Country reports:
Germany, Ireland, Kenya

girocard drives cards growth
Germany has a strong economy and high levels of financial inclusion, despite German consumers having a strong inclination towards cash for retail payments. The German maxim is “geld stinktnicht” (literally “money doesn’t stink”). As a result, consumers still consider cash the best available option due to a combination of ingrained consumer habits and a cultural preference for spending within one’s means.

While in terms of number of cards in circulation the German payment card market is the third-largest among its peers, behind only the US and the UK, it is still far from being recognised as a fully mature market. Germans are gradually shifting towards card-based payments, primarily driven by girocard. The frequency of debit card payments rose from 27.2 times in 2016 to 45.7 times in 2020 at a compound annual growth rate (CAGR) of 13.8% over the period 2016–20.

Rising adoption of contactless cards, the emergence of digital-only banks, and ecommerce growth are expected to further boost electronic payments over the four-year period 2020–2024. The outbreak of Covid-19 has affected the economy, impacting all sectors (including cards and payments) due to a decline in overall consumer spending. Yet the pandemic has also highlighted the importance of non-cash payment tools, which will boost usage of non-cash payments in the country.

Contactless girocard transactions hit 50%
Germans strongly favour debit cards over other cards. National debit card scheme girocard is the most frequently used payment card. Until a cap implemented by the EU in 2015, its lower interchange fees compared to international schemes gave it a significant edge in the market –and the new fee rules have had little impact on its dominance. In order to offer enhanced convenience to users, girocards are now equipped with contactless functionality. By the end of H1 2020, 50% of transactions made using girocards were contactless. girocard holders can also make contactless mobile payments.

German consumers are strongly averse to debt
Credit and charge cards are not very popular, mainly due to the cultural aversion towards debt. Germans prefer the use of charge cards compared to credit cards in order to benefit from interest-free credit periods without falling into long-term debt. The ready availability of overdraft facilities also tempers demand for credit cards. As a result, these cards accounted for only 24.1% of overall payment card transaction volume in 2020. The opportunity for credit card revenue in Germany is thus sharply limited. There would need to be a seismic shift in consumer attitudes towards debt to change this trend.

Covid-19 pandemic will aid e-commerce growth
Germany is the third-largest e-commerce market in Europe behind only the UK and France. The e-commerce market grew from €68.0bn ($76.4bn) in 2016 to $121.7bn in 2020, supported by technological advancements and rising internet and smartphone penetration. Covid-19 has hastened the shift towards e-commerce in Germany, as wary consumers stay home to avoid potential exposure to disease vectors and use online channels for shopping. The availability of alternative payment solutions including PayPal and Klarna will also support e-commerce market growth.

Contactless card payments to gain further traction
Contactless cards have proven effective at displacing cash in markets such as the UK, but more needs to be done to achieve the same success in Germany. Yet German consumers are increasingly using girocards for contactless payments. According to the German Banking Industry Committee, over a third of transactions made using girocards were contactless by the end of 2019. There is also growing concern among consumers about what they touch, including handling cash, amid the Covid-19 outbreak. This is further pushing consumers towards payment methods such as contactless cards.

Card acceptance at POS terminals grows
The number of POS terminals increased from 946,276 in 2016 to 1.1 million in 2020, with a forecast CAGR of 3.4%. The increasing preference for contactless cards amid Covid-19 is expected to support the growth of POS terminals. Mobile payment companies are offering mobile POS terminals integrated with contactless functionality. SumUp offers SumUp Air, which allows merchants to accept payments via contactless cards as well as mobile wallet solutions including Google Pay and Apple Pay.

Debit cards maintain Irish stranglehold
Despite cash being the preferred method of payments, Irish consumers are gradually shifting towards electronic payments. There has been significant progress in the adoption of card-based payments, which recorded compound annual growth rate (CAGR) growth of 15.7% between 2016 and 2020 in terms of its number of transactions. This can be attributed to the combined efforts of the government and financial institutions to boost financial awareness and financial inclusion through the provision of basic bank accounts, limiting the use of cash payments by charging fees on ATM cash withdrawals, and expanding the acceptance of payment cards among retailers.

Consequently, overall payment card transaction volume and value recorded healthy CAGRs of 12.1% and 5.0% respectively between 2016 and 2020. This is a trend that is anticipated to continue over the coming years. The frequency of card use also rose from 132.6 times per card in 2016 to 191.0 in 2020; this figure is set to climb to 247.7 by 2024.

The proliferation of digital-only banks, alternative payment methods, contactless technology, and growth in the ecommerce market are all anticipated to support Irish payment card growth going forward. Although the Covid-19 pandemic has impacted consumer spending, it has also highlighted the importance of non-cash payment methods, pushing the usage of electronic payments in the country.

Debit cards remain the preferred card type among Irish consumers, accounting for 84.6% of total card payment value in 2020. The high adoption of debit cards is supported by the country’s strong banked population, as well as the proliferation of bank accounts issuing debit cards as standard. The continued shift away from cash payments in favour of debit cards resulted in a significant increase in the frequency of debit card payments, which rose from 127.0 times per card per year in 2016 to 215.2 in 2020 –far more than credit cards. Banks also offer reward points on debit cards, which helps boost usage.

Robust contactless growth
Contactless payments are rapidly growing in Ireland, with all major banks offering contactless cards. The number of contactless payment cards rose from 5.2 million in 2017 to 6.8 million in 2020 at a strong CAGR of 9.4%. As per Banking & Payments Federation Ireland (BPFI) data, a total of 182 million contactless payments were made in Q3 2020 – a 36% increase compared to Q3 2019. In terms of value, contactless spending was €2.9bn ($3.26bn) in Q3 2020, up 77% compared to the same period of the previous year.

