The Development and Transformation of the Bank Card Market as an Imperative for Digitalization: the Case of Central and Eastern European Countries

Sobolieva-Tereshchenko, Olena; Moyseyenko, Olesya; Zharnikova, Valeriia Article The Development and Transformation of the Bank Card Market as an Imperative for Digitalization: the Case of Central and Eastern European Countries Comparative Economic Research. Central and Eastern Europe Provided in Cooperation with: Institute of Economics, University of Łódź Suggested Citation: Sobolieva-Tereshchenko, Olena; Moyseyenko, Olesya; Zharnikova, Valeriia (2021) : The Development and Transformation of the Bank Card Market as an Imperative for Digitalization: the Case of Central and Eastern European Countries, Comparative Economic Research. Central and Eastern Europe, ISSN 2082-6737, Łodz University Press, Łodz, Vol. 24, Iss. 4, pp. 45-67, https://doi.org/10.18778/1508-2008.24.30 This Version is available at: https://hdl.handle.net/10419/259286 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. 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Central and Eastern Europe Volume 24, Number 4, 2021 https://doi.org/10.18778/1508-2008.24.30 The Development and Transformation of the Bank Card Market as an Imperative for Digitalization: the Case of Central and Eastern European Countries Olena Sobolieva‑Tereshchenko https://orcid.org/0000-0002-1086-1192 Ph.D., Associate Professor, Borys Grinchenko Kyiv University Chair of Finance and Economics, Kyiv, Ukraine e-mail: o.tereshchenk[email protected] Olesya Moyseyenko https://orcid.org/0000-0002-4698-6843 Ph.D. student, Kyiv National University of Trade and Economics, Kyiv, Ukraine e-mail: olesya.moyseyenk[email protected]om Valeriia Zharnikova https://orcid.org/0000-0002-4335-5149 Ph.D. Student, Kyiv National University of Trade and Economics, Kyiv, Ukraine e-mail: v.zharniko[email protected]om Abstract The purpose of this study is to determine the development trends of the major deter‑ minants of the bank card market in eight countries of Central and Eastern Europe in the period from 2010 to 2019. Continuing a study carried out in 2018, further compara‑ tive analysis of the “Bank Cards Market Index” proposed earlier and based on a sys‑ tem of interrelated indicators of bank payment cards, ATMs and POS‑terminals, was carried out. We provide an overview of the rankings of Ukraine, Belarus, Moldova, Russia, Romania, Poland, Hungary, Slovakia using international ranking systems such as “The Legatum Prosperity Index,” “Doing Business,” “The Index of Economic Free‑ dom,” and the “Вank Cards Market Index.” Further studies of three international rank‑ ing systems, as well as the “Bank Cards Market Index,” again confirmed the similarity of the development models of the bank card market in Poland and Ukraine. To study the impact of the digitalization of economics and Covid–19 on the bank card market, a deeper analysis of two cases (Poland and Ukraine, as two similar bank card markets) was carried out using the “Digital Evolution Index.” In the course of the research, it was 46 Olena Sobolieva‑Tereshchenko, Olesya Moyseyenko, Valeriia Zharnikova concluded that the “Вank Cards Market Index” can be successfully used for further research of the banking sector of different countries. Also, the growth trend of cashless payments in the bank card market and the possible transformation of the market under the influence of Covid–19, and the global digitalization of economics were noticed. Taking into account the above trend, further studies of the system of interrelated in‑ dicators of bank payment cards, ATMs, and POS terminals should be carried out using the “Digital Evolution Index” or other international indexes that characterize the level of digitalization of the economy in the researched countries. Keywords: bank, Poland, Ukraine, bank cards, indicators, ranking of countries, index, digital economy, digitalization JEL: G15, G21, O12 Introduction The ranking ofCentral and Eastern European Countries (CEECs) toassess the develop‑ ment ofthe banking sector isone ofthe topics discussed inthe academic literature. The bank cards market offormer socialist states, including Ukraine, Russia, Belarus, and Moldova, and European Union members (Romania, Poland, Hungary, Slovakia) isdi‑ verse. This diversity can beconsidered anopportunity for cooperation between CEECs toimplement the best practices indifferent banking sectors, which isreflected inthe constantly