Expert Opinion

Expert: the way ATM bank fee ban is going to affect payment card market in Ukraine.

Chornaya Kаterina Vladimirovna,

the Head of the Directorate for Payment Cards of PJSC CB «EUROBANK.»

«One of the plus sides of Ukrainian banking sector (as far as banking service receiver is concerned) is high level of competition between different banks that offer equal or similar banking products including issue and service of payment cards. Citizens of Ukraine have a wide range of banks to choose from. Functionality of cards that meets the clients’ needs and flexible fee policy are the key factors to attract clients for every bank. Fee policy is formed in accordance with the current situation and resource cost that in their turn provide the functionality of cards. Correspondingly, the cheaper the bank’s resources are the more attractive is the fee policy, wider is the functionality and as a result the bigger is the client base.

Adoption of the mentioned amendment will lead to lower competition in the market. One of possible consequences will be the rise in cost of payment cards as cash withdrawal fee will be covered by higher annual and replenishment fees and so on. All mentioned factors will result in less attractive cards as payment and saving facility.

Also the amendment will bring about the necessity to provide complex revision of the current legislation in Ukrainian banking sector. For instance, it contravenes Article 47 Chapter 8 of Law of Ukraine „On Banks and Banking Activity“ which states that „a bank itself determines the interest rates and fees for provided services“. Also according to the provisions of Article 53 Chapter 8 banks are not allowed to determine the interest rates and fees below cost of these rates and fees in the bank. Due to the fact that a bank bears the fixed costs (to the benefit of a payment system, a processing centre for processing cash withdrawal transactions in ATM, costs of interchange rate payment to an acquirer bank and other indirect expenses), fee for withdrawal transactions in ATM according to the current legislation should be above zero otherwise a bank will be in the red in this very kind of transaction.

On the other hand high cash withdrawal fee creates incentives for clients to pay by payment card in retail and service outlets (where there is no fee according to regulations of international payment systems), that contributes to implementing Cabinet of Ministers initiatives on transfer to obligatory acceptance of special payment instruments by business entities. That is why regulatory activities with regard to „zero fee“ don’t seem as consistent continuation of current government regulation of banking sector as a hole and of payment card transactions in particular.» 

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