While the card market in Spain is developing at a healthy rate, the market is still dominated by cash and credit transfers. This is despite the growing inclination towards contactless cards and mobile payment solutions. However, are any of these payment methods looking to attract a real share of the market?
While Spain has progressed well in terms of its implementation of electronic payments, more can be done. This is evident from the fact that, in terms of transaction volume, cash accounted for 79.8% of the country’s total transaction volume in 2015.
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Growing acceptance of payment cards by retailers and advent of contactless technology are anticipated to reduce the industry share of cash over the next five years, from 2016 to 2020.
Although usage remains relatively low, up until the global economic and European sovereign debt crises, Spain had a robust and rapidly growing payment cards market. The use of payment cards was also supported by a steady fall in interchange fees.
With the new EU interchange fee in place, payment cards transaction volumes and values are anticipated to grow. Continued efforts by Banco de España, the central bank of Spain, and commercial banks to promote electronic payments are anticipated to support growth in the near future.
Banking penetration is very high in Spain and stood at 97.6% in 2014 – according to the World Bank’s Global Findex survey. The concentrated efforts by the government coupled with the investments in payment infrastructure led to an increase in the banked population.
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By GlobalDataThe central bank and commercial banks played an important role in increasing awareness through financial literacy programmes such as workshops and promotional campaigns.
High banking penetration resulted in an increase in the total number of bank accounts, and banking products such as debit cards.
Debit cards staying strong in the market
Debit cards remained the most widely used payment card between 2011 and 2015, and accounted for 61.8% of total transaction volume in 2015. The market recorded a CAGR of 5.04% in terms of transaction volume.
The growth was supported by the continued migration of low-value cash payments to debit cards, new regulation prohibiting banks and ATM network providers from charging fees twice from customers towards cash withdrawals, and the rising adoption of contactless technology in debit cards.
To increase the adoption of debit cards, banks in Spain focused on salaried employees as well as pensioners by offering them a number of benefits. BBVA, for example, waives account maintenance and fund transfer fees for its salaried account holders.
CaixaBank offers benefits to its salary accountholders such as a preferential rate of interest on mortgage loans, discounts on interest rate for purchasing used vehicles and apartments and loans which are six times the amount of monthly income through its ‘MultiEstrella’ programme.
Similarly, pensioners are exempt from account maintenance fees and fund transfer fees. Account holders are offered a debit card free of charge, and are entitled to loans under the ‘Nómina-Pensión Loan’ scheme.
Growing adoption of contactless technology
Contactless technology is gaining traction in Spain with banks and payment companies introducing new solutions to capture a large share of the market. The latest initiatives include the launch of Samsung Pay in January 2016, and Orange Cash in May 2015.
In December 2013, CaixaBank, in association with Visa Europe, and telecom service providers Orange, Telefonica and Vodafone, launched a contactless mobile payment solution.
A numbers of retailers such as El Corte Ingles are replacing conventional POS terminals with contactless POS terminals that offer increased convenience to their customers. In January 2014, the company announced that it had deployed 5,200 contactless terminals across its entire retail network.
The Spanish government supports initiatives to implement contactless technology. One such initiative is the launch of ‘Barcelona Smart City’ project in August 2012.
Under the project, 8,000 locations in the city such as hotels, tourist offices and attractions, bike stations, public parking places and public transportation were equipped with near field communication (NFC) and quick response (QR) touch points.
This initiative was primarily done to create awareness among consumers with regards to the benefits of adopting technology, and gradually make it an integral part of Spanish consumers.
E-commerce playing its part to drive electronic payments
E-commerce posted a CAGR of 9.03% between 2011 and 2015, growing from $15bn (10.8bn) in 2011 to $21.3bn in 2015. The growth of e-commerce was attributed to increasing online and mobile penetration, and the presence of secure online gateways.
A 2014 study conducted by the National Observatory for Telecommunications and the Information Society (ONTSI) revealed that the majority of online shoppers in Spain are aged between 25 and 49, and are living in urban areas with more than 100,000 inhabitants.
The study also revealed that consumers prefer to do their online shopping at home or while at work, with 61.4% of consumers using websites that function as shopping channels.
Another popular channel is the manufacturer’s website with 46.2% of consumers engaging. Retailers with a physical presence ranked third with a share of 36.7% of consumers, followed by websites that focus on coupons and discounts with 29.8%.
Numerous banks in Spain target online shoppers by offering cards specifically for online shopping. CaixaBank offers the Cybertarjeta Prepaid MasterCard, a virtual card that is issued instantly via an online application.
Bankia offers prepaid cards that can be used for online purchases. Most banks offer online recharge facilities for prepaid cards.
Growing preference for mPOS solutions
The growing payment cards market had attracted several entrants into Spain’s mPOS market.
In February 2013, Banco Santander partnered with iZettle to enable self-employed professionals and micro merchants to accept card payments with smartphones and tablets. The chip and PIN reader can be connected wirelessly through Bluetooth to a smartphone or tablet.
Following Banco Santander’s entry into mPOS market, Banco Sabadell partnered with Ingenico to launch an mPOS terminal in July 2013.
The mPOS terminal is EMV-compliant and is suited to accept contactless payments. In August 2013, CaixaBank, in association with Comercia Global Payments, announced that it would launch mPOS terminals exclusively for small merchants.
SetPay, a domestic mPOS solution provider, launched its solution for SMEs in July 2015. The mPOS terminal is compatible with iOS and Android phones, and comes with a chip and PIN reader which can be connected via Bluetooth.
