Estonia Cards & Payments: Opportunities and Risks to 2023

Estonia Cards & Payments: Opportunities and Risks to 2023

Summary

Estonians are prolific users of payment cards. The frequency of overall card payments in Estonia (211.3) is much higher than other mature markets such as the UK (140.8), the US (109.8), and Germany (54.1) in 2019. High consumer awareness about the benefits of cards, improved payment infrastructure, and better security associated with card payments have supported the growth of card-based transactions in the country. Debit cards are the most popular card and are primarily used for card payments, with frequency of use of 211.3 in 2019.

The credit and charge card market is expected to record a compound annual growth rate (CAGR) of 5.5% in terms of transaction volume over the forecast period (2019e-23f). Rising disposable household income, higher employment rates, and value-added benefits offered by banks will continue to support this growth. The emergence of digital-only banks, alternative payment methods, contactless technology, and growth in the e-commerce market are also anticipated to support payment card market growth.

Debit cards are the most popular card type in Estonia. Consumers’ preference for debt-free payments and prudent spending has resulted in the dominance of debit cards in terms of both transaction volume and value. However, a strong banked population - standing at 98.1% in 2019 - has resulted in stagnation of debit cards in terms of circulation.

Credit and charge cards account for a small proportion of the overall payment card market. The availability of overdrafts has reduced the need for a separate credit card. In addition, stricter eligibility criteria on credit card issuance have also been a challenge for the market. To prevent customers falling into debt, banks have set minimum income requirements for lines of credit. But banks also offer benefits such as installment facilities, discounts, reward points, and cashback. These value-added services have resulted in steady growth in the credit card space during the review period (2015-19e).

The e-commerce market has registered significant growth, rising from €226.6m ($259.6m) in 2015 to €503.3m ($576.6m) in 2019 at a review-period CAGR of 22.1%. Growth has been supported by rising internet penetration, emerging online retailers, benefits such as discounts offered by e-retailers, and the rising consumer preference for online shopping.

The report “Estonia Cards & Payments: Opportunities and Risks to 2023” provides detailed analysis of market trends in the Estonian cards and payments industry. It provides values and volumes for a number of key performance indicators in the industry, including credit transfers, cards, and cheques during the review-period (2015-19e). The report also analyzes various payment card markets operating in the industry and provides detailed information on the number of cards in circulation, transaction values and volumes during the review-period and over the forecast-period (2019e-23f). It also offers information on the country's competitive landscape, including market shares of issuers and schemes.

The report brings together research, modeling, and analysis expertise to allow banks and card issuers to identify segment dynamics and competitive advantages. The report also covers detailed regulatory policies and recent changes in regulatory structure.

The report “Estonia Cards & Payments: Opportunities and Risks to 2023” provides -

  • Current and forecast values for each market in the Estonian cards and payments industry, including debit, credit, and charge cards
  • Detailed insights into payment instruments including credit transfers, cards, and cheques. It also, includes an overview of the country's key alternative payment instruments
  • E-commerce market analysis
  • Analysis of various market drivers and regulations governing the Estonian cards and payments industry
  • Detailed analysis of strategies adopted by banks and other institutions to market debit, credit, and charge cards
The report Estonia Cards & Payments: Opportunities and Risks to 2023 enables the user to -
  • Make strategic business decisions, using top-level historic and forecast market data, related to the Estonian cards and payments industry and each market within it
  • Understand the key market trends and growth opportunities in the Estonian cards and payments industry
  • Assess the competitive dynamics in the Estonian cards and payments industry
  • Gain insights into marketing strategies used for various card types in Estonia
  • Gain insights into key regulations governing the Estonian cards and payments industry
Companies Mentioned: Swedbank, SEB, Luminor Bank, Danske Bank, Nordea, LHV Pank, Coop Pank, Eesti Pank, Visa, Mastercard

Scope
  • To remain on a par with its European peers and to promote electronic payments, Estonia has adopted instant payments. In November 2017, SEPA Instant Credit Transfer - a pan-European instant payment scheme - was implemented across SEPA-compliant regions, including Estonia. The scheme enables fund transfers of up to €15,000 ($17,183.22) in less than 10 seconds across Europe - 24 hours a day, seven days a week, 365 days a year. The service was initially introduced in Estonia by SEB; other banks such as Swedbank and LHV Pank started to offer instant payments by the end of 2018. And in November 2018, TARGET Instant Payment Settlement was launched across the EU, including Estonia. It is based on SEPA Instant Credit Transfer and is an extension of TARGET2. Apart from being available at all times, it also supports multi-currency transfers.
  • Estonian banks are increasingly focusing on security and payment authentication to offer customers a secure payment environment. In March 2017, Swedbank and SEB introduced the Smart ID electronic authentication solution. The app helps bank customers conveniently log into internet or mobile banking and make payments digitally. To use the service, consumers download the app and register. They are then required to set two PIN codes (the first to access internet banking, the second for payment authorization) to access electronic services. The app can be used for e-identification and digital signatures to authenticate payments made using electronic platforms. Other banks such as LHV Pank (May 2017) and Coop Pank (May 2018) have also introduced Smart ID, while Luminor Bank plans to introduce it by the end of 2019. As of September 2019 there are 450,000 Smart ID users in Estonia.
  • The emergence of contactless technology will further boost card payments in Estonia. Major banks such as SEB, Swedbank, Luminor Bank, and LHV Pank are now offering contactless cards. According to Eesti Pank (the country’s central bank), as of June 2019 61% of cards issued in the country were contactless. On average, 240,000 contactless payments were made per day in Q2 2019. In a bid to drive contactless card use, in October 2017 the limit for contactless payments without the need for a PIN was increased from €10 ($11.46) to €25 ($28.64). Meanwhile, transportation and ticketing companies are introducing payments via contactless cards. Transit ticketing provider Ridango collaborated with Tallinn Transport Board, Nets Estonia, LHV Pank, and Mastercard to enable travelers to pay with their contactless cards on Tallinn trams, buses, and trolleybuses.
Reasons to buy
  • Make strategic business decisions, using top-level historic and forecast market data, related to the Estonian cards and payments industry and each market within it.
  • Understand the key market trends and growth opportunities in theEstonian cards and payments industry.
  • Assess the competitive dynamics in the Estonian cards and payments industry.
  • Gain insights into marketing strategies used for various card types in Estonia.
  • Gain insights into key regulations governing the Estonian cards and payments industry.


Market Overview
Card-based Payments
E-commerce Payments
Alternative Payments
Payment Innovations
Payments Infrastructure & Regulation
Appendix

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