C O N T E N T S RESEARCH AND REVIEW Consumer Finance in Eastern Europe
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Interview with Mantas Kaluina, Senior Research Analyst at Euromonitor International
CARD MARKETS Market of Plastic Cards in Ukraine
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MasterCard EMV Cards with Pectoral® from Plastic Card Company
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Plastic Card Enterprise Ltd. has launched issuing MasterCard EMV cards with chip module Pectoral® of its own design
MasterCard® PayPass™ comes to Ukraine
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Market of Plastic Cards in Kazahstan
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Market of Plastic Cards in Georgia
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IT SOLUTIONS SRPF ARGUS Ltd Affordable IT Solutions for Financial Market
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TECHNOLOGY AND SOLUTIONS MasterCard® PayPass™ Comes to Ukraine
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MasterCard, PrivatBank and MegaMarket present an innovative technology PayPass™ on the Ukrainian payment market
EQUIPMENT PRODUCTION
MasterCard EMV Cards with Pectoral® from Plastic Card Company
Bank Equipment by Ukrainian Company
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MARKET PLACE
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Засновник та видавець: Олена ГОЛЕМБОВСЬКА
Digest•2011
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BRIEF
IN H1 2011 $7.2 BN WAS TRANSFERRED FROM RUSSIA VIA MONEY ORDER SYSTEMS
NEW LAW AIMS TO RELIEVE BUREAUCRATIC BURDEN ON RUSSIAN CITIZENS New federal legislation on administrative elec
tronic exchange, which went into effect on October 1 in regard to federal agencies, could radically simplify the exchange between private citizens and Russian administrative bodies. Under the new law, federal officials will no longer be able to request documents or information from private citizens already available in the databases of other federal agencies. Each year, Russian federal and local govern
ment bodies receive up to 81 million applica
tions and requests from citizens, the Ministry for Economic Development calculated, and in their turn these agencies require citizens to provide 560 million documents to process the applications and requests. In addition to reducing the number of docu
ments requested, the new law guarantees that the applications and requests of private citi
zens will be answered in no more than 5 days. The law will become effective for regional and local administration starting July 1, 2012.
PETROL STATIONS LUKOIL BEGAN TO ACCEPT NFC PAYMENTS SITRONIX Smart Technologies (SST), MTS and LUKOIL caried out a joint project named "Rapid filling" – the 1st in Russia contactless system of NFC payments at the LUKOIL petrol stations. Within the framework of this project SST devel
oped the SIM application "Rapid filling" for the System of Supplier Accounts' Control, integration with the system, suppporting special SIM cards based on swp/hci protocol and NFC
aerial for telephones, not supporting swp
protocol.
CYPRIAN TRIANTAL INVESTMENTS LTD. HAS 24.99% SHARES OF PRIVATBANK Company Triantal Investments Ltd. (Cyprus) became an owner of 24.99% shares of the largest bank in Ukraine Privatbank (Dnipropetrovsk). On August, 8, 2011 on General Meeting shareholders of Privatbank approved a decision to accept a foreign investor as a stakeholder – Triantal Investments Ltd. Earlier Triantal Investments Ltd. officially announced its intention to purchase shares of Privatbank for UAH 3.385 bn.
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NEWS
According to Bank of Russia, in April June from Russia was transferred $4.359 bn, including $3.774 bn into the CIS countries, $584 mn – into the countries of non CIS countries. On the whole, for the H1 2011 the volume of money orders from Russia accounts for $7.209 bn. Into Russia for the Q2 2011 was trans
ferred $662 mn, and for the H1 2011 – $1.197 bn. The Bank of Russia conducts monitoring of the followings systems of money orders: Anelik, Blizko, Coinstar Money Transfer, Contact, InterExpress, Migom, MoneyGram, PrivatMoney, Unistrim, Western Union, AsiaExpress, Alliur, Blitz, Rapid Mail, Gold Korona, Leader.
PAYPAL WILL SOON START ITS WORK IN MOLDOVA On Septembers 24, 2011 the internal do
cument of PayPal went into effect, in obedience to which the American com
pany began to acknowledge payment cards, issued in Moldova. In the middle of October the represen
tatives of PayPal will announce details
of connecting to the Moldavian bank
ing system. The negotiations about expansion of se
rvices of PayPal in Moldova began in the autumn of 2010, and in August, 2011 the company declared about its willingness to start its work in the Republic.
PARLIAMENT OF UKRAINE ADOPTED THE LAW ON INTRODUCTION OF BIOMETRIC CERTIFICATES FOR CITIZENS Verkhovna Rada (Parliament) adopted the Law on biometric documents, verify
ing personality and confirming citizenship of Ukraine. This Bill envisages that all birth certificates since January, 1, 2012, will be equipped with the special biometric plastic cards, representing main personal data. On the basis of this biometric document in the future other documents, certifying citi
zenship of Ukraine will be issued. At the same time, the law does not foresee obligatory exchange of passports for biometric documents.
RUSSIA SMART CARD MARKET 2012 REPORT It has just been published a new Smart Insights Report titled "Russia Smart Card Market 2012" that investigates in detail the secure transactions industry in Russia, and provides market forecasts for 2012 2016. The new Smart Insights Report "Russia Smart Card Market 2012" states that smart card solutions shipments in Russia will reach about 1.8 billion units yearly in 2016. Russia will continue to show a dynamic growth in secure transaction industry. Market devel
opment will be mainly supported by heavy government backed investments along with legislative dynamics. These government and private operator projects will boost the demand for smart card solutions. The report demonstrates that transport segment will continue to represent the lion share of total shipment volumes. Smart tickets in 2011 will reach 2.5 billion units
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yearly. However, by 2016, these volumes will be reduced due to replacement by other large projects. Telecommunication segment shows a steady increase. Average mobile commu
nication penetration is already above 150% and, in Moscow and St. Petersburg, it has exceeded 200%. Moreover, mobile network operators are still facing high churn rates. As a result, Smart Insights anticipates SIM cards shipments in Russia will exceed 240 million yearly by 2016. Russia implements several governmen
tal initiatives as well. The Universal Electronic Card (UEC) is a national ID card project with many different appli
cations on board, such as social welfare, healthcare insurance, transport, eGovern
ment, electronic signature and banking application, etc.
RESEARCH AND REVIEW
CONSUMER FINANCE IN EASTERN EUROPE Segmentation and personalization in financial cards is noted in most Eastern European countries as well. Banks are increasingly offering cards to serve specif ic customers groups and their personal inter ests, such as cards for youth, sport club fans, internet payments, with personalized design, etc. Demand for co branded cards is also increasing.
Interview with Mantas Kaluina, Senior Research Analyst at Euromonitor International
CB: What are the general trends of finan cial cards and payments markets in the countries investigated by your company? Mantas Kaluina: All researched Eastern European markets have strong cash culture, where majority of payments are still being made by cash. Within Easter Europe Hungary and Czech can be considered as maturing markets while Poland and Russia are still in developing pace. However, Eastern Europe overall remains in the early stages of card use compared to Western Europe or North America, primarily, as a result of the large unbanked population. Russia has the lowest banked rate in the region, with only 43% of the population over 15 banked. In Poland this number is also low at 65% In terms of cards, Eastern Europe can be described as a typical debit region. Bigger part of people, especially in Poland and Russia, still use their cards as cash access devices instead of payment instruments. Despite that number of card payment trans actions and transaction value, grows steadi ly in all Eastern European countries. The main drivers of growing cards usage are expanding infrastructure (ATMs and POS), consumer education, promotions and grow ing banked population. An increasing focus on financial literacy efforts serves as a crit ical card payment driver, as it also helps to build consumers trust in cards. Rapidly devel oping internet retailing is another driver of financial cards usage in Eastern Europe.
