also aims to address issues and businesses to send and receive money ported by a clearing and settlement network such as high processing overheads, liquidity across borders more conveniently. operated by Mastercard. management, and lack of standardisation It is also expected to support financial The two companies hope that this will and processes between banks and domestic inclusion, and provide wider access to pay- be the latest step in Mastercard’s multi-rail clearing systems. ments globally. < Western Union and TRUE North collaborate on tuition payments Western Union has announced a review payment options in advance. It also president of sales for Canada, Western partnership with True North, a multi- features a price-comparison tool, enabling Union Business Solutions. user, web-based system, whose goal is to users to lock in exchange rates for up to 72 “By simplifying payment tracking and manage information tracking, reporting hours. Users can pay with Visa, Mastercard reconciliation, True North’s education and collaborative needs to international or Unionpay, and educational institutions institutions can free up valuable financial education programmes. will not incur merchant fees. and administration resources.” The partnership will enable students to The GlobalPay for Students platform True North co-founder Jason Schaad pay tuition and expenses using a simplified enables users to track payment statuses added: “We are excited to integrate the payment process. It will help funds arrive through the online website, mobile Western Union GlobalPay for Students on time and in full, without any hidden or messages and email. Payments are usually payment platform.” unexpected charges. delivered to the school within 24 hours. He continued: “The integration will save The partnership will make use of “We are proud to collaborate with True valuable time for international agents, Western Union’s WU GlobalPay for North to integrate our payments solution parents and students, as well as school Student platform to provide the ability to into their platform,” said Roy Farah, vice boards across Canada.” <

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Canadians aware of benefits are more satisfied: JD Power The survey also noted that 38% of the respondents in the fully knowledgeable group are likely to switch their current card issuer for better benefits, compared to 46% of those with lower knowledge. Benefits related to hotels have the highest impact on customer satisfaction, the survey noted; these are followed by shopping and other travel-related benefits. Notably, the study revealed that limited communication from card issuers improves customer satisfaction. Cash rewards were found to be the most popular among customers, followed by airline tickets. Use of digital channels was also found to be rising among all age groups. The study also highlighted that non-traditional credit card issuers are preferred by Canadians. They outperform conventional issuers by offering more attractive services. Canadian customers with better satisfaction level of 840 on a 1,000-point John Cabell, director of wealth and knowledge of the benefits offered by their scale. The figure drops to 736 for lending intelligence at JD Power, said: credit card issuer tend to have higher levels customers who are not completely aware “Non-traditional credit card issuers are of satisfaction. of the rewards to which they are entitled making significant headway, differentiating The findings are from the latest JD through their credit card. themselves with rewards and benefits that Power 2019 Canada Credit Card Satisfaction Additionally, 66% of the customers better resonate with consumers.” Study, which polled 6,617 people who used with higher understanding are likely Overall, Tangerine ranked highest in a major credit card in the previous three to recommend their card to others, as customer satisfaction among all credit months. According to the study, customers compared to only 38% of those with a card issuers in Canada. It was followed by who fully understand the benefits have a lower understanding. American Express and Canadian Tire. < Société Générale, Mastercard introduce card for gamers French banking group Société Générale has teamed up with Mastercard to roll out a payment card that will provide advantages to gaming enthusiasts in France. As part of the collaboration, the two businesses will launch the special edition League of Legends Card. Mastercard is acting as ex- clusive payment services partner for global League of Legends sports events, which are said to be one of the world’s most popular e-sport events. The French bank is a sponsor of the Gamers Origin, a professional League of Legends team. The new limited-edition card will provide cardholders with up to 30% discounts on purchases of materials, by-products and spin-off products, as well as for rentals of gaming materials. on-site. Participants of Mastercard’s Priceless step forward in the world of e-sports on a Cardholders can also access League of programme can win VIP access to the World worldwide level. We are delighted in France Legends coaching sessions with Gamers Championship final in Paris in November. to partner with Société Générale for the Origin’s professional players, visit the Mastercard France country manager launch of the first League of Legends card in Gamers Origin training centre, and see Solveig Honoré Hatton said: “Mastercard is France, that offers its cardholders unprece- League of Legends French league matches one of the first global brands to take a big dented priceless experiences.” <

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CI September 2019 571.indd 9 08/10/2019 14:47:40 feature | contactless risk

contactless payments: do they pose a risk to society?

In a time where ‘tap and go’ payments are normal in everyday lives, it seems inevitable that we are moving towards a cashless society, but is this really the best idea? Evie Rusman looks at the dangers of contactless, and speaks to industry experts

