carte blanche digest 2011

12MasterCard EMV Cards

with Pectoral®

from Plastic Card Company

RESEARCH AND REVIEW

Consumer Finance in Eastern Europe 6

Interview with Mantas Kaluina, Senior Research Analyst at Euromonitor International

CARD MARKETS

Market of Plastic Cards in Ukraine 10

MasterCard EMV Cards with Pectoral®

from Plastic Card Company 12

Plastic Card Enterprise Ltd. has launched issuing MasterCard EMV cards

with chip module Pectoral® of its own design

Market of Plastic Cards in Kazahstan 14

Market of Plastic Cards in Georgia 15

IT SOLUTIONS

SRPF ARGUS Ltd � Affordable IT Solutions

for Financial Market 16

TECHNOLOGY AND SOLUTIONS

MasterCard® PayPass™ Comes to Ukraine 18

MasterCard, PrivatBank and MegaMarket present an innovative technology PayPass™

on the Ukrainian payment market

EQUIPMENT PRODUCTION

Bank Equipment by Ukrainian Company 20

MARKET PLACE 30

C O N T E N T S

Digest•2011Информаційно�аналітичний

журнал

Виходить у світ з грудня 2001 р.

Засновник та видавець:

Олена ГОЛЕМБОВСЬКА

Адреса редакції: м. Київ,

бульвар Лесі Українки, 26,оф. 901 А

Тел./факс: (044) 286�3854

www.carteblanche�online.info

Свідоцтво про реєстрацію КВ №11758�629ПР

від 19.09.2006

Передплатний індекс23741

Кольороподіл та друк: ТОВ «РЕМА�ПРИНТ»

м. Київ вул. Чорновола 2, к. 1

Тираж 1000 прим.Ціна – договірна

Журнал не несе відповідальності за зміст рекламних матеріалів.

Журнал може не поділяти поглядів автора.

Використання публікацій тільки з письмового

дозволу редакції.

Підписано до друку 08.11.2011© Карт Бланш, 2011

MasterCard® PayPass™

comes to Ukraine 18

C A R T E B L A N С H E • D I G E S T • 2 0 1 1 1

Digest 2011

B R I E F N E W S

Verkhovna Rada (Parliament) adopted the Law on biometric documents, verify�ing personality and confirming citizenship of Ukraine.This Bill envisages that all birth certificates since January, 1, 2012, will be equippedwith the special biometric plastic cards, representing main personal data. On thebasis of this biometric document in the future other documents, certifying citi�zenship of Ukraine will be issued.At the same time, the law does not foresee obligatory exchange of passports forbiometric documents.

According to Bank of Russia, in April�June from Russia was transferred $4.359bn, including $3.774 bn into the CIS countries, $584 mn – into the countries ofnon�CIS countries. On the whole, for the H1 2011 the volume of money ordersfrom Russia accounts for $7.209 bn. Into Russia for the Q2 2011 was trans�ferred $662 mn, and for the H1 2011 – $1.197 bn.The Bank of Russia conducts monitoring of the followings systems of moneyorders: Anelik, Blizko, Coinstar Money Transfer, Contact, InterExpress, Migom,MoneyGram, PrivatMoney, Unistrim, Western Union, AsiaExpress, Alliur, Blitz,Rapid Mail, Gold Korona, Leader.

IN H1 2011 $7.2 BN WAS TRANSFERRED FROM RUSSIA VIA

MONEY ORDER SYSTEMS NEW LAW AIMS TO RELIEVE

BUREAUCRATIC BURDEN

ON RUSSIAN CITIZENS

New federal legislation on administrative elec�tronic exchange, which went into effect onOctober 1 in regard to federal agencies, couldradically simplify the exchange betweenprivate citizens and Russian administrativebodies. Under the new law, federal officialswill no longer be able to request documentsor information from private citizens alreadyavailable in the databases of other federalagencies.Each year, Russian federal and local govern�ment bodies receive up to 81 million applica�tions and requests from citizens, the Ministryfor Economic Development calculated, and intheir turn these agencies require citizens toprovide 560 million documents to process theapplications and requests.In addition to reducing the number of docu�ments requested, the new law guarantees thatthe applications and requests of private citi�zens will be answered in no more than 5 days.The law will become effective for regional andlocal administration starting July 1, 2012.

PETROL STATIONS LUKOIL BEGAN

TO ACCEPT NFC�PAYMENTS

SITRONIX Smart Technologies (SST), MTS andLUKOIL caried out a joint project named "Rapidfilling" – the 1st in Russia contactless systemof NFC�payments at the LUKOIL petrol stations.Within the framework of this project SST devel�oped the SIM�application "Rapid filling" forthe System of Supplier Accounts' Control,integration with the system, suppporting specialSIM�cards based on swp/hci protocol and NFC�aerial for telephones, not supporting swp�protocol.

CYPRIAN TRIANTAL

INVESTMENTS LTD. HAS 24.99%

SHARES OF PRIVATBANK

Company Triantal Investments Ltd. (Cyprus)became an owner of 24.99% shares of thelargest bank in Ukraine Privatbank(Dnipropetrovsk). On August, 8, 2011 onGeneral Meeting shareholders of Privatbankapproved a decision to accept a foreign investoras a stakeholder – Triantal Investments Ltd.Earlier Triantal Investments Ltd. officiallyannounced its intention to purchase shares ofPrivatbank for UAH 3.385 bn.

PARLIAMENT OF UKRAINE ADOPTED THE LAW ON

INTRODUCTION OF BIOMETRIC CERTIFICATES FOR CITIZENS

PAYPAL WILL SOON START ITS WORK IN MOLDOVA

On Septembers 24, 2011 the internal do�cument of PayPal went into effect, inobedience to which the American com�pany began to acknowledge paymentcards, issued in Moldova.In the middle of October the represen�tatives of PayPal will announce details

of connecting to the Moldavian bank�ing system.The negotiations about expansion of se�rvices of PayPal in Moldova began in theautumn of 2010, and in August, 2011 thecompany declared about its willingness tostart its work in the Republic.

RUSSIA SMART CARD MARKET 2012 REPORT

It has just been published a new SmartInsights Report titled "Russia Smart CardMarket 2012" that investigates in detail thesecure transactions industry in Russia, andprovides market forecasts for 2012�2016.The new Smart Insights Report "RussiaSmart Card Market 2012" states that smartcard solutions shipments in Russia will reachabout 1.8 billion units yearly in 2016. Russiawill continue to show a dynamic growthin secure transaction industry. Market devel�opment will be mainly supported by heavygovernment�backed investments along withlegislative dynamics. These government andprivate operator projects will boost thedemand for smart card solutions.The report demonstrates that transportsegment will continue to represent the lionshare of total shipment volumes. Smarttickets in 2011 will reach 2.5 billion units

yearly. However, by 2016, these volumeswill be reduced due to replacement by otherlarge projects.Telecommunication segment shows asteady increase. Average mobile commu�nication penetration is already above150% and, in Moscow and St. Petersburg,it has exceeded 200%. Moreover, mobilenetwork operators are still facing highchurn rates. As a result, Smart Insightsanticipates SIM cards shipments in Russiawill exceed 240 million yearly by 2016.Russia implements several governmen�tal initiatives as well. The UniversalElectronic Card (UEC) is a national IDcard project with many different appli�cations on�board, such as social welfare,healthcare insurance, transport, eGovern�ment, electronic signature and bankingapplication, etc.

C A R T E B L A N С H E • D I G E S T • 2 0 1 14


R E S E A R C H A N D R E V I E W

CONSUMER FINANCEIN EASTERN EUROPE

CB: What are the general trends of finan�

cial cards and payments markets in the

countries investigated by your company?

Mantas Kaluina: All researched Eastern

European markets have strong cash culture,

where majority of payments are still being

made by cash. Within Easter Europe Hungary

and Czech can be considered as maturing

markets while Poland and Russia are still

in developing pace. However, Eastern Europe

overall remains in the early stages of card

use compared to Western Europe or North

America, primarily, as a result of the large

unbanked population. Russia has the lowest

banked rate in the region, with only 43%

of the population over 15 banked. In Poland

this number is also low at 65%

In terms of cards, Eastern Europe can be

described as a typical debit region. Bigger

part of people, especially in Poland and

Russia, still use their cards as cash access

devices instead of payment instruments.

Despite that number of card payment trans�

actions and transaction value, grows steadi�

ly in all Eastern European countries. The

main drivers of growing cards usage are

expanding infrastructure (ATMs and POS),

consumer education, promotions and grow�

ing banked population. An increasing focus

on financial literacy efforts serves as a crit�

ical card payment driver, as it also helps to

build consumers trust in cards. Rapidly devel�

oping internet retailing is another driver of

financial cards usage in Eastern Europe.

Segmentation and personalization in

financial cards is noted in most Eastern

European countries as well. Banks are

increasingly offering cards to serve specif�

ic customers groups and their personal inter�

ests, such as cards for youth, sport club fans,

internet payments, with personalized design,

etc. Demand for co�branded cards is also

increasing.

CB: Is there any crisis influence on both

the trends and market development of the

countries?

