Nadezhda Akulova
Kazakhstan is preparing for the convergence of banking and the Internet industry, during which the number of people who use electronic payment systems will increase. But if the Internet banking appeared in Kazakhstan 13 years ago, the segments of mobile banking, electronic money and banking terminals are still in early development stage. Even the population is not yet ready to abandon the traditional alive interaction when carrying out financial transactions.
Before considering the main trends in the development of Kazakhstan’s electronic payment system (EPS), let’s first clear up what they are in fact. The structure of national EPS ecosystem consists of remote financial services and bank / non-bank terminals. In its turn the first one is divided into mobile (mobile and SMS-banking), non-mobile banking (Internet banking), and non-banking non-mobile (electronic money) services. The non-cash payments are available via the Internet or mobile network with the use of mobile phones, smartphones, tablets and computers. As for the terminals, the Kazakhstani banks are now introducing remote access devices such as POS-terminals, imprinters, ATMs and bank terminals.
The evolution of electronic payment services in our country started in the mid-90’s with the occurrence of ATMs and POS-terminals, and in the 2000s info terminals appeared. In 2000 the Internet banking began to develop, and in 2005 the first mobile banking project of Halyk Bank was launched.
Finally, in 2011 it was the turn of electronic money and first national universal payment systems. Just then such specialized players as the private operators with the services of MyPay (Interval Kazakhstan LLP together with Halyk Bank of Kazakhstan JSC) and HandyPay (Regional Payment System LLP) came into the market. Thanks to them, the mobile e-commerce was launched in our country. There were three electronic purses: the Kazakh KZM (Alliance Bank JSC), “Tau-purse”, and the Russian QIWI-purse.
Currently there are 11 payment systems, including “National Payment System”, MyPay, HandyPay, KZM, “Tau-purse”, QIWI, iKassa.kz, Quickpay, M’Pay, “KiberPlat” and “Taulink” in the market. Two years ago, Yandex.Money began to serve the Kazakhstan citizens, using the cards, issued by any bank.
Thus, only mobile operator payments are expected to be developed. It is a payment service via mobile phone, when money is written off from the operator account, but not from the card base. Today, however, it is quite difficult to implement it as it is very difficult to obtain a banking license.
In general, the situation with the electronic payments is as follows. In 2012, from 38 banks the payment cards were issued by 24 banks and Kazpost JSC as well. 12 banks provided services for making payments and money transfers via the Internet, 6 of them provided this possibility only with the use of payment cards. 6 banks permit making financial transactions using mobile banking, including 4 banks that allow using the cards. Only 2 banks issue electronic money.
On the 1st of January 2013 the total number of cards, issued by the national banks, amounted to 12.1 million units that is 26.9% more than the last year. In circulation there are mainly cards of international payment systems, such as VISA International (83.2%), MasterCard Worldwide (11.9%), China Union Pay (0.1%) and American Express International (0.2%). Local systems cover only 4.6% of the market.
The number of cardholders in Kazakhstan has reached to 11.1 million people that is more than 2 million more than the Kazakhstani economically active population. In general, today 0.8 of payment card is accounted per one citizen of our country. This figure is lower if you compare it with the developed countries. For example, in the UK the index is 3 cards per capita, in Switzerland – 2 and in Russia – 2.8. Taking into account that the number of cards in circulation is less than the total number of inhabitants, the banks have a large field for the development of their issuing activity. On the other hand, only half of all issued cards are used in the Republic today and this bring us to the fact that the population has a weak interest to this payment instrument.
At the end of 2012, 187.6 millions of transactions with the total amount of KZT 5.6 trillion were committed using payment cards of the Kazakhstani issuers in the country and abroad. Comparing it with 2011, the number of transactions increased by 20.5%, and the transactions amount raised by 27.9%. Herewith, the number of cash withdrawal transactions totaled 146.4 million for the amount of KZT 4.7 trillion. Comparing it with 2011 figures they increased by 17.2% and 27.4%, respectively. It should be noted that 97.8% of the transactions and 88.6% of the withdrawal amount were executed via ATMs.
Electronic payments for goods and services are accounted for 41.2 million transactions with the total amount of KZT 0.8 trillion, that, respectively, by 33.9% and 31.6% more than the last year. Thus, the share of non-cash payments in the total structure is 20.9% of the payments quantity, and only 12.8% of the total amount.
This situation is connected with the fact that the vast majority of payment cards are issued under the payroll card program, and their holders are traditionally used to withdraw the entire amount in cash at its receipt to the card. Despite all conveniences of electronic banking services, people are not yet ready to abandon the traditional alive interaction, when carrying out financial transactions, including money payments and transfers. For most of all it is due to the level of financial literacy and to the appropriate infrastructure development.
This fact is also supported by the significant differentiation in the electronic banking services market between the regions of Kazakhstan: high indexes in large cities and low indexes in the regions. Thus, the most extensive network of electronic banking terminals is in Almaty. It accounts 32% of all POS-terminals, 18.8% of ATMs and 17.8% banking terminals. In Astana the figures are 13.4%, 10.1% and 8.5%, respectively. Almost in all other regions the figures are much lower than 10%.
The significant importance for EPS development has the willingness of the retail business to accept such payments. 14,173 retail and service businesses, that concluded agreements with the banks for the installation of POS-terminals in 21,329 sales and service points (SSP) held their activity in Kazakhstan at the end of 2012. The main part of SSP is concentrated in Almaty (34.6%) and Astana (14.4%).