owadays it seems almost old- He says: “I would say with any form of “Other drivers of debt among young people fashioned to pay with cash, while technology that’s new, your innovators are are the high costs they face – on housing, Nthe chances of a restaurant or shop typically going to be the younger audience. for example – relative to their incomes, not having a contactless card reader are I definitely think they are more vulnerable. and their greater likelihood of being in fairly slim. Contactless is a natural way of life for insecure employment, which can leave them This has led to a culture where ‘tapping’ has millennials.” particularly vulnerable to debt caused by consumed almost every aspect of our lives. In contrast, Sue Anderson, head of media changes in circumstances.” In 2018, contactless card payments overtook at StepChange Debt Charity, tells CI that chip and PIN in shops for the first time. Data THE DANGERS published by Worldpay showed that last June, 51% of all card payments in shops were by So, what exactly are the dangers surrounding contactless cards, up from 50% in May. contactless payments? With ease of payment The efficiency and speed of contactless comes the idea that people may not be fully payments means there have been huge keeping track of how much they are spending, advances in terms of payment technology; innovators are or where the money is going. however there is also a worry that Carmichael says: “Contactless payments overspending has increased, particularly typically going are great for society and great for technology; among millennials. however, they are going to create an A recent study published by the Claude to be the younger environment where you are able to purchase Littler Business School at the University faster and purchase more with a tap. of West London shows that one in five audience “That tap of a card actually is worth Londoners under the age of 45 are struggling money, and there is that underlying feeling to pay their debts because of the ease of that people are unaware of how much they contactless payments. The study also finds are spending. There needs to be more robust that more than one in 10 people considered young people are not necessarily in debt as a thought processes to ensure that people who reverting to cash in an attempt to control result of contactless payments. are using contactless have the money and their spending. She says: “Digital payments are more affordability to come out the other side.” Speaking to CI, Stuart Carmichael, chief popular among younger people, and younger He adds: “From a usability standpoint, for executive at the Debt Support Trust, explains people are increasingly experiencing problem everybody it’s not necessarily going to be the how young people are particularly vulnerable debt, but that doesn’t necessarily imply a greatest thing. It is going to cause problems, to overspending. causal link. and you can see it already.”

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CI September 2019 571.indd 10 08/10/2019 14:47:41 feature | contactless risk

Agreeing with Carmichael, Anderson this can cause overspending. overdraft fees and how you get into breaching highlights that even though electronic “It is impulse purchases we have to be wary your credit limits. payments have provided major benefits, there of, like buying a bottle of wine on a Friday “It also means having extra charges, missed are also a number of negatives. night. It’s those purchases that take us from payments and unauthorised courses. So She says: “Electronic payments are a being in a relatively healthy place to needing a certainly, we would see cashless as a bad thing massive convenience, and many of us enjoy bit of help. It’s about money management and for those who do not have savings to rely on, but rely on their overdraft each month. At that point, unless money is managed, we have to be wary of impulse purchases. contactless or cashless may not be the best thing for society.” they take us from being in a relatively It is hard to know if the UK will definitely move towards a cashless society, but all the healthy place to needing a bit of help signs seem to point towards it. If this is the case, some millennials may struggle to remain afloat when it comes to managing their being able to transact with the minimum making sure we are focused on our finances as finances. This leaves the question: is cashless of friction. This has obvious benefits, but a well as understanding your actual position,” really the best thing for society? < negative side effect of convenience is that it notes Carmichael. can be very easy to end up overspending on a cumulative basis.” A CASHLESS SOCIETY

WHAT ARE THE SOLUTIONS? For a number of years now, there has been speculation about eventually There are a number of ways people can moving towards a cashless society in overcome bad spending habits. Anderson the UK. With this comes worry in recommends budgeting and making a note of terms of access, as there would be one’s finances. an increased dependency on the She says: “One of the most important internet as well as a higher chance pieces of advice we give to clients is the of cybersecurity threats. important of making a budget, and tracking Carmichael says: “Certainly, your spending to help you stick to it. contactless is great for technology, “For some people, using cash can be a but in the wider scheme of helpful way of doing this, but there are also things, if you’ve got money helpful apps that can help you take control problems, it is not good. of tracking your spending if you do use Contactless means more people electronic and contactless payments.” are likely to pay and worry Carmichael explains how easy it is for about it later. That’s how people to overestimate the amounts they have you get into unauthorised in their bank accounts, and suggests money management apps could be a way forward. He says: “Money management is important. There are many of us that’ll look at a bank balance at the end of the month and think: ‘How did that happen?’ You have got so many payments coming out each month, coupled with using your card for cash. At one minute you can have several hundred pounds in your bank account, the next minute you look you are down to £100, and then you’re into your overdraft. “We always tell people it is worthwhile looking at these money management apps, or even writing down all transactions to accurately forecast spending. This means that people are more aware of the actual amount of money they have each month to spend.” According to an Independent Study, Brits will spend nearly £150,000 ($187,000) on impulse buys within their lifetime. As a result, Stuart Carmichael, Debt Support Trust

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CI September 2019 571.indd 11 08/10/2019 14:47:43 feature | argentina

argentina: meltdown hits cards market

In little over a month the Argentine peso has lost more than a quarter of its value. As a result, the government has placed currency controls on businesses in an effort to avoid capital flight. But how is the economic crisis impacting the credit card sector?Ivan Castano reports

