Poland has a dual-facing payment landscape. The first of which is traditional, and characterised by a wide use of cash – such as when paying out pensions to name one example.

The other is remarkably innovative, making extensive use of cashless payment instruments, particularly cards and credit transfers.

To get a better understanding of Polish payment habits, we interviewed Pawel Widawski, Director for Payment System, Digital Banking and Cybersecurity at the Polish Bank Association, and EPC Board member.

The Polish payments landscape encapsulates a number of cutting edge payment trends, including instant payments, contactless card payments and Person-to-Person (P2P) mobile payments. We have also produced a supporting infographic which presents at-a-glance all you need to know about the Polish payment landscape.

The Polish non-cash payment landscape is clearly characterised by the use of two payment instruments: credit transfers (45.6 percent of all cashless transactions) and cards (50.7 percent). How do you explain the fact that these two methods of payment are so dominant in Poland? Why aren’t direct debits more widely developed (they represent 0.5 percent of all cashless transactions, against 21 percent in the EU)?

The success of credit transfers in Poland is based on a modern infrastructure – the Elixir system. This has guaranteed efficient, secure and relatively fast interbank payments since 1996. As part of the system, transactions are settled within one of the three Elixir sessions held on any business day. Elixir has enabled the introduction of a whole range of new products, such as convenient PayByLink transfers – currently the most popular method for online payments provided by third parties in cooperation with banks.

The lack of popularity of direct debits is due to the reluctance of Polish citizens to allow creditors to debit their bank account. This could be a result of the low level of social trust in the country (the opposite of the situation in Germany or Nordic countries). On the other hand, there is no clear economic incentive for debtor banks to promote this method either. Therefore, direct debit payments have never been widely promoted in Poland.

Contactless card payments continue to become more popular among Polish customers. How do you explain this trend?

About 84 percent of the cards issued by banks in Poland are contactless (data from the National Bank of Poland – NBP – end of Q1 2016). At the end of Q1 2016, in Poland, 86.4 percent of terminals accepted contactless payments. Today, over 55 percent of card payments in Poland are contactless.

Contactless payments are very convenient for customers. People appreciate not having to pass their card to the seller and having visibility and control over it at all times.

The popularity of contactless is the result of a number of factors. First and foremost, the brave decision of card schemes and banks to implement this technology. Investments in acceptance networks and marketing efforts financed by banks, acquirers and card schemes, as well as social openness to innovations have also played a crucial part.

What about cash in Poland? Can you tell us more about the distribution between cash and cashless transactions, and the evolution of the share of cash payments across all retail transactions?

Cash payments are still the primary means of payment in Poland. These cash payments are mainly made by senior citizens as they are less likely to have a bank account. As a result, about 35 percent of pensions and retirement payments are made to senior citizens in cash via the postal service. The remaining 65 percent of senior citizens receive their benefits through their bank account. Non-cash payments, which are characterised by high levels of convenience and speed, are the domain of young people who are open to the use of ever more modern payment methods. One such payment method is Blik, a mobile payment system started in 2015 by six major banks. The solution is integrated with banking mobile apps and allows users to make payments online, and at point of sale, withdraw cash at ATMs, and enables mobile P2P payments.

According to the NBP payment habits report, in 2012, 82 percent of Polish people were paying with cash. Recent studies of economic awareness conducted for the NBP revealed that 28 percent of Poles don’t pay in cash, but the rest do.

The average value of retail payments in cash in 2012 was 38 Polish Zlotys - PLN - (EUR 8.7), PLN 25 (EUR 5.7) by contactless cards, PLN 89 (EUR 20.5) by debit card, PLN 132 (EUR 30.5) by credit card and PLN 164 (EUR 38) by credit transfer (NBP 2012 data, and conversion rate as of October 2016).

An instant payment service, Express Elixir, already exists in Poland. It was among the very first European countries to launch an instant payment solution. What are the key characteristics of this service? How successful has it been so far? How does it compare to the EPC SEPA Instant Credit Transfer (SCT Inst) scheme?

Express Elixir, the system designed for clearing instant payments, was launched as the first solution of its kind in Poland and the second in Europe. It enables the transfer of funds between accounts at different banks within seconds, 24 hours a day, seven days a week.

Express Elixir is a domestic real-time payments system operating in PLN. All payment orders in Express Elixir are executed exclusively between banks participating in the system (currently 11 direct participants - banks operating on the Polish market and almost 50 cooperative banks accessing the system indirectly). Express Elixir is based on a deposit (pre-funded) model utilising escrow accounts held by KIR (a Polish clearing infrastructure) in the NBP (central bank money).

Instant transfers in the Express Elixir system can be made by businesses and individual customers. The system serves a high maximum value of the transaction (up to PLN 100,000, i.e. EUR 23,134) and an unlimited number of daily transfers.

We have observed dynamic growth in the system. From January to the end of August 2016, bank customers used the Express Elixir system to order over 1.5 million instant transfers, with a combined value of over PLN 6.1 billion (EUR 1.4 billion).

As a comparison, in the same period during 2015, the system processed 936,000 instant money transfers with a value of little more than PLN 4.1 billion (EUR 948.5 million). It should be stressed that banks in Poland treat instant payments as a premium product (as such customers pay an extra fee).

Express Elixir offers each participating bank one of two available system messages exchange schemes: CSV or XML-based compliant with the ISO 20022 standard.

For the last few months Express Elixir has also been used for mobile P2P payments, which are initiated using a so called proxy/alias database (the receiver’s mobile phone number, rather than bank account number, is needed to initiate a payment).

The Express Elixir system rules differ a little from the SCT Inst scheme. It has a slightly different message flow – an additional step before crediting the receiver, a tolerance of technical breaks, a single currency - PLN only, the scheme is adjusted to settlement layer, and includes the possibility to limit the system only to part of the banks customers, for instance only to business or individual customers.

What is the position of the Polish payment community regarding the EPC SCT Inst scheme? Do banks in Poland intend to adhere to this new euro scheme and if so what would be the timeframe for adoption?

There is an interest in the new scheme, however Poland is not part of the Eurozone and domestic instant payments are currently available in PLN. In addition, as there is already an efficient solution dedicated for euro SCT transaction processing - Euro Elixir (batch payment system), this project is considered important but not a top priority. The start of the analytical phase is planned for after the publication of the SCT Inst rulebook (freeze of scheme rules). It should be stressed that current experiences with instant payments should enable a relatively fast implementation of SCT Inst in Poland, providing the decision to join the euro instant payments solution is made. This will be a decision for each bank to make individually.

What are the main opportunities and challenges faced by Poland in the payments area and what are the plans to address them in the next five years? In particular, where does Poland stand regarding P2P mobile payments?

The development of cashless transactions is important for the Polish government. As evidenced in the programme of the Ministry of Digitalisation "From paper to digital Poland”. The aims outlined include reducing the proportion of cash from 21.5 percent, to about 15 percent (in terms of value among all transactions) within the next five years. These goals support the growth of non-cash forms of payment, for example in state offices. What’s more, state benefits may also change from cash to cashless.

Polish Standard Payments, the operator of mobile payment system Blik, has also introduced a P2P service to Poland – enabling money transfers using a phone number. P2P allows for payments to be shared between users via mobile phones, without a bank account, and is revolutionising the way Polish people transfer money.

Once a transfer has been made, the money arrives in their account within seconds. P2P transfers are cleared by the Express Elixir System, which is operated by the National Clearing House.

P2P payments in Poland are in a development phase, but are starting to show positive signs towards rapid development. In the near future, they are likely to gain an even larger share of the total number of cashless transactions.

Source: European Payments Council article