Across the world, the Coronavirus pandemic has brought about a dramatic shift in the consumer uptake of digital services, particularly in the financial services sector.
In the case of Ukraine, however, such a shift had already been initiated. Rather, the pandemic has accelerated the transition that we at the National Bank of Ukraine view as essential for a modern financial system, businesses and consumers.
Indeed, playing a central role in preparing Ukraine for the digital future is a key priority for NBU under my governorship, as we look towards economic recovery during the course of 2021.
Even before the pandemic took hold around the globe, Ukrainian businesses were ready to meet the demands for digital finance. In 2020, the growth in the number and value of online transactions grew significantly, with one-in-three cashless transactions involving
payment cards being made online. This steady increase has also taken place in cashless transactions through point-of-sale (POS) terminals.
Ukrainians are actively migrating to contactless payments, emphasising the need for those of us driving the country’s financial system to stay ahead of the curve.
At present, more than 40% of active payment cards in the country are tokenized or support contactless transactions, and 85% of POS terminals can accept contactless payments. Last year’s figures also point to a need for modernisation; 56% of POS transactions
were made via contactless payments, and by the end of the year more than one in five POS transactions were made with a smartphone. The value of these transactions in 2020 totalled more than €2.9 billion and included shopping in supermarkets, payments in cafes,
restaurants and hotels, as well as payments for services. When assessing the past five-years, the number of card-based cashless transactions in Ukraine has increased by at least a quarter every year.
However, compared to our European partners, there is considerable progress to be made.
Our payment infrastructure remains less developed than that of many countries in the European Union. In 2019, Ukraine had close to 9,000 POS terminals per million people compared to the EU’s estimated 33,000 POS terminals per million. In addition, our country’s
financial infrastructure has been developing unevenly across our diverse regions.
This reality is a reason why, as Governor, I am championing the introduction and development of alternative cashless payments.
Among these is our upcoming system of instant payments based on accounts, not payment cards. This will mean payments are faster, cheaper and accessible to all of our citizens – 24 hours a day, 7 days a week.
NBU has also approved uniform approaches to generating and using QR codes for credit transfers. This will provide the market with a standardized tool to make payments more convenient, as well as overcoming any compatibility issues with different payment
Yet perhaps our most ambitious step comes in tandem with these exciting innovations.
NBU is continuing to monitor the possibility of issuing the electronic hryvnia (e-hryvnia), a central bank digital currency (CBDC). We are currently analysing where the e-hryvnia could serve the country best, and we have also initiated a survey of market
participants to ascertain niches that would benefit from its use.
Nonetheless, it is equally important to remain level-headed in the realm of rapid digitalisation.
As Governor, it is my role to ensure that NBU assesses the potential impact that e-hryvnia may have on macroeconomic and financial stability.
As a result, NBU is working to update the legislation that governs payments in Ukraine to allow open banking and the implementation of the EU’s Payments Services Directive (PSD2). This will lay the groundwork for the further development of payment products
and services, allow new players to enter the financial market and enable consumers to get improved services at a lower cost. Consumer protection must be at the core of our update of our financial infrastructure, in order to strengthen their confidence in
the digitisation of finance.
The past year has highlighted the need for the Ukrainian financial system to keep pace with an ever-evolving world.
Whilst there has been considerable development in our country over the past few years, it is still behind the standard that we know we can achieve.
To show that NBU is keeping pace with the modernising world, we can ensure that Ukrainians not only have access to more innovative and efficient services, but that they also have the confidence to embrace a new system.