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CB: Is there any crisis influence on both the trends and market development of the countries? Mantas Kaluina: Eastern European finan cial cards market is not mature and satu rated yet and the economic situation didn't significantly impact the pace of develop ment. While growth in overall card payments was sustained by new card users, although at a slower pace than before, both consumers and issuers shied away from credit cards, which suffered the greatest impact from financial crisis. Bad card debt rose as debt strapped consumers struggled to make payments. Banks have tightened their crite ria for granting credit on cards and offer reduced credit limits, and as a result fewer customers were eligible to borrow via cred it cards. Also, consumers themselve became more cautious in spending money and less willingly use credit cards to pay for goods and services; fearful of excessive borrowing. Bounce back in Eastern Europe was greater than the global average and greater than Western Europe. In 2011 growth in cards expected to return the region and surpass previous highs as the banked popu lation continues to increase, consumer expenditure is slowly recovering and Western European banks make further acquisitions. Western European financial institutions have greater product offerings
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which will underpin growth across all card function types. CB: Which markets have the highest share of domestic cards and why? Mantas Kaluina: Domestic cards (payments by domestic operator) are not available or their presence is negligible in all researched Eastern European markets, except Russia. In Russia domestic cards account for bit more than 10% of cards in circulation. CB: In which countries contactless cards and new directions of technologies are most developed? Which markets are most inno vative? Mantas Kaluina: In terms of financial cards and payments innovations, Poland is the most prominent market in Eastern Europe, where most modern card technologies are being implemented, tested or already start ed to gain popularity. The most important innovation – contactless cards – is rapidly developing in Poland. Card issuers have made innovation a key part of their strategies, using contactless as a branding tool to attract younger consumer segments. Both leading operators Visa and MasterCard invested to create infrastructure throughout Poland for their contactless cards Visa payWave and MasterCard PayPass, respectively. As a result, around 20 000 POS terminals across the country are capable of accepting contact less payments. Polish PKO Bank Polski, the largest issuer of payment cards in Poland, is converting its entire Visa portfolio to contact less Visa payWave cards through mid 2012. Many other banks are also already issuing contactless cards. Citizens of Warsaw and few other cities can already use contactless cards to pay fares in public transportation as well as for street parking. Polbank, Bank Zachodni and ING introduced MasterCard PayPass as a sticker affixed on a mobile phone. Thanks to the implementation of NFC mobile payment technology, consumers can make payments via their mobile phones in places where contactless payments are possible, including cafes, restaurants, conve nience stores, bookshops, kiosks or petrol stations. Warsaw was the first city in Europe to install biometric ATM, which recognise consumer by fingerprint. Contactless financial payment cards were also successfully launched in Hungary and Czech Republic.
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CB: What are the forecasts for financial cards and payments markets? Mantas Kaluina: The strong cash culture in Eastern European markets will contin ue to decline over the 2010 2015 year peri od as the security and convenience associ ated with greater point of sale terminals and ATM distribution becomes available to more and more people. Continued empha sis on consumers' financial education will additionally underpin positive development of financial cards. Good growth potential, especially in Russia and Poland, still lies in unbanked population. The obstacles in reaching the unbanked population are similar across emerging markets: general misunderstand ing of financial products; distrust of the issuing financial institutions; and a cultur al tradition of dealing in paper.
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Younger generations in Easter Europeans have demonstrated less resistance to using financial products and are more techno logically literate. This will reinforce the development of modern payments meth ods, such as contactless, NFC, m commerce, pre paid. Pre paid cards, both open loop and closed loop, are relatively new instru ments that will be gaining popularity in Eastern European countries. This card type expected to experience the strongest growth of all financial cards. Open loop pre paid cards are driven by pre paid internet payment instruments and e wallet, while closed loop are increasing ly used for public transport and plastic gift cards. Further development of new platforms for prepaid cards (payroll, youth, insurance, etc.) will continue. Potential barrier to this trend can be seen in Russia's cash kiosk system that allows consumers to conduct electronic trans actions using cash. Travel and internet retailing expected to be other important drivers of finan cial cards market in Eastern Europe. Travel spurs cards usage in a variety of ways including airline ticket purchases and the likelihood of tourists using financial cards when on vacation. Internet retailing serves as one of the most important cards drivers. Czech Republic and Hungary are expect ed to post some of the highest Internet retailing value growth rates over next five years globally. Current trends such as segmentation and personalization of bank cards will contin ue over 2010 2015. Cards will continue migration to more secure chip technology. CB: What are trends in payment infra structure development in these groups of countries? Mantas Kaluina: Development of infra structure for financial cards and payments expected to remain among key growth drivers in all Eastern European countries. The number of ATMs and POS terminals will continue to grow, which creates more opportunities for consumers to use finan cial cards for payments instead of cash. Big cities and key regional centres are already well covered and the level of merchants' acceptance is quite high, expansion expect ed to continue to other parts of the coun tries, such as smaller cities and rural areas,
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which also creates a strong base for the future growth of financial card payments in these areas. In countries where contactless technol ogy for financial card payments was already launched (Poland, Hungary, Czech Republic) heavily investments in network of termi nals accepting contactless payments will continue.
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CARD MARKETS
Ukrainian Payment Card Market ccording to the National Bank of Ukraine (NBU) 179 banks had license for banking operations on July 1, 2011. 142 of these banks were members of the card payment schemes functioning in Ukraine and issued and accepted payment cards, among which: Domestic – National System of Mass Electronic Payments (NSMEP); International – Visa, MasterCard, UkrCard, American Express, Union Card, Zolotaya Korona (Gold Crown); Interbank payment systems belong ing to a bank issuer. On July 1, 2011 Ukrainian banks issued in total 51.402 million payment cards, which had not expired, including 32.066 million (62.4%) active cards (card is
active if at least one transaction was made using this card during last 12 months). Only active cards will be taken into consideration below. In H1 2011 the number of active cards increased by 2.661 million (9%) – from 29.405 million to 32.66 million. The growth according to the payment systems is: MasterCard – by 13.4% (10.060 mil lion); VISA – by 8.4% (accounted for 19.557 million); Interbank – by 1.7% (accounted for 1.188 million). The number of cards decreased in the following payment systems: NSMEP – by 3.2% (1.183 million); UkrCard – by 22% (78 thousand). Total number of cards of the other payment systems is very low, though it
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TABLE 1
ТОР 20 BANKS ISSUERS OF PAYMENT CARDS ON OCTOBER 1, 2011 (unit) Number of active cards*
Bank PRIVATBANK Raiffeisen Bank Aval OSHCHADBANK Prominvestbank UKRSOTSBANK UkrSibBank Ukreximbank FUIB Ukrgasbank Express Bank IMEXBANK BROKBISINESBANK Delta Bank Bank Finance and Credit ALFA BANK Nadra Bank VAB Bank VTB Bank Bank Pivdenniy IndustrialBank
Number of cards in circulation**
17 138 631 2 812 350 1 965 206 959 586 901 558 853 354 649 864 617 691 571 728 488 456 481 515 475 092 401 218 325 349 314 348 274 866 260 766 243 244 187 555 167 256
31 554 630 3 579 122 2 107 192 1 555 793 1 175 072 1 225 134 834 678 983 828 716 090 600 228 810 883 507 750 667 551 548 612 358 209 582 029 471 743 514 220 254 403 220 637
* total number of issued bank cards with not less than 1 transaction during last 12 monhs ** total number of cards issued by Ukrainian banks with not ended expiration date
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Number of installed ATMs 9 697 3 390 1 236 1 416 1 148 1 675 765 1 201 1 122 454 262 725 213 465 260 953 273 424 253 171
Number of POS terminals 47 866 12 890 3 350 1 916 4 481 2 221 8 748 6 460 1 689 918 767 691 220 5 017 187 1 611 478 277 5 192 358
grew for the accounted period by 15.9% (from 171 to 198). Total number of clients of the Ukrainian banks which have payment cards, decreased in H1 2011 by 6.535 million (16.4%) from 39.942 million to 33.407 million. In Table 1 TOP20 issuing banks are listed according to NBU. The share of these banks is more than 90% of total emission of active payment cards in Ukraine. In the total volume of emission (32.066 million cards) the share of the credit cards is 21.8% (7.008 million), debit cards – 78.2% (25.058 million). The breakdown of payment cards distri bution according to holders on July 1, 2011 was: 346 thousand (1.1%) – corporate cards; 31. 720 million (98.9%) – personal cards. According to the type of data carrier: Cards with a magnetic stripe – 29.621 million (92.4%); Cards with a magnetic stripe and chip – 670 thousand (2.1%); Cards with a chip – 1.194 million (3.7%); Cards for settlements in the Internet – 581 thousand (1.8%). In H1 2011: Total number of the installed ATMs did not change and accounts by 30,163 units; Total number of the installed POS terminals increased by 2,743 units (2.5%) to 110,883 (the number of trade POS terminals grew by 1,909 units to 82,453 and the number of bank POS terminals increased by 834 units to 28,430);
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Total number of imprinters increased by 531 units (3,3%) to 16,389. As compared with the H12010 the number of transactions with the use of payment cards, issued by the Ukrainian banks, in H1 2011 decreased by 104,112 thousand (32,3%) and accounted for 218 million transactions, and the volume of these transactions, as compared the same period of the previous year, decreased by UAH 59,538 million (30%) and ac counted for UAH 138,130 million. In the total number of card transac tions: 77.5% (169 million) – cash with drawal; 22.5% (490 million) – cashless payments. If compared to the results of H1 2010, the ratio of the number of money with drawals and cashless payments changed in favor of cashless payments (by 6.4%), respectively 83.9% against 16.1%. In the total volume of card transactions: 92.3% (over UAH 127,506 million) – money withdrawals; 7.7% (over UAH 10,624 million) – cashless payments.
