A country whose economy has been shortlisted to do particularly well over the next few years, Mexico needs to increase credit and card use to achieve this growth. A good rise on transaction value over the last few years has built a strong base for this. CI reports
The debit cards category was the prime growth driver of the Mexican card payments channel during the review period (2008?2012), and recorded a CAGR of 13.15% in terms of the volume of cards in circulation. The debit cards category posted the highest transaction value and valued MXN2.6 Tn (US$199.7 Bn) in 2012. Within the credit card category, the overall transaction value reached MXN467.2 Bn in 2012.
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A decrease in credit-fuelled spending to increase the scope of prepaid cards
The prepaid cards category is expected to exhibit strong growth prospects over the forecast period (2013?2017) and post a CAGR of 5.69% in terms of the volume of cards in circulation. This will be driven by government payroll cards, government welfare (benefit cards), prepaid transport cards and prepaid gift cards. In association with mobile services operator Rêv Worldwide, domestic bank Banorte launched a general-purpose reloadable card: MiFon. This is expected to support the prepaid cards category over the forecast period. Rather than purchasing products through credit, the Mexican population tends to base their expenditure on their income value, which is expected to increase the scope for prepaid cards as customers are able to define an upper limit on spending.
Growth of remittance payments is to be an important business driver
The inflow of remittances is expected to offer expansion prospects for the Mexican cards and payments industry. Remittances from the US to Mexico in 2011 grew at an annual rate of 6.9% and totaled US$22.7 Bn. Due to the increased restrictions on immigration, this value declined in 2012 to US$22.3 Bn supported by the US economy which is projected to increase the volume of immigrants from Mexico. American Express, MasterCard and Visa branded remittance cards have all the functionalities of a general credit or debit card and are popular in Mexico. New schemes such as MoneyGram are also emerging to facilitate remittances between the US and Mexico.
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By GlobalDataLow prices and flexible terms to support the prepaid cards category
Mexican banks employ low pricing structures to promote prepaid card products. Most banks charge no annual or card replacement fees, and do not charge for balance inquiries and cash withdrawals at parent-bank ATMs. Fees are typically only charged for the international use of cards. This pricing strategy encourages the use of cards among the unbanked population.
Unbanked population to offer scope for expansion
A key driver of the Mexican cards and payments industry is the unbanked population. As of 2012, around 70% of the population was unbanked and 54% of municipalities lacked access to at least one bank or microfinance institution. Consequently, banks have taken initiatives to launch prepaid cards to the unbanked population. Prepaid cards are issued to customers with minimal ID requirements and can be obtained from agents.
Increase in broadband penetration
Internet penetration is a key driver of e-commerce growth and increased from 21.7% in 2008 to 38.4% in 2012. Business to customer (B2C) e-commerce sales reached to US$6.5 Bn in 2012 and is expected to reach US$15.2 Bn by the end of 2017. The total number of internet users grew at a review-period CAGR of 16.90%, and reached 44.1 M users in 2012. Further expansion is expected to result in the growth of card-based payments for online shopping.
Domestic scheme Carnet to change the landscape of the cards and payments industry
Domestic service provider, Carnet, is expected to transform the Mexican card payments channel over the forecast period. Carnet is issued by Prosa, the company formed by top Mexican banks: HSBC Mexico, Grupo Financiero Banorte SAB, Banco Invex, Grupo Financiero Santander SAB, Grupo Scotiabank and Banjercito. These banks are expected to promote Carnet cards as an alternative to foreign scheme providers such as Visa, which are more costly in terms of processing.
Prepaid category to offer strong prospects
The prepaid card category has growth prospects. The closed-loop prepaid cards segment is expected to grow at a forecast-period CAGR of 7.84%. General-purpose reloadable prepaid cards are popular and are issued by banks such as Banamex, Walmart and Azteca. There is also potential to expand prepaid gift and government payroll cards. Closed-loop cards are popular in transportation. For example, the Mexican government is offering a prepaid card called the Federal District Card which can be used to make payments for buses, parking, taxis and allows the user to rent bicycles. Closed-loop prepaid cards are also issued by retailers for in-store purchases.
Rural microfinance program Finca to expand cards to rural markets
Another prospective driver of the cards and payments industry in Mexico is Finca, the country’s microfinance scheme. Established in 1989, the program bases its business in rural areas and covers 13,325 village banking groups. Finca clients are issued a Cheque Inteligente prepaid card by HSBC, through which clients can draw down loan amounts according to their requirements. Cards can be used at automatic teller machines (ATMs) and at point of sale (POS) terminals, and are popular among the rural population as an efficient money management tool.
Alliance between Prosa and Fintrax
The travel card market is expected to record positive growth, with the partnership between Prosa and the Fintrax group to offer Prosa merchant customers a dynamic currency conversion (DCC) facility. The holders of foreign cardholders can pay in local currencies while purchasing at any Prosa store. The DCC facility assures the client the exchange rate recorded at time of purchase, minimizing exchange fluctuation risks. The DCC facility is also profitable for merchant banks, which receives a DCC commission every time the card is used to make a transaction.
