Payments Systems as part of Economic Growth
Experience and research have shown us that the widespread adoption of electronic payment systems can significantly contribute to expanding the sales volumes of goods and services, reduce the barriers to immediate credit and liquidity and ease geographic restrictions to trade and exchange. More generally electronic payments can help an economy to grow faster and this is why I believe that it is of extreme relevance and importance to the future of the EU accession countries, to develop a payment infrastructure for businesses.
Visa Commercial is present within eight of these 10 countries (it is not present in Cyprus or in Malta) and its most recent figures show that Visa has over 400,000 business cards already issued. This constitutes a total spend of around E800m a year with by far the biggest take up being in Poland which equates to around 70 per cent of this figure. Efficient payment tools are fundamental to economic growth in the expanding European Union.
However, despite Visa’s established presence here we estimate that there are almost six million small businesses in the region, meaning that only 6-8 per cent of the potential new business market as a whole has a payment card of any kind.
The majority of the existing cards within these countries are business debit cards. This is peculiar to these countries and it is the opposite to the rest of Europe where the emphasis has been very much that of business charge and credit cards. In fact the business debit option is less widely used outside this area although Visa is introducing it throughout the existing European countries.
The priority for the banks in these Eastern European markets has been to provide a simple payment tool that is accessible to all and is secure and low risk. This, I believe, has been the right decision and they have been very successful in meeting these objectives. But now that these countries have joined the EU, I am sure they will also look with interest into the more traditional credit opportunity.
Visa’s ongoing strategy for these countries is going to be influenced by two simple factors. Firstly, the potential of the current market situation and, secondly, the appetite and readiness of our member banks to manage commercial card programmes.
As such Visa will first focus on the dynamic and fast growing SME sector and offer key products such as Visa Business Debit and Visa Business Charge cards. These products are already well known and understood in the region and our banks are ready to issue them. By introducing them to a wider customer base we will be able to make a swift impact on payment efficiencies in this sector that should have an immediate, positive knock on effect for the local economy. The SMEs will benefit from smoother cash flow, greater visibility of transactions, lower costs and reduced administration. It will also help facilitate the growth of on-line transactions and create opportunities for e-commerce.
Secondly Visa will work closely with its banks to increase the capacity to serve the larger companies and ensure that our multi national customers are well served throughout the area. This will mean expanding our product and service offerings.
Perhaps one of the most interesting elements of all this is the positive attitude of both the banks and the businesses in these countries who are embracing change wholeheartedly. With little or no legacy they are welcoming new techniques and technologies that offer greater efficiency, convenience and can create value. For example both in the Czech Republic and Slovakia we have a number of pilot schemes already in place with some of the country’s leading travel agents and insurance companies.
Visa has extensive experience with working in relatively young and fast developing markets such as these. Take for example Portugal. Just 10 years ago there were limited payment systems in place and Visa had just a handful of SME and multi-national customers. Now we have fully developed local business and have seen that the Portuguese economy has definitely benefited from a comprehensive payment infrastructure. In fact Portugal has developed into a modern society at a surprising rate and I believe that, with the right conditions, the EU accessions countries stand a good chance of doing the same.
Inevitably real economic growth in these countries will be driven by the combination of technology, capital, materials, labour resources and entrepreneurship. But economic transactions and payments cannot take place without an efficient, interoperable payment system.
In short, the introduction of a dynamic, innovative electronic payment system that maximises economic growth by providing fundamental benefits such as safe, sound and predictable international payments network connecting buyers and sellers; ever increasing levels of security and customer empowerment, greater economic transparency, increased economic stimulation will be of great benefit to these economies. In fact I would say that it is key.