The Global market research company Euromonitor International reported that consumer card payments and mobile-commerce will see 6.6% and 23% average annual growth rates, in 2016-2021 respectively, while global cash payments will be 1.3%. This data shows that cashless payments in future, quite possibly, will supersede cash payments. However, it is important to note that, today, most transactions are made by cash. According to the research published by the McKinsey in 2016, $12 trillion retail transactions were made in 2015 and 85% of these transactions were made by cash.
The use of cashless payments has several advantages. First, cashless payments in comparison with traditional cash payments have lower transaction costs. The MasterCard in their research also shows that the cost of cash usage is about 1.5% of global GDP. Second, since cash is the primary instrument of transactions in money laundering and terrorism financing, a cashless society would discourage such laundering and terrorism. The next advantage is that cashless payments would make easier to a government to monitor income tax paid by economic agents. Therefore, most developed countries switch from cash payments to cashless payments.
Because of the importance of cashless payments, this policy brief investigate cashless payments in Kazakhstan. Kazakhstan is a developing country and due to this fact, the country has a low level of cashless transactions. According to the Director of the Consumer Products department of Visa in the Commonwealth of Independent States, Sergey Koptik, the share of cashless payments will reach 20% in 2017 in Kazakhstan. However, cashless payments are developing quickly in the country.
According to the National Bank of Kazakhstan (NBK), legal entities and individuals in Kazakhstan made transactions with payment cards with the value of 183.9 billion tenge in March 2017, which is 53.7% more than in the same period of 2016. Two years ago, in March 2015 the value of transactions with payment cards was 80.13 billion tenge, while five years ago, in March 2012 the transactions were 56.12 billion.
In general, Kazakhstan has five systems that provide services with payment cards but mostly dominated by two of them, VISA International (Visa), MasterCard Worldwide (MasterCard). Other systems are UnionPay International and American Express International and local systems, such as the Altyn Card by Halyk Bank and the local card provided by Citibank Kazakhstan. The local cards account for 0.61% of the total amount of payment cards, which is 16.117 million, as of the end of March 2017, while UnionPay International and American Express International account for 7.94%. Hence, Visa and MasterCard account for 91.45% of the total amount of payment cards, with 11.263 million and 3.476 million cards respectively as of the end of March 2017. In general, Visa is more popular in Kazakhstan than MasterCard, but the latter is increasing its share in the market. Until the end of 31 March 2017, MasterCard increased the number of its payments cards by 45.6%, while the growth rate of Visa’s payments cards was negative, and decreased by 10.2%.
The NBK also shows that in Kazakhstan was 14.573 million card holders on 1 April 2017, meaning that 82.5% of all Kazakhstanis hold payment cards (total population of Kazakhstan in 2016 –17.67 million). The number of card holders increased substantially since March 2012, when the amount was 9.58 million. It is worth mentioning that 10.312 million of card holders hold cards of Visa, while 3.101 million hold cards of MasterCard.
Almaty (excluding Almaty region) has the biggest amount of card holders (4.6 million) and accounts for almost one-thirds of the total amount of card holds of Kazakhstan as of the end of March 2017. The city is followed by South Kazakhstan region, Astana and Karaganda region with 1.24 million, 1.07 million and 1.2 million card holders. Other regions have less than a million card holders.
Along with the growing number of payment cards and card holders, the number of ATMs and POS-terminals are also growing fast. At the end of March 2017, Kazakhstani banks and other legal entities had 114.9 thousand POS-terminals, which is 32.6% more than in the same period of 2016. Five years ago, at the end of March 2012, the amount of POS-terminals was 29.422 thousand. The number of ATMs are also growing but with a bit slower pace than POS-terminals. The number of ATMs grew by 4.7% and reached 9.678 at the end of March 2017 in comparison with the same period of 2016.
Interestingly, despite the fact that South Kazakhstan region is the second by a number of card holders, the region is the fifth by a number of ATMs and only seventh by a number of POS-terminals. Almaty and Astana are leading by a number of POS-terminals and ATMs with 1,853 and 1,046 – ATMs in Almaty and Astana and with 31,296 and 19,651 POS-terminals respectively.
It is important to note that, today, people still mostly use payment cards for cash withdrawal rather than for cashless payments, but it is important to note that their preference is changing towards cashless payments. As was noted above, until the end of 31 March 2017 cashless payments made by payment cards grew by 53.7% and reached 183.9 billion tenge. In the same period, cash withdrawals grew only by 23.7% and reached 836.6 billion tenge. Hence, we can see that the share of cash withdrawals in total transaction made by payment card is still big, but its growth rate is significantly lower than the growth rate of cashless payments. This means that it is quite possible that in near future the share of cashless payment will exceed the share of cash withdrawals.
Table 1: Cashless payments in Kazakhstan
Amount (mln.tenge), 31.03.2017
Amount (mln.tenge), 31.03.2016
POS - terminal
Source: the NBK
Table 1 shows that as of the end of March 2017, more than 53% of all cashless transactions in Kazakhstan went through POS-terminals, and in comparison with the same period of 2016, the transaction through POS-terminals grew by 32.1% and reached 83.5 billion tenge. It is worth mentioning that the biggest growth was achieved by internet transactions. At the same period, the value of internet transactions grew by 200.1% and reached 55.2 billion tenge. The value of transactions through bank kiosk is decreasing, from 31 March 2016 to 31 March 2017 the transactions decreased by 26.6%.
Overall, the information presented above show that cashless payments in Kazakhstan are developing fast. However, the country still has a very low level of cashless payments in comparison with the total transaction made in Kazakhstan. Considering the fact that cashless payment has some advantages in comparison with cash payments, we should mention that it is important for the government to pay more attention to cashless payments. The government should increase incentives to change cash payments to cashless payments as for individuals and for legal entities.
Daniyar Nurbayev is a research fellow at the Eurasian Research Institute. Daniyar completed his bachelor’s degree in Finance in the Kazakh-British Technical University in 2013. In addition, he holds Masters degree in Finance from the Kazakh-British Technical University (2015).