increasing interest inthis phenomenon from management scholars. Klement etal. (2016, pp.115–126) estimated the economic and business rank ofSlo‑ vakia, including ananalysis ofthe position ofsome European Union countries. They also gave specific recommendations for focusing onthe position ofSlovakia among its closest competitor regions (i.e., the neighboring V4 countries ofPoland, Hungary, and the Czech Republic). Following this line ofinvestigation, Ramskyi etal. (2017, pp.163–174) analyzed the re‑ lationship between banking system transformation and the effective development ofthe Ukrainian economy. They determined that Ukraine’s integration into the European Un‑ ion was away tostrengthen the business environment. Based onevidence from Russian firms onthe German market and ways tosolve them, Panibratov etal. (2018, pp.106–122) described the problems ofentry modes and the liability ofthe effects offoreignness. They expressed the idea that exporters and investors experience significant negative effects from the lack ofproper institutional and business knowledge ofthe host financial market. Inthe paper about the bank cards market, Sobolieva‑Tereshchenko (2018, pp.25– 44) provided acomparative analysis and investigated the determinants ofthe estimate for Ukraine and its neighboring countries inCentral and Eastern Europe. Additional‑ ly, specific recommendations for improving the position ofUkraine inthe bank cards market were given, using Poland’s experience. The results ofpractical research ofthe development ofthe bank card market and payment card industry can befound inthe papers ofRussian authors, including Fe‑ 47 The Development and Transformation of the Bank Card Market as an Imperative for Digitalization… dorova, Dorozhkina, Cherkashnev (2016, pp.58–63) and Khetagurov (2018, pp.16–24), among others. Meanwhile, adetailed study ofthe methodological and technological development ofthe payment card industry can befound inthe works offoreign schol‑ ars, with the most significant results presented byVan and Linh (2019, pp.7–16) and Świecka, Terefenko, and Paprotny (2020, pp.5–13) This study offers insights into the best European practice and the challenges ofthe bank cards market between 2009and2019. Itwill guide the strategic and investigation reason‑ ing byidentifying the key trends and innovative solutions that allowed some participants ofthe European bank cards market tobe included inthe ranking ofcountries. The study isstructured asfollows: first, weprovide anoverview ofexisting international methods such as“The Legatum Prosperity Index 2019,” “BDO International Business Com‑ pass 2019,” and “The Index ofEconomic Freedom 2019,” emphasizing the context ofmar‑ kets inneighboring countries such asBelarus, Hungary, Moldova, Poland, Romania, Russia, Slovakia and Ukraine. After that, wepresent the results ofan empirical analysis ofthe bank cards market. Then, weintroduce the research settings, explain the rank method chosen, and make conclusions, followed byadefinition ofthe Bank Cards Market index (BCM In‑ dex) and afurther ranking ofUkraine and researched countries. Afterwards, weconduct acomparative analysis oftwo cases (Poland and Ukraine) astwo similar bank cards mar‑ kets. Using this index method, wemake conclusion about deepening the cooperation be‑ tween Ukraine and Poland inthe framework ofEuro‑integration that could contribute toan increase inthe development ofthe bank cards market developing ofboth countries. Data, variables and methods Small and medium enterprises enter the foreign market and face negative effects be‑ cause ofthe lack ofbusiness knowledge about the operation ofdigital financial and credit instruments such asbank payment cards. Information onan accessible network ofcash withdrawal points and non‑cash payment points isvery important for organ‑ izing work with buyers and suppliers. Accordingly, itis necessary tostudy the bank cards market inneighboring countries tounderstand the potential for the development and digitalization ofSME businesses. The purpose ofthe research isto make acomparative analysis ofthe bank cards mar‑ ket ofUkraine and neighboring countries todetermine the connection between the influence ofcredit‑financial instruments onstimulating business development, digi‑ talization, and the digital transformation. This study isbased ontwo data sets from 2010 to2019. The first shows information from the Legatum Prosperity Index, Doing Business, and Economic Freedom Index surveys inCentral