Mantas Kaluina: Eastern European finan�

cial cards market is not mature and satu�

rated yet and the economic situation didn't

significantly impact the pace of develop�

ment. While growth in overall card payments

was sustained by new card users, although

at a slower pace than before, both consumers

and issuers shied away from credit cards,

which suffered the greatest impact from

financial crisis. Bad card debt rose as debt�

strapped consumers struggled to make

payments. Banks have tightened their crite�

ria for granting credit on cards and offer

reduced credit limits, and as a result fewer

customers were eligible to borrow via cred�

it cards. Also, consumers themselve became

more cautious in spending money and less

willingly use credit cards to pay for goods

and services; fearful of excessive borrowing.

Bounce back in Eastern Europe was

greater than the global average and greater

than Western Europe. In 2011 growth in

cards expected to return the region and

surpass previous highs as the banked popu�

lation continues to increase, consumer

expenditure is slowly recovering and

Western European banks make further

acquisitions. Western European financial

institutions have greater product offerings

Interview with Mantas Kaluina,

Senior Research Analyst

at Euromonitor International

which will underpin growth across all card

function types.

CB: Which markets have the highest share

of domestic cards and why?

Mantas Kaluina: Domestic cards

(payments by domestic operator) are not

available or their presence is negligible in

all researched Eastern European markets,

except Russia. In Russia domestic cards

account for bit more than 10% of cards in

circulation.

CB: In which countries contactless cards

and new directions of technologies are most

developed? Which markets are most inno�

vative?

Mantas Kaluina: In terms of financial cards

and payments innovations, Poland is the

most prominent market in Eastern Europe,

where most modern card technologies are

being implemented, tested or already start�

ed to gain popularity. The most important

innovation – contactless cards – is rapidly

developing in Poland. Card issuers have made

innovation a key part of their strategies, using

contactless as a branding tool to attract

younger consumer segments. Both leading

operators Visa and MasterCard invested to

create infrastructure throughout Poland for

their contactless cards Visa payWave and

MasterCard PayPass, respectively. As a result,

around 20 000 POS terminals across the

country are capable of accepting contact�

less payments. Polish PKO Bank Polski, the

largest issuer of payment cards in Poland, is

converting its entire Visa portfolio to contact�

less Visa payWave cards through mid�2012.

Many other banks are also already issuing

contactless cards. Citizens of Warsaw and

few other cities can already use contactless

cards to pay fares in public transportation

as well as for street parking. Polbank, Bank

Zachodni and ING introduced MasterCard

PayPass as a sticker affixed on a mobile

phone. Thanks to the implementation of

NFC mobile payment technology, consumers

can make payments via their mobile phones

in places where contactless payments are

possible, including cafes, restaurants, conve�

nience stores, bookshops, kiosks or petrol

stations. Warsaw was the first city in Europe

to install biometric ATM, which recognise

consumer by fingerprint.

Contactless financial payment cards were

also successfully launched in Hungary and

Czech Republic.

CB: What are the forecasts for financial

cards and payments markets?

Mantas Kaluina: The strong cash culture

in Eastern European markets will contin�

ue to decline over the 2010�2015 year peri�

od as the security and convenience associ�

ated with greater point of sale terminals

and ATM distribution becomes available to

more and more people. Continued empha�

sis on consumers' financial education will

additionally underpin positive development

of financial cards.

Good growth potential, especially in

Russia and Poland, still lies in unbanked

population. The obstacles in reaching the

unbanked population are similar across

emerging markets: general misunderstand�

ing of financial products; distrust of the

issuing financial institutions; and a cultur�

al tradition of dealing in paper.


Younger generations in Easter Europeans

have demonstrated less resistance to using

financial products and are more techno�

logically literate. This will reinforce the

development of modern payments meth�

ods, such as contactless, NFC, m�commerce,

pre�paid.

Pre�paid cards, both open loop and

closed loop, are relatively new instru�

ments that will be gaining popularity in

Eastern European countries. This card

type expected to experience the strongest

growth of all financial cards. Open loop

pre�paid cards are driven by pre�paid

internet payment instruments and e�

wallet, while closed loop are increasing�

ly used for public transport and plastic

gift cards. Further development of new

platforms for prepaid cards (payroll,

youth, insurance, etc.) will continue.

Potential barrier to this trend can be seen

in Russia's cash kiosk system that allows

consumers to conduct electronic trans�

actions using cash.

Travel and internet retailing expected

to be other important drivers of finan�

cial cards market in Eastern Europe. Travel

spurs cards usage in a variety of ways

including airline ticket purchases and the

likelihood of tourists using financial cards

when on vacation. Internet retailing serves

as one of the most important cards drivers.

Czech Republic and Hungary are expect�

ed to post some of the highest Internet

retailing value growth rates over next five

years globally.

Current trends such as segmentation and

personalization of bank cards will contin�

ue over 2010�2015. Cards will continue

migration to more secure chip technology.

CB: What are trends in payment infra�

structure development in these groups of

countries?

Mantas Kaluina: Development of infra�

structure for financial cards and payments

expected to remain among key growth

drivers in all Eastern European countries.

The number of ATMs and POS terminals

will continue to grow, which creates more

opportunities for consumers to use finan�

cial cards for payments instead of cash. Big

cities and key regional centres are already

well covered and the level of merchants'

acceptance is quite high, expansion expect�

ed to continue to other parts of the coun�

tries, such as smaller cities and rural areas,

which also creates a strong base for the

future growth of financial card payments

in these areas.

In countries where contactless technol�

ogy for financial card payments was already

launched (Poland, Hungary, Czech Republic)

heavily investments in network of termi�

nals accepting contactless payments will

continue.


C A R D M A R K E T S

ccording to the National Bank of

Ukraine (NBU) 179 banks had

license for banking operations on

July 1, 2011. 142 of these banks

were members of the card payment

schemes functioning in Ukraine and

issued and accepted payment cards,

among which:

Domestic – National System of Mass

Electronic Payments (NSMEP);

International – Visa, MasterCard,

UkrCard, American Express, Union Card,

Zolotaya

Korona (Gold Crown);

Interbank payment systems belong�

ing to a bank issuer.

On July 1, 2011 Ukrainian banks issued

in total 51.402 million payment cards,

which had not expired, including 32.066

million (62.4%) active cards (card is

active if at least one transaction was

made using this card during last 12

months). Only active cards will be taken

into consideration below.

In H1 2011 the number of active cards

increased by 2.661 million (9%) – from

29.405 million to 32.66 million. The growth

according to the payment systems is:

MasterCard – by 13.4% (10.060 mil�

lion);

VISA – by 8.4% (accounted for 19.557

million);

Interbank – by 1.7% (accounted for

1.188 million).

The number of cards decreased in the

following payment systems:

NSMEP – by 3.2% (1.183 million);

UkrCard – by 22% (78 thousand).

Total number of cards of the other

payment systems is very low, though it

Ukrainian PaymentCard Market

A

TABLE 1

PRIVATBANK 17 138 631 31 554 630 9 697 47 866

Raiffeisen Bank Aval 2 812 350 3 579 122 3 390 12 890

OSHCHADBANK 1 965 206 2 107 192 1 236 3 350

Prominvestbank 959 586 1 555 793 1 416 1 916

UKRSOTSBANK 901 558 1 175 072 1 148 4 481

UkrSibBank 853 354 1 225 134 1 675 2 221

Ukreximbank 649 864 834 678 765 8 748

FUIB 617 691 983 828 1 201 6 460

Ukrgasbank 571 728 716 090 1 122 1 689

Express�Bank 488 456 600 228 454 918

IMEXBANK 481 515 810 883 262 767

BROKBISINESBANK 475 092 507 750 725 691

Delta Bank 401 218 667 551 213 220

Bank Finance and Credit 325 349 548 612 465 5 017

ALFA�BANK 314 348 358 209 260 187

Nadra Bank 274 866 582 029 953 1 611

VAB Bank 260 766 471 743 273 478

VTB Bank 243 244 514 220 424 277

Bank Pivdenniy 187 555 254 403 253 5 192

IndustrialBank 167 256 220 637 171 358

Number Number Number Number Bank of active of cards of installed of POS�

cards* in circulation** ATMs terminals

ТОР 20 BANKS ISSUERS OF PAYMENT CARDS ON OCTOBER 1, 2011 (unit)

* total number of issued bank cards with not less than 1 transaction during last 12 monhs** total number of cards issued by Ukrainian banks with not ended expiration date


grew for the accounted period by 15.9%

(from 171 to 198).

Total number of clients of the Ukrainian

banks which have payment cards,

decreased in H1 2011 by 6.535 million

(16.4%) from 39.942 million to 33.407

million. In Table 1 TOP20 issuing banks

are listed according to NBU. The share of

these banks is more than 90% of total

emission of active payment cards in

Ukraine.

In the total volume of emission (32.066

million cards) the share of the credit cards

is 21.8% (7.008 million), debit cards –

78.2% (25.058 million).

The breakdown of payment cards distri�

bution according to holders on July 1,

2011 was:

346 thousand (1.1%) – corporate

cards;

31. 720 million (98.9%) – personal

cards.

