The Financial Stability Board of the Magyar Nemzeti Bank discussed and approved the Payment Systems Report 2019. The Board establishes that the domestic financial market infrastructures overseen by the MNB operated efficiently and safely in 2018 as well, supporting the functioning of the money and capital markets with its high availability, and thus contributing to the strengthening of financial stability. Electronic payment methods continued to gain ground. As a result, the ratio of cash in retail payments is declining steadily year by year. Pursuant to the decision of the MNB, in line with the original schedule, the central infrastructure of the instant payment system goes live on 1 July 2019, although for clients the service will become available only on 2 March 2020.
In 2018, the development of the payment infrastructure was characterised by an expansion in the payment card acceptance network and the rapid spreading of the contactless technology, as seen in previous years. In parallel with this, electronic payment methods also continued to gain ground; in 2018, customers performed a total of around 1.25 billion electronic payment transactions in Hungary. The highest growth was observed in the case of payment card purchases, which number and value increased by nearly 25 percent, while the ratio of the number of contactless purchases exceeded 86 percent.
The efficiency of domestic payments also continued to improve, getting even closer to the European Union average. Accordingly, by 2018 the ratio of the value of payment card purchases to household consumption grew to nearly 2.5 times the figure recorded in 2012. At the same time, the share of electronic payment of utility and other bills nearly doubled in five years.
The overseen financial market infrastructures operated efficiently and safely in 2018. The value of turnover executed in the domestic systems rose by 11.7 percent, thus corresponding to 40.6 times Hungary’s annual GDP, and the number of transactions also rose by three percent. In 2018, there was no significant central bank or financial market event that had any major impact on the liquidity of payment systems participants. Payment systems participants’ liquidity was ample for performing the increased payment turnover.
Cooperating with the international Supervisory College of KELER CCP, the MNB discussed KELER CCP’s 2018 activity, and concluded that it complied with the EMIR regulation. In order to eliminate the negative effects of the turbulent developments that had taken place in international electric energy markets, in October 2018 the extraordinary general meeting of KELER CCP decided to increase the company’s capital. In spite of the fact that since 2012 the value of late payment events had been the highest in 2018, KELER CCP handled the evolving situations in an adequate manner, and thus neither participants nor the central counterparty suffered any losses.
Due to payment regulation infringements, penalties amounting to HUF 106.1 million were imposed during regulatory payment inspections in 2018. Nevertheless, in the case of the 11 institutions examined the general experience is that the operation of the payment service providers under review is fundamentally adequate. Most often the inspections unveiled irregularities related to the provision of information to costumers, amendments to and termination of the framework contract as well as to the immediate crediting of the amount of the payment transaction and highlighted that payment service providers had interpreted the stricter liability rules differently and often wrongly.
The MNB and GIRO complied with the schedule in terms of preparing for the introduction of the instant payment system; therefore, the central infrastructure launches on 1 July 2019, in line with the original schedule. The MNB closely monitored the preparations of the system participants and established that although many of them made adequate progress, significant delays were identified in some cases. Consequently, the MNB decided that the instant payment service will uniformly be available with full functionality for the clients of all domestic banks from 2 March 2020. The MNB took further steps to foster the development of innovative payment services based on instant payment by elaborating a guide on instant payment processes applicable in the main payment situations as well as by creating a domestic QR code standard.
The cost level of retail payment services in Hungary is relatively high by international standards, and several unfavourable characteristics can be found in Hungarian banks’ pricing practices. In Hungary, transaction fees proportionate to the number or value of credit transfers dominate, as opposed to package pricing considered the best practice at international level. The MNB’s objective is to enable retail customers to initiate instant credit transfers of an unlimited number and value after paying the monthly payment account management fees. The cancellation of transaction fees would also contribute to the essential increasing of banks’ competitiveness.
The introduction of strong customer authentication, which is the most important change brought by the new Payment Services Directive (PSD2), as well as providing access to costumer accounts for third-party service providers are nearing completion. Innovation and the appearance of third-party service providers will require a new type of security risk management, which will be monitored by the MNB. The MNB will start to check the compliance of the new technical and security requirements and to verify the new, more detailed data reporting from September 2019.