The FINANCIAL — The number of non-cash payments in Georgia is on the rise. The share of cash in Georgia’s GDP, as of the end of June 2013, was equal to 6.9%, compared to a figure of 7.8% three years ago.
The number of transactions made within the Georgian economy with payment cards issued to residents as of the end of June 2013 was 5,737,266; the total value of the transactions – GEL 710,508,000 GEL. The amount of transactions as of the end of June 2012 was 4,631,564 units, with the total value of the transactions at GEL 592,049,000. The number of transactions in May 2011 was 4,082,969, total value of the transactions – GEL 546,038,000. In June 2008 the number of transactions was 2,246,667, with the value of the transactions at GEL 329,632,000.
Sweden was the first European country to introduce banknotes, back in 1661. In 2012 it started getting rid of them. In most Swedish cities today public buses do not accept cash; tickets are prepaid or purchased with a mobile phone text message. A small but growing number of businesses only take cards, and some bank offices have stopped handling cash altogether.
Banknotes and coins represent only 3 percent of Sweden’s economy, compared to an average of 9 percent in the Eurozone and 7 percent in the U.S., according to the Bank for International Settlements.
“At the moment it is way too early for Georgia to think of moving away from cash,” Giorgi Bakradze, ISET Policy Institute Senior Research Advisor, told The FINANCIAL. “We need a much better developed computer/data line system; demand for uninterrupted electricity will increase drastically; a large part of the population will need some training in using credit cards or other means of cashless payments. On the whole, while developed countries are moving away from cash (cash constitutes only 3% of all transactions in Sweden, 7% in the USA and 9% in the EU), this process in developing countries is much slower (e.g. Nigerian Cashless Policy, introduced in 2011, is aimed at the reduction but not the complete elimination of cash circulating in the economy),” Giorgi Bakradze said.
“I think that given the progress of the world monetary system – from gold coins via gold standard to the current fiat money system – this is the eventual future of the world economy, although at the moment this future is really very far away,” said Bakradze.
The statistical data of NBG shows that there has been an increase in numbers of cards. The number of payment debit cards in circulation as of June 2013 reached 4,396,808 up from 3,620,141 from the same period of last year. Compared to the 2,386,518 debit cards in circulation in 2008, the figure has almost doubled this year.
The number of payment credit cards in circulation as of the end of June 2013 was 1,143,265; the figure had almost doubled in comparison with the same period of 2012, when the number of credit cards in circulation in Georgia was 622,599. Comparing the current year with the past five years’ figures shows that the number of credit cards in circulation has increased almost fivefold from what it was in 2008.
“The Georgian card payment market is characterized by a high rate of introducing innovative products. Next to commercial banks, the Government has also played a big role in the development of card payments. Namely, launching pensions and all the social benefits started via banking channels; public service employee salaries are bound to their personal bank accounts; in a number of schools cash payment has become limited,” said Giorgi Melashvili, Executive Director at National Bank of Georgia.
“As the statistics show, cardholders are using their cards more and more in sales/service facilities in order to carry out payments. Although this data is still limited, the withdrawal of cash from ATM transactions in respect to non-cash payments by credit card is greater, but the trend has been steadily increasing in recent years,” said Melashvili.
In Melashvili’s words, Georgians are increasingly using electronic payments: payment cards, electronic money, internet banking or mobile banking. Accordingly, NBG is interested in making them more safe, comfortable to use and secure. “In this regard, we are working on the relevant rules of consumer protection and electronic payment instruments,” he said.
According to Bakradze, the technology which is usually understood as a foundation of a cashless economy is quite secure. “It is easy enough to shut down a digital wallet if it falls into the wrong hands. The biometric ID – another technological feature that might be used for moving away from cash – is unique and very hard to copy. At the same time digital cashless payment systems are extremely convenient, removing the need for carrying cash, the payments themselves are easy to make (via tap or wave of a smartphone),” he said.
“From a banking point of view, cashless transactions are much faster and more secure.
Looking at it from the other side, printing physical money is quite an expensive process. There are hidden costs to the cash-based system, including underreporting of cash earnings and being easy to use in illegal and criminal transactions,” Bakradze added.
In Melashvili’s words, the main advantages of non-cash are: security, as it reduces the risk of carrying cash; convenience – unlike cash it is easy to carry, secure while travelling or is not required to carry at all; time-saving – you can order goods and services over the internet from your very home; operational control of the account transactions via sms, online, mobile banking and other remote sources; participation in various promos and discounts.”
As for the disadvantages of the cashless system, Bakradze said that hackers and the so-far high failure rates of biometric ID systems are the first to spring to mind. “Besides, huge supporting infrastructure is necessary to operate a cashless system – which means lots of computers, open data lines, power, and credit card/digital wallet readers,” he said.
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