According to the type of data carrier:

Cards with a magnetic stripe – 29.621

million (92.4%);

Cards with a magnetic stripe and

chip – 670 thousand (2.1%);

Cards with a chip – 1.194 million

(3.7%);

Cards for settlements in the Internet –

581 thousand (1.8%).

In H1 2011:

Total number of the installed ATMs

did not change and accounts by 30,163

units;

Total number of the installed POS�

terminals increased by 2,743 units (2.5%)

to 110,883 (the number of trade POS�

terminals grew by 1,909 units to 82,453

and the number of bank POS�terminals

increased by 834 units to 28,430);

Total number of imprinters increased

by 531 units (3,3%) to 16,389.

As compared with the H12010 the

number of transactions with the use of

payment cards, issued by the Ukrainian

banks, in H1 2011 decreased by 104,112

thousand (32,3%) and accounted for 218

million transactions, and the volume of

these transactions, as compared the same

period of the previous year, decreased

by UAH 59,538 million (30%) and ac�

counted for UAH 138,130 million.

In the total number of card transac�

tions:

77.5% (169 million) – cash with�

drawal;

22.5% (490 million) – cashless

payments.

If compared to the results of H1 2010,

the ratio of the number of money with�

drawals and cashless payments changed

in favor of cashless payments (by 6.4%),

respectively 83.9% against 16.1%.

In the total volume of card transactions:

92.3% (over UAH 127,506 million) –

money withdrawals;

7.7% (over UAH 10,624 million) –

cashless payments.



lastic Card Enterprise Ltd. has

launched issuing MasterCard EMV

cards with chip module Pectoral®.

Plastic Card has received a certifi�

cate of international payment scheme

MasterCard Worldwide for the chip module

of its own design Pectoral® (commercial

product name Pectoral M�CHIP33) with

the applet M/Chip 4 Select.

Chip module Pectoral® M�CHIP33 imple�

mented technology�based JAVA Card applet

using M/Chip 4 Select v1.1b, meets all the

latest specifications of the MasterCard

Worldwide, supports dynamic data authen�

tication algorithm DDA (Dynamic Data

Authentication) and can be used not only

for a financial application MChip, but also

for the additional non�financial applications.

Card personalization mechanism corre�

sponds to EMV CPS standards and M/Chip

Personalization Data Specifications and

Profiles, which are universal for the glob�

al payment card industry. Moreover, they

allow adding and removing the required

payment and non�payment applications

for the entire «life» cards. Right now for

making any changes in the chip program,

bank will need to reissue the card (which

implies additional expenditures for both

the banks and to the user); now with a

chip module Pectoral® there is an oppor�

tunity to do it online through the payment

terminal.

When banks implement projects based

on the chip cards the following parame�

ters are extremely important: quick tech�

P


MasterCard EMV Cardswith Pectoral® fromPlastic Card Company

Today we already have a broad product range certified

by VISA Int. and MasterCard Worldwide having

its own peculiarity – a chip module for EMVcards

of its own design – Pectoral®. Next year we will

expand our product range with new products

and features at a competitive price

nical support and project maintenance,

short term production of chip cards, the

flexibility while producing both small and

mass number of cards, lack of communi�

cation problems, as well as competitive

prices. Plastic Card as a producer of

MasterCard cards with module Pectoral®

meets all these requirements. According to

Deputy Director of Sales, Plastic Card

company Elena Lyutovich: «Today we already

have a broad product range certified by

VISA Int. and MasterCard Worldwide having

its own peculiarity – a chip module for

EMVcards of its own design – Pectoral®.

Next year we will expand our product range

with new products and features at a

competitive price.»

Moreover, on this card digital signature

(EDS) certified in accordance with DSTU

4145�2002is implemented, which opens

up additional opportunities to banks. Card

users with EDS will be able to use online

services, which previously were only avail�

able in bank branches. Using digital signa�

ture customers will be allowed to conduct

a wider range of transactions through

Internet banking and a legitimate digital

signature to sign the necessary documents.

MasterCard chip cards provide a suffi�

ciently effective protection against fraud.

Chip module Pectoral® allows banks to

make «content» card more various, inter�

esting and constantly to update it. We are

talking here about loyalty programs, and

transport and fuel applications and social

applications programs (such as account�

ing privileges, subsidies, etc.) and many

others. Elena Lyutovich: «We must always

remember – when a company doesn't grow

to the customers, somewhere someone is

doing it right now. I think the most diffi�

cult and yet most pleasant – to be proac�

tive of customer needs.»

Plastic Card Company – a developer and

provider of technologies in Ukraine –

provides banks with comfort and efficien�

cy in the implementation of new payment

solutions.

Plastic Card Company is the largestUkrainian manufacturer of plastic cards,certified by international paymentsystems Visa International and

MasterCard Worldwide since 2004.Production capacity exceeds 150 millioncards and 250 million scratch cardsannually. Today Plastic Card is the firstcompany in Ukraine, which combinesthe production and personalization ofcards of international payment systemsVisa International and MasterCardWorldwide.

Plastic Card has at its disposal apowerful department R&D (Research &Development). Experts from the depart�ment successfully designed and imple�mented multi�functional card operat�

ing system (COS), on the basis of whichmicroprocessor�based SIM cards formobile operators are issued. In 2009,Plastic Card certified VISA EMV cardPectoral® solution (www.pectoral.ua).At present it was issued more than 1,5Mcards with chip module Pectoral® bothin Ukraine and abroad. In 2011, PlasticCard certified MasterCard EMVcardPectoral® solution (www.pectoral.ua).More than 60 Ukrainian banks and19 foreign (out of 11 countries in Europe)became permanent partners of PlasticCard Company.

ABOUT PLASTIC CARD ENTERPRISE LTD.

ElenaLYUTOVICHDeputy Director of SalesPlastic Card Enterprise Ltd.


We must always remember –

when a company doesn't grow to the

customers, somewhere someone

is doing it right now. I think the most

difficult and yet most pleasant –

to be proactive of customer needs


n October 1, 2011, 20 banks and «Kaz�

Post» actually issue the payment cards.

These organizations issue and distrib�

ute payment cards of international

payment systems (97.4%): VISA International,

MasterCard Worldwide, American Express

International, China Union Pay and Diners Club

International.

Moreover, the banks of Kazakhstan issue

payment cards of the local systems:

Altyn Card – JSC «Halyk Bank of

Kazakhstan»;

SmartAlemCard – JSC «BTA Bank»;

Local card Citibank Kazakhstan – JSC

«Citibank Kazakhstan».

On October 1, 2011 banks issued 9.3 million

credit cards, and the number of shareholders

was – 8.6 million people. (Compared with the

situation on the same date in 2010 – an increase

of 10.4% and 9.8% respectively). The debit cards

are most prevalent, their share was 87.8%, the

share of credit cards – 10.6%. Debit cards with

a credit limit and prepaid cards have share 1.6%

and 0.1% respectively.

The change the number of cards of inter�

national payment systems on October 1, 2011

as compared to the same period in 2010:

VISA – increased by 13% and amounted to

7.69 million units.

MasterCard – decreased by 4.6% to 1.32

million units.

In September 2011 the volume of transac�

tions using payment cards issued by Kazakhstan

issuers accounted for 390.2 billion (increase

compared to September 2010 amounted to

31.9%). The number of transactions for

September 2011 amounted to 13.4 million trans�

actions, and increased in comparison with

September 2010 to 17.7%. The increase in the

number and amount of non�cash payments

amounted to 22 .4% (2.6 million transactions)

and 34.0% (52.5 billion), operations and cash

withdrawal 16.6% (10.9 million transactions)

and 31.6% (337.7 billion), respectively.

The main share of cash payments accom�

plished through POS�terminals (41.6% and 75.7%

of the total number and volume of cashless

payments) and ATM (47.8% and 17.2% respec�

tively). Operations on the issue of cash primar�

ily occurred through automated teller machines

(97.1% and 87.8% of the total number and volume

of cash withdrawal transactions of money).

On October 1, 2011 has been established:

27,579 POS�terminals;

616 imprinters;

7920 ATMs;

1275 banking kiosks;

11 657 – the number of retail outlets.

PLASTIC CARDS MARKET IN KAZAKHSTAN

O

TABLE 1

Figures 01.10.2010 01.10.2011

The number of cards in circulation (thousand unit), including: 8 394.5 9 263.4

Visa International 6 826.7 7 685.1

MasterCard Worldwide 1 382.6 1 319.9

Number of card holders (thousand) 7 838.7 8 603.1

Number of POS – terminals (unit), including: 24 871 27 579

in retailres 20 233 22 775

in the banks 4 638 4 804

Number of imprinters (unit), including: 720 616

in retailres 415 386

in the banks 305 230

Number of ATMs (unit) 7 441 7 920

MAIN INDICATORS OF THE PAYMENT CARD MARKET

TABLE 2

September 2010 September 2011 Deviation

Cashless Cash Cashless Cash Cashless Cash

payments withdrawal payments withdrawal payments withdrawal

Number of transactions

(thousand unit) 2 119.4 9 306.8 2 593.8 10 854.3 22.4% 16.6%

Volume (million tenge) 39 202.7 256 603.6 52 530.8 337 675.5 34.0% 31.6%


NUMBER AND VOLUME OF TRANSACTIONS


ccording to the National Bank of

Georgia 19 banks had license for

banking operations on September

1, 2011.