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CARD MARKETS
MasterCard EMV Cards with Pectoral® from
Plastic Card Company
P
lastic Card Enterprise Ltd. has launched issuing MasterCard EMV cards with chip module Pectoral®. Plastic Card has received a certifi cate of international payment scheme MasterCard Worldwide for the chip module of its own design Pectoral® (commercial product name Pectoral M CHIP33) with the applet M/Chip 4 Select. Chip module Pectoral® M CHIP33 imple mented technology based JAVA Card applet
using M/Chip 4 Select v1.1b, meets all the latest specifications of the MasterCard Worldwide, supports dynamic data authen tication algorithm DDA (Dynamic Data Authentication) and can be used not only for a financial application MChip, but also for the additional non financial applications. Card personalization mechanism corre sponds to EMV CPS standards and M/Chip Personalization Data Specifications and Profiles, which are universal for the glob al payment card industry. Moreover, they allow adding and removing the required payment and non payment applications for the entire «life» cards. Right now for making any changes in the chip program, bank will need to reissue the card (which implies additional expenditures for both the banks and to the user); now with a chip module Pectoral® there is an oppor tunity to do it online through the payment terminal. When banks implement projects based on the chip cards the following parame ters are extremely important: quick tech
Today we already have a broad product range certified by VISA Int. and MasterCard Worldwide having its own peculiarity – a chip module for EMVcards of its own design – Pectoral®. Next year we will expand our product range with new products and features at a competitive price
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nical support and project maintenance, short term production of chip cards, the flexibility while producing both small and mass number of cards, lack of communi cation problems, as well as competitive prices. Plastic Card as a producer of MasterCard cards with module Pectoral® meets all these requirements. According to Deputy Director of Sales, Plastic Card company Elena Lyutovich: «Today we already have a broad product range certified by VISA Int. and MasterCard Worldwide having its own peculiarity – a chip module for EMVcards of its own design – Pectoral®. Next year we will expand our product range with new products and features at a competitive price.»
We must always remember – when a company doesn't grow to the customers, somewhere someone is doing it right now. I think the most difficult and yet most pleasant – to be proactive of customer needs Moreover, on this card digital signature (EDS) certified in accordance with DSTU 4145 2002is implemented, which opens up additional opportunities to banks. Card users with EDS will be able to use online services, which previously were only avail able in bank branches. Using digital signa
Elena LYUTOVICH Deputy Director of Sales Plastic Card Enterprise Ltd.
ture customers will be allowed to conduct a wider range of transactions through Internet banking and a legitimate digital signature to sign the necessary documents. MasterCard chip cards provide a suffi ciently effective protection against fraud. Chip module Pectoral® allows banks to make «content» card more various, inter esting and constantly to update it. We are talking here about loyalty programs, and transport and fuel applications and social applications programs (such as account ing privileges, subsidies, etc.) and many others. Elena Lyutovich: «We must always remember – when a company doesn't grow to the customers, somewhere someone is doing it right now. I think the most diffi cult and yet most pleasant – to be proac tive of customer needs.» Plastic Card Company – a developer and provider of technologies in Ukraine – provides banks with comfort and efficien cy in the implementation of new payment solutions.
ABOUT PLASTIC CARD ENTERPRISE LTD.
Plastic Card Company is the largest Ukrainian manufacturer of plastic cards, certified by international payment systems Visa International and
MasterCard Worldwide since 2004. Production capacity exceeds 150 million cards and 250 million scratch cards annually. Today Plastic Card is the first company in Ukraine, which combines the production and personalization of cards of international payment systems Visa International and MasterCard Worldwide. Plastic Card has at its disposal a powerful department R&D (Research & Development). Experts from the depart
ment successfully designed and imple
mented multi functional card operat
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ing system (COS), on the basis of which microprocessor based SIM cards for mobile operators are issued. In 2009, Plastic Card certified VISA EMV card Pectoral® solution (www.pectoral.ua). At present it was issued more than 1,5M cards with chip module Pectoral® both in Ukraine and abroad. In 2011, Plastic Card certified MasterCard EMVcard Pectoral® solution (www.pectoral.ua). More than 60 Ukrainian banks and 19 foreign (out of 11 countries in Europe) became permanent partners of Plastic Card Company.
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CARD MARKETS
PLASTIC CARDS MARKET IN KAZAKHSTAN
O
n October 1, 2011, 20 banks and «Kaz Post» actually issue the payment cards. These organizations issue and distrib ute payment cards of international payment systems (97.4%): VISA International, MasterCard Worldwide, American Express International, China Union Pay and Diners Club International. Moreover, the banks of Kazakhstan issue payment cards of the local systems: Altyn Card – JSC «Halyk Bank of Kazakhstan»; SmartAlemCard – JSC «BTA Bank»; Local card Citibank Kazakhstan – JSC «Citibank Kazakhstan». On October 1, 2011 banks issued 9.3 million credit cards, and the number of shareholders was – 8.6 million people. (Compared with the situation on the same date in 2010 – an increase of 10.4% and 9.8% respectively). The debit cards are most prevalent, their share was 87.8%, the share of credit cards – 10.6%. Debit cards with a credit limit and prepaid cards have share 1.6% and 0.1% respectively. The change the number of cards of inter national payment systems on October 1, 2011 as compared to the same period in 2010: VISA – increased by 13% and amounted to 7.69 million units.
MasterCard – decreased by 4.6% to 1.32 million units. In September 2011 the volume of transac tions using payment cards issued by Kazakhstan issuers accounted for 390.2 billion (increase compared to September 2010 amounted to 31.9%). The number of transactions for September 2011 amounted to 13.4 million trans actions, and increased in comparison with September 2010 to 17.7%. The increase in the number and amount of non cash payments amounted to 22 .4% (2.6 million transactions) and 34.0% (52.5 billion), operations and cash withdrawal 16.6% (10.9 million transactions) and 31.6% (337.7 billion), respectively. The main share of cash payments accom plished through POS terminals (41.6% and 75.7% of the total number and volume of cashless payments) and ATM (47.8% and 17.2% respec tively). Operations on the issue of cash primar ily occurred through automated teller machines (97.1% and 87.8% of the total number and volume of cash withdrawal transactions of money). On October 1, 2011 has been established: 27,579 POS terminals; 616 imprinters; 7920 ATMs; 1275 banking kiosks; 11 657 – the number of retail outlets.
TABLE 1
MAIN INDICATORS OF THE PAYMENT CARD MARKET Figures The number of cards in circulation (thousand unit), including: Visa International MasterCard Worldwide Number of card holders (thousand) Number of POS – terminals (unit), including: in retailres in the banks Number of imprinters (unit), including: in retailres in the banks Number of ATMs (unit)
01.10.2010 8 394.5 6 826.7 1 382.6 7 838.7 24 871 20 233 4 638 720 415 305 7 441
01.10.2011 9 263.4 7 685.1 1 319.9 8 603.1 27 579 22 775 4 804 616 386 230 7 920
TABLE 2
NUMBER AND VOLUME OF TRANSACTIONS
Number of transactions (thousand unit) Volume (million tenge)
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September 2010 Cashless Cash payments withdrawal
September 2011 Cashless Cash payments withdrawal
Deviation Cashless Cash payments withdrawal
2 119.4 39 202.7
2 593.8 52 530.8
22.4% 34.0%
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9 306.8 256 603.6
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10 854.3 337 675.5
16.6% 31.6%
PLASTIC CARDS MARKET IN GEORGIA ccording to the National Bank of Georgia 19 banks had license for banking operations on September 1, 2011. By September 1, 2011, the number of plastic cards in Georgia exceeded 3.73 million, which had not expired, including active cards (at least one transaction was made using this card during last 12 months – 1.616 million). Visa cards enjoy the most popularity – 85.7% out of total, and 91.3% out of active cards. MasterCard come next – 6.3% out of total and 5% out of active cards. The local cards have the remaining 8% of total market share and 3.7% out of active cards. Tab.1 and Tab. 2. In the total volume of active cards emis sion (1.616 million) the share of the cred it cards is 17.2% (277517), debit cards – 82.8% (1.338 million). By September, 1, 2011: Total number of the installed ATMs accounts for 1515 units; Total number of the installed POS terminals – 10,709 (the number of trade POS terminals – 8,146 and the number of bank POS terminals – 2,583). The number of payment cards transac tions (acquiring), as compared to the same
period of the previous year, in September, 1, 2011 increased by 1,541,129 (52.7%) and accounted for 4,462,774 transactions, and the volume of these transactions, as compared with the same period of the previous year, increased by 204,588 (46,8%) and accounted for 642,136 thousand of GEL (appr. 1Euro = 2.28 Georgian Lari). Transactions (unit) within Georgian Economy with plastic cards issued by resi dent banks by September, 1, 2011: 59.4% (2,541,656) – cash withdrawal; 40.6% (1,734,324) – cashless payments. Total value of transactions with plastic cards issued by resident banks by September, 1, 2011: 73.2% (432,877 thousand of GEL) – cash withdrawal; 26.7% (158,379 thousand of GEL) – cashless payments. Transactions through Internet by September, 1, 2011: Number of transactions increased, as compared to the same period of the previous year, by 164,656 (45.5%) to 302,181 unit; Total value of transactions increased, as compared with the same period of the previ ous year, by 6,258 (37.6%) to 10,023 thou sand of GEL.
