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Innovative payments earn steady ground in Bulgaria

By Krassimira Raycheva, Country Lead Bulgaria • Visa Europe

December 18, 2015

On 1st January all new payment terminals installed by Bulgaria’s banks are going contactless. This change, along with changes in consumer behaviour and economic structures all help tackle the shadow economy.

In Bulgaria it is now well-known that the use of electronic payments is one of most effective ways to tackle the shadow economy. The Bulgarian public is aware thanks to reports commissioned by Visa Europe. The reports show that if electronic payments increase by an average of 10 per cent for five consecutive years, then the shadow economy may fall by up to five per cent.

The reports also note that if the state gives taxpayers incentives to pay electronically then collection rates, government revenue and the economy all grow. As all shadow economy activities are heavily cash-based, limiting them requires breaking the flow of cash. That also needs to be ideally coupled with measures to increase banking inclusion. So, Visa Europe in Bulgaria supports cash payment limits and the subsequent displacement with electronic transactions. And it is not alone. It works with non-governmental organisations, banks, and public institutions to achieve the shared goal.

As a part of these activities, and as a recognition of its role in the fight with the shadow economy, Visa Europe was invited to participate in Manager magazine’s Economic Forum. The event’s focus was on The World and Bulgaria in Development. Leading the discussion at the event was Tomislav Donchev, the deputy prime minister, and by Peter Andronov who chairs the Association of Bulgarian Commercial Banks.

All this activity is driven by the fact Bulgaria is one of the European countries with highest level of shadow economy. It has stood at 30% for many years and the cash payment limit has been €7,500. However, in November Bulgaria’s parliament lowered the limit to €5,000. There is also a desire to reach the much lower levels in most European countries. This important structural change is complimented by changes like the introduction of POS payments for tolls on some Danube crossings and road transport vignettes at border crossings. The introduction of electronic payments at borders will substantially reduce opportunities for corruption. Together, all these government measures will lead to further increase is card payments in Bulgaria.

Bulgarian cardholder are also increasingly recognising the benefits of innovative payment technology. Alongside the benefits of convenience, security and access to their funds, cardholders are benefiting from being able to make their purchases at any time and without any limitations. As a result, Bulgaria is seeing a significant increase in the use of contactless payments. The number of contactless payments is growing. Bulgarians are finding it is the fastest and most convenient way to pay for their everyday purchases.

From 1 January 2016 all payments terminals installed by the Bulgarian banks will be contactless. The limit for contactless card payments without the PIN is 25 Lec which is about €13. The migration to contactless terminals is rapid and they now account for 30% of total POS. The sectors adopting quickest are fast moving consumer goods, telecom services, retail fuel sales, fast food chains, pharmaceutical services and entertainment.

Visa’s contactless infrastructure is also ready to adopt the next generation of payments – mobile payments. The mobile phone will be the next payment device in the hands of Bulgarians citizens. There is also strong demand for mobile person-to-person payments and Visa together with local Banks is pursuing launch of that service in the near future. In 2014, Visa Europe reported double digit year-on-year growth for electronic payments. We expect 2015 to have delivered similar.

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