LONDON — The number of payment cards in western Europe has increased by 12.5 percent to 721 million from 2002 to 2004, according to a reported published by Retail Banking Research. In an Aug. 26 news release, RBR states that nearly every adult in western Europe has two payment cards. While the United Kingdom remains the region's largest market, Turkey, where the number of cards increased 50 percent, has shown the most remarkable growth.
In its latest report, "Payment Cards Western Europe 2006," RBR found that card numbers in Turkey increased 50 percent in two years. Western Europeans now hold 721 million payment cards, and 79 percent of those cards carry international branding. The Visa Electron and Maestro debit marques represent over half the market. And, overall, the MasterCard and Maestro brands have a higher share of the cards in issue than Visa flag and Visa Electron, although in the charge and credit card segment, Visa is the larger player.
Six countries account for almost 80 percent of cards in the region. The U.K. remains the largest market, with 166 million cards, and Germany is the second-largest, with 123 million. The U.K. and Germany are followed by France, Spain, Turkey and Italy. In contrast, Norway, Austria, Finland, Denmark and Ireland have fewer than 10 million cards.
Regulatory rulings impact interchange fees
A number of regulatory authorities in Europe have investigated, or are investigating, the level of the interchange fee paid by the acquirer to the card issuer for each purchase transaction, the release noted.
Merchant acquiring is usually undertaken either by banks or their individually or jointly owned subsidiaries. The differing levels of card acceptance fees paid by merchants are partly attributable to the role of the acquirer. In some countries, merchants incur all costs relating to installation and maintenance of POS terminals. In other countries, the acquirer usually retains ownership of the terminal and meets all associated costs.
The European Commission's investigation into the interchange fees for cross-border transactions on Visa cards resulted in a reduction of the level of these fees.
The U.K.'s Office of Fair Trading announced that only certain costs were acceptable as a basis for setting interchange fees. The fees have been forced down as a result of investigations in Spain, where it was concluded that the methodology for setting interchange fees had to be cost-based with all elements specific to the payment service provided.
Those developments are expected to bring down merchant fees. Issuers are likely to recoup at least some of their reduced interchange fee income by increasing fees to cardholders and reducing "free benefits" such as cashback and insurance. Nevertheless, differences in local merchant fees will still be found, depending on factors such as fraud rate, the means of handling transactions, the method and occurrence of transaction authorization and the level of service provided by acquirers.
