MONEY HAS NO SMELL

Today, half the population of Baku have at least one debit card, while credit card holders make up only about 2 per cent of the residents of the capital. The majority of card holders are men with higher education aged from 18 to 34. Although cards are primarily being used for withdrawing cash from cashpoints, only 14 per cent of Azerbaijanis like using them just for cash withdrawals, while others are willing to extend their use, particularly to the retail sector, but on the condition that they are be able to get some additional benefits from them.

These very interesting data were obtained from the survey, MasterIndex, conducted for the first time in Baku by the international company MasterCard in the autumn of 2011. Some 1000 residents of Baku, 50 per cent of whom are card holders, were interviewed. MasterCard regularly conducts such surveys in various countries in order to identify consumers' habits and priorities in using plastic cards, their incentives and concerns.

Data on Azerbaijan are especially interesting because, under instructions from President Ilham Aliyev, the country is speeding up efforts to encourage non-cash payments. In his speech at the cabinet meeting in January of this year, the head of state said that the situation in this sphere in Azerbaijan should not differ from the situation in developed countries. "Credit and payment cards should be used in every shop and every restaurant. In this case, the tax base, of course, will be automatically expanded without any effort," the president said.

How far did Azerbaijan go to achieve the goal over the past year and what should be done to speed up the process? MasterIndex partly provides answers to these questions, which are of particular significance to our country ahead of the Eurovision-2012 Song Contest, when the republic will host tourists from countries where bank cards have long successfully replaced cash.

Things are still the same

The MasterIndex survey once again showed that, despite the government's efforts to expand the use of payment cards, they are still being used mainly for salaries or pensions - this is the point indicated by 47 per cent of card holders. Although the bank is usually not chosen by card holders, the issuing bank is still an important factor of choice for all types of users (32 per cent). Also according to the survey's findings, when choosing a bank card, their price and additional services are also important for Azerbaijanis.

At the same time, receiving a card, the average Azerbaijani hurries to get cash from ATMs. Thus, answering the question "Where do you use your debit card more often?", 86 per cent of the respondents said that they use them to get cash from cash machines. A more detailed survey showed that 95 per cent of debit cards are used less than three times a month for getting pensions or salaries. 14 per cent of citizens prefer to use cards exclusively for cash withdrawals from ATMs. But at the same time, others said they would like to expand their use and use their cards to buy in shops, if they are offered discounts or other benefits.

The last point, incidentally, drew the attention of MasterCard, which is going to suggest that banks introduce savings for customers using their credit cards to pay - a method to encourage non-cash payments used in many countries around the world. Most likely, banks will accept this proposal, because many of them offer their clients such types of benefits as discounts on purchases at certain stores, etc. Incidentally, according to the study, 79 per cent of those questioned would like to get some savings when shopping in supermarkets, while 72 per cent expressed their desire to get the best deals at clothing stores (81 per cent of women and 59 per cent of men chose discounts at clothing stores).

However, even if card holders have the desire to abandon the "real money" in favour of electronic money, it does not mean that owners of commercial stores, public catering facilities, etc. will be happy about this. Thus, the MasterIndex study showed that card holders face problems while using them: in response to the question "Why do you not use cards in stores?", 54 per cent of respondents said that there are no POS-terminals that accept cards. In addition, 24 per cent of the respondents said that shopkeepers are not willing to accept cards even if such devices are available.

It turns out that the situation in the commercial sector has not undergone significant changes during the year - despite the mandatory presence of POS-terminals in the stores, most likely, many shopkeepers simply do not want to show them to their clients. The reasons are the same - the need to pay additional bank fees, the impossibility of tax evasion, etc. But is there no other way to solve this problem?

According to the MasterCard regional manager in Azerbaijan, Hakan Acar, the situation can be changed by stimulating competition between shops. "If one store begins to accept cards and gets a lot of customers for whom this factor will be the main condition for the choice, other shops will be forced to follow suit in order not to lose their customers," he said, answering a question from Region plus. It is also important to encourage the client's desire to use his card - if he insists on this way of payment, this can force the shopkeeper to start accepting cards. "The experience in many countries shows that even if non-cash payments may first seem like an obstacle for owners of commercial facilities, seeing a growth in sales and profits, they will begin to understand the benefits of this method," Acar said.

The European approach

But shops are not the limit of the potential of non-cash payments in Azerbaijan. The population would like to use their cards more often in everyday life - in public transport, at markets and at health facilities. When respondents of MasterIndex were asked in which areas they would like to use their cards more often, 67 per cent named public transport (buses, metro), 48 per cent - markets and 46 per cent - medical facilities.

It is because of these comments that MasterCard is going to introduce certain technological innovations in the use of bank cards, and the most striking of them is plans for the use of contactless cards. Thus, the card can be used without being inserted into the terminal - it is enough just to keep it close to the terminal, and the operation will be possible in half a second. As noted by Acar, this will naturally expand the use of non-cash payment in such areas as transport, cinema tickets, etc., where quick payment is required.

All these innovations will be very useful in 2012 when the country expects a huge influx of tourists from Europe during the Eurovision Song Contest in Baku. That's when shops and dining and eating establishments will have to put up with the Europeans' habits to pay by credit card. Although representatives of MasterCard say that Azerbaijan is ready for this on the whole - you can easily pay with cards at hotels and major shops and there is an extensive network of ATMs, etc. "As a person who came to Azerbaijan from abroad, I can say that I had no problems using the card at hotels or restaurants, so I think tourists will have no problem. Moreover, MasterCard will help the Central Bank of Azerbaijan (CBA) to prepare a 'road map' of places where non-cash payments can be used ahead of Eurovision," Acar said.

However, even without Eurovision, the CBA is going to promote non-cash payments in 2012, which is why the government has prepared a programme that will cover the period from 2012 to 2016. According to the first deputy chairman of the Central Bank, Alim Quliyev, the main objectives of the state programme will be to ensure effective use of electronic payment systems, expansion of the legal framework and issues of awareness. "Overall, the goal of the programme is to increase the access of businesses and different groups to these e-services," Quliyev said.

It must be noted that on behalf of the government of Azerbaijan, the Tax Ministry has prepared a draft law on the promotion of non-cash payments, which has been submitted to the Cabinet of Ministers for coordination with relevant government agencies. The bill provides incentives to encourage non-cash payments, in particular the introduction of preferential tax rates. Mostly, benefits will be introduced for users of POS-terminals and the maximum amount of cash that will be used in one operation will be limited, i.e. a certain limit will be imposed, a violation of which will entail financial sanctions.

Thus, 2012 promises to be a turning point in stimulating the market of non-cash payments in Azerbaijan. "Having received the results of the first MasterIndex survey in Azerbaijan, we were once again convinced that this country has great potential for becoming a leader in the payment system in the region. We work with Azerbaijani banks to introduce advanced payment solutions and technology that will benefit consumers, retailers and banks in 2012 and in subsequent years," Acar said. That is to say the untapped potential is a good chance for banks and payment systems to show their worth on the market of the country, whose economy is dynamic and is less subject to external risks and whose population is young and relatively educated. "All this is good grounds for the development of non-cash payments," Acar said.

The main thing is to ensure that these grounds finally begin to yield good results...