and Eastern Europe, such asHungary, Poland, Romania, Slovakia, Belarus, Russia, Moldova and Ukraine. The second data set isinformation from the website ofthe European Central Bank and websites ofthe central banks ofthose countries. Weused three indicators tomake 48 Olena Sobolieva‑Tereshchenko, Olesya Moyseyenko, Valeriia Zharnikova our own calculations based ondata from the banks ofthese countries. These indicators include information about bank cards, ATM and POS‑terminals. Studying the two data sets together, wecan obtain adata set tounderstand the possibility ofthe bank cards business development ineach analyzed country. The Legatum Prosperity Index™ provides the performance of167 nations across 65 policy‑focused elements, measured byalmost 300 country‑level indicators. The “Leg‑ atum Prosperity Index survey makes the indexes aunique global benchmarking tool for determining acountry’s economic potential. The Economic Quality pillar measures how well astate’s economy isequipped togenerate wealth sustainably and with the full engagement ofits workforce. The comparative analysis ofthe Rank ofEconomic Quality inCEECs over the ten years ispresented inTable 1. Table 1. Legatum Prosperity Index for CEECs, 2010–2019 Country LP Country Economic Quality 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Belarus 42 54 47 40 41 47 48 42 40 54 Hungary 57 56 59 60 59 54 53 57 44 31 Moldova 96 91 91 86 79 84 84 90 90 101 Poland 36 36 39 41 37 37 37 34 38 39 Romania 63 64 68 84 75 71 71 60 60 40 Russia 77 73 70 72 60 66 66 70 63 43 Slovakia 38 44 48 49 50 50 50 49 37 27 Ukraine 76 76 87 77 77 88 88 84 97 91 Source: Legatum Prosperity Index (2020). According tothe data inthe table, between 2010and2019, Moldova and Ukraine had the lowest Economic Quality ranking. The highest ranked country was Slovakia. Atthe same time, for the majority ofcountries, 2015–2016 was the most stable peri‑ od, according tothe parameters ofLegatum Prosperity Index, while the most non‑sta‑ ble period was the last two years. Between 2018and2019, the most volatile countries were Romania (–20) and Russia (–20). The most stable country was Poland (+1). The most well‑known and popular methodology for assessing the establishment and support ofbusiness is“Doing Business,” conducted byan international network ofpublic accounting, tax, consulting and business advisory firms which perform pro‑ fessional services among 190 countries across all continents. “Doing Business” isan annual report that studies the regulations that improve do‑ ing business and those that constrain it. Itpresents quantitative indicators onbusiness regulation and the protection ofproperty rights, which can becompared across 190 economies. Itmeasures aspects ofregulation that affect 11 areas ofthe life ofabusi‑ ness, and the indicators are used toanalyze economic outcomes and identify the re‑ sults ofbusiness reforms. 49 The Development and Transformation of the Bank Card Market as an Imperative for Digitalization… Thus, the best conditions for business development in2019 according tothe “Do‑ ing Business” Index Rank were inRussia (31st place), Poland (33rd) and Belarus (37th), which can beabenchmark for Ukraine (71 Rank) ondetermination ofthe potential ofbusiness development. Table 2 shows the attractiveness ofUkraine and other CEECs in2010–2019 according tothe “Doing Business” Rank. Table 2. “Doing Business” Index for CEECs, 2010–2019 Country Doing Business 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Belarus 58 91 69 58 63 57 44 37 38 37 Hungary 47 46 51 54 54 54 42 41 48 53 Moldova 94 99 81 83 78 63 52 44 44 47 Poland 72 59 62 55 45 32 25 24 27 33 Romania 55 65 72 72 73 48 37 36 45 52 Russia 120 124 120 112 92 62 51 40 35 31 Slovakia 53 43 48 46 49 37 29 33 39 42 Ukraine 142 149 152 137 112 96 83 80 76 71 Source: World Bank Group (2018; 2019). Asthe table shows, inthis period, the analyzed countries increased their rankings, with the exception ofHungary (+6), which had the most negative dynamic. The most volatile countries were Russia (–89) and Ukraine (–71). Ukraine has avery good pos‑ itive dynamic; over ten years, the country improved its “Doing Business” rank from 142nd in2010 to71st in2019. The “Index ofEconomic Freedom” methodology for assessing and supporting busi‑ ness conducted among 180 countries inthe World isalso popular. Ituses 12 indicators tocalculate the world rank for every country the index. The 12 indicators that make upthe economic freedom score are equally