When it comes to emerging
markets, it is the issuance side of the card industry that has been
garnering the most attention, but as Ruth Burton, head of
acceptance in Visa CEMEA explains, merchant acquiring is now taking
centre stage as players realise the importance of increasing
acceptance. Victoria Conroy

With many Western European markets
now approaching or already past the point of saturation in terms of
cards issued, and a good level of payment infrastructure in place,
attention is turning to the promising Central and Eastern European
markets, the Middle East and Africa (CEMEA), where issuance efforts
have rapidly gathered pace in the last couple of years.

The challenge now is to advance the level of
card acceptance infrastructure in the CEMEA region, but there are
several disparate factors to take into account in a region that
contains many countries, a region that stretches from South Africa
to the far east of Russia.

Ruth Burton, head of acceptance for Visa
CEMEA, recently spoke to CI about the challenges and opportunities
that lie in such a diverse operating region. The importance of the
CEMEA region to Visa Inc is evident in the fact that, as of June
2009, the region contributed 11.3 percent of Visa’s total global
volume (excluding the Visa Europe region, which operates as a
separate entity to the rest of Visa Inc).

Issuing gives way to

Describing the level of merchant
acceptance across CEMEA, Burton told CI it is still very much a
developing region and, although in recent times emphasis has been
placed onto getting cards out into the marketplace, the focus is
now switching to building up a matching level of

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“What we are finding now is that we have got
quite a good base of issuance, but infrastructure for acceptance
tends to be not as well developed, particularly in terms of
domestic infrastructure, and this is a common theme across all of
the CEMEA countries,” she said.

“I would say this is one of our major
challenges in terms of how to build out that domestic

“Probably the most developed areas in terms of
acceptance would be the Balkans, including Croatia and Serbia,
particularly cross-border due to a good tourist industry. South
Africa is also quite well developed and tends to be compared with
Western European markets. The rest of the region is at various
stages of development in terms of acceptance.

“If we look at the Middle East, Dubai is a
pocket of good acceptance. If you go outside that, there is a
little bit of work to do.

“Let’s take a market like Saudi Arabia, which
you would expect to be quite well developed because of
international business travel there. POS points in Saudi Arabia
would be around 70,000-80,000 and that is with seven acquiring
banks, so that is quite a small base in terms of POS per acquiring
bank and about 35 percent of that belongs to one acquirer.”

However, considering a lot of these markets
didn’t have payment cards until a decade ago, Burton said that a
lot of progress has been made in a short space of time.

“If we look at a typical development curve,
what happens in our markets tends to be what has happened in the US
and Western Europe, so the region tends to follow behind by about
five years,” she told CI.

“Generally speaking, about 85 percent of the
region is still using cash – consumers will typically go to the ATM
and take out cash and spend it. But I never see the effort to grow
acceptance as solely focused on getting POS machines out and having
the acquiring strategies correct – I see it as a joint effort with
the issuing banks to get cardholders into that habit of using their
cards at POS.

“We are definitely not there yet in the
region, but that is certainly where our efforts are focused,
working with the acquirers and the issuers to bring the two parts
together to help form the habit of card usage at the POS.”

Driving acceptance delivers

Efforts to improve acceptance are
already paying off in certain parts of the region. According to the
central bank of Russia’s annual report for 2008, the significant
growth in card payments for goods and services (rising by 42
percent in quantity and 51.1 percent in volume in 2007) was a
direct result of the expansion of card processing

The number of devices (POS and ATM) used for
card payments for goods and services reached 458,300 as of 2008, an
increase of 45.6 percent on 2007.

In Saudi Arabia, there are now more than 9,500
ATMs and 76,000 POS terminals connected to the national payment
network (SPAN) which links all POS terminals and ATMs through a
central switch. In 2008, the total number of transactions that went
through SPAN was more than 459 million, for a total amount of
SAR235 billion ($62.4 billion).

According to Burton, there are more
similarities than differences in the challenges to increasing
merchant acceptance across the CEMEA region, including the
predominance of cash, and the lack of domestic infrastructure, but
there are some challenges that are specific to certain areas.

“In Russia, for example, there is a general
mistrust of banks following the crash of the late 1990s and
consumers prefer to use cash. Some markets have a bigger shadow
economy than others, but in the Middle East it is probably not as
much of an issue as it is in the CIS countries,” Burton added.

“Communication infrastructure is another
challenge. Again, that varies country by country, but if you look
at sub-Saharan Africa where theft of copper telephone wires is not
uncommon, that makes life very challenging.

