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Positive shifts in the payment services market in 2012 were caused by growing competition

January 22, 2013

In the previous year positive shifts for consumers of the payment services market were caused by growing competition among banks and new participants of this market. However, when several commercial banks raised the prices of some of their services, the fee gap expanded between cash payments or those carried out in bank branches and electronic transfers. These conclusions are presented in the Survey of Payment Service Fees, presented for the first time by the Bank of Lithuania.

The analysis of fee development revealed that fee averages of the set-off of domestic electronic transfers in litas to another bank and of respective transfers in euro from euro funds received from another bank were decreasing in 2012, as compared to 2011. These shifts were basically caused by lower fees offered by the electronic money institution UAB EVP International, licensed by the Bank of Lithuania in 2012.

When some banks increased their fees in 2012, credit transfers in litas inside the bank into the account of another customer as initiated by the bank branch and transfers to another credit institution became more expensive on average; the average fee for   services in cash increased as well.

"These facts allow us to assume that some banks prefer to encourage the usage of electronic services that are cheaper for them by making payments in branches and in cash more expensive. However, payment institutions are becoming more active in this market. Analysis of fees shows that the average standard fees for payment institution services in cash are often even several times smaller when compared to standard fees of banks or credit unions," said Gediminas Šimkus, Executive Director of the Financial Stability Department of the Economics and Financial Stability Service.

Competing in payments for services segment, the banks, in turn, encouraged the usage of alternatives in cash payments-a direct debit service which is free of charge for the payer in the majority of banks; the possibilities of the customer being able to perform several payments with one transfer were developed.

The 2012 Survey of Payment Service Fees compares for the first time the possible fees of different banks by applying three payment service baskets. The baskets were formed by choosing several of the most popular payment services-account management, domestic credit transfers in litas, fees for services, credit transfers in euro, debit cards and cash operations.

The analysis revealed that annual costs for the payment services basket, formed on the basis of the average number of operations per capita, amounted to LTL 177.42, i.e., 6 per cent more than in 2011. According to this basket, the highest average costs for payment services would be incurred by SEB Bank AB and AB DNB Bank, the cheapest-by AB Citadele Bank and AB Swedbank. The Survey also presents two more service baskets that demonstrate different assessments of consumer habits. Comparisons of payment service suppliers are given on the basis of standard fees of services provided by banks, disregarding any applied loyalty programmes or shares by which bank customers may pay less.

In order to establish better opportunities for customers to compare payment fees, to increase market transparency and encourage competition, the Bank of Lithuania has been disclosing on its website the payment service fees applied to natural persons as of October 2011. From now on, the Bank of Lithuania provides the possibility for customers to compare in diagram form which credit payment or electronic money institutions raised their fees the most, and which ones reduced them.here.