Payments Landscape in Hungary: Opportunities and Risks to 2022

Payments Landscape in Hungary: Opportunities and Risks to 2022

  • April 2019 •
  • 52 pages •
  • Report ID: 5390534 •
  • Format: PDF
Payments Landscape in Hungary: Opportunities and Risks to 2022

Summary
Cash remains the preferred mode of consumer payments in Hungary, accounting for 62.5% of the country’s total transaction volume in 2018. However, payment cards registered strong growth during the review period (2014-18e) in terms of transaction volume and value, with respective compound annual growth rates (CAGRs) of 19.0% and 11.8%. The Hungarian government has been taking several initiatives in the form of regulatory and operational measures to boost electronic payments in the country, including a POS installation program, mandatory basic accounts by banks, and the proposed launch of an instant payment system.

Debit cards account for 84.6% and 94.0% of total cards in circulation and transaction value respectively. Supported by the government’s financial inclusion initiatives, the number of bank accounts in Hungary has risen. According to the Magyar Nemzeti Bank (MNB), the country’s central bank, the number of payment accounts offered by banks and other payment service providers stood at 10.7 million in 2018, of which 6.7 million were consumer accounts used for payment purposes.

The growing consumer preference for contactless cards has also supported the growth of the Hungarian payment cards market.According to the MNB, 79% of the total payment cards in Hungary had contactless functionality by the end of 2018.

The number of transactions using contactless cards increased by 10.5% year-on-year in Q4 2018, while in terms of value, it grew by 13.5%. Overall, contactless transactions accounted for over 81% of the total payment card transaction value. The average transaction value of contactless cards was HUF6,438 ($22.99) in Q4 2018.

E-commerce registered robust growth at a review-period CAGR of 19.0%, supported by rising internet and smartphone penetration. To push internet adoption in the country, the government reduced the VAT rate on internet subscriptions in January 2017 to 18% from 27%, which further reduced to 5% in January 2018. With a rise in online shoppers, banks such as Erste Bank, OTP Bank and MKB Bank offer virtual debit cards exclusively for online purchases. The availability of alternative payment solutions such as PayPal, Masterpass and paysafecard are further expected to drive the e-commerce market.

The report "Payments Landscape in Hungary: Opportunities and Risks to 2022", provides detailed analysis of market trends in the Hungarian cards and payments industry.It provides values and volumes for a number of key performance indicators in the industry, including cash, cards, credit transfers, and direct debits during the review-period (2014-18e).

The report also analyses various payment card markets operating in the industry, and provides detailed information on the number of cards in circulation, transaction values and volumes during the review-period and over the forecast-period (2018e-22f).It also offers information on the country’s competitive landscape, including the market shares of issuers and schemes.

The report brings together research, modeling, and analysis expertise to allow banks and card issuers to identify segment dynamics and competitive advantages. The report also covers details of regulatory policy and recent changes in the regulatory structure.

The report provides -
- Current and forecast values for each market in the Hungarian cards and payments industry, including debit, credit and charge cards
- Detailed insights into payment instruments including credit transfers, direct debits, cards, and cash.It also, includes an overview of the country’s key alternative payment instruments
- E-commerce market analysis
- Analysis of various market drivers and regulations governing the Hungarian cards and payments industry
- Detailed analysis of strategies adopted by banks and other institutions to market debit, credit and charge cards

Companies mentioned: OTP Bank, Budapest Bank, TakarekBank, AXA Bank, Raiffeisen Bank, Erste Bank, KBC Bank, BNP Paribas, Intesa Sanpaolo, Citibank, MKB Bank, UniCredit Bank, Visa, Mastercard, American Express, PayPal, paysafecard

Scope
- To further accelerate the provision of basic financial services to under-banked consumers, in September 2016 the Hungarian government directed banks to compulsorily offer basic bank accounts in compliance with an EU directive.

The government decree outlines the services available to account holders, and caps the monthly fee at 1.5% of the minimum wage, or HUF1,575 ($5.62). Following the central bank’s mandate to offer basic bank accounts, all major banks - including OTP Bank, Budapest Bank and K&H Bank (a subsidiary of KBC Bank) - now offer low-cost basic bank accounts. Additionally, in October 2016, the government launched a new account-switching service to make switching current accounts faster and easier.
- The Hungarian instant payment service is scheduled to go live in July 2019. The Hungarian financial services provider GIRO Zrt will implement the platform in partnership with Nets A/S group. The system will process credit transfers and other payments within a maximum of five seconds on a 24/7/365 basis. Through the new system it will be possible to initiate payments of up to HUF10m ($35,707.49), and make payments using the recipient’s email address, mobile phone number or tax identification number, without having to know their bank account number.
- To develop a strong payment infrastructure and encourage card-based payments, the Hungarian government launched a POS installation program in December 2016. The program was developed by the Ministry for National Economy, with HUF2.4tn ($8.6bn) being allocated towards its implementation. As part of the program, the government agreed to offer merchants HUF80,000 ($285.66) per terminal for the procurement and installation of new POS terminals, on the condition that they operate them for at least two years. Furthermore, the government launched the second phase of the program in 2017, extending the subsidy program with a target to install 30,000 more POS terminals over the next few years.

Reasons to buy
- Make strategic business decisions, using top-level historic and forecast market data, related to the Hungarian cards and payments industry and each market within it.
- Understand the key market trends and growth opportunities in the Hungarian cards and payments industry.
- Assess the competitive dynamics in the Hungarian cards and payments industry.
- Gain insights into marketing strategies used for various card types in Hungary
- Gain insights into key regulations governing the Hungarian cards and payments industry.
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