Visa’s future: Credit – yes; cards – not necessarily

Leumi Card and Visa Europe data show Israelis are ranked second in Europe in credit-card use.

By RON STEIN
Israeli consumers love to buy – a lot – on credit. They are ranked second in Europe in credit-card use, according to credit-card company Leumi Card Ltd.
Average annual use of a Visa card in Europe is €2,432; in Israel, it is €4,925 (NIS 24,625). Credit-card use in Israel is the second highest in Europe, behind France (where the average annual use of a Visa card is €5,863), and well ahead of the average in Germany, Britain, Italy and Austria.
Figures provided by Leumi Card show that the average transaction of its Visa cards in Israel is €42.60 (NIS 213), compared with the average transaction of €49.10 in Europe. In other words, the average Leumi Card Israeli Visa cardholder feels freer than his European counterpart in making smaller transactions with his credit card in daily life.
Transactions by Leumi Card’s Israeli Visa cardholders are smaller than the norm in the UK, Germany, France, Italy, Spain and Turkey, as well as those in smaller economies such as Switzerland, Greece and Austria.
Visa Europe’s Israel country manager Oded Salomy presented the figures, based on data from Leumi Card and from Visa Europe, the licensee of Visa Inc. in Europe, Turkey and Israel. Bank Leumi owns 80 percent of Leumi Card, and Azrieli Group Ltd. owns 20%. Leumi Card is run by CEO Dan Cohen.
The average Israeli credit-card holder makes 112 transactions a year (more than nine per month), compared with an average of 50 transactions a year in all Visa Europe member states. According to Visa Europe, French cardholders make an average of 10 transactions a month. Only French cardholders use their Visa cards more than Israelis.
According to the financial reports (for the first half of 2010) of Israel’s three credit-card companies – Leumi Card, Isracard Ltd. and Israel Credit Cards-Cal Ltd. – credit-card use totaled NIS 87.4 billion, 11% greater compared with the first half of 2009.
The number of active credit cards rose by 2% to 5.5 million.
Visa Europe’s statistics show that Israeli cardholders use their credit cards more than their European peers, and for smaller transactions, so that total turnover in Israel is higher. This is reflected in the results of Leumi Card and presumably in the results of its two rivals.
However, Israelis carry an average of two credit cards each, fewer than the average in Europe. At the same time, Israelis appear unconcerned about using their credit cards for smaller transactions. It appears that as far as Visa Europe is concerned, that is where the future lies.
Visa Europe operates in 36 countries, while Visa Inc. operates in about 200 countries. Visa Europe says just 12% of total consumer spending is by credit cards, with the rest conducted in cash or by check, and for business to business (B2B) transactions, by bank transfers.
Visa Europe sees its main growth potential in the cash-transactions market, and it is offering solutions to replace the use of coins and bills, so that consumers will become accustomed to using credit cards for small transactions.
In Israel, 13% of private consumption is by credit card, 14% in cash and the rest by checks and bank transfers, according to the Central Bureau of Statistics.
Visa Europe sees the future in replacing cash with credit cards through the use of technologies that are not part of the ordinary Visa credit card but are included in a chip inserted into cellphones, which will function as a credit card or prepaid card. The chips are loaded with an amount of money for purchases at locations with “smart” technology until the amount is used up, effectively functioning as cash.
In general, future technology will shorten the contact-less payment process. Visa plans to have this technology for general use by the London Olympics in 2012.
As part of this effort, Visa plans to offer cards that enable the cardholder to decide at the actual point of sale whether the transaction will be credit or debit. Visa will also offer machines for the automatic and immediate issuing of prepaid cards, as well as contact- less payment cards.
Visa also sees real potential in the mobile market through the use of credit cards on a chip installed in cellphones that will enable payments.
As far as the Israeli market is concerned, the technology is not available, and heavy investment will be necessary to install it.
The correspondent was a guest of Leumi Card at the offices of Visa Europe in London.


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