Payments Landscape in Azerbaijan: Opportunities and Risks to 2023

Payments Landscape in Azerbaijan: Opportunities and Risks to 2023

  • June 2019 •
  • 45 pages •
  • Report ID: 5392293 •
  • Format: PDF
Payments Landscape in Azerbaijan: Opportunities and Risks to 2023

Summary
Azerbaijan is a cash-oriented economy due to its high unbanked population, low financial awareness, and inadequate payment infrastructure.Azerbaijan ranks lowest in terms of card penetration and payment card frequency of use in comparison to its peers Poland, Russia, Ukraine, Romania, Turkey, and Kazakhstan, reflecting the dominance of cash in the economy.

However, with government initiatives to increase awareness of non-cash payments, financial literacy programs, charges on ATM cash withdrawals, and cash transaction limits imposed on individuals and businesses, payment cards will gain traction over the next five years.

Card payment transaction volume and value are anticipated to record compound annual growth rates (CAGRs) of 18.3% and 15.3% respectively over the forecast period (2019e-23f). The emergence of contactless technology, the adoption of new payment solutions, and growth in the e-commerce market will also support payment card market growth in Azerbaijan.

Debit cards in are mainly issued in the form of social and salary cards. According to the central bank there were 2.5 million social cards and 2 million salary cards in the country as of December 2018, collectively accounting for 80.7% of total debit cards in the country. All of the country’s major banks - including Kapital Bank, International Bank of Azerbaijan (IBA), Expressbank, AccessBank, and AGBank - offer specific payroll cards for employees.

The credit and charge card market is still in the developmental stage, with only 10.3 cards per 100 individuals in 2019. In terms of transaction volume and value, the credit card market registered a decline during the review period (2015-19e), mainly due to low levels of financial literacy, limited awareness of credit cards, and the declining number of credit institutions in the country.

The E-commerce in Azerbaijan grew significantly during the review period, rising from AZN12.8m ($7.5m) in 2015 to AZN111.9m ($66.0m) in 2019 at a review-period CAGR of 72.0%. The market is anticipated to reach AZN275.8m ($162.6m) in value by 2023. The proliferation of mobile internet users and smartphones are the key drivers of this strong growth. The availability of virtual cards exclusively for online shopping and alternative payment solutions such as PayPal, Wallet One, and Azerpay will help boost the e-commerce market over the forecast period.

The report "Payments Landscape in Azerbaijan: Opportunities and Risks to 2023", provides detailed analysis of market trends in Azerbaijan’s cards and payments industry.It provides values and volumes for a number of key performance indicators in the industry, including cards and credit transfers during the review-period (2015-19e).

The report also analyzes 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 (2019e-23f). 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 Azerbaijan’s cards and payments industry, including debit and credit cards
- Detailed insights into payment instruments including cards and credit transfers.It also, includes an overview of the country’s key alternative payment instruments
- Analysis of various market drivers and regulations governing Azerbaijan’s cards and payments industry
- Detailed analysis of strategies adopted by banks and other institutions to market debit and credit cards

Companies mentioned: Kapital Bank, International Bank of Azerbaijan, Expressbank, AGBank, AccessBank, Unibank, Bank of Baku, YapiKredi Bank, Visa, Mastercard

Scope
- To promote electronic payments, Azerbaijan’s government implemented the “State Program on expansion of digital payments in the Republic of Azerbaijan for 2018-2020” in September 2018.

The program aims to reduce the share of cash transactions in the economy from 74% to 40%.To help achieve this, the government will expand innovative payment infrastructure supporting QR code-based transactions, cloud technology, and fast payments.

In addition, the government aims to launch the first stage of its Instant Payment System in the country by the end of 2019.
- To aid the government’s vision of a less cash-dependent society, banks in Azerbaijan are going digital. In January 2019, Pasha Bank introduced online bank account opening in five minutes for individuals and entrepreneurs. And in October 2018, Kapital Bank upgraded its BirBank mobile app to include QR code-based payments called QR-Pay. As of April 2019 over 500,000 users had downloaded the app. The increased focus on digitalization is anticipated to further drive electronic payments in the country.
- In December 2016 the central bank sanctioned amendments to the Law On Non-Cash Settlements effective from January 2017. As per the law, all monthly cash transactions were capped at AZN30,000 ($17,681.50) for VAT-registered businesses with monthly transactions worth over AZN200,000 ($117,876.63). Similarly, monthly cash payments for other taxpayers were limited to AZN15,000 ($8,840.75). All transactions over the relevant value must be paid electronically. Individuals who do not comply with the law will be fined 10% of the transaction amount, with subsequent increases to 20% and 40% if the offence is repeated a second and third time. In addition, the law also mandates that all salaries should be paid using non-cash methods. These measures are expected to encourage cashless payments in the country over the coming years.

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