Business consultancy project

Qualitative Data Analysis

Numerous semi-structured interviews and discussions with experts from the leading banks of Azerbaijan, payment processing center, online payments portals and internal interviews with Azercell professionals have been conducted to address the research questions stated in the BCP.
Interview protocols contained different questions depending on distinguished aspects aimed at obtaining the related information from the banking industry and payment processing companies.

1. External Interviews

Most experts had similar views on some questions, such as the favorable legal and business environment for digital transformation, acknowledgment of positive trend and strengthened competition in the financial market, while had different views on some of the other topics that will be discussed below.
Representatives of top management of the following Banks, payment systems, and payment processing center from the Azerbaijan market have agreed to meet and share their knowledge and expertise in this field.

Interviews with payment portals and card processing centers:

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  General Manager of “Golden Pay” (Hesab.az)
  
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  Head of “Easypay” LLC
  
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  Business Development Director of “Azericard” processing center
  
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  Director of “SmartPay”
  
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  CEO of “Modenis” LLC (“E-manat” payment system)
  

All interviewees underlined the positive tendency in the online payments’ field and growing opportunities to extend the business. For instance, “Easypay” offering all types of payments, such as utilities (58%), mobile (34%) and governmental payments (3%), insurance fees etc, plans to extend the range of available services to compulsory motor insurance premium payments and AzeriGaz payments. Market share of “Easypay” constitutes around 20%. Currently, the sophisticated mobile application is being developed by “Easypay” and number of self-service payment terminals is steadily increasing in order to enhance the convenience and quality of the provided services.
Meanwhile, CEO of “Golden Pay” payment portal, Company possessing the largest market share exceeding 50% of all online payments’ market in Azerbaijan, emphasized a fierce competition on the market due to rocketed interest of Banks to online payments in Azerbaijan that fosters the appropriate measures fulfilled in this direction. The highest shares among various types of payments belong to utilities and telecommunication categories.
The range of services provided is similar to the competitors’ one, however, tickets for cultural events are also available through the platform.
According to information received from “Smartpay”, 94% of all payments made through the platform refers to the registration of mobile devices, 3% belongs to mobile payments, and 3% to other categories. Director of the Company emphasized the increasing financial literacy of consumers and promising opportunities for business expansion.
“Modenis” company possesses approximately 25% share of the online payments market. The split of services’ shares is similar to other payment portals, and customers mostly use the online payment system for utilities, telecommunication, internet payments. CEO of the company underlines the growing interest of
consumers to online payments, nevertheless, the prevalence of cash payments is expected for the next few years in Azerbaijan. “Modenis” does not possess a mobile application but is going to launch it in the nearest future to meet the clients’ expectations.
One of the managers of the largest card processing company in Azerbaijan, “Azericard”, also considers the huge potential of fast-developing Azerbaijan financial market and emphasized the growing competition on the market. The major part of payments made via the processing center refers to loans and telecommunication payments. Nevertheless, cash payments’ position is still very strong nowadays. According to their experience, the financial literacy level of customers increases steadily, and they are potentially ready for a greater digitalization of the services.

Interviews with representatives of management of Banks:

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  HR manager of “Express Bank”
  
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  Director of Customer Service department of “International Bank of Azerbaijan” (“IBA”)
  
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  First Deputy CEO, “Kapital Bank”
  
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  Head of settlement division, “Xalq Bank”
  
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  Head of International Financial Institutions Department of “Bank Respublika”
  
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  Managers of middle level (various departments) of “Pasha Bank”
  

