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Emerging Opportunities in

Peru’s Cards and Payments

Industry

Market Size, Trends and Drivers,

Strategies, Products and Competitive

Landscape

Product Code: VR0890

Published Date:

TABLE OF CONTENTS

Emerging Opportunities in Peru’s Cards and Payments Industry

© Timetric. This product is licensed and is not to be photocopied Published: December 2012

TABLE OF CONTENTS

1 Executive Summary ..................................................................................................................... 7 2 Market Attractiveness and Future Prospects of the Cards and Payments Industry ..................... 9 3 Analysis of Peruvian Cards and Payments Industry Drivers ..................................................... 12

3.1 Economic Fundamentals .............................................................................................................. 13

3.1.1 GDP growth ................................................................................................................................ 13

3.1.2 Urban employment ...................................................................................................................... 14

3.1.3 Rising per capita income .............................................................................................................. 15

3.2 Infrastructure Drivers ................................................................................................................... 16

3.2.1 Increasing number of internet users .............................................................................................. 16

3.2.2 Increasing smartphone penetration ............................................................................................... 17

3.2.3 Wireless 3G payment terminals .................................................................................................... 17

3.2.4 Growing number of ATMs ............................................................................................................. 17

3.2.5 Increasing number of POS terminals ............................................................................................. 18

3.3 Business Drivers .......................................................................................................................... 19

3.3.1 Growing retail sector .................................................................................................................... 19

3.3.2 Lower banking penetration ........................................................................................................... 19

3.3.3 E-commerce dynamism................................................................................................................ 20

3.3.4 Agent banking ............................................................................................................................. 21

3.4 Consumer Drivers ........................................................................................................................ 22

3.4.1 Private consumption .................................................................................................................... 22

3.4.2 Urban vs rural populations ............................................................................................................ 23

3.4.3 Declining poverty ......................................................................................................................... 24

3.5 Card Fraud Statistics ................................................................................................................... 25

3.5.1 By channel .................................................................................................................................. 25

3.6 Regulatory Framework ................................................................................................................. 26

3.6.1 Anti Money laundering (AML) and terrorist financing (TF) ............................................................... 27

4 Emerging Consumer Atti tudes and Trends................................................................................ 29

4.1 Market Segmentation and Targeting ............................................................................................. 29

4.1.1 Retail sector ................................................................................................................................ 29

4.1.2 Corporate sector .......................................................................................................................... 29

4.2 Consumer Preference .................................................................................................................. 30

4.2.1 Price ........................................................................................................................................... 30

4.2.2 Service........................................................................................................................................ 30

4.2.3 Convenience ............................................................................................................................... 31

4.3 Online Buying Behavior ................................................................................................................ 32

4.4 Preferred Payment Methods ......................................................................................................... 32

5 Competitive Landscape and Industry Dynamics........................................................................ 33

5.1 Analysis by Payment Channels ..................................................................................................... 33

5.1.1 Cash ........................................................................................................................................... 34

5.1.2 Credit transfers ............................................................................................................................ 35

5.1.3 Direct debits ................................................................................................................................ 36

5.1.4 Card payments ............................................................................................................................ 37

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5.1.5 Checks........................................................................................................................................ 38

5.2 Debit Cards Category Share......................................................................................................... 39

5.2.1 By bank....................................................................................................................................... 39

5.2.2 By scheme .................................................................................................................................. 40

5.3 Credit Cards Category Share........................................................................................................ 41

5.3.1 By bank....................................................................................................................................... 41

5.3.2 By scheme .................................................................................................................................. 42

6 Strategies Adopted by Key Operators ....................................................................................... 43

6.1 Marketing Entry Strategies ........................................................................................................... 43

6.1.1 Case studies ............................................................................................................................... 43

6.2 Marketing and Product Strategies ................................................................................................. 45

6.2.1 Credit cards ................................................................................................................................. 45

7 Market Size and Growth Potential of the Payment Card Industry .............................................. 46

7.1 Share Analysis by Type of Card.................................................................................................... 46

7.2 Total Market Size and Forecast of the Card Industry ...................................................................... 47

7.2.1 Analysis by transaction value........................................................................................................ 48

7.2.2 Analysis by transaction volume ..................................................................................................... 49

7.3 Debit Card Category Size and Forecast ........................................................................................ 50

7.3.1 Analysis by number of cards ......................................................................................................... 50



7.3.4 Other key performance indicators ................................................................................................. 53

7.4 Prepaid Card Category Size and Forecast ..................................................................................... 55

7.4.1 Analysis by number of cards by segment....................................................................................... 56


7.5 Credit Card Category Size and Forecast ....................................................................................... 59

7.5.1 Analysis by number of cards ......................................................................................................... 59



7.5.4 Other key performance indicators ................................................................................................. 62

8 Company Profiles, Product, and Marketing Strategies .............................................................. 64

8.1 Banco de Crédito del Perú (BCP).................................................................................................. 64

8.1.1 Strategies .................................................................................................................................... 64

8.1.2 Credit cards offered ..................................................................................................................... 65

8.2 Banco Financiero......................................................................................................................... 67

8.2.1 Strategies .................................................................................................................................... 67

8.2.2 Debit card offered ........................................................................................................................ 67


8.3 HSBC Bank Peru ......................................................................................................................... 68

8.3.1 Strategies .................................................................................................................................... 68


9 Appendix ................................................................................................................................... 71

9.1 Methodology................................................................................................................................ 71

TABLE OF CONTENTS



9.2 Contact Us .................................................................................................................................. 71

9.3 About Timetric ............................................................................................................................. 71

9.4 Disclaimer ................................................................................................................................... 72

TABLE OF CONTENTS



LIST OF FIGURES

Figure 1: Current and Future Prospects of Various Cards in Peru ................................................................................................................. 9 Figure 2: Grow th Potential of Peru’s Cards and Payments Industry by Area of Use .................................................................................... 10 Figure 3: Peruvian Cards and Payments Industry Drivers ........................................................................................................................... 12 Figure 4: Peruvian GDP Grow th Rate (%), 2008–2017................................................................................................................................ 13 Figure 5: Urban Employment Grow th in Peru (%), 2007–2011 .................................................................................................................... 14 Figure 6: Per Capita Income in Peru (PEN), 2008–2017 ............................................................................................................................. 15 Figure 7: Internet Users in Peru (Million), 2008–2012.................................................................................................................................. 16 Figure 8: Number of ATMs in Peru (Thousands), 2008–2017...................................................................................................................... 17 Figure 9: Number of POS Terminals in Peru (Thousands), 2008–2017 ....................................................................................................... 18 Figure 10: Internet Users Who Buy Online in Peru (%), 2011 ...................................................................................................................... 20 Figure 11: Average Number of Hours Spent Online per Month by Internet Users in Peru, 2011.................................................................. 20 Figure 12: Peruvian Private Consumption Grow th (%), 2007–2011 ............................................................................................................. 22 Figure 13: Urban vs Rural Populations in Peru (Million), 2008–2012 ........................................................................................................... 23 Figure 14: Peruvian Total Poverty Growth (%), 2007–2011 ......................................................................................................................... 24 Figure 15: Peruvian Card Fraud Statistics (PEN Million), 2008–2012 .......................................................................................................... 25 Figure 16: Objectives of the National Plan to Combat Money Laundering and Terrorist Financing.............................................................. 27 Figure 17: Consumer Preferences on Various Types of Cards .................................................................................................................... 30 Figure 18: Share of Payment Options in Peru (%), 2012 ............................................................................................................................. 32 Figure 19: Shares of Payment Channels in Peru (%), 2008 And 2012......................................................................................................... 33 Figure 20: Value and Growth of Peruvian Cash Transfers (PEN Million), 2008–2012 ................................................................................. 34 Figure 20: Value and Growth of Peruvian Credit Transfers (PEN Million), 2008–2012 ................................................................................ 35 Figure 21: Value and Growth of Peruvian Direct Debit (PEN Million), 2008–2012 ....................................................................................... 36 Figure 22: Value and Growth of Peruvian Card Payments (PEN Million), 2008–2012 ................................................................................. 37 Figure 23: Value and Growth of Peruvian Check Payments (PEN Million), 2008–2012............................................................................... 38 Figure 24: Peruvian Debit Card Category Shares by Banks (%), 2011 ........................................................................................................ 39 Figure 25: Peruvian Debit Card Category Shares by Scheme (%), 2011..................................................................................................... 40 Figure 26: Peruvian Credit Card Market Shares by Bank (%), 2011 ............................................................................................................ 41 Figure 27: Peruvian Credit Card Market Shares by Scheme (%), 2011 ....................................................................................................... 42 Figure 28: Foreign Banks and Entry Strategies in Peru ............................................................................................................................... 44 Figure 29: Peruvian Card Shares by Category (%), 2008–2017 .................................................................................................................. 46 Figure 30: Peruvian Cards Industry Volume (Thousands), 2008–2017........................................................................................................ 47 Figure 31: Peru’s Cards Industry Transaction Value (PEN Million), 2008–2017 .......................................................................................... 48 Figure 32: Peruvian Cards Industry Transaction Volume (Million), 2008–2017............................................................................................ 49 Figure 33: Peruvian Debit Card Category Size (Thousands), 2008–2017.................................................................................................... 50 Figure 34: Peruvian Debit Card Category Size (PEN Million), 2008–2017................................................................................................... 51 Figure 35: Peruvian Debit Card Category Size by Transaction Volume (Million), 2008–2017...................................................................... 52 Figure 36: Peruvian Debit Card Category Size by Frequency of Use, 2008–2017....................................................................................... 53 Figure 37: Peruvian Debit Card Use at ATMs and POS Terminals (Million), 2008–2017 ............................................................................. 54 Figure 38: Peruvian Prepaid Cards Category Size (Thousands), 2008–2017.............................................................................................. 55 Figure 39: Peruvian Open-Loop Prepaid Cards Segment (Thousands), 2008–2017 ................................................................................... 56 Figure 40: Peruvian Closed-Loop Prepaid Cards Segment Size (Thousands), 2008–2017 ......................................................................... 57 Figure 41: Peruvian Prepaid Cards Category Size (PEN Million), 2008–2017 ............................................................................................. 58 Figure 42: Peruvian Credit Card Category Size by Volume (Thousands), 2008–2017................................................................................. 59 Figure 43: Peruvian Credit Card Category Size by Transaction Value (PEN Million), 2008–2017 ............................................................... 60 Figure 44: Peruvian Credit Card Category Size by Transaction Volume (Million), 2008–2017..................................................................... 61 Figure 45: Peruvian Credit Card Category Size by Frequency of Use, 2008–2017...................................................................................... 62 Figure 46: Peruvian Credit Card Category Size by Average Transaction Value (PEN), 2008–2017 ............................................................ 63 Figure 47: Banco de Crédito del Perú – Segmentation of Cards Offered..................................................................................................... 64 Figure 48: Banco Financiero – Market Segmentation of Cards Offered ....................................................................................................... 67 Figure 49: HSBC Bank – Segmentation of Cards Offered ........................................................................................................................... 68 Figure 50: Snapshot of HSBC Bank’s Miles/Points Rew ard Program .......................................................................................................... 69

TABLE OF CONTENTS



LIST OF TABLES

Table 1: Peruvian Payment Channels (PEN Million), 2008 and 2012 .......................................................................................................... 33 Table 2: Peruvian Card Volumes by Category (Thousands), 2008–2017 .................................................................................................... 46 Table 3: Peruvian Cards Industry Volume (Thousands), 2008–2017 ........................................................................................................... 47 Table 4: Peruvian Cards Industry Transaction Value (PEN Million), 2008–2017 ......................................................................................... 48 Table 5: Peruvian Cards Industry Transaction Value (US$ Million), 2008–2017 .......................................................................................... 48 Table 6: Peruvian Cards Industry Transaction Volume (Million), 2008–2017............................................................................................... 49 Table 7: Peruvian Debit Card Category Size (Thousands), 2008–2017....................................................................................................... 50 Table 8: Peruvian Debit Card Category Size (PEN Million), 2008–2017 ...................................................................................................... 51 Table 9: Peruvian Debit Card Category Size (US$ Million), 2008–2017 ...................................................................................................... 51 Table 10: Peruvian Debit Card Category Size by Transaction Volume (Million), 2008–2017 ....................................................................... 52 Table 11: Peruvian Debit Card Category Size by Frequency of Use, 2008–2017 ........................................................................................ 53 Table 12: Peruvian Prepaid Cards Category Size (Thousands), 2008–2017 ............................................................................................... 55 Table 13: Peruvian Open-Loop Prepaid Cards Segment Size (Thousands), 2008–2017 ............................................................................ 56 Table 14: Peruvian Closed-Loop Prepaid Cards Segment Size (Thousands), 2008–2017 .......................................................................... 57 Table 15: Peruvian Prepaid Cards Category Size (PEN Million), 2008–2017 .............................................................................................. 58 Table 16: Peruvian Prepaid Cards Category Size (US$ Million), 2008–2017............................................................................................... 58 Table 17: Peruvian Credit Card Category Size by Volume (Thousands), 2008–2017.................................................................................. 59 Table 18: Peruvian Credit Card Category Size by Transaction Value (PEN Million), 2008–2017 ................................................................ 60 Table 19: Peruvian Credit Card Category Size by Transaction Value (US$ Million), 2008–2017................................................................. 60 Table 20: Peruvian Credit Card Category Size by Transaction Volume (Million), 2008–2017...................................................................... 61 Table 21: Peruvian Credit Card Category Size by Frequency of Use, 2008–2017....................................................................................... 62 Table 22: Peruvian Credit Card Category Size by Average Transaction Value (PEN), 2008–2017 ............................................................. 63 Table 23: Peruvian Credit Card Category Size by Average Transaction Value (US$), 2008–2017.............................................................. 63

EXECUTIVE SUMMARY



1 Executive Summary

Stable economy

The Peruvian economy has shown a significant upward trend over the last ten years (2002–2012) which has

been mainly reflected in sustained annual growth in gross domestic product (GDP). In 2012, Peru’s GDP

expanded X.X% in the third quarter, after expansions of X.X% in the second quarter and X.X% in first, mainly

driven by domestic demand which grew by nearly XX% in the third quarter of 2012. Peru’s banking system

has shown tremendous growth with the steadily growing economy. However, despite its sound economy, the

country still has relatively low banking penetration of XX% in comparison with other countries in Latin

America, such as Brazil with XX%, and Chile with XX%. This gives financial institutions opportunities to

introduce financial products and services to capture this unbanked population.

Prepaid cards gaining acceptance by middle -class users

During the review period (2008–2012), both the debit and credit card categories registered slight declines,

with respective CAGRs of –X.XX% and –X.XX%, due to the impact of the global recession in 2009. The

number of debit cards fell from XX.X million in 2008 to XX.X million in 2012, whereas the number of c redit

cards fell from X.X million to X.X million during the same period. Prepaid cards registered the highest growth

during the review period with a CAGR of XX.XX%, rising from X.X million cards in 2008 to X.X million in 2012.

The prepaid cards category is mainly driven by the country’s unbanked population , and payment service

providers are already benefiting from the country’s low banking penetration by offering prepaid cards. For

instance, NovoPayment, a prepaid card service provider in Latin America, launched the Latodo MasterCard to

offer unbanked Peruvians access to modern payment and service infrastructure. This card can be reloaded at

more than X,XXX stores throughout the country. The prepaid cards category is expected to post the highest

growth with a CAGR of XX.XX% during the forecast period (2013–2017), from XX.X million cards in 2013 to

XX.X million in 2017.

Regulatory framework for agent banking

In 2005, regulations were int roduced which allow banks to offer financial services through third-party agents.

According to resolution No 775-2008, any licensed financial institution may use third parties to deliver services

on its behalf, subject to the superintendent of banks, insurance and pension funds’ (SBS) prior authorization.

The regulation does not impose any constraints on the type of agents financial institutions may choose.

Agents are typically small retail establishments through which banks are able to execute financial transactions

such as loan payments, withdrawals, transfers, deposits to a customer’s or a third party’s account, payments

on goods or services, and other functions permitted by SBS. Agent banking has become a significant and

cost-effective way for banks to diversify geographically. Banks are also offering services in Peru through mini

branches within retail establishments that are part of their own group. For instance, domestic bank Interbank

has mini branches inside Supermercados Vivanda, a supermarket chain in the county’s capital Lima. Mini

branches are used to acquire new credit card customers in the country. Through agent banking and mini

branches, banks can reach a large number of retail customers, increasing the number of cards in circulation.

Strategies by key operators

Peru’s banking industry is growing with a rapidly expanding middle class in the country, and domestic demand

is accelerating the growth of the retail, banking and service industries. The steadily growing economy has

encouraged leading global banks to expand into the country, and with the help of a favorable regulatory

framework, the banking and financial services industry has expanded in line with the inflows of foreign direct

investments (FDI), the and growing middle-class population, which tends to have higher salaries and requires

greater access to credit facilities such as loans, credit cards and mortgages. To compete in Peru’s banking

industry, both foreign and domestic banks are adopting strategies such as introduc ing co-branded cards

designed to benefit cardholders on daily purchases in the form of deals , discounts, reward miles or points

programs.

MARKET ATTRACTIVENESS AND FUTURE PROSPECTS OF

CARDS AND PAYMENTS INDUSTRY



2 Market Attractiveness and Future Prospects of the Cards and

Payments Industry

Peru’s cards industry recorded a nominal growth at a CAGR of X.XX% during the review period in terms of

volume. In terms of transaction value, the industry increased from PENXX.X billion (US$XX.X billion) in 2008

to PENXXX.X billion (US$XX.X billion) in 2012. Economic growth is anticipated to benefit the industry and

provide positive growth potential for banking and non-banking card issuers in the country.

The debit and credit card categories in Peru recorded slight declines, with CAGRs of –X.XX% and –X.XX%

respectively during the review period. Over the forecast period, the debit card category is expected to post a

CAGR of X.XX%, although the overall cards industry in value terms is expected to record a CAGR of

XX.XX%. In terms of value, the credit cards category is forecast to post a CAGR of X.XX% over the forecast

period.

Figure 1: Current and Future Prospects of Various Cards in Peru

Source: Timetric analysis © Timetric

Demand for smart cards with enhanced security features

In the financial sector worldwide, card products such as debit, credit, prepaid and charge cards with chips and

EMV technology are gaining importance to reduce card fraud. With growing internet penetration and

smartphone use in Peru, using a card for commercial transactions has become common. In Peru, the most

highly reported type of fraud is strip falsification, also known as skimming or cloning, which involves copying

the credit card's magnetic strip without the user's knowledge.

Card fraud grew at a CAGR of X.XX% during the review period, from PENX.X million (US$X.X million) in 2008

to PENX.X million (US$X.X million) in 2012. Most financial institutions across the globe have implemented

technology such as EMV and contactless to increase transactional security , and Peruvian banks are in the

process of moving towards these technologies. However, very few banks offer cards with EMV technology in

Peru. Scotiabank in Peru introduced premium chip-enabled credit card products in 2011, such as the Master

Card Gold debit card. Peru’s cards industry has significant potential for cards with enhanced security features,

due to increasing card fraud in the country.

ANALYSIS OF CARDS AND PAYMENTS MARKET DRIVERS



3 Analysis of Peruvian Cards and Payments Industry Drivers

Peru’s banking system has shown tremendous growth with the country’s steadily growing economy. However,

the country still has relatively low banking penetration, giving financial institutions opportunities to introduce

services and card products to capture the unbanked population.

Figure 2: Peruvian Cards and Payments Industry Drivers

Source: Timetric analysis © Timetric




3.1 Card Fraud Statistics

Credit card fraud is a major issue in Peru, and grew at a CAGR of X.XX% during the review period from

PENX.X million (US$X.X million) in 2008 to PENX.X million (US$X.X million) in 2012. POS transactions were

the main channel for fraudulent activity.

3.1.1 By channel

ATMs and POSs are the most used platforms for payment cards, other than online shopping, and the Central

Bank of Peru and commercial banks in the country have taken a number of steps, such as increasing security

measures, to control fraudulent activity. For example, Scotiabank in Peru started issuing premium chip-

enabled credit card products in 2011, including the Master Card Gold debit card.

POS transactions recorded the highest amount of fraudulent activities. Due to the lack of complete adoption of

EMV as well as the advanced technologies such as contactless and near field communication, card fraud in

the country is increasing significantly. Commercial banks are slowly adopting EMV technology for their card

products, and payment service providers are also implementing security measures to reduce card fraud in

Peru. For example, in November 2012, Ingenico announced the deployment of the new iWL250 3G terminal in

Peru with VisaNet in order to provide secure payment solutions and value-added services to cardholders and

commercial establishments. Moves such as this are expected to reduce card fraud over the forecast period.




3.2 Regulatory Framework

Peru’s banking system is highly prosperous due to the rapid expansion of financial services in the country.

Branchless banking (through third parties) has grown significantly in Peru since regulation in 2005 which

allowed banks to offer financial services through third -party agents. SBS is the main government agency

responsible for the regulation and supervision of the financial, insurance and private pension system, and the

prevention and detection of money laundering and terrorist financing.

Consumer protection

Peru currently does not have a law setting maximum interest rates for consumer credit, and there are no plans

by SBS to impose limits on credit card interest rates or fees. SBS is responsible for consumer protection , and

is equipped with a team of supervisors dedicated to ensuring compliance with consumer-focused regulations.

SBS mainly focuses on transparency and the complete disclosure of quantitative and qualitative information,

rather than on dictating pricing or setting pricing limits. All financial institutions are required to report prices

and other basic information on a quarterly basis to their customers, and during financial contracts, customers

must be clearly informed of these by the provider before a transaction is concluded or a contract is signed.

Although financial institutions are free to set fees, charges and interest rates, SBS has legal authority to

actively identify and curb or prohibit predatory or abusive practices, and to impose sanctions on financial

institutions.

Retail agents

In 2005, SBS announced a regulation which allowed banks to offer financial services through third-party

agents. According to resolution No 775-2008, any licensed financial institution may use third parties to deliver

services on its behalf, subject to SBS’s prior authorization. The regulation does not impose any constr aints on

the type of agents financial institutions may choose. Typically, agents are retail establishments such as

pharmacy stores and supermarkets. Through these agents, banks can access a large number of customers

who purchase goods and services at these stores, and offer products such as credit, prepaid and charge

cards.

Agents are permitted to conduct the following transactions:

Loan payments

Withdrawals

Transfers

Deposits to a customer’s or a third party’s account

Payments for goods or services

Other functions permitted by SBS

EMERGING CONSUMER ATTITUDES AND TRENDS



4 Emerging Consumer Attitudes and Trends

Consumer attitude and preference plays a major role in the success of any product in any industry , and this is

also the case with Peru’s cards and payments industry. Organizations need to be aware of their target

markets, their age groups, income levels and locality. Consumer expectation in terms of service and product

pricing should be assessed. The following section discusses the factors that can help organizations in Peru’s

cards and payments industry to take effective business decisions.

4.1 Market Segmentation and Targeting

The use of and demand for payment cards vary significantly based on the market targeted, such as corporate

customers and individual customers. Large domestic and foreign banks are making concentrated efforts to

divide the overall market and target profitable and growing sectors in order to gain market share and improve

their overall business.

4.1.1 Retail sector

Co-branded cards are generally credit cards that are offered by a financial services company in partnership

with a retail merchant. These cards allow banks to access the retailers’ customer base in order to increase the

number of cards in circulation. Co-branded cards are designed to encourage the number of transactions both

in value and volume with a variety of incentives such as discounts or rebates. For instance, Banco de Crédito

de Perú (BCP) offers three co-branded cards, the Lanpass Visa Classic, Gold and Platinum credit cards, for

frequent fliers in co-operation with Chile’s LAN Airlines. The cardholders can earn kilometers by flying LAN

routes under its frequent flyer program, which can be redeemed for travel.

4.1.2 Corporate sector

Banks and card service provides are classify corporate customers by their need type and specific service

requirements. Travel cards for frequent travelers, commercial cards for small and large business , and food

cards are offered for business users, with banks developing products and adopting marketing strategies for

each market based on its type and size. The following section details key business markets and how they are

targeted.

Cards for corporate customers

Both banking and non-banking card issuers offer a wide range of cards and services to corporate customers,

including business managers and employees that allow them to t rack and evaluate their expenditure in areas

such as travel expenditure, utility payments, office supplies, and salaries and other employee benefits. BCP

offers Visa Business and Corporate cards for company executives and employees. They can pay for

expenses such as travel, meals or gasoline, and the cards give detailed information of the expenses in the

form of both consolidated and individual statements to cardholders.

STRATEGIES ADOPTED BY KEY PLAYERS



5 Competitive Landscape and Industry Dynamics

The Peruvian banking system recorded impressive growth during the review period, supported by a booming

economy that has fuelled greater consumer demand. This trend is expected to continue over the forecast

period as banks look to increase the low degree o f participation in the financial system. Strong growth exists

for consumer loans, mortgages, as well as small and micro business credit. Most banks in Peru performed

well during the review period. For example, BBVA Banco Continental increased its branch n etwork by XX.X%

to XXX branches in 2011. The Peruvian banking industry is attracting international operators with its promising

future growth. For instance, in November 2012, Chinese commercial bank ICBC, which provides a wide range

of financial products and services, established a branch in Lima under the name ICBC (Peru) Company Ltd.

This growing market is expected to see more number of foreign bank entries over the forecast period.

5.1 Analysis by Payment Channels

In Peru, the cash transactions channel dominates other channels such as credit transfers, direct debit, card

payments and check payments, with a XX.X% share in 2012. During the review period, the cards payments

channel’s share recorded a growth of X.X percentage points in 2012 over 2008 in terms of market share. The

following section contains the market shares of various payment channels and details how these channels

have grown during the review period. The channels covered are checks, cards, credit transfers, and direct

debit.

STRATEGIES ADOPTED BY KEY PLAYERS



6 Strategies Adopted by Key Operators

Peru’s banking industry is growing with a rapidly expanding middle class in the country, and domestic demand

is accelerating the growth of the retail, banking and service industries. The following section discusses the

marketing strategies adopted by commercial banks operating in the country, the strategies adopted by foreign

banks entering Peru’s banking industry, and the pricing and operational strategies undertaken.

6.1 Marketing Entry Strategies

This section analyzes the entry strategies of foreign banks, as they are the leading card providers. Steady

economic growth has encouraged leading global banks to expand their business in the country , and with the

help of a favorable regulatory framework, the banking and financial services industry has expanded in line

with the huge flows of foreign direct investment (FDI), and growth in the country’s middle class, which

generally has higher salaries and requires greater access to credit facilities such as loans, credit cards and

mortgages. There are around XX financial institutions in Peru, of which approximately XX are commercial

banks. The most common mode of entry adopted by foreign banks is through opening branches, whereby

foreign financial institutions initially establish a branch in Peru, which is later converted into a standalone

business once operations are stabilized. Examples of the market entry strategies adopted by foreign banks in

Peru are as follows:

6.1.1 Case studies

Citibank

Citibank del Perú SA, a Peru-based institution principally engaged in corporate and personal banking,

established a branch in 1920. In 2004, the branch was incorporated as Citibank del Peru SA, a subsidiary of

Citibank NA. Currently, the bank serves more than XXX large corporations, XXX small and medium

enterprises and serves approximately XXX,XXX customers in the country. The bank operates XX branches

and employs more than XXX people in the country.

