The document discusses payment card developments in several Commonwealth of Independent States (CIS) countries. In Georgia, most payment cards are debit products used primarily for cash withdrawals. Cash remains the main payment method. Adoption of mobile payments may increase as Georgians are attached to their phones. In Moldova, EMV chip technology is being deployed in response to an upcoming European payment card mandate. Card usage is still low at 5-6% despite high card ownership. The document examines key trends and innovations in cards and payments across the CIS region by speaking with retail bankers in different CIS countries.

1. CIS countries report
Local politics challenge development
The 12 CIS region countries present both opportunities and challenges in the development of their
payment markets. Introduction by Morten Kriek, regional director at banking software provider CR2.
I n the twelve countries of
the CIS (Commonwealth of
Independent States) region the
10-15 brand new ATMs, if not
more. The ATM is open 24 hours
a day, 7 days a week and are vis-
USSR, and has more in com-
mon with the Commonwealth
of Nations than a political and
percentage of the unbanked ited by more of the bank’s clients administrative entity such as
population is far bigger than in and potential clients than any the European Union. The Baltic
Western Europe. other customer touch point. former USSR states of Latvia,
Developments such as branch Lithuania and Estonia declined
expansion, the rise of electronic Georgia to join the CIS.
channels, cards and electronic I will be speaking at the 2nd
payments and the downsizing of CIS bankers international bank- Co-operation
branch networks is several years ing conference and exhibition The principle objective of the
behind Western Europe. (www.cisbankers.com), which CIS is to enable cooperation in
However, since the banks in takes place from 3 to 7 June in political, economic, environmen-
the CIS region have access to Kiev Ukraine. The event was tal, humanitarian, cultural and
Morten Kriek
the same technology as their originally planned to take place other fields among a number of
Western peers, this makes for in Tbilisi, Georgia. However, as so For this reason, the organisers at former Soviet Republics.
interesting market develop- often happens in the CIS region, CIS bankers decided to pull out Through the CIS bankers net-
ments. politics got in the way of the of Georgia. work, I decided to contact senior
Many banks find them- development of the banking sec- The CIS covers 12 countries retail bankers in the different
selves at a crossroads. Will they tor. Georgia is blessed with some - Armenia, Azerbaijan, Belarus, countries of the CIS region to
invest in further development advanced services on their ATMs Georgia, Kazakhstan, Kyrgyzstan, find out more about the state of
of their branch networks or do and some innovative cards and Moldova, the Russian Federation, the cards and payments market
they invest in self-service chan- payments projects. However, as Tajikistan, Turkmenistan, Ukraine in their country. What is working
nels? For the investment it takes the new government and the and Uzbekistan. well, what is not and what are
to open up a new branch in, opposition are playing the wait- It is a loose agglomeration of the key trends and innovations.
for example, Ukraine, you can ing game, banks are reluctant to 12 independent countries that My findings are on the
expand your ATM network with invest in further development. used to be part of the former following four pages.
Cards are still used mainly for cash
M ost payment cards in Georgia are
debit products, are held by 18-34-
year-olds and are primarily used for cash
GEORGIA
rather lose their wallet than their mobile.
TOTAL DEBIT CARDS IN GEORGIA
DATE Number of cards issued
withdrawal at ATMs. In total there were 5.278 million pay-
The MasterIndex survey conducted by ments cards in the country in January this
January 2010 3,049,863
MasterCard found that cash is still the year, of which 4.145 million were debit June 2010 2,914,380
main means of payments for both card- cards, and 1.133 million were debit cards January 2011 2,654,208
holders and non-cardholders. Consumers June 2011 3,051,519
said that the top three incentives that Georgia payment January 2012 3,404,788
would persuade them to use cards are: market in brief 2013 June 2012 3,679,474
interest free instalments, money refunds
l 4,145,364 debit cards (January January 2013 4,145,364
and promotional lotteries.
