The Growing Interest in National Debit Networks Worldwide

by Ron Mazursky 0

Since the 1970s, we have seen the developmentof over 25 national debit networks throughout the world.

Most of those were launched in the period from 1970 to 2000. From2000 to today, five new national debit networks have been launchedand four have ceased operation. Over the last decade or so, asignificant slowing in the creation of new national debit networkshas occurred in tandem with a movement toward MasterCard and Visaissuance and away from domestic debit brands. This coincided withboth MasterCard and Visa’s IPOs. During this period some of thepotentially largest national debit networks were launched, in Chinaand India. Mercator Advisory Group has reason to believe that thereis now a resurgence of interest in national debit networks aroundthe world, with new ones under consideration for launch in the nextseveral years.

Based on recent research, we know that national debit networkdiscussions are under way in developed as well as developingmarkets.

It appears that various countries in Western Europe are well ontheir way to establishing national debit networks, although EasternEuropean markets have a long way to go in this regard. One of thechallenges in developing markets is the need for investment capitalat the same time the national debit networks are generally tryingto minimize network costs. Joint ventures are one means of meetingthis need (look at Nigeria’s investment partnership inInterswitch).Growth of national debitnetworks in other markets like the Middle East and Africa is takingother forms. Some of the banks in the region are beginning toexpand from national debit networks to regional debit networks. Inthose situations, the regional debit product can be used only inthose markets within the region that have a merchant network andtransaction switches in place to accept the product.The growing demand for national debit networks isbased on several factors, including cost reduction for issuingbanks and control of product delivery, product development, andimplementation timeline. The growth of national debit networks islikely to spark some concern on the part of the major internationaldebit networks since these growing national debit institutions canand will take volume away from MasterCard and Visa.

There are other supporters of these national debit networksbesides issuers. These supporters include merchants who willbenefit from lower interchange/merchant fees and governments thatare looking for products to support financial inclusion for asegment of their citizens, potential privacy controls, andcross-border currency controls.

To read more about national debit networks, see Mercator AdvisoryGroup’s recent Debit Advisory Service research report National DebitNetworks: Global Goes Local, posted in December 2013.