The EBA discussed the regulation of Tap-to-Phone/Tap-on-Phone technology with the National Bank and the State Tax Service

05/ 07/ 2023

The tap-to-phone/tap-on-phone technology has simplified and improved contactless payments using smartphones. This Android-based system gained popularity in Ukraine shortly after its introduction two years ago. To discuss the usage nuances of this technology and its regulation in the context of the requirement to enable non-cash payments, the Committee on Electronic Payments and the Tax Committee of the European Business Association, along with other interested member companies, held a meeting on June 29 with representatives from the State Tax Service and the National Bank of Ukraine. According to Visa and Mastercard payment systems calculations, the share of contactless non-cash transactions exceeds 85% in terms of transaction volume and quantity. Additionally, in 2022, over 50% of all card transactions in the countrys retail network were made using smart devices. This transition highlights the growing advantage of smartphone payments. Moreover, security is a crucial factor, as the tap-to-phone/tap-on-phone technology ensures transaction safety. By utilizing the security features of Android-based smartphones, businesses can accept contactless payments through software terminals as an alternative to physical terminals. The largest acquiring banks in Ukraine have already integrated the tap-to-phone/tap-on-phone technology into their systems. For example, the payment solution Oschad PAY from Oschadbank has been using tap-to-phone technology in a pilot mode since 2020 and fully replaced physical terminals for non-cash transactions starting in 2021. With over 7,000 connected terminals and nearly 2,500 active users, Oschad PAY facilitated over 130,000 transactions totaling 1.3 million hryvnias. Banking applications utilizing tap-to-phone/tap-on-phone technology provide businesses with additional features beyond simple payment acceptance. Entrepreneurs can leverage these capabilities to offer discounts, schedule payments, receive tips, and more. Of course, this solution enables the fiscalization of payments and the issuance of electronic fiscal receipts to customers. At the same time, users still have traditional payment cards with magnetic stripes or special chips without the module required for contactless payments. These cards currently represent 10-15% of all active payment cards and are no longer issued by payment systems and banks. As a result, they will be completely phased out by the end of 2026. However, merchants using tap-to-phone/tap-on-phone technology should also accommodate owners of magnetic stripe cards. Following the discussions, the business community and the State Tax Service (STS) received confirmation from the National Bank of Ukraine regarding the equivalence of the functionality of software payment terminals operating on the tap-to-phone/tap-on-phone technology compared to traditional payment terminals. The European Business Association will address the Ministry of Economy of Ukraine (as the creator of Resolution No. 894) with information stating that due to the specific operation of certain electronic payment instruments, existing advanced technologies that greatly facilitate transactions do not fully meet the needs of all customers, particularly owners of cards with magnetic stripes and chips, which are required to be phased out in Ukraine by the end of 2026 with the introduction of cards using new technologies. This may be a reason for concern. The representative of the STS noted that they would support such a proposal from the business community if it is submitted for consideration by the relevant authority. The EBA expresses gratitude to the representatives of the State Tax Service and the National Bank of Ukraine for the productive meeting and effective discussion of the business communitys proposals regarding the regulation of the use of tap-to-phone/tap-on-phone technology for non-cash payments. The EBA hopes for a prompt review by the Ministry of Economy of the proposals put forward by the business community and, if necessary, the incorporation of the suggested amendments into Resolution No. 894 by the Cabinet of Ministers.

According to Visa and Mastercard payment systems’ calculations, the share of contactless non-cash transactions exceeds 85% in terms of transaction volume and quantity. Additionally, in 2022, over 50% of all card transactions in the country’s retail network were made using smart devices. This transition highlights the growing advantage of smartphone payments. Moreover, security is a crucial factor, as the tap-to-phone/tap-on-phone technology ensures transaction safety. By utilizing the security features of Android-based smartphones, businesses can accept contactless payments through software terminals as an alternative to physical terminals.

The largest acquiring banks in Ukraine have already integrated the tap-to-phone/tap-on-phone technology into their systems. For example, the payment solution “Oschad PAY” from Oschadbank has been using tap-to-phone technology in a pilot mode since 2020 and fully replaced physical terminals for non-cash transactions starting in 2021. With over 7,000 connected terminals and nearly 2,500 active users, “Oschad PAY” facilitated over 130,000 transactions totaling 1.3 million hryvnias. Banking applications utilizing tap-to-phone/tap-on-phone technology provide businesses with additional features beyond simple payment acceptance. Entrepreneurs can leverage these capabilities to offer discounts, schedule payments, receive tips, and more. Of course, this solution enables the fiscalization of payments and the issuance of electronic fiscal receipts to customers.

At the same time, users still have traditional payment cards with magnetic stripes or special chips without the module required for contactless payments. These cards currently represent 10-15% of all active payment cards and are no longer issued by payment systems and banks. As a result, they will be completely phased out by the end of 2026. However, merchants using tap-to-phone/tap-on-phone technology should also accommodate owners of magnetic stripe cards.

Following the discussions, the business community and the State Tax Service (STS) received confirmation from the National Bank of Ukraine regarding the equivalence of the functionality of software payment terminals operating on the tap-to-phone/tap-on-phone technology compared to traditional payment terminals. The European Business Association will address the Ministry of Economy of Ukraine (as the creator of Resolution No. 894) with information stating that due to the specific operation of certain electronic payment instruments, existing advanced technologies that greatly facilitate transactions do not fully meet the needs of all customers, particularly owners of cards with magnetic stripes and chips, which are required to be phased out in Ukraine by the end of 2026 with the introduction of cards using new technologies. This may be a reason for concern. The representative of the STS noted that they would support such a proposal from the business community if it is submitted for consideration by the relevant authority.

The EBA expresses gratitude to the representatives of the State Tax Service and the National Bank of Ukraine for the productive meeting and effective discussion of the business community’s proposals regarding the regulation of the use of tap-to-phone/tap-on-phone technology for non-cash payments. The EBA hopes for a prompt review by the Ministry of Economy of the proposals put forward by the business community and, if necessary, the incorporation of the suggested amendments into Resolution No. 894 by the Cabinet of Ministers.