The Baltic nations of Lithuania, Latvia
and Estonia are among the fastest-growing cards markets in Europe,
underpinned by economic growth and stability, foreign entrant
expertise and improved infrastructure. Justin

The cards markets of the three Baltic nations of Latvia,
Lithuania, and Estonia have grown dramatically in both volume and
value. From end-2001 to end-2006, the number of cards in the region
nearly trebled, growing from 2.25 million to 6.66 million. Over
this period, Lithuania’s cards market grew the most quickly in
terms of cards in issue, followed by Latvia, then Estonia (see
figure 1).

Three factors have underpinned this growth. First, foreign
entrants from neighbouring countries have brought their expertise
and resources to the Baltic cards market. Through their
subsidiaries, two Swedish banking groups, Swedbank and SEB, control
two-thirds of the Baltic cards market. Swedbank acquired regional
powerhouse Hansabank in 2005, and SEB has been issuing payment
cards in the Baltic countries since the mid-1990s. Nordic players
Nordea and Danske Bank (the latter through its acquisition of
Sampo) also have a significant presence in the Baltic

Foreign players are also important actors in the development of
the ATM network. In 2006, First Data, Sampo Bank and Nordea agreed
to set up an extensive ATM network in the Baltic countries, and
establish 400 ATMs in the region over the next few years.

Second, rapid economic growth and improved macroeconomic
stability have increased consumer purchasing power and sparked a
willingness to spend and borrow using cards. These three Baltic
economies are among the fastest-growing globally: in 2006 their
GDPs grew at between 7.5 percent and 11.9 percent. “There has been
very high growth in the Baltic economies over recent years. They
have shown the fastest growth among all European Union countries
and achieved over 10 percent compound annual growth rate in the
past few years. Strong growth is estimated to continue, at a rate
above the European average, although not as fast at it has been,”
Rami Ryhanen, chief executive at consumer finance company Mobile
Credit Baltic, told CI’s sister publication Retail
Banker International
in May.

As a result of solid economic growth, the retail sector in the
Baltic is booming, evidenced by a 25 percent expansion of the
Latvian retail sector in 2006. All three nations joined the
European Union in 2004, bringing economic and monetary stability in
the process.

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Third, the region has developed its cards and technology
infrastructure in recent years, leading to more card usage by
consumers. “The Baltic region is one of the most advanced areas of
Eastern Europe in terms of POS and ATM infrastructure development
and internet penetration,” said Ulf Geismar, a director at industry
consultancy Edgar Dunn & Co and the head of its Frankfurt
office. The number of POS terminals in all three counties has more
than doubled since 2001, and the ATM infrastructure has also grown
solidly, albeit at a slower pace.

Though cards usage has grown in all three counties, there is
still room for cards to take market share away from cash. Consumer
spending using bankcards is on the rise in all three Baltic
countries, although there remains significant variation in such
usage between the nations. According to figures from Rimi Latvija,
a Latvia-based supermarket with substantial operations in Estonia
and Lithuania, 20 percent to 30 percent of shoppers in Latvia pay
with bankcards, whereas the number is around 50 percent in Estonia
and only around 15 percent in Lithuania. Cards penetration is
generally higher in the major cities than in more rural areas.
According to executives at Elvi, a Latvian food and hygiene
retailer, payment cards are used by 14 percent to 18 percent of
customers, lower than the 20 percent to 30 percent reported by Rimi
Latvija. This discrepancy is primarily explained by the fact that
most Elvi shops are found outside the Latvian capital of Riga, in
regions where fewer people use cards.

Baltic credit card issuers have begun offering many of the same
design options that are available in more developed markets. For
example, SEB Vilniaus Bankas, the largest bank in Lithuania, allows
customers to personalise their payment cards using their own
pictures and images. “The SEB Group introduced personalised cards
in Estonia at the end of last year. This service has drawn a lot of
interest from customers there, and there is no doubt that it will
be popular in Lithuania as well,” said Audrone Narkauskiene,
director of the bank’s Payment Card department. “It is planned that
personalised cards will make up at least 10 percent of all new
cards issued by the bank this year.”

