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Regulation of interchange fee to increase cash turnover in Ukraine

05/ 04/ 2021
  The draft law № 4364 over the interchange fee regulation will increase the cash turnover in Ukraine and the cost of banking services for customers, the Head of the Card and X-sales Business Development Department of OTP Bank Yevhen Hruby believes. According to Y. Hruby, the EU practice shows that the regulatory regulation of interchange rates leads to an increase in the cost of servicing bank accounts for clientele and, accordingly, to a decrease in their number. After all, no bank may conduct unprofitable activities and has to implement additional fees to provide product profitability. Also, in his opinion, acquiring banks will begin to stop the card acceptance network growth. Besides, issuing banks will have to narrow significantly or even close loyalty programs (cashback, grace periods on credit cards). This, in turn, can lead to a decrease of card turnover and the lack of additional motivation for the customer to make payments by payment cards. And the result will be an increase in cash turnover respectively, - the banker said. On the other hand, according to him, as EU practice shows, measures to force interchange rates reduction in no way affect the goods price. The interchange rate, which will potentially decrease by even 1%, in the goods prices of UAH 400 (equal to the average check paid by a card in 2020 according to NBU statistics) will equal UAH 4 and not be identified as a discount for a buyer. But the consequences of reduced income from all these operations will be felt by the banks very quickly, - Y.Hruby highlighted. An alternative way of fees regulation, according to the banker, should be its evolutionary and harmonious reduction by banks and payment systems. The draft law № 4364 over the interchange fee regulation is being prepared now for the second reviewing in Verkhovna Rada. Joint Stock Company OTP BANK is one of the biggest Ukrainian banks with foreign capital, which is a recognized leader in the countrys financial sector. The bank provides a full range of financial services for corporate and private clients, as well as small and medium-sized businesses. It has been represented on the Ukrainian market since 1998, has a strong reputation as a socially responsible, reliable and stable structure offering consumers services of European quality. Its 100% owner is the largest Hungarian bank OTP Bank Plc. Since 2019, according to the decision of the NBU, OTP Bank has been included in the list of systemically important banks in Ukraine that have a significant impact on the development of the countrys financial system. In Ukraine, OTP BANK JSC acts as the flagship of the OTP banking group, registered by the National Bank of Ukraine, which also includes AMC OTP Capital LLC and OTP Leasing LLC. Follow OTP Bank news on social networks Facebook, Twitter, Youtube, Instagram, Telegram and Viber.

The draft law № 4364 over the interchange fee regulation will increase the cash turnover in Ukraine and the cost of banking services for customers, the Head of the Card and X-sales Business Development Department of OTP Bank Yevhen Hruby believes.

According to Y. Hruby, the EU practice shows that the regulatory regulation of interchange rates leads to an increase in the cost of servicing bank accounts for clientele and, accordingly, to a decrease in their number. After all, no bank may conduct unprofitable activities and has to implement additional fees to provide product profitability.

Also, in his opinion, acquiring banks will begin to stop the card acceptance network growth. Besides, issuing banks will have to narrow significantly or even close loyalty programs (cashback, grace periods on credit cards). “This, in turn, can lead to a decrease of card turnover and the lack of additional motivation for the customer to make payments by payment cards. And the result will be an increase in cash turnover respectively,” – the banker said. On the other hand, according to him, as EU practice shows, measures to force interchange rates reduction in no way affect the goods price. “The interchange rate, which will potentially decrease by even 1%, in the goods’ prices of UAH 400 (equal to the average check paid by a card in 2020 according to NBU statistics) will equal UAH 4 and not be identified as a discount for a buyer. But the consequences of reduced income from all these operations will be felt by the banks very quickly,” – Y.Hruby highlighted.

An alternative way of fees regulation, according to the banker, should be its’ evolutionary and harmonious reduction by banks and payment systems.

The draft law № 4364 over the interchange fee regulation is being prepared now for the second reviewing in Verkhovna Rada.

Joint Stock Company “OTP BANK” is one of the biggest Ukrainian banks with foreign capital, which is a recognized leader in the country’s financial sector. The bank provides a full range of financial services for corporate and private clients, as well as small and medium-sized businesses. It has been represented on the Ukrainian market since 1998, has a strong reputation as a socially responsible, reliable and stable structure offering consumers services of European quality. Its 100% owner is the largest Hungarian bank OTP Bank Plc.

Since 2019, according to the decision of the NBU, OTP Bank has been included in the list of systemically important banks in Ukraine that have a significant impact on the development of the country’s financial system.

In Ukraine, OTP BANK JSC acts as the flagship of the OTP banking group, registered by the National Bank of Ukraine, which also includes AMC OTP Capital LLC and OTP Leasing LLC. Follow OTP Bank news on social networks Facebook, Twitter, Youtube, Instagram, Telegram and Viber.

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