Payment Cards Market Fuelling Growth in Argentina
Webteam: 13th May 2014 2:21pm
New research published by Lafferty Group has found a boom in credit cards well underway in Argentina, despite the troubles being experienced elsewhere in the economy.
In the past decade, the country's cards sector was one of the bright spots in its retail banking industry, seeing strong annual double-digit growth both in billed volumes and transactions. "The current currency crisis should not obscure solid performance in cards, which has been showing remarkable growth in recent years," said Sisi Liao, Group Head of Research at Lafferty.
Credit cards are at the centre of all retail banking strategies in Argentina, together with payroll services and personal loans. Besides the strong focus on discounts, almost all issuers have traditionally treated credit cards as a volume-based, non-differentiated business. However, issuers are moving to a more segmented approach with a specific value proposition for each market segment associated with tourism, leisure, entertainment, food and personal care services. Retail banks view credit cards as a key vehicle to push consumer credit and have implemented creative tactics to promote them, such as moving their sales forces out of the branch offices to shopping centres, holiday spots and other distribution points. Banks also use credit cards as means of acquiring new customers — drawing them in with interest-free instalment promotions on cards and then, during this period, attempting to cross-sell other financial products.
Traditionally, issuers have all fought for wallet share among high-income segments. However, this has changed as the segment has become more saturated and the market opened up through the development of highly successful local labels targeted at the low- and medium-income market (e.g., Tarjeta Naranja, Italcred, and Cabal). In addition, retailers also compete in the card financing market with closed-loop cards such as CMR, Coto, and Carrefour.
Debit cards are popular in Argentina and approximately 85 percent of workers in formal employment have a payroll account, normally a savings account, with a zero-cost debit card attached. Savings accounts prevail over current accounts because they are exempt from a government tax applied to each current account deposit and withdrawal amount. The number of debit cards in issue is on par with credit cards, while the billed volume difference between debit and credit cards is due to the aggressive discount and interest-free instalment campaigns developed around credit cards. While there are also discount promotions on debit cards, especially at petrol stations and some retailers, they are relatively low level by comparison.
A key development barrier in Argentina's payment cards market is that over 40 percent of merchants do not accept card payments. The vast majority are small, unbanked businesses that only accept cash payments.
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