weighted indetermining the rankings. Ta‑ ble 3 presents the Index ofEconomic Freedom results for the period 2010–2019. Table 3. Index of Economic Freedom for CEECs, 2010–2019 Country EF Economic Freedom 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Belarus 48.7 47.9 49.0 48.0 50.1 49.8 48.8 58.6 58.1 57.9 Hungary 66.1 66.6 67.1 67.3 67.0 66.8 66.0 65.8 66.7 65.0 Moldova 53.7 55.7 54.4 55.5 57.3 57.5 57.4 58.0 58.4 59.1 Poland 63.2 64.1 64.2 66.0 67.0 68.6 69.3 68.3 68.5 67.8 Romania 64.2 64.7 64.4 65.1 65.5 66.6 65.6 69.7 69.4 68.6 Russia 50.3 50.5 50.5 51.1 51.9 52.1 50.6 57.1 58.2 58.9 Slovakia 69.7 69.5 67.0 68.7 66.4 67.2 66.6 65.7 65.3 65.0 Ukraine 46.4 45.8 46.1 46.3 49.3 46.9 46.8 48.1 51.9 52.3 Source: Miller, Kim, and Roberts (2019). 50 Olena Sobolieva‑Tereshchenko, Olesya Moyseyenko, Valeriia Zharnikova According toTable 3, Ukraine had the worst Economic Freedom Rank among the analyzed countries every year during the ten years. This indicator varied from 46.4 in2010 to52.3 in2019. Atthe same time, the Economic Freedom Rank was high‑ est inRomania (64.2 in2010 and 68.6 in2019) and Poland (63.2 in2010 and 67.8 in2019). So, acomparative analysis ofthe economic and business conditions inCEECs tode‑ termine the potential for business development shows that such ratings as“The Leg‑ atum Prosperity Index,” “Doing Business,” and “The Index ofEconomic Freedom” don’t allow usto fully define the potential economic development ofthe bank cards market. Empirical results and discussions Every bank cards market inCentral and Eastern Europe has different conditions. First ofall, countries need toadapt tothe modern business environment for their economic development and investment attractiveness. Itis very important for them tounder‑ stand their place among other competing countries, which can bedone based onrank‑ ing data. Secondly, foreign companies that dobusiness inother countries have anum‑ ber ofadvantages. They can use information about the cards’ business environment and high‑quality supporting infrastructure combined with aconvenient geographic location, which can also bedone based onranking data. Third, the level ofdistribution ofnon‑cash payments using payment cards isone ofthe indicators ofthe development ofthe global system ofcashless payments and the banking system ingeneral. Thus, two main criteria were identified toassess the key indicators ofthe bank card market: the existence ofcards and the availability ofsupport devices for cash with‑ drawals and card payments. The first isfocused mainly onthe issue ofbank cards, and the second onthe expansion ofthe number ofPOS‑terminals and ATM net‑ works. The study was conducted inCEECs: Romania, Moldova, Hungary, Slovakia, Poland, Belarus, and Russia. The countries were ranked inalphabetical order for the analy‑ sis. Acomparative analysis ofthe key indicators ofthe bank cards market among the analyzed countries over the ten years ispresented inTable 4. Acomparison ofthe population ofUkraine and the analyzed countries showed that Poland isthe closest indicator for Ukraine. All countries, except for Russia, have signif‑ icantly smaller populations compared toUkraine. Over the ten years, the population increased inRussia but decreased inHungary, Romania, and Ukraine. The popula‑ tion ofthe other analyzed countries was relatively stable throughout the period. Ukraine ranks third after Russia and Poland bythe number ofbank cards. The num‑ ber ofbank cards inRussia (285.8 ml. pcs) significantly exceeds the indicators ofall analyzed countries. The number ofbank cards inUkraine (42.2 ml. pcs) isslightly less than inPoland (42.9 ml. pcs) 51 The Development and Transformation of the Bank Card Market as an Imperative for Digitalization… Table 4. Indicators of bank cards market for CEECs, 2010–2019 Country 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Belarus Population, ml. 9.5 9.5 9.5 9.5 9.5 9.5 9.5 9.5 9.5 9.5 Cards, ml.pcs. 9.2 9.9 10.4 11.8 12.3 12.3 12.7 13.9 15.0 15.5 АТМ, th.pcs. 3.1 3.3 3.7 4.1 4.4 4.4 4.4 4.4 4.2 4.2 POS, th.pcs. 29.6 40.7 56.8 73.6 91.8 111.7 139.6 150.9 160.7 173.2 Hungary Population, ml. 10.0 10.0 9.9 9.9 9.9 9.8 9.8 9.8 9.8 9.8 Cards, ml.pcs. 8.9 8.9 8.9 9.0 8.9 9.0 9.0 9.1 9.4 9.4 АТМ, th.pcs. 4.8 4.9 4.8 4.8 4.9 4.8 5.0 5.1 5.1 5.1 POS, th.pcs. 66.6 73.7 84.7 90.8 104.9 111.7 121.1 147.5 155.5 157.8 Moldova Population, ml. 