Future of payments market — faster innovation implementation and stronger competition
Even though positive changes are seen in the payments market, unfavourable trends for bank customers — limited competition and delayed payment innovation implementation — hamper faster progress. Hence the Bank of Lithuania took the initiative to implement measures encouraging market openness and accessibility of payment services and innovations.
‘Insufficient development of payment services and limited competition leads to higher payment service fees for consumers (compared to other Baltic States) and higher costs for businesses. We seek to diminish deficiencies in the payments market and are preparing a strategy for developing Lithuania’s retail payments, hence we will invite all market participants and interested parties to contribute to the creation and implementation of this strategy’, said Marius Jurgilas, Member of the Board of the Bank of Lithuania.
Restriction of the price of basic payment services, the possibility to easily switch accounts from one payment service provider to another, while keeping set regular payments, prohibition to request users to acquire financial services not related to mortgage loans, provisions for payment card transactions, favourable to merchants, and the possibility to use the payment initiation service — all these are measures that are being implemented at the moment and will improve the operation of the payments market.
Even though banks are the main payment service providers in Lithuania, they have not yet taken the initiative to invest in modern payment innovations. For example, unlike in Scandinavian countries, users in Lithuania do not have the possibility to carry out interbank instant payments, which ensure that transfer of funds takes only a few seconds. Such instant payments simplify payments between natural persons and could become an alternative not only to cash payments but also to payment cards.
In 2015, 421.5 million payment transactions were initiated in Lithuania through payment service providers. Approximately half of transactions were made using payment cards — for a total of EUR 4 billion. However, compared to other EU countries, card payments are rare in Lithuania. The number of payments per capita in the EU is almost 60 per cent greater, while the numbers for some EU countries are 3–4 times greater.
Cash remains one of the most commonly used means for retail payments among Lithuanian residents, although in recent years it has been used less. For example, the share of funds withdrawn in cash using cards decreased from 78 per cent (in 2011) to 67 per cent (in 2015).
Read more about the achievements, deficiencies, trends and expected developments in the Lithuanian retail payments market in the latest Payments Market Review (927.8 KB download icon), published on the website of the Bank of Lithuania.