The FINANCIAL -- Cashless payments have increased by 3% in the second quarter of 2016 compared to the same period of 2015, Dmytro Krepak, Visa Inc. Country Manager for Ukraine, Georgia and Armenia, told The FINANCIAL in an exclusive interview.
Payment Volume/Total Volume ratio for Georgia reached 20% in the second quarter of 2016. This indicator shows how much cardholders used their cards for payments versus total volume processed on cards.
Supermarkets, clothing stores, restaurants, pharmacies and petrol stations are the places where Georgian customers tend to use cards the most. 25% of cashless payments are made on groceries; about 13% of consumers prefer to pay by card when buying clothes; and 10.4% prefer cashless transactions in restaurants. Pharmacies and petrol stations make up 5.3% and 3% respectively.
“Georgia is a leader in launching innovations. There are multiple examples of Georgia being a pilot market for Visa to launch really interesting and exciting innovations. For example, the first contactless transaction to take place in the whole region of Central-Eastern Europe, the Middle East and Africa, actually happened in Georgia. Georgia was the first place to have a contactless transaction, many years ago. So that is why Georgia is one of our champions in terms of innovations,” Krepak told The FINANCIAL.
Q. Self-service machines have been introduced in McDonald’s Georgia which is already quite popular in Europe as well. What is the concept of the idea? What makes it different from the already-existing types of service and what are your expectations about the amount of Visa cards being used?
A. We joined our partners, McDonald’s and Bank of Georgia, for the launch of a new service - self-service kiosks, where McDonald’s customers (and, at the same time, our customers) can pay by card, including contactless cards, and take advantage of a very convenient service. First of all these kiosks give you different opportunities. You can either stand in line to pay in cash or you can go to the kiosk, which doesn’t accept cash. So if you are using a card to pay then it means you can avoid standing in line. This makes your experience very convenient, you can then save that much more time. Will it work for other restaurants? I think it works very well for restaurants where you expect speed, and we will be working on it.
Q. Georgian customers are now able to make payments with their watches. Considering the constant transformation of payment systems, where do you see the future of payment technologies?
A. The future of payments can be described in terms of a couple of things. It has to be seamless, fast, very secure and convenient, which means you can pay online, with whatever device you prefer, a watch, a payment ring (which is what for example our athletes could do at the Rio Olympics). It will be online, though not necessarily from one’s computer, because people would like to be able to pay from their mobile phones, while being online, while in the middle of a chat, without even having to exit their chat. This is what the future looks like.
And of course, connected devices. For example, in the United States Visa is piloting connected cars and other connected devices. There are already billions of connected devices. There will be 50 billion of them in 10-15 years. This means, for example, that my refrigerator might see what food supplies are missing, which brands I prefer, and will order food and pay by itself, even without my involvement. I will then be pleasantly surprised when I find that my refrigerator has restocked my favourite food for me. Or, my car, on my way home from work, will be giving me several menu options offered by my favourite restaurant, and I will be able to press a button to choose a specific menu number so that by the time I reach the restaurant, there will be a person waiting to give me a bag with my chosen food in it.
Convenience, speed, payment by whatever method you prefer, or whatever device you have on the internet - that is the future.
Q. By how much percent are cash-payments decreasing within your cluster countries?
A. What we measure is cashless transactions with cards (e.g. at POS terminals or on the internet) to the total volume of transactions processed on cards. So this percentage ranges from 20 to 40% in different countries of our region. There is some progress. This percentage grows every year by 15-25% depending on the country. I think it is a pretty good pace.
Q. Scandinavian countries, in particular Sweden, are the flagship of a cashless economy. Do you think that it is the future of all countries?
A. It depends on the country. Those countries that are more advanced in terms of economic reforms and fighting the shadow economy, will be moving faster towards Swedish results. Certainly, for an economy to become cashless it has to be advanced both in terms of consumer behaviour (as when consumers are financially educated, they have the habit of using their cards), and the second element, which is very important, is a transparent economy.