rgentina’s financial crisis has hit trumped President Mauricio Macro in an over $100bn of debt. It says it intends to credit card issuers, with default primary-vote upset. restructure its debts quickly and without any A rates tripling as consumers tighten discounts. their belts to survive a major economic SHOCK WAVES Meanwhile, South America’s second-largest downturn. economy is set to shrink by 2.5% this year, up “We are at a turning point. Delinquency The results sent shock waves across global from the 1.5% previously forecast, as the crisis payments are rising in gigantic steps,” financial markets. Investors worry that escalates amid fresh caps on dollar purchases, says Nora D’Alessio, owner of industry Fernandez, who has former leader and rising inflation and unemployment. consultancy D’Alessio in Buenos Aires. Argentina’s banks are largely to blame for D’Alessio adds that most Argentines the difficulties consumers are facing, says are struggling to pay their minimum card D’Alessio, adding that they over-leveraged balances, slipping into a vicious debt cycle. themselves during expansion times. Almost 76%, nearly eight of 10, Argentinian “Two years ago we told them to be careful households have debt to pay because of to not over-lend with credit cards, but it was credit cards, up from 68% a year ago, says We are at a turning a good business so they didn’t listen to us,” D’Alessio. D’Alessio sighs. “Now people don’t know Meanwhile, delinquencies stand at 7.5%, point. Delinquency what’s going to happen. Ninety percent worry up from 6.6% in late 2018, says Victor about inflation, and 82% about economic Bescos, president of Argentina’s Bank payments are rising uncertainty.” Marketing Association (AMBA). He adds that the situation is set to worsen if Argentina in gigantic steps BANKING CUSHION fails to restructure its ballooning debt. Some observers, however, note that Bescos’s statistics Despite rising defaults, banks are in good seem overly optimistic, and that the default shape to survive the downturn, observers rate is more likely hovering at around 12%. political powerhouse Cristina Fernandez note. This is mainly because the country’s top Spanish and international banks de Kirchner as his running mate, will lenders amassed large cash reserves during the Santander, Banco Galicia, ICBC and Banco resurrect unpopular interventionist policies last decade when Argentina’s economy grew at Macro are the biggest issuers in the cards and ask investors to take a new haircut on relatively healthy rates. sector. The industry moved roughly $50bn international bonds. “While banks are facing growing defaults, before Argentina’s peso and stock markets Argentina has already asked the they have had many years of strong earnings collapsed in mid-August, when front-runner International Monetary Fund and and they are very liquid, buffering them presidential candidate Alberto Fernandez bondholders to accept late payments on against potential losses and giving them room

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to manoeuvre to extend credit terms or cut fees,” says Manuel Beaudroit, chief marketing officer at blockchain payments startup Bitex, Argentina credit tightens which helps businesses use Bitcoin and During the second quarter of 2019, The spreads on the cost of funding other digital currencies to make payments. Argentina’s banks effected a moderate widened moderately for retail lending, Indeed, banks’ overall loan-to-asset ratios and impaired loan portfolios remain very low, tightening of credit standards in all lines including credit cards, and with lesser ranging at 69% and 65% for Banco Macro for households, with a slight tightening intensity in the mortgage lending and BBVA Argentina respectively, according in the credit cards sector. sector. to analysts. Banking health aside, Buenos Aires should The policy shift results from the Commission fees charged by banks quickly devise a strategy to help consumers deterioration of the economic situation increased significantly for credit cards, slash their debts, just as Argentina’s debt-to- – both current and expected – and the equity ratio ticks over 100%, adds Beaudroit. and increased slightly for other retail “More and more people are stuck in increased risk of households’ overall lending in the second quarter. In making minimum payments, so the debt credit portfolio. other loan segments, they remained balance continues to grow,” he says. “The unchanged in the second quarter. government has to decide whether the banks According to Argentina’s Central Bank, can and should bail out consumers amid there was a mixed performance in The central bank forecasts that the different options to tackle the issue.” relation to the terms and conditions of standards for approval of nearly all Meanwhile, lenders are rushing to make life easier for consumers. For example, they are loans to households during the second credit lines for households will remain rolling out new campaigns that enable them quarter. unchanged in the third quarter. < to extend payments to 18 months instead of the typical 12, says Beaudroit. However, he Whether Argentines will resort to Bitcoin macroeconomic outlook,” he says. notes that issuers have so far refused to cut or other digital currencies to skip capital Uala is the latest enterprise attracting interest rates, which are prohibitively high controls, as many Venezuelans have done, foreign cash for expansion with China’s in Argentina, ranging from 70% to 80% remains to be seen. One thing seems certain, Tencent, owner of messenger-to-payment annually. however: online payments are taking off app WeChat, recently making a big-yet- in the country, driven by a slew of startups unspecified investment and joining billionaire CAN CRYPTO HELP? seeking to court Argentina’s huge unbanked George Soros and New York hedge fund population. Point72 to fund the young firm. To shore up the peso, which plummeted 30% Online retailer Mercado Libre’s digital Operating a mobile app linked to a alongside a major stock market crash – the wallet, Mercado Pago, has taken the market Mastercard prepaid card, Uala has printed second-worst in history – the government by storm. 1.1 million prepaid cards; however, it remains far from market leader Mercado Pago, which has won the hearts of three million card The fintech sector continues to grow, holders by providing them with discounts on its e-commerce site and the ability to with new groups and international conveniently pay for services such as Cabify, Netflix and Spotify. funds growing counter-cyclically While the emerging fintechs do not offer lower transaction fees than banks, their technology is more efficient and easier to use, instituted capital controls, capping dollar This follows a growing number of well- says Carballo. withdrawals to $10,000 for individuals and funded rivals, including Uala, Nubank, and “They provide better services for the $2m for firms, including importers. Wilobank, says Ignacio Carballo, who teaches unbanked, a huge consumer pond where The thresholds, designed to avoid a repeat financial inclusion and digital banking at banks do not want to fish,” he adds. of the infamous corralito, an event that saw Buenos Aires’s FCE-UBA University. That is important. One in two Argentines Argentines boycott banks to withdraw their He claims that the fintech sector is defying operates in the cash economy, making these savings in 2001, represent an opportunity for the crisis, growing 65% so far this year after firms, which are more lightly regulated than Bitcoin and cryptocurrencies. chalking up gains of 110% in 2018, sharply traditional lenders, increasingly popular. “If you are an SME, you can use Bitcoin outpacing traditional banking. As Argentina’s debt crisis continues – with to make an import payment with no limits a repeat of the 2001 debt malaise that shut its and with an average transfer fee of $0.50,” FINTECH BOOM access to international financing still looming Beaudroit explains. Conversely, he adds: “If – it is easy to see how its dominant lower- you are using your black [premium] business “The fintech sector continues to grow in and-middle class citizens will continue to seek card, you have a $4,000 monthly limit and Argentina, with new groups and international online and other unconventional payment 5% fees.” funds growing counter-cyclically to the methods. <

