The Balkans, one of the most diverse and
divided regions of Europe, is no more coherent in terms of its
adoption of card payment systems. Yana Palagacheva considers the
opportunities and threats, from the upwardly mobile Serbia and
Bulgaria to the troubled markets of Macedonia and Kosovo
Despite being a relatively small
geographical area, the Balkan countries have some major
discrepancies in the growth and sophistication of their financial
services.
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Political differences and ethnic conflicts have
split the region; while there is a tangible presence of modern
foreign banks in the Serbian capital Belgrade for example, many
Albanians are entirely unbanked. A number of additional factors not
only prevent this gap from closing, but make it even bigger.
Greece is the most developed country in the
Balkans, and Greek banks have gained a significant market share in
the region. The other countries are classified as developing, but
still lag considerably in terms of electronic business. The
unpopularity of credit and debit cards is mostly marked in the
western Balkan countries: Albania, Kosovo, Macedonia and
Montenegro. Many employees in the region are still paid in cash and
no legislation enforces electronic payment in any regard.
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By GlobalDataOne big factor holding back the use of
cards in the region is merchant resistance. Merchants increasingly
prefer cash transactions as this helps them avoid tax, and many
apply high charges for card use to discourage customers from using
electronic payments. Utility payments too are mostly collected in
cash and there is little support for changing this trend.
“Utilities and telecoms need to encourage
electronic payments and payments with cards, direct debits, and
over the telephone. There are still far too many kiosks on street
corners collecting payments in cash,” says Raiffeisen Bank Kosovo’s
chief executive Robert Wright.
Wright has worked in the Western Balkan region
for nine years. He explains that distrust of technology is deeply
rooted in the culture, making them very wary of using electronic
forms of payment. Customers are inexperienced and often careless
with personal data and PIN numbers. This, combined with the fact
the western Balkans are not fully EMV-compliant or chip-enabled,
significantly increases the risk of fraud.
“They say ‘Why should we use complicated
electronic banking systems when cash is safe and easy?’ Many people
do not even know the difference between a debit card with an
overdraft and a credit card,” says Wright.
This trend is mostly visible in Albania, the
country with the lowest usage of debit and credit cards in the
region. According to the latest data from the Bank of Albania,
there are around 700,000 debit cards and only 30,000 credit cards
in use in the country, which has a population of around 3m.
Slow progress
Wright says that Raiffeisen Bank started
installing ATMs and POS machines for the first time outside the
capital Tirana in 2005. He believes the slow transition is a result
of the lack of confidence in the banking system following the
collapse of a number of pyramid schemes in the late 1990s.
After 40 years of extreme communism, Albania
transitioned into a liberalized market economy and the government
endorsed a number of pyramid schemes. Approximately two-thirds of
the population invested in them, and when the schemes eventually
collapsed people lost nearly $1.2bn.
The Serbian suppression of Kosovo in the 1980s
and 1990s, followed by the war, weakened the infrastructure of the
country and Kosovo is considered the poorest state in Europe with
an average monthly salary of only around €250.
This has led to a thriving cash-based black
economy, which holds back the uptake of cards and electronic
banking channels. According to Wright, the state’s poor
infrastructure considerably adds to people’s reluctance to use
electronic banking.
“Regular power cuts play havoc with ATM and POS
systems and undermine retailer and customer confidence in
electronic banking” says Wright.
A different story
Montenegro and Macedonia have much
higher use of credit cards. The most recent data indicates that
there are more than 90,000 credit cards per million people in both
countries – 10 times the figure for Albania.
Montenegro has been relatively conflict-free
for the last few decades, and has seen its tourist industry grow,
which has helped raise the standards of the banking system.
Macedonia has been positively affected by the
presence of many leading Greek banks. Wright, however, feels that
the pace of change is slowing in Macedonia, due to the considerable
problems faced by Greek banks following the eurozone sovereign debt
crisis.
Its strong economy and dominant position in the
region’s political landscape has put Serbia well ahead of most of
the developing countries in the region. The appetite for payment
cards is much bigger in Serbia, with around 0.71 debit and 0.17
credit cards per adult.
“Serbia has significant history with credit
card usage compared to the rest of the region. Even today I can say
with confidence that we are at least a step forward from
surrounding countries,” says Piraeus Bank Belgrade’s credit card
product officer Vladimir Stojanovic.
Pro-active reform
A major factor is the approach Serbia
took following the break-up of the former Yugoslavia, and its
readmission to the UN in 2000.
The country’s banking system went through a
number of reforms that included transferring the responsibility for
payment operations from a state-owned institution to commercial
banks. This reform enhanced banks’ competitiveness and broadened
their range of services. New laws stimulating electronic business
were enacted, such as the Law of Electronic Signature (2004),
enabling legitimacy of electronic documents, and the Law on
Electronic Commerce (2009), enabling online shopping.
Bulgaria is the only developing country wholly
located inside the Balkan Peninsula that is a member of the EU.
Although its membership is relatively recent, it has increased bank
efficiency and popularised electronic payments in Bulgaria, which
stands at approximately 1.1 debit cards per adult.
The region, though small, is clearly
developing. But the pace of that development varies considerably.
Though are both opportunities and significant challenges for banks
and payments providers looking to tap into the Balkan markets. The
biggest challenge of all is the diversity of cultures and attitudes
that make the region so interesting in the first place.
