You're reading: Experts: Cashless economy will help reduce corruption

Cashless transactions are on the rise in Ukraine but cash circulation is still too high. And it’s fueling the nation’s corruption problem, according to experts on the Cashless Economy Panel at the Kyiv Post’s annual Tiger Conference in Kyiv on Nov. 29.

Larisa Makarova, a regional senior director of risk services for Visa, said over the past years the number of people starting to spend in ecommerce has grown to 62 percent.

But it’s largely a fear of fraud that keeps more people from using cashless payments.

“This is the key barrier we see if we talk specifically about Ukraine now. The research shows that 67 percent of respondents have fear of fraud preventing them from using cards and to pay cashless,” she said.

According to Makarova, a regulator and reducing the cash payment limit are among the solutions.

The National Bank of Ukraine capped cash transactions between individuals and businesses at Hr 150,000 in 2013.
But Makarova said with the median salary in Ukraine Hr 5,000, a cap of Hr 150,000 was too high.

Ruslan Kravets, deputy director of department and head of strategy and transformation division at the National Bank of Ukraine, said the central bank was planning to reduce that figure to Hr 50,000.

However, he warned that even when the bank capped the limit at Hr 150,000 it still saw “grey and black schemes.”
Kravets said meanwhile public transport and utility bill payments needed to shift to a cashless system- and quickly- to change the nation’s habits and transfer the country into a cashless state.

“The most often used transaction in payment is transport marshrutka, buses, trams. The second is utility payments,” he said.

He said the NBU would also be pushing for utility companies to issue electronic bills.

In 2015 Ukraine’s cash-to-gross domestic product ratio stood at 14.6 percent, with the NBU earlier this year announcing plans to halve that figure by 2020.

Maksym Saulyak, treasury and trade solutions head for Ukraine at PJSC Citi Bank, said unlike their international clients who prefer e-commerce transactions, their key clients in Ukraine tend to use cash collection services.

According to Saulyak, some of the country’s biggest retailers receive 60 percent of their income in cash.

“(That) is very different to the developed market,” he said.

The country’s high cash circulation has recently been emphasized by a series of e-declarations, which revealed millions of dollars and euros have been kept in cash by the country’s top officials.

And according to International Monetary Fund resident representative Jerome Vacher, the high circulation of foreign currency is where the problem lies.

“If you look at domestic currency only, the amount compared to GDP is not much larger than in the euro area, but I think what’s also important is that you’ve got a lot of foreign currency in circulation,” he said.

He said corruption is among the key problems fueled by a cash-based economy and it should be seen as an issue of social justice.

“The large amount of cash is not only a symptom that there is a lot of corruption in the economy but it’s an enabler of more corruption. It’s a vicious cycle that needs to be broken,” he said.

The panel was moderated by Andy Hunder, the president of the American Chamber of Commerce in Ukraine.

“We’re doing everything we can to increase e-commerce transactions. We’ve invested this money because we see market potential.” – Yevgen Velikanov, director of iPay.ua

“We’re doing everything we can to increase e-commerce transactions. We’ve invested this money because we see market potential.”
– Yevgen Velikanov,
director of iPay.ua

“We may start for the very first time in the NBU’s history ... to use recommendations ... to move all market participants to cashless..” – Ruslan Kravets, head of the strategy and transformation division at the National Bank of Ukraine

“We may start for the very first time in the NBU’s history … to use recommendations … to move all market participants to cashless..”
– Ruslan Kravets,
head of the strategy and transformation division at the National Bank of Ukraine

“The key driver for people to start people using cashless payment more and more is to eliminate the fear of fraud.” – Larisa Makarova, a regional senior director of risk services for Visa

“The key driver for people to start people using cashless payment more and more is to eliminate the fear of fraud.”
– Larisa Makarova,
a regional senior director of risk services for Visa

“I look at some of our key clients that are using cash collection services... 60 percent of the retailers’ income comes in cash, which is very different to a developed market.” – Maksym Saulyak, treasury and trade solutions head for Ukraine at PJSC Citi Bank

“I look at some of our key clients that are using cash collection services… 60 percent of the retailers’ income comes in cash, which is very different to a developed market.”
– Maksym Saulyak, treasury and trade solutions head for Ukraine at PJSC Citi Bank

“The large amount of cash is not only a symptom that there is a lot of corruption in the economy but it’s an enabler of more corruption.” – International Monetary Fund resident representative Jerome Vacher

“The large amount of cash is not only a symptom that there is a lot of corruption in the economy but it’s an enabler of more corruption.”
– International Monetary Fund resident representative
Jerome Vacher