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TABLE 1
NUMBER OF BANK DEBIT CARDS, UNIT Cards in circulation M/Y September 10 September 11
VISA 2469493 2771869
EC/MC 187011 193072
of which active cards
Other 6407 204886
Total 2662911 3169827
VISA 1031553 1270257
EC/MC 54628 62950
Other 577 5155
Total 1086758 1338362
TABLE 2
NUMBER OF BANK CREDIT CARDS, UNIT Cards in circulation M/Y September 10 September 11 September 11 Share,%
VISA 343184 426692 3198561 85,70
EC/MC 33454 41568 234640 6,30
of which active cards
Other 34359 92652 297538 8,00
Total 410997 560912 3730739 100,00
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VISA 180594 205415 1475672 91,30
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EC/MC 15167 17476 80426 5,00
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Other 8116 54626 59781 3,70
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Total 203877 277517 1615879 100,00
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IT
SOLUTIONS
SRPF ARGUS Ltd – Affordable IT Solutions for Financial Market Banking software ABS «BIS GRANT», constructed on multi level «client serv er» architecture with use of RDBMS Oracle and intended for maintenance of full work cycle of a commercial bank; Intra banking payment system «GRANT»; Software complex «Pegas» – remote banking system giving the customer a possibility of remote managing of his accounts both in national and foreign currency in off line mode; Automated card system ACS «ARGUS» for commercial banks – member of National System of Mass Electronic Payments (NSMEP), devel oped under a contract with the National Bank of Ukraine according to the tech nical project of IT Department of the National Bank of Ukraine; Computer terminal CT «ARGUS» for NSMEP; Software for multi purpose termi nal «ARGUS» for NSMEP on the basis of terminal VeriFone Series OMNI 3ххх and VX 5xxx/6xx terminals; Software for Internet terminal «ITAR»; ARGUS NSMEP ATM software for Diebold Series 5хх and 7xx automatic teller machines; Software for cryptographic protec tion of the information «Gryphon» developed under the license of the Department of Special Telecommunica tion Systems and Information Protection and intended for crypto graphic protection of the information in the banking sphere, in particular for
pecialized Research and Production Firm ARGUS Ltd founded on Sep tember 3, 1991, deals with design, development, implementation and support of complex OLTP applications, mainly banking oriented software. Company's staff consists of 55 persons including highly qualified system analysts, application designers and developers, system programmers and database admin istrators, QA engineers. Our software has been promoted in the market since 1992. Currently, our software is used in more than 100 bank establishments of Ukraine. Our cus tomers include such great banks as Ukreximbank PJSC, VOLKSBANK PJSC, SEB Bank PJSC, IMEXBANK PJSC, Zakhi dinkombank PJSC, Expressbank PJSC and others. ARGUS Ltd. is recognized for our competence and possesses both nation al and foreign approvals and certificates. Since 1994 ARGUS Ltd. has the status of Gold partner of the Oracle Corpo ration. Now we propose proprietary soft ware products ensuring all round automation of a modern commercial bank, namely:
S
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Levon K. AVETISYAN General Director
the confidential (including financial) information, and also in the «Home banking» systems. In 2010, the Processing Center of ARGUS Ltd. was founded to enhance the amount of services and to create new conditions for commercial banks to work in the National System of Mass Electronic Payments (NSMEP). The NSMEP is a domestic state banking multi issuing mass electronic payment system, in which all payments for goods and services, receiving cash and other transactions are effected with payment smart cards according to technology developed by the National Bank of Ukraine. The Processing Center offers the most accessible and suitable way to communicate with the System. Since February 2011, ARGUS Ltd is a certified representative NET info in Ukraine. The duties of partners include: presentation of NETteller complex inter net and mobile banking system on the Ukrainian market, localization work, integration and support. ARGUS Ltd offers a wide range of IT outsourcing services that cover the whole project life cycle including:
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consulting project/product design software development software testing deployment and maintenance These services give our clients an oppor tunity to use our dedicated teams to extend their own team of software developers and other IT specialists. Our expertise extends across a vast range of financial industries and business verticals that are both regional and global in scale. We deliver professional and reliable solutions to our customers. With ARGUS Ltd, our clients can spare their own resources and be confident that our team of full time IT professionals is just as committed to the project as their own team. Our customers can be assured that our quality control guide lines are applied throughout each phase of the project life cycle, and our expe rienced management team personally oversees every stage of the project. Quality of our Company's products and success of our clients' activity is guaranteed by the use of industrial deci sions in designing and development of our software.
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TECHNOLOGY AND SOLUTIONS
MasterCard® PayPass™
COMES TO UKRAINE MasterCard, PrivatBank and MegaMarket present an innovative technology PayPass™ on the Ukrainian payment market
asterCard, a global leader in elec tronic payments, PrivatBank, the leader of Ukrainian banking market, together with the Mega Market chain, one of the leading food retail chains in Ukraine, have announced the launch of a unique technology PayPass™ in Ukraine, which allows contactless electronic payments in the sales and service network. In November 2011, Ukrainians will get a unique opportunity to make electronic payments utmost quickly and convenient ly. Functioning as a usual payment card, contactless PayPass card sticker allows making transactions immediately dabbing it to a special terminal, thus, a cardholder is no longer required to provide the card to the cashier for the procedure. Moreover, if the amount of purchase paid by the card sticker does not exceed 100 UAH, there is no need to enter PIN and sign the check. At that, the card sticker is always in the
hands of a cardholder and payment is contactless. PayPass transactions are processed through a special terminal, the first terminals of this kind in Ukraine will be installed in the MegaMarket chain. PayPass card sticker is equipped with a chip and antenna which allows the chip to contact the bank through a special terminal and almost immediately confirm the transaction. PrivatBank is an issuer of the first PayPass cards stickers in Ukraine, as well as an acquirer, having established special PayPass terminals in the chain. Sergiy Ravnyago, Head of MasterCard Europe representative office in Ukraine: «Having been implemented in over 37 countries worldwide, PayPass technology continues to increase its global footprint. As of the second quarter of 2011, nearly 100 million PayPass enabled cards and devices had been issued worldwide. Currently, more than 341,000 merchant loca tions accept PayPass in segments like quick
M
Aleksey Mochanov, racing driver, made the first contactless transaction with a MasterCard® PayPass at the MegaMarket
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service restaurants, supermarkets, petrol stations, parking, buses and taxis. We are delighted that thanks to the cooperation with our partners today we can present this innovative product in Ukraine and promote its application in vari ous fields of business and trade. I am sure, PayPass will become not only a convenient payment instrument for Ukrainians, as a payment tool #1 for the customer thanks to its convenience and reliability, but will also give new drive to the development of the Ukrainian market of electronic payments in general.» Alexander Dubilet, Chairman of PrivatBank: «Today the market of electronic payments is steadily developing which is proved by the overall performance of the market, in partic ular the growth in the number of operations with payment cards by about 20% according to the results of 2010, as well as the growing customer demand for new and unique propos al in the light of their real needs and expec tations. It is exactly what the technology PayPass is, meaning a revolutionary way of contactless payments, providing cardholders a quick and convenient alternative to cash for making everyday purchases. We are pleased to be the first in this revolutionary project, once again emphasizing our status as a customer oriented pioneer of the market.» Roman Neginskiy, Deputy Chairman of the Board of PrivatBank: «Our strategy is quite ambitious. We are planning to install more than 2 thousand terminals that support contactless payments and 300 thousand card stickers this year.» Vladyslav Tsymbal, CFO, MegaMarket chain: «PayPass technology provides significant addi tional comfort for the customers, which is our unquestionable priority. Contactless payment method helps to make purchases quickly and conveniently, and given the fact that in many cases it does not even require staff, it significantly optimizes time of both the buyer and the staff of the whole chain, which means you can serve more customers with guaranteed high level of service.» With PayPass card data is protected with the same encryption standards as chip cards. In addition, PayPass has built in safeguards that prevent unwanted purchases: the device must be taken very close to the reading machine, so that it worked, and the money is taken for purchase only once, even if the card was dabbed twice. The introduction of PayPass technology in the world began in 2004, when the contactless payment terminals appeared in
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Sergiy Ravnyago, Head of MasterCard Europe representative office in Ukraine
Vladyslav Tsymbal, CFO, MegaMarket chain
Roman Neginskiy, Deputy Chairman of the Board, PrivatBank
McDonald's chain in USA, Canada, Japan and the Philippines. In Europe today, this technology is being most actively introduced by banks of Great Britain, France, Poland, Russia, Germany and Turkey.
