Many Ukrainians think it is much safer to keep their money under the mattress than in the bank.
This point is proven by Ukraine’s richest: The country’s top officials and lawmakers, many of them millionaires, tend to keep their vast savings in cash, according to their recently filed electronic declarations of assets.
But even with distrust in the banking sector lingering, the number of cashless operations is slowly increasing in Ukraine.
Slow growth
In the first nine months of 2016 Ukrainians have made in total 1,272 million cashless payments worth Hr 398 billion – more than for the whole year of 2015, according to the National Bank.
Today, 35.8 percent of all the payments in Ukraine are cashless, up from just 8 percent in 2011.
Based on the data for July – September 2016, the most popular way to pay cashless is through a shop’s point of sale terminal – that’s how 35.9 percent of the cashless payments were conducted, while 33.1 percent were card-to-card payments, and 27.8 percent were internet transactions. The remaining 3.2 percent were made through self-service devices.
The top five banks behind the most internet transactions in 2015 were PrivatBank, Raiffeisen Bank Aval, Alfa Bank Ukraine, Oschadbank and First Ukrainian International Bank (PUMB).
But while the number of cashless payments is slowly increasing, this slow growth shouldn’t mislead one into thinking that Ukraine is moving to cashless economy at any great pace.
The numbers are still very small compared to developed European countries and the United States, where citizens have almost forgotten about the times when they had to pay cash in public transport or in a store. Compared to them, Ukrainians are only beginning their move towards a cashless economy.
According to the Swedish National Bank, Riksbank, in 2014, Ukraine was among those countries in the world with the greatest fondness for cash: The amount of cash circulating in the economy equaled 18.1 percent of the country’s gross domestic product. In comparison, in Poland the same indicator was 7.5 percent, in Canada – 3.8 percent, and in Sweden – 2.2 percent.
“It’s been a long time since I last used cash in Sweden – cards work everywhere,” says Gustav Henman, a Swede, and the cofounder of Beetroot, an IT company that operates in Ukraine.
“In Ukraine, using cash is obviously inevitable in some cases.”
Henman even says he enjoys using cash for a change – as long as it’s not coins.
“Feels a bit nostalgic and exotic in some way,” Henman told the Kyiv Post. “But surely it’s convenient not to handle cash. You more or less forget about the whole concept of (paper money) after a couple of years of only card payments.”
How to go cashless, and why?
The country’s high cash circulation is fueling the nation’s corruption problem, says VISA country manager for Ukraine, Georgia and Armenia Dmytro Krepak.
“Cashless means transparency. Cash, on the other hand, is a key element of the shadow economy and corruption in any society,” Krepak told the Kyiv Post.
Currently, there are over 31.1 million active payment cards in Ukraine, but that’s owing to the fact that an average Ukrainian has more than two cards. And the country’s potential is huge, for Krepak says only one-fifth of Ukrainians trust banks and online transactions, and hence there’s still a lot of customers waiting to discover cashless services.
The National Bank of Ukraine plans to bring the amount of circulating cash from 18.1 to just 9.5 percent of GDP by 2020, as part of their Cashless Economy project.
Reducing the amount of paper money will increase the database of taxpayers, reduce expenditures on supporting monetary circulation and printing bills, and allow cashless money to be used for economic purposes.
Iryna Kholod, the CEO of consultancy firm E-Commerce Expert says the development of a so-called cashless society in Ukraine will indicate the stability of the country’s development and will send a positive signal to the European Union, which Ukraine longs to join.
She thinks that currently not all of Ukraine’s transactions are clear, agreeing with VISA’s Krepak that cashless payments will help the market become “well-organized and transparent.”
“Cashless payments will get most of the transactions out of the shadows, and will show their real volume,” Kholod said.
Terminals needed
Although more than 50 percent of Ukrainians’ salaries are paid in a cashless form, 80 percent of all spending are done with cash.
Another reason for people to withdraw money they receive on their bank card is the scarceityof point-of-sale terminals in the country. There are 200,000 retail terminals in Ukraine, while VISA’s Krepak thinks that the country needs 1 million at least.
After retail, the focus is on making payments for public transport and utilities cashless – these are the two most frequent cash transactions in Ukraine.
“Cashless is convenient,” says Yaroslava Boyko, a coordinator at Kyiv Smart City, a group of volunteers that are implementing technology and cashless solutions in Kyiv’s public transport and other municipal systems. “Everything can be done with three clicks, which saves up to 30 minutes of one’s time.”
The NBU also promises to push for utility companies to issue electronic bills. There already are intermediary services that collect utility bills in an electronic form for a customer to pay online.
“Migration to cashless is a global trend, and Ukraine is not an exception here,” says Krepak of VISA. “Consumers get more digital, they expect a ‘fast-lane’ consumer experience and this is what electronic payments offer – they make overall consumer experience better.”
