While various cards markets in Eastern Europe
are currently undergoing a rapid growth period, many of these
countries still face a variety of challenges that include consumer
awareness, low merchant acceptance in some areas, and differing
levels of SEPA compliance. Truong Mellor reports.
Poland, Romania and Hungary are currently going
through a stage of healthy growth within the cards and payments
industry, with more sophisticated product lines such as revolving
credit being offered by banks in order to tap into a growing
consumer market. While cards have been present for many years in
this region, it is only recently that card spending has seen
significant growth. However, these markets still face numerous
challenges that will have to be overcome within the next few

Some countries are further along in the
overall migration towards EMV and SEPA compliance, while others are
still struggling with low levels of merchant acceptance in more
isolated areas and a generally less knowledgeable consumer base
than found in the more mature markets of Western Europe and the

Region survey: card market snapshot


Within the last decade, the cards industry in
Poland has seen phenomenal levels of growth. From 2000 to 2006, the
cards market grew at a compound annual growth rate (CAGR) of 13.25
percent. A large part of this development  can be attributed
to an extremely low penetration base rate when compared to other EU
countries, and this is borne out by statistics such as the growth
in the number of cards in circulation as well as the overall volume
and value of transactions.

Areas of potential growthPoland: credit card market share 2006

The key driver behind both debit and credit
card spending is an increase in the overall customer awareness of
these types of payment methods. “Customers have started to see that
there is no issue with security,” Paweł Rychliński, general
director of MasterCard Poland, told CI. “There are definitely big
advantages of comfort and convenience.”

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Last year, Poland was the first country in the
region to see PayPass contactless payments introduced, with larger
retail chains as well as magazine and newspaper kiosks in major
cities now accepting this technology. Rychliński identifies this as
one of the key changes in overall consumer gravitation towards card
payments. “They are starting to enter into those areas which are
historically cash-driven,” he says.

Where Rychliński sees further growth in card
spending is through newer channels such as internet shopping.
Although internet penetration in Poland stands at a respectable 50
percent, Rychliński says that the majority of payments related to
internet purchases are still predominantly made by cash on delivery
or to a lesser extent by bank transfer. However, with increased
consumer education and acceptance of card payments this will
quickly change.

Debit cards

Debit cards account for the large majority of
cards in the Polish market. While debit cards are traditionally
used by Polish consumers to withdraw cash from ATMs, there has been
rapid growth in cashless transactions. There has not been any
significant increase in the number of debit cards in Poland,
according to Rychliński. However, he believes that the Polish
market has moved to the stage of drawing consumers away from ATMs
to POS transactions.

Merchant acceptance has in the past been an
issue in Poland, and Rychliński still believes that it is an area
that can be improved. “If you look at cities with a population of
around 200,000 people, the merchant coverage is pretty high,” he
says. “The key challenge starts when you look at cities that have a
population below 50,000 to 100,000.” This is an area that acquirers
are increasingly beginning to focus on, according to Rychliński, as
they see that in the larger cities, while there will be growth
alongside the shift from ATM to POS within the next few years,
there will be limited capacity for growth in the longer term.

Credit cards

Poland: value of credit card transactions, 2000-2006However, it is
the credit card industry in Poland that has seen the most
staggering rise in numbers, with a CAGR of over 56 percent from
2000 to 2007. A significant part of this comes from the strong
demand for consumer credit from Polish consumers, which in turn has
been bolstered by changes within the domestic marketplace. The
accessibility of credit cards to the general consumer has also
widened in recent times, according to Rychliński, with the majority
of financial institutions lowering their threshold regarding the
income level of applicants.

“In the past, it was not that easy to get a
credit card,” he explains. “Today, credit cards are really products
for everyone. The risk parameters and the procedures processes to
get the cards have changed significantly.”

One other factor that has contributed to this
explosion in credit card usage is the continual improvements being
made by Polish banks in terms of efficiency. Having realised that
instalment loans and fixed loans are in the long run less efficient
due to the processing costs involved with every individual loan,
financial institutions have increasingly gravitated towards credit
cards. Rychliński is also keen to point out that there have been a
number of extensive marketing campaigns launched by Polish banks in
order to boost customer awareness, and this has been helped by
incentive programmes for bank employees that are focused on credit
card products.

“The quality of the communication with the
customer has also improved,” adds Rychliński. “The message is
easier to understand – it’s less about free credit for 45 days and
more about increased security and comfort and the fact that you can
use the card as a means of payment.”


The Romanian cards market began just over a
decade ago with debit cards that were more akin to salary cards and
almost exclusively used to gain access to funds in a current
account through cash withdrawals. Over the last few years, there
has been an increase in debit card usage at the point of sale, but
this remains relatively low and the cards are still predominantly
used at the ATM.