By September 1, 2011, the number of

plastic cards in Georgia exceeded 3.73

million, which had not expired, including

active cards (at least one transaction was

made using this card during last 12 months –

1.616 million). Visa cards enjoy the most

popularity – 85.7% out of total, and 91.3%

out of active cards. MasterCard come next

– 6.3% out of total and 5% out of active

cards. The local cards have the remaining

8% of total market share and 3.7% out of

active cards. Tab.1 and Tab. 2.

In the total volume of active cards emis�

sion (1.616 million) the share of the cred�

it cards is 17.2% (277517), debit cards –

82.8% (1.338 million).

By September, 1, 2011:

Total number of the installed ATMs

accounts for 1515 units;

Total number of the installed POS�

terminals – 10,709 (the number of trade

POS�terminals – 8,146 and the number of

bank POS�terminals – 2,583).

The number of payment cards transac�

tions (acquiring), as compared to the same

period of the previous year, in September,

1, 2011 increased by 1,541,129 (52.7%)

and accounted for 4,462,774 transactions,

and the volume of these transactions, as

compared with the same period of the

previous year, increased by 204,588 (46,8%)

and accounted for 642,136 thousand of

GEL (appr. 1Euro = 2.28 Georgian Lari).

Transactions (unit) within Georgian

Economy with plastic cards issued by resi�

dent banks by September, 1, 2011:

59.4% (2,541,656) – cash withdrawal;

40.6% (1,734,324) – cashless payments.

Total value of transactions with plastic

cards issued by resident banks by September,

1, 2011:

73.2% (432,877 thousand of GEL) –

cash withdrawal;

26.7% (158,379 thousand of GEL) –

cashless payments.

Transactions through Internet by

September, 1, 2011:

Number of transactions increased, as

compared to the same period of the previous

year, by 164,656 (45.5%) to 302,181 unit;

Total value of transactions increased, as

compared with the same period of the previ�

ous year, by 6,258 (37.6%) to 10,023 thou�

sand of GEL.

PLASTIC CARDS MARKET IN GEORGIA

A

TABLE 1

M/Y VISA EC/MC Other Total VISA EC/MC Other Total

September�10 2469493 187011 6407 2662911 1031553 54628 577 1086758

September�11 2771869 193072 204886 3169827 1270257 62950 5155 1338362

Cards in circulation of which active cards

NUMBER OF BANK DEBIT CARDS, UNIT

TABLE 2

M/Y VISA EC/MC Other Total VISA EC/MC Other Total

September�10 343184 33454 34359 410997 180594 15167 8116 203877

September�11 426692 41568 92652 560912 205415 17476 54626 277517

September�11 3198561 234640 297538 3730739 1475672 80426 59781 1615879

Share,% 85,70 6,30 8,00 100,00 91,30 5,00 3,70 100,00

Cards in circulation of which active cards

NUMBER OF BANK CREDIT CARDS, UNIT

I T S O L U T I O N S

pecialized Research and Production

Firm ARGUS Ltd founded on Sep�

tember 3, 1991, deals with design,

development, implementation and

support of complex OLTP applications,

mainly banking oriented software.

Company's staff consists of 55 persons

including highly qualified system analysts,

application designers and developers,

system programmers and database admin�

istrators, QA engineers.

Our software has been promoted in

the market since 1992. Currently, our

software is used in more than 100 bank

establishments of Ukraine. Our cus�

tomers include such great banks as

Ukreximbank PJSC, VOLKSBANK PJSC,

SEB Bank PJSC, IMEXBANK PJSC, Zakhi�

dinkombank PJSC, Expressbank PJSC

and others.

ARGUS Ltd. is recognized for our

competence and possesses both nation�

al and foreign approvals and certificates.

Since 1994 ARGUS Ltd. has the status

of Gold�partner of the Oracle Corpo�

ration.

Now we propose proprietary soft�

ware products ensuring all�round

automation of a modern commercial

bank, namely:

Banking software ABS «BIS GRANT»,

constructed on multi�level «client�serv�

er» architecture with use of RDBMS

Oracle and intended for maintenance

of full work cycle of a commercial bank;

Intra�banking payment system

«GRANT»;

Software complex «Pegas» – remote

banking system giving the customer a

possibility of remote managing of his

accounts both in national and foreign

currency in off�line mode;

Automated card system ACS

«ARGUS» for commercial banks –

member of National System of Mass

Electronic Payments (NSMEP), devel�

oped under a contract with the National

Bank of Ukraine according to the tech�

nical project of IT Department of the

National Bank of Ukraine;

Computer terminal CT «ARGUS» for

NSMEP;

Software for multi�purpose termi�

nal «ARGUS» for NSMEP on the basis of

terminal VeriFone Series OMNI 3ххх

and VX�5xxx/6xx terminals;

Software for Internet�terminal

«ITAR»;

ARGUS NSMEP ATM software for

Diebold Series 5хх and 7xx automatic

teller machines;

Software for cryptographic protec�

tion of the information «Gryphon»

developed under the license of the

Department of Special Telecommunica�

tion Systems and Information

Protection and intended for crypto�

graphic protection of the information

in the banking sphere, in particular for

SRPF ARGUS Ltd –Affordable IT Solutions

for Financial Market

S


the confidential (including financial)

information, and also in the «Home�

banking» systems.

In 2010, the Processing Center of

ARGUS Ltd. was founded to enhance

the amount of services and to create

new conditions for commercial banks

to work in the National System of Mass

Electronic Payments (NSMEP). The

NSMEP is a domestic state banking

multi�issuing mass electronic payment

system, in which all payments for goods

and services, receiving cash and other

transactions are effected with payment

smart cards according to technology

developed by the National Bank of

Ukraine. The Processing Center offers

the most accessible and suitable way to

communicate with the System.

Since February 2011, ARGUS Ltd is a

certified representative NET info in

Ukraine. The duties of partners include:

presentation of NETteller complex inter�

net and mobile banking system on the

Ukrainian market, localization work,

integration and support.

ARGUS Ltd offers a wide range of IT

outsourcing services that cover the

whole project life�cycle including:

consulting

project/product design

software development

software testing

deployment and maintenance

These services give our clients an oppor�

tunity to use our dedicated teams to extend

their own team of software developers

and other IT specialists. Our expertise

extends across a vast range of financial

industries and business verticals that are

both regional and global in scale.

We deliver professional and reliable

solutions to our customers. With ARGUS

Ltd, our clients can spare their own

resources and be confident that our

team of full�time IT professionals is

just as committed to the project as their

own team. Our customers can be

assured that our quality control guide�

lines are applied throughout each phase

of the project life�cycle, and our expe�

rienced management team personally

oversees every stage of the project.

Quality of our Company's products

and success of our clients' activity is

guaranteed by the use of industrial deci�

sions in designing and development of

our software.


Levon K. AVETISYAN

General Director

T E C H N O L O G Y A N D S O L U T I O N S

hands of a cardholder and payment is

contactless.

PayPass transactions are processed through

a special terminal, the first terminals of this

kind in Ukraine will be installed in the

MegaMarket chain. PayPass card�sticker is

equipped with a chip and antenna which

allows the chip to contact the bank through

a special terminal and almost immediately

confirm the transaction. PrivatBank is an issuer

of the first PayPass cards�stickers in Ukraine,

as well as an acquirer, having established

special PayPass terminals in the chain.

Sergiy Ravnyago, Head of MasterCard Europe

representative office in Ukraine: «Having been

implemented in over 37 countries worldwide,

PayPass technology continues to increase its

global footprint. As of the second quarter of

2011, nearly 100 million PayPass�enabled cards

and devices had been issued worldwide.

Currently, more than 341,000 merchant loca�

tions accept PayPass in segments like quick

asterCard, a global leader in elec�

tronic payments, PrivatBank, the

leader of Ukrainian banking

market, together with the Mega�

Market chain, one of the leading food retail

chains in Ukraine, have announced the launch

of a unique technology PayPass™ in Ukraine,

which allows contactless electronic payments

in the sales and service network.

In November 2011, Ukrainians will get a

unique opportunity to make electronic

payments utmost quickly and convenient�

ly. Functioning as a usual payment card,

contactless PayPass card�sticker allows

making transactions immediately dabbing

it to a special terminal, thus, a cardholder

is no longer required to provide the card to

the cashier for the procedure. Moreover, if

the amount of purchase paid by the card�

sticker does not exceed 100 UAH, there is

no need to enter PIN and sign the check.

