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Debit cards thriving in Ireland, marking profound shift

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Debit cards thriving in Ireland

The debit cards industry is thriving in Ireland, according to a new report by researchers from the London-based Lafferty Group. Of the 5.9 million payment cards in circulation, almost 70 percent are debit cards and the remaining 30 percent are credit cards. This is in stark contrast to the breakdown in 2005, when credit cards accounted for a 60 percent majority.

The consumer credit market in Ireland exploded between 2003 and 2008. Consumer credit outstandings more than doubled in these five years — known as the 'Celtic Tiger' era — to reach their peak of $228 billion in 2007. Since then, outstandings have contracted by 31 percent and stood at just over $157 billion at the end of 2012, as banks restricted lending and consumers were forced to tighten their belts.

The booming economy drove the huge growth in credit card outstandings, as personal consumption reached historically high levels and consumers turned to credit cards to meet their financial outgoings. Credit card debt grew by about 250 percent between 2003 and 2008, with growth of over 64 percent recorded in 2004 alone.

Interestingly, while levels of outstandings in all other consumer credit sectors contracted in the wake of the economic crisis in 2008, credit card outstandings continued their upward trend and reached their peak in September 2009, as consumers continued to use their credit cards as a short term borrowing tool when it became more difficult to obtain alternative sources of credit.

However, the report highlights the fact that in the wake of the economic crisis in Ireland, banks tightened lending conditions and become more prudent when granting revolving credit lines. With that shift, the debit cards industry has thrived in Ireland.

According to the report, Ireland's debit card market is undergoing huge changes. Over the past few years, many issuers have opted to terminate their participation in the domestic Laser card scheme and migrate to international schemes. The huge change in the landscape has seen Visa coming to the fore as Ireland's prominent debit card issuer and MasterCard becoming the partner of choice for a few, smaller issuers. The entry of international schemes to the Irish debit card market has also served to introduce the country's consumers to contactless payments.

The report has touted contactless payments as the big development in the industry over the coming years. The report found that issuers are currently waiving transaction fees on contactless payments to maximise consumer adoption. Given that contactless payments will only be available on low-value purchases, their success is expected to have a large impact on transaction volumes in Ireland.

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