The Antimonopoly Committee of Ukraine has granted permission to MasterCard Europe S.A. and Visa International Service Association to reduce the amount of domestic interchange fees (interchange rate) paid by an acquirer to an issuer in Ukraine from 0.9% to 0.7% for the period of war.
“The planned changes in concerted actions are aimed at establishing an effective and balanced ceiling on interchange rates, taking into account the interests of all market participants under martial law,” the AMC commented on its decision of 5 October.
The Committee expects that these changes will allow retail chains to maintain the current price level for consumers, as well as contribute to the development of small and medium-sized entrepreneurs and the overall economic development of Ukraine.
The agency clarified that the 0.7% rate will be effective “not earlier than the next business day after 14 calendar days after the date of receipt of the Committee’s authorization until the next business day after 30 calendar days from the date of termination or cancellation of martial law.”
It is noted that after this period, MasterCard and Visa will return to the 0.9% rate agreed with the AMCU before the war.
“The introduction of a further reduction in the interbank commission is an attempt by government agencies and other industry representatives to respond to a request for assistance to retailers who have suffered significant economic losses caused by the war,” the AMCU said.
As reported, a memorandum signed in May 2021 between MasterCard, Visa and the NBU provided for the interchange rate to be set at 1.2% from July 1, 2021, and its gradual reduction, in particular from July 1, 2023, from 1% to 0.9%.
However, during the war, the rate was first reset to zero and then gradually increased to 0.7%. The decision of Visa and MasterCard to return it to 0.9% on July 1 this year was sharply criticized by retailers. The largest banks in the market – PrivatBank, Oschadbank and Raiffeisen Bank – for their part, kept acquiring rates for their clients unchanged (approximately 1.3-1.5%), but called on MasterCard and Visa to support this initiative and cancel the interchange rate increase from July 1, 2023 to 0.9%.
However, Oschadbank noted that “if payment systems do not reduce the interchange rate within one to two months, the bank will reconsider its decision.”
According to the NBU, the share of payment terminals of PrivatBank, Oschadbank and Raiffeisen Bank at the beginning of the year was 60.4%, 19.6% and 7.6%, respectively.
Payment system operators Visa Inc. and Mastercard Inc. plan to increase the fees charged to retailers when their customers pay for purchases with bank cards, Bloomberg reports, citing documents in its possession.
Visa’s fee hike for online transactions will start in October and will affect credit, debit and prepaid cards in April. In the case of Mastercard, the increase will also start in October.
Industry consulting firm CMSPI estimates that the annual amount of fees paid by retailers could increase by more than $500 million as a result.
Although the fees are set by Visa and Mastercard, the bulk of the fees are collected by the banks that issue the cards. While the fees are small, retailers’ costs to pay them have risen in recent years as more shoppers use credit cards, which carry higher fees than debit cards.
Retailers shift at least some of these costs to consumers by raising prices. Small businesses often offer discounts to customers who pay with debit cards or cash.
The State PrivatBank (Kyiv) and the MasterCard international payment system have launched contactless fare payment at all metro stations in Dnipro, the bank’s press service reported on Thursday.
“In August 2022, as part of the program with MasterCard, the bank installed turnstiles with contactless payment technology with a bank card at four more stations of the Dniprovsky metro – Metrostroiteley, Prospekt Svobody, Metallurgov and Zavodskaya. Now you can pay for travel with a card or smartphone at all metro stations,” the statement said.
For two years of operation of such turnstiles at the stations “Vokzalnaya” and “Pokrovskaya” in the Dnieper, more than 420 thousand trips were paid contactlessly.
The press service noted that the Dnipro metro has become the second metro in Ukraine after the Kyiv one, where you can pay for travel with a card or an NFC device right at the turnstile.
Ukrainians are actively switching to non-cash payments – 48% of citizens began to pay cashless more often than a year ago.
So, according to a study of the attitude of Ukrainians to non-cash payments, carried out by InMind for Mastercard in June 2021, some 49% are ready to completely abandon cash payments in the future, and every third Ukrainian is ready to do this within the next two years.
The company also notes that the pandemic has significantly influenced the growth of popularity of digital commerce in the world and in Ukraine in particular: 60% of surveyed users claim that they began to shop online much more often since the beginning of pandemic, and 45% make orders online regularly several times per month.
Also, Mastercard reported that during the pandemic, the “food” segment came out on top in Europe, showing an increase of 26%, the “electronics” segment grew by 24%, while in Ukraine both of these categories grew by 38%.
Also, an interesting trend in 2020 was the growth in the penetration of online transactions among customers over the age of 80 – both in the European market and in Ukraine. For example, in Czech Republic, the growth of online transactions in this category of users quadrupled last year.
“In Ukraine, the market has already recovered. We saw the first decrease in market activity and a significant drawdown in number of transactions during the first lockdown, when everyone was in shock. In January of this year there was also a lull, but January itself is not the most active month. But the lockdown in April did not show such a visible decrease in activity – people got used to it,” Director General of Mastercard in Ukraine and Moldova Inha Andreyeva said.
According to her, in Ukraine since 2016 there has been a stable increase in non-cash transactions by an average of 3% year on year.
“To date, nine out of ten transactions are already in the non-cash segment,” she said.
Also, 44% of Ukrainians prefer to choose shops with the possibility of cashless payments, and another 8% said they were not ready to use the services of shops without an option of cashless payments.
The number of active cards in the Mastercard payment system in Ukraine in the fourth quarter of 2019 grew by 4.3%, to 25.97 million, while its key rival – Visa – had 6.9% less cards, to 10.52 million, according to the National Bank of Ukraine (NBU). According to the report, in October-December 2018, the number of active payment cards in Ukraine increased 0.8%, to 36.95 million, as a result, the share of Mastercard of the Ukrainian market increased from 67.9% to 70.3%, while the share of Visa decreased from 30.8% to 28.5%.
In the fourth quarter of last year, the Prostir national payment system managed to increase the number of active cards by 4.9%, to 459,000 (with a decrease in its cards in circulation by 6.6%, to 586,000). However, its share increased very slightly – from 1.19% to 1.24%, which is lower than the figure as of the middle of 2018 being 1.26%.
The number of cards of all other payment systems at the beginning of 2019 in Ukraine was extremely small – only 4,000 (out of 27,000 cards in circulation). In the last quarter of last year, it halved.
The National Bank also reported that in general, the number of payment cards in circulation in Ukraine in October-December last year decreased by 2%, to 59.39 million. Their growth was recorded only for Mastercard – by 1.7%, to 41.23 million cards, while Visa recorded a drop of 9.7%, to 17.55 million cards.
The NBU said that every ninth active payment card at the beginning of this year was contactless – 4 million cards, which is 44.3% more than at the beginning of 2018.
