Spain’s Pace of Change to Achieve Digital Financial Transformations
Introduction to Spain
An overview of Spain's currency, population and key statistics.
Spain uses the euro (€) as its official currency. Euro banknotes include €5, €10, €20, €50, €100, €200, and €500. Euro coins are also widely used. These coins are 1 cent, 2 cents, 5 cents, 10 cents, 20 cents, 50 cents, €1, and €2.
As part of its 2020-2024 strategic plan, the Bank of Spain will focus on recommendations for establishing an electronic currency. The country's ruling political party has proposed the creation of domestic digital money but the European Central Bank has yet to release the digital euro.
Spain had a population of over 46 million as of the middle of 2020, according to the United Nations. Meanwhile, Worldometer data showed that 80.3% of the country's people lived in urban areas, such as Barcelona and Madrid. The median age of the population is 44.9 years. Data Reportal noted that over 42.54 million people in Spain were actively using the internet as of January 2021.
Languages spoken in Spain
Spain's official language is Spanish, also known as Castilian. It is the primary language of most autonomous regions in the country.
Spain's gross domestic product stood at nearly $1.45 trillion in 2022, which was a significant increase from the previous year.
The country's household savings rate increased to around 9% in the final quarter of 2022. It has fluctuated significantly in recent years. It reached its highest value of 25% during the coronavirus pandemic in 2020.
Spain internet & mobile phone trends
According to Statista, around 97% of the country's internet users were over the age of 20 years in 2020.
Datareportal meanwhile claimed that 42.54 million people were using the internet as of January 2021, an increase of around 144,000 from a year earlier. The number of people owning smartphones also increased to 91% during this period.
Spain e-commerce stats
Despite the high number of smartphone and internet users in Spain, the country still has a long way to go to establish a thriving e-commerce market.
According to the PPRO Report, the average annual revenue per paying user in the country stood at $1,447 in 2020. Most of the country's online shoppers buy products from Germany, China, and the UK.
A PPRO report showed that 94% of Spaniards have bank accounts, but only 54% of them are credit card holders.
Summary of Spain's fiscal policy
The use of monetary policy as a defence against the economic impact of the pandemic has been the cornerstone of Spain's financial policy response. Public debt as a proportion of GDP has increased significantly in advanced economies.
The people of Spain are required to contribute to the maintenance of public expenditure. The tax system is based on the principles of equality and should not be used for any other purpose.
The Spanish economy faces various challenges, including the need to raise productivity, address labour market inefficiencies, mitigate the impact of climate change, reduce inequality, and deal with the consequences of an ageing population, while ensuring that public finances remain healthy. In addition, the country's public pension system is unsustainable, its education system is not providing the required skills, and its unemployment rate is high.
How people pay in Spain
An overview of how people in Spain choose to make payments.
Traditional payment methods
The primary traditional payment methods used in Spain
A Visa credit/debit card is a financial payment card issued by banks or financial institutions. It allows users to make purchases, withdraw cash, and be used online and in person. Visa's processing network can handle over 65,000 transaction messages per second.
Mastercard is a worldwide payment network that links financial institutions, merchants, and individuals, facilitating seamless transactions. This renowned company provides a range of credit and debit cards issued through partner banks. Depending on the specific bank, customers may enjoy supplementary benefits such as rewards programs, cashback offers, and insurance coverage.
American Express cards encompass a range of payment cards provided by the multinational financial services corporation, American Express Company. The Amex card portfolio includes diverse options like credit cards, charge cards, and prepaid cards. Renowned for their broad acceptance among merchants, these cards grant cardholders access to various advantages, including perks, rewards programs, travel benefits, and dedicated customer service assistance.
The Single Euro Payments Area (SEPA) is an EU initiative that harmonises direct debit payments across 36 countries in the eurozone. It ensures consistent payment processing for merchants and offers consumers the same level of security and convenience. SEPA covers all banks that provide euro-denominated direct debits and uses standardised identifiers like BIC and IBAN for payment transactions. It aims to create a unified payment market and promote cross-border trade within the eurozone.
Individuals can make a direct bank transfer using their online banking credentials with the help of SOFORT. The users must first authenticate themselves using their bank's website. This method is convenient and reliable, as it provides instant confirmation of transactions.