“There are more and more spending categories
for cards, and we are quite optimistic about the future,” Denisa
Mateescu, general manager, Romania and Balkans at MasterCard Europe
told CI. “While the number of merchants [that accept card payments] is not yet sufficient, compared to where we were several years the
change is amazing. But there is still a long way to go.” As in
Poland, the issue of merchant acceptance in Romania is more
pronounced outside of Bucharest in the more rural areas of the
country, where acceptance levels are often close to zero.

One of the other key hurdles that the cards
industry in Romania faces, and one that is intrinsically bound up
with market penetration and merchant acceptance, is the level of
consumer awareness regarding card products. “Before the revolution
in 1989, Romanians had no notion of cards,” says Mateescu. “From
there, it is difficult to bring people up to the level of knowledge
of somewhere like the UK, for instance.” She adds that this will
improve as the level of merchant acceptance rises, bringing up the
general visibility of cards as a payment tool.

Moreover, the mechanisms of credit cards –
revolving credit, grace periods and so forth – were not something
that Romanian consumers were familiar with, so a high level of
consumer education is still needed. Mateescu highlights the fact
that this lack of knowledge can spread beyond the average consumer
and into the media, that has in the past drawn inaccurate
comparisons between credit cards and expensive consumer credit.

Problems also arise when cardholders are not
fully aware of the penalties involved if a balance remains unpaid
or overdue, leading to frustration on the consumer’s part. “There
is an improvement needed in education in all layers [of society],”
she says. “This includes the people in the banks and the third
party companies that sell the card. It is improving year-on-year,
but of course we started from a very low level.”

Potential growth

Despite the various challenges faced in the
Romanian market, Mateescu is optimistic about the potential for
growth in card spending. There are numerous areas of development,
including internet shopping. Romania was the first country within
the region to implement MasterCard’s Secure Code, which offers
cardholders a confidential code known only to the customer and the
bank that allows for safer online shopping. Mateescu also cites
T&E spending within the corporate sector as a potential area of
further expansion, explaining that while the cards market as a
whole is currently underdeveloped, this also provides a huge growth



Between 2001 and 2005, the Hungarian cards
industry grew at an average annual rate of 9.7 percent. The number
of cards in circulation has grown at a steady rate over the last
few years, while the rise in overall transaction volume has led to
banks focusing their efforts on their cards portfolio in order to
tap into this growth. Like the majority of countries in the region,
a significant amount of this recent growth has been in the
revolving credit market, which has been driven by this increased
competition amongst the banks and a steadily growing level of
consumer awareness.

Credit cards

According to Zdenek Houser, Country Manager of
MasterCard Hungary, the banks have been actively developing their
revolving credit card products since early in the millennium.
Although they were introduced several years previous to that, they
were not a major part of any bank’s offerings. The more concerted
focus on credit card offerings has developed alongside a growing
consumer awareness regarding these types of card products. “Now the
consumer much better understands what the differences between debit
and credit cards are, how they can use these cards and how they can
be useful for managing their personal finances,” Houser told

However, credit card debt still only accounts
for a tiny percentage of all debt (2 percent), even as the country
is rapidly becoming a credit-based society. While the increased
competition in the personal loan market and the mortgage market has
in some cases led to riskier loans and a deterioration in the
quality of loan portfolios, Houser hasn’t seen this trend creep
into the Hungarian cards industry yet. “The credit card market is
not yet fully saturated,” he says. “From that point of view, there
is still space for the banks to grow. They don’t necessarily have
to increase their sensitivity on the credit risk.”


The market has been developing in a healthy
manner in Hungary over the last few years, and Houser is quick to
point out that consumer understanding and education of payment
products is relatively high. Where the key challenge lies for the
cards sector in Hungary is to move areas that have traditionally
been cash environments towards card payments. Despite high levels
of consumer knowledge regarding card products, cash withdrawals
from ATMs still dominate card activity in Hungary.

“There is a need for developing further
education and understanding on the consumer side that the card can
be used at every occasion,” says Houser. “MasterCard is focusing on
this, and is working with banks on some programmes to develop and
speed up the acceptance side of things in Hungary. We are trying to
make sure this spreads out to the smaller places as well.”

Merchant acceptance is still relatively low
compared to other countries in the region such as Poland, and this
is impeding potential growth in the market. For Houser, this is one
of the key areas he believes the industry needs to focus on to help
the market further develop. He nevertheless remains optimistic
about it: “We have seen significant improvement in this over the
last two years,” he adds. According to Visa Europe, the number of
POS terminals in Hungary continues to grow, but the coverage in
larger cities is far better than in the rest of the country.

Growth prospects

This increased acceptance is where Houser sees
a lot of potential growth happening. The further development of
internet activity is another area where card spending may continue
to expand. “There are some other activities which are indirectly
educating people to be more involved with the internet, including
being able to pay taxes online – e-government is actually quite
high on the Hungarian political agenda as well,” he says. “We are
expecting to see much more activity happening in the virtual
environment through this.”

