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  1. Analysis
June 11, 2014

Country survey: Greece

Greece was the most severely affected country by the eurozone crisis, mainly as a result of government overspending, rampant tax evasion and a budget deficit that eventually spiraled out of control. The crisis also affected the entire banking system; most banks faced liquidity problems and loan defaults, which had a direct impact on the card payments channel.

By Editorial

Greece was the most severely affected country by the eurozone crisis, mainly as a result of government overspending, rampant tax evasion and a budget deficit that eventually spiraled out of control. The crisis also affected the entire banking system; most banks faced liquidity problems and loan defaults, which had a direct impact on the card payments channel.

The government announced number of initiatives to revive the economy, including cuts in public sector employment, and defense and other government spending. In 2010, the IMF, the European Central Bank (ECB) and the European Commission announced a three-year aid package worth EUR110 Bn (US$144.7 Bn) to bail out Greece economy. That was followed by second bailout of EUR130 Bn in February 2012. Greece was forced to take essential austerity measures such as tax increases and public spending cuts as conditions of the bailout packages.

The banking landscape is still reeling under high credit risk and frail depositor confidence. In May 2012, the Hellenic Financial Stability Fund (HFSF), a private legal entity in Greece, disbursed EUR18 Bn to Greece’s four biggest banks, National Bank of Greece, Eurobank Ergasias, Alpha Bank and Piraeus Bank, as part of a recapitalization plan. The plan is expected to reinstate the capital adequacy levels of the four banks, and their access to liquidity funding from the European Central Bank and European Union (EU).

Prepaid and debit card growth remain strong despite the recession

Uncertain economic conditions, a deteriorating labor market and government austerity measures had a profound effect on Greece’s card payments channel. Consumer spending remained cautious, with most individuals opting to reduce debt on credit and charge cards. Additionally, banks fearing payment defaults became wary of issuing credit and charge cards, and instead encouraged customers to opt for debit and prepaid cards, which registered healthy growth during the review period.

In terms of the number of cards in circulation, the prepaid and debit card categories registered healthy growth at compound annual growth rates (CAGRs) of 15.44% and 3.29% respectively during the review period (2009-2013). With the Greek economy anticipated to recover slowly over the forecast period (2014-2018), the prepaid and debit card categories are expected to grow at a healthy pace and register CAGRs of 21.80% and 4.62% respectively, while the credit and charge card categories continue to decline, albeit more slowly than during the review period.

Decline in growth to ease with fresh funds and economic recovery

Anticipated improvements in economic indicators such as GDP, GDP per capita and inflation are expected to support card volume growth over the forecast period. Government attempts to inject fresh funds into the banking sector to stimulate growth are also expected to improve credit availability. Cautious consumer spending is, however, expected to continue over the forecast period, increasing the demand for prepaid cards.

Emergence of new ticketing system for public transport

The growing popularity of contactless cards has prompted the Greek government to introduce smart cards in its public transport systems. The project was awarded to South Korea’s LG and Terna Energy of Greece, and implementation will be overseen by the Athens Urban Public Transport Organization, OASA. The budget for the project is EUR137.9 M and is likely to be completed in phases by the end of 2016. A contactless smart card with a prepaid fare amount will be issued to consumers, which can be validated at terminals on buses and trains.

Growth of m-commerce and e-commerce to drive the card payments channel

A well-developed mobile market and the growing popularity of smartphones have led to robust growth in mobile payments (m-payments), which posted a review-period CAGR of 41.55%, increasing from EUR26.2 M in 2009 to EUR105.0 M in 2013. Over the forecast period, the value of m-payments is anticipated to further increase from EUR149.2M in 2014 to EUR803.0M in 2018, at a CAGR of 52.32%.

Banks such as National Bank of Greece (NGB), Alpha Bank and Eurobank Ergasias are partnering with merchants and online retailers to offer secure payment facilities, enabling customers pay online or via mobile phones linked to bank accounts. As a result, e-commerce recorded a review-period CAGR of 43.75% and grew from EUR962.3 M in 2009 to EUR4.1 Bn in 2013. It is anticipated to post a forecast-period CAGR of 32.94% to reach EUR18.0 Bn by the end of 2018.

Adoption of secure payment technology to reduce card fraud

To offer more security to card users and enable them to conduct a greater number of online and offline transactions, several banks have taken steps to offer enhanced security features. Most banks and card issuers are now offering cards with chip-and-PIN technology, as well as the MasterCard SecureCode and Verified by Visa programs. Banks also offer cards with contactless functionality to facilitate fast and secure payments. With the adoption of advanced security features, card fraud is projected to decrease over the forecast period.

Embracing social media to benefit the cards and payments industry

The use of social media to reach target audiences is steadily increasing among Greek banks. Piraeus Bank uses micro-blogging tool Twitter to communicate the latest developments concerning its products and services, and to answer consumers’ queries. The bank also has its own online forum, Think Green, where customers are invited to share thoughts and suggest possible improvements. Eurobank Ergasias is present on social networking sites such as YouTube and Twitter. With a number of banks strengthening their presence in social media to engage with their target audiences, this will have a positive impact on the cards and payments industry.

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