Alternative payment methods (APMs)
The top APMs used in Spain
Apple Pay, a mobile payment service from Apple Inc, allows users to make in-person, online, and in-app payments. It replaces chip and PIN transactions at contactless terminals.
PayPal is a frequently used digital payment system that allows clients to use their PayPal accounts, debit/credit cards, or bank accounts. Customers use PayPal for secure online shopping and to send/receive money.
Google Pay is a digital wallet and payment service developed by Google. It allows users to make secure payments using their mobile devices or computers. It supports various payment methods, offers compatibility across different devices, and provides features like loyalty program integration and transit ticketing. Google Pay prioritises security and convenience with tokenisation and biometric authentication. It has expanded to include digital banking services and continues to evolve.
With Amazon Pay, consumers can easily pay for their purchases on the website using the information they have stored with Amazon. It eliminates the need for them to set up a new account with a different merchant. In addition, they can also make purchases at restaurants and stores using the app.
Founded in 2005, Klarna is a global payment and shopping service. It offers flexible payment options, including bank transfers, BNPL, and instalments. Klarna's Buyers Protection policy ensures consumer protection. The payment options are integrated into the checkout process of partnering merchants. With 90 million active consumers and over 250,000 merchants in 17 countries, Klarna is a trusted and popular choice for convenient and secure payments.
How to accept payments in Spain
A guide to accepting payments in Spain
How to accept online payments in Spain
Before accepting online payments, you must determine which methods you prefer. Then you can choose a payment gateway provider, a service that authorises and processes online payments with their specific system.
Although there are plenty of payment gateway options in Spain, the general process for online payments typically involves an acquirer, issuer, retailer, and cardholder in the following steps:
The cardholder initiates a payment by presenting their payment card to the retailer to purchase goods or services.
The retailer sends the payment details to the acquirer, who processes the payment request and sends it to the payment scheme (such as Mastercard or Visa).
The payment scheme sends the payment request to the issuer (such as a bank or licensed issuer) who issued the card to the cardholder.
The issuer checks if the cardholder has enough funds to complete the transaction and approves or declines the payment request. If the payment is approved, the issuer sends an authorisation code to the payment scheme.
The payment scheme sends the authorisation code to the acquirer, which then sends it to the retailer, completing the transaction.
How long does an international payment from Spain take?
The payment processing time may vary depending on the method and the recipient's bank. For instance, online money transfers through platforms like PayPal can quickly and conveniently send money to multiple destinations.
Bank debit/credit cards: International payments with bank debit or credit cards may take a few minutes to a few hours, depending on bank processing times.
Online money transfers: Platforms like PayPal can process international payments within minutes to hours, depending on the service and destination country.
Wire transfers: Traditional bank-to-bank transfers via SWIFT or wire may take one to five business days or longer, depending on the destination country, intermediary banks, and transaction requirements.
Merchant fees for online payments in Spain can vary depending on the payment method and the merchant services provider used. Here are some examples of typical merchant fees for online payments in Spain:
Credit and debit cards: Merchant fees for accepting online credit and debit card payments can range according to the transaction amount. It also varies depending on the type of card used and the merchant services provider.
Bank transfers: Bank transfer fees can vary depending on the bank used, with some banks charging a flat fee per transaction and others charging a percentage of the transaction amount.
Other fees surrounding online payments in Spain include charges incurred by merchants, payment processors, and financial institutions involved in the payment processing chain. Below are some common fees:
Interchange fees: Interchange fees are charges paid by merchants' banks to cardholders' banks to cover the costs of processing card transactions. These fees are usually based on a percentage of the transaction value and can vary depending on the type of card used and the merchant's industry.
Payment gateway fees: Payment gateway providers charge a fee for processing transactions on their platform, which may be a percentage of the transaction value or a flat fee per transaction.
Cross-border fees: If a merchant accepts payments from customers outside the country, they may be subject to additional fees for cross-border transactions, including currency conversion fees and international processing fees.
Merchant discount rate: A processing fee that merchants are charged for transactions made using credit or debit cards. This fee generally falls within 1% to 3% of the total transaction amount.
Security challenges of online payments in Spain
The increasing popularity of online payments in Spain has raised security concerns, including phishing attacks and data breaches. Phishing involves fraudulent messages or websites that trick users into disclosing personal information. Data breaches occur when unauthorised individuals access sensitive data, leading to identity theft and fraud.