www.cardsinternational.com | 13

CI September 2019 571.indd 13 08/10/2019 14:47:50 feature | us-china trade war

trade war impact: us winning cards battle with china

China’s credit card market appears to be on the losing side of the country’s increasingly fractious trade war with the US – at least when viewed by the number of late payments sitting on banks’ balance sheets, argues Ivan Castano

hina’s card issuers, including its nagging concerns that a recession could be to surge well over last year’s 20% hike to big banks and leading industry around the corner. CYN79bn ($11.1bn), when they were up Cnames such as China UnionPay, ten-fold against 2010. Meanwhile, the asset- are suffering from the country’s deepening HOUSEHOLD DEBT RISES backed securities market is also deteriorating, trade conflict with Washington DC. with late balances at seven of China’s top 10 Delinquent payments are expected to grow Observers say China’s biggest banks are lenders that securitise credit card receivables sharply this year. At the same time, credit beginning to struggle, after over-hedging rising markedly. card issuance could decline as much as 50%, themselves during China’s boom years when “We have seen an increase in credit card as consumers feel the pinch from a sharp consumer loans rose too fast. non-performing loan ratios at some banks economic downturn. during the first half, especially those that Meanwhile, the US payments sector is were more aggressive in credit card lending performing more strongly, with charge-off expansion over the past two years,” Fitch levels rising modestly, while the global cards Ratings analyst Tracy Wan tells CI. market is set to gain 8-10% on the back of Some of China’s fastest-growing issuers, rising e-commerce demand. The default rate including Bank of Guiyang, Harbin Bank and The high-stakes trade spat, which some Bank of Shanghai, are cutting down on plastic experts see as worsening with no hope of a for the eight issuance, which surged 40-60% last year but resolution until after the 2020 US elections, is bound to fall in coming months to leave the has so far taken a bigger toll on China, they largest issuers overall growth rate at 5-10%. That compares claim. GDP is expected to grow by under 6% with 2018’s 23% jump to CYN6.85trn, this year, down from a prior 6.5% forecast we cover is low according to observers. and much higher rates in the past decade, To avoid further losses, China’s banks must while industrial production fell to a 17-year bolster their underwriting standards which low in July. “have been less stringent than for auto loans The US does not seem to be doing much Currently, household debt stands at over and residential mortgages, especially since better on the economic front, however, with 53% of GDP and 85% of disposable income, Chinese banks turned to online channels GDP growing by a slower-than-expected up from 18% and 31% respectively just or social media platforms for customer 1.8% in the third quarter, and manufacturing a decade ago, according to Fitch Ratings. acquisition” in recent years, Wan and her activity falling to a 10-year low, reviving Observers expected credit card defaults team say in a report.

14 | September 2019 | Cards International

CI September 2019 571.indd 14 08/10/2019 14:47:54 feature | us-china trade war

US DEFAULTS EASE UP US CREDIT CARD CHARGE-OFF RATES (%)

