WITHOUT LEAVING THE CASHPOINT

Azerbaijan has hit upon a strategy for developing a national payment system up to the year 2021, the ultimate goal of which is the formation of a single online payment space throughout the country.

Member of the Central Bank of Azerbaijan (CBA) believe that the implementation of this strategy will allow the cash turnover in the economy to be restricted, will reduce the use of cash payments between economic entities and increase transparency in their turnover. Besides this, its application will allow the use of non-cash payment instruments to become some kind of norm in society and the sphere of embracing and applying online payment services, based on the latest technology and tools, to be expanded

New plans

In compliance with the instructions of President Ilham Aliyev, at the present time the state structures are known to be actively working on going over to onlineservices. According to the data at the start of July, the total number of online services installed by Azerbaijan's state bodies is 455, of which 277 can be accessed on the "e-government" portal. Moreover the number of applications for digital services accessible on the portal reached almost 1.4m in the period from December 2012 to 30 June 2014. At the present time more than 60 organisations are connected to the portal and its annual monetary turnover is about 1bn manats.

In short, the efforts on a government level to make online services and non-cash payments popular are still ongoing. It has to be admitted that a sufficiently extensive infrastructure for developing these spheres has been set up in Azerbaijan. Social and pension payments have already been paid by bank card for a long time now, as well as the payment of wages in many spheres, such as those of civil servants, and even in the private sector of the economy; the range of communal and other public services that can be paid online has been substantially expanded. The installation of POS-terminals [point-of-sale terminals] in the commercial and service spheres allows the customer to make non-cash payments for purchases and services. Starting this year, payment for public transport, using a card, has begun. True, for the moment this novel method of payment is only available in Baku and not on all bus routes, but the officials have promised that by the end of 2014 and the beginning of 2015 the system will have been installed everywhere and cover more than 2,500 buses, and in the future it will be extended to the whole of the republic.

As regards further steps, Kamala Qurbanova, the head of the department of payment systems accounts of the CBA, has noted that the new strategy for the development of a national payment system calculated for 2015-2020, is to be submitted to the government before the end of the year. It consists of measures in five directions: the development of an online payment infrastructure and the extension of its range by applying new services; boosting the institutional basis of e-payments; the expanded application of innovatory technologies for making non-cash payments; providing the public with more information on how to make e-payments for services; incentives provided for making e-payments.

CBA general director Rasad Orucev believes that the strategy contains future measures relating to additional incentives in the non-cash payment sphere.

We remind you that a state programme for the development of a payments system was adopted in 2005 on the instructions of the head of state. A complex of measures were carried out within its framework, which mainly involved the installationof POS -terminals at all facilities throughout the country by 2015. The outcome of its implementation was that the total turnover of almost 6m payment cards amounted to 988m manats in January to May, using cashpoints and POS-terminals.

Automatic and advantageous

But, in spite of all the efforts, cash transactions still predominate throughout the republic. This is due to numerous factors such as the desire of entrepreneurs to evade paying taxes, the existence of the shadow economy, and the fact that the general public does not know enough about the advantages of making e-payments. Therefore the main aim of the proposals drawn up and the second draft state programme is to eliminate these factors and develop the relevant infrastructure, which will ultimately lead to the share of non-cash payments in Azerbaijan increasing to an international level.

The reason why insufficient non-cash bill payments are being made in the provinces is the high cost of the terminals and the low turnover. The head of the "Millikart Group" processing centre, Calal Orucev, is proposing installing mobile POS-terminals in order to solve this problem. It is understandable that a small business, if it does not have sufficient turnover will not be interested in having non-cash payments. But mobile terminals (when a special app is applied to the mobile device) cost much less compared with the customary POS-terminals and they are mobile in the literal sense of the word. Therefore terminals like these will be more popular with small business, especially in the country's regions," C. Orucev thinks. 

Then the automatic payment cards may be much in demand in many of Azerbaijan's retail sectors. How these technologies work can be seen from the example of paying for travel on public transport. "Similar cards may be called for in various segments of the retail trade, where many sufficiently small-scale transactions are conducted. These may be fast-food establishments, food courts in shopping malls, and organised car parks. For the moment there are not that many of these places in the country, but we need to reckon on future development," Calal Orucev noted.

Moreover, the country's banks have also started to understand that this trend is a promising one. In order to provide similar services, the bank needs to undergo the relevant certification process. At the present time several banks have initiated a similar procedure and intend to obtain the right to issue bank cards, as well as purchasing and installing POS-terminals or validators which allow the customer to use these cards. 

In its turn, the "Millikart Group" processing centre, in which 15 of the country's banks are provided with services, intends to offer bank customers the opportunity to join the system of travel cards in Baku in September this year. This system is completely open for the banks and accordingly any bank wishing to join it only has to undergo the necessary certification.

As far as the other major processing centre, Azericard, is concerned, it is already completely ready to issue and acquire the Visa payWave and Mastercard PayPass cards. These cards are expected to be issued before the end of the year, they said at the centre. At the present time, the POS-terminals, equipped with the payWave and PayPass automatic payment technology, have already been installed in a number of shopping premises in the capital.

Create your own and befriend others

Moreover, what is probably the most interesting element of the new CBA strategy may be the setting up of a national payment system in Azerbaijan. 

It is known that the latter situation in Russia's payment expanse has made many central banks fall to thinking about setting up a local payment network. We will remind you that, in connection with the well-known events in the political arena, the Visa and MasterCard international payment systems have ceased to service the payment cards of a number of Russian banks, which has naturally caused a serious financial problem. As a result, Russian President Vladimir Putin has instructed the government and the Central Bank [of Russia] to take all the necessary measures to set up a national payment system. Moreover, in Russia they are discussing the setting up of a national payment card system starting from zero, which will allow internal Russian card transactions to be made, independent of international payment systems.

As far as the CBA's plans are concerned, the aim of setting up a payment system is to create an effective process for developing non-cash payments and getting close tiesgoing between the processing centres operating in Azerbaijan. In this connection, the relevant international experience is being studied at the present time. They note at the Central Bank that this will allow the data on card operations conducted within the country, within the bounds of Azerbaijan, to be stored, a local market in payment cards to be developed and also domestic tariffs for operations with them to be reduced.

According to information from those involved in the market, when a national system of payments is set up, it is not to be ruled out that all public services-related cards will be transferred to it in the future, by means of which pension payments, grants, benefits and other payments are to be made. These measures, according to the source, will, among other things, allow the extent of expenditure on the issuing and servicing of these cards, currently produced on Visa and MasterCard platforms,to be reduced.

At the same time, this project is exclusively local, and the Central Bank intends to continue close co-operation with international payment systems in developing and expanding the range of non-cash payments in the country.

In short, on the one hand, the new strategy for the development of a national payment system in Azerbaijan will be a response to the regular calls of the financial markets against the backdrop of the events unfolding in the international arena, while, on the other hand, it will help the domestic situation with regard to the spread of non-cash payments to catch up with the rate of IT development, both in the world as a whole and also in the country in particular.