Spain's banks and financial institutions can carry out various measures to prevent fraudulent activities during online transactions. These include training staff members on spotting and preventing phishing attempts. They can additionally create incident response plans and conduct regular audits. These measures help prevent fraud and unauthorised access to a customer's information.
Key sectors and industries in Spain
An overview of Spain's market.
Spain's top industries
According to the US International Trade Administration and other various sources, the top 10 industries in Spain are:
Tourism- Tourism is vital to the Spanish economy, driving economic and social development. In 2018, it accounted for 11.8% of GDP, supporting 13.5% of employment (2.6 million direct jobs). Tourist arrivals reached 82.8 million, generating €89.8 billion in international receipts. In 2021, tourism amounted to 8.0% of GDP, contributing to 2.27 million jobs (11.4% of total employment).
Manufacturing- The Spanish manufacturing sector is diverse and export-oriented but still fragmented compared with Germany. Increasing company size and productivity and adopting new technologies by investing in research and development is crucial to enhance competitiveness. Additionally, transitioning towards a sustainable industrial model is essential for continued market operations.
Fashion- Spain's fashion sector has experienced instability in recent years, but there are signs of recovery. Apparel exports reached over €17 billion in 2019, demonstrating economic improvement. Inditex, the Spanish clothing multinational, generated a turnover of more than €27.7 billion in 2021, surpassing competitors like Mango and Tendam (Cortefiel).
Aquaculture- Aquaculture is a vital part of various countries' economies. Spain was ranked the world's fourth-largest importer of seafood and fish products in 2021. It is also a net buyer of these items. The country's fish processing industry has led to high per-capita expenditure and consumption.
Energy- In Spain, the goal is to transition to 100% renewable energy by 2030. This involves the development of various energy sources, such as solar and wind power, as well as energy efficiency. The country's electricity demand increased by 2.5% in 2021. Renewables made up 46.7% of Spain's electricity generation, with wind energy contributing 23.3%.
Construction- Spain's construction industry has undergone considerable change over the past two decades. It saw rapid growth during the housing bubble, contributing 10% to the country's GDP.
Healthcare- With a population of more than 47 million and the EU's fourth-largest economy, Spain is one of the most important markets in the bloc for medical products. Around 70% of the healthcare sector comprises public entities, such as hospitals, research facilities, and health centres.
ICT- The information and communications technology (ICT) sector has been one of Spain's most promising industries over the past decade. Among prioritised technologies are artificial intelligence, cybersecurity, and 5G. The ICT sector recorded a turnover of €120 billion in 2019, equivalent to 3.8% of the country's GDP. It then rebounded strongly and grew by 18.8% from 2020 to 2021.
Telecommunications- Spain is among the top 10 countries in the European Union in the provision of digital public services. With the largest fibre network in the EU, Spain provides 92% of households in the country with high-capacity lines.
Aerospace- Spain's aerospace and defence market has recorded tremendous growth in recent years. In 2021, the sector had a turnover of €11.6 billion, creating more than 50,000 jobs. Its rapid development was mainly due to significant investment in research and development. As a member of the European Space Agency, Spain is known for its active participation in the organisation's flagship projects.
Spain's leading exports include cars ($34.4 billion), refined petroleum ($12.4 billion), packaged medicaments ($12.2 billion), motor vehicles and parts/accessories ($10.8 billion), and vaccines, blood, antisera, toxins, and cultures ($8.93 billion). France is the largest export recipient ($59 billion), followed by Germany ($38.3 billion), Italy ($30.6 billion), Portugal ($30.5 billion), and the UK ($21.6 billion).
Spain's primary imports are crude petroleum ($26.7 billion), cars ($15.9 billion), packaged medicaments ($11.8 billion), motor vehicles and parts/accessories ($11.6 billion), and vaccines, blood, antisera, toxins, and cultures ($11.2 billion). Germany is the top import source ($49.6 billion), followed by France ($41.6 billion), China ($38.5 billion), Italy ($29.7 billion), and the Netherlands ($20.7 billion).
Regulation in Spain
The regulatory environment of Spain.
