There must be fees for cards, the bank has expenses for such services

How does the crisis reflect upon the card business - demand from clients, payments with cards, numbers of cards issued?

The tendencies caused by the crisis on the Bulgarian market do not differ from those of the European market. Must be taken into consideration that our market is not so well satiated with card products. In Europe the number of the credit cards issued decreases and the number of the debit cards increases. This process is relatively new for the European market. The number of ATM transactions decreases too, meaning the customers withdraw less money with debit and credit cards. The payments with debit cards on POS terminal increase and the ones with credit cards decrease. The number of the credit cards in our country do not change, which is a different tendency compared to the growth for the past one-two years. The ATM withdrawals with credit cards decrease and there is a slight increase in the payments at outlets. There is definitely a growth in the number of the debit cards issued, increase of the POS payments and retention of the ATM withdrawals.

This means that the crisis reflects in lower demand for credit cards and increase of the financial culture of the clients. This fact is confirmed by the fewer ATM withdrawals, which is an expensive service, especially with credit card. When the customers realize this and do not do this so often, this means, that they already know how to use this type of card in the best manner. More and more customers began to understand that the debit card serves not only for withdrawal of the salary from the ATM outside. They understand that it makes sense to put money into their card accounts, for which they receive an interest and to pay their purchases with card instead of withdrawing from an ATM, for which they pay taxes. We in our turn try to stimulate people to use more credit cards at the moment, because this is much more convenient for them and for the traders. 

Before the crisis the bank cards had promotional conditions. Now, when the interest rates are high and there are no discounts in the taxes, with what do the banks attract customers in this segment?

We do not stop our activity in any way. We continue to maintain the interest of the customers through various campaigns, promotions, new services. Yes, it is easy, when we can make bids as lower interest rates and taxes like it has been at other times,  but yet we live in a crisis. And since we can no longer make such bids we are more active in other directions. For example we have noted 30% growth in the transactions during our last campaign with cinema tickets as a prize, in which we have been encouraging the ATM payments with debit and credit cards. Moreover, the banks have also the support of the major card organizations as Visa and MasterCard. The card organizations are interested and pay special attention to the Bulgarian market, because the growth here is great. Another line that should be taken into consideration when it comes to bank cards is the novelties in the technologies. I expect contactless payments, loyalty programs, which virtually do not exist on the Bulgarian market, to emerge till the end of the year. The emergence of true loyalty programs will stimulate the card payments.

What does a real loyalty program include?

When the loyalty program is adopted the giving of the agreed from the bank and the merchant discount happens automatically with a special software. A discount on purchases in a store is only one of the functionalities of this program. Another application is the accumulation of points, which are spent at different merchants in different proportions or special birthday discounts or happy hour – discount for a particular day from the week for a concrete hour. Such programs are very developed in neighboring countries like Greece and Turkey.

How and why does it come to bringing into use charging upon payment with debit card in trade facilities, which happened recently? The most part of these transactions were cost-free before?

We have not changed anything and we have not brought into use charging upon payment in a trade facility. We do not have such a tax for the debit cards Visa Electron, V PAY, as well as for all the credit cards. The only card for which there is a tax for payment in a trade facility is Maestro – no matter whether on our device or not. The fee has been introduced since the very creation of the product and has not been changed – 15 stotinki per transaction as there is no charge for issuance and maintenance of this card though. The idea is the POS terminals to be used as much as possible, and in long term our aim is to reduce the cash payments and to increase the cashless payments. The introduction of these fees is a policy of each bank and I can not comment on the reasons why the banks that have introduced them had done so.

Last year the interbank fees for debit and credit cards have increased. If this is the reason for introducing them to the customers, isn`t this a transfer of the burden as well?