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EQUIPMENT
PRODUCTION
BANK EQUIPMENT BY UKRAINIAN COMPANY Modern world is characterized by active technologies development in oder to minimize human's labour, and to increase product quality for enduser. Nowadays any person has a possibility to control their money remotely. Financial operations are conducted quicker, in a much more convenient and secure way due to use of innovative equipment.
R
ONTEC Company is the first and the only Ukrainian engineering and production company that has its own production capacities of bank ing equipment at the territory of Ukraine. The main principles for our company are: Quality and reliability. Our equip ment is of European quality standard with price level much lower than identical European equipment and has Certification approval according to EMV Level 2, TUV RheinLand InterCert Kft. ISO 9001:2000; UkrSEPRO National Certificate; Certificate of Conformity of ExUSSR Standards (GOST, DSTU). In our production capacities we use only high quality materials and certified and proven spare parts. The basis of outdoor equipment is solid steel case covered with powder paint that are high ly climate and physical wear resistant. All TECHPRO terminals are equipped with wide anti vandal 6 mm thick touch screens. The second principle is Flexibility. The main principle for our constructors and in production at the stage equipment completion is customers' perception of technical and functional features of equip ment. The customer chooses range of func tions for TM or terminal, its color, addi tional spare parts and our company provides the customer with high quality equipment in the shortest terms. Sales Top: Tech Pro 3000 Terminal is for payments acceptance.
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Comfortable and easy to use. Tech Pro 3000 is equipped with bar code scanner, certified 1 (А) security class banking safe, contactless reader, wide touch screen. Case of the terminal is made of light metal. It's possible to furnish it according
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Tech Pro 3000 Terminal (Minimal)
to the customer's requirements. For exam ple, we may install video surveillance system, open door sensor, sensor for open terminal, anchor fixation to the floor with anchors situated inside the terminal. Tech Pro 3000 Terminal (Minimal) The main feature of the terminal is its adaptable properties, the terminal can be adjusted vertically depending on customer's needs. First of all, such terminals are intend ed for invalids that are wheel chaired. Concerning other functions terminal Tech Pro 3000 (Minimal) is similar to Tech Pro 3000. Tech PRO 7000 Cash In Lobby ATM is equipped with a validator for 2000 notes that can accept 50 notes bunch. This ATM is also equipped with dis penser for dispensing notes of 4 deno minations, 2500 notes of every denom ination. Anti vandal touch screen and 19" wide format monitor. Barcode scan ner and EPP key board. This model can also be used for currency exchange, and it is almost twice cheaper than European analogs.
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Tech PRO 7000 Cash In Lobby ATM
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EQUIPMENT
PRODUCTION BRIEF NEWS
The pride of RONTEC Company is Multi functional terminal Tech PRO 9000 (mini bank). By functionality this terminal can substi tute a bank branch. The terminal accepts cash (notes and coins) as payment for differ ent services. It can dispense 2 and 4 denom inations change and change money, if you need another denomination. If you need scan copy or A4 accountable form, Tech PRO 9000 is ready to do that for you. It's easy to find your location on a map or to contact call center operator with help of in built camera. Using the termi nal you can not only to order, but also to buy and to get a ticket for any kind of transport. But the most surprising is that the terminal can issue a plastic card to the customer, e.g. credit card. Large monitor of TechPro 9000 allows to place all information blocks in a qual ity manner and becomes very comfort able for such users as elderly or weak sighted people. Logical and convenient interface makes it quick to find informa tion and easy to work. So, using equipment manufactured by Engineering and Production Company RONTEC you get high quality product for a competitive price.
ARMENIAN ARARATBANK PRESENTED CARDS WITH A TRANSPORT AND FUEL APPLICATION Araratbank (Yerevan, Armenia) presented cards with a transport and fuel application at the technological exhi
bition DG Tech in Yerevan that opened on October 2011. Two types of dual cards which were issued in 2010
2011 based on modern contactless technology Mifare are very popular in Armenia. In 2010 the card CLASSIK
M appeared. Besides conducting payments in the system of ArmenianCard (ArCa) it can also serve as a payment instrument in underground. Mainly it is used by students. 12 thousand of such cards were issued already. In March 2011 Visa Petrol Plus card was issued which is used for payment at fuel filling stations belong
ing to the company Flesh. 4.5 thousand of such cards are issued already.
NUMBER OF ISSUED PAYMENT CARDS IN RUSSIA EXCEEDED THE QUANTITY OF POPULATION The number of payment cards in Russia exceeded the quantity of population. The general number of payment cards on July 1, 2011 accounted for 157.7 million. The number of banks, issuing and processing cards, has increased almost times ten. At the beginning of 2009 there were 70 banks, on July 1, 2011 there were 692 banks. Only 19% cardholders conduct cashless operations. For last 10 years the share of cashless operations decreased by 4.3%. Cash settlements is 94.7% in retail.
THE NUMBER OF ATMS AND POS TERMINALS IN AZERBAIJAN GROW On October, 1, 2010, the number of ATMs in the Republic of Azerbaijan was 1847. This indicator increased by 209 in comparison to the respective period of the previous year. On October,1 of the current year, 1028 ATMs are located in Baku, and 918 – in other cities and regions. Within this period, the number of POS terminals in the Republic of Azerbaijan reached 8882. This indicator increased by 363 in comparison to the respective period of the previous year. At present, 8077 POS terminals are located in Baku, and 805 in other regions. As at 1 October 2010, the number of payment cards in circulation in the Republic of Azerbaijan has increased by 6.5% compared to the respective peri
od of the previous year and reached 4059 thou
sand. The number of operations carried out through ATMs and POS terminals via payment cards reached 3804. 94.7% of them are debit cards.
Multi functional terminal Tech PRO 9000 (mini bank)
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BANKING ANALYTICS
UKRAINIAN BANKING SYSTEM OUTLOOK Banking system developments in H12011: recovery on the way, but substantial downside risks
We have slightly improved our 2011 forecast for the banking system, but 2012 is now revised down due to weak er economic outlook on the background of deteriorating external environment.
SUMMARY: Lack of trust in the local currency has been the main factor of its weak ness over last years. Traditional deteri oration of household sentiment in the fall may put some pressure on the exchange rate in H22011. A slowdown in the global economic growth and recent turbulences on the markets may generate additional pressure on hryvnia and also negatively affect bank ing sector performance. The main effects are going to come through curtailment of investment by export oriented compa nies, more expensive funding (interna tional and domestic), rising risk aversion and capital outflows. So far (7 months of 2011), the bank ing sector performance has been grad ually improving: corporate lending continued growing, but retail also start ed to catch up, NPLs have stabilized. However, profitability is still stagnating, as margins are squeezed.
