Coronavirus in action: bank cards beat cash for the first time in Hungary

The coronavirus crisis is clearly reflected in Hungary's Q2 2020 payment statistics, as well. As the country locked down in the first wave of the pandemic, turnover of payment systems fell, even on electronic channels, but fortunately this affected some segments less drastically. 

The instant payment system was launched at the start of March and since then we've been able to transfer any sum under HUF 10 million between the accounts of Hungarian payment service providers within seconds. (Since then Transferwise has also joined the IPS.) Despite the speed of the system and new services (using secondary account identifiers, for instance) coronavirus dampened turnover. Following a slow growth over the last few years, the total number of individual forint credit transfers initiated at domestic payment service providers fell by nearly 5% yr/yr in Q2, with the value of credit transfers falling by nearly 3%. 

A similar trend was observed in the turnover of direct debits, used mainly to pay for utility services and meet other regular bills, with the number of transactions falling by more than 3% and their value by nearly 9 % relative to Q2 2019.

As a result of the prolonged coronavirus pandemic, there was a significant decline in the turnover of most payment methods due to consumers’ precautionary considerations and the economic slowdown. Consequently, the previous dynamic (double-digit) expansion in purchase turnover conducted with domestically issued payment cards also stalled.

Although the value of transactions rose by 9% yr/yr in Q2, the number of transactions declined by over 3%.

As a result, there were 236 million transactions conducted using domestically issued cards in a total value of HUF 2,018 billion.

A sharp rise in the turnover of online stores in the grip of quarantine measures dampened a general decline in purchases with payment cards. The value of online purchases jumped by 142% in annual terms, while the value of payments with cards at physical points of sale practically stagnated. 

Due to the general cautious approach to travelling and the restrictions introduced, there was a decline especially in cross-border transactions conducted at physical merchant acceptance points. The number and value of these transactions were nearly 47% and 60% lower yr/yr, respectively.

Although households' currency holdings increased substantially due to the pandemic in the spring months (as in such uncertaint times they prefer to hold cash at home over having other types of savings), MNB statistics show that the value of cash withdrawals fell even more than the value of card transactions:

The number of cash withdrawals declined by over 23% yr/ry and the value of cash withdrawn was down by almost 14 in Q2.

As a result of the above, the card and cash payment battle has reached a watershed:

Hungarians have spent more money in the second quarter paying for stuff with their cards than how much they withdraw with their plastic.

The change in the number of POS terminals was interesting in Q2, with several factors contributing at once.

• Service providers have been given extra time to distribute POS terminals currently "stuck" in the government scheme aimed at expanding the payment card accepting network, which could lead to a further rise in the number of POS terminals. (There's supposed to be a single service provider with such "leftover" terminals.)
• An infrastructural programme operating on market-based mechanisms is also available on the market. Last December Mastercard announced a three-year Infrastructure Development Program, aiming to raise the number of Hungarian businesses that accept credit cards as a form of payment. With the help the scheme called Doppio, Mastercard has helped to deploy thousands of terminals in recent months. 
• It was reported earlier this month that the government will make electronic payment possible in every store operating online cash registers, but the impact of that is clearly not reflected in the Q2 stats.  
• It is also crucial that the MNB keeps adjusting its statistics for POS terminals and payment card acceptance points that are operated by foreign service providers, and this trend has picked up over the last few years. 

Terminals set up by foreign players supervised by foreign supervisory authorities cannot be included in the statistics and as the market share of said service providers has been generally growing over the last few years, this statistical release paints an ever inaccurate picture of the actual situation of the domestic card acceptance network. The MNB strives to be able to include data of these service providers in its statistics, but until then reports on the number of terminals and the related trends should be treated with a pinch of salt. 

Having said that, the number of POS terminals at acceptance points rose slightlz by 2% yr/yr in Q2, while the number of physical acceptance points fell by more than 1%, while the number of online acceptance points jumped by 10%.