J.P. Morgan Country Insights. THE CHANGING DYNAMIC OF PAYMENTS IN EUROPE Spain

Transcription

1 J.P. Morgan Country Insights THE CHANGING DYNAMIC OF PAYMENTS IN EUROPE Spain

2 Introduction Beset by political unrest in Catalonia in 2017, Spain's economic growth is predicted to slow slightly but remain reasonably stable in 2018 and Inflation is projected to fall to 1.3% in 2018, before bouncing back slightly in After years of dealing with the lingering fallout of the 2008 Spanish banking crisis, national debt levels are slowly improving. Corporates and households have reduced their combined debt by nearly 55% of GDP since mid However, deleveraging is not complete, as firms in the construction sector and low-income households still struggle to make gains. The banking system is stronger, but faces challenges over the medium-term due to low credit demand and profitability. The unemployment rate is projected to continue declining, which may well improve household spending power. 3 This information is based on projected figures and is subject to change at any time [ 2 ]

3 Spain: At a glance Population 46.5m Average age GDP B2C ecommerce market value Source: World Bank, CIA (2016), Global Data, Internet Live Stats years 1.23trn Internet penetration 82% Smartphone penetration 82% Card penetration per capita 1.55 (debit & credit) 24.19bn A small but growing ecommerce market Despite being the fifth-largest country by population in our study,* Spain has one of the more underdeveloped ecommerce markets in Western Europe. Spanish online shopping accounted for just 4.6% of total European retail sales in 2016, 4 and in Spain, just 4.1% of retail sales are made online. 5 A number of factors lie behind Spain's historically below-average appetite for online shopping, including years of economic difficulties, high unemployment and a culture heavily geared towards shopping and socialising outside of the home. As a result, there is plenty of potential for this ecommerce market to expand. Indeed, the Spanish e-tail market, though small in comparison to heavyweights such as Germany and the UK, is growing rapidly. The country's B2C ecommerce value grew 20.9% to 24.19bn in 2016, up from 20.01bn the year before. 6 Spanish retailers are beginning to increase their focus on the online channel. For example, in December 2017, one clothing retailer put 14 of its stores up for sale after its revenues were boosted by gains made online. 7 Spain: Consumer spending 2015 July July 2016 Source: Trading Economics, National Statistics Institute 2017 July , , , , , EUR Millions Spain's online shopping market is forecast to reach a value of 36bn by 2020, representing a compound annual growth rate (CAGR) of 10.5% between 2017 and Driving this growth are emerging online shopping opportunities that did not exist until recently; bigname brands have been slow to launch online stores in Spain. Inditex only launched an online store for fashion favourite Zara in 2010, and H&M first opened its online doors to Spanish shoppers in This has led to an interesting opportunity for international businesses to acquire Spanish market share. Historically underserved by domestic brands, it appears Spanish shoppers are happy to order from overseas suppliers: the top three ecommerce sites in Spain by visitor numbers in 2015 were foreign brands Amazon, ebay and Alibaba. 9 Spanish e-merchants account for just 53.4% of ecommerce revenue, while the remaining 46.6% is made by foreign e-tailers. 10 [ 3 ]

4 ecommerce: % of total sales by segment 100% Digital Goods 35% Accommodation/ Hotels 10% Online travel agents (OTAs)/ Tour Operators 6% Fashion/ Apparel 2% Department Stores 56% Airlines 16% Public Transit (metro/rail/bus) 9% Consumer Electronics 3% Mass Merchandise 2% Grocery/ Supermarkets Increasing internet penetration Smartphones have become a key channel for Spanish online shopping. In Spain, there is a clear online shopper journey from research to receipt: some 31% of Spaniards use their smartphone to compare prices and features of products; 25% use their smartphone to read reviews of products, and 7% finalise the purchase on their smartphones. 11 Yet sales of smartphones in Spain actually decreased by 11% in 2016, due mainly to higher fees charged by the main providers, and a country still dealing with the fallout of a financial crisis. 12 This could potentially impact growth for mcommerce. E-wallet merchants eye emerging opportunity Spanish shoppers are cautious, with a lack of confidence in security cited as the most common reason for not shopping online. 13 This explains why card payments, which are easily traceable and often offer payment protections, hold the lion's share of the payment market. Card-not-present payments accounted for 42% of ecommerce sales in Payment method split by value (%) J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data provided by Edgar, Dunn and Company via emarketer & ecommerce Europe, 2016 ecommerce penetration (%) Card penetration per capita Metric indicator DEBIT CREDIT TOTAL Debit card per capita (ecommerce enabled) Credit card per capita (ecommerce enabled) Total cards per capita (ecommerce enabled) Total Source: J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via GlobalData and Lafferty, % Bank Transfer 42% Card 13% Other 25% E Wallet 11% Cash Source: J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via GlobalData, 2016 [ 4 ]

