Resolution of the Financial Stability Council on the Payment System

The Financial Stability Council (Council) of the Magyar Nemzeti Bank (MNB) discussed and approved the 2021 Payment Systems Report. The Council established that in 2020, the electronic payment infrastructure continued to develop despite the coronavirus pandemic. The changes in consumer habits, the successful launch of the instant payment system and the new provision of the Act on Trade were significant contributing factors in this improvement. The pandemic had a major impact on payment trends as well, although considerable differences can be seen between different payment methods and situations. The growth rate of the turnover of the main payment methods slowed down; however, the number of payment card purchases still broke through the limit of 1 billion transactions. Another important development is that the value of payment card purchases exceeded the value of cash withdrawals conducted with payment cards for the first time. The domestic financial market infrastructures overseen by the MNB operated in an efficient and safe manner in 2020 as well, adequately addressing the challenges of the pandemic. With their high availability, they supported the functioning of the money and capital markets, thereby contributing to a stronger financial stability.

As a response to the change in consumer habits driven by the outbreak of the coronavirus pandemic, the development of the electronic payment infrastructure was characterised by the spreading of contactless payment opportunities and online sales as well as by a wider availability of electronic payment options following the introduction of the instant payment service. The payment card acceptance ratio grew more than twice faster than in 2019, which may have been facilitated at the end of 2020 by the preparation for the amendment to the Act on Trade entering into force on 1 January 2021, pursuant to which those obliged to use online cash registers have to provide the possibility of electronic payment.

The growth rate of the turnover of the main payment methods slowed down in parallel with the containment measures related to the coronavirus pandemic, the general cautiousness and the deceleration in economic processes. In the case of the number of payment card purchase transactions, the previous annual growth rate of around 20 percent fell to 7 percent, although it was still enough for the annual number of payment transactions to exceed 1 billion. In addition, in the case of contactless payment card transactions the raising of the limit for the mandatory use of PIN codes to HUF 15 thousand was an extremely successful step initiated by the MNB. This measure also contributed to the fact that nearly 95 percent of the purchases were carried out using the contactless technology. The growth rate of the number of credit transfers remained only slightly below 5 percent, which is a minimal decline compared to 2019. The number of cash withdrawals fell by 14 percent, which is unprecedented.

On 2 March 2020, the instant payment service was launched successfully, placing domestic payments into a new dimension. Moreover, already in the first year of operation it was achieved that more than one third of all domestic credit transfer transactions were carried out according to the instant processing rules, which required much more time in other countries even with a developed payment ecosystem. Starting from the launch of the new service until the end of 2021 Q1, including intrabank items, a total of 152 million instant payment transactions in a value of HUF 29 thousand billion were executed. According to the processing data of the central infrastructure, customers initiated one third of the transactions outside bank opening hours, and 96 percent of them were executed in 2 seconds. Nevertheless, payment service providers, merchants with high turnover and bill issuers alike should make further efforts for instant payment to be a relevant option in every payment situation. Developing a pricing structure that is free from transaction fees and the implementation of the request to pay service as well as the payment initiation solution based on the Hungarian QR code standard into mobile banking applications are of utmost importance.

Banks' unfavourable pricing structure regarding credit transfers is still a general obstacle to the further spreading of electronic payments. In order to support instant payment, it is essential to widely introduce account products with package-based pricing that - similarly to payment cards - do not apply direct transaction fees in connection to credit transfers either. Nevertheless, even in the case of the currently available account packages some of the customers could significantly reduce their respective payment costs by choosing an account product in a prudent manner.

In 2020, the overseen financial market infrastructures operated efficiently and safely in spite of the increasing turnover and the turbulences resulting from the pandemic. Even the measures taken in view of the pandemic - mainly the remote operation - did not cause any operational problems. In addition, supported by the expansion of the monetary policy instruments as well, participants of the payment systems adequately managed their liquidity for performing their payment turnover, which increased and became more volatile due to the pandemic. Neither the pandemic, nor the launching of the instant clearing platform of the Interbank Clearing System caused any disruptions in terms of liquidity management, and thus the clearing and settlement risk remained low.

On 16 December 2020, KELER received its CSDR licence needed for its central securities depository activity, valid on the territory of the European Union. Accordingly, it is entitled to provide basic central securities depository as well as non-banking and banking-type ancillary services and also custody services that are in line with the relevant legislation, although not specified in the CSDR but specifically approved in the licence.

The outbreak of the coronavirus pandemic had a major impact on the operation of KELER CCP as well, since it faced greater risks in terms of both the markets it serves and the reorganisation of the operation entirely to remote working. In spite of all that, services continued to be provided with high reliability. In March 2020, the worldwide spread of the coronavirus led to one of the highest market volatilities of the past 30 years. As a result, major shifts in prices and surges in turnover were observed in the capital and energy markets. Nevertheless, the ensuing risks were successfully managed by KELER CCP.

In parallel with the rapid spread of digitalisation and the increasingly fast rise in the share of electronic payments, it is becoming more and more important to strengthen the defence against fraud attempts that affect electronic payments, even if their ratio to the turnover continues to be insignificant. In connection with the acquiring of sensitive payment data and unauthorised payment transactions the most important thing is prevention, which allows the reduction of losses through providing adequate and understandable information to clients, applying real-time fraud monitoring systems and the strengthening of cooperation between service providers. At the same time, the MNB expects a decline in the number of these frauds as a result of the application of strong customer authentication in all payment situations. Nevertheless, concerning credit transfers, in addition to the major role played by phishing, a dynamic shift towards methods that are not payments related and are based on scams can be observed. Moreover, fraudsters apply increasingly sophisticated solutions, and therefore in addition to real-time fraud monitoring systems, there seems to be a growing need to strengthen consumers' financial awareness as well.