Interest rates continue to hamper credit card growth, but Pakistan’s moderate economic growth during global recession has kept led to overall card payments growth. Cards International analyses a report by data and advisory company Timetric on the emerging opportunities in Pakistan’s cards and payments industry

The Pakistani card payments channel demonstrated significant growth during the review period. In terms of the number of cards in circulation, growth was at a CAGR of 28.29% during the review period (2008-2012). The total number of cards increased from 9.7m in 2008 to 26.2m in 2012. The industry is projected to grow at a CAGR of 13.27% over the forecast period (2012?2017), increasing from 31.9m cards in 2013 to 52.5m cards in 2017.

Strong growth in prepaid cards due to government usage

In 2012, the prepaid cards category held the second-largest share of the cards industry, equivalent to 16.9%. In terms of the number of cards in circulation, the category increased significantly from 1.6m in 2008 to 4.4m in 2012, at a CAGR of 28.51% during the review period. In association with the national database registration authority (NADRA), which maintains the civil registration of all Pakistanis, Habib Bank issued 700,000 Watan Cards (pre-loaded) under the government’s poverty alleviation Scheme (BISP) to make flood relief payments in 2011.

Improving economic performance

Despite the challenges of flooding, global economic slowdown and weak capital inflow, Pakistan’s economy performed relatively well, with a GDP growth of 3.0% in 2011 to 3.7% in 2012, driven by agricultural and manufacturing sectors and accompanied by deceleration in the services sector. Inflation declined from 13.7% in 2011 to 11% in 2012 due to the protracted energy crisis, weak fiscal fundamentals and a decrease in private investment expenditures. Pakistan’s GDP is forecast to stabilise at 3.5% in 2013.

High interest rates prompt declining credit cards trend

In terms of the number of cards in circulation, Pakistan’s credit cards category held a share of 4.2% in 2012. The category is forecast to decrease from 3.2% in 2013 to 1.7% in 2017. During the review period, the number of credit cards declined at a CAGR of 9.49% from 1.6m in 2008 to 1.1m in 2012. This trend is mainly due to high interest rates which ranged from 35-40% during the review period and the fact that cards are not widely accepted as a payment platform by online retailers.

Internet use popularised e-banking

The number of internet users in Pakistan increased at a CAGR of 12.29%, from 11.7m in 2008 to 18.6m in 2012, alongside increasing technological advancements in broadband and mobile internet infrastructure. The internet penetration rate increased from 6.6% in 2008 to 9.8% in 2012. Broadband packages are relatively inexpensive compared with other emerging countries, ranging from PKR250?3,000 (US$2.7?32.4). The increase in internet use is a factor for m-commerce growth.

Government issuing smart cards with ATM functions to citizens

Smart cards are not very popular in Pakistan but are used by the government to transfer funds to help the poorer population and pensioners. The National Database and Registration Authority (NADRA) issued nearly 92.8m Smart National Identity Cards (SNIC) by the end of January 2013. These cards feature chip-based technology and an ATM functionality that facilitates the prompt distribution of pensions.

Habib Bank

Habib Bank provides commercial banking and asset management services. In December 2011, the bank had 1,464 branches in Pakistan, 22 Islamic banking branches and 42 international branches.

Habib Bank has partnered with retail companies in Pakistan and operates a reward program whereby credit cardholders earn one reward point for every PKR25 (US$0.3) spent on retail purchases with their card. The bank promotes its credit cards while offering installment options on consumer electronics. Habib Bank’s active promotions include Kenwood and Homeage, Shop Big Pay Small, Jafferjees Leather Goods and JASCO.

The bank offers two types of credit cards: the Gold card and Green card. The Gold Card is offered to individuals with a minimum monthly gross salary of PKR50,000 (US$540.5) and to self- employed business persons earning PKR180,000 (US$1,945.8). The Green Card is offered to individuals with a minimum monthly gross salary of PKR15,000 (US$162.2) and to self- employed business persons earning PKR25,000 (US$270.3).

MCB Bank Limited

MCB Bank is a banking corporation in Pakistan providing commercial banking and related services. In December 2012, the bank comprised 1,179 branches, including 27 Islamic banking branches in Pakistan and eight international branches.

MCB Bank rewards its cardholders with points when the card is used to pay for shopping, dining, fuel and travel. Benefits include high withdrawal limits, SMS alerts, door delivery, instant ATM PIN generation via call centers, e-statements and variable spending limits. In order to encourage card usage, MCB Bank offers PKR250 (US$2.7) cashback the first time the card is used.

Standard Chartered Bank Pakistan

Standard Chartered started its operations in Karachi, Pakistan in 1863. The bank offers personal banking, Islamic banking, priority banking, wholesale banking and SME banking services. Standard Chartered has 4,000 employees and a network of 132 branches across 29 cities.

