The Spanish credit card market echoes the international market. Three brands - Visa, MasterCard and American Express - dominate the market with 97 percent of the cards. Yet, when one takes a closer look at the network of businesses that operate them, the picture changes considerably. In his paper "The Payment Card Sector in Spain," IESE finance professor Ahmad Rahnema offers an x-ray of the plastic money market in Spain.
Unlike in other countries, Spanish cards do not generally belong to the international payment networks but rather to banks, which in Spain are the issuing institutions. Also unusual is that the three major brands coexist in the Spanish market with three payment networks: 4B, Euro 6000 and SERMEPA (ServiRed).
SERMEPA provides service mainly to the 147 member financial institutions of its owners: Visa España, SEMP and ServiRed. ServiRed operates entirely with Spanish capital, divided among its 107 partnering financial institutions, and works with Visa, MasterCard and Maestro cards. Sistema Euro 6000 comprises 47 savings bank processing centers, whereas the senior member of the group, Sistema 4B, founded in 1974 by the Spanish banks Central, Hispano Americano, Español de Crédito and Santander, provides service to 28 financial institutions, while operating with a single, centralized system.
Visa or MasterCard?
If we are talking about brands, we should mention SEMP (Sociedad Española de Medios de Pago), Visa España and American Express.
SEMP is a company founded by banks and savings banks (there are presently 142 participating members) to provide them with services, and to use MasterCard cards which are the property of (and administered by) their partners, as well as the interconnected networks of MasterCard International.
As with SEMP, Visa España operates entirely with Spanish capital, split between the 147 financial institutions that are both its owners and customers. It is a group member of Visa International, with a representative in the international government bodies. It uses the Visa name and brand as well as the interconnected network of Visa International. It is not the proprietor of the cards, which are issued and administered by the banks and savings banks.
American Express cards have a smaller presence in Spain, with just 2 percent of the market share. Nevertheless, there are six types: Platinum, Gold Personal, Business Green, Business Gold, Corporate and Blue.
In terms of the issuers, the Spanish market is highly concentrated in the top five financial institutions: BSCH, BBVA, La Caixa, Banco Popular and Caja Madrid represent 47.5 percent of the total cards. The largest issuer is BBVA with 11 million cards, with La Caixa a distant second with 6 million, followed by Caja Madrid with 4.3 million.
A Product for Every Need
The study provides a classification of the different card products available in Spain. In terms of service, the list includes: credit cards (for which the institution collects payment at the conclusion of the agreed billing period), ATM cards for withdrawing money using cash machines, debit cards (for withdrawing cash and making purchases, with payments made immediately) and electronic purse cards, which are designed for handling small amounts, where payment is made using a "reloadable" electronic chip. With respect to the cardholder, individuals may have classic, Gold or Platinum cards (offering a higher credit limit), while companies may have Business or Business Gold (corporate) for purchases or travel.
The surge of Internet banking has spawned new specialized products. The most important of these, at least in terms of volume, are the cards called affinity or co-branding, which allow the holder to obtain added benefits (such as rebates, exchangeable points and various gifts) when using them at participating establishments or services. Among the best known are Visa Repsol, Visa Iberia, MasterCard Unión Fenosa and El Corte Inglés. There are over 8 million cards issued bearing the El Corte Inglés name. Other available options that are smaller in scale, but that have bright prospects for the future, include revolving cards for paying in installments and EMV smart cards.
According to Rahnema, this diversification (i.e., private cards, paying via Internet or mobile telephone) shows that there is still very high potential for growth in the Spanish market.
Little Activity
Although Spain has a per capita average of 1.63 cards, well above the European average of 1.2, annual spending per card is 2,000 euros, while the Continental average is nearly 3,000 euros. In terms of card usage, just 10.9 percent of the transactions done in Spanish businesses are made using cards, less than half of the European average of 22 percent. Financial institutions are aware that the majority of their customers prefer to use cash withdrawn from ATM machines to make their purchases rather than use their card, something that banks and savings banks simply consider a cultural habit.
Ahmad Rahnema concludes that there are a number of factors that have made the Spanish payment-card market so highly developed: an expansive network of cash machines, little competition from other areas, interoperability between the various systems and a high level of security in the country's existing card system. Nevertheless, some elements could use improvement. For instance, despite the large amount of cards in existence, their use is still quite limited, both in the number and value of transactions, for cultural reasons. Other phenomena to correct in the future include the excessive discount rate applied to merchants, and the interest rate applied to the credit associated with this format, which is higher than that applied in other types of credit.