Azerbaijan’s payments industry demonstrated robust growth over the last five years. Improved banking infrastructure, growing banked population, and government efforts to accelerate electronic payments in the country contributed to the industry’s growth between 2010 and 2014, a growth set to continue
According to World Bank statistics, the percentage of individuals with an account at a bank or another type of financial institution grew from 14.9% in 2011 to 29.2% in 2014.
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Government initiatives driving growth in electronic payments
In a move to promote electronic payments in the country, the Central Bank of Azerbaijan (CBA) took a number of initiatives between 2010 and 2014. For instance, it collaborated with Visa to launch a marketing campaign called ‘Life is easier with Visa’ in May 2013.
Furthermore, Azerbaijan’s government launched the e-government portal in 2013, enabling citizens to pay for utility bills, tax bills and customs payments, among others. To enhance the functionalities and scope of use of the e-payments, the government included nine government agencies in 2014, allowing them to process the payments via the Government Payment Portal (GPP). These initiatives were intended to promote e-payments in the country and reduce dependence on cash.
Changing lifestyles, rises in the economically active population and disposable income, the growing popularity of online shopping and the increased acceptance of cards at retail outlets supported the growth of payment cards over the last five years, and are anticipated to continue for the foreseeable future. With the adoption of contactless technology, the payment cards market is projected to grow at a healthy rate both in volume and value terms between 2015 and 2019.
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By GlobalDataDebit cards continue to dominate the payment cards market
The debit card market accounted for 78.3% and 80.2% of the overall payment cards, in terms of transaction volume and value respectively, in 2014. According to Timetric research, about 90% of debit cards in Azerbaijan are social and payroll cards, while the rest are considered as individual cards.
Banks such as the International Bank of Azerbaijan (IBA), Xalq Bank and Bank Technique offer salary cards under the Salary Project. As most bank customers became cardholders under payroll projects, the majority of the cards in circulation are debit cards. Similarly, the government prefers to distribute social benefits such as pensions and social insurance through banks, which has encouraged banks to offer social or pension cards. Banks are also offering loans to payroll and pension cardholders, contributing to the growth of debit card transaction values.
To encourage the usage of payroll and pension cards, banks are offering loans for cardholders. For instance, Kapital Bank announced it was to offer cash loans of up to $7,649.70 for salary and pension cardholders in December 2013. This loan is issued with an interest rate of 24% p.a. for tenure of up to 36 months, and with no guarantee, collateral and income statement. Similarly, in January 2014, IBA announced offer interest-free loans to senior citizens through their pension cards.
Growing preference for credit cards among Azerbaijani consumers
In 2014, the credit card market accounted for 21.8%, 21.7% and 19.8% of the overall payment cards in terms of number of cards in circulation, transaction volume and value respectively. Growing employment levels and disposable incomes saw increased demand for consumer credit, fuelling demand for credit cards over the last five years. A decrease in interest rates on loans also facilitated demand for consumer credit.
The availability of installment credit cards was the primary factor driving growth in Azerbaijan’s credit card market. These cards allow consumers to purchase goods and make payments in installments. The spent amount is automatically divided into 1-12, 18 or 24 months.
