European Card Review
Mar 24 2004 : Banks in Spain are to postpone their EMV compliance deadline to 2008 in light that over 1 million POS terminals need upgrading, and the three processing firms have yet to co-ordinate their EMV migration, according to the ECR. Due to missing the EU region’s EMV deadline of January 1, 2005, the Spanish banks will have to absorb any fraud on foreign-issued chip cards from that date, according to the ECR. Spain’s banks did invest in mobile payments to try to offset the cost of their EMV migration, and generate new revenue streams, but need to refocus on EMV now that Mobipay has been sidelined by the pan-European Simpay initiative.
Protection against cross-border card fraud, which may shift to Spain as neighboring countries move to EMV payments, was touted as Spain’s primary case for EMV migration, given its low card fraud. To this extent, Spain’s EMV delay to 2008 implies that, the country will, like the US, be more susceptible to card fraudsters seeking to tap weak links in its payment system. With the ECR reporting over half of Spain’s credit card volume to occur at the POS, the question remains whether online authorization will give sufficient protection against fraudulent card payments tendered at a retailer’s point-of-sale.
Spain, which is one of the major European markets for cards issuance, is expected to see a sustained increase in credit and debit card payments in the near future, according to Lafferty Publications, even if the country lacks a national debit card program. The country had been expected to meet the EMV deadline of 2005, and to convert its credit card base to chip in 2002 to 2004. Between 1999 and 2002, the number of payment cards in circulation in Spain rose by 35 per cent to 55.92 million, even if consumers rely on a mix of cash and plastic payments.
Interchange Falls Threaten Spain's EMV Rollout
Cards International
Jul 10 2003 : Spain’s falling credit card interchange rates may threaten the national rollout of chip and PIN, as shrinkage in card issuers’ bottom lines will slow investment in chip card conversion. “If banks make less through cards at a time when they have to make investments for this, things are going to be delayed”, Cards International quotes a Servired spokeswoman as saying. MasterCard’s Baldomero Falconeres also confirms that Spain’s banks “want to request a two-year extension for the ‘costly’ process [of EMV migration], which the EU must have ready by January 2005”.
Like other southern European countries, Spain has one of the lowest rates of credit card usage rates in the EU, with just 11 per cent of all households using credit cards. Card industry insiders warn that “government intervention into how credit card fees are set up in the country, will hurt the local payments industry and delay [the national] conversion to chip-based cards”, CI reports. Retailers pay interchange fees of about €600 million per year, but this summer, the government is expected to bow to pressure from business associations by reviewing banking interchange fees.
Spanish businesses argue that the credit card networks, Servired, Euro 6000 and Sistemas 4B, set interchange rates in a ‘random and non-transparent manner’. National discount rates average about 2.8 per cent in a range of 0.85 per cent to 3.5 percent, which the Business Confederation (CEC) says is double the 0.9 per cent for credit purchases defined by the EU. Servired, which processes most Visa transactions in Spain, counters that its discounted charges have fallen by 40 per cent since the late 1990s, while warning that further shrinkage could jeopardize investment in chip and PIN.
Spain Is 'A Key Growth Market For Cards Industry'
Cards International
Jun 12 2003 : Spain, “a key growth market for the cards industry”, according to Cards International, saw a near-60 per cent increase in the number of debit and credit card transactions between 1998 and 2001. In this period, all-purpose cards including prepaid, debit, charge, credit and business payment cards, grew by about 20 per cent, to more than 60 million cards. While “Spain has arguably the most extensive and sophisticated payments infrastructure in Europe”, CI notes, this has “failed to translate to a commensurate level of non-cash lending”, given a heavy reliance on debit cards.