Standard Chartered Bank partnered with PIA to offer a co-branded PIA credit card. The card provides a range of offers, such as a 15% discounts on airline tickets at PIA booking counters throughout the country. The bank offers card products with cashback offers in association with retail companies. Cardholders of the bank’s Saadiq VISA, MasterCard Titanium and MasterCard Cashback credit cards can avail 5% cashback on up to PKR10,000 (US$108.1) of fuel transactions. Cardholders can also receive 3% cashback on online card purchases.

Debit cards

The transaction value of the debit card category grew from PKR610.7bn (US$8.8bn) in 2008 to PKR1.9trn (US$20.9bn) in 2012, at a CAGR of 33.42% during the review period. The category is expected to grow from PKR2.4trn (US$25.9bn) in 2013 to PKR4.0trn (US$43.6bn) in 2017, at a CAGR of 13.96% over the forecast period. This represents a growth rate decline of 19.5% over the forecast period, compared to growth posted during the review period.

In the number of transactions, the debit card category grew from 86.5m in 2008 to 194.5m in 2012, at a CAGR of 22.44% during the review period. It is expected to grow from 224.2m in 2013 to 311.2m in 2017, at a CAGR of 8.54% over the forecast period; a decline of 13.9% over growth posted during the review period. The frequency of use of debit cards declined from 13.5 transactions per card in 2008 to 9.4 in 2012, at a CAGR of -8.66% during the review period. The frequency of use is expected to decline from 8.7 in 2013 to 7.1 in 2017, at a CAGR of -4.91% over the forecast period.

Prepaid cards

The number of prepaid cards registered significant growth with a CAGR of 28.51% during the review period, increasing from 1.6m cards in 2008 to 4.4 million cards in 2012. The category is forecast to grow at a CAGR of 11.60% over the forecast period, from 5.2m cards in 2013 to 8.0m cards in 2017. The open-loop prepaid cards segment is expected to record the highest growth. Prepaid cards category growth is primarily driven by the increasing acceptance by both private and public sectors of fund transfers to employees and the general public.

The number of open-loop prepaid cards rose from 161,776 in 2008 to 603,536 in 2012, at a CAGR of 38.98% during the review period. The segment is forecast to grow at a CAGR of 15.92% over the forecast period, increasing from 744,658 cards in 2013 to 1.3m in 2017.

The value of prepaid card transactions in Pakistan increased from PKR15.2 billion (US$218.1m) in 2008 to PKR28.5bn (US$308.1m) in 2012, at a CAGR of 17.06% during the review period. The value of prepaid card transactions is expected to grow at a CAGR of 8.35% over the forecast period to reach PKR43.9bn (US$475.0m) by the end of 2017.

Charge cards

Charge cards category registered a CAGR of 8.81% in terms of number of cards during the review period. The category is expected to increase at a CAGR of 2.32% over the forecast period. The charge card category is forecast to grow both in terms of volume and value over the forecast period.

In transaction value, charge cards increased from PKR4.8bn (US$68.5m) in 2008 to PKR6.4bn (US$68.6m) in 2012, at a CAGR of 7.44%. The charge card category is expected to increase from PKR7.6 billion (US$82.2m) in 2013 to PKR11.7bn (US$126.7m) in 2017, at a CAGR of 11.41%. In transaction volume, charge cards rose from 323,248 transactions in 2008 to 450,743 in 2012, at a CAGR of 8.67% during the review period. The number of transactions is projected to increase from 530,984 in 2013 to 750,634 in 2017, at a CAGR of 9.04%.

Charge cards declined in frequency of use from 12.0 transactions per card per year in 2008 to 11.9 transactions per card in 2012, at a CAGR of -0.13%. The charge card category is expected to grow from 13.6 transactions per card per year in 2013 to 17.6 in 2017, at a CAGR of 6.57%.

Credit cards

Credit cards declined in circulation at a CAGR of -9.49% during the review period. In transaction value, the category declined at a CAGR of 1.82%. The number of credit cards in circulation declined from 1.6m in 2008 to 1.1m in 2012.

The number of transactions in the credit card category declined from 13.4m in 2008 to 11.6m in 2012, at a CAGR of 3.59%. The total number of transactions is expected to grow from 12.7 million in 2013 to 15.8m in 2017, at a CAGR of 5.63%. The frequency of use of credit cards grew from 8.2 transactions per card per year in 2008 to 10.6 in 2012, at a CAGR of 6.52%. The frequency of use of credit cards is expected to increase from 12.3 transactions per card per year in 2013 to 18.1 in 2017, at a CAGR of 10.07%.