Economy 1 April 2015, 4:26pm

Charts that tell you everything about how Hungarians use their banking cards

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The volume of electronic payment transactions continued to increase and in electronic payments, the volume of purchases using payment cards rose significantly, according to the latest statistics by the central bank (MNB). Within this, the use of contactless payment cards and use of payment cards on the Internet continues to increase steadily. By the end of 2014, every fifth purchase by payment cards was done by contactless cards. This required a commitment by the banks to this technology. As a result, nearly half of card acceptance terminals and 44% of payment cards support this technology. In the meantime, the number of Internet acceptance points started to rise too, whereas a series of bank account closures started in late 2012 has come to a halt.

Three years ago almost no-one used their near field communication (NFC) banking cards in Hungary. Besides 125 million traditional card transactions in the second half of 2012 only 1 million contactless payments were made in local stores. According to the latest statistics, however, 137 million payment card transactions were made with regular cards and 30 million with contactless payment cards in H2 2014. This means that at least every fifth payments were made by contactless payment cards.

However, the weight of contactless payments in terms of the value of purchases remains small, given that from a practicality point of view the technology is useful mostly when small sums need to be paid quickly.

Needless to say, the above increase could not be achieved without the existence of NFC-enabled infrastructure. The banking sector has made huge efforts in this respect over the last few years. The latest figures attest that such endeavours started to bear fruit. At the end of last year, 48% of POS terminals and 44% of payment cards enabled this payment method.

Upgrading to this technology is generally hindered by the fact that the banks replace traditional banking cards with NFC banking cards only at expiry therefore this process will take some time.

Although the situation did improve some in the last quarter of 2014, Hungarians still withdraw 2.8x more cash using their cards than the value of card payment transactions.

At the same time, they use their plastics 3.2x more for payment than at ATMs.

The number of Internet acceptance points also rose further. By end-2014 their number was almost 1.5-fold of the figure a year earlier, although we must emphasise that the base effect was significant here.

It is also a welcome change that the number of physical card acceptance points has risen for the second consecutive quarter, by 156 this time, by the end of Q4.

The number of bank accounts dropped by nearly 350,000 since the financial transaction tax was levied, but in the fourth quarter account openings outnumbered account closures already.

The regulatory measures of the last few years had both positive and negative impacts on electronic payment habits and infrastructure. Some steps are thought to be working against the spread of electronic payment, while some others work in favour of its proliferation.:

Capping the interbank commission: it encourages acceptance instead of issuance; it is a net loss for the banking system;
POS planting programme in Fejér county: encourages acceptance,
Transaction fee: as it is passed on to customers, account/banking card services become more expensive which works against the spread of electronic payments. As the rate on cash withdrawal is higher than on other transactions, in theory this regulation is, in theory, should limit cash usage.
As part of a tax package submitted last October, the FTT is capped at HUF 800 per year, but the FTT is capped at only HUF 500 on NFC banking cards. This could also incentivise banks to propagate the use of contactless card payments.
Free-of-charge cash withdrawal twice a month does not exactly help curb cash usage.