2 PAYMENT METHOD PROFILES: CARD
2.2 Card Introduction
Payments using cards, whether debit or credit, continue to dominate the payment landscape in many countries. While used often as standalone payment products, cards also commonly sit behind other payment methods. They can be used via pass-through digital wallets and Buy Now, Pay Later services or as a funding source for staged/stored-value digital wallets and stablecoins. Brief History Modern card payment first originated in 1950 in the United States, a year after Frank McNamara left his wallet in another suit, leaving him unable to pay a bill. 164 Within three years of launching, the Diners Club card reached international acceptance, and within the decade, saw the rise of formidable competitors and the four-party card model. It wasn’t long after the launch of the four-party card network that three fees central to the global card system today were introduced: interchange, acquiring fees, and network fees. While markets like the United States, United Kingdom, and Australia have seen transitions from physical to digital since the initial launch of card payments, the underlying infrastructure and economics have largely remained the same. The economics underpinning interchange and network competition have been challenged by legislators and regulators around the world, with markets introducing limits to interchange and competition-promoting interventions like co-badging. While card payments gained market share in countries such as the United States, United Kingdom, and Australia, alternative payment methods have experienced explosive growth in other, typically less developed economies. Since the late 1990s, card payments have become the dominant payment method in many major retail markets around the world. For example, in the United States, the share of non-cash payments made with cards grew from 33% in 2000 to nearly 80% in 2022. 165 Similar growth over this period was observed in markets such as Australia, 166 and the United Kingdom. 167 Concurrent to the drumbeat of card growth in major developed markets was the launch and meteoric growth of alternative payment methods in less developed payment markets. These payment methods, such as UPI in India, Pix in Brazil, and M-Pesa in Kenya, have not only offered a diverse range of consumers accessible financial services, contributing to increases in financial inclusion across these markets, but also means to transact with in-store and online retailers both domestically and internationally. In India, cash represented 71% of POS spending in 2019, but fell to just 18% by 2023 due in large part to the success of UPI. 168 Similar success has been observed in Brazil, where within two years of launching, Pix had become the country’s most popular payment method by number of transactions. 169
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