LOYAL PAYMENT

The government's efforts to develop the sector of noncash payments seem to be producing tangible results as the country's banks have begun to show more interest in promoting payment through credit cards. New bonus programs, credit campaigns and other marketing moves advertised in the media are intended to eventually promote this modern, comfortable and safe means of payment for purchases or services.

Of course, judging by the consumer huge interest in these products, they are having a positive impact on the market. But it is necessary to resolve a series of problems, bring the area of noncash payments in Azerbaijan close to international standards and introduce new technological innovations to achieve the desired spread of noncash payments in the lives of ordinary citizens. Because economists estimate that the acceleration of noncash payments just by one day provides annual GDP growth by 1.5-2  per cent. Also, the decrease of cash in the country's economy leads to a reduction in the costs of servicing it, reduces the scale of the shadow economy and tax evasion and gives an impetus to the development of banking.

The regional director of MasterCard for South-East Europe, Kemal Uyan, describes prospects for the development of noncash payments in Azerbaijan and important innovations in this sphere in an exclusive interview with Region Plus.

- In the last two years Azerbaijan has unfolded a wide-ranging program to promote noncash payments. How would you assess progress in this area to date? What is the level of development of noncash payments in the country?

- I have often been to Azerbaijan before. In the last five years I have been visiting the country as Business Development Manager for MasterCard and I can confidently say that if you compare the situation in the sphere of noncash payments 10 years ago with today, then there is tremendous growth, both in terms of infrastructure and in terms of business expansion. Progress has been particularly rapid in the last two to three years - this applies to the number of issued credit cards and the establishment of new areas for their application. Therefore, MasterCard has further enhanced its cooperation with local banks and government organizations and institutions to expand the services in accordance with market requirements.

- According to a study conducted by "MasterIndex", credit cards are less popular in Azerbaijan than debit ones. In recent months, a number of leading banks of the country have started to introduce special credit cards for shopping and special bonus programs to encourage interest in this product. What types of stimulation are most effective in Azerbaijan in your opinion?

- A similar situation was observed in Turkey 10 years ago when debit cards were more popular. Credit cards were in the background. Then we, in cooperation with the banks, decided to introduce a system of loyalty to make credit cards more attractive to use than cash. After all, debit cards are used to withdraw cash from an ATM and eventually lead to cash payments. This is the most ancient way of settlement, but against the background of today's technological innovation it is inconvenient and less safe, while credit cards are much easier to use. And our goal is to inform the people of the benefits of noncash payments. A simple example: you lose your wallet and any cash there is in it is gone forever. A card is a different thing. Even if you drop it somewhere, no-one else can withdraw cash from it not knowing your PIN-code, and you can safely recover it and all of its "contents". In addition, cards are very convenient in traveling abroad - there is no need to waste time searching for currency conversion stations, etc. And there are dozens of such nuances.

Going back to the issue of stimulation. Azerbaijan has also introduced loyalty programs to promote credit cards. These are bonus and credit programs which envisage the accumulation of certain "points" and the opportunity to buy goods in free installments when using a card.

- However, it has to be acknowledged that the nuances of these campaigns are not always clear to consumers. There is often a lack of time and patience to study the long list of retailers included in these programs, etc. Do you have any suggestions on simplifying them?

- These programs are a joint product of banks and outlets. A bank may start cooperation with one outlet and gradually expand the list of its partners. But our goal is, of course, to build a user-friendly loyalty program whereby customers could use a "credit card" in one shop, get a bonus and spend it at another store. So we want to ensure that this program is single and unified software managed and used in the largest possible number of places.

In Azerbaijan, we use the experience gained in other countries, for example in Turkey, where the above loyalty program was introduced 10 years ago. Banks, in turn, also need to work with potential partners in the commercial sector to explain the benefits of these programs. In essence, they can significantly increase the number of purchases and thus the turnover of an outlet.

- But the main obstacle to the promotion of noncash payments in Azerbaijan is still the reluctance of retail facilities to accept bank cards. Is there a need, in your opinion, to use special administrative measures to stimulate the process in this area, for example, tax breaks, reduced bank charges, etc.?

- Of course, traders should have a motivation for using noncash payments. First, as I noted, is material gain - increase of sales due to increased trade. On a short-term, it might be appropriate to use certain administrative benefits, but this will not produce a long-term effect. Again: it is necessary to rely on the business effect. This is what can form the basis for stable growth of the market of noncash payments. In Turkey, for instance, the trading facilities that do not offer customers the opportunity to pay by card are greatly disadvantaged in terms of competition. In Azerbaijan, these loyalty programs are only beginning to work and tangible results should come about in one to three years.

- How would you assess the level of cooperation between MasterCard and Azerbaijani banks? What new projects and technologies will be offered in our market?

- Today a number of countries have already introduced the technological innovations of MasterCard, and we are going to introduce them in Azerbaijan in the coming months. For example, until recently, in order to make a payment by a credit card it was necessary to carry it through the terminal. Today we are moving to a new technology using electronic chips, whereby it is simply necessary to insert the card into the terminal.

The technology of contactless payments Pay Pass has also been developed when it is not necessary to insert the card into the terminal. It is enough to bring it closer to the machine to make a payment, but within a certain amount. A transaction exceeding a limit will require additional verification. This technology can be very popular in bookstores, in fast food facilities, caf?s, taxis, public transport, as it enables customers to make payment in very quickly, contributing to a significant reduction in queues. These cards were first released into circulation in Turkey in 2006. In Azerbaijan, they will be available in the near future.

Also next year, we will introduce the latest technology of mobile payments, that is noncash settlement by mobile phone. Thanks to the Pay Pass chip and by bringing the phone close to the terminal, you can pay for your purchase. Moreover, at the entrance to a particular trading outlet your phone will receive a notification about the possibilities of credit and bonus programs in this particular store. This will be the best way to simplify loyalty programs for consumers. This technology has already been successfully introduced in a number of countries and has caused a huge demand from consumers. We hope to achieve this in Azerbaijan too.

And finally, the latest development of MasterCard applies to remote mobile payments when you don't have to be near the terminal to make a payment. In other words, this is the use of a mobile phone as mobile banking for payment of utilities, phone bills, money transfers from one account into another, etc.

MasterCard has all the necessary technology and infrastructure capabilities to implement these innovations in Azerbaijan and local projects to promote noncash payments. But first of all we focus on security issues and all of the said innovations are based on the principle of maximum compliance.

We hope that our innovations will take root in the market of noncash payments in Azerbaijan and contribute to its further growth in coming years.