FOCUS ON: HRYVNIA STABILITY As autumn arrived we are once again seeing sentiment deterioration over the possible crisis and exchange rate depre ciation. Rising crisis fears in autumn is both psychological and economic phenomenon. In economic terms, Q3 is the most active during the whole year representing 29% of the full year GDP, in contrast to lowest earning Q1 which represents only 19% of the GDP. Thus there are much more transactions in economy which certainly makes signif icant events in the 3rd quarter more likely. But also importantly, consumer sentiment deteriorates simply due to the colder weather, which drives up overall depression levels and with it
TABLE 1
BANKING SYSTEM CONSENSUS FORECAST Total assets, UAH bn Total assets, yoy change, % Total loans, UAH bn Total loans, yoy change, % Corporate loans, UAH bn Corporate loans, yoy change, % Retail loans, UAH bn Retail loans, yoy change, % Total deposits, UAH bn Total deposits, yoy change, % Retail deposits, UAH bn Retail deposits, yoy change, %
2007 599.0 76.2 426.9 74.1 217.4 62.1 155.4 99.9 280.1 53.1 164.5 55.0
2008 926.0 54.5 734.0 71.9 460.2 69.6 273.8 76.1 357.9 27.7 215.6 31.1
2009 880.0
4.9 717.5
2.2 482.3 4.8 235.4
14.0 327.7
8.3 211.4
1.9
2010 945.5 7.4 724.6 1.0 520.1 7.8 204.5
13.1 414.2 26.4 271.7 28.5
2011f 1059.0 12.0 800.4 10.5 596.6 14.7 203.9
0.3 487.9 17.8 322.8 18.8
2012f 1203.0 13.6 884.6 10.5 679.5 13.9 205.1 0.6 568.4 16.5 375.1 16.2
Source: NBU, consensus estimates of Raiffeisen Bank Aval, UniCredit & Ukrsotsbank, ING, OTP and Erste Bank analysts
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BANKING
ANALYTICS have had strong positions during the recent years. Solving the issue of confi dence towards hryvnia exchange rate among population is the first most vital issue of hryvnia stability. Yet since July, we have been also witnessing negative changes to the glob al economic environment which could heavily impact hryvnia exchange rate and Ukrainian economy more broadly. The slowdown in global growth and the ongoing turbulence on the financial markets is most likely to affect Ukrainian banking sector through the three main channels: 1) Trade: a weakening of the exter nal demand will affect Ukrainian exports, which were the main growth driver as Ukraine has been recovering from the crisis. Weaker exports will put downward pressure on hryvnia, which will provoke NBU intervention to support the currency by tightening monetary policy. Also, large export oriented companies that were a target for lending by banks may scale down their investment and borrowing plans. 2) Banking: tightening of cross border funding conditions for international banking groups may constrain their lending activities in Ukraine. Tighter monetary policy will also drain liquid ity from the domestic market, making funding more expensive. 3) Capital flows: as Ukraine is perceived as a high risk economy, any deterioration in global risk sentiment immediately affects it. Indeed, the summer turbulence has already trans lated into a dramatic fall of the equity market in Ukraine. However, as not too many banks in Ukraine are listed, equi ty markets performance will probably have limited effect on banks. The bond markets are much more relevant, as banks have been actively issuing bonds recently, which now will become more expensive. Economic situation in the top trad ing partners of Ukraine is deteriorating. Russian economy is affected by the declining oil prices. Turkey, second biggest buyer of Ukrainian exports, is seeing its currency falling as its current account deficit reached almost 10% of GDP. Moving one step down the list, Italy is on the eve of sovereign default
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SEASONAL FACTORS IN GOOGLE SEARCHES FOR 'CRISIS' AND 'DEPRESSION' IN US
Source: http://www.google.com/insights/search/#, NBU
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FOREIGN CURRENCY DEMAND
Source: NBU
fears over crisis. Such correlation is char acteristic for almost every economy of the northern hemisphere. This can be traced looking at seasonal fluctuations of google searches for 'crisis' and 'depres sion' on example of US, which has more internet users for more representative data. Consumer sentiment was and remains the main source of pressure on hryv nia. In some quarters population spends up to 18% of its disposable income buying foreign currency. Without outflows into FX cash, hryvnia would
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as its borrowing cost rose more than twofold over the last month. Next, Belarus has already seen its currency collapsed and the story is still far from over. Main trading partners of Ukraine are seeing their currencies under deval uation pressure towards USD, and thus towards hryvnia. At the same time imports to Ukraine are rising faster than exports due to the booming domestic consumption. The National Bank already made steps to limit consumer lending which is largely used to buy foreign goods. Yet the share of consumer imports being financed by banks is small and will not lead to any significant decline in imports. What Ukraine needs is greater stabil ity of its exports. For this hryvnia exchange rate needs to be more volatile to match the movements of main buyers of Ukrainian exports. Also Ukrainian economy is still plagued by the same structural weaknesses as it was three years ago (low productivity growth, poor energy efficiency, weak rule of law, poor long term fiscal sustainability, etc.). Solving these issues is vital for hryvnia stability in the long run. In the medium term, first and most urgent on the agenda are negotiations with the IMF on the renewal of the stand by arrangement (which went off track in February of this year). Under the current circumstances, the deal with the IMF will provide a necessary cush ion for Ukraine. Second, the govern ment needs to immediately tackle the financial disaster with Naftogas. The further postponement of the retail gas tariff adjustment and much higher import gas prices in the second half of 2011 could cause the company's finan cial deficit to reach 1.5% of GDP this year, pushing the overall fiscal deficit to 4%. Ukrainian economy is currently entering economic environment that is more risky for hryvnia. But if we do not see any disastrous events like sovereign defaults of Eurozone countries, hryvnia will be stable at 8 UAH per USD.NBU will be keeping hryvnia at tight peg to USD just to avoid seeing demand from population skyrocketing. In the long run the NBU will also have to decide on the problem of banks' exposure to hryvnia exchange rate fluc
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BANKS' ECONOMICAL FX POSITION, JULY 2011, UAH BN
Source: Erste Bank calculations
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BANKS' ECONOMICAL FX POSITION
Source: Erste Bank calculations
tuations. As a global standard of risk management, banks always have near ly same amounts of assets in particular currency, as they have in liabilities1. This is not the case in Ukraine. In 2009 the NBU issued the resolution #109 which forced banks to have more hryvnia assets than liabilities 2. In fact, the banks now have at least UAH 67bn more in hryv nia assets than in liabilities. Thus, 1% UAH
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For example, if bank attracts USD 1000 client deposit all it will do with it is make same USD 1000 and only USD denominated asset, for exam
ple foreign currency loan. The same is applied to all currencies.
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2 NBU excluded provisions in foreign currency from the calculation of banks FX position. As provisions for foreign currency loans grew, so did the banks' exposure to foreign exchange movement.
BANKING
ANALYTICS
depreciation versus USD will cause an immediate loss of UAH 670mn. Should hryvnia suffer same devaluation as it did in 2008, banks will immediately loose 23% of their regulatory capital. The return to international standards of FX position calculation is required by the IMF program. So far we did not see any actions on behalf of the regu lator in that respect. To be fair, the current financial market conditions do not allow the adjustment to be made. According to our estimate, the realign ment of FX position rules back with international standards will generate the additional demand of USD 8.5bn from the banks, thus putting pressure on NBU FX reserves. Moreover, hryvnia liquidity is another problem as the banks would need UAH 67bn to buy the foreign currency, which is 4 times higher than banks have in their possessions. Basically, the balance of payments has to turn strongly positive to generate both the spare foreign currency for NBU reserves and new base money for banks. This is now seemingly impossible without
significant hryvnia devaluation. The #109 clause saved a lot of funds for NBU's FX reserves back in 2009, but it came at cost of future stability. Now we have entered a period where there are no easy choices for NBU or banks to solve the problem.
