Luxembourg's Cards and Payments Industry: Emerging Opportunities, Trends, Size, Drivers, Strategies, Products and Competitive Landscape
Like other EU countries, Luxembourg’s economy was damaged by the 2009 global economic crisis. Following strong economic growth from 2004 onwards, Luxembourg's economic growth contracted by 5.6% in 2009, but recovered gradually from 2010 onwards. Economic turmoil in the global financial markets and lower demand during the peak of the recession prompted the government to inject capital into the financial services sector and implement stimulus measures to boost the economy.
A favorable tax regime coupled with bank-privacy legislation enabled the financial services sector, especially the banking and insurance sectors, to become the growth leader. Consequently, Luxembourg’s cards and payments industry thrived during the review period (2009–2013), which is anticipated to continue over the forecast period (2014–2018).
In 2013, credit transfer was the preferred payment instrument, having a substantial industry share of 98.1%, in terms of transaction value, while payment cards accounted for just a 0.5% share. The use of cash is continuously decreasing due to a growing preference for electronic payment methods, resulting in cash’s share being halved during the review period, down from 1.5% in 2009 to 0.7% in 2013.
In terms of the number of cards in circulation, Luxembourg’s payment cards (including debit and credit cards) registered a positive growth during the review period, recording a significant compound annual growth rate (CAGR) of 23.14%, increasing from 992,348 cards in 2009 to 2.3 million in 2013. In terms of transaction value, payment cards valued EUR10.2 billion (US$13.5 billion) in 2013, after registering a review-period CAGR of 10.60%.
Improved banking infrastructure, new product developments, a higher awareness of electronic payments and wider acceptance of payment cards at point-of-sale (POS) terminals were the key factors driving growth. The adoption of Europay, MasterCard and Visa (EMV) standards also supported the industry’s growth.
In 2013, the average transaction value (ATV) in Luxembourg was US$121.0, which was the fifth highest in the European region. Greece recorded the highest ATV, with US$227.6, followed by Switzerland (US$156.6), Italy (US$141.2) and Germany (US$131.5). However, Luxembourg recorded the region’s highest card penetration of 4.43 cards per inhabitant in 2013, followed by Norway (2.73), the UK (2.48), Sweden (2.38) and Belgium (2.04).
Prior to the eurozone crisis, consumers used debit cards more frequently at POS terminals. However, with uncertain economic conditions and increases in unemployment from 2009 onwards, consumers moved to use credit cards more frequently to benefit from the interest-free credit period offered by the banks. In terms of the number of cards in circulation, transaction volume and value, debit cards decreased during the review period, which is anticipated to continue over the forecast period. In terms of the number of cards in circulation, debit cards accounted for 51.2% in 2009, which reduced to 27.1% in 2013. In terms of transaction volume, its share decreased from 65.9% to 57.2%, while in terms of transaction value its share decreased from 61.3% to 51.6%, during the same period.
Instead of solely depending upon their salaries, consumers moved to credit card payments in times of higher need, paying it back when they have funds. During the review period, the use of credit cards increased significantly both in volume and value terms at CAGRs of 19.05% and 17.00% respectively. Over the forecast period it is projected to grow at respective CAGRs of 5.11% and 4.48% in terms of volume and value.
The report provides top-level market analysis, information and insights into Luxembourg's cards and payments industry, including: