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Plastic payments?: The beginning of a cashless society

The credit card is widely seen as the legal tender of the Third Millennium. With more than 2 billion cards in circulation in the world...

The credit card is widely seen as the legal tender of the Third Millennium. With more than 2 billion cards in circulation in the world, economists say there is a lot more room for growth, especially in the Arab world. Here in Jordan, the situation points to a steady increase. Figures show paying by "plastic", including cards issued by Visa International, MasterCard and National Express, is approaching one million people.

For Visa International, as well as other credit card companies in the world, this type of payment is marketed as more convenient and allows people to enjoy their shopping. Sonia Booth, Visa's area manager for the Middle East and West Africa, says payment cards are a very cost-efficient industry. She believes Jordan has a model economic system that offers a stable foundation for a growing credit card business. "It would probably happen faster than in the US and Europe." Even there, about 70 percent of the daily transactions are still made in cash," Booth told The Star.

Visa International launched its activities in Jordan 10 years ago, making it the first to develop such business methods in local markets. Visa also enjoys the lion-share of the circulated payment cards in Jordan with more than 500,000 using Visa International alone. The credit card has become more popular since an agreement was forged between 10 local banks in Jordan and the London-based Standard Chartered Bank with Visa International. Such a partnership makes it easier for Visa to introduce its services in the local market. "It should be clear that credit cards oblige account holders to make payments more efficiently," said Hani Adrees, deputy director-general of the Jordan National Bank (JNB).

He added credit card penetration in the Kingdom faces a number of obstacles, including lack of public awareness about the significance of using such cards for daily purchases. There are currently around three million people who have yet to open bank accounts in Jordan.

Although Jordan's economy is facing an uphill struggle, credit cards are spreading rapidly among consumers. Visa cardholders spent more than $700 million using "plastic" in the past 12 months. MasterCard and National Card come in second and third. Holders of these cards in Jordan spent between $300 to $400 million each.

Booth noted Jordan's economic recession does not necessarily have a direct impact on Visa's local operations, since these activities are still in the early stage of development. "Our programs in Jordan are still pre-developed, and our main objective is to encourage Jordanians to understand the significance of payment cards rather than using checks or cash," she added.

"The banking sector in Jordan does not know the right way to promote the payment card business among its customers," Adrees explained. "We should never forget the credit card business requires a higher income, something which is not the case in Jordan." Economists often regard the credit card business as a double-edged sword. While payment cards contribute to promoting tourism and activating trade, economists warn these cards may negatively affect the short-term availability of liquid cash in the market.

Booth pointed out Jordan's fast and strong devotion to building an Information Technology hub helps make payment cards more eligible in the long-term. "There are many ways to make credit cards a successful business. And Jordan has a model banking system. It provides a lot of services that push for issuing a variety of card products, growing steadily from this year onwards," she said.

Visa Vice-President Mikael Zoghbi noted his company witnessed a strong growth in Jordan and around the Arab world over the past 12 months. Visa cards are currently used largely for travel, shopping and entertainment in over 21 million locations in nearly 220 countries in the world.

Still, the penetration of payment cards in the Arab world remains below international levels. Five percent of the two billion users in the world are in the Middle East. Of these, 6 million cards are issued by Visa International. "I believe our main competitor is cash," Booth stressed.

Last week, Visa International launched a marketing campaign with its Jordanian member banks to encourage the use of Visa cards in the Kingdom. The four-month campaign, which began on 15 September, enables every Visa card holder to enter a lottery and win JD 50 on a daily basis, that is, every time he or she uses the card. "Customers using the card will also be eligible for a monthly drawing of JD 1000," Booth added. She noted Visa International is planning to offer daily prizes to merchants who accept Visa cards. The merchants will also be entered in the monthly prize drawing.

Ghassan Joha
The Star

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