As we leave 2021 behind, our experts have reflected on the key trends in International Card Payments and identified key opportunities for Card Issuers to unlock value in 2022.

As we leave 2021 behind, here is our reflection on the key trends in International Card Payments. 2021 has been a year of recovery and there were four key trends: (#1) Recovery: Cross-border card spend has now returned to 2019 levels; (#2) Cross Border spend is about a lot more than Travel; (#3) FX Functionality is increasingly a hygiene factor for card programmes and (#4) Pricing transparency is beginning to improve and will drive new customer behaviours. As the market continues to recover and grow in 2022, the time is right for Card Issuers to start putting their longer-term plans in place for this important segment of card spend.

Trend #1: International Card Spend on Travel is Recovering…Fast

After the steep declines caused by the Covid-19 crisis, International card spend on Travel has rapidly recovered in 2021. This has driven card total cross-border spends back to 2019 levels. This surge won’t stop as the world recovers from Covid-19 and the travel component of cross-border spend recovers to prior levels.

As of September 2021, both Visa & Mastercard reported that their aggregate cross-border transaction activity had now recovered and surpassed 2019 levels, completing the recovery started in March this year. Within this recovery, travel related cross-border spend has staged a remarkable improvement, doubling each month on 2020 levels since April. This is despite ongoing restrictions on travel in a number of major economies (particularly in the Asia-Pacific region). Although not quite back to 2019 levels, Visa now expects travel related cross-border spend to have returned to 2019 levels by 2023, whereas Mastercard expect a full recovery by the end of 2022.

€263bn Estimated combined Visa & MasterCard cross-border spend in Europe in 2021
Cross-border card spend returned to pre-Covid-19 levels

Trend #2: eCommerce Now a Significant Component of Cross-Border Spend

Cross-border ecommerce has supported cross-border card spend throughout the pandemic, growing at an average of ~20% each month since the beginning of 2020. This growth accelerated in 2021 to an average of 30% as the shift to ecommerce continued in light of the ongoing pandemic.

This trend now looks sustainable with Visa commenting in a recent investor call that this “shift is likely to persist as the convenience of e-commerce is indisputable and its growth continues to be robust, even as card-present begins to return.” Shopify’s recent news release highlighted this continued trend with cross-border purchases accounting for ~15% of total purchases on Black Friday/Cyber Monday.

30% month-on-month growth in cross-border eCommerce spending

Trend #3: FX Functionality Increasingly a Hygiene Factor

In the first era of Fintech disruption, Neobanks and Fintech Issuers made travel a core point of difference to incumbent banks. Travel propositions helped fuel rapid customer growth for Issuers as diverse as Revolut, Curve, Monzo, Starling, Lunar, Bunq, N26 and more, all of whom offered a combination of competitive pricing points, and increased functionality (real-time pricing and multi-currency wallets).

Travel & FX-related functionality are now hallmarks of most the popular Digital Bank in over three-quarters of European markets. This functionality is now a hygiene factor for Fintechs looking to achieve growth in key European markets and is increasingly market standard in key markets with incumbent Banks beginning to offer their own versions of these products (e.g. Barclays in the UK, mBank in Poland and Raiffeisen Bank in Czech Republic). In fact, multi-currency features are already a market standard in many Central & Eastern European markets.

75%+ Europe’s top digital banks offer travel & FX-related functionality

Trend #4: Pricing Transparency Improving, But Still Some Distance To Go

The return of cross-border card spend described in Trend 1 is a welcome boost to Debit/Credit Card business models driven by FX Fees. However, these fees (averaging 1.5 – 3.5%) are increasingly coming under scrutiny from key regulatory changes in Europe.

Survey of CBPR2 compliance amongst banks and fintech issuers

The EU CBPR2 regulations require complete transparency on the costs charged to cardholders. This necessarily improves the comparability of fee structures across Card Issuers and will, as consumers get familiar with this new information, drive new consumer behaviours. Eight months on from the full implementation deadline, compliance levels with these new regulations are improving, but still require significant action by European Banks and Fintechs. Our research identified multiple instances of incomplete, incorrect or missing information.

1.5 – 3.5% Average card FX fees
60% of issuers surveyed were not fully compliant with EU FX transparency regulation CBPR2

Closing Remarks

The key trends identified in 2021 are likely to continue into 2022: Travel spend will continue its return to prior levels; eCommerce will remain a significant component of the cross-border card spend story; Travel and FX-related feature functionality will become a key focal point for competition; and further improvements in pricing transparency will change consumer behaviours.

2021 has been a year of recovery in cross-border card spend with levels now returned to 2019 levels. This has been driven by growth across all categories of spend and the time is right for Card Issuers to start putting their longer-term plans in place for this important segment of card spend.