The chips are down, but cash still rules

While Hungary is a leader in international comparison in the overall number and active use of contactless PayPass bankcards, and is said to be up for a boom in mobile payments, the nation is far from getting rid of card companies’ sworn enemy: the cash. 

MasterCard representatives admitted at a recent press conference that they had been expecting a mobile technology boom for several years, but this time they’re pretty sure it will happen. Their confidence is partly driven by the fact that they have finished pilot tests with so-called NFC-chipped mobiles and will be ready to go live this year, allowing smartphone users to make transactions with their phones with a single touch.

MasterCard already boasts some pretty impressive figures: since the launch of its PayPass system, more than 1.7 million cards were issued and 14,000 POS terminals set up throughout the country. The company expects further expansion, and will rely on such additional functions as location based solutions, which would practically mean that we could forget carrying huge wallets with IDs, tickets and passes (and banknotes of course), and instead use mobiles to check-in at our workplace, on the bus, in the theatre and so on.

Still there are a few question marks; for one, it’s not sure which technology will be the most suitable. “This is war,” Gábor Lemák, head of Hungarian Mobile Wallet Association said, referring to the battle between different technologies on a heavily fragmented market. But he is sure that NFC will win in the end, as it is the most widespread of the rival solutions (topping QR code-based technologies). He recalled that a couple of years ago there were as few as two types of smartphones available with built-in NFC chips. Since then, more than 200 MasterCard certificates have been issued. iPhones are an exception, but the other 10 biggest mobile companies do use NFC technology, in over 300,000 – mainly Android – devices.

The global figures also seem to show a boom is inevitable: the penetration rate is expected to rise from last year’s 300 million NFC-phones sold to 1.3 billion by 2017, and if this trend continues, eight out ten smartphones will be NFC-ready in three years. Also, there will be five times more contactless POS terminals by 2017 (44 million worldwide, with 1.6 million in Hungary) than last year.

MasterCard representatives admitted though that customers appear to be a bit less optimistic then they are. László Szetnics, regional business development manager for the company, spoke proudly about the cooperation of the Hungarian mobile and banking sector, bringing the three mobile operators together in one association, something he described as a huge success even at a European level, guaranteeing the quick spread of contactless devices.

But just a few percent of mobile owners use contactless technology for bank transactions. Even those who use bankcards don’t seem to trust the online payment methods: 75% still makes their payments in hard cash, which Lemák called a “cultural challenge”. He cited some even more shocking numbers from an earlier MasterCard report, according to which 75% said they wouldn’t use their mobiles to pay.

So for now, the old law still applies and Hungary is no exception: cash rules everything.

-- this is an article from BBJ print vol. 22 no. 11