Azerbaijani banks accelerate the digitalization of payments, services in 2020

By Trend

The current COVID-19 pandemic period plays an important role in determining development tendencies in digital payments, Tamerlan Rustamov, Head of the expert group on payment systems and digital banking of the Azerbaijan Banks Association (ABA), told Trend.

According to Rustamov, the benefits applied by the Central Bank of Azerbaijan (CBA) during the pandemic (a 50 percent reduction in service fees for cards, contactless options for extending the validity of payment cards, delivery of bank cards at the request of customers, an increase in the number of contactless payments and a number of other services) had a positive impact on the development of digital payments.

"Moreover, the processes of digital payments’ development were accelerated, new products and services in the digital ecosystem were introduced by the banks, reforms were carried out to improve mobile banking services, the spheres of activity of non-bank payment service providers were expanded and their interaction with banks was intensified, as well as the activity of e-commerce platforms was improved," he said.

Besides, he noted, according to the Central Bank of Azerbaijan, as of December 1, 2020, 55,000 POS terminals were installed in the country in retail trade, catering, and other facilities in Azerbaijan.

"An average of 83 payment transactions were made in the amount of about 4,069.4 manat ($2,393.7) during November through each of the POS-terminals installed in retail trade, public catering, and other facilities. This figure reached 1,796.6 manat ($1,056.8) or 37 successful transactions for the same period of 2019 while in 2018 - 1,616.2 manat ($950) or 23 payments through one terminal,” pointed out the group’s head.

The total volume of non-cash payments through the network of POS terminals with payment cards issued in the country amounted to 1.9 billion manat ($1.1 billion) for 11 months of 2020. This figure has doubled compared to the same period of 2018. The total volume of e-commerce transactions for the analyzed period amounted to 3.3 billion manat ($1.9 billion). An increase of 2.5 times is observed here.

In general, the turnover of non-cash payments on transactions with payment cards amounted to 22 percent.

“Taking into account the statistics data, the products and services which are provided by payment service providers, small and medium-sized businesses should highly appreciate the existing potential for accepting non-cash payments,” he stressed.

The ABA’s representative also noted that many business entities in Azerbaijan have already adapted to the requirements of the new reality in order to maintain their activities during the COVID-19 pandemic.

“These requirements are mainly to be met in the digital payments area, which is characterized by e-commerce sales organizations depending on the products and services provided by these entities, as well as by expanded cooperation with e-commerce platforms, creation of an infrastructure for POS terminals, a courier service and providing the ability to make payments through a POS terminal at the address,” he added.

Besides, according to him, in a number of cases, business entities that provide their goods and services via the Internet under the guise of e-commerce and without using digital payments accept payment with their subsequent registration in cash.

“Sometimes entrepreneurs accept such payments through our usual payment terminals,” he also noted.

As the group’s head pointed out, in order to use the advantages of digital payments in their field of business, business entities must first decide on the products and services that they will provide.

"Based on this, possible digital payment solutions must be implemented by providing products and services through the formation of an e-commerce page or using the services of e-commerce platforms for this purpose, the formation of a contactless infrastructure through POS terminals, cashless payments on the spot and in a number of other areas," said Rustamov.

In his opinion, after identifying the products and services to be sold, as well as possible solutions for digital payments, the bank must be chosen.

"The main factors to look out for when making the choice are the efficiency of the digital solutions provided by the bank, tariffs, availability of an extensive network of services, expected security requirements, and other factors," he added.

Along with the above, Rustamov stated that the CBA successfully continues to play a dominant role in the formation of an extensive digital ecosystem based on the ‘web’ principle and accelerate the introduction of innovative solutions.

“The main elements that disclose this policy are the launch of an instant payment system, a digital identification system based on blockchain technology, regular improvement of the regulatory framework for digital payments, as well as incentive reforms,” he noted.

In addition, Rustamov said that the ABA, Visa, MasterCard, and Worldwide, in cooperation with local banks, are carrying out educational and stimulating campaigns in the field of digital payments. The ABA also focuses on the formation of a unified and reasonable approach to the banking system in the field of digital payments in banks.

“Successful projects are being signed to deepen digital transformation. First of all, this is due to the attraction of attention to the improvement of mobile banking services and the creation of more favorable opportunities for access to financial services for the general population. The issuance of virtual payment cards through mobile banking has begun. Some banks, as a result of the introduction of tokenization services within the framework of cooperation with the international card organization Visa, have achieved payment transactions using mobile phones without a payment card.

The next successful project aimed at expanding the coverage of digital payments was the possibility of cashless payments by payment cards in public transport in the cities of Sumgayit and Shamakhi, as well as on trains in the Baku-Sumgayit direction,” the head said.

According to Rustamov, educational events held on a regular basis with the participation of international financial institutions are of great importance in the development of digital payments in terms of increasing financial literacy.

“The publication of the textbook and curriculum ‘Digital Payments and Electronic Banking Services’ with the participation of ABA, the international card organization Visa, the Zolotaya Korona money transfer system, and other financial institutions, will provide a new generation with theoretical and practical knowledge in the field of digital payments,” noted Rustamov.

The head of the ABA expert group concluded that all these reforms in the field of digital transformation will have a positive effect on increasing the competitiveness of the payment ecosystem of Azerbaijan, expanding the coverage of digital payments, strengthening financial inclusion (inclusion of all segments of the population in the financial system), as well as the creation of society, for which digital payments will become a familiar form of payment.

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