The Growing Interest in National Debit Networks Worldwide
Since the 1970s, we have seen the development of over 25 national debit networks throughout the world.
Most of those were launched in the period from 1970 to 2000. From 2000 to today, five new national debit networks have been launched and four have ceased operation. Over the last decade or so, a significant slowing in the creation of new national debit networks has occurred in tandem with a movement toward MasterCard and Visa issuance and away from domestic debit brands. This coincided with both MasterCard and Visa’s IPOs. During this period some of the potentially largest national debit networks were launched, in China and India. Mercator Advisory Group has reason to believe that there is now a resurgence of interest in national debit networks around the world, with new ones under consideration for launch in the next several years.
Based on recent research, we know that national debit network discussions are under way in developed as well as developing markets.
It appears that various countries in Western Europe are well on their way to establishing national debit networks, although Eastern European markets have a long way to go in this regard. One of the challenges in developing markets is the need for investment capital at the same time the national debit networks are generally trying to minimize network costs. Joint ventures are one means of meeting this need (look at Nigeria’s investment partnership in Interswitch).
Growth of national debit networks in other markets like the Middle East and Africa is taking other forms. Some of the banks in the region are beginning to expand from national debit networks to regional debit networks. In those situations, the regional debit product can be used only in those markets within the region that have a merchant network and transaction switches in place to accept the product.
The growing demand for national debit networks is based on several factors, including cost reduction for issuing banks and control of product delivery, product development, and implementation timeline. The growth of national debit networks is likely to spark some concern on the part of the major international debit networks since these growing national debit institutions can and will take volume away from MasterCard and Visa.
There are other supporters of these national debit networks besides issuers. These supporters include merchants who will benefit from lower interchange/merchant fees and governments that are looking for products to support financial inclusion for a segment of their citizens, potential privacy controls, and cross-border currency controls.
To read more about national debit networks, see Mercator Advisory Group’s recent Debit Advisory Service research report National Debit Networks: Global Goes Local
, posted in December 2013.