Cards: the number one choice for buying online in rising markets

Almost 1 billion people have become card owners in rising markets in the past decade, as opposed to just 130 million new card owners in developed economies. This rise was due to a combination of healthy competition and innovation, with the arrival of new competitors, and incentives from governments and regulators aimed at attracting new customers.?

It proved to work. In Brazil, for example, card issuance has increased by a staggering 130% in four years; in India, card volume has jumped 30% per year since 2021. This has happened in many other countries in emerging regions.

Beyond financial inclusion and its wide-ranging effects on everyday life, this booming moment is also reflected in digital commerce: cards have been pivotal in creating access, and have become the number one choice for buying online in many rising markets.?

The preference for cards can be explained by their usability, installment plans, and rewards programs, but the factor with the most significant impact is their ubiquity. When we take a look at the online commerce scenario, in Brazil, for instance, 97% of vendors accept credit cards; in India, 82%; in South Africa, 78%, per a Salesforce report. Basically, cards are everywhere.?

"In most countries, cards are the most widely known and the most widely accepted payment method. There's just a long history and infrastructure built around cards and credit cards. For most parts, they work well," says Lindsay Lehr, Managing Director from PCMI.

As EBANX's Beyond Borders study shows , cards are essential for digital businesses in major markets such as Brazil, Mexico, and Chile. Combined, they represent 51% of online commerce volume in Brazil, 66% in Mexico, and 75% in Chile, according to PCMI data (Payments and Commerce Market Intelligence). Even in countries where cards have a negligible penetration, they account for a significant share of digital commerce. In India, cards make up 43% of the value of online transactions; in Morocco, 42%; in Nigeria, 36%.

And this relevance is unlikely to recede. According to an analysis by PCMI, cards will continue to be the leading payment method for online commerce in Africa and Latin America by 2026, competing head-to-head with mobile money and instant transfers, respectively, reinforcing the importance for companies looking to expand in these regions investing in a localized and diversified payment strategy to reach more consumers.?

Domestic brands and debit first

There's a different playbook to ensure consumer adoption and high approval rates in rising markets: consumers usually get access to debit cards first, as they come with their accounts. This is why, for some consumer segments and in some countries, debit cards might become a relevant avenue for growth – and for attracting new consumers.?

In Peru, for instance, where credit card penetration is at a low 13%, debit cards account for a 45% share of online sales. In Mexico, Latin America's second-largest economy, debit card volume actually surpassed credit cards during the country's leading shopping holiday, El Buen Fin.

Also, there's a growing inclination towards domestic cards, known for their broader acceptance when compared to international schemes. Homegrown card brands have a relevant share in India (RuPay), Egypt (Meeza), and Brazil (Elo). Most of them are government-driven, with public banks promoting their adoption.

As debit cards are usually used for low-ticket purchases, for higher-value orders credit cards have another key feature to convert sales – installments (the ability to split up the total amount of one purchase into monthly payments).

According to EBANX internal data, in Latin America, where we can say that paying in installments is an aspect of the regional financial culture, installments raise order value by an average of 61%, with the increase being directly related to the number of splits.?

Paying in installments is also becoming a more common practice in India and Africa, thanks to the growth of Buy Now Pay Later solutions that seek to disrupt the legacy consumer lending landscape by offering quicker access to credit, smooth onboarding, and user experience journeys, and (often, but not always) no-interest repayment plans.?

Cards revamp

The path taken by cards to grow in rising markets – from historically low penetration to accelerated popularization in the last decade – also has to do with the ability of this payment method to adapt and modernize.

With growing competition from alternative methods such as instant transfers and mobile-based payments, cards are reviewing their value proposition and aggregating more services and products to entice and retain customers in rising markets.?

Betting on a more seamless experience for the customer, cards are integrating with other payment methods, embedding card payments in apps and other digital services, improving customer service and communication, and tailoring products to different spending categories.

"Cards and alternatives are actually learning from one another, paying attention to the needs of merchants and consumers. Cards are adding many features to catch up with alternative payments, whereas alternatives are growing to become more than a one-time payment," says André Allain, VP of Global Expansion & Market Development at EBANX.

Perhaps one of the greatest examples of this is in India, where cards have taken advantage of the reach of UPI, the world's leading instant payment system. Customers follow the traditional UPI flow (in a fully mobile experience, with QR code reading and authentication through UPI PIN) and choose to pay with their RuPay credit card. The connection with a widely accepted payment method, with an astounding 73% share of digital transactions in the country, has pushed credit card adoption in India.?

In Brazil, another good example: Nubank, the largest digital bank in Latin America, has created NuPay , a payment method tailored for online purchases, integrated with app checkouts, online stores, and digital services. In other words, it's a case of a credit card company creating its own alternative payment.?

This shows us that collaboration is actually the watchword in the card space. As the payment ecosystem in rising markets evolves, card companies will work more closely with partners to develop seamless solutions and reach a larger addressable market of both vendors and consumers.?

That's all for now – if you want more impressive data on cards and alternative payments, don't hesitate to check out Beyond Borders 2024 .?