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MasterCard studies Europe's borderless economyMasterCard studies Europe's borderless economy
Gavin Lipsith
MasterCard Europe vice-president Brian Moore speaks to RavenFox.com about the company's first half-yearly study of cross-border spending in Europe and its implications for the region's travel and retail industries
MasterCard Europe revealed its first MasterInsights "Europe's Borderless Economy" survey this month, and the findings make interesting reading for anyone whose business depends on the flow of intra-regional travellers and their wallets. The report found that Europe is an increasingly open market where citizens are taking advantage of cheap and easy travel to find the best retail offers.
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Brian Moore: The study looked at the 350m Maestro debit card and MasterCard credit card owners in Europe, and at their spending outside their country of origin. We wanted to give a sense of how and where cardholders are spending when they travel, and also where they are travelling.
It gave us a good feel for these patterns, and for other trends such as the more widespread use of debit cards. Use of debit cards is up by 22%, primarily because of international functionality. At MasterCard, where we have a 70% share of the debit card market in Europe, we have been swapping over from Switch to Maestro cards in the UK and other European markets. So there is growing awareness of Maestro and the fact that it can be used outside holders' countries. Customers are in the habit of using it every day and realise it is also a comfortable, simple and secure way of spending abroad.
What does the study suggest about the relative health of tourism and travel in Europe, particularly in light of a tough few years for the industry?
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| Moore: travelling consumers are becoming more adventurous in choosing their shopping destinations. |
In addition, with the expansion of the EU we are seeing the release of a great deal of pent-up demand from new member states, and their citizens are taking advantage of the opportunities by travelling much more.
Based on the findings of the study, how do people's spending habits change when they travel abroad?
It varies dramatically depending on people's nationality and their destination. For Russian and Ukrainian cardholders, for example, Italy is one of the preferred destinations and they like to buy clothes there. Russians and Ukrainians are high spenders; their average transaction is more than €200 ($240) above the average spent in clothes stores while travelling.
We are also seeing a lot more day-to-day cross-border spending, especially on the continent where people can travel freely. So people might drive across the border between France and Belgium to find cheaper petrol or other goods. The different tax levels affect price and people are increasingly aware of that.
Another factor is that people are willing to travel further and search more carefully for their purchases. Previously, many travellers may have been intimidated by the language, the different culture and so on, but today they seem more prepared to hunt for bargains and souvenirs. And they are more adventurous in their purchases, such as the clothes they buy when travelling.
What advice would you give to retailers in Europe on maintaining an edge in an increasingly competitive, cross-border market?
The importance of an online presence cannot be overstated. That is where the biggest gains are made and the retailers that invest there, if it is appropriate for their field, will see good returns. Online and non face-to-face spending is growing significantly—in 2004 it rose by 67%.
This seems to go hand in hand with the increases we've noticed in intra-regional travel and tourism, with many of the budget carriers using the internet for bookings. In fact many traditional high street travel agents are struggling with the increased competition from online agencies such as Expedia and Lastminute.com.
At the moment the UK dominates the European online retailing market, taking a 65% share of online spending. Again, that is probably because a lot of the budget carriers are based there.
Do you think these results bode well for retailers at European airports, or do people prefer to spend their money downtown?
The survey doesn't include data on spend in airports in cardholders' departing countries as they are considered domestic transactions. But it does show that in general spending while travelling is rising. The spending associated with downtown—in hotels, motels, petrol stations and retail outlets—is growing dramatically, and although I don't know how many airports have those types of business it is clear that passenger numbers are increasing. It is just a matter of them maximising spend from those passengers.
Will the study be repeated and if so will you look at expanding its scope?
We will be doing this every six months, so the next one will be out in December. Starting from this one we hope to be able to identify consumer spending and travel trends, and also to refine the division of sectors. Looking at airport purchases is a possibility, although I think it might be difficult to isolate that data.
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The MasterCard study presents a summary of its key findings in map form |
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