In the course of the public discussion on “Fight against shadow economy: why should we limit cash payments”, Ms. Natalia Syniavska, Director of the NBU General Department of Information Technologies and Payment Systems, provided comments on the provisions of the draft law No10656 regarding the cash payments made by legal entities and individuals for goods and services.

Ms. Natalia Syniavska has reminded that the Verkhovna Rada of Ukraine passed in the first reading the draft law No 10656 “On the Introduction of Amendments to Certain Legislative Acts of Ukraine (with regard to the Operation of Payment Systems and Development of Cashless Payments)” initiated by the National Bank of Ukraine.

“I would like to cite the provisions of the above-mentioned draft law that has drawn significant public attention: “The ceiling on the amount of cash payments for individuals and legal entities as well as individual entrepreneurs shall be established by the National Bank of Ukraine in accordance with this Article”. In other words, neither the upper limit for cash payments nor definite time framing (when this provision will come into effect) is mentioned. Furthermore, this provision relating to the use cash payments by legal entities and individuals became effective since 2005 – it was approved by NBU Board Resolution No32 of 9 February 2005. The law is primarily applied to legal entities and individual entrepreneurs making cash payments. When it comes to individuals, the draft law is not intended to impose restrictions on the right of average citizens to use different forms of payments,” said Ms. Natalia Syniavska.

According to her, there has been a lot of speculation about this provision, when it will come into effect and the upper limit for cash payments. However, the Director of the NBU General Department of Information Technologies and Payment Systems has emphasized that the upper limit for cash payments and time framing (when this provision will come into effect) will be established only after the NBU carries out an in-depth analysis of the economic situation in Ukraine. “It is a necessary measure as the implementation of this provision should ensure maximum convenience for citizens. What is more, this draft law contains additional provisions with regard to consumer rights protection,” added Ms. Natalia Syniavska. 

When withdrawing cash from a bank ATM other than the bank that has issued a payment card, a customer has to pay a fee charged by the bank. In contrast, a customer does not have to pay any fees for making cashless payments with the use of payment cards. In addition, banks offer bonus schemes to their customers that use payment cards. Therefore, the customers using payment cards will not incur extra expenses when making transition to cashless payments.

“There is an upward trend in cashless payments – every third transaction carried out through the retail outlets is a payment card transaction, which is indicative of the increased public confidence in the banks and payment cards issued by banks. A customer does not have to withdraw the entire amount of his money held on his account from an ATM, as usually happens when a customer receives his salary, but leave the money in his account,” said Ms. Natalia Syniavska. 

According to her, the largest Ukrainian retailers handle cashless payment transactions. It has become a well-established practice. Smaller shops with a low turnover will be next to introduce cashless payments. They have been given the opportunity to install POS terminals free of charge.

Ms. Natalia Syniavska has pointed out that the National Bank of Ukraine and all the banks take measures to promote cashless payments and develop the ATM infrastructure. Mr. Yurii Yaremenko, chairman of the Committee of the National Association of Ukrainian Banks (NABU) on banking and payment systems infrastructure, has said that cash payments are the most expensive:” "The specialists know exactly that cash payments are the most expensive form of payment for the country, for the banks and, ultimately, for consumers. In order to handle cash payments, the country should print money, provide storage, protection, and so on. Today, banks make efforts to transport this money, preserve it in circulation, remove worn-out bills, and ensure its collection, preservation and storage, let alone the large number of people who are involved in this work. As a result, the costs are borne by the consumer. The transition to cashless payments is the next step in the evolutionary process rather than an enforcement measure."

“A wider use of cashless payments is a worldwide trend that reflects the level of development of market relations. An increase in the use of cashless payments will provide additional liquidity to banks, thus making loans more accessible to households. As a result, banks will gain visible benefits. Moreover, it will be beneficial for the whole economy” concluded Ms. Natalia Syniavska. 

For reference

According to statistical reports submitted to the National Bank of Ukraine by the member banks of payment systems, as of 1 July 2012, the banks have issued over 62 million payment cards, with 1.4 payment card falling on 1 person.

As of 1 July 2012, more than half of 62.7 million payment cards in circulation were active (which means that they have been used to carry out cashless payment transactions in the past three months). In the first half of 2012, the value of cashless payment transactions has climbed by 26.4% (to UAH 328.3 billion), compared with the first half of 2011, whereas the number of these transactions has increased by 22.6% (to 507.8 million pieces).