Market electronic banking services - The concept of payment system

2 The development of payment system in the Republic of Kazakhstan

2.1 The concept of payment system

2.1.1 Market electronic banking services

Banks payment and other services by means of the electronic terminals and systems remote access from the innovative method is gradually becoming one of the major factors influence the market financial services. For example, the bank, not having extensive network bank offices, can attract more customers, introducing services through the internet, mobile banking and electronic terminals. Thus, an assessment of the current status and prospects for development of the financial sector in a country, including payment systems, must take into account physical infrastructure operators internet, mobile communications, as well as availability of electronic terminals and their availability the main part of the population.

In Kazakhstan infrastructure indicators electronic banking terminals as mentioned in Figure No. 2 at the end of 2013, are presented as follows:²³

 33,318 POS terminals, 27,325 of which are installed in the trade and service organizations (growth compared with 2011 year amounted to 16.5 % and 15.3 % respectively);

 8,652 ATMS, 1,040 of which the function accept cash money (growth at 6.7 % and 13.8 % respectively);

 1,678 Banking kiosks (growth at 18.0 %).

23 An analytical review of electronic banking services and payment systems for the year 2012, the National bank of the Republic of Kazakhstan. Almaty, 2014.

Figure No. 2 - Infrastructure of electronic banking terminals at the end of 2013.

Source: compiled by the author by “An analytical review of electronic banking services and payment systems for the year 2012, the National bank of the Republic of Kazakhstan. Almaty, 2014”.

In Kazakhstan as of 01.01.2014, the 1 terminal accounted for 483 residents, at 1 ATM - 1,860 inhabitants. For comparison, at the beginning of 2013, the 1 terminal accounted for 270 residents, the one ATM - 1,007 inhabitants (watch table No. 1). However, in Kazakhstan in connection with more features should be expected in the subsequent a more dynamic development of the network banking kiosks.

Table No. 1 - A comparative table of the terminals and ATMs in 2012

Country Number of per capita at the

1 terminal

Source: compiled by the author by “An analytical review of electronic banking services and payment systems for the year 2012, the National bank of the Republic of Kazakhstan. Almaty, 2014”.

The ratio of quantitative indicators electronic banking terminals with the holders of cards 3 of terminal and 1 ATM is located at 1000 the clips. When the Supreme Court ruled on this figure is similar to those of developed countries. With regard to the established rate of Kazakhstan below terminal performance of developed countries, for example, in England in 1000 the clips are 8 terminals, in Singapore - 17 terminals, in Switzerland - about 10 terminals.

However, the presence of a large amount of equipment is not a sign of maturity and payment infrastructure. For example, in the city of Almaty, in the framework of a working meeting and assessment payment infrastructure, the representatives of the World bank and company Visa concentration noted in separate locations, which is not the case in Europe and the United States. Thus, there is a problem equivocation between banks, as well as the deployment of the hardware, and the service holders of payment cards.

To assess the development infrastructure payments through remote access systems, such as the Internet, the use of mobile phones, and so forth. Possibly by consideration of the dynamics changes in the volume of transactions, committed through data systems. Thus, in 2013, as compared with the year 2012 the growth in the number of payments, carried out through the internet and mobile phones, amounted to 27.3 %, which indicates that the interest banks do business electronically.

However, the advantage of e-business is at the same time and the main disadvantage. As noted western experts, where banks have long drew attention and develop the market electronic banking services, a significant portion of the population does not accept, and some, by trying, refuses to electronic banking service.

As the primary reason for such behavior, banking customers have noted the inability to when a virtual solution for all their needs, that, including, implies an unwillingness to examine the procedures for the implementation of e-payments and other financial transactions.

Thus, despite all the convenience electronic banking service, the population is not yet ready to abandon the traditional live communication with the implementation of the financial transactions, including payments and money transfers. And to a greater extent this applies to less than progressive part of the society.

One of the supporting factors such conclusions is a marked differentiation indicators of development of electronic banking services for regions of Kazakhstan, i.e. high rates in major

cities - traditionally cultural centers and low in the areas. The most developed indicators network electronic banking terminals there is in the city of Almaty, which accounted for 32.0

% of all POS terminals, 18.8 % and 17.8 % ATM banking kiosks. In Astana there are 13.4 % POS terminals, ATM and 10.1 % 8.5 % banking kiosks. Almost all the remaining regions data rates are below 10 %.²⁴

In Russia there is a similar situation, because, according to proactive all-Russia survey conducted in the year 2012, the major user’s electronic banking services, including internet banking, live in Moscow and St. Petersburg. In Kazakhstan, at the end of 2012, there were 14,173 trade and service enterprises, which have entered into agreements with banks for the installation of POS-terminals in their 21,329 paragraphs trade and service (TSI). For the year 2012 the number of the specified business increased by 17.8 %, and OB at 15.8 %.

The main part of, entrepreneurs and TSI are located in the city of Almaty - 32.8 % and 34.6

%, respectively, in Astana - 14.8 % and 14.4 %.

