Country reports:
Estonia, Netherlands, UAE

Credit card market to post modest growth
Estonians are prolific users of payment cards. At 193.6, the frequency of overall card payments in Estonia is much higher than major developed markets such as the UK (130.5), Canada (110.9), the US (102.9) and Germany (45.4). High consumer awareness of the benefits of cards and improved payment infrastructure have supported the growth of card-based transactions.

Debit cards are the most popular card, and are primarily used for card payments, with a frequency of use of 214.5 in 2020; this is much higher than for ATM cash withdrawals (17.5). Given the strong hold of debit cards, credit and charge cards have been slow to take off.

However, the credit and charge card market is expected to record a compound annual growth rate (CAGR) of 6.5% in terms of payment volume over the period 2020-24). Rising disposable household income, higher employment rates and value-added benefits offered by banks will continue to support this growth.

The emergence of digital-only banks, alternative payment methods, contactless technology and e-commerce market growth are anticipated to drive electronic payments. The Covid-19 outbreak is expected to further propel the adoption and use of cashless payment methods. Although the pandemic is impacting consumer spending, there has been a rise in digital transactions at the expense of cash.

Debit cards remain the preferred payment card
Debit cards are the most popular card type in Estonia. Consumer preference for debt-free payments and prudent spending have resulted in the dominance of debit cards in terms of both transaction volume and value.

However, a strong banked population – standing at 98% in 2020 – has resulted in the stagnation of debit cards in terms of circulation. Debit cards are frequently used for low-value, day-to-day transactions. In addition, banks are offering various products such as basic low-cost accounts, account switching facilities, bundled products, online account opening and enhanced security, in a bid to further increase debit card adoption.

Credit and charge cards are yet to gain traction
Credit and charge cards account for a small proportion of the overall payment card market. The availability of overdrafts has reduced the need for a separate credit card. Stricter eligibility criteria on credit card issuance have also been a challenge for the market. To prevent customers falling into debt, banks have set minimum income requirements for lines of credit. However, banks also offer benefits such as instalment facilities, discounts, reward points and cashback. These value-added services resulted in steady growth in the credit card space during 2016-20.

The e-commerce market will grow amid the pandemic
The e-commerce market has registered healthy growth, rising from €256.0m ($287.4m) in 2016 to $737.7m in 2020, at a CAGR of 26.6%. Growth has been supported by rising internet and smartphone penetration, emerging online retailers, rising consumer preference for online shopping, and the development of a secure online gateway. Covid-19 has further accelerated the e-commerce market as wary consumers stay home and use online channels for food deliveries and other essential goods. This will benefit online solutions such as PayPal and Apple Pay.

Card acceptance at POS terminals grows strongly
Meanwhile, the number of POS terminals recorded a 2016-20 CAGR of 4.2%, rising from 30,195 in 2016 to 35,616 in 2020. Banks including Swedbank and SEB offer a range of card payment acceptance solutions, including conventional and mobile POS terminals as well as cash register systems.

Banks also offer benefits such as discounts to encourage POS installation. For instance, Swedbank is offering a 50% discount on its six-month rental POS terminal.

The growing payment card market has attracted new entrants to the Estonian mobile POS space. Mobile payment company SumUp’s3G Reader enables merchants to accept payments without a smartphone or Wi-Fi connection. The terminal allows merchants to accept chip-and-PIN and contactless payments from American Express, Visa and Mastercard cards, as well Apple Pay and Google Pay. The company also offers the mPOS terminal, SumUp Air.

Pandemic accelerates contactless growth
The Dutch payment card market is mature, with a high penetration rate of 2.1 cards per inhabitant. Growth has been driven by debit cards, which accounted for 90.5% of the overall card payment value in 2020. Dutch consumers perceive debit cards to be secure, cost-effective and consumer-friendly. Credit and charge cards are less popular due to a cultural aversion to debt. Growth in the payment card market is supported by well-developed infrastructure, the rise of contactless payments, affordable and widely available financial products, the strong presence of digital-only banks, and growing consumer preference for digital payments.

Despite the strength of electronic payments, the country’s mobile proximity payments market is yet to reach its full potential. However, developments in mobile proximity payments and contactless technology by ING and Rabobank, and the entry of international operators such as Apple Pay, and Google Pay will see this payment options gain traction among Dutch consumers. The Covid-19 crisis has affected the Netherlands’ payments market; however, the eventual easing of lockdown and travel restrictions and opening of businesses will boost consumer and commercial spending, which in turn will drive payments.

Debit cards maintain their stranglehold
Debit cards remain the preferred card type, accounting for 90.5% of the total card payment value in 2020. This is mainly due to the debt-averse nature of Dutch consumers. Debit cards registered robust growth in terms of payment volume at a CAGR of 9.5% between 2016 and 2020. The migration of low-value cash transactions to debit cards was a key trend. The frequency of debit card payments stood at 176.4 times in 2020, comparatively high compared to 31.6 times for credit and charge cards. The high use of debit cards is largely due to a growing preference for contactless payments.