Deutsche Bank

Deutsche Ueberseeische Bank, a subsidiary of Deutsche Bank , followed the same mode of entry as Citibank.

It opened a branch in Lima under the name Banco Aleman Transatlantico in 1905, and expanded with a

branch in Callao in 1906. In 1976, Deutsche Ueberseeische Bank was incorporated into Deutsche Bank . It

received a banking license and launched its subsidiary, Deutsche Bank (Perú) SA, in Lima.

Industrial and Commercial Bank of China Ltd

In November 2012, ICBC, which provides financial products and services to X.XX million corporate clients and

XXX million individual customers worldwide through XX,XXX outlets in and outside China, entered the

Peruvian financial industry by establishing a branch in Lima under the name ICBC (Peru) Company Ltd.

Scotiabank

Scotiabank, a financial services provider in Canada, entered Peru’s banking sector as a shareholder of Banco

Sudamericano, with a XX% stake in 1997. In 2006, the bank increased its holding to XXX% and became the

only shareholder. In the same year, as part of its expansion strategy in Latin America, Scotiabank acquired a

majority stake, approximately XX%, of the shares owned by Banca Intesa SpA in Banco Wiese Sudameris. In

the same year, the bank started its operations under the name Scotiabank Peru SAA, integrating both Banco

Wiese Sudameris and Banco Sudamericano. The bank currently operates nearly XXX branches and provides

a range of retail, commercial, corporate, treasury and investment services.

MARKET SIZE AND GROWTH POTENTIAL OF PAYMENT CARD

INDUSTRY



7 Market Size and Growth Potential of the Payment Card Industry

This section gives an overview of the market size and growth potential of various segments of Peru’s cards

and payments industry. The various subsections cover market sha re of various types of cards, current and

forecasted market size of various card categories. It analyses credit, debit and prepaid card categories market

size in terms of transaction volume, value and number of cards. The section covers both the past performance

and future growth potential of various types of Peru’s cards and payments industry.

7.1 Share Analysis by Type of Card

In terms of cards volume, debit cards held the highest share of XX.X% in 2012. The second-largest share was

held by prepaid cards with XX.X%, followed by credit cards with XX.X%. Over the forecast period, debit cards

registered a CAGR of XX.XX%, rising from XX.X million cards in 2013 to XX.X million in 2017.

MARKET SIZE AND GROWTH POTENTIAL OF PAYMENT CARD

INDUSTRY



7.2 Debit Card Category Size and Forecast

The debit card category registered a decline with a CAGR of –X.XX% in terms of volume during the review

period, from XX.X million in 2008 to XX.X million in 2012. In terms of transactions value, the debit card

category posted a CAGR of XX.XX% during the review period, growing from PENXX.X billion (US$XX.X

billion) in 2008 to PENXXX.X billion (US$XX.X billion) in 2012.

7.2.1 Analysis by number of cards

The debit card category recorded a CAGR of –X.XX% during the review period, with the number of cards in

operation declining from XX.X million in 2008 to XX.X million in 2012. Over the forecast period, the number of

cards in issue is expected to increase from XX.X million in 2013 to X.X million in 2017 at a CAGR of X.XX%.

7.3 Prepaid Card Category Size and Forecast

Number of total prepaid cards

In terms of number of cards, the prepaid card category registered significant growth at a CAGR of XX.XX%

during the review period, from X.X million in 2008 to X.X million in 2012. The category is forecast to grow at a

CAGR of XX.XX% over the forecast period, from X.X million in 2013 to X.X million in 2017.

7.4 Credit Card Category Size and Forecast

During the review period, the credit cards category declined at a CAGR of -X.XX% in terms of volume. In

terms of transaction value, however, it registered significant growth with a CAGR of XX.XX%. The number of

cards in issue fell from X.X million in 2008 to X.X million in 2012.

7.4.1 Analysis by number of cards

During the review period, the total number of outstanding credit cards fell slightly from X.X million in 2008 to

X.X million in 2012, at a CAGR of -X.XX%. Over the forecast period, the category is expected to record a

CAGR of X.XX%, growing from X.X million in 2013 to X.X million in 2017, gaining some of the debit card

category’s share.