Meanwhile, the payments sector seems May 2019 June 2019 July 2019 August 2019 healthier in the US, where the tariffs ordeal Chase 1.40 1.13 1.15 1.14 has not yet exerted too much pressure, American Express 1.40 1.40 1.40 1.50 according to analysts. Citi 1.57 1.51 1.53 1.53 “The default rate for the eight largest issuers Bank of America 1.56 1.56 1.57 1.56 we cover is low,” says Fitch Ratings analyst Discover 2.33 2.34 2.37 2.41 Michael Taiano, adding that charge-offs rose by 10-25 basis points to 3% of outstanding Capital One 3.29 3.40 3.49 3.50 card balances as of the second quarter, and Source: GlobalData have gradually fallen from a 5-6% rate since the 2009 financial crisis. PLASTIC USE GROWS or Philippines – already a rising trend – or As Washington and Beijing’s tensions passing higher costs to consumers, in which reach new heights, with Trump threatening Not everyone agrees that either Amex or case Amex, Visa and Mastercard would to limit investments to China, Taiano sees its rivals would suffer a heavy blow from a benefit from higher fees. Moreover, the risk delinquencies inching higher, though he drawn-out crisis in foreign commerce, mainly that some companies will be unable to absorb declines to provide a year-end forecast. because global card demand and transaction rising duties and be forced to fold their Meanwhile, American Express, which has fees continue to grow rapidly. franchises remains low, Biggar adds. a large pool of US manufacturing customers “American Express has enough cash and He expects global card fee revenues to that are facing losses from Trump’s tariffs on plenty of liquidity to launch a variety of continue to leap this year – with or without a roughly $500bn of Chinese goods, could initiatives to restore any lost business,” says recession – as online retail purchases remain suffer from a prolonged trade war. This is because it targets more businesses than archrivals Visa and Mastercard, which have a higher consumer focus, according to Taiano. the shift to plastic from cash in online “American Express is seeing spending volumes moderating, especially from mid-size spending will benefit payment flows. operating costs onto consumers,” he explains, adding that the blue-box-logo issuer saw This won’t change in a downturn corporate spending volumes jump 7% in the second quarter, down from 11% in the same Argus analyst Stephen Biggar, adding that buoyant, boosting credit and debit card use period last year. the company has also been fairly successful in more rapidly than in the bricks-and-mortar Amex has also “grown loans faster than recovering from the dramatic unravelling of economy. peers in the last couple of years, partly to its co-branded Costco card business. “Credit card companies are charging higher compensate for losing the Costco retail More crucially, Biggar points out: “While fees relative to transaction amounts, and the account, so there is a concern that if we move the trading feud is in its second year, it doesn’t shift to plastic from cash in online spending into a down cycle, some of those loans will seem to be affecting credit card payment flows will benefit payment flows,” adds Biggar. underperform,” adds Taiano. as much as bank and invoice-related payments “This won’t change in a downturn.” In balance, American Express continues [such as trade finance].” to run a formidable business, with return While higher tariffs are squeezing some US CHRISTMAS GAINS? on equity (ROE) margins exceeding 30%, importers, they have many options to fight compared to 20% for Discover and other them, notably shifting suppliers out of China Ivan Feinseth, Visa and Mastercard analyst competitors, he points out. and into Vietnam, Bangladesh, Indonesia at Tigress Financial Partners, agrees. Despite China’s slowing economy, global credit transaction volumes continue to increase, he insists, forecasting gains of 8-10% in 2019. On top of this, he says: “Mastercard and others are expecting a 5% gain in holiday sales,” adding that Mastercard continues to benefit from strong global consumer demand US record unemployment. That may be so, but the trade war remains a hangover on the global economy. Washington and Beijing negotiators are set to meet in mid-October with hopes of ironing out a deal to end the impasse. But gloomy market watchers say the chance of a thaw during those meetings remains relatively slim. <

www.cardsinternational.com | 15

CI September 2019 571.indd 15 08/10/2019 14:47:57 country snapshot | hungary

HUNGARY

country snapshot: hungary Interest rate policy continues to hinder credit card growth

ash remains the preferred mode of However, payment cards registered strong The Hungarian government has been consumer payments in Hungary, growth during 2014-2018 in terms of taking several initiatives in the form of Caccounting for 62.5% of the transaction volume and value, recording regulatory and operational measures to country’s total transaction volume in 2018. respective CAGRs of 19% and 11.8%. boost electronic payments in the country, including launching a POS installation value of credit transfers value of payment cards program, mandatory basic accounts by banks, and a proposed new instant bn bn payment system. , These government initiatives are , complemented by the introduction of , an EU-wide cap on interchange fees, encouraging merchants in the country to , accept card-based payments. , In terms of transaction volume and , value, debit cards are expected to continue

, to dominate the payment card market. This growth will be facilitated by the growing awareness of debt control and the continued migration from low-value cash e f e f payments. The growing adoption of contactless Source: ECB, GlobalData Source: ECB, GlobalData payments and strong growth in the

16 | September 2019 | Cards International

CI September 2019 571.indd 16 08/10/2019 14:48:03 country snapshot | hungary

e-commerce market are expected to Debit card shares by issuer Debit card shares by scheme further drive electronic payments in the country. Others . DEBIT CARDS PREFERRED Visa . Others Debit cards account for 84.6% and 94% of . total cards in circulation and transaction OT Bank . value respectively. Supported by government financial Mastercard KBC Bank . . inclusion initiatives, the number of bank rste accounts in Hungary has risen. Bank . According to the central Magyar Nemzeti Bank (MNB), the number of payment accounts offered by banks and

other payment service providers stood at Source: GlobalData Source: GlobalData 10.7 million in 2018, of which 6.7 million were consumer accounts used for payment pay later shares by issuer pay later shares by scheme purposes. Debit cards are primarily used by consumers to make payments rather American Express than to withdraw cash at ATMs, with the rste Bank Visa 3.3% number of debit card payments accounting . 16.7% for 86.8% of the overall debit card Others transaction volume in 2018. .