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.5 3.5 Cards, ml.pcs. 0.8 0.9 1.0 1.2 1.3 1.3 1.5 1.7 1.9 2.0 АТМ, th.pcs. 0.8 0.9 0.9 1.0 1.1 1.0 1.0 1.1 1.1 1.1 POS, th.pcs. 7.3 8.0 9.4 10.5 11.5 12.0 15.1 16.6 18.2 20.5 Poland Population, ml. 38.5 38.5 38.5 38.5 38.5 38.5 38.4 38.4 38.4 38.4 Cards, ml.pcs. 32.0 32.0 33.3 34.7 36.1 35.2 36.9 39.1 41.2 42.9 АТМ, th.pcs. 16.4 17.4 18.2 18.9 20.5 22.1 23.4 23.2 22.9 22.7 POS, th.pcs. 246.5 266.4 289.5 326.3 398.2 463.4 536.2 624.4 786.8 906.6 Romania Population, ml. 20.2 20.1 20.1 20.0 19.9 19.8 19.7 19.7 19.5 19.4 Cards, ml.pcs. 12.8 13.3 13.7 14.1 14.5 15.0 16.0 16.4 17.4 18.2 АТМ, th.pcs. 10.4 11.0 11.0 10.8 11.5 11.5 11.1 11.1 10.6 10.5 POS, th.pcs. 114.0 124.9 126.3 128.0 130.5 144.4 161.9 193.9 204.4 229.5 52 Olena Sobolieva‑Tereshchenko, Olesya Moyseyenko, Valeriia Zharnikova Country 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Russia Population, ml. 142.8 143.0 143.2 143.5 143.8 146.4 146.7 146.5 146.9 146.8 Cards, ml.pcs. 144.4 200.2 239.5 248.6 278.5 286.2 315.3 268.5 272.6 285.8 АТМ, th.pcs. 116.2 141.9 171.9 188.8 222.8 206.9 201.4 206.3 201.0 202.6 POS, th.pcs. 434.5 528.5 718.0 965.5 1288.7 1489.8 1778.0 2189.1 2588.8 2913.0 Slovakia Population, ml. 5.4 5.4 5.4 5.4 5.4 5.4 5.4 5.4 5.4 5.5 Cards, ml.pcs. 5.0 5.3 4.6 4.8 5.0 5.3 5.5 5.2 5.2 5.3 АТМ, th.pcs. 2.3 2.4 2.5 2.6 2.7 2.7 2.8 2.7 2.8 2.8 POS, th.pcs. 37.5 38.0 37.5 41.0 46.8 49.6 42.2 49.2 45.3 57.8 Ukraine Population, ml. 45.8 45.6 45.5 45.4 45.2 42.8 42.6 42.4 42.2 41.9 Cards, ml.pcs. 29.4 34.9 33.1 35.6 33.0 30.8 32.4 34.9 36.9 42.2 АТМ, th.pcs. 30.2 33.0 36.2 40.4 36.6 33.3 33.8 37.0 36.6 35.9 POS, th.pcs. 108.1 123.5 162.7 221.2 203.8 194.5 219.2 251.7 279.0 333.8 Source: own calculations based on data from Banks of analyzed countries: Statistical Data Warehouse (n.d.); Verisk Financial (n.d.); Bank of the Russia (n.d.); The Magyar Nemezeti Bank (n.d.); The National Bank of the Republic of Belarus (n.d.); Narodowy Bank Polski (n.d.); National Bank of Moldova (n.d.); Banca Naţională a României (n.d.); Národná Banka Slovenska (n.d.); Slovak Banking Association (2021); National Bank of Ukraine (n.d.), Cashless Payments. Table 4. (continued) 59 The Development and Transformation of the Bank Card Market as an Imperative for Digitalization… Asthe table shows, Belarus, Poland and Slovakia have aBCM Index better than other countries between 2010and2019. Atthe same time, according toEconomic Rank of“The Legatum Prosperity Index,” Belarus, Poland and Slovakia take leading positions. According tothe “Doing Business” rank, Hungary, Poland and Slovakia have the best positions. According tothe rank ofFinancial Freedom from “The In‑ dex ofEconomic Freedom,” Belarus, Russia, and Ukraine have good conditions for investment. So, during the last ten years, Poland and Slovakia had the best positions according tothe estimate of“The Legatum Prosperity Index,” “Doing Business” and the BCM Index proposed bythe author. The comparative analysis for “The Legatum Prosperity Index,” “Doing Business,” “The Index ofEconomic Freedom,” and the “BCM Index” for Poland, Slovakia and Ukraine in2010, 2014and2019 are represented inFigure 1. The model isavisual representation ofhow the four indexes are interrelated inSlo‑ vakia, Poland and Ukraine. The model ofUkraine and Poland issimilar. Thus, wecon‑ clude that deep cooperation between Ukraine and Poland inthe framework ofEuro‑in‑ tegration could help develop the bank cards market ofboth countries. In2020, the challenge ofthe Covid–19 pandemic and trend ofdigitalization put pressure onthese indicators inmany EC countries. European economies are among the most digitally inclusive (measuring gender, class, and geographic inclusion), and six European countries (Norway, Belgium, Switzerland, Austria, Iceland, and Poland) are included inthe Digital Intelligence Index top 10. InCEECs, mobile internet ac‑ cess isexpanding and has improved rapidly. Over 90% ofthe population inPoland are covered by4G mobile networks now, while inUkraine, 4G access has jumped from 2% to75% since 2017. Tounderstand the level ofDigitalization inPoland, Slovakia and Ukraine, wead‑ ditionally studied the Digital Evolution Index (DEI). The DEI created bythe Fletcher School atTufts University (with the support ofMastercard and Data Cash) and com‑ bines more than 358 indicators intwo scorecards, the Digital Evolution State and Dig‑ ital Evolution Momentum. Digital Evolution captures the state and rate (momentum) ofdigital evolution and identifies implications for investment, innovation, and policy