5 These cards were likely to be credit, rather than debit cards. Spain has the second-lowest number of debit cards in our study, at 0.56 per capita, 15 ranking the country above only Germany, which has the lowest amount at 0.12 per capita. 16 In contrast, credit card use, which may suggest a willingness to take on personal debt, is relatively high, at 0.99 cards per capita 17 the third highest country in our study, with only Norway (1.22 cards per capita) and Sweden (1.00) ranking higher in Penetration of alternative payment methods (%) At 25%, e-wallets were the second-highest used payment method, 18 while cash and bank transfers were least popular at 11% and 9% respectively. 19 Despite accounting for a lower share of the market, as a method of payment e-wallet transactions are growing at a much faster rate than card payments. The total value of e-wallet transactions grew 170% between 2014 and 2016 (from 2.24bn to 6.05bn), compared to 30% growth in the total value of card transactions. 20 This could make Spain an attractive option for the e-wallet industry, 21 Spaniards tend to favour payments they can make on the move 22 and e-wallets tend to be optimised for mobile. Indeed, there have been a string of new entrants such as Masterpass (a Mastercard -led system that takes 2-4% of the Spanish payment market), 23,24 Apple Pay and CaixaBankWallet, although PayPal still dominates, with around 20% of the market. 25 With regards to fraud, `false positives' where a shopper is wrongly identified as a fraudster and the transaction is declined is lower in Spain (2%) than the European average of 3%, perhaps down to low debit card use in Spain. 26 MasterPass 3% PayPal 20% Source: J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company A double-digit growth story led by cards Spain, despite its geographical and population size, is undoubtedly one of the smaller ecommerce markets in our study. However, between 2010 and 2016, the share of households connected to the internet in the country increased by more than 20%. 27 The rising acceptance of online shopping has followed naturally from improved internet penetration. With a predicted 10.5% CAGR for Spain's ecommerce industry to 2020, 28 and consumers happy to adopt alternative payment methods, Spain will likely soon be a more significant player in the European ecommerce market. [ 5 ]

6 * J.P. Morgan's The Changing Dynamics of Alternative Payments in Europe study includes the following countries: UK, the Netherlands, Germany, France, Italy, Spain, Norway, Denmark, Sweden, Switzerland, Finland. References [1] OECD, Spain - Economic forecast summary (November 2017). Accessed uary [2] OECD, Spain - Economic forecast summary (November 2017). Accessed uary [3] Trading Economics, Spain Unemployment Rate. Accessed uary [4] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via CNMC.es, 05 uary El comercio electrónico supera en España los millones de euros en el segundo trimestre de 2017, un 23,4% más que el año anterior. Accessed uary [5] Edgar, Dunn and Company via Statista, 2016 [6] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via CNMC.es, 05 uary El comercio electrónico supera en España los millones de euros en el segundo trimestre de 2017, un 23,4% más que el año anterior. Accessed uary [7] Bloomberg, 12 December Billionaire Zara owner said to seek 472 million for 16 stores. Accessed uary [8] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Edgar, Dunn and Company via GlobalData, [9] emarketer.com, 25 September Global Retailers lead Spain s ecommerce market. Accessed uary [10] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Edgar, Dunn and Company via CNMC (2016). [11] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Edgar, Dunn and Company via emarketer & GFK, [12] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Edgar, Dunn and Company via emarketer & GFK, [13] LandmarkGlobal.com, February E-commerce in Spain: trends, facts and figures. Accessed uary [14] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Edgar, Dunn and Company via GlobalData, [15] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Edgar, Dunn and Company via GlobalData & BDE, [16] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Edgar, Dunn and Company via GlobalData, 2016 [17] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services via Edgar, Dunn and Company via Lafferty, [18] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via GlobalData, 2016 [19] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via GlobalData, [20] Edgar, Dunn and Company via Global Data 2016 and CNMC.es, 05 uary El comercio electrónico supera en España los millones de euros en el segundo trimestre de 2017, un 23,4% más que el año anterior. Accessed uary [21] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via CNMC.es, 05 uary El comercio electrónico supera en España los millones de euros en el segundo trimestre de 2017, un 23,4% más que el año anterior. Accessed uary [22] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Edgar, Dunn and Company via emarketer & GFK, [23] The Paypers, February MasterPass launches on the Spanish market. Accessed March [24] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company. [25] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company. [26] Kount, Propriety research Q1, [27] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Edgar, Dunn and Company via Internet Live Stats 2016, and Eurostat [28] Bloomberg, 12 December Billionaire Zara owner said to seek 472 million for 16 stores. Accessed uary For more information please contact: Your Relationship Manager or visit Information contained in this document has been prepared by third parties or obtained from sources which are believed to be reliable; but neither Chase Paymentech Europe Limited nor any of its affiliates warrant the completeness or accuracy of the information contained herein. Chase Paymentech Europe Limited and any of its affiliates shall have no liability to the user or to third parties, for the quality, accuracy, timeliness, or for any special, indirect, incidental or consequential damages which may be experienced because of the use of or reliance on the data or statements made available herein. Third party trademarks, brand names, products and services are only referential and Chase Paymentech Europe Limited and its affiliates disclaims any sponsorship, affiliation or endorsement of or by any such third party. Chase Paymentech Europe Limited, trading as J.P. Morgan, is regulated by the Central Bank of Ireland. Registered Office: JP Morgan House, 1 George's Dock, I.F.S.C., Dublin 1, D01 W213, Ireland. Registered in Ireland with the CRO under the Registration No Directors: Catherine Moore (UK), Carin Bryans, Michael Passilla (US), Dara Quinn, Steven Beasty (US) Copyright 2018 [ 6 ]