Summary of the regulatory environment in Spain
To maintain fairness and operational smoothness in business ventures in Spain, entrepreneurs are required to comply with a range of laws and regulations, which include:
Company law: This includes regulations governing companies' establishment, operations, and dissolution.
Employment law: This includes regulations governing employment contracts, working conditions, and employee rights.
Product liability law: This includes regulations governing the legal liabilities and responsibilities of manufacturers, sellers, distributors, and other parties involved in the production and sale of goods.
Intellectual property law: This includes regulations governing copyrights, patents, and trademarks.
Competition law: This includes regulations governing competition and antitrust matters to promote fair competition.
Consumer protection law: This includes regulations governing the rights of consumers, product safety, and advertising standards.
Data protection law: This includes regulations concerning the collection, use, and storage of personal data.
Like many other nations, Spain has some governmental entities overseeing those various regulations. For example, the Spanish Data Protection Agency (Agencia Española de Protección de Datos, or AEPD) enforces the country's data protection laws and aims to educate the public about their rights and obligations. While the National Commission on Markets and Competition (Comisión Nacional de los Mercados y la Competencia, or CNMC) enforces competition rules and investigates anti-competitive practices.
How card payments are regulated in Spain
The government has introduced an anti-fraud law that limits the amount of money paid in cash. The limit was previously set at €2,500 but this was reduced to €1,000. Therefore, all payments exceeding this amount must be made by card.
Over the years, the European Union has been working on the establishment of a single market for retail payments. The implementation of the SEPA has allowed more than 500 million people to use direct debits and credit transfers. But despite the progress that has been made, the card payments industry still has a long way to go regarding market integration and technical standards.
Do I need a licence? Yes. In Spain, it is required for businesses to be licensed. The process of getting a licence can be very time-consuming and complex. You must first register your company with the tax office and the social security agency.
Payment solutions in Spain
An overview of how to accept payments from customers in Spain.
Payment gateways and providers in Spain
Due to the evolution of payment methods, Spanish merchants can now accept different types of transactions. As a result, businesses must find a solution that enables them to accommodate the varying needs of their customers when it comes to payment methods. With the help of its POL platform, APEXX can provide a central hub that connects banks and payment methods.
One of the main benefits of the POL system from APEXX is it supports different payment methods. In addition, it has various features that can help firms improve their efficiency.
Integrating the payment processing capabilities of APEXX into existing systems can be effortless. The company's pre-built plugins and APIs allow organisations to easily integrate its solution with various platforms like e-commerce shops and POS terminals. This flexibility helps minimise disruptions and potential issues and makes operations smoother.
In Spain, businesses rely on APEXX's payment processing solution to improve operations and handle different payment methods. Its adaptable framework enables them to process different types of transactions and provide better customer service.
Cheapest payment solutions in Spain
To reduce fees in their payment stacks, merchants in Spain can implement the following strategies:
Negotiate fees: Merchants should negotiate with their payment providers for better rates, including transaction fees, interchange fees, and monthly fees.
Choose a suitable payment provider: Merchants should research and compare different payment providers to select the one that offers competitive rates and low fees.
Use alternative payment methods: Merchants can reduce fees by using alternative payment methods such as e-wallets or bank transfers instead of traditional card payments.
Prevent chargebacks: To avoid chargebacks and additional fees, merchants can offer clear product descriptions, prompt customer complaint resolution, and refunds when necessary.
Implement fraud prevention measures: Merchants should adopt fraud prevention measures to prevent fraudulent transactions, which can lead to chargebacks and additional fees.
Monitor payment processing fees: Merchants should keep a close eye on their payment processing fees and use payment analytics tools to track their expenses and identify areas where they can reduce costs.
Merchants can also consider using payment aggregators such as APEXX, which allow them to accept multiple payment methods through a single platform, reducing the need for multiple payment providers and lowering costs.
BNPL in Spain
The BNPL payment industry in Spain has experienced steady growth over the past couple of years. This is mainly due to the country's increasing e-commerce penetration and the economic slowdown caused by the coronavirus pandemic.
The long-term growth potential of the BNPL payment industry in Spain is expected to remain strong. It is estimated that the adoption of this technology will grow at a rate of 14.6% during 2021-2028.
Due to the increasing number of payment providers and the acceptance of BNPL, Spanish merchants can benefit from using APEXX. This platform allows them to manage their operations and integrate various systems.