priorities. The Digital Evolution Scores ofPoland, Slovakia, Ukraine in2020 are rep‑ resented inFigure 2. The graph shows that Poland and Slovakia have ahigher state index than Ukraine, while Ukraine has afaster‑moving economy interms ofthe pace ofchange inits digi‑ tal evolution (digital momentum) than Slovakia. Thus, weconclude that the deepening cooperation between Ukraine and Poland inthe framework ofusing the experience ofdigitalization ofthe economy can contribute togreater development ofthe bank cards market inboth countries. According tothe National Bank ofPoland’s report about the payment card mar‑ ket inPoland inQ1 2020, the share ofcontactless transactions inthe value ofall card payments was record‑breaking. Atthe end ofMarch 2020, itreached 84.1 percent. The previous record, recorded inthe last quarter of2019, was 81.4 percent. Inthe first 60 Olena Sobolieva‑Tereshchenko, Olesya Moyseyenko, Valeriia Zharnikova quarter of2020, there were 41.2 million different contact payment instruments onthe market (plastic cards, virtual cards, stickers, etc.). More than 9 out of10 card payments inPoland are contactless. 0 2 4 6 8 1 2 3 4 5 6 7 8 9 10 Poland Slovak Republic Ukraine 0 20 40 60 80 100 120 140 160 1 2 3 4 5 6 7 8 9 10 11 12 Poland Slovak Republic Ukraine Figure 1. Criteria and indicators of the bank cards market for Poland, Slovakia and Ukraine Source: own study. So, the pandemic and quarantine restrictions accelerated the shift inhouseholds’ payment habits towards cashless settlements, including online payments. Ukraini‑ ans are more actively switching tocashless payments and are using electronic com‑ merce services increasingly often. Atthe same time, there has been asustainable trend 61 The Development and Transformation of the Bank Card Market as an Imperative for Digitalization… inwhich contactless payment instruments and settlements involving their use are in‑ creasing inpopularity. This trend has mainly resulted from anincrease inthe value and number ofcashless transactions. Thus, the value ofcashless transactions stood atUAH 1,550.1 billion, or55.2% ofthe total value ofall card transactions. InSeptem‑ ber 2019, itamounted at49.7% (Undeniable Card Market Trends in2020). 63,58 63,01 46,03 57,29 42,29 49,21 0 10 20 30 40 50 60 70 Poland Slovakia Ukraine Digital Evolution: Momentum Digital Evolution: State Figure 2. Digital Evolution Scores of Poland, Slovakia, Ukraine Source: Chakravorti, Chaturvedi, Filipovic, Brewer (2020). Thus, innovative payment technologies and the relevant infrastructure play akey role inthe development ofthe cashless economy. Ukraine has tremendous potential inimplementation ofpayment innovations incomparison with Poland. This iswhy future research inthese three variables ofthe bank cards market will bevery important. They will help explain the reasons for success and failure, and identify the challenges that lie ahead instrengthening the bank cards market inCEECs. The comparison of the bank cards market of Ukraine and Poland The level ofdevelopment ofthe bank cards market has animportant place inthe banking system’s development. However, the level ofthe bank cards market isapar‑ ticular concept, and itis obvious that there isno perfect indicator that characterizes it. Inthe phase ofEuro‑integration, Ukraine has faced difficult tasks such asimple‑ menting and complying with the Basel III regulations inUkrainian banking system. During digitalization and the challenge ofthe COVID–19 pandemic, many countries faced the need toimplement digital cards, develop contactless payments, and stabi‑ lize the banking system. 62 Olena Sobolieva‑Tereshchenko, Olesya Moyseyenko, Valeriia Zharnikova Ukraine and other countries urgently need solutions. The bank cards market isthe most dynamic part ofthe banking sector. Asbank cards combine elements ofpayment, deposit, credit, and currency‑exchange functions, the bank cards market isasimpli‑ fied model ofthe banking system. Comparing the rankings ofUkraine and Poland shows that these countries’ mod‑ els are similar, although the countries are ranked differently according to“The Leg‑ atum Prosperity Index,” “Doing Business,” and “The Index ofEconomic Freedom”. “The Legatum Prosperity Index” and “Doing Business” rank Poland highly, while Ukraine has alow rank. Ukraine has high level of“The Index ofEconomic Freedom” while for Poland itis low. Therefore, using the experience ofPoland, Ukraine has sig‑ nificant potential for economic development, including