At that, the card�sticker is always in the

M

MasterCard, PrivatBank and MegaMarket present an innovative

technology PayPass™ on the Ukrainian payment market


MasterCard® PayPass™COMES TO UKRAINE

Aleksey Mochanov, racing driver, made the first contactless transaction with a MasterCard® PayPass at the MegaMarket

service restaurants, supermarkets, petrol stations,

parking, buses and taxis. We are delighted that

thanks to the cooperation with our partners

today we can present this innovative product

in Ukraine and promote its application in vari�

ous fields of business and trade. I am sure,

PayPass will become not only a convenient

payment instrument for Ukrainians, as a

payment tool #1 for the customer thanks to

its convenience and reliability, but will also give

new drive to the development of the Ukrainian

market of electronic payments in general.»

Alexander Dubilet, Chairman of PrivatBank:

«Today the market of electronic payments is

steadily developing which is proved by the

overall performance of the market, in partic�

ular the growth in the number of operations

with payment cards by about 20% according

to the results of 2010, as well as the growing

customer demand for new and unique propos�

al in the light of their real needs and expec�

tations. It is exactly what the technology

PayPass is, meaning a revolutionary way of

contactless payments, providing cardholders

a quick and convenient alternative to cash

for making everyday purchases. We are pleased

to be the first in this revolutionary project,

once again emphasizing our status as a

customer�oriented pioneer of the market.»

Roman Neginskiy, Deputy Chairman of

the Board of PrivatBank: «Our strategy is

quite ambitious. We are planning to install

more than 2 thousand terminals that support

contactless payments and 300 thousand

card�stickers this year.»

Vladyslav Tsymbal, CFO, MegaMarket chain:

«PayPass technology provides significant addi�

tional comfort for the customers, which is

our unquestionable priority. Contactless

payment method helps to make purchases

quickly and conveniently, and given the fact

that in many cases it does not even require

staff, it significantly optimizes time of both

the buyer and the staff of the whole chain,

which means you can serve more customers

with guaranteed high level of service.»

With PayPass card data is protected with

the same encryption standards as chip cards.

In addition, PayPass has built�in safeguards

that prevent unwanted purchases: the device

must be taken very close to the reading

machine, so that it worked, and the money

is taken for purchase only once, even if the

card was dabbed twice.

The introduction of PayPass technology

in the world began in 2004, when the

contactless payment terminals appeared in

McDonald's chain in USA, Canada, Japan

and the Philippines. In Europe today, this

technology is being most actively introduced

by banks of Great Britain, France, Poland,

Russia, Germany and Turkey.


Sergiy Ravnyago, Head of MasterCard Europe representative office in Ukraine

Vladyslav Tsymbal, CFO, MegaMarket chain

Roman Neginskiy, Deputy Chairman of the Board, PrivatBank

E Q U I P M E N T P R O D U C T I O N

BANK EQUIPMENT BY UKRAINIAN COMPANY

ONTEC Company is the first and

the only Ukrainian engineering and

production company that has its

own production capacities of bank�

ing equipment at the territory of Ukraine.

The main principles for our company are:

Quality and reliability. Our equip�

ment is of European quality standard with

price level much lower than identical

European equipment and has Certification

approval according to EMV Level 2, TUV

RheinLand InterCert Kft. ISO 9001:2000;

UkrSEPRO National Certificate; Certificate

of Conformity of ExUSSR Standards (GOST,

DSTU).

In our production capacities we use

only high�quality materials and certified

and proven spare parts. The basis of

outdoor equipment is solid steel case

covered with powder�paint that are high�

ly climate� and physical wear resistant. All

TECHPRO terminals are equipped with

wide anti�vandal 6 mm thick touch�screens.

The second principle is Flexibility. The

main principle for our constructors and

in production at the stage equipment

completion is customers' perception of

technical and functional features of equip�

ment. The customer chooses range of func�

tions for TM or terminal, its color, addi�

tional spare parts and our company

provides the customer with high�quality

equipment in the shortest terms.

Sales Top: Tech Pro 3000 Terminal is for payments

acceptance.

Comfortable and easy to use.

Tech Pro 3000 is equipped with bar�

code scanner, certified 1 (А) security class

banking safe, contactless reader, wide

touch�screen.

Case of the terminal is made of light

metal. It's possible to furnish it according

Modern world is characterized by active technologies development in oder to minimizehuman's labour, and to increase product quality for enduser. Nowadays any person has apossibility to control their money remotely. Financial operations are conducted quicker, ina much more convenient and secure way due to use of innovative equipment.

R

Tech Pro 3000 Terminal


Tech PRO 7000 Cash In Lobby ATM

Tech Pro 3000 Terminal (Minimal)

to the customer's requirements. For exam�

ple, we may install video surveillance

system, open�door sensor, sensor for open

terminal, anchor fixation to the floor with

anchors situated inside the terminal.

Tech Pro 3000 Terminal (Minimal)

The main feature of the terminal is its

adaptable properties, the terminal can be

adjusted vertically depending on customer's

needs. First of all, such terminals are intend�

ed for invalids that are wheel�chaired.

Concerning other functions terminal TechPro 3000 (Minimal) is similar to TechPro 3000.

Tech PRO 7000 Cash In Lobby ATM

is equipped with a validator for 2000

notes that can accept 50�notes bunch.

This ATM is also equipped with dis�

penser for dispensing notes of 4 deno�

minations, 2500 notes of every denom�

ination. Anti�vandal touch�screen and

19" wide�format monitor. Barcode scan�

ner and EPP key�board. This model can

also be used for currency exchange,

and it is almost twice cheaper than

European analogs.


Multi�functional terminal Tech PRO 9000 (mini�bank)

E Q U I P M E N T P R O D U C T I O N

The pride of RONTEC Company

is Multi�functional terminal

Tech PRO 9000 (mini�bank).

By functionality this terminal can substi�

tute a bank branch. The terminal accepts

cash (notes and coins) as payment for differ�

ent services. It can dispense 2� and 4�denom�

inations change and change money, if you

need another denomination. If you need

scan�copy or A4 accountable form, TechPRO 9000 is ready to do that for you.

It's easy to find your location on a map

or to contact call�center operator with

help of in�built camera. Using the termi�

nal you can not only to order, but also to

buy and to get a ticket for any kind of

transport. But the most surprising is that

the terminal can issue a plastic card to the

customer, e.g. credit card.

Large monitor of TechPro 9000 allows

to place all information blocks in a qual�

ity manner and becomes very comfort�

able for such users as elderly or weak�

sighted people. Logical and convenient

interface makes it quick to find informa�

tion and easy to work.

So, using equipment manufactured by

Engineering and Production Company

RONTEC you get high�quality product for

a competitive price.


Araratbank (Yerevan, Armenia) presented cards with atransport and fuel application at the technological exhi�bition DG Tech in Yerevan that opened on October 2011.Two types of dual cards which were issued in 2010�2011 based on modern contactless technology Mifareare very popular in Armenia. In 2010 the card CLASSIK�M appeared. Besides conducting payments in the systemof ArmenianCard (ArCa) it can also serve as a paymentinstrument in underground. Mainly it is used by students.12 thousand of such cards were issued already.In March 2011 Visa Petrol Plus card was issued whichis used for payment at fuel filling stations belong�ing to the company Flesh. 4.5 thousand of suchcards are issued already.

ARMENIAN ARARATBANK

PRESENTED CARDS WITH

A TRANSPORT AND FUEL APPLICATION

The number of payment cards in Russia exceeded thequantity of population. The general number of paymentcards on July 1, 2011 accounted for 157.7 million. Thenumber of banks, issuing and processing cards, hasincreased almost times ten. At the beginning of 2009there were 70 banks, on July 1, 2011 there were 692 banks.Only 19% cardholders conduct cashless operations. Forlast 10 years the share of cashless operations decreasedby 4.3%. Cash settlements is 94.7% in retail.

NUMBER OF ISSUED PAYMENT CARDS

IN RUSSIA EXCEEDED

THE QUANTITY OF POPULATION

On October, 1, 2010, the number of ATMs in theRepublic of Azerbaijan was 1847. This indicatorincreased by 209 in comparison to the respectiveperiod of the previous year.On October,1 of the current year, 1028 ATMs arelocated in Baku, and 918 – in other cities and regions.Within this period, the number of POS�terminalsin the Republic of Azerbaijan reached 8882. Thisindicator increased by 363 in comparison to therespective period of the previous year.At present, 8077 POS�terminals are located in Baku,and 805 in other regions.As at 1 October 2010, the number of payment cardsin circulation in the Republic of Azerbaijan hasincreased by 6.5% compared to the respective peri�od of the previous year and reached 4059 thou�sand. The number of operations carried out throughATMs and POS�terminals via payment cards reached3804. 94.7% of them are debit cards.

THE NUMBER OF ATMS AND

POS�TERMINALS IN AZERBAIJAN GROW

BRIEF NEWS

SUMMARY:

Lack of trust in the local currency

has been the main factor of its weak�

ness over last years. Traditional deteri�

oration of household sentiment in the

fall may put some pressure on the

exchange rate in H22011.

A slowdown in the global economic

growth and recent turbulences on the

markets may generate additional pressure

on hryvnia and also negatively affect bank�

ing sector performance. The main effects

are going to come through curtailment of

investment by export�oriented compa�

nies, more expensive funding (interna�

tional and domestic), rising risk aversion

and capital outflows.