BANKING SECTOR UPDATE AND OUTLOOK Lending and deposits: continuing eco nomic momentum fostered growing activity in the banking industry. The expansion of lending to non finan cial corporations has continued in H12011, with loans extended predom inantly in national currency towards companies' current operations. In Q2 there was some shift in the extension of new credit from the corporate to the retail segment as household income improved. The share of new loans to individual entities in total new loans increased from 5.9% to 7.5% in 7 months, whereas that of non financial corporate entities dropped from 93.5% to 90.5%. Retail lending expanded predominantly in short term retail consumer and automotive loans in national currency. Falling deposit rates affected the term structure of bank deposit portfolio, increas ing the share of long term and on demand deposits. Household deposits remained the major contributor of resources to the banking system in H12011, reaching 65.7% of the overall bank deposit portfolio by August, 1st, 2011, and having increased by a monthly average of 3.4% in 7 months. Corporate deposits accounted for 24.2% of the portfolio, declining by a monthly average of 0.1%. Local currency deposits still prevail (52.4% of bank deposit port folio), but USD deposits continue show ing the highest growth rate, with Ukrainian citizens still opting for USD holdings, notwithstanding the fluctuations of the US currency and the uncertainties of the American economy. On the corporate side, short term deposits in the national currency contin ue prevailing (68.6% of the overall deposit portfolio as of August, 1st). The scarcity of loans to the real economy together with the lack of working capi tal prompted companies to cut long
Forum for Lea
ding International Financial Institutions (Forum) it is the new discussion platform aimed to launch high level dialogue with Ukrainian authorities in order to further develop the financial sector of Ukraine. The mission of the Forum is to promote and implement international best practices of manage
ment and supervision for the Ukrainian financial market. The Forum activ
ity based on principles of legitimacy, independence, transparency and autonomy of each and all Members. As well as credence and mutual assistance of the Members in achieving the objectives of the Forum. Among main objectives of the Forum such as: developing a stable and transparent Ukrainian financial services system oriented towards Western standards; representation to state authorities the interests of the Members with respect to essential financial and banking matters and facilitating formation of legal and regulatory basis for financial services in Ukraine. The Forum for Leading International Financial Institutions was founded in May 2010. Today Forum includes 18 banks with foreign capital: Credit Agricol CIB, Citibank Ukraine, Credit Europe Bank, Erste Bank, Forum Commerzbank, ING Bank Ukraine, OTP Bank, Piraeus Bank, Platinum Bank, Pravex Bank, ProCredit Bank, Prominvest Bank, Raiffeisen Bank Aval, SEB Bank, Swed Bank, UkrSibbank, Universal Bank and UniCredit Group.
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term savings, redirecting them towards short term or on demand deposits prompting an increase in the overall credit rate.
BALANCE SHEET Total assets of the Ukrainian banking system increased by 9.2% year to date to UAH 1.2 trln as of end July. On the background of a weak lending, the banks have been expanding other parts of their balance sheet, notably, investments in government bonds (which grew 27% in H1), although not as fast as last year, as bond yields plunged, while lending start ed reviving. Banks have also been increasing their external assets, which, combined with the repayment of foreign loans, contributed to a further improve ment of the banks net foreign asset posi tion. H1 2011 was marked by a surge in the issuance of bonds by banks. In view of restrictions on the FX lending, as well as more prudent policies by banks them selves, there is a big need for the devel opment of local funding with longer maturities. As market conditions improved, banks started issuing bonds from the end of 2010, more than doubling the total outstanding volumes between Sep 2010 and June 2011. In view of recent market turbulences however, bond issuance is likely to be substantially curtailed in H2 2011. Banks have also continued beefing up their capital, with the total for the system growing by 10.1% over H1. INTEREST RATES, MARGINS AND COST OF FUNDING Average interest rates on household deposits decreased by almost 1% in the first seven months of 2011. The largest banks offer 9 13% in hryvnia for 1 year term deposits, and 5 7% in US dollar. For the same period companies may place their funds for 9% in hryvnia and 3 4% in US dollar. Over the last few months the National Bank has substan tially tightened its monetary stance in the response to surging inflation and pressure on the exchange rate. And, on the other hand, the gradual lending recovery eats up excess liquidity in the banking system. As a result, the volume of correspondent accounts dropped to
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the lowest level over last years, push ing money market rates up. Average monthly overnight KIEIBOR increased from 1.9% in January to 5.5% in August. Consequently, we do not see the room for the banks to cut deposit interest rates much further. Instead, the lack of liquidity and the expected inflation acceleration might put an upward pres sure on the deposit rates. The downward dynamics of deposit rates in H1 in turn translated into the decreases on the loan side. Moreover, the banks have been actively compet ing for good customers on the lend ing side, thus pushing the interest rates on new loans further down. The inter est rates on the corporate loans in the national currency descended to 12 14% and to 9 10% in foreign curren cy as of end July. The interest rates also decreased in the retail lending segment. Banks offer hryvnia mort gage loans for 17 18% and car loans for 12 16% at the moment. However, given the liquidity squeeze mentioned above, the downward movement in the lending rates came to a halt recent ly and we might witness trend rever sal in the near future should liquidity shortages persist. Although pricing has been steadily falling on both passive and active oper ations, the margins contracted, driving down the profitability of the banking
PICTURE 5
NON PERFORMING LOANS RATIO, %
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system. Since the beginning of 2011 net margin decreased by half a percentage point, to 5.36% at the moment, and the net spread fell by 0.2 p.p. to 4.57%. We expect that based on the current competitive situation in lending some banks will keep on decreasing the level of profitability, while for the banking system this figure will remain at current levels in the near future.
LOAN QUALITY In line with our expectations, the peak in non performing loans has been reached in the first half of 2011. The total volume of problem loans (in NBU definition) has even slightly fallen since the beginning of the year – from UAH 84.9bn at end 2010 to 83.5bn as of end July. Given increasing loan portfolio, the NPL ratio declined from 11.7% to 10.9% in Jan Jul 2011. At the same time, the real NPL levels are likely to be much higher than those reported by the NBU. IMF estimated NPL ratio at 40.3% as of end June 2011 (unchanged since end 2010 and fallen of the peak of 41.6% reached at end September 2010). In our view, economic stabilization played the major role in loan quality improvement. Moreover, according to anecdotal evidence, the performance of newly issued loans has been very good thanks to much more cautious lending policy adopted by the banks after the crisis. The recent regulation of the National Bank facilitated the write off of prob lem loans by resolving the issue of tax treatment of write off process. Con sequently, banks now can write off the loss loans (defined as 180+ days over due) and reduce the volume of loan loss reserves by the corresponding amount. As a result, banks will be able to clean up the balance sheets, improving NPL ratios and reducing short open FX posi tions. Plus, the release of loan loss reserves may help the banks to meet the cap on tax deductibility of loan loss provisions. We do not expect banks to massively write off their problem loans – we estimate that the total volume of loan write off at the first stage (i.e. this year) will not exceed UAH 15 20bn (2 3% of total loan portfolio).
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P&L: NO HOPES FOR HIGH PROFITS IN 2011 Recent three months strengthened the expectations that Ukrainian banking system would not reach even break even in the financials this year. We see several reasons for that: 1) Banks still did not start new lend ing actively, which reduced the poten tial of Ukrainian banks to earn on new clients. 2) The banking system continues to write off actively banking non perform ing loans. Therefore expenses on reserve creation (coupled with higher reserves requirement since July) still remain the most significant factors affecting the profitability of the banking system. In particular, reserve expenses over 7M reached UAH 22.4bn while negative financial result was just UAH 4.0bn. At the same time, net interest income together with net commission income stayed strictly in positive area, i.e. core activity in the banking sector remained profitable. 3) Shrinking interest margins also negatively affected the financial perfor mance of Ukrainian banks in 2011. The influence of this factor might be even more significant over 2H11 taking into consideration squeezed money market liquidity and corresponding growth in the cost of funding while banks will not be able to increase their lending rates in par with financing costs. We believe the influence of three aforementioned factors should affect the financial performance of the bank ing system at least until the end of 2011. We also expect that banks will change their strategies in 2012 and will be more active in lending, as they need to gener ate income. Consequently, we expect margins and profitability to rise as banks start lending not only to blue chip companies, but also to smaller ones that have higher risks, as also as risks are generally higher than pre crisis. This report was produced jointly by analysts of several banks – FLIFI (Forum for Leading International Financial Institutions) members. The views and the forecasts presented here reflect the consensus position of this group of analysts.
B L A N С H E
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MARKET PLACE
АТ «БАНКОМЗВ’ЯЗОК», ДЕПАРТАМЕНТ СИСТЕМ ЗАХИЩЕНИХ ТРАНЗАКЦІЙ
BS/2
• Постачання та сервісне обслуговування
• Аутсорсинг бизнес процессов для банковской индустрии и
POS терміналів Ingenico • Розробка, впровадження і супровід спеціалізованого програмного забезпечення для обслуговування пластикових карток • Створення комплексної інфраструктури банків для обслуговування платіжних карток
• Решения по оптимизации, основанные на
розничной торговли.
программно техническом оборудовании мирового класса.
• Разработка программного обеспечения и интеграция систем в соответствии с требованиями заказчика.
• Эксплуатационные услуги и послепродажное обслуживание: Desk и мониторинг; • Service Поддержка и обслуживание технического • оборудования и программного обеспечения.
