2014-06-19
The Bank of Lithuania will create a domestic payments system, encourage competitiveness and significantly decrease payment rates
The Bank of Lithuania’s proposal on payment market innovations, submitted this spring, was met with support from payment service providers. Therefore, as of next year, it will be possible to make payments more quickly and cheaply.
“Quite a few market participants responded to the Bank of Lithuania’s invitation, so next year an electronic system of retail payments in euro will begin operating. Its participants will be able to make payments to their customers more quickly and cheaply, and this will increase competition in the country’s payments market,” says Marius Jurgilas, Member of the Board of the Bank of Lithuania.
In 2015, all of the commercial banks operating in Lithuania, as well as the Lithuanian Central Credit Union (LCCU), will participate in the domestic payments in euro system. With the Republic of Lithuania Seimas having approved the amendments to the Law on Credit Unions, those credit unions that do not belong to the LCCU will also be able to participate in the system.
Seeking to create preconditions to reduce transfer costs for the end user, the Bank of Lithuania from 2015 will decrease for the system participants the tariff on submitted and settled domestic payment orders by 5.5 times: from the current LTL 0.19 (EUR 0.055) to EUR 0.01. In addition, in 2015 payment transactions will be done much more quickly. Having executed a simple payment order, the customer’s funds can be transferred to another bank or credit union within an hour, since in the payment system clearing will be conducted hourly (currently it is being conducted four times a day).
“Whether customers of banks and credit unions shall feel these positive changes will depend on the payment services providers themselves; however, we hope that in seeking to meet consumer expectations payment market participants will take into account the opportunities provided by the Bank of Lithuania,” says M. Jurgilas.
From 2016 not only banks and credit unions will be invited to join the Bank of Lithuania’s payment system, conforming to the requirements of the Single Euro Payments Area (SEPA), but also monetary and electronic money institutions that have already expressed their willingness to participate in the system. The system participants will be able to make payments almost in real time, while competitiveness in the market will increase.
According to M. Jurgilas, the results of greater competitiveness can be clearly seen in the cash payments market, when payment institutions that apply favourable rates over the year took over from banks a major part of the market. The innovations proposed by the Bank of Lithuania will create preconditions for a breakthrough in non-cash payments — increase their appeal in comparison to payments in cash.
According to the data of the Survey of the Payments Market, payments in cash in Lithuania make up 81 per cent of all monetary operations, while payments by card or credit transfers occur in only one in ten cases. In the neighbouring Baltic or Nordic countries, the indicators of non-cash payments are several times higher.
According to M. Jurgilas, the prevalence of cash in payments is the major obstacle in seeking to increase the efficiency of the payments market. Therefore, it is important for secure, convenient and competitive alternatives to cash to be developed: for example, increasing the number of locations where payments with cards can be made or the expansion of other payment instruments.