Covid-19 is aiding e-commerce growth
Ireland’s e-commerce market expanded at a strong 2016-2020 CAGR of 8.9%, increasing from $7.11bn in 2016 to $9.98bn in 2020. This can be attributed to the country’s increasing internet and smartphone penetration as well as the growing consumer preference for online shopping. The share of m-commerce within total e-commerce stood at 39.7% in 2020. Moreover, the Covid-19 pandemic has further boosted online purchases of essential goods as this helps consumers avoid close social contact.

Irish prepaid card market on the rise
The prepaid card market in Ireland is growing, with transaction value and number of prepaid cards registering strong CAGRs of 7.1% and 7.4% respectively between 2016 and 2020. This is a trend that is anticipated to continue over the next few years. While banks in Ireland focus on promoting debit and credit cards, non-banking companies such as SWIRL and AnPost focus on the prepaid card market.

Gift cards are popular in the country. Ireland-based prepaid card company SWIRL offers the Mastercard-branded SWIRL gift card, which is available in denominations ranging from $11.23 to $561.35. The card can be used for both in-store and online payments. Businesses can also use the gift card to distribute corporate rewards to their employees. The maximum top up balance for business gift cards is $561.35.

Improving payment infrastructure, shifts in consumer preference drives e-payments
The number of POS terminals increased at a 2016-2020 CAGR of 17.0%, rising from 183,769 in 2016 to 344,380 in 2020. In line with the strong growth in the number of POS terminals, card payment volume and value also registered CAGRs of 15.7% and 10.1% respectively. This trend is anticipated to continue over the coming years. To boost the acceptance of card payments for small merchants, in March 2020 card acquirer and payment services provider Truevo launched its Smart POS Android terminal in Ireland. The terminal supports both contactless and chip and PIN card payments as well as mobile wallet payments.

Credit cards are yet to gain traction
Kenya is a cash-dominated economy, with cash accounting for 99.6% of overall payment transaction volume in 2020. The low uptake of payment cards is due to consumers’ dependence on cash and the limited acceptance of payment cards at merchant locations.

The growing popularity and wide acceptance of mobile payment solutions such as M-Pesa and Pesapal also poses an obstacle to payment card growth, as these solutions offer convenience and cost effectiveness. Unlike banks, mobile payment solution providers offer their services to small merchants and charge lower processing fees, making them attractive among consumers.

However, the use of payment cards in in the country is growing at a healthy pace, supported by an increasing banked population. This has been supported by the government’s financial inclusion efforts, the availability of basic bank accounts, and the adoption of the agency banking model to provide financial access to individuals in remote areas.

Improving payment acceptance infrastructure, the emergence of contactless payments, and a growing ecommerce market will boost the uptake of electronic payments over the period 2020–24. Covid-19 will also play a role; although the pandemic will impact consumer spending, there has been a rise in the use of electronic methods of payment at the expense of cash.

Debit cards are the preferred card type
Debit cards remain the preferred payment card type, accounting for 81.0% and 86.8% of total card payment transaction value and volume respectively in 2020. Debit card payments registered healthy growth in terms of volume and value with respective (2016–20) compound annual growth rates (CAGRs) of 19.8% and 14.6%. The high adoption of debit cards has been supported by the government’s financial inclusion initiatives. The availability of agent banking and rising use of payroll cards will further drive debit card adoption going forward.

The credit card market is still in the developmental stage. The number of credit cards recorded 2016-2020 CAGR of 8.1%, rising from 234,578 in 2016 to 320,203 in 2020. Growth was supported by commercial banks offering credit cards as part of bundled packages and providing value-added features such as rewards and discounts. Meanwhile, the availability of flexible payment options coupled with rising adoption of credit cards for ecommerce purchases will boost credit card transaction value and volume.

E-commerce will continue to grow amid the pandemic
The Kenyan e-commerce market registered a strong (2016-2020) CAGR of 19.1%, growing from KES17.1bn ($168.6m) in 2016 to $338.8m in 2020. This was mainly supported by the growing number of online retailers, rising internet and smartphone penetration, as well as increasing consumer confidence in online transactions and the development of secure online gateways. The pandemic will further accelerate the ecommerce market as wary consumers are staying home and using online channels for food delivery and other purchases.

Instant payments gradually gaining prominence
PesaLinkis a real-time interbank money transfer solution. It was launched by the Kenya Bankers Association (KBA) in February 2017. The instant payment platform was built and is managed by Integrated Payment Services Limited, a fully-owned subsidiary of KBA. The solution enables customers to transfer funds from one bank account to another instantly. It allows fund transfers via various channels including online and mobile banking, ATMs, bank branches, USSD, and agency banking. Funds can be transferred using a recipient’s bank account number, mobile phone number, credit card, or debit card. It operates 365 days a year, seven days a week, 24 hours a day. Over 30 banks in Kenya support PesaLink.

Improved payment infrastructure
The number of POS terminals recorded a 2016-2020 CAGR of 11.9%, rising from 30,133 in 2016 to 47,230 in 2020. The rising number of POS terminals boosts the potential for card-based payments. Overall, the number of card payments rose from 17.2 million in 2016 to 35.0 million in 2020 at a CAGR of 19.5%. This figure is anticipated to reach 66.3 million by 2024.

To capitalise on the growing number of card-based payments, mobile POS terminal solutions have been launched in the country in addition to traditional POS terminals. For instance, SellioCloud is a mobile app-based POS terminal system through which merchants can directly use their NFC-enabled Android smartphones to accept mobile payments made via M-Pesa.