So far (7 months of 2011), the bank�

ing sector performance has been grad�

ually improving: corporate lending

continued growing, but retail also start�

ed to catch up, NPLs have stabilized.

However, profitability is still stagnating,

as margins are squeezed.

We have slightly improved our 2011

forecast for the banking system, but

2012 is now revised down due to weak�

er economic outlook on the background

of deteriorating external environment.

FOCUS ON: HRYVNIA STABILITY

As autumn arrived we are once again

seeing sentiment deterioration over the

possible crisis and exchange rate depre�

ciation. Rising crisis fears in autumn is

both psychological and economic

phenomenon. In economic terms, Q3

is the most active during the whole year

representing 29% of the full year GDP,

in contrast to lowest earning Q1 which

represents only 19% of the GDP. Thus

there are much more transactions in

economy which certainly makes signif�

icant events in the 3rd quarter more

likely. But also importantly, consumer

sentiment deteriorates simply due to

the colder weather, which drives up

overall depression levels and with it

UKRAINIAN BANKING SYSTEMOUTLOOK

Banking system developments in H12011: recovery on the way, but substantial downside risks


2007 2008 2009 2010 2011f 2012f

Total assets, UAH bn 599.0 926.0 880.0 945.5 1059.0 1203.0

Total assets, yoy change, % 76.2 54.5 �4.9 7.4 12.0 13.6

Total loans, UAH bn 426.9 734.0 717.5 724.6 800.4 884.6

Total loans, yoy change, % 74.1 71.9 �2.2 1.0 10.5 10.5

Corporate loans, UAH bn 217.4 460.2 482.3 520.1 596.6 679.5

Corporate loans, yoy change, % 62.1 69.6 4.8 7.8 14.7 13.9

Retail loans, UAH bn 155.4 273.8 235.4 204.5 203.9 205.1

Retail loans, yoy change, % 99.9 76.1 �14.0 �13.1 �0.3 0.6

Total deposits, UAH bn 280.1 357.9 327.7 414.2 487.9 568.4

Total deposits, yoy change, % 53.1 27.7 �8.3 26.4 17.8 16.5

Retail deposits, UAH bn 164.5 215.6 211.4 271.7 322.8 375.1

Retail deposits, yoy change, % 55.0 31.1 �1.9 28.5 18.8 16.2

Source: NBU, consensus estimates of Raiffeisen Bank Aval, UniCredit & Ukrsotsbank, ING, OTP and Erste Bank analysts

TABLE 1

BANKING SYSTEM CONSENSUS FORECAST

B A N K I N G A N A L Y T I C S



fears over crisis. Such correlation is char�

acteristic for almost every economy of

the northern hemisphere. This can be

traced looking at seasonal fluctuations

of google searches for 'crisis' and 'depres�

sion' on example of US, which has more

internet users for more representative

data.

Consumer sentiment was and remains

the main source of pressure on hryv�

nia. In some quarters population spends

up to 18% of its disposable income

buying foreign currency. Without

outflows into FX cash, hryvnia would

have had strong positions during the

recent years. Solving the issue of confi�

dence towards hryvnia exchange rate

among population is the first most vital

issue of hryvnia stability.

Yet since July, we have been also

witnessing negative changes to the glob�

al economic environment which could

heavily impact hryvnia exchange rate

and Ukrainian economy more broadly.

The slowdown in global growth and the

ongoing turbulence on the financial

markets is most likely to affect Ukrainian

banking sector through the three main

channels:

1) Trade: a weakening of the exter�

nal demand will affect Ukrainian

exports, which were the main growth

driver as Ukraine has been recovering

from the crisis. Weaker exports will put

downward pressure on hryvnia, which

will provoke NBU intervention to

support the currency by tightening

monetary policy. Also, large export�

oriented companies that were a target

for lending by banks may scale down

their investment and borrowing plans.

2) Banking: tightening of cross�border

funding conditions for international

banking groups may constrain their

lending activities in Ukraine. Tighter

monetary policy will also drain liquid�

ity from the domestic market, making

funding more expensive.

3) Capital flows: as Ukraine is

perceived as a high�risk economy, any

deterioration in global risk sentiment

immediately affects it. Indeed, the

summer turbulence has already trans�

lated into a dramatic fall of the equity

market in Ukraine. However, as not too

many banks in Ukraine are listed, equi�

ty markets performance will probably

have limited effect on banks. The bond

markets are much more relevant, as

banks have been actively issuing bonds

recently, which now will become more

expensive.

Economic situation in the top trad�

ing partners of Ukraine is deteriorating.

Russian economy is affected by the

declining oil prices. Turkey, second

biggest buyer of Ukrainian exports, is

seeing its currency falling as its current

account deficit reached almost 10% of

GDP. Moving one step down the list,

Italy is on the eve of sovereign default

PICTURE 1

SEASONAL FACTORS IN GOOGLE SEARCHES FOR 'CRISIS' AND 'DEPRESSION' IN US

Source: http://www.google.com/insights/search/#, NBU

PICTURE 2

FOREIGN CURRENCY DEMAND

Source: NBU

as its borrowing cost rose more than

twofold over the last month. Next,

Belarus has already seen its currency

collapsed and the story is still far from

over. Main trading partners of Ukraine

are seeing their currencies under deval�

uation pressure towards USD, and thus

towards hryvnia. At the same time

imports to Ukraine are rising faster than

exports due to the booming domestic

consumption. The National Bank already

made steps to limit consumer lending

which is largely used to buy foreign

goods. Yet the share of consumer imports

being financed by banks is small and

will not lead to any significant decline

in imports.

What Ukraine needs is greater stabil�

ity of its exports. For this hryvnia

exchange rate needs to be more volatile

to match the movements of main buyers

of Ukrainian exports. Also Ukrainian

economy is still plagued by the same

structural weaknesses as it was three

years ago (low productivity growth, poor

energy efficiency, weak rule of law, poor

long�term fiscal sustainability, etc.).

Solving these issues is vital for hryvnia

stability in the long�run.

In the medium term, first and most

urgent on the agenda are negotiations

with the IMF on the renewal of the

stand�by arrangement (which went off

track in February of this year). Under

the current circumstances, the deal with

the IMF will provide a necessary cush�

ion for Ukraine. Second, the govern�

ment needs to immediately tackle the

financial disaster with Naftogas. The

further postponement of the retail gas

tariff adjustment and much higher

import gas prices in the second half of

2011 could cause the company's finan�

cial deficit to reach 1.5% of GDP this

year, pushing the overall fiscal deficit

to 4%. Ukrainian economy is currently

entering economic environment that is

more risky for hryvnia. But if we do not

see any disastrous events like sovereign

defaults of Eurozone countries, hryvnia

will be stable at 8 UAH per USD.NBU

will be keeping hryvnia at tight peg to

USD just to avoid seeing demand from

population skyrocketing.

In the long�run the NBU will also

have to decide on the problem of banks'

exposure to hryvnia exchange rate fluc�

tuations. As a global standard of risk

management, banks always have near�

ly same amounts of assets in particular

currency, as they have in liabilities1. This

is not the case in Ukraine. In 2009 the

NBU issued the resolution #109 which

forced banks to have more hryvnia assets

than liabilities2. In fact, the banks now

have at least UAH 67bn more in hryv�

nia assets than in liabilities. Thus, 1% UAH

PICTURE 4

BANKS' ECONOMICAL FX POSITION

Source: Erste Bank calculations

1 For example, if bank attracts USD1000 client deposit all it will do withit is make same USD 1000 and onlyUSD denominated asset, for exam�ple foreign currency loan. The sameis applied to all currencies.

2 NBU excluded provisions in foreigncurrency from the calculation ofbanks FX position. As provisionsfor foreign currency loans grew,so did the banks' exposure toforeign exchange movement.


PICTURE 3

BANKS' ECONOMICAL FX POSITION,JULY 2011, UAH BN

Source: Erste Bank calculations



depreciation versus USD will cause an

immediate loss of UAH 670mn. Should

hryvnia suffer same devaluation as it

did in 2008, banks will immediately

loose 23% of their regulatory capital.

The return to international standards

of FX position calculation is required

by the IMF program. So far we did not

see any actions on behalf of the regu�

lator in that respect. To be fair, the

current financial market conditions do

not allow the adjustment to be made.

According to our estimate, the realign�

ment of FX position rules back with

international standards will generate

the additional demand of USD 8.5bn

from the banks, thus putting pressure

on NBU FX reserves. Moreover, hryvnia

liquidity is another problem as the banks

would need UAH 67bn to buy the foreign

currency, which is 4 times higher than

banks have in their possessions. Basically,

the balance of payments has to turn

strongly positive to generate both the

spare foreign currency for NBU reserves

and new base money for banks. This is

now seemingly impossible without

significant hryvnia devaluation. The #109

clause saved a lot of funds for NBU's FX

reserves back in 2009, but it came at

cost of future stability. Now we have

entered a period where there are no

easy choices for NBU or banks to solve

the problem.