At the same time, in early 2013, in effect the decision of the Government, according to which individual entrepreneurs (IE), by implementing certain types of activities, undertake to take the payment card, respectively, to install POS-terminals (4th). According to tax committee, such IE there is over 160 thousand. In this connection, it should be expected to make a significant increase in the scope of application of payment cards. But, in spite of the positive expectations, there are some outstanding issues. For example, under the operation of the said judgment is not subject to trade, carried out with the containers and honey, i.e., in the markets.

While the turnover, respectively, of cash earth a separate carve or container on the market can be in times exceed speed TSI, in which mandatory install POS-terminal.²⁵

There are also the chances of downtime POS-terminals. For example, in the year 2012, one POS-terminal on the day was carried out at least 2-x transactions. For example, in the year 2012 on a single ATM connection on the day in an average of over 46 transactions for removing cash and 5 for the implementation of the cash payment, the bank kiosk 21 transaction, of which 19 by cash contribution. For comparison, in Russia on a single ATM connection in an average day is committed some 40 transactions.

24 An analytical review of electronic banking services and payment systems for the year 2012, the National bank of the Republic of Kazakhstan. Almaty, 2014

25 Payment system of the Republic of Kazakhstan. [online]. [cit. 2015-02-03]. Available from WWW: < //

http://www.itk.kz/>

In Kazakhstan the residents have 0.8 payment cards, which is below the rate developed foreign countries. For example, in the developed countries, the residents have 3 - 5 cards, that show the active use issuers this balance-of-payments support tool as oppositional magazine.

In England the one resident have 3 cards, in Switzerland - 2 cards, in Russia - 2.8 cards. Thus, bearing in mind that in Kazakhstan the number of payment cards in treatment less than total number of inhabitants, the banks has space for development activities.

A characteristic feature of the market of payment cards in Kazakhstan is a gradual growth in payment cards in treatment is not less than 10% per year, the total number of which on the 01.01.2013, amounted to 12.1 million units, that the 26.9 % more than their number as at 01.01.2012. The number of holders of payment cards amounted to 11.1 million people, that the 2 million more economically active population of the country. ²⁶

Draws attention to itself a significant (from 11.4 % to 17.6 %) the increase in the year 2012 the proportion of credit cards in the treatment.²⁷

It should be noted that a significant increase (2.2 times) in Kazakhstan credit cards in circulation in 2012, similar to the situation in Russia, where the follow-up to the 9 months 2012, the number of credit cards increased by record 60.3 %, and experts are predicting the end of the year, growth may exceed 80 %.

Figure No. 3 - The share of credit and banking cards in the Republic of Kazakhstan in 2012

Source: compiled by the author by “Payment system of the Republic of Kazakhstan. [online], [cit. 2015-02-03]. Available from WWW: <//www.nazbank.kz>.”

26 An analytical review of electronic banking services and payment systems for the year 2012, the National bank of the Republic of Kazakhstan. Almaty, 2014

27 Payment system of the Republic of Kazakhstan. [online]. [cit. 2015-02-03]. Available from WWW: < //

http://www.itk.kz/>

81%

18%

Debit Credit Prepaid

The bulk of payment cards in circulation are international payment system - 95.4 %, which represented the payment cards VISA International (83.2 %), MasterCard worldwide (11.9 %), China Union Pay (0.1 %) and American Express International (0.2 %). Local systems are 4.6

% of the market.

The regional cut payment cards market in Kazakhstan shows that more than a third of cards in treatment and their holders are in Almaty. The probe into these claims, East Kazakhstan, South Kazakhstan and Astana is 7.7 %, 7.0 %, 6.8 % and 6.8% respectively of the total number of payment cards in circulation. In the other regions of the world, this figure is less than 5 %.

On the follow-up to the 2012, using a payment card issuers Kazakhstan in the territory of the Republic of Kazakhstan and outside it is committed by 187.6 million transactions in the amount of 5.6 trillion KZT. In comparison with the year 2011 the number of transactions increased 20.5 % and the amount 27.9 %. The number of removal operations for cash money, using cards Kazakh issuers amounted to 146.4 million. Transactions in the amount of 4.7 billion KZT (97.8 % of quantity and 88.6 % of the amount carried out by ATM), increased in comparison with the year 2011 17.2 % on the number of and the 27.4 % of the total cashless payments for goods and services using a payment card issuers Kazakhstan amounted to 41.2 million. Transactions in the amount of 0.8 trillion KZT, increase as compared with the year 2011 33.9 % on the number of and the 31.6 year of the total amount.

Thus, the share of cash payments in the overall structure payments using a payment card issuers Kazakhstan is 20.9 % of the number of and 12.8 % of the amount.²⁸

Trends change in the proportion of cashless payment system using a payment card issuers Kazakhstan in the past 5 years are as follows, that there has been a gradual increase in the proportion of number of cashless payment, at the time, as a percentage of the amount is not changed.

The reality of the situation is related to the fact that the vast majority of cards had been issued equity holders in the framework of the "salary projects", which have traditionally been the flow of money to remove the entire amount in cash. In this regard, growth in wages these clips directly affects the pattern of payment using payment cards.

