Credit Card Culture – What’s It Like Outside The U.S.?

Kimberly Rotter

Kimberly Rotter | Blog

Dec 15, 2014 | Updated Apr 27, 2016

Most consumers in the U.S. use credit cards, and many of those who don’t use their debit alternative. There are two extremes: the über-wealthy might use an American Express Centurion card to purchase a luxury car; while the least fortunate (in California, at least) must use a Bank of America EDD Visa debit card for their monthly food stamp, unemployment, disability or paid family leave benefits.1

In the United States, plastic is a way of life among all demographics. In many ways we can’t get by without one. So many everyday transactions require one card or the other.

Try renting from a national car rental agency without a credit card. Most online purchases require a 16-digit credit/debit account number. Want to buy a sandwich mid-flight while traveling by commercial air? Many U.S. airlines no longer accept cash.

Where Credit Cards Are Commonplace

Globally, credit card use has been on the rise every year. Interestingly, the average dollar amount per transaction has gone down annually and the total, individual number of transactions is trending upwards. This indicates that credit cards are quickly replacing hard cash and loose change in the pockets of consumers worldwide.

Only Finland surpasses the U.S. in annual non-cash transactions per consumer (405 versus 367 in 2011, the most recent numbers available).2 The numbers are attributed to Finland’s “highly developed electronic payment infrastructure.” Rounding out the top ten are the Netherlands, Denmark, Luxembourg, Australia, Canada, Sweden, the U.K. and France. (Non-cash transactions include checks, direct debits and credit transfers, but credit cards make up the vast majority.)

Differences in the levels of use and acceptance of credit cards are attributed to several factors.

First is the propensity to save rather than spend. Thus, in countries where the average consumer debt is low, card use is also correspondingly less. Another factor is wealth. Stronger economies tend to have more highly developed electronic payment infrastructures. When we look at regional, non-cash markets outside the U.S. and the Euro zone major players include Brazil, South Korea, Canada, Japan, China, Australia and Russia.

In poorer nations, credit card use is much less common and far fewer people take formal loans. A World Bank research initiative3 showed that only 2%-7% of adults in South Asia, the Middle East, North Africa, Sub-Saharan Africa and East Asia use a credit card. By contrast, 50% of adults in high-income economies (and 62% in the U.S.) carry at least one card with them. Tiny Israel tops the world at 81% credit card ownership.

How Consumers Around The World Relate To Their Credit Cards

Citibank issued a report in 20074 that showed differences in the way credit cards are perceived internationally:

  • 53% of Australians consumers are very confident they know their balance at any given time
  • In China, 78% of consumers consider a credit card to be a status symbol
  • Among India’s vast population, 69% of cardholders would use their card more if the rate were lower
  • For Indonesian consumers, 44% of cardholders own multiple cards from the same issuer
  • Hong Kong residents may have a record: a stunning 95% of its cardholders own more than one card
  • A full 84% of Malaysian cardholders own three or more cards
  • In thrifty South Korea, 81% of cardholders pay off their balances each week
  • Confident Australian consumers are more than twice as likely as Chinese consumers to pay a utility bill with a credit card, and
  • Australians join South Koreans in using their cards several times each week. In contrast, Indonesian and Indian weekly use averages only once or twice

Cash Around The World

In many parts of the world, a cash economy is still alive and thriving. The Middle East and Africa is one of the smallest card payment markets in the world. Cash is king. Even those who do own a credit card tend to use it for cash withdrawals, not for direct payments. Nevertheless, card payment growth is expected to be strong for the foreseeable future.5

Likewise, although Japan is one of the most technologically advanced nations in the world its consumer culture mostly runs on cash. Surprisingly (to Americans) few Japanese businesses accept credit cards even today, although the numbers are increasing each year. All mobile phone carriers in Japan support electronic wallet services, but as recently as 2012 mobile wallet payments averaged a tiny 1.5 per month per card.6

There are probably two reasons Japan has been slower than the U.S. to adopt electronic payments on a wide scale. First, the Japanese are savers, and saving is inversely correlated to credit card use. Second, credit cards are associated with steep fees on both the consumer and the merchant side.

American consumers seem to be mostly oblivious to the massive additional cost for goods and services incurred by credit cards. In truth, every single credit and debit card transaction has to be is paid for. In some cases, a swipe fee is added to the consumer’s purchase total and in others the merchant pays the bill.

The Future Of Credit Cards Around The World

Although developed markets are where the credit cards are (North America and Europe accounted for more than half of global credit card spending in 20127), emerging markets outpace them when it comes to card payment growth each year. Many nations will catch up to the U.S. and the U.K. where electronic payments are concerned. But some will bypass credit cards altogether, opting for mobile instead.

In many sub-Saharan African countries mobile payment technology is leapfrogging over traditional credit cards. In Kenya, 68% of adults report sending or receiving money by mobile phone in the past twelve months, but the percentage of adults who own credit cards is in single digits.

References

  1. https://prepaid.bankofamerica.com/EddCard/Pages/Home.aspx
  2. World Payment Reports, 2013, Royal Bank of Scotland
  3. “Measuring Financial Inclusion,” World Bank Policy Research Working Paper 6025
  4. Citibank Payment Evolution Report, 2007
  5. “Assessing the Payment Landscape in the Middle East and Africa,” Euromonitor International
  6. Fitzpatrick, M., “Death of Cash? Maybe, but not quite yet in Japan.” Fortune Magazine 2013
  7. “Consumer Payments 2013: Trends, Developments and Prospects,” Euromonitor International
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