Infrastructure can be considered the third element, there should be enough payment terminals and opportunities to pay, let’s say, government fees, taxes online. So, when you have the infrastructure, transparent economy, and when you have educated, advanced users, then these three elements give you “Swedish” success.
Q. Many believe that the future of standard banking services will disappear soon as many people have got used to distance services. Are you already witnessing this trend and what would you suggest to the reps of the banking sector?
A. It depends on what type of service we are talking about. I am a former banker, I was a chief-executive officer of a bank in Ukraine, head of retail of a big bank in Ukraine as well, and I can tell you that there is an element of trust for savings. When you would like to place your money somewhere, very often you want to see the person who you are giving your money to. Of course, there is a segment of people who can easily make a deposit online from their internet bank, but there is always a segment of more conservative customers who would like to look into the eyes of the banker to whom they are entrusting their money. Typically, it doesn’t depend on generation, in terms of trust in savings, banks have a really great future, as they have had for hundreds of years.
In terms of payments, true, already today people are no longer using branches for payments generally. They use remote channels and everything is moving online. Banks have a really bright future, but as for the payments, most of them will migrate to contactless and the internet. Banks are already adjusted to it, they are watching start-ups very closely and are cooperating with them for new exciting payment instruments.
Q. Recently your main competitor, MasterCard, launched extra services for its VIP segment in Georgia. What are your plans in this regard?
A. First of all, my plan is to reinforce what Visa is famous for. Visa is famous for providing great payment opportunities in terms of various deals, for example we have the World of Privileges Program for premium cardholders in many countries of the region, in Georgia & Ukraine in particular. This is something that makes my payments with Visa very attractive. Because I get discounts, loyalty points and many interesting things, which encourage me to pay with a card and get benefits from it. The choice for Visa is where to invest money: do we invest in technology, or in providing great deals for our customers, or something else? We need to make a choice. The first priority for me is to invest in those things where Visa is already famous for providing great opportunities to pay and get benefits. And as I said, the World of Privileges is one of the key elements here.
As I am responsible for Ukrainian, Georgian and Armenian markets, I would love to inform cardholders about the discounts and deals they get from paying with a Visa card. For example, when Ukrainians are travelling to Georgia they must know that they could get great deals with Visa cards - at hotels, retailers, etc. This is what I would like to reinforce.
Q. Recent years have been quite hard for Ukraine, which was involved in military conflict in its region. Georgia, like Central Asian countries, faced economic difficulties due to the devaluation of national currencies. How have these trends influenced Visa Inc.’s plans?
A. Visa operates worldwide. We as a company have seen all kinds of situations and Visa knows how to work in these kinds of environments and we will keep investing. In other words, crisis or devaluation or fluctuation of currencies are not conditions which would prevent Visa from being interested in markets or stop it investing. We will keep investing in new technologies. We keep investing and cooperating with our key stakeholders.
Q. Security is the main priority for Visa. Which specific features make the safety of Visa outstanding?
A. A very specific example is 3D Secure. This is an instrument which was invented by Visa and is now being used worldwide. We also call it Verified by Visa. Basically, it is a way to pay safely on the internet. With VbV each online transaction is protected with a dynamic onetime password. If you do not disclose your information to anyone, online payments with VbV are almost 100% safe.
We are currently working to launch so-called tokenization, this is a safety tool that will allow very safe payments via smartphones. Also, tokenization makes it practically impossible to steal your card information and somehow abuse it on the internet or somewhere else. These examples make us an outstanding company in terms of payment security.
Q. Banks are providing customers with additional card insurance service. Do you see a possibility for customers to become more concerned about a company, for example Visa, if banks are suggesting some additional safety measures?
A. Every consumer looks at risks differently. Some people do not have health insurance at all and yet they feel comfortable, while there are people who prefer to have all types of insurance. If a service is offered voluntarily, there will always be someone who would like to buy that type of insurance. I think people can have different feelings and so for example, there could be an opinion that this creates more safety, while others might be more concerned. The only way to understand real feelings, is to carry out a survey. This could be something that we and the banks might look into in some of our next surveys.