Armenian parliament discusses issue of increasing bank tariffs

ArmInfo.The Armenian Parliament held a discussion on the topical issue of banking tariffs. This problem  becomes quite acute due to the transition to a significant growth of non-cash transactions in the country, associated with the adoption of a law regulating non-cash circulation a year ago and actually obliging economic entities to accept non-cash payments for goods and services. 

Garegin Gevorgyan, Director of the Financial Stability Directorate of  the Central Bank of Armenia (CBA), addressed the MPs and noted that  over the past 2.5 years, the infrastructure of non-cash payments in  the country has increased significantly. Thus, if in June 2022 there  were 23 thousand POS terminals in the country, then in October 2023  their number reached 79 thousand. In total, the banking system has  invested around 1.8 billion drams for the expansion of the terminal  network. As a result, the cost of installing POS terminals for trade  and service providers has decreased by 6 times. At the same time, he  noted that the banks tried to provide this infrastructure not only to  cities, but also to villages with a population of a thousand people. 

And yet, about 20 thousand terminals, although they were installed,  do not actually work and the Central Bank, together with the tax  authorities, is trying to solve this problem, since it becomes clear  that the refusal to use the infrastructure of non-cash payments in  some retail outlets, especially in the villages of the country, is  largely associated with an attempt to evade taxation.

According to Gevorgyan, an interesting picture is emerging in the  field of banking tariff policy. According to him, Central Bank  statistics show that commission rates have been reduced since June  2022. If in 2022 the average acquiring commission for small and  medium-sized enterprises in the country for card transactions with  cards of the National Payment System was 1.6%, which was paid by  business owners, now this level has dropped to 1.1%. Tariffs for  international cards issued by Armenian banks have decreased from 2.5%  to the current 1.6-1.7%, for international cards of non-Armenian  banks, an average of 2%. Tariffs for all cards decreased by 0.7% on  average.

Meanwhile, parliamentarians did not agree with the Central Bank's  assessments. The opinion was expressed that the Central Bank's  statistics were too average, and on the contrary, after the adoption  of the law, banks, taking advantage of the "right of citizens to  non-cash transactions", began to increase payment fees. A number of  MPs have personally witnessed a significant increase in commission  fees by banks, even when transferring money between two card accounts  of the same bank. Moreover, it was noted that the Central Bank cannot  withstand the asymmetry in non-cash and cash payments, since not all  people are able to master new technologies.

Meanwhile, according to the data of the CBA, if in 2022, a total  amount of 81 billion drams was paid to pensioners in non-cash form as  part of pension payments, then by the end of 2023 it amounted to 191  billion drams. According to the cash-back program for pensioners  introduced by the government, 2.3 billion drams were transferred to  the card accounts of the pensioners in 2023. This measure simulating  non- cash payments made it possible to increase the volume of  non-cash transactions on pension cards from 20% to 24%. As a rule,  the main part of pension cards are NPS (National Payment System)  Armenian Cards, which will be issued with chips from this year, which  will make their use much easier.

Gevorgyan emphasized that a significant increase in non-cash payments  is becoming a challenge for the growth of the infrastructure of both  the card market and payment systems. He recalled that there are 5  processing centers in the country, 4 of which belong to specific  commercial banks, but the main one is the processing center of the  National Payment System (NPS)- Armenian Card National Payment System.  It accounts for more than 90% of payments. For example, in the 4th  quarter of last year alone, the NPS processed 436 million payments  for a total amount of 5.3 trillion drams. To develop the payment  infrastructure, Armenian Card invested about 2.5 billion drams in  2023 alone, and plans to increase capital investments to 3.4 billion  drams in 2024. He noted that NPS Armenian Card is working today on a  very important program for the development and implementation of the  ArCaPay payment system, which could start operating this year.

At the same time, the CBA Director of the Financial Stability  Directorate noted a number of problems in the non- cash payments  market that have yet to be resolved. Among them, there are often  differences in prices for goods and services in the case of cash and  non-cash payments. At the same time, according to MPs, the difference  is much greater than the amount of the acquiring tariff, which also  indicates attempts by business entities to evade taxation.

As another market problem, Gevorgyan noted the need to adopt  regulations that would eliminate the attempt of economic entities to  shift acquiring costs from themselves to the buyer of goods and  services, which sometimes happens in the market.

Another problem is related to the competition of payment systems, and  its solution is seen in the need to organize a technical connection  between them, since there are systems that "do not see each other,"  and thereby allow people to have the right to choose, and the systems  to have competitive tariffs. To do this, it is also necessary to  develop and adopt a number of national standards for the payment  business, including API and QR payment standards for the national  card infrastructure.

According to independent expert estimates, there was a significant  increase in tariffs in Armenia back in 2022, first of all, for  non-residents - immigrants, about 110 thousand of whom arrived in  Armenia. Tariffs have also increased for residents. Thus, in 2022,  the annual service fee for international cards issued by Armenian  banks for residents has almost doubled, and for non-residents it  increased 5-10-fold, remaining at this level throughout 2023.  According to analysts, a significant increase in banking tariffs,  mainly for non- residents, led to a significant increase in  commission income, which, coupled with foreign exchange transactions,  significantly compensated for the decrease in interest income due to  stagnation of the credit market. In 2022 alone, banks' fee income  increased 42.2% and fee expenses rose 28.8%. At the end of 9 months  of 2023, the growth of card income and expenses increased by 77.7%  and 96% year-on-year , respectively.

According to the Central Bank, by October 1, 2023, there were 3.6  million active bank cards in Armenia, of which 1.7 million were Visa  cards, about 851 thousand were Mastercard and 838 thousand cards of  the local ArCa system. Over the past year and a half, VTB Bank of  Armenia has issued 188 thousand cards of the MIR Russian payment  system .