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January 11, 2016updated 04 Apr 2017 4:00pm

Italy’s government encourages the payment market

Italy is one of the world’s most developed economies, although it was affected between 2010 and 2014 by the eurozone crisis. The country’s real GDP growth declined from 1.7% in 2010 to -0.4% in 2014. The economy is expected to stabilise, with GDP growth rising from 0.6% in 2015 to 1.1% in 2019

By Verdict Staff

Italy is one of the world’s most developed economies, although it was affected between 2010 and 2014 by the eurozone crisis. The country’s real GDP growth declined from 1.7% in 2010 to -0.4% in 2014. The economy is expected to stabilise, with GDP growth rising from 0.6% in 2015 to 1.1% in 2019

In a bid to revive the economy, the Italian government introduced austerity measures and shifted its focus towards increased financial inclusion through the Save Italy plan in December 2011. The plan included mandatory opening of a free current account or a basic payment account by financial institutions for socially disadvantaged customers with an annual income of less than $9,950.50 (€7,500).

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Government initiatives to limit cash transactionsWhile other European countries such as France, Spain and the UK are moving towards becoming cashless economies, cash is still the preferred payment instrument for Italians. Cash accounted for 85.6% of the cards and payments industry’s transaction volume in 2014.

The government banned all cash-based transactions over $1,390 on December 8, 2011, as part of efforts to reduce the annual tax loss of nearly $139bn, and an additional $13.9bn lost to processing cash-based payments.

The government introduced a regulation in July 2014, making it mandatory for service providers such as wholesalers and retailers to install POS terminals to accept payments for transactions over $39.80. These initiatives are anticipated to reduce dependence on cash, and encourage payment card transaction values and volumes.

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Traditional credit-averse environment supported growth in prepaid cardsThe debt crisis and subsequent austerity policies led to a decline in overall consumer spending. The traditionally credit-averse nature of Italian consumers, coupled with their conservative spending attitude, is expected to result in a decline in credit card-based transactions.

This is expected to reduce new credit card issuance over the next five years and increase the issuance of prepaid cards as customers prefer pre-planned or budgeted spending.

The number of prepaid cards in circulation increased at a CAGR of 18.13% between 2010 and 2014, from 12.4 million in 2010 to 24.1 million in 2014 and is expected to further increase to reach 32.4 million by 2019. Growth in the prepaid card market can be attributed to improved infrastructure of POS terminals, security features and promotional offers by card issuers.

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To capitalise on rising demand for prepaid cards among consumers, card issuers are now adding extra features to prepaid cards such as online functionality, global usability, easy reloading and contactless functionality. The Intesa Sanpaolo prepaid card can be recharged online, using mobile phone or at retail stores.

According to Timetric research, Poste Italiane, UniCredit and UBI Banca are the leading companies in the Italian prepaid cards market. To maintain their dominance, these banks are entering into partnerships with various companies to offer co-branded products. For instance, UBI Banca offers prepaid cards for readers, for club and disco enthusiasts and for the Alpine club.

Card personalisation is an important marketing strategy adopted by issuers to market prepaid cards. Issuers now enable customers to customise their cards by adding photos, themes, designs or company logos.

For instance, Intesa Sanpaolo offers card personalisation services on its Flash Visa payWave and Flash Card Expo prepaid cards.

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