.• Консультации и обучения. «Penkiu kontinentu» Bankines technologijos, UAB ул. Калварию, 143, LT 08221, Литва, Вильнюс Teл.: +370 5 266 45 95; факс: +370 5 266 45 50 E mail: info@bs2.lt, www.bs2.lt, www.atmeye.net, www.atmiq.com, www.bs2outsourcing.com
Київ, вул. Фрунзе, 69 в Тел.: +38 (044) 496 00 96, факс: +38 (044) 492 37 54 E mail: banking@bkc.com.ua, www.bkc.com.ua
ТОВ «ТЕЛЕКАРТ ПРИЛАД»
SERVUS SYSTEMS INTEGRATION
• Повний цикл виготовлення
• POS термінальне обладнання серії Optimum, виробництва VeriFone Inc.
усіх видів карток • Розробка проектів на базі безконтактної картки (паркомати, системи контролю доступу, транспортні системи безготівкових розрахунків та ін.).
• Банкомати виробництва Nautilus Hyosung Inc. • Системи керування потоками відвідувачів Q mate SSI Pro • Сервісна підтримка POS термінального та банкоматного обладнання
• Розробка програмного забезпечення для всього спектру устаткування
Одеса, Люстдорфська дорога, 162 Тел.: (048) 716 93 26, (048) 714 28 42 E mail: citycard@telecard.com.ua, E mail: comdpt@telecard.com.ua, www.telecard.odessa.ua
Київ, пров. Куренівський, 12, корпус А, БЦ «Форум Кінетик», 7 поверх, оф. А 702 Тел./факс: (+38 044) 461 92 55 www.ssi.com.ua
ООО «ВИНКОР НИКСДОРФ»
COMPASS PLUS Решения для автоматизации розничных банков и процессинговых центров: • фронтальная система процессингового центра • карточный бэк офис с ритейловыми функциями • клиринговая система • система персонализа
ции карт • аналитическая система для отслеживания мошеннических транзакций и ведения расследований • система планирования и оптими
зации инкассации банкоматов • система автоматизации претензионной работы и взимания просроченной задолженности • система консолида
ции, выставления и оплаты счетов.
• Оборудование для автоматизации процессов • • •
142770, Россия, Московская область, Ленинский район, Сосенский с.о., ж/к «Дубровка», ул. Сосновая, стр. 4 Тел: +7 (495) 229 54 99, факс: +7 (495) 229 54 88 E mail: enquiries@compassplus.ru www.compassplus.ru, www.compassplus.com
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C A R T E
B L A N С H E
самообслуживания (банкоматы, информационно
транзакционные терминалы, принтеры и проч.); Информационные и автоматизированные системы управления и мониторинга; Мультивендорные программные решения; Широкий спектр дополнительных услуг (поддержка каналов продаж, консалтинг, управление локальным обслуживанием). 04119, Украина, Киев, ул. Дегтяревская, 27 т, Тел.: (+38044) 4929707, факс: (+38044) 4929709 E mail: info@wincor nixdorf.com, www.wincor nixdorf.com
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ТОВ «СВІТ ІТ»
SYSNET
Безпека комп`ютерних мереж, комплексні рішення: • Модулі безпеки HSM компаній Thales e Security та SafeNet • Міжмережеві екрани CheckPoint • Системи запобігання вторгненням IPS Radware та Fortinet • Засоби моніторингу вразливостей фірми Qualys • Засоби автентифікації користувачів від компаній Vasco та RSA Security • Засоби моніторингу, архівації та контролю вмісту електрон
ної пошти • Системи моніторингу стану та ефективності роботи мережевих засобів компанії SolarWinds • Системи захищеного зберігання лог файлів фірм ArcSite та RSA.
• Проведение аудита и консультаций в получении
• •
стандарта Payment Card Industry Data Security Standard (PCI DSS) Проведение внешнего сканирования безопасности банковских сетей Проведение Теста на Проникновение (Penetration Test)
Тел.: +38 (093) 77 69 615 E mail: sysnet.ukraine@gmail.com, vivian.duff@sysnet.ie www.sysnet.ie
03067, Київ, вул. Виборзька, 42 а, Тел.: (044) 457 63 22, 457 70 39, 457 95 35, факс: (044) 455 73 56 Е mail: info@svit it.com.ua www.svit it.com.ua
ТОВ «РЕНОМЕ СМАРТ»
ООО СНПФ «АРГУС»
• Комплексні рішення для мереж
• Программное обеспечение для комплексной автоматизации
•
деятельности банковских учреждений (АБС «БИС ГРАНТ», ВПС «ГРАНТ», ПК «Пегас» и др.) • Программное обеспечение для автоматизации деятельности коммерческого банка в НСМЭП (АКС «АРГУС», ПО для терминального оборудования, банкоматов и др.) • Процессинговый центр «АРГУС» по обслуживанию банков
участников НСМЭП; • Cредства криптографической защиты информации; • Системы автоматизации небанковских финансовых учреждений.
банківського самообслуговування: банкомати, системи cash in, кіоски, POS термінали Розробка, впровадження і супровід спеціалізованого програмного забезпечення.
Київ, вул. Щербакова, 59 Тел.: (044) 449 84 01, 449 48 50, факс: (044) 449 10 42 Рівне, вул. Костромська, 25 Тел./факс: (+38 0362) 69 34 20, 69 34 69 E mail: smart@renome.ua, www.renome smart.com
61058, Харьков, ул. Ромена Ролана, 12 тел.: +38 (057) 714 01 96, 714 01 97 E mail: market@banksoft.com.ua, www.banksoft.com.ua
ООО «ПРЕДПРИЯТИЕ ПЛАСТИК КАРТА»
ООО «ИПК «РОНТЕК»
Сертифицированное производство, персонализация пластиковых карт: • Карты МПС Visa и MasterCard с магнитной полосой • EMV карты • Карты НСМЭП • SIM карты • Скретч карты • Бесконтактные карты • Дисконтные и клубные карты. Мощность – 250 млн. карт в год.
• Серийное производство и продажа банковских терминалов самообслуживания
• Производство и продажа банкоматов • Продажа POS терминалов • Продажа оборудования для персонализации
пластиковых карт, сортировочных машин, уничтожителей
• Комплексное решение для банков в НСМЭП • Продажа комплектующих для терминалов самообслуживания
• Сервисный центр
Ул. Новопромышленная, 4, пос. Новые Петровцы, 07354, Украина, Киевская обл., Вышгородский р н Тел. +38 044 585 0303, факс: +38 044 585 0292 E mail: sales@plasticcard.kiev.ua, www.plasticcard.kiev.ua
C A R T E
B L A N С H E
04080, г. Киев, ул. Нижнеюрковская, 45 а Тел.: (+38044) 425 85 04, 425 87 87, Факс: (044) 585 03 28 E mail: gvi@rontec.com.ua, www.rontec.kiev.ua
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INFORMATION FOR SUBSCRIBERS Периодичность выхода журнала: 10 номеров в год
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ЭЛЕКТРОННОЕ ПРИЛОЖЕНИЕ К ЖУРНАЛУ «КАРТ БЛАНШ» распространяется среди подписчиков журнала бесплатно.
New!
РЕКЛАМА В НОМЕРЕ «Телекарт Прилад»
Тел. +38 (048) 714 2842
BS/2
Тел. +370 5 266 4595
«Банкомзв'язок»
Тел. +38 (044) 496 0096
с. 30
Sysnet Ltd.
Тел. +38 (093) 776 9615
с. 31
РОНТЕК
Тел. +38 (044) 485 0320
обл. 3, с. 31
«Підприємство Пластик Карта»
Тел. +38 (044) 585 0303
обл. 4, с. 31
«Servus Systems Integration»
Тел. +38 (044) 461 9255
с. 30
«Реноме Смарт»
Тел. +38 (0362) 69 3412
с. 31
Wincor Nixdorf
Тел. +38 (044) 49 29707
с. 30
ТОВ «СВІТ IT»
Тел. +38 (044) 390 1162
с. 31
СНПФ «Аргус»
Тел. +38 (057) 714 0196
с. 31
32
C A R T E
B L A N С H E
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Редакция журнала «Карт Бланш» предлагает читателям подписаться на рассылку на новом портале www.smArt payments.info
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формационные, аналитические и другие мате
риалы по вопросам и проблемам развития рын
ка пластиковых карточек в Украине и за рубе
жом по самым различным направлениям.
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