While the economic crisis in the EU region continued to drag on total nominal card volumes in 2009, debit card growth fundamentals rebounded, at least on a normalized basis. Credit card POS spend continued a downward spiral in 2009, driven primarily by reductions in available credit. Normalized for macro-economic changes in household consumption, debit POS spending grew at 6% between 2008 and 2009 while spending on credit cards declined by 3%.
There was a clear shift from credit to debit through the economic crisis, but changes to cash behavior were somewhat less visible in aggregate market data. There was a slight growth in ATM transactions in Western Europe from 2007 to 2009 as opposed to historically modest annual declines; but there were no consistent patterns across markets to suggest anything close to a cash revival (already strong ATM growth patterns in Eastern Europe slowed modestly during the crisis).
This POS spend story for 2009 remained largely consistent across Western Europe with a few exceptions. Central and Eastern Europe were more dramatically altered by the crisis, with declines in credit card spend reaching 20% in some markets and with similarly dramatic reductions in the number of credit cards in issue. In general, markets hardest hit by the economic crisis evidenced also the greatest declines in card spend (led by credit). Ireland, a traditional stronghold for credit cards, saw a decline in credit card POS spend of 15% in 2009. In Greece, the number of credit cards in issue declined a full 15% in 2009, while spend declined 8% (although debit POS spend increased 13%). Similarly, the Baltic markets were also hard-hit by the crisis with debit and credit spend declining at double digits across the board in 2009. Poland and Austria (plus Norway and Turkey, which lay outside of our graphed EU universe) were among few countries that achieved strong growth in credit card POS volumes in 2009.
Card Market Growth in Western Europe [EU Members]
(normalized growth in normalized for household consumption expenditure)
Source: European Central Bank, CB, Swedish Bankers Association, Riksbank, DNB, Banca d’Italia, Banco de Espana
Card Market Growth in Eastern Europe [EU Members]
(normalized growth in normalized for household consumption expenditure)
Source: European Central Bank, Magyar Nemzeti Bank, Czech Bankcard Association, Latvijas Banka, National Bank of Poland, ZBK, Banca Nationala a Romaniei
Card Market Growth in UK
(normalized growth in normalized for household expenditure)
Source: European Central Bank, UK Cards Association, British Bankers’ Association
The U.K., Europe’s largest cards market, typified the experience felt elsewhere – debit card POS volume increased 8% while credit card POS spend declined 8% in 2009. The decline in credit card spend was driven, at least in part, by an 11% decline in the number of cards in issue and a general tightening of available credit (not to mention the planned or actual exit of several issuers).
Based on our observations to date in 2010, we expect a continuation of trends evidenced in 2009 although the credit card blood-letting appears to have largely run its course. While there is no denying the debit centricity of the future of the EU cards market, we remain somewhat more bullish than the pundits on credit cards as we believe that credit cards will mount at least a modest comeback in the medium-term.
For more information, please contact Yuriy.Kostenko@firstannapolis.com or Erik.Howell@firstannapolis.com
