Presentation1

The ninth project managementmeeting for reducing cash transactionsin KosovoProject Management Group within the National Payments Council(NPC)Prepared by: Payment Systems Department, CBK23 November, 2012CENTRAL BANK OF THE REPUBLIC OF KOSOVO 1.

1. Approval of minutes from the last meeting(September 19th 2012)• To prepare a detailed analysis on the performance of Kos-GIRO payments for the next meeting(CBK) (fulfilled)• Detailed statistics on the number of ATMs and POS terminals (active and passive) and for thenext meeting to prepare statistics and analysis for payment instruments (CBK) (fulfilled)• In the next meeting, the team can discuss about their new projects that MasterCard can supportthem.(in process)CENTRAL BANK OF THE REPUBLIC OF KOSOVO 3.

Second Point (2)2. Presentation of the “Analysis on the Use of Payment Instruments”(1)Terminals by function 2008 2009 2010 2011 Q2 2012Automated Teller Machines (ATM ) 240 339 415 460 472From which:1 - ATM with cash withdrawals function N/A 339 415 460 4722 - ATM with credit transfers function N/A 122 141 147 149From which:a - ATM with Kos-Giro payment N/A N/A 39 69 72b- ATM with deposit cash function N/A 0 0 1 1ATM terminals by regions*The data presented in the graph shows that the largest number ofATMs is concentrated in the Prishtina region, due to the largenumber of residents.Equipping these ATMs with barcode reader will enable customers tomake payments for certain services directly from ATM withouthaving to visit the bank facilities.* Division of regions is made according to the following cities :Prishtina(Prishtinë, Podujevë, Obiliq, Novobërdë, Lipjan, Graçanicë, Gllogovc, Fushë-Kosovë)Prizren(Prizren, Dragash, Suharekë, Rahovec, Malishevë, Mamushë)Mitrovicë(Mitrovicë, Skenderaj, Vushtrri, Zubin Potok, Zveçan, Leposavië)Pejë(Pejë, Gjakovë, Deçan, Junik, Klinë, Istog)Ferizaj(Ferizaj, Kaçanik, Shtime, Han I Elezit, Shtërpcë)Gjilan(Gjilan, Kamenicë, Kllokot, Parteshë, Viti)CENTRAL BANK OF THE REPUBLIC OF KOSOVO 4.

2. Presentation of the “Analysis on the Use of Payment Instruments”(2)Terminals by function 2008 2009 2010 2011 Q2 2012POS terminals ( Point ofSale )From which:1 – POS terminals with cashwithdrawal function3.426 5,251 6.194 7.534 7.713N/A 212 212 1.376 2222 – EFTPOS terminals N/A 5.223 5,930 6,320 7,620POS terminals by regionsActive and inactive POS terminalsThe graphs above shows the distribution of POS terminals by regions of Kosovo, respectively POS active and inactive. The firstgraph shows that in Prishtina region is focused half of POS terminals, and the other half in all regions of Kosovo. The secondchart shows that a large number of POS (18%) are inactive, so there needs higher commitment of banks in order to promote theuse of payment cards.CENTRAL BANK OF THE REPUBLIC OF KOSOVO 5.

2. Presentation of the “Analysis on the Use of Payment Instruments”(3)Cards by function 2008 2009 2010 2011 Q2 2012Cards with cashfunctionCards with paymentfunctionfrom which:N?A 516,847 504,174 612,388 665,350116,852 538,907 518,581 623,488 677,644Percentage of active cards1 – Debit cards 105,713 507,399 480,659 548,253 589,8712 – Credit cards 11,139 31,508 37,922 74,873 87,793Cards with electronicpayment function0 9,801 8,321 12,391 12,736Total number of cards 116,852 548,708 529,525 637,519 690,400Card holders by ageCard holders by genderCENTRAL BANK OF THE REPUBLIC OF KOSOVO 6.

2. Presentation of the “Analysis on the Use of Payment Instruments”(4)Number of card transactionsDescription 2008 2009 2010 2011 Q2 2012Number of transactions 5,882,919 7,571,790 9,004,293 10,666,205 5,758,323from which:1 - ATM cash withdrawals 5,136,022 6,155,640 6,960,469 7,958,448 4,116,7542 - ATM deposit N/A 0 0 26 333 – Credit transfer throughATMs4 – Cash withdrawals in POSterminals5 – Payments with cards inPOS terminalsValue of card transactionsN/A 111,083 194,851 188,018 79,433N/A 17,923 35,574 90,127 8,406746,897 1,287,144 1,813,399 2,429,586 1,553,697Description 2008 2009 2010 2011 Q2 2012Number of transactions 539,535,697 662,115,998 758,437,983 965,501,131 464,458,077from which:In the tables at the left is shownthe number and value of cardtransactions. The data in the tableshows clearly the increase in thenumber and value of cardtransactions each year. Problem isthe fact that the largest number ofcard transactions consist of cashwithdrawals at ATMs, so greaterattention should be paid topromoting other functions exceptcards withdrawals in ATM.1 - ATM cash withdrawals 485,109,074 578,132,778 636,934,701 790,036,796 378,183,3222 - ATM deposit N/A 0 0 2,440 6,0403 - Credit transfer throughATMs4 - Cash withdrawals in POSterminals5 - Payment with cards inPOS terminalsN/A 764,111 1,304,436 1,280,784 559,112N/A 14,793,115 25,885,027 31,810,579 8,540,50154,426,623 68,425,994 94,313,819 142,370,533 77,169,102CENTRAL BANK OF THE REPUBLIC OF KOSOVO 7.