“This problem can be solved by using a GPRS
infrastructure for POS. Some of the problems around telecoms
infrastructure can be fixed relatively easily, whereas others
require close co-operation with all stakeholders. This is where
Visa can help to drive improvements.”

Merchant acceptance levels also vary by

“We see the travel and entertainment sector
[T&E] as being the first sector which acquirers in a market
will go after, and then we move into large ticket retail, and then
the everyday spend categories like food retail and petrol,” Burton

“That category, the everyday spend category,
is really where we in Visa CEMEA are focusing our attentions,
because it is very underpenetrated.

“In terms of growth, large ticket tends to be
the next sector penetrated. Grocery is growing but if I look at
Russia for example, the top six food retailers do not accept cards
today. Fuel is patchy round the region for different reasons. In
South Africa, the fuel retailers were not allowed to accept cards
until the law was changed in July this year.

“With the FIFA World Cup coming next year, we
see that as a great opportunity to work with the banks and
retailers there to get grow acceptance at petrol outlets.
E-commerce in terms of online airline bookings is definitely a
growth area.

“And there is a lot of interest around
government and utilities payments, particularly in countries like
Dubai where we have done a lot of work with Dubai eGovernment in
terms of facilitating card acceptance to pay for public services
like education and utility bill payments.”

Co-operation with

With so many disparate strands to
pull together, Burton says close co-operation with different
regulatory bodies is an important element in raising card
acceptance levels, not just to increase Visa’s reach in the region,
but also to facilitate the migration from cash to electronic

“The Dubai government is an example of success
in working with government bodies to grow acceptance. We have an
agreement with Dubai Water and Electricity, which is part of Dubai
eGovernment, which enables payment of utility bills on cards and
online,” Burton said.

“This brings real convenience to the consumer.
We are always keen to ensure we keep the regulator informed about
what we are working on. If there are any differences in approach to
how we want to develop our business, we work through those
differences so that there are no surprises for the regulator.

“In Russia, we are working with regional
government bodies to plan how we can build acceptance with their
help in the regions. There are markets in the region that are
taking steps themselves to make card acceptance mandatory by
offering tax relief to merchants, for example.

“I see cashback with purchase as a way of
getting the consumer used to getting cash at the POS, but it is not
allowed in Russia today. This is an example of how we would work
with regulatory bodies to see how the rules can be changed.”

There are also industry pushes, such as the
migration to EMV, that are helping to boost acceptance levels in
certain markets.

“There have been well-published dates in place
for liability shift for some time now and CEMEA markets are still
working on the migration to chip,” Burton said.

“For example, Saudi Arabia has mandated that
everything be moved to chip by July of next year. In South Africa
banks want to be fully up and running and having merchants
understanding how to accept chip cards by the time the World Cup
kicks off, so again that is an area of focus in the South African
market for sure.”

The spate of banking mergers and acquisitions
that has taken place across Europe over the last few years has led
to a smaller group of more powerful banks which are operating on a
pan-regional basis across Europe and the CEMEA regions, and this is
also bringing about a shift in the way that acquirers are
approaching acceptance.

“They will tend to want to bring their best
practices into their operations in the CEMEA countries,” Burton

“We would definitely encourage this. Another
area of interest and influence from Europe is a push for
cross-border acquiring. Some banks acquiring in Europe who have
retail customers in CEMEA want to acquire card transactions from
those customers in CEMEA.

“Likewise there are large merchants who are
being acquired in Europe through a certain acquirer, and they want
to take advantage of that same acquiring relationship in CEMEA

Burton added that the shift of focus moving to
increasing acceptance is being reflected in industry trends.

“I would say in general acceptance has always
been the somewhat less glamorous member of the family, but we are
seeing that definite shift and acquiring business within the banks
is taking on more importance,” she told CI.

“There is a lot of consolidation in acquiring
and we are seeing some of the larger European and US acquirers
starting to move into markets like Russia. Hand in hand with that,
we are seeing a bit more sophistication in acquiring strategies.
What Visa is doing is helping them understand how they can tune
their acquiring business to help become profitable where it may not
be profitable today. We are working actively with acquirers on
their strategies and what they want to get out of acquiring.

“We are also putting focus on how we develop
merchant relationships in order to expand acceptance. Acquiring can
be a very marginal business, and retailing has always been very

“So we are working together with our acquiring
banks and other stakeholders so that everyone benefits from a
growth in card acceptance and the convenience and security that
paying by card brings.”

Ruth Burton



Merchant Aquiring