The EU’s fastest-growing economy has benefitted from falling oil prices and government policies to stimulate exports and domestic demand. With more investment expected, how will this affect the Czech Republic’s cards and payments industry?
The Czech Republic is the fastest-growing economy in the EU, supported by falling oil prices, increased investment activity, and government policy to encourage exports and domestic demand.
Economic growth and disposable incomes are expected to accelerate in the period 2016–2020; in turn, more investments can be expected in the country’s cards and payments industry.
The Czech payment card market grew significantly from 2011 to 2015 as consumers spent more on cards.
The total number of payment card transactions increased in the period 2011-2015 at a compound annual growth rate (CAGR) of 14.8% from 437.9 million in 2011 to 760.4 million in 2015.
The Czech Republic’s payment card penetration – the number of cards per inhabitant – was 1.1 in 2015 – higher than peers Poland (0.97), Slovakia (0.95) and Hungary (0.92).
Merchant card acceptance also increased, with 108,000 merchants and retailers accepting payment cards in 2015, an 18.5% increase over 2014.
Uptake of contactless technology
Contactless cards were first introduced in the Czech Republic by Citibank in 2011, followed by other banks; now, all domestic banks except Sberbank allow customers to make contactless payments.
According to the Czech National Bank, the number of cards with contactless functionality was 8.7 million, accounting for 75% of the total 11.6 million cards in 2015.
The contactless card transaction value registered annual growth of 63.5% to reach $8.5bn in 2015. The number of contactless transactions reached 369.2 million in 2015 – accounting for 48.5% of the country’s total payment card transactions.
According to Visa Europe, the Czech Republic was the third-largest market for Visa contactless cards in Europe with
13.9 million transactions conducted in March 2015.
Only the UK (52.6m) and Poland (49.7m) recorded higher values.
In addition, according to a 2015 report by MasterCard, nearly 52% of MasterCard and Maestro in-store transactions are contactless in the Czech Republic.
According to data reported by Visa Europe in February 2015, Czechs use contactless payments for 3.3 transactions per month per card on average – the highest in the EU, followed by Poland (2.6) and Slovakia (1.3).
E-commerce growth paves the way
The Czech Republic’s e-commerce market’s total transaction value posted a CAGR from 2011 to 2015 of 16.11%, from $2.5bn in 2011 to $4.1bn in 2015. A high mobile penetration rate, consumer confidence in online transactions, and the presence of a secure online gateway drove the growth during this period.
According to Ecommerce Europe, 80% of the Czech population above the age of 14 years – equivalent to 7.1 million individuals – use the internet, and 3.7 million shop online.
Banks and other card participants are introducing innovative payment options to encourage electronic payments and improve online shopping convenience.
For example, UniCredit Bank launched a Pay button on its internet banking platform in December 2015. The bank, in association with online payment service provider PayU, offers the new option when consumers make payments at e-commerce website and price comparison websites, including mall.cz and heureka.cz.
Similarly, MasterCard launched the MasterPass system in the Czech Republic in November 2014.