Magazine article American Banker

Cash-Heavy Int'l Markets Seen as Test for Debit

Magazine article American Banker

Cash-Heavy Int'l Markets Seen as Test for Debit

Article excerpt

Though the debit card business is thriving in the United States and Europe, cash is still king in emerging markets, a report says.

The report, from Celent Communications LLC, says that debit transactions have grown by double digits in the last several years, but not in regions considered untapped opportunities for payment card products.

Payment companies will find it difficult to convert consumers in developing countries from cash to debit cards, said Gwenn Bezard, a senior analyst in New York for Celent and the author of the report, "The Future of Debit Cards: A Global Perspective."

Cash still makes up a far greater percentage of the money supply in developing countries than other forms of currency do. In Egypt, for example, it is 71% of the money supply; in Russia and the Philippines, it is 47%, compared with 11% in the United Kingdom and 12% in France, Celent reported, citing Visa International statistics.

Mr. Bezard said in an interview that banks' ability to push debit in less developed countries "will be critical to the long-term growth of the debit-card market." They will also need to squeeze more transactions out of consumers in developed countries, his report said.

Celent classifies 69% of the global adult population as unbanked, but it sees debit cards becoming a more suitable payment product for that segment than credit cards.

"The lack of risk management expertise and solid credit bureaus, as well as strict regulation on credit card lending, limit banks' ability to market credit cards as aggressively as in wealthier economies," says the report, which came out July 12. Debit cards, which are always tied to available funds, are an easier transition from using cash than credit cards.

As for the United States and other countries where debit has matured, Mr. Bezard said, banks still have plenty of room to draw consumers away from cash and checks. …

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