BANKING SECTOR UPDATE

AND OUTLOOK

Lending and deposits: continuing eco�

nomic momentum fostered growing

activity in the banking industry.

The expansion of lending to non�finan�

cial corporations has continued in

H12011, with loans extended predom�

inantly in national currency towards

companies' current operations. In Q2

there was some shift in the extension

of new credit from the corporate to the

retail segment as household income

improved. The share of new loans to

individual entities in total new loans

increased from 5.9% to 7.5% in 7

months, whereas that of non�financial

corporate entities dropped from 93.5%

to 90.5%. Retail lending expanded

predominantly in short�term retail

consumer and automotive loans in

national currency.

Falling deposit rates affected the term

structure of bank deposit portfolio, increas�

ing the share of long�term and on�demand

deposits. Household deposits remained

the major contributor of resources to the

banking system in H12011, reaching 65.7%

of the overall bank deposit portfolio by

August, 1st, 2011, and having increased

by a monthly average of 3.4% in 7 months.

Corporate deposits accounted for 24.2%

of the portfolio, declining by a monthly

average of 0.1%. Local currency deposits

still prevail (52.4% of bank deposit port�

folio), but USD deposits continue show�

ing the highest growth rate, with Ukrainian

citizens still opting for USD holdings,

notwithstanding the fluctuations of the

US currency and the uncertainties of the

American economy.

On the corporate side, short�term

deposits in the national currency contin�

ue prevailing (68.6% of the overall

deposit portfolio as of August, 1st). The

scarcity of loans to the real economy

together with the lack of working capi�

tal prompted companies to cut long�

Forum for Lea�ding InternationalFinancial Institutions(Forum) it is the newdiscussion platformaimed to launchhigh�level dialoguewith Ukrainianauthorities in orderto further develop the financial sector of Ukraine. The mission of theForum is to promote and implement international best practices of manage�ment and supervision for the Ukrainian financial market. The Forum activ�ity based on principles of legitimacy, independence, transparency andautonomy of each and all Members. As well as credence and mutualassistance of the Members in achieving the objectives of the Forum.

Among main objectives of the Forum such as: developing a stable andtransparent Ukrainian financial services system oriented towards Westernstandards; representation to state authorities the interests of the Memberswith respect to essential financial and banking matters and facilitatingformation of legal and regulatory basis for financial services in Ukraine.

The Forum for Leading International Financial Institutions wasfounded in May 2010. Today Forum includes 18 banks with foreigncapital: Credit Agricol CIB, Citibank Ukraine, Credit Europe Bank, ErsteBank, Forum Commerzbank, ING Bank Ukraine, OTP Bank, PiraeusBank, Platinum Bank, Pravex�Bank, ProCredit Bank, Prominvest Bank,Raiffeisen Bank Aval, SEB Bank, Swed Bank, UkrSibbank, UniversalBank and UniCredit Group.

term savings, redirecting them towards

short�term or on�demand deposits

prompting an increase in the overall

credit rate.

BALANCE SHEET

Total assets of the Ukrainian banking

system increased by 9.2% year�to�date

to UAH 1.2 trln as of end�July. On the

background of a weak lending, the banks

have been expanding other parts of their

balance sheet, notably, investments in

government bonds (which grew 27% in

H1), although not as fast as last year, as

bond yields plunged, while lending start�

ed reviving. Banks have also been

increasing their external assets, which,

combined with the repayment of foreign

loans, contributed to a further improve�

ment of the banks net foreign asset posi�

tion.

H1 2011 was marked by a surge in

the issuance of bonds by banks. In view

of restrictions on the FX lending, as well

as more prudent policies by banks them�

selves, there is a big need for the devel�

opment of local funding with longer

maturities. As market conditions

improved, banks started issuing bonds

from the end of 2010, more than

doubling the total outstanding volumes

between Sep 2010 and June 2011. In

view of recent market turbulences

however, bond issuance is likely to be

substantially curtailed in H2 2011. Banks

have also continued beefing up their

capital, with the total for the system

growing by 10.1% over H1.

INTEREST RATES, MARGINS

AND COST OF FUNDING

Average interest rates on household

deposits decreased by almost 1% in the

first seven months of 2011. The largest

banks offer 9�13% in hryvnia for 1�year

term deposits, and 5�7% in US dollar.

For the same period companies may

place their funds for 9% in hryvnia and

3�4% in US dollar. Over the last few

months the National Bank has substan�

tially tightened its monetary stance in

the response to surging inflation and

pressure on the exchange rate. And, on

the other hand, the gradual lending

recovery eats up excess liquidity in the

banking system. As a result, the volume

of correspondent accounts dropped to

the lowest level over last years, push�

ing money market rates up. Average

monthly overnight KIEIBOR increased

from 1.9% in January to 5.5% in August.

Consequently, we do not see the room

for the banks to cut deposit interest

rates much further. Instead, the lack of

liquidity and the expected inflation

acceleration might put an upward pres�

sure on the deposit rates.

The downward dynamics of deposit

rates in H1 in turn translated into the

decreases on the loan side. Moreover,

the banks have been actively compet�

ing for good customers on the lend�

ing side, thus pushing the interest rates

on new loans further down. The inter�

est rates on the corporate loans in the

national currency descended to 12�

14% and to 9�10% in foreign curren�

cy as of end�July. The interest rates

also decreased in the retail lending

segment. Banks offer hryvnia mort�

gage loans for 17�18% and car loans

for 12�16% at the moment. However,

given the liquidity squeeze mentioned

above, the downward movement in

the lending rates came to a halt recent�

ly and we might witness trend rever�

sal in the near future should liquidity

shortages persist.

Although pricing has been steadily

falling on both passive and active oper�

ations, the margins contracted, driving

down the profitability of the banking

PICTURE 5

NON�PERFORMING LOANS RATIO, %


system. Since the beginning of 2011 net

margin decreased by half a percentage

point, to 5.36% at the moment, and the

net spread fell by 0.2 p.p. to 4.57%. We

expect that based on the current

competitive situation in lending some

banks will keep on decreasing the level

of profitability, while for the banking

system this figure will remain at current

levels in the near future.

LOAN QUALITY

In line with our expectations, the peak

in non�performing loans has been

reached in the first half of 2011. The

total volume of problem loans (in NBU

definition) has even slightly fallen since

the beginning of the year – from UAH

84.9bn at end�2010 to 83.5bn as of end�

July. Given increasing loan portfolio, the

NPL ratio declined from 11.7% to 10.9%

in Jan�Jul 2011. At the same time, the

real NPL levels are likely to be much

higher than those reported by the NBU.

IMF estimated

NPL ratio at 40.3% as of end�June

2011 (unchanged since end�2010 and

fallen of the peak of 41.6% reached at

end�September 2010). In our view,

economic stabilization played the major

role in loan quality improvement.

Moreover, according to anecdotal

evidence, the performance of newly

issued loans has been very good thanks

to much more cautious lending policy

adopted by the banks after the crisis.

The recent regulation of the National

Bank facilitated the write�off of prob�

lem loans by resolving the issue of tax

treatment of write�off process. Con�

sequently, banks now can write off the

loss loans (defined as 180+ days over�

due) and reduce the volume of loan loss

reserves by the corresponding amount.

As a result, banks will be able to clean

up the balance sheets, improving NPL

ratios and reducing short open FX posi�

tions. Plus, the release of loan loss

reserves may help the banks to meet

the cap on tax deductibility of loan loss

provisions. We do not expect banks to

massively write off their problem loans

– we estimate that the total volume of

loan write�off at the first stage (i.e. this

year) will not exceed UAH 15�20bn (2�

3% of total loan portfolio).

P&L: NO HOPES

FOR HIGH PROFITS IN 2011

Recent three months strengthened the

expectations that Ukrainian banking

system would not reach even break�

even in the financials this year. We see

several reasons for that:

1) Banks still did not start new lend�

ing actively, which reduced the poten�

tial of Ukrainian banks to earn on new

clients.

2) The banking system continues to

write�off actively banking non�perform�

ing loans. Therefore expenses on reserve

creation (coupled with higher reserves

requirement since July) still remain the

most significant factors affecting the

profitability of the banking system. In

particular, reserve expenses over 7M

reached UAH 22.4bn while negative

financial result was just UAH 4.0bn. At

the same time, net interest income

together with net commission income

stayed strictly in positive area, i.e. core

activity in the banking sector remained

profitable.

3) Shrinking interest margins also

negatively affected the financial perfor�

mance of Ukrainian banks in 2011. The

influence of this factor might be even

more significant over 2H11 taking into

consideration squeezed money market

liquidity and corresponding growth in

the cost of funding while banks will not

be able to increase their lending rates

in par with financing costs.

We believe the influence of three

aforementioned factors should affect

the financial performance of the bank�

ing system at least until the end of 2011.

We also expect that banks will change

their strategies in 2012 and will be more

active in lending, as they need to gener�

ate income. Consequently, we expect

margins and profitability to rise as banks

start lending not only to blue�chip

companies, but also to smaller ones that

have higher risks, as also as risks are

generally higher than pre�crisis.