Yes, they have increased. But there is no transfer of fees upon the client, because the bank of the cardholder do not owe anything to the bank that owns the POS terminal, but vice versa. Ultimately this is a question of a business model, each bank decides where its incomes should come from - from ATM transactions, from POS. Our work is focused mainly on how to help the clients to get used to cashless payments, because the cash is expensive for both the bank and the final customer. The client does not understand this immediately, but a certain amount from the state budget goes for maintenance of the cash money. And this cost is paid by all of us with our taxes. While not a penny goes from the budget for the card payments. They are financed by the participants in the process themselves. That is why we try to ease the cardholders. And this is not our idea – Europe is very active in this regard. And there must be taxes because the bank has expenses for the providing of such services. Furthermore we need and an income for investment. The card business is high tech and without investments it won`t be attractive and competitive at the market. The goal is not to make profits but the citizens to get used to cashless payments.

But this is in contradiction with these taxes, because some banks really did it - they initiated new or increased existing ones?

I can not say what are the driving motives of the colleagues in this respect. Ultimately the fees are not drastic - some of the clients won`t even notice them, for others they will be negligible, and third ones may give up from this type of payments. The colleagues have thought over their decision I guess.

Is the credit card an expensive product for the Bulgarian market and doesn`t it turn out that it is the most expensive loan at the moment?

It is not more expensive than the consumer loan or any other loan, even if the interest rate which is recorded in the contract is higher. The reason is that according to the consumer loan the loan installments must be paid immediately, no matter whether the client has used the credit funds or not. I.e. he has to pay principal and interest upon the whole loan amount in the first month. With the credit card interest is paid only when there is an amount used, and this is made not upon the entire credit limit, but only for the used part of it, for the period for which it has been used. With the credit cards of Fibank if the whole amount of the sum is repaid for a period of 45 days, the interest is not charged. Another great advantage of the credit card in front of the consumer loan is that it is revolving (i.e. the refund sum can be used again). Thus the opportunity to use the limit amount when the client has the need to in a combination with interest-free (grace) period make the credit card much more profitable. In addition, there are the various bonus programs. For example we return 1% of the amount of payments with credit card. The only requirement is the amount of the sum to be at least 2000 lv. for a period of 6 months. If the customer makes such a turnover in practice we will return to him at least 40 lv. for one year, which exceeds the annual maintenance fee for a standard card. Thus, when properly used the credit card is more lucrative than the consumer credit.

Is the credit card a more expensive product in our country than in Europe in terms of interest and fees?

It is hard to tell definitely because the practice in the different countries is very various. There are countries in which the annual fee is between 40-50 Euros, and other countries in which the fee is 20-30 euro per month. There, however, the cards there are built with additional extras – free insurances, accumulation of bonus points for spending and many more functionalities. We have adapted the credit cards to the Bulgarian taste. Bulgarians do not like their product to has many but useless for them features, which cost expensive. I will give you an example of doing business according to the preferences of the given market: a pretty big hamburger in London costs 4 pounds. The same sandwich is much smaller and several times cheaper in a restaurant from the same chain in Bulgaria. And if the client says that he wants his sandwich to cost 1 lev, although it is much smaller, this is what the trader will offer to him because greater than the trader is only the customer. It is similar with the credit cards - about 20 euro annual fee with extra strong cash back program and international insurance and important coverage included is a good for the Bulgarian market product, consistent with our reality and taste.

The client, however, is interested in the interest rates and fees. What are they?

The interest rates on the Bulgarian market are relatively high, which overall is a function of the credit rating and the macroeconomic environment. In particular, the interests on credit cards follow the logic of calculation of the loan interest. They are moving with the same rates. Upon decrease of the interest rates as a whole, the interest rates on the credit cards also decreases  If the question is whether a Bulgarian citizen pays higher interest than an European the answer is no. The product is designed with a grace period and the interest expense is much lower because the amount spent with the credit card is much lower. Moreover, it depends whether loans are lent to customers with higher financial culture, who know how to manage their finances. In this way the banks also have less overdue and provisions. My point is that there are reasons for this situation and in my opinion the credit cards here are profitable for the Bulgarian clients.

What are the prospects of the card business in our country?

I can say that they are excellent. A proof of this is that even in a situation of crisis we manage to achieve a growth in many areas. On the other hand, the card business as one of the most high tech sectors will develop in the direction of introducing innovations, new products and services. This is an obligatory condition to maintain the interest of the clients and to meet the competition, which transfers from pricing competition to technological and product one.