While internet usage in Georgia is 2013)
l 3,404,788 debit cards (January TOTAL Credit CARDS IN GEORGIA
quite frequent, especially among card-
holders, online shopping has not yet 2012) DATE Number of cards issued
become widespread. l 3,127,643 Visa cards January 2010 236,288
The survey found that offering online l 529,660 MasterCards June 2010 326,534
identity verification for internet transac-
l 1,936 ATMs January 2011 474,427
tions has the potential to increase the
number of online shoppers. l 11,125 POS terminals June 2011 537,865
MasterCard says that the attachment l Total no. of transactions (January January 2012 600,795
of Georgians to their mobile phones 2013): 4,714,588 June 2012 635,631
points to the potential of m-payments in l Total val. of transactions (January January 2013 1,133,281
the country. 2013): GEL668.81m (E311.37m) Source: Central Bank of Georgia
Sixty percent said that they would
10 card & payments world MARCH 2013

2. CIS countries report
NFC payments the next big move
Moldova has a high proportion of cards per person, but usage is still quite low. The payment
card mandate for EMV migration in eastern European countries that comes into force next
year will drive the uptake of new payment technologies, says Cristina Doros, head of the cards
division at Moldova Agroindbank.
What payment developments into the regulation in December
MOLDOVA
are currently taking place in 2012.
Moldova, and what technolo- How prevalent are payment
gies are being used (NFC, wal- cards compared to cash, and How profitable is the cards and
lets etc)? what are the levels of card payments market in your coun-
For the moment EMV tech- acceptance at retailers? try? How competitive is it?
nology is being actively deployed Card payments are constantly The profitability of the card
by Moldovan banks. Although growing, but unfortunately the business is under constant pres-
the biggest players adopted chip percentage of card payments sure. Payment scheme commis-
much earlier (2007/2008) mas- usage is still quite low – about sions are quite high and force
sive implementation is boosted 5-6%. Although card penetration banks to maintain a high level
now by the MasterCard EMV is good – there are about 1 mil- of fees. Card payment usage is
mandate for Moldova and some lion cards in circulation for the still low and doesn’t allow for
other Eastern European coun- around 1.4 million economically Cristina Doros interchange revenue growth.
tries that comes into effect on active population. So the main The acceptance market is pres-
April 1, 2014. Therefore all issuers target is to drive card usage as a Are there any particular barri- sured by the quite big number of
must comply and this will give payment method. ers/problems to development acquirers. Competition is tough
additional momentum to EMV of the card market that you because all 14 banks in the mar-
in Moldova. NFC is being seen as Are most cards now EMV cards would identify? ket are developing their card
the next big move. or are there still a lot of mag- The main barrier is the lack of business, which is quite a big
stripe cards? financial education of the popu- number of banks for the size of
Who is leading the mobile Banks are issuing EMV cards, lation. Despite banks’ efforts in local economy. Therefore they
payments initiatives – banks, but the majority are still mag this regard people are still using have to compete strongly for
mobile phone companies or stripe. Moldova Agroindbank is cards mainly for cash withdrawals. customers.
retailers? now issuing only EMV cards. The There is a lack of incentives for
Banks and mobile operators overall situation is expected merchants to grow cards accept- What are the biggest oppor-
are the main drivers for new to change due to the payment ance. Some regulations from the tunities for payments in
initiatives. scheme mandate in 2014. National Bank of Moldova (NBM) Moldova?
impede commercial card usage Driving card acceptance at
Moldova card & payments market 2012 – for example, companies have the POS and card usage replac-
Number Compared to 2011 to submit confirmation docu- ing cash.
ments for each commercial card New innovative technologies
(% increase)
transaction. However, the NBM also provide opportunitie such
Total cards 1,011,673 11.0 is taking certain steps towards as ecommerce development,
Total cards issued in 2012 359,322 9.5 developing the card market – tackling contactless, virtual cards
Total card transactions 19,380,213 10.2 prepaid cards were introduced and e-wallets.
Total card transactions 967,680 32.7
abroad
Total card transaction 20,038,111.6 52.1
Diners Club invited
value (M000*) in Moldova
Total card transaction
value (M000*) abroad
1,296,442.7 18.6 T he National Bank of Belarus
is in talks with Diners Club to
enter the local market as part of
BELARUS
start shortly after reaching an
Transactions in Moldova 1,461,724 52.1 its plan to get all major payment agreement with authorities.
on foreign cards systems operating in the country In Q2 2012 the total vol-
by 2014. ume of card transactions in
Total card transaction 2,396,992.6 35.5
The National Bank plans to Belarus increased BR38.3 trillion
value (M000*) on foreign get all major payment systems to (E3.58bn), an increase of 190% on
cards in Moldova Belarus by 2014. Q@ 2011. The number of cards in
Total POS terminals 9,362 17.2 Vice chairman of the board of circulation grew by 0.9% in Q2 to
Total ATMs 924 8.6 the National Bank Sergei Dubkov 9.76 million. Non-cash transac-
Source: National Bank of Moldova said that Visa and MasterCard tions represented 18.7% of total
already issue cards and it was payments, compared to 14.2% in
* 1 Moldovan Leu = E0.063
hoped American Express will Q2 2011.