This report was produced jointly by

analysts of several banks – FLIFI (Forum

for Leading International Financial

Institutions) members. The views and

the forecasts presented here reflect the

consensus position of this group of

analysts.


M A R K E T P L A C E

ТОВ «ТЕЛЕКАРТ�ПРИЛАД»

• Повний цикл виготовлення

усіх видів карток

• Розробка проектів

на базі безконтактної картки

(паркомати, системи контролю доступу, транспортні

системи безготівкових розрахунків та ін.).

Одеса, Люстдорфська дорога, 162

Тел.: (048) 716 93 26, (048) 714 28 42

E�mail: [email protected],

E�mail: [email protected], www.telecard.odessa.ua

COMPASS PLUS

142770, Россия, Московская область, Ленинский район, Сосенский с.о., ж/к «Дубровка», ул. Сосновая, стр. 4Тел: +7 (495) 229 54 99, факс: +7 (495) 229 54 88E�mail: [email protected] www.compassplus.ru, www.compassplus.com

Решения для автоматизации розничных банков и процессинговыхцентров:• фронтальная система процессингового центра • карточный бэк�офис сритейловыми функциями • клиринговая система • система персонализа�ции карт • аналитическая система для отслеживания мошенническихтранзакций и ведения расследований • система планирования и оптими�зации инкассации банкоматов • система автоматизации претензионнойработы и взимания просроченной задолженности • система консолида�ции, выставления и оплаты счетов.

АТ «БАНКОМЗВ’ЯЗОК», ДЕПАРТАМЕНТ СИСТЕМ ЗАХИЩЕНИХ ТРАНЗАКЦІЙ

• Постачання та сервісне обслуговуванняPOS�терміналів Ingenico

• Розробка, впровадження і супровід спеціалізованогопрограмного забезпечення для обслуговуванняпластикових карток

• Створення комплексної інфраструктури банків дляобслуговування платіжних карток

SERVUS SYSTEMSINTEGRATION

• POS�термінальне обладнання серії Optimum,виробництва VeriFone Inc.

• Банкомати виробництва Nautilus Hyosung Inc.• Системи керування потоками відвідувачів Q�mate SSI Pro• Сервісна підтримка POS�термінального

та банкоматного обладнання• Розробка програмного забезпечення

для всього спектру устаткування

Київ, пров. Куренівський, 12, корпус А,

БЦ «Форум Кінетик», 7 поверх, оф. А�702

Тел./факс: (+38 044) 461 92 55

www.ssi.com.ua

BS/2

• Аутсорсинг бизнес�процессов для банковской индустрии ирозничной торговли.

• Решения по оптимизации, основанные на программно�техническом оборудовании мирового класса.

• Разработка программного обеспечения и интеграция систем в соответствии с требованиями заказчика.

• Эксплуатационные услуги и послепродажное обслуживание:• Service Desk и мониторинг;• Поддержка и обслуживание технического

оборудования и программного обеспечения..• Консультации и обучения.

«Penkiu kontinentu» Bankines technologijos, UABул. Калварию, 143, LT�08221, Литва, ВильнюсTeл.: +370 5 266 45 95; факс: +370 5 266 45 50 E�mail: [email protected], www.bs2.lt, www.atmeye.net,www.atmiq.com, www.bs2outsourcing.com

Київ, вул. Фрунзе, 69�в

Тел.: +38 (044) 496 00 96, факс: +38 (044) 492 37 54

E�mail: [email protected], www.bkc.com.ua

ООО «ВИНКОР НИКСДОРФ»

• Оборудование для автоматизации процессов самообслуживания (банкоматы, информационно�транзакционные терминалы, принтеры и проч.);

• Информационные и автоматизированные системы управления и мониторинга;

• Мультивендорные программные решения;• Широкий спектр дополнительных услуг (поддержка

каналов продаж, консалтинг, управление локальнымобслуживанием).

04119, Украина, Киев, ул. Дегтяревская, 27�т,

Тел.: (+38044) 4929707, факс: (+38044) 4929709

E�mail: info@wincor�nixdorf.com, www.wincor�nixdorf.com


ТОВ «РЕНОМЕ�СМАРТ»

• Комплексні рішення для мереж

банківського самообслуговування: банкомати, системи

cash�in, кіоски, POS�термінали

• Розробка, впровадження і супровід спеціалізованого

програмного забезпечення.

Київ, вул. Щербакова, 59

Тел.: (044) 449 84 01, 449 48 50, факс: (044) 449 10 42

Рівне, вул. Костромська, 25

Тел./факс: (+38 0362) 69 34 20, 69 34 69

E�mail: [email protected], www.renome�smart.com

ООО «ПРЕДПРИЯТИЕПЛАСТИК КАРТА»

Сертифицированное производство, персонализация

пластиковых карт:

• Карты МПС Visa и MasterCard с магнитной полосой

• EMV�карты • Карты НСМЭП • SIM�карты • Скретч�карты

• Бесконтактные карты • Дисконтные и клубные карты.

Мощность – 250 млн. карт в год.

Ул. Новопромышленная, 4, пос. Новые Петровцы,

07354, Украина, Киевская обл., Вышгородский р�н

Тел. +38 044 585�0303, факс: +38 044 585�0292

E�mail: [email protected], www.plasticcard.kiev.ua

ООО «ИПК «РОНТЕК»

04080, г. Киев, ул. Нижнеюрковская, 45�а

Тел.: (+38044) 425 85 04, 425 87 87, Факс: (044) 585 03 28

E�mail: [email protected], www.rontec.kiev.ua

• Серийное производство и продажа банковскихтерминалов самообслуживания

• Производство и продажа банкоматов• Продажа POS�терминалов • Продажа оборудования для персонализации

пластиковых карт, сортировочных машин, уничтожителей• Комплексное решение для банков в НСМЭП• Продажа комплектующих для терминалов

самообслуживания• Сервисный центр

ТОВ «СВІТ ІТ»

Безпека комп`ютерних мереж, комплексні рішення: • Модулі безпеки HSM компаній Thales e�Security та SafeNet • Міжмережеві екрани CheckPoint • Системи запобігання вторгненням IPS Radware та Fortinet • Засоби моніторингу вразливостей фірми Qualys • Засоби автентифікації користувачів від компаній Vasco та RSASecurity • Засоби моніторингу, архівації та контролю вмісту електрон�ної пошти • Системи моніторингу стану та ефективності роботимережевих засобів компанії SolarWinds • Системи захищеногозберігання лог�файлів фірм ArcSite та RSA.

03067, Київ, вул. Виборзька, 42�а,

Тел.: (044) 457�63�22, 457�70�39, 457�95�35, факс: (044) 455�73�56

Е�mail: info@svit�it.com.ua www.svit�it.com.ua

• Проведение аудита и консультаций в получении

стандарта Payment Card Industry Data Security Standard

(PCI DSS)

• Проведение внешнего сканирования безопасности

банковских сетей

• Проведение Теста на Проникновение (Penetration Test)

Тел.: +38 (093) 77 69 615

E�mail: [email protected], [email protected]

www.sysnet.ie

SYSNET

• Программное обеспечение для комплексной автоматизациидеятельности банковских учреждений (АБС «БИС ГРАНТ», ВПС«ГРАНТ», ПК «Пегас» и др.)• Программное обеспечение для автоматизации деятельностикоммерческого банка в НСМЭП (АКС «АРГУС», ПО длятерминального оборудования, банкоматов и др.)• Процессинговый центр «АРГУС» по обслуживанию банков�участников НСМЭП;• Cредства криптографической защиты информации;• Системы автоматизации небанковских финансовых учреждений.

61058, Харьков, ул. Ромена Ролана, 12

тел.: +38 (057) 714�01�96, 714�01�97

E�mail: [email protected], www.banksoft.com.ua

ООО СНПФ «АРГУС»


INFORMATION FOR SUBSCRIBERS

«Телекарт�Прилад» Тел. +38 (048) 714�2842 с. 30

BS/2 Тел. +370 5 266�4595 c. 2, с. 30

«Банкомзв'язок» Тел. +38 (044) 496�0096 с. 30

Sysnet Ltd. Тел. +38 (093) 776�9615 с. 31

РОНТЕК Тел. +38 (044) 485�0320 обл. 3, с. 31

«Підприємство Пластик Карта» Тел. +38 (044) 585�0303 обл. 4, с. 31

«Servus Systems Integration» Тел. +38 (044) 461�9255 с. 30

«Реноме�Смарт» Тел. +38 (0362) 69�3412 с. 31

Wincor Nixdorf Тел. +38 (044) 49�29707 с. 30

ТОВ «СВІТ IT» Тел. +38 (044) 390�1162 с. 31

СНПФ «Аргус» Тел. +38 (057) 714�0196 с. 31

РЕКЛАМА В НОМЕРЕ

ЭЛЕКТРОННОЕ ПРИЛОЖЕНИЕ

К ЖУРНАЛУ «КАРТ БЛАНШ»

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ПОДПИСКА НА ЖУРНАЛ ЧЕРЕЗ АГЕНТСТВА:

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в Украине

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