Kazakhstan may have been placed on the
comedy map by the character of Borat, but in payment circles at
least, the country has been acknowledged as a major growth hotspot
for payment cards and electronic banking. Victoria Conroy reports
on the development of Kazakhstan’s payment sector to
Kazakhstan, on the border
with Russia, is a country rich with natural mineral and energy
resources, which has helped Kazakhstan’s GDP to achieve an average
annual growth of around 10 percent since the beginning of this
This gathering of wealth, coupled with
foreign direct investment into Kazakhstan (around $50 billion since
1991), has trickled down into the real economy, pushing up
household incomes in a country with a population of 16 million,
expanding the number of middle-class consumers, bolstering
purchasing power, and opening up a fertile market for electronic
So much so, in fact, that Kazakhstan’s
banking sector is acknowledged as being more advanced than that of
Russia, even though both economies have followed similar patterns
of development. The proportion of Kazakhstan’s population living
below the poverty line fell from 43.4 percent in 1998 to 18.2
percent in 2006.
But despite being Central Asia’s largest
economy, it too is caught in the headwinds of global economic
According to the International Monetary
Fund (IMF), the country’s economic growth in 2008 and 2009 may slip
below forecast due to continuing economic turbulence and volatility
in commodity prices.
And if some of the world’s major economies
like the US, UK and Japan slip into full-blown recession, as is
looking increasingly likely, commodity and energy prices will fall
further, as demand for exports drop – at present, oil accounts for
60 percent of exports from Kazakhstan.
This is already causing problems for
Kazakh banks, which previously didn’t hesitate to extend large US
dollar loans to customers while times were good, but which are now
faced with significant foreign debt repayments as refinancing
Following a year of credit crunch-driven
nervousness among Kazakh banks, in mid-November 2008, Kazakhstan’s
government agreed a $3.5 billion bank bailout package in order to
help them cope with economic volatility and public concern over
Under the partial nationalisation plan,
the government will buy into the country’s four biggest banks,
which should help restore some semblance of confidence in the
However, the bailout came too late to save
several of Kazakhstan’s banks which succumbed to acquisition by
larger players, some of which were foreign. Texaca Bank was bought
out by Russia’s Sberbank, and ATF Bank was acquired by Bank
Austria, a subsidiary of Italy’s UniCredit.
Also, South Korea’s Kookmin Bank acquired
a 30 percent stake in Bank Center Credit in March 2008 with a view
to becoming majority owner in due course.
The IMF recently cut its forecasts for
Kazakhstan’s GDP growth to 4.5 percent in 2008 and 5.3 percent in
2009, down from 5 percent and 6 percent respectively. However, the
revised rates are still far higher than many Western economies,
meaning that there still could be rich pickings for payment players
in the region.
Payment card usage in
As of November 2008, the total number of payment cards
issued in Kazakhstan amounted to over 6.9 million, an impressive
growth of 30.2 percent compared to November 2007. The vast majority
of cards are debit/ATM or cash cards. The number of cardholders
amounted to 6.5 million, growth of 26.8 percent.
However, the number of active cards is far
lower, amounting to 3.06 million in September 2008, suggesting that
Kazakh banks need to do a much better job in educating customers
about card features and security benefits once they take delivery
of their cards.
Kazakhstan’s banks have for some years
issued their own proprietary ATM and cash cards, which are for
domestic use only. According to the National Bank of Kazakhstan, as
of September 2008, 19 Kazakh banks were issuing payment cards in
the country, the vast majority of which are international
scheme-branded cards from Visa, MasterCard, American Express, China
UnionPay and Diners Club.
Indeed, international scheme-branded cards
have a market share of 97.3 percent compared to domestic ATM/debit
card market share of 2.7 percent as of November 2008, compared to
96 percent and 4 percent respectively in September 2007.
It is Visa which is the dominant
international scheme in Kazakhstan – of the 6.9 million cards in
circulation as of November 2008, 5.4 million were Visa-branded,
with 1.27 million being MasterCard/Europay-branded.
American Express is also present in the
Kazakh market, although its cards are solely aimed at high net
worth individuals and corporates.
In September 2007, Amex teamed with
Kazkommertsbank, the exclusive issuer of Amex in the country, to
launch an Amex-branded gold and platinum card, denominated in KZT
and US dollars.
True revolving credit cards are still a
rarity in Kazakhstan, and credit cards offered by banks are
technically charge cards, as they are linked to a cardholder’s
current or salary account with the balance paid off in full on a
As is common with Russia and most former
Soviet states, cash remains the most popular form of payment, but
it appears that in Kazakhstan cash withdrawals, whilst still
popular, are gradually decreasing and the growth rate slowing.
In terms of non-cash transactions, for
example transactions other than ATM withdrawals, these are growing
as Kazakh consumers become more comfortable with electronic
payments and services.
In terms of transaction value, this too is
showing healthy double-digit growth levels. In October 2008, total
payment card transaction value totalled KZT226.9 billion ($1.9
billion, a jump of 35.3 percent compared to the year-ago period,
while the volume of transactions was 9.1 million, a rise of 17.5
Cashless payment transactions amounted to
1.5 million transactions by October 2008, a jump of 22.1 percent,
while cashless payment transaction value amounted to KZT48.1
billion. The volume of cash withdrawal transactions rose by 16.6
percent to 7.6 million transactions, amounting to KZT178.7
ATM development a key growth
A key factor driving growth in card
payments is undoubtedly the enhancement and extension of the
country’s payment infrastructure, notably ATM channels.
