Professional Treatment
01.07.2009
Professional Treatment
Participants of the conference “Payment Card 2009” came to the unanimous conclusion that under the conditions of a financial recession banks must reduce expenditures involved in servicing their clients, outsourcing the personalization and processing of plastic cards to professional companies
The Kyiv International Exhibition Center (Kyiv) hosted the 9th Conference “Payment Card 2009” on June 10-12 this year. The Conference raised important issues concerning the latest trends in the area of clearing settlements.
Participants of the round table at the “Payment Card 2009” Conference discussing perspectives of card business development
The Conference was traditionally organized by the Ukrainian Interbank Payment Systems Member Association EMA. More than 200 representatives of the banking industry of Ukraine and abroad, international payment systems, central banks of EU and CIS states, plastic card manufacturers and suppliers of personalization equipment and software took part in “Payment Card 2009”. The Ukrainian EDAPS Consortium was represented at the Conference by ZNAK Enterprise, POLLY-SERVICE and Commercial Industrial Bank.
Outsourcing of worries
It is clear that under the conditions of a financial recession the participants of the conference primarily discussed the problem of upgrading the efficiency of banking business functioning. Mr. Andrey Bereziuk, Director for questions of business development of the Ukrainian Processing Center, says, “Before mid-2008, banks had to ensure income growth; in 2009 banks are focusing on reducing expenditures and are searching for ways to upgrade the efficiency of their businesses”.
Under such conditions the reduction of expenses involved in servicing the population acquires greater importance. The participants of “Payment Card” claim that Ukrainian banks must seriously consider outsourcing the personalization and processing of plastic cards (servicing all operations with a payment card) to specialized professional companies.
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Comments
representative of the MasterCard Worldwide payment system: Because of the economic recession the priorities of the population of practically all states have changed considerably. The results of our research show that people intend to pay back credit card debts the last thing after completing all major payments. This trend, however, will not slow the growth of the total number of credit card transactions globally, as many people are inclined to view a credit card as a source of income currently. In 2008-2010 drastic growth in the number of payments through prepaid services cards (for example, adding to a mobile account, Internet purchases, etc.) is also expected. |
Mr. Jorg Rule, | Comments
President of Ukrainian Interbank Payment Systems Member Association EMA: – There is a shortage of POS-terminals for servicing payments in Ukraine now. During the last four years (2005-2008) the number of retail operations carried out with the help of payment cards grew almost 4 times: from 16,7 million to 63,8 million annually. At the same time the growth of the number of POS-terminals was not as drastic: from 28,4 to 85,3 thousand. |
Mr. Alexander Karpov, |
Our expert
Commercial Director of ZNAK Ltd. (Kyiv; member of EDAPS Consortium; since 2005 ZNAK has manufactured 48 million cards for various purposes): – ZNAK is a very dynamic enterprise and it efficiently responds to market demands. Participating in discussions of issues concerning the development of the payment card industry helps us outline true and actual areas for development of our enterprise. We create and implement the highest level of state-of-the-art achievements at ZNAK. |
Mr. Alexander Fomenko,
Mr. Bereziuk explains that it is often cheaper for banks to let a specialized enterprise process plastic cards than to create their own center for servicing payments. Outsourcing the personalization of payment cards has a similar effect, saving both money and time, because time is money.
Our Product wrote (see No3/2008, pp. 18-22) that it is unfavorable for financial institutions to personalize cards independently because their production capacities are outdated or are idle during transitional seasons when the influx of clients is reduced. Constantly renewed technologies and equipment require a stable financial investment.
Following this, in September 2008, the outsourcing of the personalization of plastic cards for banks was presented to the Ukrainian market.
POLLY-SERVICE Company (a member of the EDAPS Consortium) created the Interbank Personalization Bureau, the biggest manufacturing facility in Europe. Therefore, the EDAPS Consortium managed to foresee market demands with its enterprises ZNAK Ltd. (card manufacturer) and POLLY-SERVICE (supplier of personalization services) offering banks a full range of technological services. Apart from efficient and high quality personalization service for plastic cards, the Interbank Personalization Bureau also produces PIN-mailers, direct-mailing programs, and marketing of card programs.
