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Consumer credit in Italy has been enjoying some of the highest growth rates in Europe, at 18 percent in 2003, exceeded in 2004 (see latest statistics in Market Watch pages 18/19). However, banks and specialist finance companies still provide the bulk of consumer finance in Italy, and most credit cards are generally deferred debit cards, which issuers have not promoted as a borrowing vehicle
Italy is one of the most underdeveloped card markets in Western Europe, largely the result of the country's debt-averse culture. Other factors play a role, one of the most important being that banks have traditionally aimed their credit cards (most of which operate as charge cards or deferred debit cards) at the travel and entertainment sector, resulting in a low-volume, high-margin business.
Consequently, Italy has one of the highest levels of cash use in the European Union (EU). Debit card use has also faced barriers: attempts to introduce debit cards for the mass market foundered prior to 1996 mainly because of high transaction charges that the banks imposed.
The fragmented structure of Italian retailing has also discouraged use of payment cards. Italian retailers are small, so lack bargaining power in negotiating merchant service charges.
Nonetheless, strong demand for consumer credit in the mid-1990s paved the way for the emergence of a market for general-purpose revolving credit cards in Italy. Italy's first bankcard, BankAmericard, was always promoted as a credit card but use of this facility was traditionally low. Increasing competition in the Italian cards market, however, has forced issuers to focus on promoting revolving credit.
Additionally, attempts over recent years to develop a modern credit infrastructure have led to local credit cards issuers enjoying strong growth. Foreign entrants are watching developments in the market closely.
By 2003, there were approximately 12.6 million credit cards in circulation, of which 11.7 million were personal cards and 0.8 million corporate cards. This amounts to about 0.22 cards per head of adult population, compared to the EU average of 1.5 cards.
Credit card debt remains very manageable, although Italian accounting rules are quite flexible regarding doubtful loans. Since the mid-1990s, overall doubtful loan levels have fallen to between 2 percent and 3 percent.
The merchant service charge (MSC) on revolving credit cards has come...