Payment methods

The growth of the turnover of payments intermediated by banks decelerated to 20% at the end of September 2007 (27% in the previous period). The growth rate of the number of payments, however, was similar to earlier periods (12%). This has been fostered by the favourable economic environment, including the continuous income growth, the development of the real estate market and the increasing loan volume.

Regarding retail payments, no unexpected developments have occurred in the past five years. The Estonian payment environment has evolved dynamically over the years and reached an excellent level in terms of electronic payments, which is reflected in the growing availability of electronic payment methods and consumer preferences.

Owing to less risky and faster money transfers, non-cash payment methods have become more effective and their structure has not changed drastically in the past five years either. Card payments as well as Internet and telebank credit orders are used most frequently: they comprise 56%, 24% and 10%, respectively, of the total number of payments intermediated by banks.

The majority of the turnover of non-cash payments included credit orders over the Internet and telebank (35% and 29%, respectively). The turnover of card payments, on the other hand, comprised merely 2%.

Cash does not dominate the Estonian payment environment: by the end of 2006, the share of cash in the economy had declined to 4.9% of GDP.

Table 1. Payments by payment methods in the period January-September 2007 as a monthly average

*   Cash payments include payments initiated with the down payment of cash or a cash card payment. Card transactions with cash function are cash payments to the account or receiving cash from the account.
**  Other debit orders include all debit orders not reflected under any other specific type of debit order (e.g., payments made on the basis of decisions subject to compulsory execution, such as court judgments and rulings, precepts of tax authority to collect tax arrears, loan repayments, etc).
*** Other credit orders include all credit orders not reflected under any other specific type of credit order (e.g., conditional credit orders).
**** SWIFT (Society for Worldwide Interbank Financial Telecommunications) is a standardized international inter-bank information exchange network for forwarding transaction orders to banks in various countries.

In recent years, the active real estate market has caused a growth in the turnover of paper-based credit orders. However, in 2007 the growth rate has decelerated from 62% to 37% as a result of the changing economic environment.

Figure 1. Number of payments (thousand; left scale) and turnover (EEK bn; right scale)

* Electronic credit orders include direct debits, telebank, telephone bank, Internet bank, SWIFT and mobile credit orders.

By the end of September, credit institutions operating in Estonia had issued a total of 1.7 million bank cards, which is 10% more than during the same period a year ago. 77% of those, i.e. approximately 1.3 million were debit cards and 23%, i.e. 0.4 million, were credit cards. About 26% of all issued bank cards are passive[1].

With the year, 89 ATMs were added and by the end of September there were 983 ATMs in Estonia, 85% of which allowed cross-usage[2]. The growth in the number of points of sale (POS) accepting card payments has shrunk from 38% to 16% within four past years. By the end of September 2007, there were about 16,357 POS enabling card payments, which is 2,209 more than at the same time in 2006.

[1] Payment cards that have not been used for any transactions during a quarter.
[2] In the case of ATMs enabling cross-usage, it is possible to perform transactions also if the bank card issuer and the ATM installer are different credit institutions.