2. Presentation of the “Analysis on the Use of Payment Instruments”(6)Conclusion• ATM terminals mostly are used for cash withdrawals, banks shouldalso promote their other functions besides Cash withdrawals;• POS terminals network is extended to all centers of Kosovo, but thereis high number of inactive POS, thus raising campaign for payments atPOS terminals;• Cards number is constantly increasing, but their use in paymentterminals should be promoted, especially their use in POS terminals,as the number of cards used in the terminal is low;• The use of e-banking services remains low although upward trends.Banks should promote this service to increase use of it either throughtariffs or other forms from banks.CENTRAL BANK OF THE REPUBLIC OF KOSOVO 9.

2. Kos Gyro AnalysisNumber and value of Kos Giro payments in cash and from the account through EICS for the year 2007-2012Type of transaction Giro payment in Cash ( through EICS) %Giro payment from the account(through ICS)Number Value Number Value2007 87,511 203,625,449.22 30,805 160,783,620.072008 136,847 56.38 125,706,145.06 -38.27 108,812 253.23 406,472,555.25 152.812009 163,496 19.47 78,748,589.23 -37.36 205,259 88.64 578,300,941.81 42.272010 299,360 83.10 107,627,591.00 36.67 177,091 -13.72 610,038,088.00 5.492011 291,648 -2.58 132,138,679.00 22.77 205,244 15.90 775,414,392.00 27.11Q2 2012 146,061 -49.92 57,341,689.00 -56.60 108,467 -47.15 325,518,041.00 -58.02Number and value of Kos Giro payments in cash and from the account in the bank (INTRA) for the year2007-2012Type of transaction Giro payment in Cash ( through EICS) %Giro payment from the accountwithin the bank /INTRANumber Value Number Value%%The number and value ofpayments that belong to theKOS GRIO scheme is growingconstantly. The main purpose ofthis form of payment is toreduce cash payments, andtherefore should be promotedGiro payments throughaccounts, discouraging Giropayments through Cash.2007 10,197 40,848,767.14 18,019 8,827,130.432008 29,528 189.58 8,967,735.92 -78.05 29,273 62.46 103,801,821.17 1,075.942009 74,619 152.71 12,087,887.32 34.79 30,444 4.00 76,014,418.96 -26.772010 109,442 46.67 35,314,429.00 192.15 99,562 227.03 85,154,228.00 12.022011 114,368 4.50 20,566,916.00 -41.76 89,027 -10.58 222,255,236.00 161.00Q2 2012 49,233 -56.95 7,418,571.00 -63.93 34,886 -60.81 120,058,704.00 -45.98CENTRAL BANK OF THE REPUBLIC OF KOSOVO 10.

Third Point (3)3. Discussion regarding the way of cooperation with VISA– Financial support by VISA, as discussed in other meetings.“Visa has promised the budget of US$ 10,000 to be used next year. ..toinvest the funds in developing a local web site by local resources and alsoVisa can help with providing the content"CENTRAL BANK OF THE REPUBLIC OF KOSOVO 11.

Third Point (3)3. Discussion regarding the way of cooperation with MasterCard (1)Regarding the CBK objective of reducing volumes of cash transactionswithin the banking system, Master Card Advisors prepared a proposal tohelp:1. Design framework for establishing national card processing center;2. Bring worldwide legal and marketing practices to increase share ofelectronic payments.CENTRAL BANK OF THE REPUBLIC OF KOSOVO 12.

Third Point (3)3. Discussion regarding the way of cooperation with MasterCard (2)MasterCard built a custom approach for CBK with three main work streams:1. Market Assessment and Target Setting;2. Benchmark Analysis and NPC Op Model Options;3. Legal and Marketing Practices BenchmarkingCENTRAL BANK OF THE REPUBLIC OF KOSOVO 13.

Third Point (3)3. Discussion regarding the way of cooperation with MasterCard andVISA, and other sources required for project managementProposal:Each participant in Payment System to contribute at least with 2 000 Euroincluding CBK, to support the development of awareness campaigns on theuse of electronic payments;CENTRAL BANK OF THE REPUBLIC OF KOSOVO 14.

Fourth Point (4)4. Discussion about National Interbank Card Switch• To analyze the possibility of using reciprocal the bank cards at all ATMsand POS terminals.- Bilateral or multilateral agreements between banks.- Standardization – (how to be done?, what to do and when?)• Third Pillar. Within National Payment Systems DevelopmentStrategy, leaded by CBK, there have been undertakenquestionnaires, analysis and assessing practices from othercountries.• Support requested from World Bank and in contact withMasterCard (through this team).CENTRAL BANK OF THE REPUBLIC OF KOSOVO 15.

Fifth Point (5)5. To define objectives of the team and their completion timeConclusions and objectives decided together with theproject management team within the NPC.• ______________________• ______________________• ______________________• ______________________• ______________________• ______________________CENTRAL BANK OF THE REPUBLIC OF KOSOVO 16.

Thank youNational Payments Councilhttp://www.bqk-kos.org/?cid=1,59,55CENTRAL BANK OF THE REPUBLIC OF KOSOVO 17.