B aribas HIGH INTEREST RATES . Mastercard OT Bank 80% Credit and charge card adoption in . Hungary remain very low, with 14.7 cards per every 100 individuals in 2018. The typical annual percentage rate (APR) on credit cards has historically been high in Source: GlobalData Source: GlobalData Hungary, which discourages consumer use of pay-later cards. Although there have been reductions in 2018, while in terms of value, it grew by Bank offer virtual debit cards exclusively the interest rate in recent years, the APR 13.5%. Overall, contactless transactions for online purchases. on credit cards remains high, at over 30%, accounted for over 81% of the total The availability of alternative payment as compared to around 15% for other payment card transaction value. solutions such as PayPal, Masterpass and credit products such as personal loans, and The average transaction value of paysafecard are further expected to drive around 23% for overdrafts. contactless cards was HUF6,438 ($22.99) the e-commerce market. The low growth is also partially a result in the fourth quarter of 2018, which was of the country’s strict lending standards, much lower than the overall average GOVERNMENT INITIATIVES which caps the maximum monthly payment value. credit repayment amount to 50% of the The number of POS terminals grew from borrower’s monthly income. E-COMMERCE GROWTH 104,895 in 2014 to 161,405 in 2018, a CAGR of 11.4%. CONTACTLESS PAYMENTS Hungary’s e-commerce sector registered This growth was mainly supported robust growth at a CAGR of 19% during by government initiatives such as the Growing consumer preference for 2014-2018, primarily supported by Ministry for National Economy’s POS contactless cards has also supported notable rises in internet and smartphone installation program launched in December growth in the Hungarian payment cards penetration rates. 2016, which aimed to encourage POS market. According to the MNB, 79% of To encourage internet adoption in the installations at smaller retail outlets. the total payment cards in circulation in country, the government reduced the VAT The rising adoption of contactless POS Hungary had contactless functionality by rate on internet subscriptions in January among Hungarian merchants has also the end of 2018. 2017 from 27% to 18%, and further to 5% supported this growth. According to the The number of transactions using in January 2018. MNB, by the end of 2018, nearly 86% of contactless cards increased by 10.5% With a rise in online shoppers, banks the POS terminals in Hungary facilitated year on year in the fourth quarter of such as Erste Bank, OTP Bank and MKB contactless payments. <

www.cardsinternational.com | 17

CI September 2019 571.indd 17 08/10/2019 14:48:04 country snapshot | greece

GREECE

country snapshot: greece Greek credit card sector enjoys mild revival

reece was severely affected by the The country received conditional bailout of capital-control measures in June 2015 eurozone crisis, due to government packages from the International Monetary to arrest the outward flow of money, Goverspending, tax evasion and a Fund, the EU and the European Central curb tax evasion, encourage electronic budget deficit that spiralled out of control. Bank. As a result, it had to enact a number payments, restrict cash withdrawals at

value of credit transfers value of payment cards value of cheque payments bn bn bn ,

e f e f e f

Source: ECB, GlobalData Source: ECB, GlobalData Source: ECB, GlobalData

18 | September 2019 | Cards International

CI September 2019 571.indd 18 08/10/2019 14:48:09 country snapshot | greece

ATMs and introduce the compulsory Debit card shares by issuer Debit card shares by scheme acceptance of card-based payments by retailers, as well as certain categories of professional such as doctors, lawyers, electricians and plumbers. Others Consequently, there was a rise in the use . ational Bank of reece of electronic payments, with the number . of card transactions recording a significant Mastercard Visa CAGR of 68.2% in the four-year period to . . 2018. Debit cards are the most popular Alpha Bank . card type, and are increasingly used for iraeus Bank payments as consumers gradually switch . to them for low-value transactions. DEBIT CARDS PREFERRED Source: GlobalData Source: GlobalData Debit cards are the most popular card type, with every Greek consumer holding pay later shares by issuer pay later shares by scheme at least one. High banking penetration and the combined efforts of banks and government bodies to promote electronic

payments and financial inclusion have led Others . to strong adoption. Others . Government regulations to promote Alpha Bank electronic payments, including restrictions . Visa on cash use in the country, have stimulated Mastercard . debit card use. Consequently, the debit urobank . . card payments transaction volume, value iraeus Bank and frequency of use recorded significant . respective CAGRs of 103.8%, 84.1% and 88.6% during 2014-2018.

CREDIT CARD REVIVAL Source: GlobalData Source: GlobalData

Credit and charge cards are not very popular in Greece; penetration stood at and discounted prices offered by online KEA reloadable prepaid card to Social 33.5 cards per 100 individual in 2018. retailers that helped to serve price- Solidarity Income recipients. Amid uncertain economic conditions and sensitive consumers in Greece. Prepaid gift cards are also popular in growing unemployment, banks were forced The availability of various payment Greece. Piraeus Bank offers a Mastercard- to adopt a cautious approach to issuing options, including virtual cards and branded non-reloadable prepaid gift card, credit cards. This resulted in a decline in alternative solutions such as PayPal, Viva which can be loaded once to a maximum the number of credit and charge cards Wallet, paysafecard and Masterpass, also value of $286.39, and can be used at any issued up to 2015. helped to promote e-commerce. merchant that accepts Mastercard. However, with capital infusions and strict austerity measures adopted by the PREPAID MARKET GROWTH POS INSTALLATION government in 2015, the economy and the banking sector are recovering slowly. Growth in the number of prepaid cards in The number of POS terminals recorded a With growth in the job market, banks have circulation can be attributed to a number significant CAGR of 34% for 2014-2018, become more confident about credit cards of factors, including growing popularity rising from 194,799 to 627,663. than they were five years ago. among the unbanked population, and In response to tax evasion issues, the better control on expenditure. government identified over 85 different DEVELOPING E-COMMERCE Faced with harsh economic and labour business categories that were required conditions, most Greek consumers were to install POS terminals by July 2017. The Greek e-commerce market is currently forced to curb unnecessary expenditure Refusal to accept card-based payments in a growth phase, increasing from €3.3bn and opted for prepaid cards as a more attracts a fine of $1,718.32. According ($3.7bn) in 2014 to $5.9bn in 2018, a affordable means of spending. to Mastercard, as of December 2018 the CAGR of 12.2%. Factors contributing Banks also offer prepaid cards for proportion of POS terminals per capita was to this growth include the availability individuals to receive social benefits. the highest in Greece among all Central of wide range of products and services Piraeus Bank, for instance, offers the Visa and Eastern European countries. <

