Portugal was hit hard by the global financial crisis, which severely impacted the country’s payment cards market. Debit cards are the leading card type by a wide margin, with households generally cautious of debt. Contactless adoption is low but growing, and e-commerce is also encouraging consumer card payments

he Portuguese banking sector was deeply affected by the economic crisis. Amid growing debt and falling profitability, banks were forced to close operations, triggering mergers and acquisitions which directly impacted the country’s payment cards market.

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Profitability in the payment cards market also decreased following the EU regulation on the interchange fee cap. Consequently, large banks saw revenues on payment cards decrease; banks increased annual fees, current account minimum balances and maintenance fees to combat this.

Debit cards maintain stranglehold  

Debit cards accounted for 94.8% of the total payment card transaction value in 2016, with consumers on lower household incomes tending to be cautious of debt.

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Uncertain economic conditions discouraged consumers from making unnecessary purchases, preferring debit cards as a mode of payment. An increase in debit card use for low-value transactions was also supported by the increasing acceptance of contactless payments at retail outlets.

The convenience of making payments up to $22.2 (€20) without entering a PIN encouraged consumers to use contactless debit cards. Millennium BCP offers four types of contactless debit card: Maestro, Visa Electron, Maestro Go and Visa Prestige.

During the economic crisis, Portuguese consumers used credit cards to help meet short-term financing needs and avoid liquidity constraints.

However, rising unemployment levels forced consumers to default on payments, resulting in high debts. This led banks to close dormant credit card accounts and those of payment defaulters, resulting in a decrease in the number of credit cards in circulation, and their transaction value.

Gradual adoption of contactless

Contactless payments are expected to gain prominence in Portugal, and consumers have been encouraged by banks to gradually shift from cash to card-based payments.

While banks have started issuing contactless payment cards, merchants have started providing the necessary infrastructure to support them. Caixa Geral de Depósitos (CGD), Novo Banco and Banco BPI all offer contactless payment cards. The number of contactless cards rose from 3.0m in 2012 to 8.2m in 2016.

According to the Portuguese central bank, contactless card transactions grew by 900% in 2015, both in volume and in value, with 5.7m transactions, totalling $81.6m. However, there is still significant scope for further growth, as contactless transactions accounted for only 0.7% of the volume and 0.2% of the total value in 2015, according to the central bank.

Rise in e-commerce to support card growth

The e-commerce market in Portugal grew from $3.1bn in 2012 to $3.9bn in 2016.
E-commerce is a key driver of card market growth, as the majority of consumers use payment cards for online purchases. Payment cards accounted for 80.4% of the total e-commerce transaction value in 2016.

Banks also offer payment cards exclusively for online shopping. Millennium BCP offers a Visa-branded web card for an annual fee of $11.1. Banks also partner with online retailers to offer co-branded cards to online shoppers. For example, CGD offers a co-branded card, LA Visa card, in partnership with online retailer Lanidor.

Emerging payment methods such as digital and mobile wallets are also gradually gaining prominence.