Credit cards in Spain account for 26% of the total number of cards in circulation, but only for 8% of the total payment card spend. Nicolae Bacila, consumer payments analyst at Verdict Financial, looks at the market’s recent performance and what Spanish issuers can do to increase card use
Credit cards have never taken off in Spain – with around 18m credit cards in circulation in 2015, the penetration stands at 40 cards per 100 inhabitants.
Amid the economic crisis of 2008 net credit card loss rates rose sharply, and high unemployment rates have since affected the ability of Spanish consumers to repay debts.
The country’s credit card issuers responded by increasing interest rates and card fees to compensate for lending risk and reduced merchant revenues.
The loss rate has since decreased, while the credit card debt has gradually increased from an estimated €13.4bn ($14.1bn) in 2010 to €15.5bn in 2015.
With the share of Spanish cardholders likely to switch to a new credit card in the next year being 12%, to maximise their opportunity for acquisition, providers should target switchers through no-annual-fee or low-annual-fee cards and discounts at retailers, as they are the most important features of credit card choice among Spanish consumers.
While an annual fee is a standard feature of Spanish credit cards, a number of banks, including Barclaycard, WizInk and BBVA’s online bank Uno-e, and retailers such as Carrefour, Ikea and Eroski offer credit cards with no annual fees.
The research from Verdict Financial also reveals that the key acquisition channel for primary credit cards in Spain is the bank branch, with half of Spanish credit card holders applying for credit cards using this channel.
This compares to a rate of 19% of UK consumers who apply for credit cards through bank branches.