Tuesday, April 3 2012 18:02
Any card should work and bring income
ArmInfo. Interview of Director of Armenian Card (ArCa) National Payment System Ishkhan Mkhitaryan to ArmInfo News Agency
Plastic cards are widely used in many developed countries. People got accustomed to them long ago: the cards are safe and even help people save costs. Cards have become an irreplaceable and even everyday "tool" for many people. In the meantime, to most of our citizens a plastic card is an instrument, with the help of which they just convert their salary into cash, nothing else. Is it good or bad? Card business experts consider this trend to be rather good than bad. The director of Armenian Card is convinced that salary cards at least bring the ordinary citizens to the banks. And the banks should do their best to keep their good customers and to turn their salary cards into an access to a wide spectrum of banking services. In his interview to ArmInfo, Mkhitaryan touches on the card business problems and shares the national payment system's plans on introduction of new software.
Mr. Mkhitaryan, this summer ArCa is going to launch new software. How will it differ from the present one? What advantages, in particular, will the new system of electronic card payments have and what opportunities will it open for the members of the national system?
I'd reply to your question the following way: one can get from point A to point B both by a Soviet car and by a Mercedes-Benz 600. In both cases the task to pass that distance will be carried out successfully, but the level of comfort, safety and speed will be strongly different. The same can be said about the new system of card payments.
I'd like to mention that the present software of the ArCa processing center was launched 11 years ago. Certainly, it has already gone out of date against the background of technical and technological progress and does not meet the up-to-date business needs both technically and morally. Therefore, two years ago Armenian Card started the processes aimed at switching to the new system of card payments.
What stage is the introduction of the new software at and when will it be launched?
Actually, huge work has been done for introduction of the new system. The national operator has already selected the software vendors. The functional requirements and software customization have been coordinated. New servers have been installed, the system of uninterrupted power supply and climate of the server premises have been modernized. Certification of the new software by international payments systems dealing with ArCa processing center is currently underway. ATMs and POS-terminals with new software are connected to the system in test mode.
I would like to mention that we are working with almost all the commercial banks of Armenia, which have card programs (except ProCredit Bank). Almost all the banks of Armenia are members of ArCa national payment system. And only two banks - VTB Bank (Armenia) and Areximbank- Gazprombank Group - operate on their own processing platforms. As regards the new system, we are going to switch to the new platform in late summer 2012.
Yet, two banks - Unibank and ArmBusinessBank - have already announced the launch of their own processing centers. Apparently, this is becoming a trend. What consequences may this trend have for ArCa?
Unibank has installed a processing center, but at present its operations still pass through our processing center. ArmBusinessBank has lately announced the launch of activities on introduction of its own processing center. I am not inclined to think the fact that some banks have decided to develop their own processing centers is a trend. Nor do I want to comment on efficiency or economic expediency of these decisions: the banks themselves have made the relevant estimations and forecasts. I will only say that the processing business is a type of activity with scale effect. At the same time, the number of operations plays a bigger role here than the number of cards, ATMs or terminals.
As regards the consequences, I would like to say that ArCa is not only a processing center but also a national payment system, on the basis of which a lot of card products have been introduced. It is a serious property that exists in not all countries. We will be working on creation of new and interesting products for the banks on the basis of ArCa national payment system.
Back to our question about the advantages of the new software, what can you offer the banks after introduction of the new software?
We can offer a lot of things, first of all, a new level of relations with banks, more effective system of database management, wider opportunities and functions. The major advantage of the new program is that every bank in the system will be free in its 'card ideas'.
That is to say, the new base will create an opportunity for the banks to work out their unique offers to the cardholders.
That's right. But the unique projects do not strongly depend on the software. To be more precise, ideas should be unique, and the software should be quite flexible to put the unique ideas into effect. The new platform will be very flexible from the viewpoint of implementing unique card projects.
How unique do you think our banks are and how do you assess their innovation solutions in the card business?