New entrants are also playing an important role in the
development of the Baltic cards market. Mobile Credit Baltic, a
consumer finance company in the three Baltic countries and Finland,
recently announced it would team up with Conister Trust (an Isle of
Man-based bank) to issue the Credit24 MasterCard credit card this


Baltics: Payments cards growth 2001-2006

Country by country


Lithuania by numbers 2006Between 2001 and 2006, the
number of payment cards in Lithuania increased 337 percent from
683,000 to 2.98 million. Over the same period, the value of debit
and credit card transactions increased tenfold to $2.81 billion,
while the number of transactions increased from 8 million to 68
million. The number of POS terminals increased over 124 percent
from 9,258 to 20,778 and the number of ATMs increased over 63
percent from 689 to 1,127.

One of the areas for fastest growth in the cards sector is
spending by businesses. Overall spending on Visa business cards in
Lithuania totalled $252.3 million in the 12 months ending July
2006, a surge of 87 percent over the year-before figure of $135
million. The spending per Visa business card in Lithuania averaged
$9,920 in the reporting period, Visa Europe said.

Although the cards sector is dominated by Hansabank and SEB
Vilniaus, which together control two-thirds of the market, small
players are also making inroads, and in some cases are pushing the
envelope of innovation in the market. Siauliu Bankas, a small
commercial bank in Lithuania, announced in January that it had set
up its first ATM and that it has plans to install several more ATMs
this year.

Lithuania: Credit card marketBankas Snoras, a local bank
and the third-largest issuer of payment cards in the country,
announced on 1 June that it had signed a mutual co-operation
agreement with MasterCard Europe to confirm that Snoras was the
major MasterCard partner in Lithuania. Currently, roughly 75
percent of Snoras cards are MasterCard-branded. “We consider Bankas
Snoras a reliable and innovative bank. We are happy that mutually
beneficial co-operation has grown into a strong partnership and
that this bank has become one of our most trusted partners in
Lithuania and Baltic States,” said Carlos Rodriguez, general
manager, MasterCard Benelux & Nordic countries.

Snoras is also a leader in issuing co-branded cards, and has
partnerships with basketball club Žalgiris and trade network VP
Market. It was the first bank in Lithuania to launch and certify
microchip cards.

Other issuers are also expanding into co-branded cards. In 2006,
SEB Vilniaus and Laisvalaikis, a leading retailer, launched the SEB
Laisvalaikis credit card. Nearly 35 percent of all issued
Laisvalaikis cards are now SEB Laisvalaikis cards.

Lithuania: Debit card market


Latvia by numbers 2006The size and structure of
Latvia’s payments industry have grown explosively in the past few
years. Between end-2001 and end-2006, the number of payment cards
in the country increased by 131 percent from 0.9 million to just
over 2 million, while the number of POS terminals increased by over
130 percent from 6,908 to over 16,000 and the number of ATMs by
more than 20 percent from 791 to 952. Card penetration rates in
Latvia are among the highest in any Eastern European country. By
end-2006, Latvia had 0.9 payment cards per person, and should end
2007 with more than one card per person.

According to statistics from the country’s banking supervisory
body, the Financial and Capital Markets Commission, Latvian banks
had issued 949,600 loans to Latvian residents by the end of March
2007, equivalent to 0.4 loans per capita. This represents an
increase of 3.6 percent over the end of 2006. Loans on payment
cards dominate consumer lending in terms of numbers, accounting for
602,000 loans; however, loans on payment cards account for only 3.7
percent of consumer lending by value.

Credit cards account for only 11.3 percent of all cards in the
market, although this is up from the 7.4 percent share they held at
the end of 2005. Visa is the most widespread network in the
country. By the end of 2006, Latvian banks had issued 155,200 Visa
credit cards, as well as 440,100 Visa Electron debit cards with
overdraft facility, and 637,200 Visa Electron debit cards,
representing 60 percent of the cards in the market.

