Mastercard Sees Shift to Debit as Gulf Banks Rein in Lending

Consumers in the Persian Gulf are “rapidly shifting” to debit and prepaid cards from credit cards as regulators tighten rules on bank lending, Mastercard Inc.’s president of the Middle East and Africa said.

“If I take our business as a window into the world of regulatory framework and what is happening, what we can is that the use of debit cards has dramatically increased,” Michael Miebach said in an interview in Doha, Qatar, on Jan. 23.

Transactions by debit cards, where the cash is immediately deducted from users’ bank accounts, are increasing twice as fast as by credit cards, while prepaid card transactions are growing 8 times faster than debit, Miebach said in further comments sent by e-mail. The number of debit cards in the Gulf are growing at “double digit” figures, with those for prepaid cards at “triple digits,” he said, without giving further information.

Central banks in the six-member Gulf Cooperation Council imposed limits on bank lending after the 2008 financial crises forced some countries to bail out lenders. The United Arab Emirates central bank notified lenders of a proposal to cap mortgages for foreigners and nationals at 50 percent and 70 percent of property values respectively last month, while Qatar placed restrictions in 2011 on amounts banks can lend to nationals and foreigners and limited the interest they charge.

Still, Mastercard, the world’s second-biggest card network after Visa Inc., seeks to expand its market share in the Middle East and Africa, Miebach said, speaking at the opening of the company’s Doha office. The office in Qatar’s capital is its fifth in the Middle East and North Africa region after Dubai, Riyadh, Cairo and Casablanca, he said.

While payments in Gulf countries are 85 to 90 percent cash, compared to 50 percent in the U.S., the region’s exposure to travelers have made it “a very credit-centric market in terms of electronic payment,” Miebach said. “It’s rapidly shifting toward using a lot more debit. Regulators and banks are pushing for that.”

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