MARCH 2013 card & payments world 11

3. CIS countries report
Internet banking provides UKraine card & payments market*
opportunities for growth Total number of active payment cards
Total number of card issuing banks
32.199 million
143
Cash still accounts for 90% of transactions Total number of debit cards 25.671 million
Total number of credit cards 6.528 million
T he Ukraine payments mar-
ket remains heavily oriented
towards cash – which accounts
UKRAINE
tors, banks, service providers as
Total personal payment cards
Total corporate payment cards
30.882 million
1.317 million
for around 90% of transactions well as mobile phone compa- Number of magnetic stripe cards 30.488 million
– but internet banking provides nies and merchants who wants Number of chip cards 762,000
an opportunity to develop the Number of chip/magstripe cards 670,000
electronic payments sector. Number of internet cards 279,000
Svetlana Cherkay, deputy
CEO and head of retail banking
Main card issuing banks and % market share:
at Erste Bank Ukraine, says that
all the country’s largest banks PrivatBank 14.464 million cards (45% market share)
have been offering customer Oschadbank 4.273 million cards (13% market share)
internet banking solutions since Raiffeisen 2.88 million cards (9% market share)
2010, but so far they have had
limited functionality.
Number of payment cards in major population centres
“The main opportunities
and % market share:
we see are in expanding func-
tionalities such as the ability City of Kyiv 4.041 million cards (12.6% market share)
to receive and pay bills,” says Svetlana Cherkay Dnipr region 3.461 million cards (10.7% market share)
Cherkay. “We also plan to offer Donetsk region 3.193 million cards (9.9% market share)
smart phone applications to to promote mobile payments Source: Independent Association of Ukrainian Banks
internet-banking users, and pay- and attract new customers. The
* Figures as at July 1, 2012
ments in foreign currency.” international payment systems,
The development of remote Visa and MasterCard, will also
payments and online person to
person transfers through mobile
play a key role in develop-
ment.” Problems after POS law
apps are major opportunities
for banks the Ukraine, accord-
ing to Piotr Kaczmarek, head
Barriers to plastic
Around 70 million pay-
F rom January 1 2014, all busi-
nesses in Kazakhstan will be
required to accept POS card
KAZAKHSTAN
34,620 tenge (around US$231)
ment cards are in issuance in payments. for individual entrepreneurs to
the Ukraine, but only around A law actually came into 86,550 (US$577) for large busi-
32 million of these are “active” effect requiring most merchants nesses.
(used in the last three months), to have POS devices from the
according to the Independent start of 2013, but 12 months
Association of Ukrainian Banks. grace has been given to some
Bank card use is expanding groups including individual trad-
in the country but, according to ers and those operating in areas
Cherkay, the prevalence of pay- with no general use communica-
roll/salary cards for company tions networks.
employees is one of the factors The law has led to some On January 1 2013 there were
standing in the way of further problems, according to Halyk 12.65 million payment cards in
increases, with cards generally Bank officials, who said there the country (up from 10.26 mil-
Piotr Kaszmarek used to withdraw cash via ATMs is a waiting list of two months lion in January 2012), accord-
rather than as a debit card. among its merchant customers, ing to figures from the National
of retail banking at Alfa-bank Despite this cards are being with over 200 queuing to obtain Bank.
Ukraine. used more for purchase transac- a POS terminal in the country’s Of these, 9.40 million were
Kaczmarek adds that NFC tions, according to figures from biggest city Almaty alone. debit cards, 1.91 million were
will play a key role in develop- Alfa-bank. In 2012 there were The Soyuz Atameken busi- credit cards, and around 950,000
ing mobile payments over the 348 million POS transactions ness union says that more time were prepaid products.
next three years. (32.4% of total card transac- should be given to businessmen Visa International had 10.46
Asked which sectors will tions), up by nearly 300% from to install POS terminals. million cards, and MasterCard
be the major players in m-pay- the 121 million POS transactions According to the National had 1.56 million. There was a
ments in the country he says: in 2010. In the same period, ATM Bank of Kazakhstan, penalties total of 35.17 million POS termi-
“It’s not yet decided. All parties transactions increased by 120% for refusing to accept payment nals (compared to 28.93 million
are interested - mobile opera- to 700 milliion during 2012. via a bank card will range from in January 2012).