Latvia: Payment card percentage market share by number of cards issuedAs in Estonia and
Lithuania, the Latvian cards market is dominated by SEB and
Hansabank. However, Parex, a local bank, holds 16 percent of the
cards market and is the second-largest issuer of credit cards after
Hansa-bank. Parex aims to boost its market share to 20 percent of
the credit card market by the end of 2007, according to a
spokesperson for the bank. Parex is currently the only Latvian bank
authorised to issue American Express cards; it is issuing over
5,000 American Express cards per month and has announced plans to
have 100,000 such cards in circulation by the end of 2007.

Cards technology is also playing a part in the government.
Latvia had a chance to show off its cards development in November
2006 when the defence ministry selected card technology provider
Oberthur Card Systems to deliver a card-based identity verification
system for the North Atlantic Treaty Organisation summit that took
place in Riga that month.


Estonia by numbers 2006Estonia’s cards and
payments sector has grown impressively in volume and value over the
past five years, albeit at a slightly slower pace than its two
Baltic cousins. Since 2001, the number of ATMs in the country has
increased by 35 percent from 680 to 918, the number of payment
cards in issue by 64 percent from just under 1 million to 1.6
million, and the number of POS terminals by over 178 percent from
5,260 to 14,665. Cards infrastructure in Estonia has also expanded
in scope, particularly regarding mobile phone payments. By the end
of March 2007, 13 percent of all POS terminals in the country were
equipped to accept mobile phone payments.

Cards are the most significant part of the consumer payments
sector. According to a survey by TNS Emor, the Baltic specialist
market research company, one-third of households pay for purchases
in cash and two-thirds use a payment card. Card payments account
for 56 percent of non-cash payments.

Estonia: Credit card marketThe cards segment in
Estonia is dominated by Hansapank (Hansabank), which controls
roughly 65 percent of the credit and debit cards market. Other
banks issuing payment cards include SEB Eesti Ühispank, Sampo
Estonia, Nordea Bank Finland Estonia Branch, Eesti Krediidipank and
the Tallinn Business Bank.

Estonia’s cards market is dominated by debit cards. At the end
of 2006, the nation had 1.26 million debit cards compared with only
345,000 credit cards. However, credit cards are relatively new
entrants in the Estonian market, and as recently as 2000, there
were fewer than 50,000 credit cards in the country. According to
the central bank, 42 percent of credit cards are instalment cards,
24 percent are revolving credit cards, 13 percent are charge cards
and 21 percent are other types of credit cards. Charge cards
dominate credit card transactions and have a 58 percent of value
share, compared with 17 percent for instalment payment and 12
percent for revolving credit. Although the number of credit cards
in issue has grown impressively in recent years, only 56 percent of
such cards are active, compared with 80 percent of debit cards.

Estonia: Debit card marketVisa is the dominant
issuer of debit cards: 87 percent of Estonia’s debit cards carry
the Visa Electron logo. However, MasterCard has a slight lead in
the number of credit cards issued, with 180,000 compared with
Visa’s 165,000.

Cards technology is also penetrating new areas of society,
creating new opportunities for multi-use cards. In Estonia, roughly
1 million chip cards are used as official national identity cards.
Already, one-quarter of new businesses in Estonia are established
by the owner identifying themselves using the national identity
card, and over 30,000 people used their cards to vote online in
parliamentary elections earlier this year.

The electronic payments and payment card infrastructure in
Estonia is run by Pankade Kaardikeskuse (PKK, which translates as
‘card centre of banks’), which was founded in 1993 by a coalition
of Estonian banks. The PKK was established to support local banks
in accepting and issuing foreign payment cards, and currently it
also functions as the acquiring institution for Diners Club and
American Express cards. It is a major force behind the expansion of
the cards infrastructure in Estonia.