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Statement of The Financial Stability Board Regarding the payment system

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The Financial Stability Board of the Magyar Nemzeti Bank discussed and approved the Payment Systems Report 2018. The Board establishes that the domestic financial market infrastructures overseen by the MNB operated efficiently and safely in 2017 as well, supporting the functioning of the financial and capital markets with its high availability, and thus contributing to the strengthening of financial stability. The usage of electronic payment instruments by households is increasing year by year. Last year, further progress was achieved in the area of electronic bill payments and the electronic payment of retail purchases. At present, the introduction of the instant payment system is the largest bank digitalisation project, which determines the functioning of payment services for many years. The new payment service, which is innovative by international standards as well, will start operating on 1 July 2019. The implementation of the central infrastructure of the system has started at the central bank-owned GIRO Zrt. Developments are in progress at payment service providers as well, and all market participants will have to successfully complete them by July 2019.

Similarly to previous years, the turnover of electronic payment methods expanded in 2017 as well. With a slight increase in the number of cards, the rate of access to payment accounts and cards by households can be considered adequate. Significant progress was made in the area of the indicators measuring the level of development of the payment system in terms of closing up with the EU averages, due to an increase in the amount of the electronically paid utility and other service fees as well as in the value of electronically paid purchases. The contactless card technology became primary in card payments in Hungary.

The payment card system is extremely safe in Hungary in international comparison as well. The ratio of frauds to turnover declined in 2017. As a result of the consumer-friendly regulatory background, more than 90 percent of losses caused in connection with payment card frauds debited on the issuing and acquiring payment service providers not the cardholders.

The current level and structure of the prices of payment services do not stimulate the spreading of electronic payment transactions sufficiently. Therefore, in 2018, the MNB is preparing a detailed analysis of the pricing of payment services and initiating a dialogue with payment service market participants in order to identify what steps could be taken in Hungary already in the short term for a pricing that is more favourable for customers and that encourages the usage of electronic transactions.

The operation of the overseen financial market infrastructures was highly reliable in 2017, efficiently and safely supporting the functioning of financial and capital markets. The overseen systems operated reliably during the whole year, although the operational risk increased slightly with an increase in the time of recovery of incidents in 2017. However, this did not result in any major perceivable decline in the service level for the participants. In the domestic systems, the turnover amounted to forty-times of the annual GDP of Hungary, which means that the systems cleared and settled more than HUF 6 billion a day. In 2017, there was no significant central bank or financial market event that had any major impact on the liquidity of payment systems participants. Banks’ efficient liquidity management continued, as a result of which there was sufficient liquidity for the execution of payment transactions.

The Supervisory College of KELER CCP chaired by MNB discussed the 2017 activity, authorised services as well as short- and long-term plans of KELER CCP. The college concluded that the operation of KELER CCP complies with the EMIR requirements. In 2017, the number and value of clearing members’ late payment events increased, but it did not cause any financial problems for KELER CCP or the other clearing members.

Due to payment regulation infringements, fines amounting to HUF 75 million were imposed during regulatory payment inspections in 2017. Nevertheless, in the case of the around 15 inspected institutions the general experience is that the operation of the payment service providers is adequate. It was mainly the requirements concerning the provision of information to customers, the immediate crediting of the amount of payment transactions and the opening of payment accounts that were not complied with by the institutions under review. In the interest of customers, the MNB started the inspection of the compliance with the Decree on payment account switching; the inspection revealed inadequate practices of some institutions.

The regulation of instant payments was finalized at end-2017, the development parameters are definite, and the rulebooks describing the details of the functioning of the system became publicly available. At the beginning of 2018, GIRO Zrt. selected the supplier of the system, and the development of the central infrastructure started with that. Until mid-2019 all banks and market participants have to complete the developments necessary for accessing to the system. As of 2019 H2, a new system operating 24 hours a day, every day of the year will ensure the crediting of payment orders below HUF 10 million within five seconds on the beneficiaries payment accounts. The services relying on the system may allow the conversion of a significant amount of cash transactions into electronic payments. This requires the availability of modern and innovative payment solutions, e.g. comfortable mobile payment applications, for customers, who can pay with them in a wide range of payment situations. The MNB’s expectation in this field is that payment service providers develop such services already by the time of launching the system.

The new payment services regulation that entered into force in January 2018 may change the payment services market significantly. The new rules allow customers to employ, while obeying strict security rules, innovative third-party service providers for executing their payment transactions. As a result of the appearance of these new firms and the digitalisation of payments, competition will increase in the market of payment services, resulting in more comfortable and faster innovative payment services for customers. All detailed rules related to the new Payment Services Directive became final in 2017. The MNB supports the preparations of payment service providers in a number of ways and at various fora, as in 2018 it already examines compliance with the new rules as well during the payment inspections.

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