Spending on credit cards seems to become independent from overall consumption, according to a study
In Turkey, the world of finance is witnessing a significant shift as credit card spending continues to soar, reaching an impressive 1.2 billion transactions in the recent year - a 17% increase compared to the same period last year. This surge in card payments has been fuelled by a variety of factors, from the growth of e-commerce and digital payments to changes in consumer financing behaviour.
One of the primary drivers of this trend is the rapid expansion of e-commerce globally, including in Turkey. The rise in online shopping platforms has led to a corresponding increase in credit card usage, as online transactions often rely heavily on credit and debit cards. Innovations such as Buy Now, Pay Later (BNPL) options and digital wallets further encourage consumers, particularly younger demographics like Gen Z, to spend via cards.
Increased penetration of smart devices and digital payment gateways has also made card payments more convenient, nudging consumers away from cash. Retailers and merchants synchronizing payment options across multiple devices further facilitate smoother card transactions.
Despite fluctuations in other parts of the economy, consumer spending resilience, particularly in goods-related sectors, has supported credit card usage. This environment may include increased borrowing through credit cards when alternative financing options such as mortgages have become more expensive, with interest rates for home loans in Turkey reaching over 41% as of late 2024.
The shift from cash to card payments is a primary reason for the decoupling of card spending from private consumption. As carrying cash becomes more costly due to rising inflation, consumers are turning to credit cards as a more convenient and potentially more accessible form of short-term borrowing.
Researchers at the Central Bank have identified card spending as a significant indicator for monitoring private consumption. The rise in card spending, attributed to technological advancements leading to digitalization and wider use of contactless payment systems, has decoupled from private consumption in recent years.
However, it's important to note that interpreting card spending data without adjusting for the structural shift may overstate the strength of consumer demand. The onset of monetary tightening has led to a more moderate increase in card spending. When adjusted for the structural shift, card spending increased more moderately in recent years.
As of May, there were 134.3 million credit cards in use, representing a 9% increase from the previous year. The number of credit card transactions rose by 14% to reach 1 billion in May. The Interbank Card Center (BKM) reports a 58% year-on-year increase in credit card spending, reaching 1.7 trillion Turkish Liras in May.
In conclusion, the boom in credit card spending in Turkey can be attributed to a combination of factors, including the growth of e-commerce and digital payments, changes in consumer financing behaviour driven by high-interest loan environments, and the convenience of credit cards as a payment method. As technology continues to advance and consumer habits evolve, it's likely that credit card spending will continue to play a significant role in Turkey's financial landscape.
- The surge in online shopping, fueled by technological advancements, has led to an increased use of credit cards in personal-finance transactions, as online purchases often rely heavily on these instruments.
- The expansion of digital payment technologies and the increased adoption of Buy Now, Pay Later (BNPL) options, digital wallets, and smart devices have made credit card payments more accessible and convenient for consumers, contributing to the rise in personal-finance technology in Turkey.
