Mobile payments work for economic development in 93 countries around the world, covering 411 million users. Their advantage over banking financial services is in greater convenience, simplicity, 24/7 availability and independence from the availability of a bank card and POS-terminals. Everything required to settle accounts by using mobile payments is to be a subscriber of mobile operators and have an account used with your phone number.
Ukraine virtually has no such market, despite the developed network of mobile communication services used by the vast majority of Ukrainians, and only 53% of the population having a bank account – and hence the access to banking services.
The Better Regulation Delivery Office (BRDO) experts have conducted the analysis of the legislative regulation of the market, which is at the intersection of telecommunications and financial services, and identified two regulatory barriers hindered the development of the mobile payment market in Ukraine:
- A lack of a mechanism to compensate funds for taxes for telecom operators in case of returning unused funds to consumers when paying for a tax on state pension insurance (approved by the CMU’s Resolution No.1740 dated 03/11/1998)
- Mandatory registration of users when returning funds from a mobile account (approved by the CMU’s Resolution No.295 dated 11/04/2012)
The BRDO Office together with the Ministry of Economic Development and Trade has prepared a draft Resolution designed to remove the barriers. After public discussion and approval of the document, on July 4, 2017, the Cabinet of Ministers adopted amendments to Resolutions No.1740 and No.295. All changes will come into force after the official publication. Thus, it is possible to use a mobile account to pay for goods and services, make cash transfers and take advantage of other financial services.
“According to our estimates, at least 15% of mobile subscribers, or 7.8 million people will use mobile payment services over two years. Under such conditions, the annual market volume could reach more than 650 million dollars or 17 million hryvnas. The service of mobile payments will significantly increase the population’s access to financial services and facilitate deeper involvement of cashless payments,” the BRDO IT and Telecom sector Oleksandr Kurbakov said when presenting the results of the relevant research during the roundtable “Mobile payments: new opportunities for everyone” in the framework of Public Dialogue #PRODialogue, which was held on 13 July.
It is important to make this service available in the most remote parts of the country, where there are no bank branches and 3G network coverage, since the confirmation of payments can be obtained via SMS.
Maksim Nefyodov, the First Deputy Minister of Economic Development and Trade, highlighted the potential of this new service: “Mobile payments are not only an affordable alternative for the population, but also new opportunities for business development: fast payments, higher bandwidth, the possibility to reduce own costs – that is, the service has clear economic justification.”
Moreover, the development of the mobile payments market will be one of the important directions in the implementation of the Cashless Economy project, presented by the NBU in 2016. “Mobile services are definitely a step towards the future. We have to create a legislative framework, which will not have unnecessary regulations, but will contribute to the civilized development of entrepreneurship, for this new market,” the Head of the State Regulatory Service Kseniya Lyapina said.
At the same time, BRDO experts emphasized that a number of issues should be addressed for the further development of the market, in particular:
– the problem of remote user identification;
– limits on electronic money transactions for identified and unidentified users;
– the right to issue electronic money.
Mobile operators, representatives of the NBU, the state Agency for e-Governance in Ukraine, businesses, experts and the public participated in this event.
We express our gratitude to the founder of iHUB Dmitry Podolyev for the partnership and support in developing the technological start-up industry in Ukraine.