PENSION PLUS

Several years ago when the State Social Security Fund (SSSF) announced transition to a system of pensions by plastic cards, many were indignant why the elderly should bother with ATMs, said it was a useless idea, etc. But every year, as plastic cards "took root" among pensioners, the system not only proved its viability, but also its necessity and progressiveness. The mere fact that corruption was almost completely eliminated in getting pensions is worth all the initial inconveniences in dealing with ATMs.

The SSSF did not stop at this and introduced advanced technologies in calculating and issuing pensions every year. Although it is too early to speak about their mass popularization among the current generation of older people, given the fact that computer literacy is rapidly spreading among the Azerbaijani population of all age groups, the progressive initiatives of the SSSF will be assessed according to their deserts in the near future just like the latest Pension+ public project.

Supplement to the pension?

The first deputy chairman of the IBA board, Emil Mustafayev, noted during the presentation that an interest-free credit line in the amount of 100 manats is opened for all plastic pension cards serviced by the bank. One important aspect of the project is the complete absence of additional payments, including in the form of bank commission. A pensioner is able to spend the credit limit allocated to him at any time at commercial properties that signed an agreement with the IBA. The debt will be repaid from the pension transferred into the pensioner's account next month. After that, the credit limit will be restored automatically.

"All pension cards serviced by the IBA (only cards of the State Social Security Fund) are connected to the programme in an automatic manner," Mustafayev said.

At the initial stage, the project will cover two districts of Baku - Nasimi and Sabayil - and in the future, the entire capital and later the entire country.

The first deputy chairman of the IBA said that at the request of the pensioner, the credit limit can be increased. To do this he will need to apply to any branch of the bank and sign a contract. At the same time, Mustafayev said, the maximum limit on the credit line cannot exceed the size of the applicant's pension.

One of the important features, which Pension+ emphasizes, is the inability to cash the allocated credit funds through ATMs. A pensioner can only spend the money in the form of payment for goods or services in partner networks. Currently, the network includes several dozen supermarkets, pharmacies and medical facilities.

According to the SSSF chairman Elman Mehdiyev, the choice of facilities and the payment mechanism was dictated by certain considerations. "It's no secret that a serious part of pensioners' income is spent on the purchase of consumer goods, medicines and medical services. Connecting such shopping facilities and organizations to the project was the primary goal," Mehdiyev said.

Regarding the impossibility of cashing the additional amount, Mehdiyev noted that in this way, the State Social Security Fund intends to begin to address one of the main problems connected with the pension system, namely, the extremely narrow range of card usage. For example, currently, a wide network of ATMs has been created in Baku and in the regions. In the regions, the concentration of ATM devices even exceeds the norm, but in spite of this, there are constant queues in front of ATMs, and as a consequence, citizens complain that banknotes of the needed value run out pretty quickly in them.

"The reason is that most pensioners still see their plastic card not as a means of payment for goods and services but as a tool for getting their pension in the form of cash," the head of the state fund said.

Such a situation, in spite of the first impression, affects other categories of citizens who use ATMs. That is why, according to Mehdiyev, it was decided to launch such a project.

Stimulus to non-cash payments

Experts, as well as government representatives have repeatedly noted the low level of the use of plastic cards. Most of the operations connected with them are still cashing. To increase the use of cards as well as the total share of non-cash payments in the total amount of payments, various measures have been undertaken, including stimulatory and administrative measures.

Possible ways to increase public interest in non-cash payments are tax breaks and limiting cash payments for certain goods and services. In addition, the number of POS-terminals installed in shopping facilities is steadily growing, thus expanding the possibilities of using plastic cards. In addition, the country is conducting events and activities of educational nature.

It is no secret that many people, especially the older generation, still treat cashless mechanisms with a certain degree of distrust or scepticism. The cash that you can always "touch" and feel in your pocket still seems as the only "real" instrument to many.

This explains the predominance of operations to cash funds among scenarios for the use of plastic cards, including among pensioners. It is impossible to solve the ensuing problems - queues in front of ATMs and shortage of banknotes in them - by expanding the chain of ATMs. The installation and operation of ATM devices is costly. Moreover, it is impossible to calculate how many ATMs will be enough to prevent queues. A simple calculation shows that this will require a significant increase in the number of ATM terminals, which is unjustified from an economic point of view and does not guarantee that there will be no queues in front of them at certain times. We must take into account other issues connected with this option, namely the need to fill ATMs with sufficient amounts of bills in time.

In this regard, the only real way to change the situation can be stimulating citizens to make use of bank cards - not only pension cards - for their intended purpose. Projects like Pension+ are able to make a significant contribution to solving this problem. If a citizen needs additional funds and they cannot be cashed, in some way he "will be forced" to use non-cash payments. Every time the citizen will become convinced of the convenience and safety of this method of payment for goods and services. Gradually, the consciousness of the population will change in the direction of increasing confidence in plastic cards, and the number and volume of transactions with them will grow not only in various stimulating operations but also in the daily life of citizens. 

OUR REFERENCE 

Pensioners comprise 10% of Azerbaijan's population, i.e. 1.27m people. In the past year, two decrees of President Ilham Aliyev on indexing and raising pensions were executed. Thereafter, the basic pension increased to 100 manats, their average size - to 170 manats, and the replacement rate of the retirement pension was 45%. As a result, the size of pensions in the country is 1.7 times higher than the subsistence level, whereas in 2003 it was half that figure.

According to the State Social Security Fund of Azerbaijan, 99.9 % of pensioners receive their money through ATMs on time. 

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As of 1 December 2013, the country had 2,411 ATMs, of which 1,360 are located in Baku and 1,051 in other cities and regions of the country. Their total number in one year increased by 171 units or 7.6%. The number of POS-terminals operating in the country is 33,301, of which 29,101 are in Baku and 4,200 - in other cities and regions. 

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The number of payment cards in the country at the end of November 2013, according to the Central Bank of Azerbaijan, was 5,515m. Compared with the same period of 2012, their number rose by 8.8%.