www.cardsinternational.com | 19

CI September 2019 571.indd 19 08/10/2019 14:48:10 Country snapshot | romania

ROMANIA

country snapshot: romania Debit cards popular, despite low penetration

ash remains the dominant payment value transactions are shifting to electronic gradually rising, they are mostly used for instrument in Romania, accounting platforms, low-value transactions are cash withdrawals rather than payments Cfor 85.1% of total payment mostly carried out in cash. Although use at merchant outlets. The government transaction volume in 2018. While high- of payment cards, primarily debit cards, is has taken steps to promote electronic

value of credit transfers value of payment cards value of cheque payments

bn bn bn ,

, ,

e f e f e f

Source: ECB, GlobalData Source: ECB, GlobalData Source: ECB, GlobalData

20 | September 2019 | Cards International

CI September 2019 571.indd 20 08/10/2019 14:48:14 Country snapshot | Romania

payments, including the introduction of the Debit card shares by issuer Debit card shares by scheme cashback law in 2017 to drive merchants to accept card-based payments. Debit cards remain the dominant payment card type, and credit card use Banca Transilania is low due to the debt-averse nature . of Romanians and their low disposable Mastercard income. To encourage credit card use, Others . Socit . Visa banks offer value-added benefits such as nrale . roup cashback, rewards and zero interest on . instalments. Raiﬀeisen The gradual adoption of contactless Bank and the emergence of e-commerce – . supported by the availability of alternative payments – are likely to drive the card

market over the 2018-2022 period. Source: GlobalData Source: GlobalData

FINANCIAL INCLUSION pay later shares by issuer pay later shares by scheme

Although debit cards are the dominant card type, penetration remains low in Others Romania in comparison to its peers due to . BNP Paribas the country’s large unbanked population, 17.4% Visa lack of trust in the financial system, and . limited knowledge of financial products. Others However, Romania’s central and retail 50% Raiﬀeisen Bank 17.4% banks are taking steps to improve financial Mastercard literacy and consumer faith in the banking . system. Many banks offer low-cost basic Credit Europe accounts for a nominal fee or no fee, Bank 15.2% which offer complimentary debit cards. Banks are also encouraging individuals to open accounts via digital channels. Banca Source: GlobalData Source: GlobalData Transilvania does not charge fees for account management or card issuance for bank accounts opened online. CAGR of 19.3%. This was supported by be loaded with $12.31–246.19. Valid for a A rise in banking penetration will drive rises in consumer confidence, internet year, holders can use the card for in-store overall debit card adoption in the country. penetration and the number of online purchases, but not to withdraw cash. retailers. The country’s fast-growing Non-bank companies also offer prepaid PAY LATER YET TO DEVELOP e-commerce market has prompted many cards. Carrefour Romania, for example, retailers to launch online shops. In March offers the Carrefour gift card, which can be Credit and charge cards are not popular in 2018, fashion retailer C&A launched a new loaded with $2.46–246.19 with one-year Romania, with a penetration rate of 14.9 online store in 11 EU countries, including validity. The card can be used at Carrefour cards per 100 inhabitants in 2018. Romania. hypermarkets, Market, Orange Express and The availability of overdraft facilities The availability of alternative solutions Supeco stores. on bank accounts further reduces the such as PayPal, Masterpass, paysafecard need for credit cards, but the market has and Skrill is expected to further support POS INITIATIVES registered strong growth in terms of card e-commerce growth in the coming years. payment volume and value, supported OTP Bank, Banca Transilvania and by convenient repayment options such PREPAID CARDS GROWTH Raiffeisen Bank offer POS terminals to as instalment facilities, long repayment SMEs. OTP Bank offers a POS package to tenures, and banks offering reward points, Despite low penetration, the Romanian businesses with accounts at the bank. discounts and cashback. prepaid card market registered a significant For business customers with a monthly CAGR of 22.6% in terms of transaction turnover of over $2,461, the company E-COMMERCE GROWTH value during 2015-2018. The high charges 0.70% of the total transaction unbanked population presents a significant value, while 0.90% is charged on The Romanian e-commerce market value opportunity for prepaid card issuers. transactions for monthly turnovers below registered robust growth, from RON5.4bn Gift cards are popular, and BRD offers $2,461. No fee is charged for installation ($1.3bn) in 2014 to $2.7bn in 2018, at a a Mastercard-branded gift card that can and administration. <