Contactless market highly developed but still growing
Contactless cards were introduced in the Netherlands in 2014, since when both consumers and banks have embraced the technology. The number of contactless cards in circulation rose from 18.8 million in 2016 to an estimated 29.6 million in 2020 at a 2016-20 CAGR of 12.1%. The figure is anticipated to rise to 47.1 million by 2024. During the Covid-19 pandemic, the contactless payment limit was increased from €25 ($28.07) to $56.14.

E-commerce in the Netherlands grew from $22.6bn in 2016 to an estimated $32.0bn in 2020 at a CAGR of 9.0%. As Covid-19 spread, major online shopping platforms including Bol.com, ah.in, Coolblue, Zalando and Wehkamp recorded strong spikes in online sales. To capitalise on this, online retailer Amazon finally launched in the Netherlands in March 2020, building a customer base of millions in just a few months. Meanwhile, iDEAL, Apple Pay, and PayPal are increasingly being used for online purchases.

The Dutch card acceptance infrastructure is well developed
While the number of POS terminals has decreased marginally since 2016, transaction volume and value have grown strongly – recording 2016-20 CAGRs of 9.4% and 6.0% respectively. Dutch retailers are increasingly installing mobile POS terminals. iZettle offers iZettle Card Reader, which enables retail businesses to process chip-and-PIN and contactless transactions. The card reader costs $88.69. Similarly, SumUp offers a mobile POS terminal, Air, which supports contactless and chip-and-PIN card transactions.

Government drive to displace cash shows signs of success
The payments landscape in the UAE is dominated by cash, accounting for 77.1% of the overall payment transaction volume in 2020. However, UAE consumers are increasingly adopting electronic modes of payment, with every individual holding nearly two payment cards in 2020.

The shift towards card payments can be attributed to efforts by the government and financial institutions to promote electronic payments, including financial inclusion initiatives, launching digital-only banks, and developing and expanding the payment acceptance infrastructure. As a result, payment card use rose gradually during 2016-20. The frequency of card payments increased from 29.8 times per card per year in 2016 to 37.9 times in 2020, with the figure set to reach 46.2 times by 2024.

Customers are also increasingly embracing alternative payments including Google Pay and Apple Pay, as well as other innovative methods such as self-checkout stores and cryptocurrency payment cards. The ongoing pandemic will further propel the shift in preference towards cashless, even though there has been an adverse impact on levels of consumer spending and the payments industry.

Financial inclusion remains at the forefront of driving electronic payments
Financial inclusion remains a key priority in the UAE. The government’s electronic payroll service, Wage Protection System (WPS), has brought a large number of unbanked consumers into the mainstream financial system. Under WPS, the government requires the payment of salaries via digital channels through banks or other financial institutions. According to the Central Bank of the UAE, the value of payments made via WPS increased from AED230bn ($62.63bn) in 2018 to $65.35bn in 2019. This has driven the demand for banking products like bank accounts and debit cards.

Credit and charge cards remain the preferred method of making payments
Despite lower penetration compared to debit cards, credit and charge cards accounted for 88.2% of the total card payment transaction value in 2020. Banks are focusing on boosting card usage by offering various installment plans, discounts, reward programmes and cashback, as well as value-added benefits such as annual fee waivers.

As a result, the number of credit and charge card payments has registered strong growth both in terms of volume and value, recording respective CAGRs of 12.5% and 8.4% for the four-year period to 2020.

The UAE’s ecommerce market expanded at a 2016-2020 CAGR of 33.1%, rising from $6.29bn in 2016 to $19.73bn in 2020. This growth was supported by government initiatives and rising internet and smartphone penetration. To boost the e-commerce market, the Dubai eCommerce strategy was approved by the Dubai Executive Council in September 2019. A dedicated ecommerce zone has been set up in Dubai that offers a range of logistic facilities and solutions to e-commerce companies. Moreover, the outbreak of Covid-19 has further boosted online purchases, as this helps consumers avoid close social contact.

Prepaid cards cater to diverse customer needs
The UAE’s prepaid card market has registered significant growth, with the transaction value and number of cards in circulation recording strong CAGRs of 7.9% and 5.4%, respectively for the period 2016-20. With the UAE population consisting of numerous expatriate workers, prepaid cards are primarily issued for remittances and salary payments, justifying the aforementioned strong growth. Other categories of prepaid card, such as basic reloadable payment cards, travel cards and gift cards, are also widely used.

Improved payment infrastructure is driving electronic payments in the country
The number of POS terminals in the UAE rose from 190,000 in 2016 to 254,815 in 2020. In line with the growth in payment acceptance infrastructure, the volume of card payments registered strong growth, rising from 428.6 million in 2016 to 670.7 million in 2020, at a CAGR of 11.8%. This highlights the growing preference for electronic methods of payment.

To boost the card acceptance for small merchants, in September 2020 Abu Dhabi Commercial Bank, in partnership with Visa, launched the Pace Pay app, which turns NFC-enabled android phones into mobile POS terminals. By downloading the app, merchants can start accepting contactless card payments free of charge. The app also facilitates remote card payments by generating links that can be shared via social media platforms such as WhatsApp, Facebook Messenger, SMS and email.