Azerbaijani central bank to divulge its decision on integration of processing centers
Azerbaijan, Baku, Sept. 1 / Trend , I.Khalilova/
The Central Bank of Azerbaijan (CBA) is going to divulge new steps to develop the processing market in the country, Executive Director of Milli Kart Limited Liability Company (LLC), Jalal Orujov said on Sept. 1.
"The Central Bank will publicize plans on integration of processing centers in the country in the coming days," Orujov said. "The CBA as a neutral organization and the regulator of the banking system in the country has undertaken this initiative, since the development of the processing market is a part of the program on improving the payment system. [The adoption of this decision was expected at the end of last week.]
This program aims at developing the country's medium-term integrated single electronic payment space, accelerating the development of electronic commerce and increasing non-cash circulation.
Earlier the processing centers held consultations among themselves about the integration, but the CBA's decision will also be made in compliance with the interests of each company, believes Orujov. At present there are three processing companies in the country. Milli Kart is possessed by 18 commercial banks after buying the centre from the Central Bank of Azerbaijan, the International Bank has its own company Azericard, which services 30 banks, and the third was established by Kapital Bankin 2009.
Orujov said the integration which is considered acceptable from a technological point of view may be implemented in two ways: when processing centers are directly linked to each other and through the regulation of interior calculations.
In the first case, the centers agree on inter-processing fees for services, on the basis of which all domestic transactions are served. Meanwhile, the third organization does not pay for some services.
In this case, one can even agree on a zero tariff, that is, maps of all banks operate at the minimum rate, unlike the current situation. At present as there is not such integration from a technical point of view, bank cards, served by the processing, operate on the international prices of Visa and Mastercard.
Tariffs are divided into two parts. For the money, which international payment systems takes for the technological processing services, a fixed rate has been set, depending on the turnover of banks, and averagely, one transaction costs 3-4 cents in the region, and taking into account the total payment for the clearing services, the total cost does not exceed 10 cents (about 6-7 cents).
Besides tariffs, which are transferred to payment systems, there are tariffs, which the bank pays the opposite side. If a bank customer withdraws cash, card issuing bank must pay its commission to the bank-acquirer. These rates constitute the main burden on the international rates, as well as for the issuance of cash depending on the product, the issuer pays 0.8-1.2 percent of the transaction.
The issuer pays this amount to the acquirer directly in connection with the services of their ATM or his client. In the case of purchase of goods through the POS-terminals, a similar scheme is used. Tariffs are divided into two parts: in most cases, a fixed fee is provided by the international payment systems, and there are fees for inter-bank payments. In the latter case, the stream of payments is not directed away from the issuer to the acquirer, but in the opposite direction - from the acquirer to the issuer. Rates for basic payments fluctuate between 1-1.6 percent.
These rates are the same in the CEMEA (Asia and Central and Eastern Europe) region. However, there are specific types of credit cards, services for which tariffs are much higher, up to three percent of the transaction.
In the case of the integration of processing centers, fees for Visa and Mastercard will automatically be eliminated or reduced for, which today comprises 6-7 percent.
Creating interface [on the second version of the integration] does not involve the operation of international payment systems. In this case, processing companies agree among themselves, as well as all the banks that are maintained at these centers, as all rates are mainly related to banks, and banks also decide on reducing or increasing tariffs. Processing is engaged in mainly that they make such a scheme of service technologically available.
Virtually all processing centers for creating such an interface must implement the software that is to invest.
The integration can be reduced by the issuer in favor of the bank-acquirer rate for cash withdrawals, or, on the contrary, in the case of non-cash purchase transaction. Accordingly, the final price for cardholders to such services or the stores also declined. For cardholders, the cost of services by the issuer to the acquirer is one percent, for in the cash withdrawal. Typically, the cost of such a transaction currently stands at 1.5 percent.
Withdrawal of cash in someone else's ATM costs about 1.5-2 percent, which account for one percent, which the issuer must pay to the acquirer. If the issuing bank and acquirer would agree to reduce the rate to 0.5 percent, respectively, the final cost to the cardholders should fall from 1.5-2 percent to 1-1.5 percent.
In the case of shops, the agreement is reached on payment of interest of the turnover on transactions. Typically, the percentage begins from 2.5 percent or higher, because t its 1-1.6 percent is paid to the issuing bank. Banks may again negotiate a reduction in the tariff, then shop has to install POS-terminal less than the amount on which the banks agreed. The best option is to reduce tariffs more than twice. Of course, it is profitable for shops, because they will have to pay less VAT, Orujov said.
A final agreement on pricing can be reached after the decision on integration.