ATMs were first introduced into Kazakhstan
in 1997 by commercial banks. In 2002, the number of ATMs in the
country totalled 702 – by November 2008, this number had shot up to
5,981. POS terminals across the country numbered 5,285 in 2002 – by
November 2008, this figure had grown to 19,586.
High levels of card issuance are spurring
the country’s banks and independent deployers into rolling out
functionally advanced ATMs, with 2007 being a particularly good
year for growth.
According to data from payment consultancy
Retail Banking Research, the Central and Eastern European (CEE) ATM
market grew by an impressive 34 percent in 2007, with Kazakhstan
accounting for a staggering 93 percent of that increase, helped by
oil income and foreign investment which has helped to increase bank
However, as more ATMs are deployed
throughout the country, this will likely reduce the average ATM
withdrawal value. According to RBR, in the CEE region, Kazakhstan
has the lowest level of cash withdrawals per ATM per month at
1,417, compared to 5,719 in Estonia.
A low level of cash withdrawals typically
translates into high average values of cash withdrawals, with RBR
citing Kazakhstan as having the second-highest average cash
An increase in the number of ATMs will
likely have a diluting effect on transaction volumes and values
over the next few years.
In relation to credit cards, Kazakhstan
has become infamous over the past few months for being the
launch-pad for a new credit card, ‘Diamond’, embedded with gold and
a real diamond.
Needless to say, the MasterCard-branded
card, issued by Kazkommertsbank, is only available to high net
worth individuals for an annual fee of $1,000.
This card looks to be taking the notion of
consumer segmentation to a whole new level, as it is also available
in ‘his and hers’ formats – the male format comes with a picture of
a winged horse, while female customers will receive an image of a
peacock on their cards.
The bank only plans to issue around 1,000
of the cards at a rate of 30 a month, each with a credit limit of
$50,000, about $20,000 higher than the highest limit on some
MasterCard platinum cards.
More than 2.68 million Halyk Bank payment
cards are in use in Kazakhstan, giving it a market share of 48
percent as of September 2008. Halyk’s branch network comprises 706
branches, along with 1,655 ATMs and 4,114 POS terminals.
Its stated aim is to win or maintain a
market share of at least 20 to 25 percent in all key financial
services segments and at least 50 percent market share for payment
cards and payroll projects.
As part of its ongoing 2008-2010 growth
strategy, Halyk is placing more emphasis on cross-selling various
service offerings through its branch network and aims to bolster
its position in payment cards, payroll banking, ATMs, mobile
banking and remittances.
Halyk has set a target of selling an
average of five products per retail customer, specifically payment
cards, deposit accounts, loans, insurance and pensions to name a
Going forward, Halyk is aiming to
implement an IT system to support sales through its branch network
and a risk management system that fully conforms to European
standards, along with a computerised customer relationship
In 2007 Halyk and Chinese national card
network China UnionPay (CUP) signed a deal enabling Halyk to issue
CUP cards to residents of Kazakhstan, marking the first time that
CUP cards were issued outside China. Kazakh CUP cardholders are
able to withdraw cash and make purchases with their CUP card while
in China, and also use their CUP cards through Halyk’s ATM and POS
network in Kazakhstan.
In September 2008 Halyk announced that
over 270,000 users had registered to use its mobile banking service
which was established in conjunction with Visa CEMEA. Any Halyk
charge card customer can connect to the service.
In November 2008 the bank, along with
Visa, launched an international money transfer service via mobile
phone. The new service allows card-to-card money transfers in four
currencies – KZT, euros, US dollars and Russian rubles.
Halyk also recently launched a prepaid
gift card in Kazakhstan on the Visa Electron platform.
Kazakhstan’s largest bank, as
seen above, is not shy about stamping its mark in the retail
financial services area. Established in 1990, Kazkommertsbank until
recently focused solely on corporate banking, but the last year saw
the bank announce plans to rebrand its retail arm as Kazkom,
coinciding with an aggressive investment programme in order to
bolster its retail banking market share.
The bank has undertaken a branch
modernisation and extension programme in order to heighten the
customer service experience, and as of June 2008 had a network of
181 branches, compared to 111 in 2006, 860 ATMs and around 8,000
POS terminals. As of October 2007, credit cards comprised around 1
percent of Kazkommertsbank’s retail loan portfolio.
In its financial results for 2007,
commissions from payment cards increased by 61 percent compared to
2006, while fee and commission expense rose by 62.3 percent in 2007
to KZT2.7 billion, compared to KZT1.7 billion in 2006.
Bank TurenAlem (BTA)
BTA was the first bank in Kazakhstan to
become a principal member of Visa in 1994 and MasterCard in 1998.
BTA also opened the first card processing centre in the country and
installed the first ATM.
BTA, with over 970,000 debit/ATM cards
issued as of March 2008, views payment cards as a major strategic
priority in Kazakhstan, and has enhanced the functionality and
features of its proprietary ATM card, Alem Card, alongside its
international scheme-branded offerings. BTA offers cards
denominated in KZT, US dollar and euros, and allows card accounts
to be funded by the cardholder or third parties such as friends and
BTA also allows utility, mobile phone and
cable TV bills to be paid via its ATM network and via automatic
bill payment from cardholder accounts. Discounts are also offered
to customers who use card to pay for goods and services.
According to the bank’s 2007 annual
report, it is the leader in the credit/charge card market with a
share of 19.6 percent. In 2007 the bank focused on expanding its
credit card market share with the number of cards in circulation
Lending volumes reached KZT2.6 billion by
the end of 2007, representing 33 percent of total lending volumes
in Kazakhstan. According to the bank, as of March 2008, it had 688
ATMs, 1,852 POS terminals and 312 branches across