The banks, which are actively involved in the card business, are creative and efficient enough in terms of innovations. And the less active banks in the given segment are, naturally, not so unique.
Would you speak on the new technology of internet payments? What is the situation in this segment?
New software implies also introduction of new internet technologies, specifically, 3-D Secure system, developed and promoted by international payment systems to upgrade the security of virtual payments. Inherently, this technology provides for participation of the emitter-bank in the process of purchase. 3-D Secure adds an authentication step for online payments.
As for the situation in the internet payments market of Armenia, this segment is growing with every passing month. In December 2011 alone, almost 61 thsd transactions worth 1.192 mln AMD were carried out via internet, of which almost 7 thsd operations worth 550 mln AMD were card-to-card operations. We introduced the system of payments through ATMs in August 2011, and now the average monthly volume of transactions is no less than 400 mln AMD. Given the current dynamics, by late 2012 the volume of internet payments in Armenia may double.
You have said that the quality of the card business is characterized by such indices as the number of car operations or the average amount of transactions. If we are guided by the analysis of these indices, what conclusions may we arrive at?
The banks demonstrate different indices. Some banks have a big number of cards and a low volume of transactions and vice versa. Some banks have proportional indices. For instance, there are banks, which have a modest number of cards (about 28,000 cards) and they ensure a twice as big volume as other banks with about 100,000 cards. That's why it doesn't matter how many cards you have or how many ATMs or POS-terminals you have. The most important thing is that all this should work.
What is the share of inactive cards in the total volume of the issued cards?
First of all, let's define the active or inactive cards. According to the terms in our system, active cards are the cards, by means of which one can make operations. In 2011 their number reached 764,568 (33.9% growth versus 2010). As of 1 March 2012, there were 798,348 active cards in the system. In 2011 the number of issued cards totaled 315,163. There is another definition as well - the cards, by which transactions were made. Last year the share of these cards in the total volume of active cards was 66% (24.7% growth versus 2010).
By the way, ArCa cards are the most active cards in the market. Over 72% of the total number of ArCa cards are really operating cards. The same index for the international cards ranges from 60% to 62%.
According to our information, about 80% in the total volume of issued local cards are salary and pension cards. We just use them for cash withdrawal. As regards POS-terminals, they are still strange to most citizens. Is it the fault of the banks?
In most cases a common salary card is still an instrument to receive the salary from the ATM. I cannot reproach the banks for that, because when introducing salary projects they seek to attract new customers. But it is also necessary to carry out proper work with these customers.
Do you consider it normal that the share of salary cards in the total volume of the issued cards is still high?
From the viewpoint of card business, the most important thing is that the card should work, and the more the card works, the bigger income it brings to the bank, no matter whether it is a salary card or a credit card. I mean salary projects are rather good than bad. It is bad that the banks do not properly explain to the customers what other goals the salary cards may serve.
Mr.Mkhitaryan, according to our Agency's review "Armenian Banks in the Card Business", the growth rates of the international cards prevail over the growth rates of local cards. This is primary source information.
Our analysis demonstrates an opposite trend. For instance, in February the national payment system issued 14,747 cards. In March the number of issued VISA cards totaled 6,961, and MasterCards - 9,928. In January the number of the cards totaled 9,243; 5,312 and 7,513 respectively. As you see, the growth rates of the local cards do not yield to the growth rates of international cards, and the number of local cards in circulation is higher than the number of international cards together. I admit that some banks are now becoming members of a certain international system, and they issue a big number of international cards to ensure certain indices. But even in this case, according to our data, the growth rates of these cards do not prevail over the growth rates of the local ones.
It's good that there are two opinions of the problem. And the last question. The National Assembly of Armenia has failed to adopt a bill on Restriction of Cash Operations. What do you think the market has lost due to the Parliament's refusal to implement the governmental initiative?
I think it is a temporary loss. The initiative on restriction of cash turnover is fraught with nothing bad. In fact, the bill is of great importance and aims to reduce the shadow turnover.
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