the development ofthe bank cards market. The dynamics ofthe bank cards market indicators inUkraine and Poland showed that the variables ofthe number ofcards, the development ofthe ATM network, and the number ofPOS‑terminals complement each other. Inrecent years, the relationship between these indicators has become more meaningful.Table 8 represents the changes inthe bank cards market indicators inUkraine and Poland inthe years 2010–2019. Table 8. The dynamics of the bank cards market indicators in Ukraine and Poland, 2010–2019 Years Population, thousands Number of bank cards, thousands АТМs. POS‑terminals Ukraine Poland Ukraine Poland Ukraine Poland Ukraine Poland 2010 45,783 38,530 29,405 31,984 30,163 16,413 108,140 246,510 2011 45,598 38,538 34,850 32,045 32,997 17,392 123,540 266,429 2012 45,453 38,533 33,106 33,291 36,152 18,188 162,724 289,547 2013 45,373 38,502 35,622 34,659 40,350 18,876 221,222 326,340 2014 45,246 38,484 33,042 36,069 36,596 20,531 203,810 398,172 2015 42,759 38,455 30,838 35,209 33,334 22,143 194,478 463,366 2016 42,591 38,427 32,389 36,874 33,783 23,443 219,241 536,236 2017 42,415 38,422 34,858 39,096 37,003 23,230 251,681 624,434 2018 42,153 38,413 36,949 41,237 36,585 22,885 278,993 786,845 2019 41,902 38,390 42,158 42,854 35,930 22,720 333,840 906,564 Source: data from National Bank of Ukraine (n.d.), Statistics; Narodowy Bank Polski (n.d.). Wecan see improvements inboth countries, although the situation inPoland ismuch better than inUkraine. Inboth countries, the number ofbank cards showed frequent fluc‑ tuations inindicators between 2010and2014, and annual growth between 2015and2019. Over the past 10 years, the number ofATMs has increased by19%, from 30,163 to35,930 inUkraine, and inPoland by38%, from 16,413 to22,720. During this period, the num‑ ber ofPOS terminals increased 3.1 times, from 108,140 to333,840 inUkraine, and in3.7 times inPoland, from 246,510 to906,564. Although the bank cards market inUkraine, inparticular, the number ofPOS‑terminals, isdeveloping and expanding, the growth rates are still low and insufficient incomparison with Poland. 63 The Development and Transformation of the Bank Card Market as an Imperative for Digitalization… Atthe same time, over the last 10 years the population has decreased inboth coun‑ tries: from 45.7 million to41.9 million (–8.5%) inUkraine, and from 38.5 million to38.4 million (–0.5%) inPoland. The indexes proposed and calculated bythe authors show that inPoland, the following components are higher compared toUkraine: the Number ofbank cards per capita (1.12) and the Number ofcards per АТМ (more than 1,880). The same indicators accounted for slightly more than 1,010 and 1,170 inUkraine, respectively. Inthis case, acomparative analysis ofthe relative indicators ofthe bank cards market ismore accurate than the absolute ones. Table 9. Indices of the bank cards market in Ukraine and Poland, 2010–2019 Years Cards per capita, pcs. Cards per АТМ. Cards per POS‑terminal. Ukraine Poland Ukraine Poland Ukraine Poland 2010 0.64 0.83 975 1949 272 130 2011 0.76 0.83 1056 1843 282 120 2012 0.73 0.86 916 1830 203 115 2013 0.79 0.90 883 1836 161 106 2014 0.73 0.94 903 1757 162 91 2015 0.72 0.92 925 1590 159 76 2016 0.76 0.96 958 1573 148 69 2017 0.82 1.02 942 1683 139 63 2018 0.88 1.07 1010 1802 132 52 2019 1.01 1.12 1173 1886 126 47 Source: own calculations based on data from the National Bank of Ukraine (n.d.), Statistics; Narodowy Bank Polski (n.d.). Table 9 describes the main indexes ofbank card market inUkraine and Poland between 2010and2019. The Number ofbank cards per POS terminal decreased (orthe Number ofPOS terminals per thousand bank cards increased) inboth coun‑ tries. The Number ofbank cards per capita inUkraine increased from 0.64 to1.01, meaning that cashless payments had anupward trend during the period. Regarding Poland, the number ofbank cards per capita increased from 0.83 to1.12. So, there was anexpansion tendency for cashless payments inPoland, too. The deepening cooperation between Ukraine and Poland inthe framework ofEu‑ ro‑integration could contribute tothe development ofthe bank cards market ofboth countries. However, itis not ashort‑term process. For some time, Ukraine has had toovercome many humanitarian (Covid–19, global warming), political (annexation ofthe Crimea, military operations inDonbas), and economic challenges (euro‑inte‑ gration, digitalization). All these factors will influence the development ofthe bank cards market inthe near future. 