Credit card executive says plastic is safer, more convenient and will help authorities fight gray economy.
It is Jean-Marc Tonti’s job to wean Ukrainians off cash and onto cards – a tough task for the business development general manager for Visa in Southeast Europe and the Commonwealth of Independent States.
Almost 87 percent of people mostly use their cards just to withdraw their salaries, according to a 2010 survey by market research firm GfK Ukraine. Twenty-eight percent of the population doesn’t even know that their cards can be used to pay for goods or services.
Tonti said it is just a matter of time before Ukrainians switch over to plastic. He said the government should be promoting the move, as it is a way to fight the gray economy.
Kyiv Post: Although many Ukrainians receive their salary onto card accounts, they use it mainly to take the money out from cash machines. Do you see ways to stimulate people to use cashless payments?
Jean-Marc Tonti: You pinpointed a core problem we are facing in the banking and card industry. This is not typical just for Ukraine. In all the [Commonwealth of Independent States] region you will see exactly the same issue.
We have been trying for a long time to change consumer behavior and the way banks approach salary cards in Ukraine.
Banks need to explain to the customers: You have received this card from your company, and it is not just for taking salary, but you can use it in the supermarket, you can use it in any shop, you can use it at the petrol station, you can use it to top up your mobile phone, you can use it to pay utility bills.
We are talking directly to cardholders as well. We run many campaigns in Ukraine this year. We run a campaign called “try and you’ll like it,” which encourages people to use the cards. We also have piloted some work with big enterprises, some big companies for example in Donetsk.
KP: And do you see any results of your attempts?
Jean-Marc Tonti. (Courtesy)
JT: The ratio of usage of Visa cards at the point of sale has been increased this year from 4.8 percent to 6.8 percent. So, it is slowly, slowly moving. I think the government also wants less cash on the street, as it is expensive, unsafe and inconvenient. It means that it’s more of an informal economy in the country. We have the same goals. We want to make Ukraine much more cashless society.
KP: Is the government doing anything to promote the cashless payments?
JT: Yes, the central bank did help us. Recently there was a decree that would establish that retailers over a certain [revenue amount] must accept cards.
But I come often to Kyiv, and I can tell you I cannot always use my card. Either the terminal is down, or some of the managers are away.
People are still afraid of using cards. We need to explain them that they are actually safer than cash.
KP: But fraud still exists. What are the ways to protect your card from robbery?
JT: It is an element of common sense. Like your house or your car, you must protect your card. You mustn’t give it to anyone, you must make sure that the PIN [personal identification number] is not disclosed, you never write down your pin, you sign the card. It sounds very basic, but you would be surprised how often people do not follow even basic instructions.
KP: What about Internet purchases, which are considered to be a less safe way of paying by cards?
JT: We are developing a dynamic authentication. At the moment you see on your card the same number and the same three security digits. When you go to make a transaction you still put the same information. But with dynamic authentication you have a different password every time. I think this technology will add another level of security to internet shopping, and we are trying to persuade the banking community to implement it more and more.
KP: How is Ukraine’s national bank differ in financial regulations compared to other ex-Soviet republics?
JT: I think it’s good that the National Bank of Ukraine is initiating legislation. There are lots of things that could be improved today: consumer protection, combating fraud, how to expand the merchant network, which is still not optimal.
Russia has just finished its payment regulations, and they are much, much more liberal and open to competition than the Ukrainian ones.
We are particularly against extreme regulations like the [proposed] domestic processing system, which means they would force each bank to route the transactions through NBU computers. Obviously it’s competition to Visa as we have a huge engine – Visa transactions. And basically they are making NBU a monopoly. And this is what we are against.
Of course, if the regulator wants to create a competitive system, we say go ahead. However, what is put into the regulation is a mandate that will limit competition. And that is what we completely oppose: First, of course, it is bad for our business, and second, it will limit the choice for the banks and consumers.
We used to have a similar system 13 years ago called Topaz, and, to put it very mildly, every bank thought it was a disaster, because every bank had to go the speed of the slowest one.
I think that by creating the monopoly, the NBU goes against Ukraine’s international obligations before the World Trade Organization.
The second provision we are fighting is so-called co-badging, which means that on the same card you would have Visa and a domestic brand. Like, for example, Coca-Cola and Zhyvchyk on the same bottle. And we say – no.
We promise a certain level of quality and reliability to our customers, and if it is about Visa transactions, we want Visa to conduct transactions all the way through. The customer should know whose fault it is when something goes wrong.
In addition, it is a contradiction with copyright law.
KP: Are you going to sue Ukraine’s government if those multi-brand cards are implemented?
JT: No, no. We are not suing anybody. We are very dedicated to the market. We have invested so much time and effort in this market in last 15 years. We are not going to jeopardize our business in the country. But we want to have an open dialogue.
Kyiv Post staff writer Oksana Grytsenko can be reached at [email protected]
