The Argentinian cards and payments channel has grown well over the last few years, with further good grow on the horizon. Increases to competition and the modernization of the payments system as speeded up this growth although the industry is being held back associated costs. CI reports
The Argentinian card payments channel registered marginal growth during the review period (2008-2012). The number of cards in circulation recorded a review-period CAGR of 14.51%, supported by a positive economic outlook, a need for more sophisticated products in terms of prepaid and charge cards, the growth of retail commerce and increased demand for prepaid products. During the review period, the size of the card payments channel, in terms of volume, increased at a CAGR of 14.51% to reach 60.2 M cards in 2012. In value terms, the Argentinian card payments channel grew from ARS265.4 Bn (US$84.4 Bn) in 2008 to ARS561.6 Bn in 2012. Over the forecast period (2013-2017), card payments are expected to deliver strong growth as consumers increasingly move away from cash transactions.
The already matured Argentinian card payments channel presents steady growth potential
The Argentinian card payments channel grew both in volume and value terms during the review period. In terms of volume, the card payments channel grew at a CAGR of 14.51% from 35.0 M cards in 2008 to 60.2 M in 2012. Growth is anticipated to continue at a forecast-period CAGR of 6.27% to reach 86.5 M cards in circulation by 2017.
In terms of card volume, credit cards accounted for a 46.4% share in 2012, followed by debit cards with 45.1%. In terms of value, the card payments channel grew from ARS265.4 Bn in 2008 to ARS561.6 Bn in 2012, at a CAGR of 20.61%. The channel is expected to reach ARS839.2 Bn in 2017, representative of a forecast-period CAGR of 7.03%.
Growth in the channel is expected to be driven by an increasing demand for charge cards and credit cards, a better regulatory framework, an increasing e-commerce market and a positive economic outlook.
Argentine government’s initiative and efforts to increase banking population
Argentina is a developing country with sustained economic growth, but banking penetration is relatively low in comparison with neighboring countries. High levels of unrecorded cash transactions in the country drive an underground economy. To regulate the growing black market and divert money to the standard economy, the Argentinian government is taking initiatives to increase banking penetration, such as collaborating with the central bank to offer tax benefits on card transactions. This creates ample opportunities for card issuers to expand their customer base.
Innovative pricing and promotional strategies to attract customers
Competition in the cards and payments industry has forced issuers to employ effective promotional strategies. Card transaction discounts and benefits, which create consumer satisfaction and increased customer loyalty, are available.
Benefits include complementary insurance, interest-free credit, overseas medical and legal assistance, and information on transactions through e-statements. Many banks have competitive interest rates on credit cards with deferred interest. Also available is a 5% VAT rebate on purchases made with certain cards. Attractive pricing strategies increase the use of payment cards in many areas.
Consumer preference directing the card payments channel
Consumer behavior is influenced by price, convenience and service. Argentinian consumers are heavily swayed by associated costs rather than service and convenience, and prefer to use cash when making purchases in order to avoid taxes. To counteract this, banks offer discounts and tax benefits on card payments. Corporate customers also consider cost before service and convenience while obtaining travel, incentive or entertainment cards. To remain competitive, financial card providers have reduced interest rates and charges, and now provide purchase and travel assistance, complementary insurance and payment by installments. Establishments generally embrace payment card technology which has made card payments more convenient and accessible to consumers.
Modernization in payment systems and supporting infrastructure
Technological advances in payment systems and its supporting infrastructure include EMV, NFC and contactless technology. EMV technology replaces magnetic strip-based cards with chip-based cards which store data and can be read with radio frequency identification device (RFID) or NFC devices, both of which enable contactless payment. These technologies have significantly reduced processing times and strengthened security measures, saving both consumers and retailers time and money. Overall growth in the Argentinian cards and payments industry is based on the adoption of advanced technology which will increase card use for transactions.
Targeting selective niche markets to overcome competition and gain market share
The Argentinian cards and payments industry is currently underexplored by card issuers. Niche markets such as female-only cards, exclusive cards for certain age groups, gift cards and e-shopping cards are gaining popularity in other countries, but are yet to be fully exploited in Argentina. For example, only Banco Galicia offers gift cards, and only Citibank Argentina offers cards exclusively for women. With systematic segmentation and customized offers, these markets could provide major opportunities for growth in the cards and payments industry.
Growth in e-commerce and the retail industry
E-commerce consumers in Argentina prefer to use cards when making online payments, often encouraged by promotional offers. In Argentina, more than 30% of the country’s SMEs used e-commerce to make transactions including buying and selling of the products and services in 2013, and this trend is expected to continue over the forecast period, driving online card transactions.
The growth of the retail industry is also driving the overall growth of the cards and payments industry. The total value of retail sales grew from ARS325.5 Bn in 2008 to ARS433.8 Bn in 2012, after registering a CAGR of 7.45%.