www.cardsinternational.com | 21

CI September 2019 571.indd 21 08/10/2019 14:48:16 industry insight | gemalto

3: Choose green suppliers It is important to consider eco-design at time for banks to join every stage of the card-making process, from conception to re-engineering. This includes environmental impacts such as resource consumption and emissions during the revolution manufacturing, as well as end-of-life disposal. But that is not to say that traditional financial institutions are not taking steps to be more sustainable too. Banks, for example, of sustainability are improving their environmental credentials by setting targets that will help them hit their From cutting back on plastic to reducing carbon footprints UN Sustainable Development Goals – such globally, there has been a fundamental shift towards more as the UN Principles for sustainable banking that will officially launch in September. green-conscious habits in many parts of society. Howard We are helping clients to achieve these Berg, SVP and MD at Gemalto UK and Ireland, writes goals by providing a ‘carbon offset’ solution, among other things, which provides financial oday’s consumers are increasingly information with cardholders and providing support to energy-saving and renewable choosing brands that use issuers with reporting solutions. By allowing energy programs. The goal is to generate Tsustainable materials and offer cardholders to use digital technology to carbon credits to compensate greenhouse gas ethically manufactured goods. manage their finances, banks and payment emissions generated by card production. In fact, according to a study by Nielsen, providers provide a sustainable alternative to 66% of global consumers are willing to pay paper documents and physical branches. 4: Help consumers track carbon footprints more for sustainable goods, and 81% believe Moving from paper to digital is also critical Consumers are becoming increasingly open to businesses have a responsibility to help protect for a seamless customer experience. Currently, apps designed to offset their carbon footprint. the environment. customers need to wait at least two or three Although today’s conscious consumers are These sustainability-conscious consumers working days to receive a PIN for a new debit driven by environmental concerns when are having an increasing impact on businesses. or credit card, which could cause a lot of making purchases, they often struggle to In the past few years there has been an friction. Luckily, there are better alternatives. understand their carbon footprint. Banks incredible focus on the harm of single-use For instance, a PIN can be delivered and financial services companies can help by plastics on the environment, but what about instantaneously via a banking app, website or giving customers more insight into the effect the plastic in our wallets? SMS. This not only provides customers with of their spending habits on the environment. According to the UK Card Association, innovative, more seamless experience, but also For example, Swedish company Doconomy there are over 164 million payment cards allows banks to reduce their carbon footprint. has rolled out a free and easy-to-use mobile in circulation in the UK. The vast majority service that lets users track, understand and

of these are made from non-biodegradable 2: Use sustainable materials reduce their CO2 footprints through carbon plastic such as PVC, which contributes to From big sports brands like Adidas and Nike offsetting. Its aim is to inspire a change in harmful landfill waste. With debit cards being using recycled materials in some trainers and behaviour and a reduction in unsustainable the most popular way to pay in the UK, clothing, to Ikea sourcing 100% of its cotton consumption and carbon emissions. it is essential that the cards that we use are from farms that meet the Better Cotton Doconomy has also worked with Gemalto environmentally friendly. So how can banks standards, companies from different industries to provide customers with an eco-friendly address the challenge and develop a card are making a step change into adopting more debit card made from a sustainable plastic strategy that encourages sustainable banking? sustainable materials. substitute, which is connected to a mobile As a starting point, banks should develop Banks are no exception. For example, app that allows users to measure their carbon a sustainable card lifecycle strategy based Triodos has been working with Gemalto footprint from every purchase. on sustainable technology, processes and to become one of only a few UK banks products that can deliver a substantially to provide eco-friendly debit cards that In conclusion… reduced carbon footprint. There are four key are created from a plastic substitute called Advances in technology and sustainable ways in which banks can achieve this: polylactic acid (PLA). products have made it possible for banks PLA is made from renewable sources to offer alternatives to plastic and choose 1: Move from paper to digital such as plant leaves and corn, which makes more eco-friendly card strategies. Innovative The first step is introducing processes that it biodegradable, recyclable and non-toxic financial services sit at the heart of this green accelerate dematerialisation. This includes if incinerated. The materials make the card evolution, taking advantage of technologies to reducing the excessive and unnecessary compatible with magstripe, contact and make every aspect of a card’s life sustainable. volume of printed documents such as dual-interface card technologies. Ultimately, The benefits of adopting a more sustainable personalised card carriers, inserts and PIN working with sustainable materials can have a banking strategy are huge: it helps institutions mailers, as well as paper products associated profound impact on the environment if it is to raise their brand profile, and lowers carbon with delivering and activating cards, sharing adopted on a large scale. emissions and plastic waste. <

22 | September 2019 | Cards International

CI September 2019 571.indd 22 08/10/2019 14:48:17 HEAR • NETWORK • DISCOVER • CELEBRATE Leasing Life Conference & Awards 2019 Barcelona, Spain • 28 November 2019

For its 15th edition, the Leasing Life Conference and Awards 2019 moves to Barcelona, to bring together asset finance professionals and industry disruptors in an active discussion of the key issues facing the leasing industry. This year’s Leasing Life Conference explores how Europe’s leasing industry is responding to the value chain opportunity, the role of technology in this pinnacle transformation, strategy-driven innovation and much more. Thriving in a digital age has never been more important.

Event highlights • Embracing technological transformation: creating digitised business models • From new technologies to corporate cultures: making innovation a reality • The circular economy: driving change at full speed • CEOs panel discussion and Q&A: the future of asset finance – a strategic outlook • Remaining relevant in an increasingly competitive world • Panel discussion: capitalising on data to drive industry-wide innovation

Headline Partner Gold Partner Silver Partners Bronze Partners

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For more details please contact Ray Giddings on [email protected] or call +44 (0)20 3096 2585