Low levels of fraud, at less than 0.02 per cent of turnover, imply that Spain will see “a sustained rise in debit and credit card transactions … while other European markets stabilize”, CI reports. Cash payments, however, “are extremely resilient in Spain”, with credit and debit card payments comprising 1.04 per cent of the country’s non-cash payments in 2000. Spain still lacks a national debit card scheme, although its issuers belong to one or more of the three payment network providers, while the main banks are involved in the mobile payment initiative, Mobipay Espana.
“Cards are rarely used in Spain for low-value items, the most popular use being online”, CI notes, citing a report that shows online use to account for 88 per cent of card payments by volume, and 96 per cent by value. This is despite the fact that retailers accepting online card transactions in Spain, pay commission of 3 per cent for each payment, versus 0.5 per cent at real-world retailers. While “the banking sector is expected to migrate to smart cards by 2003”, according to CI, about 10.5 million e-money cards and over 27,000 related terminals are in use, but usage remains low.
EMV In Spain To Beat Cross-Border Fraud
European Card Review
Jan 24 2003 : Card payments at the POS in Spain are growing rapidly, with the number and value of payments by bankcards increasing by over 70 per cent between 1998 and 2001, according to the European Card Review. In 2001, over 900.7 million card payments, to the value of EUR 42.5 billion were made, with POS use accounting for about one-third of total volume on debit cards, and over half of volume on credit cards. The installed POS base runs to 900,000 terminals and with acquirers offering terminals for free, merchants often have a terminal for each network, the ECR observes.
Since Spain has the largest POS acceptance network in the EU, most transactions are captured electronically, and verified at the POS by signature. Domestic fraud is very low, with most transactions captured online. As a country "with such a large ATM and POS infrastructure", the ECR notes, Spain's migration to EMV "is a monumental task", while its low levels of fraud, at less than 0.02 per cent of turnover, make a weak business case for chip migration. "Spain [is] in a similar position to the US on EMV", the ECR states, given its heavy use of online authorization.
While the three domestic card networks have not agreed on a co-ordinated national migration to EMV, the key players are confident that Spain will meet the January 2005 deadline. Like Holland and Norway, protection against cross-border card fraud could be Spain's case for chip adoption. Migration to EMV also "gives Spain the opportunity to consider low-value card payments made off-line with a PIN", the ECR notes. Spain is a leader in mobile payments, and its national project, Mobipay, is now searching "for new features not provided by standard credit and debit cards".
Spain's Banks Working To Leverage Card Growth
Cards International
Jun 16 2003 : Spain’s financial institutions are working to grow the volume of transactions on credit and debit cards, which Cards International reports to comprise just 1.04 per cent of all cashless payments in Spain in 2000. Debit cards account for 50 per cent of the cards market, with the ECB’s Blue Book Addendum also reporting revolving and charge cards to comprise just 21 per cent. Spanish-issued credit cards often have a delayed debit function which gives the cardholder a grace period of 15 to 30 days to settle a payment, with the Blue Book noting these delayed debit cards to be much more popular than ‘pure’ credit cards.
At end-2001, credit cards had generated €20.9 billion in volume, up 60 per cent over the correlated period in 1998, according to CI, while debit card volume was similar, at €21.5 billion, a 55 per cent growth on figures for 1998. While most bankcards are issued by Spanish banks, “international issues are enticed by the excellent infrastructure of Spain’s payments system”, CI notes, which has a respective 1,123 ATMs and 20,104 POS terminals per million inhabitants. This contrasts with the EU averages of 655 ATMs, and 11,267 POS terminals per million inhabitants, which suggests card payments to have a solid future in Spain.
“Many people [in Spain] have both a commercial and a savings bank account”, which explains the high proportion of networked payment devices, as does the presence of large bank networks, according to CI. Similarly, the Spanish banks’ “efforts to encourage alternative means to branch banking and to [harness] technology are impressive”, CI notes. In terms of Spain’s EMV migration, which is expected to conclude in 2003, however, “the sheer number of ATMs and POS terminals mitigate against” the banks, “as they will have to shoulder the full cost of such a transfer”.
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