28 Payment system of the Republic of Kazakhstan. [online]. [cit. 2015-02-03]. Available from WWW: < //

http://www.itk.kz/>

The increase in the proportion of number of cashless payment system also is associated with the development of the functional capabilities and the emergence on the market banking kiosks, by means of which may be the implementation of the cashless payment system.

However, the indicated payments, as a general rule, are committed by a small amount (watch table No. 2).

So in the year 2012 by an ATM by 42.4 %a and 24.2 % of the sum of all cash payment with payment cards between Kazakhstan and foreign issuers in Kazakhstan, at the time, as well as through POS terminals, originally intended for the implementation of the cashless payment system, implemented 46.1 % of quantity and 66.1 % of the amount specified payments.²⁹ Table No. 2 - Payments through electronic banking terminal systems and remote access in

Source: compiled by the author by “Payment system of the Republic of Kazakhstan. [online], [cit. 2015-02-03]. Available from WWW: <//www.nazbank.kz>.”

29 An analytical review of electronic banking services and payment systems for the year 2012, the National bank of the Republic of Kazakhstan. Almaty, 2014

Only in the territory of the Republic of Kazakhstan for the year 2012 through banking electronic terminals and remote access systems (with the exception of the bank-client) with the use of cards between Kazakhstan and foreign issuers, as well as without their use is committed 52.8 million transactions in the amount of 1.1 trillion KZT (7.5 billion USD).

For comparison in Russia for the 2011 year was held through electronic terminals, 49.8 billion USD, in England - 753.1 billion USD, in Switzerland - 84.9 billion USD, that shows that the market banking terminals of Kazakhstan is only at the initial stage of development.

Load on the ATM's in 2013, was relatively small. On average, every day in every ATM transaction accounted for 53, that the 2 transactions more than the year 2012. Such a change is understandable from the point of view of slowing the rate of growth imposed by atm. The similar figures for banking kiosks have changed significantly, with 97 transactions at one bank kiosk in the year 2012 up to 178 transactions in 2013. The increased load on the banking kiosks has been expanding their functional capacity, in particular, the introduction to their use as a terminal services instant payment. However, in spite of this, the major share of all cashless payment and transaction with cash in Kazakhstan accounted for the traditional device - ATM and POS-terminals.

30 Payment system of the Republic of Kazakhstan. [online], [cit. 2015-02-03]. Available from WWW:

<//www.nazbank.kz>.

The main share of payments through bank electronic terminals and systems remote access occurred in the city of Almaty (37.4 % and 40.2 % of the amount) and in Astana (11.3 % and 11.5 % respectively). At the same time, the proportion of removal operations for cash money using payment cards in the city of Almaty (17.8 % and 20.9 % of the number of and amount of removal operations for cash money) and Astana (9.5 % and 9.9 %, respectively) is lower than the corresponding share of the structure in the cashless payment, that also shows the greater financial literacy of the inhabitants of these cities.

Figure No. 4 - The cashless payment system in Kazakhstan in 2013

Source: compiled by the author by “National Bank of Kazakhstan: number of cashless payment system, using payment cards have increased in 2013, to 31%. [online], [cit. 2015-02-03]. Available from WWW: <// www.Profit.kz, on 19 February 2014>”.

As at 1 January 2014, remote banking services by means of the electronic terminal services and remote access systems provide 27 second-tier banks and KazPost from the specified number of the 24 bank and in KazPost represent, including, services with payment cards, and 13 banks - without their use.³¹

In the past year alone, the number of banks, providing electronic banking services without the use of payment cards has increased by three. The regulator explains that the small banks to focus on the installation instant payment terminal. However, according to the National Bank, in the near future, is not expected to be a significant increase in the number of banks the

31 Payment system of the Republic of Kazakhstan. [online], [cit. 2015-02-03]. Available from WWW:

<//www.nazbank.kz>.

terminal owners instant payment, since this market segment, given the competition, there still remains for banks unattractive.³²

Figure No. 5 - The structure transactions using cash-in Kazakhstan in 2013

On the whole the number of POS terminals increased by 46.8 %, reaching the mark of 40117 units. Also there was a significant increased (58 %) of number of trade points with POS-terminals and amounts up to 33709 units. However, in spite of such a turbulent growth the number of POS-terminals remains low. In the year 2013 during 24 hour about two transactions per one POS-terminal were made.

In regional cross-sectional distribution network of the implementation of the electronic banking services in practically has not changed. Change in the ratio of the basic indicators infrastructure in the vast number of regions does not exceed 1 %. An exception to this is the situation with the banking kiosks, the share of which in the South Kazakhstan region has increased by 6.3 %, in the Karaganda Oblast - at 4.4 %, and in the city of Almaty - at 3.7 %, which is also linked to the actions by a single bank. Still, not less than 20 % market share for the core indicators are in Almaty.

32 Payment system of the Republic of Kazakhstan. [online]. [cit. 2015-02-03]. Available from WWW: < //

http://www.itk.kz/>

In document The Payment System in Kazakhstan (Stránka 21-31)