COMPANY PROFILE, PRODUCTS AND MARKETING STRATEGIES



8 Company Profiles, Product, and Marketing Strategies

8.1 Banco de Crédito del Perú (BCP)

Banco de Crédito del Perú (BCP) is a Peru-based financial services company engaged in providing various

products and services to individuals, businesses and institutions. Credicorp Ltd, a Peru-based financial

institution which provides commercial and investment banking services and securities brokerage, is a parent

company of BCP, holding a XX.X% stake. The bank offers a range of products and services such as saving

accounts, commercial and consumer loans, mortgages, debit and credit cards, financial i ntermediation,

port folio management, insurance policies and other banking operations. As of December 2011, the bank

operated XXX branches in Peru.

8.1.1 Strategies

The following table provides a snapshot of BCP’s card offerings and the strategy adopted for credi t cards:

Figure 3: Banco de Crédito del Perú – Segmentation of Cards Offered

Source: Company website and Timetric analysis © Timetric

Cards target frequent fliers with travel miles program s

BCP offers various credit cards which are mainly targeted to frequent fliers in Peru in co-operation with airline

services companies. The bank offers three credit cards, the Visa Classic, Gold and Platinum cards, for

frequent fliers in cooperation with Chile’s LAN Airlines. Cardholders can earn kilometers by flying LAN routes

under its frequent flyer program. The bank also provides value-added services such as travel accident

insurance and fraud cover to stimulate number of credit cards in circulation and their usage.

Co-branded cards with attractive offers and discounts

In co-operation with various retailers in Peru, BCP offers various co-branded cards with discounts and offers

by the participant retailers. Co-branded credit cards include the Visa Classic Primax and the Visa Plaza San

Miguel, which are designed in association with Plaza San Miguel, a retail shopping mall in Lima, and Peruvian

fuel retailer Primax. With the Visa Plaza San Miguel credit card, cardholder benefit from discounts at all the

retail establishments in Plaza San Miguel.




8.2 Banco Financiero

Banco Financiero was established as Financial and Construction SA in 1964. In 1982, it changed its name to

Finanpro Financial Company, and in 1986 it became a commercial bank with its current name, Banco

Financiero. The bank offers a range of products and services to individuals and businesses in Peru, including

savings and deposits, credit and debit cards, loans, funding and leasing services.

8.2.1 Strategies

The following table provides a snapshot of Banco Financiero’s card offerings and its strategy adopted for debit

and credit cards:

Figure 4: Banco Financiero – Market Segmentation of Cards Offered


8.2.2 Debit card offered

MasterCard debit card

Features

Discounts and offers at partnered outlets such as supermarkets, restaurants and department stores

Can be used for internet shopping

8.2.3 Credit cards offered

Platinum, Gold and Classic credit card

Features

Up to four additional cards

Utility bills such as telephone, electricity and water can be paid with the card with no extra charges




8.3 HSBC Bank Peru

HSBC Bank Peru started operations in 2006. It currently operates four administrative offices and XX branches

nationwide, and holds a X.X% market share in Peru. The bank operates primarily through two business areas:

retail banking, and business or corporate banking. Under retail banking, HSBC Bank offers a range of

services to individual customers such as accounts, deposits, loans, credit cards and insurance services. The

bank’s business banking services include leasing, business accounts, funding, cash management and foreign

trade services to businesses in Peru.

8.3.1 Strategies

The following table provides a snapshot of HSBC Bank Peru’s card offerings , and the market strategy adopted

for credit cards:

Figure 5: HSBC Bank – Segmentation of Cards Offered


APPENDIX



9 Appendix

9.1 Methodology

Timetric’s dedicated research and analysis teams consist of experienced professionals with an industry

background in marketing, market research, consulting and advanced statistical expertise.

Timetric adheres to the Codes of Practice of the Market Research Society (www.mrs.org.uk) and the Society

of Competitive Intelligence Professionals (www.scip.org).

All Timetric databases are continuously updated and revised.

9.2 Contact Us

If you have any queries about this report, or would like any further information, please contact

[email protected].

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Timetric is an independent economic and business research firm that provides critical intelligence on

emerging economies and key global industries. The company offers detailed economic and sector

intelligence, business insights and independent and authoritative commentary.

Underpinning all Timetric’s research services is a belief that data – i f gained following the right technologies

and analytic frameworks – can provide unique and powerful economic and business insights.

The Timetric economic and industry intelligence centers are premium decision tools that provide access to

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easily digestible format and grounded in rich, proprietary data and data analysis frameworks.

Each year, Timetric produces hundreds of high-quality research reports across countries, industries and

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trends.

Timetric helps its clients to:

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Access the latest and most useful data sets, indices and forecasts

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Forecast and predict trends more accurately

http://www.scip.org/

mailto:[email protected]

APPENDIX



Economic Research Services

Timetric’s economic research services are founded on three key goals:

1. To provide the strongest base data:

The most accurate data

The most timely and frequently updated data sets

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Forward-looking indicators

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Truly expert, independent economic analysis and commentary

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The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please

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