Year 2005 in Cards Business Gives Hopes and Sets New Targets

Riga, Latvia - 22 Feb 2006 - In 2005, the payment cards market of the Baltic countries retained a stable trend of growth, and the market of Latvia excelled itself positively with rapid development in some positions, compared to a year ago, when the results of 2004 were summarised. Thus, for example, Latvia has had the highest growth of card number among the Baltic countries in 2005 (+ 17.65%), while in Estonia it was (+8.9%) and in Lithuania (+16.19%); whereas in 2004 the number of cards in Latvia grew only by 10.88%, in Estonia by 6.59%, while in Lithuania by 20.06%.

Also as regards the ratio of payment cards issued against the number of residents in every country, the results of 2005 proved that this number has grown most in Latvia. Although Estonia retains its leader position with 1.06 cards (0.97 in 2004) per resident, in Latvia this number reached 0.7 cards per resident at the end of 2005 (0.57 % in 2004), while in Lithuania it was 0.82 per resident (0.7 in 2004). From this curve of growth it can be concluded that, if the growth rate is retained, within the next year Latvia and Lithuania could come close to a situation that there is on average at least one card in the wallet of every resident. Estonia had reached such level already at the end of 2004; however, compared with the card markets of Scandinavian countries, the possibilities of Latvian and Lithuanian markets has not yet hit the highest level. Thus, for example, in Norway there are 1.66 payment cards per resident on average, in Finland – 0.93, and in Denmark – 0.78.

However, as to the activity with payment card transactions, the Baltic countries are still lagging behind their Scandinavian neighbours, where the card use traditions and trust towards plastic cards is on a much higher level. Thus, on average 908 million transactions are performed per year in Sweden, in Norway – 806 million, in Finland – 661 million, and 604 million in Denmark, while in Estonia 137 million transactions per year are performed, in Lithuania -98 million, but in Latvia only 80 million transactions per year. The significant difference in numbers shows that there is not yet enough information in the society on card payments, their essence, safety and advantages as opposed to cash circulation in the Baltic countries. At the same time, these numbers show that cash is dominating in payments in our country because the majority of people get paid in hand. Thus, for example, in the quantitative sociologic poll on card use habits that was carried out in 2005, 43% respondents answered that they do not need a payment card because they receive their wages in cash. „It is the state that should be interested in the transparency of payment and cash flow. It has to be pointed out that card acquiring devices provide such a possibility much better than cash-registers, fiscal memories or double cash-register tapes. It is possible not to register a receipt in cash register, whereas any merchant who wants to receive the payment for his goods will draw the payment card through the POS terminal’s slot and the transaction will be registered,” stressed Zanda Brīvule, Managing Director of First Data International in Latvia.

At the same time, it has to be pointed out that 2/3 of the card acquiring devices (POS terminals) that are installed in the Baltic countries fully comply the standards and most recent requirements of the international card issuer organisations EMV (Europay, MasterCard, VISA), which, on the whole, proves the high development level of card acquiring in the markets of the Baltic countries. Also, 2/3 of the cards issued in the Baltic countries are chip cards that guarantee a much higher protection level against forging and fraudulent actions than magnetic-strip cards.

Comparing the number of card acquiring devices installed in the Baltic countries (POS terminals, integrated cash-register systems), it has to be admitted that the ratio among the countries and the trends of growth have remained on the same level as in previous years. In absolute numbers, Lithuania has most acquiring devices -18 336, in Latvia - 13 754, and in Estonia - 10 904. Per one million residents, there are 5080 acquiring devices in Lithuania, 5097 in Latvia, and 8140 in Estonia.

“Assessing the results on the whole, it has to be admitted that the year 2005 gives justified hopes about gradual growth of the trust in the society towards payment cards and electronic payments; however, we who work in the payments cards industry still have to work seriously not only on the modernisation of card products and advertising them but also on educating the existing and potential card users and providing systematic information to the society on the advantages of card use. First Data International subsidiary in Latvia, as part of a global card processing concern, will continue, like in previous years, to popularise card payments among the residents, and it is planning, in cooperation with commercial banks, to take part in a new informative campaign to dispel the distrust of one part of the society towards the most modern type of payments. But the main thing is – we still have huge growth possibilities because the maximum saturation of the market has not been achieved yet. And that means that there still is a lot to be done,” said Z.Brīvule.