Thursday, March 21 2013 16:32
Successful card market development by Armenian banks leads to considerable growth in revenues in this segment
ArmInfo. Over the past three years, the banking system of Armenia has experienced annual growth in fee revenues from card service by 30% at the mean amid 28% increase in the expenses on plastic card transactions, the Analysis and Financial Ratings of Armenian Banks by the Agency of Rating Marketing Information (ArmInfo) says.
According to the source, in the market of card operations the banks' revenues are thrice as many as the operating expenses. Over 2012 the total revenues from the card service exceeded 6 bln AMD, and expenses on plastic transactions totaled over 2 bln AMD. For comparison it should be noted that in 2009 the fee revenues from the card service grew by 5% only, while expenses on plastic transactions grew by 28%, with the former being twice as much as the latter. To note, the expenses on plastic transactions imply the payments to the payments systems (Visa Int., MasterCard Int., American Express, Diners Club Int.) and Armenian Card, as well as the commission fees to other banks for the service.
This exponential growth was due to the increase in the commission fees for the card service. In particular, over the pre-crisis period most of the banks used zero commission fee in case of cash withdrawal from the cardholders' cards, whereas during the crisis the situation changed and now only few banks, specifically, only 6 of the banks have retained the zero commission fee. In addition, the commission fee for cash withdrawal via the card network of other issuer banks grew by 1-2% (to 0.5-3%), and the fee for cash withdrawal abroad increased by 0.8-1% (to 2-2.5%). Over the past five years, the annual cost of ArCa local card service dropped from 5.5 thsd to 3.7 thsd AMD at the mean, and international Visa and MasterCards - from 14.8 thsd to 13.7 thsd AMD. The premium card products used as exclusive projects are not taken into account here. The total volume of plastic transactions grew by 43% over the past three years, the volume of ATM transactions - by 40%, while the number of ATMs grew by almost 400 to 966, and the number of active cards - more than twofold.
The overdraft rate for cards grew from the pre-crisis 18% to the current 20% at the mean amid the considerable increase in the total number of active cards (more than 1 mln), including the salary cards (almost 60% of the total number of cards). Along with this, the free commission fee under the pension card project launched in March 2011 is compensated for by the balance remaining on the account when the pension is converted into cash. By late 2012 there were almost 505 thsd pensioners in Armenia, and over 110 thsd pension cards. Given that the average amount of the pension is 29689 AMD, nearly 50 mln AMD remain on 110 thsd cards when the pension is converted into cash via the ATMs.
Experts say that in case of a favorable economic situation, the potential of the Armenian plastic market may be well estimated at 1.5-2 mln bankcards, and the potential of ATMs for the next post-crisis years is estimated at 100-150 ATMs per annum.
Thus, the situation in the plastic market of Armenia can be characterized in the following way: growth in price of attracted AMD resources, growth in expenses on ensuring card solutions and introduction of innovative technologies that raises the price of services in the retail card segment; considerable market saturation with salary projects. The banks continue their progressive work at technological development of the market infrastructure, first of all, connected with the software update of Armenian Card.
To note, the bankcard market in Armenia started developing in March 2000 by creation of Armenian Card (ArCa), the National Single Payment System. The organizer of this initiative was the Central Bank of Armenia, which invited the country's banks developing the card business to become members of Armenian Card and took direct control over the new market development.
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