Future Trends in Cards and Payments: Key Issues, Innovation and Competition in Europe and the US

Table of Contents
Future Trends In Cards And Payments
Executive summary 10
Consumer payment tools 10
Key issues in payment cards 11
Competition in the cards market 13
The future of cards and payments 14
Chapter 1 Consumer payment tools 18
Summary 18
Introduction 19
Overview 19
The cards and payments landscape 19
Cashless payments are moving away from cheques and credit
transfers 20
Cards are gaining ground in all countries 21
Payment cards 23
Overview 23
Classification of payment cards 23
Key players and transaction processes 24
Some issuers work on a closed loop basis 25
The role of Payment Service Providers 25
Growth of payment cards in Europe 27
Greece and Turkey are outgrowing the rest of Europe 27
High number of cards per person in the US results in low usage
figures per card 30
Card usage is strongest in the Nordic region 31
Pay now cards dominate in more than half of Europe 33
Pay now cards 35
Germany and the UK hold 50% of European pay now cards 35
Germany tops the league in terms of pay now card penetration 37
In Belgium and the US, the number of transactions per pay now card
has more than doubled since 1999 38
Consumers in some European countries show an increasing
readiness to pay by debit card 39
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Pay later cards 41
The European pay later cards market is still tiny compared to the US 41
The UK is by far the biggest pay later cards market in Europe 41
Pay later card penetration in Europe is generally still low 43
Finland has the highest number of transactions per pay later card 44
The European average value of transactions for pay later cards lies
below the US average 45
Chapter 2 Key issues in payment cards 48
Summary 48
Introduction 49
Card fraud 50
Types of card fraud 50
Card-not-present fraud (CNP) 50
Counterfeit fraud 52
Lost and stolen card fraud 54
Mail non-receipt fraud 54
Fraud following identity theft 55
Cross-border fraud 56
Fraud at cash machines 56
Prevalent fraud types 57
Combating card fraud - EMV is expected to reduce counterfeit fraud 59
Migration to EMV in Europe 60
Migration to EMV in the US 61
Combating other types of card fraud 63
3-D Secure to curb card-not-present fraud online 63
Preventing identity theft fraud 65
Information-based anti-fraud solutions are critical 67
Sharing fraud-related information and educating players 68
Growth strategies in payment cards 69
Pay now card issuers benefit from greater POS usage 70
Do loyalty programs provide the answer? 71
Pay later cards 72
Converting cash acquisition to POS transactions 72
Expanding into other areas of payments 74
Boost revolving balances rather than total transaction volumes 77
Chapter 3 Competition in the cards market 82
Summary 82
Introduction 83
Competition in the pay now card segment 83
Maestro dominates the pay now segment 83
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Market concentration on issuance 84
Competition in the pay later card segment 86
Across Europe, Visa has a market share of more than 50% 86
Concentration of pay later card issuance 86
Chapter 4 The future of cards and payments 90
Summary 90
Introduction 91
Outlook for the pay later card segment 91
High growth in the number of pay later cards in Turkey 91
Turkey - the third largest pay later card market in Europe by 2008 92
Pay later card use in Finland is set to increase even further 93
Changes in average transaction value 95
Data tables 96
Glossary 103
Index 109
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List of Figures
Figure 1: The use of cashless payment instruments, 1999-2002 22
Figure 2: Consumer cards by way of bill settlement 24
Figure 3: Payment card transaction processes and flows 25
Figure 4: Total number of cards in Europe and the US, 1999-2003 27
Figure 5: Payment cards issued in Europe, 2003 28
Figure 6: Card penetration in Europe is still low, but most countries show solid growth in the
number of payment cards, 2003 29
Figure 7: Average number and value of transactions per payment card in Europe and the US,
1999-2003 30
Figure 8: Transactions per card by country, 1999-2003 32
Figure 9: Growth in average card usage in Europe and the US, 1999 - 2003 33
Figure 10: Pay now and pay later cards by country, 2003 34
Figure 11: Card usage is much higher for pay now than for pay later cards, 2003 35
Figure 12: The dominance of the two largest markets for pay now cards in Europe, 1999-2003 36
Figure 13: Pay now card penetration in Europe and the US, 2003 38
Figure 14: Debit card transactions in Europe and the US, 2003 39
Figure 15: Average transaction values for pay now cards, 2003 40
Figure 16: The number of pay later cards in Europe and the US, 1999-2003 41
Figure 17: The UK has a share of 31% of pay later cards in Europe, 1999-2003 42
Figure 18: Pay later card penetration in Europe, 2003 43
Figure 19: Use of pay later cards in Europe and the US, 2003 45
Figure 20: Average value of transactions for pay later cards, 2003 46
Figure 21: Types of fraud and losses to fraud in Europe and the US, 2003 58
Figure 22: Pay now cards in Europe by scheme, 2003 83
Figure 23: Combined market shares of the Top 3 pay now card issuers in each country, 2003 84
Figure 24: Market shares of pay later cards by schemes, 2003 86
Figure 25: Combined market shares of the Top 3 Pay Later card issuers in each country, 2003 87
Figure 26: Increase of the number of pay later cards, 2004e-2008f 92
Figure 27: Pay later cards per person in Europe, 2008f 93
Figure 28: Transactions per pay later card in Europe, 2008f 94
Figure 29: Average transaction value for pay later cards in Europe, 2008f 95
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List of Tables
Table 1: Average transaction values in Europe, 1999-2003 31
Table 2: Issuer shares in the European pay now card markets, 2003 85
Table 3: Issuer shares in the European pay later card markets, 2003 88
Table 4: Cashless payment tools in Europe and the US, 1999-2002 96
Table 5: Number of payment cards in Europe and the US, 1999-2003 97
Table 6: Payment cards per person in Europe and the US, 1999-2003 97
Table 7: Average number of transaction for payment cards in Europe and the US, 1999-200398
Table 8: Number of pay now cards in Europe and the US, 1999-2003 98
Table 9: Number of pay now cards per person in Europe and the US, 1999-2003 99
Table 10: Number of transactions per pay now card in Europe and the US, 1999-2003 99
Table 11: Average value of pay now card transactions in Europe and the US, 1999-2003 100
Table 12: Number of pay later cards in Europe and the US, 1999-2003 100
Table 13: Number of pay later cards per person in Europe and the US, 1999-2003 101
Table 14: Average value of pay later card transactions in Europe and the US, 1999-2003 101
Table 15: Number of transactions per pay later card in Europe and the US, 1999-2003 102