Credit card growth is a fairly new phenomenon
in Hungary, but there was an 18.2 percent growth in the number of
Visa credit cards between 2006-2007. “Consumers are using these
mainly for travel and purchases for the home. The cards provide
consumers the flexibility to buy now and pay in instalments,” said
a Visa spokesperson.

Visa has seen a 7.4 percent rise in the number
of its payment cards overall in Hungary over the last year, and
although cards are still chiefly used for cash withdrawal from
ATMs, the average number of transactions per card at point of sale
rose by 12.4 percent during the same period, so it is clear that
consumers are becoming more receptive to the idea of using their
cards more at POS locations.


Hungary has been relatively slow in terms of
the migration to EMV. At the end of 2006, there had been no ATMs
that had been upgraded to EMV-compatibility. However, Houser says
that this process has begun – “There are two banks that are both
deploying acceptance devices for ATMs and POS in the field, and at
the same time they are issuing the cards. It’s an ongoing process
and I believe that banks will do it over the next two years,” he

Some 43 percent of all Visa issued cards are
now chip and PIN, while 37 percent of ATMs and 43 percent of POS
terminals are EMV-compliant, according to Visa.



PKO Bank – Poland

The biggest retail bank in Poland, PKO has the
largest number of issued cards in the Polish market. PKO also has
the largest number of ATMs in the country – over 2,000 – and over
1,200 branches. It currently has a 30 percent share of the cards
market in Poland, with the number of issued credit cards exceeding
935,000 and debit cards numbering 6.02 million as of 31 December
2007. At present, PKO Bank serves over 8.5 million customers,
including 6.2 million persons with an account and 2.7 million
customers that use the e-banking facility.

Aside from more traditional credit and debit
offerings, the bank currently offers a prepaid Municipal card as a
money access card, which provides a cash replacement tool for the
payment of social benefits.

Lukas Bank – Poland

Lukas Bank is part of the Credit Agricole
banking group and one of Poland’s largest issuers of credit cards,
with over 800,000 cards in circulation. The bank is also active in
the store cards and co-branded market. Lukas bank also introduced
Poland’s first smart-card technology back in 1999, as well as the
market’s first co-branded private label credit card.

The bank is currently growing from strength to
strength, particularly through its cards portfolio. In 2006, it
sold a record number of 368,000 credit cards – an increase of 84
percent over the previous year. Late last year, the bank forged an
agreement with transaction processor Postilion to support the
further growth of its cards business and to allow it to bring
selected outsourced operations in-house.

Raiffeisen Bank – Romania

Raiffeisen Bank Romania is the result of a
2002 merger between the two Raiffeisen Group banks present in the
local market. Raiffeisen had more than 170,000 credit cards in
circulation at the end of 2006, representing 24 percent of credit
cards in Romania. Raiffeisen is also behind a co-branded credit
card with mobile operator Vodafone since 2004 that offers
cardholders free minutes and handsets.

The bank offers card products for small to
medium enterprises to provide salary payment on Visa Electron or
Maestro cards. Raiffeisen also has several Visa-branded cards
designed for Romanian businesses whose employees travel abroad.

Bancpost – Romania

Bancpost is one of the largest retail banks in
Romania, with over 400,000 cards currently issued and a network of
over 150 branches across the country. The bank currently offers a
variety of Maestro and Visa-branded debit cards as well as a range
of Visa credit cards.

Bancpost was also the first bank in Romania to
offer customers American Express products, including Green, Gold,
Classic and Premium options. The bank also offers cards in
conjunction with EFG Retail Services, part of the Eurobank EFG
Ergasias financial group of which Bancpost is part. All of
Bancpost’s cards can be obtained through post offices in Romania,
with which it has an alliance with, as well as the bank’s

OTP Bank – Hungary

OTP Bank is Hungary’s largest issuer of credit
cards with over 525,000 in circulation, although it is gradually
losing market share to other banks in the market. OTP operates a
comprehensive network of over 1,800 ATMs that allow customers to
access cash, change their PIN numbers and reload prepaid mobile and
landline phone cards.

The bank also offers the Mobil KártyaKontroll
(card monitoring) service, which sends the cardholder SMS
notification within a few seconds of any purchase or cash
withdrawal using their card.

The bank makes no charge for making purchases
anywhere in the world with OTP cards.

Erste Bank – Hungary

Erste Bank in Hungary is currently the second
largest bank in the Hungarian market with nearly 900,000 retail
customers in its nationwide network of 196 branch offices.
Additionally, the bank currently operates a network of 388 ATMs and
about 1,700 POS terminals.

The bank’s strategic alliance with Magyar
Posta – the Hungarian Post Office – has helped strengthen its
retail market presence throughout the country.