Debit Feeds On Difficult Times in Europe

The global economic downturn and the European debt crisis havecaused great concern to European economies over the past few years.Consequently debit cards appear to be experiencing strong growth asmany European consumers shy away from using credit cards.

Consumers are still wary of the outlook for the overall economy andtheir income so they are more debt averse today than a couple yearsago. This is the case even in markets such as UK where consumershave traditionally enjoyed credit cards.

A recent report from PwC suggests that UK credit card spending isat a five-year low and credit card debt declined slightly last yearto £8,000. The reasons are multi-fold. Banks are becoming morecautious in extending new credit cards, the costs of revolvingcredits on cards have risen, and consumers are working to bettercontrol their spending and personal finances.

At the same time, debit cards are becoming more popular as consumersurveys suggest that many UK consumers plan to use debit card morein the future even if the economy improves. It was reported thatdebit card transactions exceeded cash transactions in 2009 for thefirst time. And Visa Europe noted that its debit card transactionsgrew by 45% in the fiscal year ended September 30, 2010. At thesame time, purchase transactions on Visa-branded credit cards fellduring the same period.

A similar trend could be observed in the US. In the first 3quarters in 2010, Visa-branded debit card spending grew strongly at20.3% while credit card spending grew just 5.3%, according to theNilson Report.

The strong performance of debit cards across the world, especiallythe European market, makes it even more pressing for emergingEuropean card schemes such as PayFair, EAPS, and Monnet to makeprogress in getting a piece of the debit card market.