Card usage in developing countries: incentivising is key

According to a recent Visa Europe study, cash is not going away. The study found that 35% of people in 2010 stated that they: "prefer to pay in cash for everything I buy." This is down from 54% in 2002, but up from 18% in 2008. Amazingly, that study was conducted with European respondents where card usage is high.

Unsurprisingly, cash is still king in developing countries and is the payment method of choice in places like Brazil and Nigeria where the level of trust for card usage remains low. So low in fact, that one customer told me that in Nigeria before purchasing an item debit card holders will often go out of their way to find an ATM so that they can return to the store to make the purchase in cash, rather than simply using their debit card to pay at the till!

So how can card processing companies in developing countries up the ante to encourage card usage? Key to driving this cultural change is incentivising customers to user their cards more, for example through loyalty programs that offer the opportunity to earn points or cash back the more often the card is used. In time this will help educate them on the convenience and security of using their cards at the point-of-sale, gradually increasing users' trust and creating mass-market acceptance. Also encouraging retailers to explain the benefits of paying by card instead of cash at the time of purchase is essential to gaining customers' trust. Retailers stand to benefit from higher sales totals at the point-of-sale (POS) and a move towards increased electronic cash handling. Running in parallel should also be communication with customers at the ATM to inform them about the benefits of also using their cards to make payments.

Once these steps are in place, there's a real opportunity to develop more advanced loyalty programs for card holders. These loyalty programs can help card issuers to differentiate themselves and the services they offer and help them develop and grow their merchant and acquirer network. They also offer a tremendous opportunity to easily incentivise card users at the POS so that they get instant gratification after using their card. Innovative programs like Barclaycard's Freedom loyalty scheme where users instantly see their reward money after the transaction alongside any promotions from the retailer really offer a new approach to encouraging frequent card usage.

Loyalty programs can also encourage customers to increase the number of transactions they undertake and potentially spend more, which in turn helps drive revenue and expand overall profitability for both card issuers and retailers. So my advice for those looking to increase their customers' card usage, is incentivise, incentivise, incentivise!