As of December 17, less card fees – Economy

On August 17, 2018, banks will be forced to issue customers with a new account or replace an existing payment card with a national card whose transactions are processed in Serbia (currently Dinakard) and international cards will be issued at the request of the customer.

Source: EPA / JUSTIN LANE

This is a consequence of the recent adoption of the law on interbank services. Other members of the law will come into force on December 17 this year, which mainly concerns the limitation of interbank fees to 0.5 percent for payments and 0.6 percent for credit cards in the six next few months. Effective June 17, 2019, these fees will be limited to 0.2% and 0.3%. Up to now, interbank fees have increased by 2% and accounted for up to 80% of transaction costs.

The adoption of this law brought a lot of dust to the public, especially about Article 9, which required banks to issue free and obligatorily cards Dina to the customers. Following this decision, the central bank intends to reduce systemic risk, since 57% of non-monetary transactions in Serbia (in 2017) are made with cards, of which 88% are processed outside Serbia. In the event of problems in the operation of the largest international card companies on the territory of Serbia, the SNB considered that this would cause great damage without any possibility for the regulator to do anything on the issue.

Thus, according to the SNB, every citizen will have a residence card for which the NBS is guaranteed. In addition, over the past year, 32 million euros have been spent in Serbia for processing fees abroad. And not to believe, the treatment is done even through Singapore. This increases the costs, so that the fixed cost of Dine is 2.16 dinars per average transaction of 1800 dinars, while for international cards, this cost is between 8.2 and 12 dinars.

If you wish to act as domestic cardholders, foreign card companies will have to register in Serbia and provide a license, as they have done in the EU and on D & B. Other important markets. Whatever the case may be, according to the data, 97% of card transactions are made in the domestic market and only 3% abroad. Otherwise, the biggest advantage of international cardholders in relation to the inside is their network of users and receivers and Internet payments abroad. For example, dino can not be paid abroad and can only be used for online payment with local sellers. However, NBS is working with the China UnionPay card for co – financing, so in internal traffic, it will work like Dina, and abroad will work as a UniPay card and will be able to use on POS terminals that accept this card.

Otherwise, most countries, particularly developed countries, have dominant national maps in domestic traffic, and those of the largest and richest countries also have co-transactions with the largest international Visa cardholders and MasterCard.

Interbank fees, which were limited by the new law, constituted the bulk of the transaction fees that the bank charged the merchant when his goods were paid for by the card. While these merchant fees increased from one to more than three percent with small merchants, interbank fees accounted for up to 80 percent of transaction costs. In practice, this means that a card has a paid bill of 1,000 dinars in the store, say 2% or 20 dinars go to a bank whose POS terminal, and then they pay up to 16 dinars to the bank that issued the card. Of the remaining four dinars, he covers his expenses, pays a commission to the card company, pays the CPU and earns money. The whole system is based on the fact that this interbank commission was determined by the card company. Thus, in a competitive game between the two largest competitors of Visa and Mastercard, they encouraged banks to issue cards to their customers by committing to increase interbank fees that were not paid by them. tradespeople. The problem with this is that customers of banks, that is, traders, no longer pay card because they do not pay higher costs directly to those who are already traders. Indirectly, traders increase the prices of goods to cover this commission. Or simply do not want to take POS terminals, so customers are only limited to pay in cash, which once again opens the space for the gray economy.

The new legal provisions, but especially the limitation of fees by type of card and sending reports to traders by the banks with a detailed overview of the composition of the tax, that is to say say NBS, which leads to the reorganization of high-cost card banks to cheaper cards, which is what Dina claims. Let's say, according to some information, that the annual fixed cost of Dine for a bank is 450,000 dinars and that the international card holders go up to 200,000 euros.

Thus, according to the available data, 63% of the cards are issued to Visa cards, accounting for 42% of the costs for the banks, Mastercard with 25% of the transaction is 54% of the costs and Dina with 12% of the turnover figure. Business only 2%. According to some projections, if, for example, 70% of card transactions were made by Dino, the annual costs for the banks would be lower by about 15 million euros.

For the next six months, new bank calculations will mean that some of them will lose substantial income through bank charges. However, this applies mainly to those who were the main card issuers. However, in the new system, those who have more POS terminals, that is, cardholders, could be better off because they will no longer have to pay huge interbank fees. . However, in all probability, the costs to the incumbents themselves, who set as much as the variable, will likely remain the same. This could push national commercial banks more precisely towards the Dina card.