64 Olena Sobolieva‑Tereshchenko, Olesya Moyseyenko, Valeriia Zharnikova Conclusion The strategies for the development ofthe bank cards market inevery country inCentral and Eastern Europe has different directions. This isreflected inthe ranking ofcoun‑ tries on“The Legatum Prosperity Index,” “Doing Business,” “The Index ofEconomic Freedom,” and the “BCM Index”. Therefore, itis suggested that countries use the recommended methodology for arapid review ofthe bank cards market. Periodic upgrading and in‑depth analysis ofthe “BCM Index” will ensure that the data isalways relevant toreliably compare the risks and opportunities ofthe market. This methodology provides asolid founda‑ tion for decision‑making about investments and innovations infinancial and bank‑ ing spheres. Ukraine should therefore seek toachieve ahigh level ofdigitalization, acashless economy, awell‑developed payment infrastructure, and the use ofinnovative payment tools. The pandemic and quarantine restrictions accelerated the change incardhold‑ ers’ payment habits towards cashless settlements, including online payments. Card‑ holders are more actively switching tocashless payments and are increasingly using electronic commerce services. Atthe same time, there has been asustainable trend inwhich contactless payment instruments and settlements involving their use are in‑ creasing inpopularity. Inthe near future, all this will influence the development ofthe bank card market. Finally, future research should beconducted inother developed and developing economies using the same methodology asin the current study toexamine whether anassociation between the BCM Index and the level ofeconomic development isfound tobe consistent. References Banca Naţională aRomâniei, Payments Statistics, http://www.bnr.ro/Payments‑Statis tics‑5312.aspx (accessed: 18.01.2021). Bank ofthe Russia, National Payment System, http://www.cbr.ru/eng/statistics/nps/ (accessed: 18.01.2021). Chakravorti,B., Chaturvedi, R.S., Filipovic, Ch., Brewer, G.(2020), Digital inthe time ofCovid. 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Rozwój i transformacja rynku kart bankowych jako imperatyw cyfryzacji na przykładzie krajów Europy Środkowo‑Wschodniej Celem niniejszego opracowania jest określenie trendów rozwojowych głównych deter‑ minant rynku kart bankowych w ośmiu krajach Europy Środkowo‑Wschodniej w okresie 2010–2019. Kontynuując badanie przeprowadzone w 2018 r. przeprowadzono dalszą analizę porównawczą zaproponowanego wcześniej „Indeksu Rynku Kart Bankowych” opartego na systemie powiązanych ze sobą wskaźników bankowych kart płatniczych, bankomatów i terminali POS. Przedstawiono przegląd rankingów Ukrainy, Białoru‑ si, Mołdawii, Rosji, Rumunii, Polski, Węgier i Słowacji przy użyciu międzynarodowych systemów rankingowych, takich jak „The Legatum Prosperity Index”, „Doing Business”, „The Index of Economic Freedom” i „Вank Cards Market Index”. Dalsze badania trzech międzynarodowych systemów rankingowych, a także „Вank Cards Market Index” ponownie potwierdziły podobieństwo modeli rozwoju rynku kart bankowych w Polsce i na Ukrainie. Aby zbadać wpływ cyfryzacji gospodarki i pandemii Covid–19 na rynek kart bankowych, przeprowadzono pogłębioną analizę dwóch przypadków (Polski i Ukrainy jako dwóch podobnych rynków kart bankowych) za pomocą „Digital Evolution Index”. W trakcie badań stwierdzono, że „Вank Cards Market Index” może być z powodzeniem wykorzystany do dalszych badań sektora bankowego w różnych krajach. Zauważono również trend wzrostowy płatności bezgotówkowych na rynku kart bankowych i możli‑ wą transformację rynku pod wpływem Covid–19 oraz globalną cyfryzację gospodarki. Biorąc pod uwagę powyższy trend, dalsze badania systemu powiązanych wskaźników bankowych kart płatniczych, bankomatów i terminali POS powinny być prowadzone z wykorzystaniem „Digital Evolution Index” lub innych międzynarodowych wskaźników charakteryzujących poziom cyfryzacji gospodarki w badanych krajach. Słowa kluczowe: Bank, Polska, Ukraina, karty bankowe, wskaźniki, ranking krajów, indeks, gospodarka cyfrowa, cyfryzacja 67 The Development and Transformation of the Bank Card Market as an Imperative for Digitalization… © by the author, licensee Łódź University – Łódź University Press, Łódź, Poland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution license CC‑BY‑NC‑ND 4.0 (https://creativecommons.org/licenses/by‑nc‑nd/4.0/) Received: 2021‑02‑01. Verified: 2021‑06‑20. Accepted: 2021‑08‑11.