Radovan Jelašić: Payment card business in Serbia
Speech by Mr Radovan Jelašić, Governor of the National Bank of Serbia, at the Round Table
Discussion on Payment Card Business, Belgrade, 17 September 2008.
* * *
Distinguished members of the press, colleague bankers and hosts to this event,
I would like first of all to warmly thank the organizers of this Round Table on payment card
business for the invitation to give introductory speech and to take part in the discussions
during this event. Payment card business, together with the overall system of payment
operations, represents the backbone of a stable and efficient financial industry of any market.
Supervision of these operations in Serbia, however, is under the remit of the National bank.
Recently, we have been witnessing major, both technological and regulatory changes in the
domain of payment card business equally in Europe and worldwide. Its significance in some
economies has met and even exceeded that of payments in cash and has consequently
grabbed the attention of financial market regulatory authorities and central banks.
Perhaps the most significant decision in this domain is the one taken by the Master Card
(under supervision, not to say pressure, of the European Antimonopoly Commission) to cut
down cross-border interchange fees down to the zero level, and hence open up a new era in
the relations between payment card systems, financial market regulatory authorities, banks
and traders in Europe and worldwide. Besides, the initiative of the European Commission
and the European Central Bank to develop a new European payment card system within the
implementation of the SEPA agreement (if you'll permit me to boast a bit, following in the
footsteps of our "Dina Card") and to do so now when VISA and Master Card have already
established strong positions for themselves, shows how important payment cards have
become for the stability of payments systems, not only from the financial, but also from the
social point of view.
Today, we shall also attempt to discuss current issues prevailing in our economy. One of the
topics of discussion (and often a bone of contention) between the NBS and commercial
banks in the course of several recent years has been the treatment of payment cards and
debit card overdrafts. I sincerely hope we shall see further discussions on this matter as they
strongly contribute to the improvement of the quality of the system.
On our part, I wish to reaffirm the position of the NBS to continue its best efforts begun six
years ago to promote further intense development of the card business in Serbia. Let me
remind you that the number of transactions processed through the Dina Card system (set up
by the NBS five years ago) averages over 25 million per year, of which almost one million are
initiated by the mobile telephone.
Our projects in the Dina Card system in cooperation with banks, traders and telecom
operators comprise:
• Mobile telephone top up via SMS messages (available since April 2006)
•
Transfer of remittances from abroad to Dina Cards (available since December 2007)
•
Payment by Dina Cards via Internet (expected to be available from 25 September
2008)
•
Payment of state taxes and duties in the Treasury Administration of the Ministry of
Finance using payment cards (expected to be available from May 2009)
What further steps should be taken in the domain of card business is the question which
keeps coming up, but, contrary to other issues, not from the point of view of profit
maximization, but from the aspect of socially optimal costs of payment cards, i.e. more
efficient payment card business. One thing is for sure, the development of card business in
Serbia should not match that in the USA where payment card frauds have been cut by 70%,
number of payment cards issued has quadroupled, number of card issuers increased by 50%
and the reference rate trimmed to a quarter of its value since 1990s to date. Now guess
whether the costs of interchange in those circumstances were decreased by the oligopolies,
VISA and Master Card? The answer is no - costs of interchange have been increased. To
me, the main issue is no longer whether the NBS does or does not need to take
administrative measures to enable faster development of the card business in Serbia. The
answer is yes, administrative measures need to be taken by the NBS, but the question
remains as to in which area and in what way as any measure has its advantages and
disadvantages. Should it be a measure relating to the maximization of the interchange fee on
payments via debit or on payments via credit card, or a measure to encourage traders to
charge higher fees on payment card operations if they feel payment card business cuts too
deep into their profits, or some altogether different measure.
The main role of the NBS is to secure the efficiency of the payment card business over the
medium and long run, and in order to do so we have been analysing measures taken
worldwide, from the EU countries to Australia. We welcome any support we can get in this
effort and are certain that it will pay off even for banks in the medium and long run.