Latin America Credit Card Market Continues to Rise

Credit cards have been the main source of consumer credit and according to a new report by research company BSLatam, around 22% of the region’s population has one of the estimated 390 million cards currently in circulation.

Simplification of the credit card application process in 2014 meant that the number of cards in the region rose over 9%. This year the level is expected to grow over 8.6% higher. Growth is particularly strong in Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela.

The backdrop is that the region has experienced great economic success (despite the recent slowdown) and that over 70 million people have been lifted out of the poverty. The middle class will soon be made up of over 180 million people, representing just under 35% of the population. It is in this environment that the financial sector saw their opportunity to expand their businesses and in particular, promote credit cards.

It should be remembered that unlike Europe, in which 95% of the population has a bank account, LATAM is still very much behind in terms of the financial services sector. Just over 50% of the population has a bank account, although this has grown from around 30% five years ago.

The middle classes use credit cards to increase their consumption and further their financial options. Having such cards, the experts point out, allow people to dramatically increase their purchasing power and access cas

By 2014, the number of LATAM adults who have at least one credit card, says the World Bank, will have risen to 22%, up from 18% in 2011. However, it’s not just banks which have fuelled the use of credit cards. Their use has also been driven by retail stores offering their own versions.

Financial experts have varying views as to how these high levels of credit will affect the region. Most agree that the situation is not about to explode, but it might be a restricting factor as the economic slowdown part of the cycle plays out.

Other experts say that the situation is not critical because credit cards are used in moderation and only for specific purchases. For example, they point out that in Brazil, only 28.8% of card users make frequent purchases and this is also true in Chile (22.9%) and Argentina (24.4%).

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Reference: El País and Payment Media

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