Azerbaijani economy digitalization: Achievements during pandemic, prospects

COVID-19 has forever changed the rules of the game for the global economy. New tools and formats replaced the classic forms. The current situation indicates that the transformation will continue and proceed quite quickly. Therefore, the main criterion for business success in the current environment will be its ability to adapt to the digital world’s requirements and actively interact with other market players, becoming even stronger.

In an interview with Report, Visa’s regional manager for the Caucasus region, Kristina Dorosh, spoke about Azerbaijan’s achievements during the pandemic and the prospects for the development of the digital economy

As you know, Visa, the world leader in electronic payments, and Azericard processing center are working on developing digital emission and creating innovative digital payment solutions for a broad audience of users in Azerbaijan. What digital services are being designed, and what specific measures should be taken to stimulate the Azerbaijani economy’s digitalization?

The modern infrastructure of electronic payments is very complex, and the well-coordinated work of all participants is essential for further digitalization. Banks remain our key partners, but the range of our partnerships is much broader - these are mobile operators, FinTech, Big Tech, and, of course, regulators. Based on this, we are working in several key areas:

Traditionally, our focus is on the daily expenses of consumers and the development of the infrastructure for accepting electronic payments, including working with small and medium-sized businesses, new technologies for accepting cards where electronic payments aren’t yet accepted - in particular, QR payments, Visa Tap to Phone, and the development of contactless payments: first of all, the introduction of contactless payments in transport.

Digital innovation, which includes digital emissions, the development, and implementation of new innovative solutions to improve the customer experience. In November, as you rightly noted, we announced a strategic partnership between Visa and the Azericard processing center, as part of which we are working on the development of digital emission and the creation of innovative digital payment solutions for a broad audience of users. This partnership aims to stimulate the digitalization of the economy precisely due to the greater availability of digital services for consumers in Azerbaijan.

- How much did cashless payments in Azerbaijan increase during the pandemic? Against this background, what new projects on introducing contactless payments in Azerbaijan is your company planning to implement in 2021?

- The active growth of non-contact payments is one of the leading trends in recent years. The pandemic served as a stimulus for the development of non-contact transactions. Our global research shows that from the very beginning consumers have favored contactless payments as a safer and faster payment method, among other things, to minimize physical contact. As a result, today, six out of ten transactions in Azerbaijan are already made using contactless payment tools.

Almost half of the consumers (49 percent) say that non-contact payments are one of the most effective ways for safe shopping that offline retail outlets can offer to their customers. At the same time, 65 percent of consumers note that they will prefer contactless payments even in the post-COVID period, and only 16 percent can return to their usual forms of payments.

Given the current growth rate of contactless payments, our goal is to make these payments, including mobile tokenized payments based on the Visa Token Service, available to more consumers and merchants. In particular, we will continue to expand our contactless payment channels.

In the summer of 2020, Visa announced the launch of Tap to Phone technology for small and medium-sized businesses. Visa Tap to Phone allows an Android smartphone with an NFC feature to function as a POS terminal for accepting contactless payments without additional equipment. The advantage of this technology is that it expands the payment acceptance infrastructure while significantly reducing the cost of accepting card payments for small and medium businesses. In our region of the CIS countries and Southeast Europe, Kazakhstan was one of the first countries to launch Visa Tap to Phone. The number of merchants using this technology for accepting cards has already exceeded 5,000. We are looking at how the technology is developing in those countries where it has already been launched to expand it to other markets, including Azerbaijan.

- Visa launched the Visa Token Service program in Azerbaijan in partnership with the International Bank of Azerbaijan, Kapital Bank, and Bank Respublika in 2019 -2020. With which banks are you in talks to connect to this service?

- Visa Token Service provides a technical opportunity for the development of mobile contactless payments. In Azerbaijan, we see rapid growth in tokenized transactions. After the launch of the campaign ‘Pay with a mobile application with Visa’ jointly with the Central Bank of Azerbaijan with the support of banks that have already launched their mobile wallets (International Bank of Azerbaijan, Kapital Bank, Bank Respublika, and VTB Bank), we saw a 264 percent increase in turnover when paying with mobile phones. At the same time, the number of transactions increased by 189 percent. The presence of gadgets with payment functionality plays an essential role in increasing the penetration of tokenized transactions. Over the past year, manufacturers have begun to equip even inexpensive smartphones with NFC payment modules, suggesting that the number of tokenized transactions will grow even more actively.

What stage is the joint project with the Azerbaijan Railways at, and what other transport fare payment projects are being implemented with Visa?

- Payments in transport are one of our priorities: in November 2020, together with PASHA Bank, the first solution in Azerbaijan for contactless payment of fares in public transport in Sumgait city was launched. In September, as part of the partnership with Azerbaijan Railways CJSC, the Central Bank of Azerbaijan, and the International Bank of Azerbaijan, we launched the payment system testing using contactless bank cards and payment rings at several stations of the Absheron ring railway. Together with our partners, we continue to work on the development of this area.