12 card & payments world MARCH 2013

4. CIS countries report
Premium cards targeted Lack of competition brings
Premium cards and increasing ATM functionality
are creting major opportunities in Armenia says high credit card profits
Artak Khachatryan, director of retail business Loyalty services help expand market
development at VTB Bank.
What are the biggest oppor-
tunities for your payments
ARMENIA T he low level of compe-
tition in the Azerbaijan
credit card market – which
AZERBAIJAN
the penetration of cards include
business? used (NFC, wallets etc)? has high APR and commissions a low level of financial litera-
Increasing the penetration Mobile payments is an emerg- rates – makes the business cy – particularly in the regions
of premium cards, increasing ing business in Armenia and more profitable than in many outside the capital Baku.
the average amount of non- currently mobile wallets have other countries. In terms of opportunities
cash transactions, and creating become comparatively popular That is the view of Elchin for his bank’s payment business,
new distance channels for card in the country. There is only Abdullayev, head of the retail Abdullyev says: “There is great
usage, such as improving the one implemented mobile wal- products division at JSC potential due to the low credit
functionality of ATMs and self- let product based on the USSD Bank Standard. card penetration and the exist-
service terminals. interface named “MobiDram” Abdullayev commented: ence of latent demand for such
which has limited functionality “We have seen progress in products.
What are the specific barri- (domestic P2P transfers, utility credit card penetration and the “The absence of fully-fledged
ers to the development of the payments etc.). retail share in total card turno- solutions for online banking and
card market? NFC technologies have not ver, especially after the launch money transfers also present
There is a low penetra- yet been introduced in the of loyalty cards with bonus & opportunities for us, as does
tion rate of POS-acquiring in country, and are not in the short installments services.” the growing popularity of loy-
the regions outside of Yerevan, term plans of banks and mobile He says factors holding back alty programmes.”
as a result low level of cards operators
noncash usage. This is a major
obstacle for cards market force- AZERBAIJAN card & payments market
ful development and has rather
impact on the cards penetration DATE Debit cards Credit cards
indicator. June 2010 4,019000 127,000
January 2011 4,118,000 135,000
How prevalent are payment
June 2011 4,250,000 139,000
cards compared to cash, and
what are the levels of card January 2012 4,437,000 184,000
acceptance at retailers? June 2012 4,679,000 247,000
Year by year payment cards September 2012 4,602,000 318,000
are becoming more and more
popular. Currently about 10%
DATE Number of credit Value of credit
of overall transaction volume Artak Kachatryan & debit transactions & debit transactions
at the retailers is via payment
cards. Who is leading the mobile (in MA: MA1 = E0.996)
The total number of cards payments initiatives – banks, June 2010 3,499,000 454,000,000
in the country is 1.3 million in mobile phone companies or January 2011 3,411,000 448,000,000
an economically active popula- retailers? June 2011 3,830,000 552,000,000
tion of 2.2 million. But the main Both mobile operators and
January 2012 3,541,000 531,000,000
usage of cards remains ATMs banks, but mostly the initiative
June 2012 4,405,000 676,000,000
withdrawls, especially outside comes from mobile operators as
of Yerevan [the capital]. an infrastructure key founder. September 2012 4,690,000 734,000,000
How has EMV card deployment What particularly important Number of non-cash payments via ATM and POS:
progressed in the country? recent payment innovations DATE ATM payments POS payments
12 of the 21 banks in Armenia have there been in Armenia?
January 2010 52,000 34,0000
issue EMV cards. However mag- Distance banking services
January 2011 83,000 73,000
stripe cards still prevail in the have developed, particularly
local card market. card-to-card transfers, mobile June 2011 93,000 125,000
banking, and virtual cards January 2012 65,000 205,000
What developments are cur- (cardholders have became September 2012 50,000 349,000
rently taking place in mobile more active in internet-based Source: Central Bank of the Republic of Azerbaijan
payments in Armenia, and transactions over the last few
what technologies are being years). Don’t miss our country report on Russia in the April issue of
Card & Payments World
MARCH 2013 card & payments world 13