At the beginning of 2013 the Decree of the Government came into force, according to which the individual entrepreneurs (IEs), carrying out certain types of activity, are to accept payment cards and, therefore, to install POS-terminals. According to the Tax Office, there are now more than 160,000 of such IEs. In this regard, the National Bank expects a significant expansion in the sector of payment cards use. However, despite the positive expectations, the regulator considers that in this sphere there are a number of unresolved issues. Thus, the market retail trade is not subject to the Decree. Meanwhile, the turnover of a separate market counter or container can exceed the SSP’s turnovers by times.
We should not forget that mandatory purchased equipment may be simply unclaimed. For example, in 2012 one average POS-terminal was used for less than 2 transactions per day, one ATM – for 46 cash withdrawal operations and 5 – for non-cash payments, the banking terminal was used for 21 transactions, 19 of which were committed by cash down payments. As a comparison, in Russia about 40 transactions are committed via one ATM per day on average.
In addition, the availability of a large number of equipment does not state for the payment infrastructure development. The problem of an agreed policy absence between the banks both on equipment placement and servicing of the card holders is the reason for the excessive concentration of ATMs in certain areas (which is not typical of Europe and the United States).
It is possible to evaluate the development of payment infrastructure by remote access systems, such as the Internet and mobile phones, studying the change dynamics of the volume of transactions made by using them. Thus, in 2012, compared with a year earlier, the growth in number of payments made via the Internet and mobile phones accounted for 27.3%. However, the contribution of the remote access systems to the total volume of payments made via remote channels is still negligibly small. Thus, according to the National Bank, in 2012 the ATMs accounted for 80.5% of all transactions, POS-terminals – 9.1%, self-service terminals – 5.6%, Internet banking – 3.2% and mobile banking – only 0.2%.
Completing the statistical profile of EPS in Kazakhstan I want to cite the results of the studies conducted by ICT-Marketing last year. According to these studies, the most typical online buyers in our country are residents of megacities and 57% of them live in Almaty and Astana. 40% of buyers are between 20 and 30 years, and nearly 60% of them are male. More than 70% of online buyers have higher education. Most of them do not have children yet, and their personal income exceeds USD 500. It is also possible to distinguish two main devices that the Internet buyers sue for the net access: PC / Laptop (80%) and mobile phone (43.3%). The tablets (10%) and other devices (11.8%) are used for the Internet access much less.
Problems and perspectives
Among the key factors that determine the future development of financial industry experts call the mobility, use of virtual money and information security. In this case, the problems of domestic mobile financial services are quite obvious. Kazakhstan needs to implement new solutions, including distance payments using bank cards and NFC technology, as well as to develop the Internet-based commerce.
According to Konstantin Gorozhankin, the General Manager of Processing.kz, the major factor constraining the mobile commerce development is that about half of the bank cards are closed for the Internet. “This way the Kazakhstani banks insure their risks. In all developed countries the bank cards are opened for the Internet by default and you have the opportunity to write an application to close your card. In our country it is the opposite.”
It is understood that the increased use of mobile payment systems demands a new level of security provision. Illegal withdrawals from holders’ cards via ATM and illegal transactions, committed by the third parties without the owner’s knowledge, contain the main risks for both parties, banks and customers. And here the new technologies bring some risks, which are clearly seen in the banking sector that is extremely conservative and sensitive to the data loss or leakage.
Virtual money is another driver that shall determine the banking industry in the future. According to Maxim Tambiev, the Chairman of the Board of Directors of Info Industries Group, we are on the way of the convergence of banking, media and Internet industries. Virtual money, discounts and coupons should be treated as a financial asset. The problems and risks arising in this sphere are related to the user identification at the online payments execution. How to identify the user making mobile payments, how to enhance the authentication process security? These are the questions to be answered in the nearest future by IT-professionals and developers of technologies and solutions.
Continue to actively expand and alternative channels for the provision of payment services with the use of innovative technologies. Thus, the market for mobile payment services banks introduced solutions such as SMS-service and Java-based applications (applets, MIDlet). Despite this, the level of trust in the non-cash electronic payments by means of the Internet in Kazakhstan is still low. Thus, according to the studies of ICT-Marketing, conducted in 2011, only 27% of the population in the major cities of Kazakhstan were willing to trust in the cashless electronic payments. Herewith, respondents identified payments by credit card – 61.1%, as well as e-money – 22.4% as the most preferred methods of payment. As the least attractive were payments via SMS – 11.3%.
Meanwhile, according to the Director of Intervale Kazakhstan LLP, Marina Martynova, mobile transactions can significantly simplify the lives of consumers, who now spend considerable time and efforts for the mandatory payments. In addition, they shall reduce the bank’s operating costs for the contact service of its customers by promoting transparency in trade transactions.
As it was noted by Erlan Ashykbekov, the Head of the Office for Policy Payment Systems of the Payment Systems Department of the National Bank, the main industry perspectives are associated with the introduction and promotion of the new mobile technologies and solutions in trade: contactless technologies, NFC, mobile applications based on the use of electronic money. He also stresses the need for efforts cooperation and deepening of cooperation between the industry participants for the development and the maintenance of common standards of operations and technologies. And, of course, it is needed to implement effective clearing procedures for the interoperability and organization of accounts between the different systems of mobile payments in the system of retail payments.
In this regard, a good example is the position of the CIO at the Financial University under the Government of the Russian Federation, Vladimir Soloviyev, who believes that the reason that inhibits the banking industry development is the undeveloped models of interaction between telecom-players and banks, but not the lack of new technologies: “The bank customers inevitably become mobile. The increasing number of them are accustomed to have in their pocket the control center (including banking) for all the services from anywhere in the world. The technologies for this already exist, but they are not designed in the convenient packages. And it seems that in the next few years a revolution associated with the emergence of new user-friendly and widely sought-after technology packages may take place.”