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Conference profile: 9th International “Payment Card 2009” Conference Date of holding: June 10-12, 2009 Place of holding: International Exhibition Center, Kyiv, Ukraine Organizers: Ukrainian Interbank Payment Systems Member Association EMA Golden sponsors: MasterCard Worldwide, Visa International Number of participants: more than 200 representatives of Ukrainian and foreign banks, manufacturers of plastic cards, suppliers of personalization equipment, software; mass media. |
In the fall of 2008 the POLLY-SERVICE Interbank Personalization Bureau and the Ukrainian Processing Center signed a partnership agreement. The companies plan to offer a full range of services for personalization and delivery of plastic cards to banks serviced by the Ukrainian Processing Center. The purpose of the agreement is to provide Ukrainian banks with professional service in the field of unified personalization and processing of payment cards.
Time to collect debts
It is clear that bankers who participated in “Payment Card 2009” were not just interested in saving on servicing clients. A number of reports dealt with loan debts and distressed assets of financial institutions. Mr. Alexander Ilchyuk, President of the Associated Collecting Business of Ukraine, says, “The first half of 2008 saw a boom in consumer credit, but since fall with the worsening of the economic situation the growth of distressed assets of individuals has reached a critical point at banks: their share went from 10-15 % (as of July 2008) to 20-25 %”. According to estimates of the Associated Collecting Business of Ukraine, the volume of the distressed assets market of individuals consisted of around 60 billion UAH or around 25 % of the total credit portfolio of commercial banks as of 01/05/2009.
After some time financial institutions found out that their attempts to retrain their personnel for collecting activity failed. This caused banks to turn to private collection companies for assistance.
Because of the growth of loan debt among Ukrainians, so-called credit bureaus offering information regarding the “credit conduct” of clients are becoming more and more popular. The Conference featured automated systems of appraising credit risks (the loan repayment history of clients). The real mechanisms of appraising clients with a “clean” credit score are yet to be worked out (clients have either never taken out a loan or their information is not recorded in the integrated databases of credit bureaus, as not all banks took part in such programs).
Mr. Marius Vismantas, the World Bank Financial Sectors Project Coordinator for Ukraine, Belarus and Moldova, did not sound very encouraging. “In the future Ukrainians as well as EU residents will have to pay higher interest rates on “light” and short term loans. The current crisis proves that low interest rates on credit are harmful for banking systems and the economy in general”, says Mr. Vismantas.
Disappointing conclusions
Ms. Natalia Lapko, Director of the Department of Payment Systems at the National Bank of Ukraine, points out that in 2009, because of the financial crisis, the use of plastic cards has decreased considerably. As of January 1, 2009 the number of active cards with at least one financial transaction was 38.6 million pieces (progressive total). However during the next three months this figure went down 7.9 million pieces and as of April 1 it was 30.7 million (for more about card market trends see on pp. 48-54).
All players unanimously agree that the volume of the card market in 2009 has shrunk at least 30 %. In the summer of 2009 there appeared some signs of the stabilization of the volume of plastic cards issued (sizes of orders from banks for their manufacture have ceased to fall).
Chip technologies
Traditionally, particular attention was drawn to expanding the areas of chip card utilization. Chip cards (contact and contactless cards) are known to be the cards most protected against financial fraud (also see No2/2008, pp. 46-54).
The National Bank of Ukraine claimed its intention to accomplish social projects with the application of chip cards in the near future. Ms. Natalia Lapko says that the Bank intends to launch a new system of automated payment of pensions and monetary aids. This will help pensioners receive all welfare benefits on their card and withdraw their funds at any convenient time, and also use their travel privileges for public transport. Our Product wrote previously (see No2/2008, pp. 46-54) that the National Bank intends to implement such projects on the base of chip cards of the National System of Mass Electronic Payments (NSMEP). One of the leading manufacturers of cards for NSMEP is ZNAK Enterprise, which is a member of the EDAPS Consortium.
Text: Anna Levkovskaya
Photo: Dmitry Korablyov
Source: Magazine "Our Product" No 2(2009)