According to information provided by the banking experts it is hard to estimate the position of each Bank in terms of B2B and B2C due to the lack of market statistics about all the participants. As per information provided by the Director of Customer Service department of the largest bank of Azerbaijan, “IBA”, not all banks declare information on the volumes of interbank settlements. Based on the obtained information 26% of all legal entities in Azerbaijan are customers of “IBA”. Moreover, being the largest bank institution, and positioning itself as a universal bank institution, historically “IBA” was stronger in corporate clients` segment rather than retail banking. Availability of large payroll projects with its corporate clients and pension bulk payments processing allow the bank to develop its consumers lending and arrange for new retail products. Furthermore, bank’s representatives acknowledge the strengthening impact of online payment systems on the bank’s performance. In order to mitigate this, influence the Bank constantly fulfills measures to develop merchant acquiring clients` network, which also includes largest local online payments providers, to improve and constantly upgrade of IBA’s own online banking platforms (for instance, IBAm Mobile Banking), to expand our partnership with global premium payment services (American Express, Diners Club, etc.). For some of them IBA is a sole and exclusive local partner. Also, “IBA” is a main banker for ASAN and E.GOV governmental portals. “IBA” constantly improves relationship and payment terminal network, expands salary and other payroll projects with large state and private enterprises, pension fund and other massive payroll card holders and constantly upgrade card products with full range of online capabilities within merchants and ATM network.
Meanwhile, “Kapital Bank” is considered as the leading retail Bank in Azerbaijan and as was stated by the interviewee, B2B is not the priority segment for the entity, but share of B2C is increasing quite fast.
For instance, according to received information, customers of “Xalq Bank” mostly prefer to pay loans by cashless methods. Moreover, clients of “Xalq bank” and Respublika Bank mostly fulfill non-cash transactions. While, according to information received from “Kapital Bank”, volume of cashless transactions increased twofold in comparison with last year, nevertheless, cash transactions still prevail among their customers. Meanwhile, representatives from “Express bank” and “Kapital Bank” have not underlined any preferred payment tool, banks’ customers are using various payment tools: online (via internet and mobile banking application), cash terminals, by cash at the office.
Moreover, all interviewed experts agreed on the vast importance of mobile banking applications and according to provided information, all banks possess App for payments and are constantly improving and working on it for easier and more convenient use by the Clients, such as IBAm, Express Pay etc.
Furthermore, interviewed experts of banks declared that contactless payment tools are offered to their customers.
For instance, Bank Respublika offers PayPass stickers instead of traditional bank card, that can be attached to any item like a mobile device, bag etc.
Meanwhile, according to information provided by managers of various departments of Pasha Bank in recent years Bank has been increasing penetration in SME segment where the ratio cash/non-cash transactions are quite different than in corporate segment. For both segments, bank offers wide product range in respect of non-cash transactional business with innovative components such as corporate cards, POS acquiring and Letters of guarantee which enable to make settlements cheaper, quick and suitable. Also, the process of constant investment aimed at improving the user experience of the clients: the interface has been enhanced, and the number of products available through the new modern e-banking solution has expanded. It led to the growth of a share of the client’s transactions executed in a digital way, which is part of Bank’s strategy. Regarding the types of transactions in current accounts: cash constitutes only 20 % among incoming transactions in CIB and 27 % in SME segment. Moreover, the major share of customers pays credits online (Internet Banking service, Milliön payment terminals, etc), while, partially cash payments are observed in respect of agricultural payments. The Mobile App was launched by Pasha Bank in 2016 – all kinds of payments can be executed, including parking payments. For the near future, it is planned to apply an electronic signature for customers not to waste time coming to the office.
Pasha Bank was the first Bank in Azerbaijan, introducing the system of acquiring and issuing the contactless payment cards (Visa and Mastercard). Moreover, 96% of payments made by corporate, commercial, and SME customers are realized online.
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In a nutshell, all interviewed banking experts agreed that financial literacy of customers is growing steadily, that is reflected by the increasing number of consumers using online payments by mobile applications and web platforms. Moreover, positive trends are observed on the financial market of Azerbaijan due to the

recent institutional changes, such as reforms in tax legislation triggering cashless payments, increasing transparency in business, restructuring of the assets and liabilities of the banks and growing diversification in terms of concentration of corporate and retail business. Experts admitted that the volume of online transactions increased significantly. However, some experts consider that growth of digitalization is caused by the increased sophistication level of data exchange tools rather than general digitalization level as a result of conducted reforms.
Meanwhile, centralized databases for banks, such as reporting systems, tax, and custom systems, are accessible by banks and are updated online. Access to the credit scoring system plays a crucial role in the performance of banking institutes.