With only 50 percent of Romanians receiving their monthly income in their bank accounts and 17 percent receiving it in cash, according to the Digital Payments Index, a measurement methodology developed by Mastercard, Romania is far from having large-scale adoption of digital payment methods. According to Bartosz Ciołkowski, General Manager for Southeast Europe at Mastercard Europe, the growth of digital payments in Romania is a mission that brings together several partners—payments networks, banks, retailers, authorities—with the value of this collaboration being reflected in the year-to-year growth in the use of digital payment methods.
By Anda Sebesi
What are the current trends in international payments and how many of them have been adopted in Romania?
The last two years have represented a “reset” period, which sparked a recalibration of priorities, values, and behaviours and triggered the “rewiring” period, during which we’ve witnessed an acceleration of technology adoption, enhanced innovation, and infinite possibilities, including in terms of purchasing whatever we want, whenever and however we choose to, from wherever we are. And this is where Mastercard steps in: our mission is to build a sustainable digital economy for consumers everywhere.
Payment options have steadily diversified in recent years, driven by consumer demand and the evolution of new technologies that have made solutions like digital wallets and biometric payments possible. Mastercard data shows that adoption of new payment methods is on the rise and that consumer appetite for new, fast, and flexible digital technologies continues to grow. With this interest and demand from consumers also comes an expectation that businesses should offer more ways to shop and pay. We’re seeing an increased focus on the customer experience area, with goals like facilitating a more comfortable and safer user experience, offering simplified transactions, and introducing certain advantages such as cashback policies, instant payments or Buy Now Pay Later schemes.
Contactless technology has been the digital catalyst for exploring new payment options, because it offers a fast, secure, and touch-free payment experience. In Romania, contactless products and technologies have reached an almost maximum level of maturity.
Mobile payments are also increasingly popular in Romania, with more and more people preferring to use their phones or smart watches to make payments over traditional methods. A group of consumers that’s particularly inclined towards mobile phone payments is Gen Z. 49 percent of young Romanians say that they currently use this payment method versus a 38 percent average in Central and Eastern Europe, according to a Mastercard study carried out in the CEE region on the attitudes and behaviours of Generation Z, published in 2021.
Another method that is gaining ground is biometric payments. Biometrics relies on the user’s characteristics and requires personal presence and active participation to approve a transaction, meaning it’s highly secure.
According to the 2021 Digital Payments Index, only 50 percent of Romanians receive their monthly income in their bank account, while 17 percent receive it in cash. What can be done to make the use of digital payments more widespread in Romania?
The Digital Payments Index is a measurement methodology developed by Mastercard to assess the dynamics and the maturity of the payments ecosystem in Romania, aiming to be a valuable asset to a range of audiences, from industry players to companies, institutions, and administrative bodies and helping them set their goals and agendas.
Following three indicators—Infrastructure, Knowledge, Usage—rated on a scale from 1 to 100, the index provides an overall dimension of the digitalization of payments in Romania. In 2021, the Digital Payments Index for Romania scored 54 out of 100 points. This result is calculated as the average of the individual scores obtained for each pillar: 69 for Infrastructure, 49 for Knowledge, and 44 for Usage. The results indicate a significant growth potential in all three directions and prescribe our course of action.
The growth of digital payments in Romania is a mission that brings together several partners—us at Mastercard, banks, retailers, authorities—and the synergy of this collaboration can be seen in the year-to-year evolution of the adoption of digital payments.
An important objective is providing financial education for all age groups, at the national level. The results of the Index suggest that Romanians are generally open to adopting digital payments, but many still do not fully understand how they work and are not familiar with the advantages of these payment methods.
Another path of action is expanding the infrastructure. We have a good base that we can build on, especially in the main cities, but there is also a lot of space to fill in across small towns and rural areas.
The legislative framework is also essential for the growth of digital payments in Romania. There are several legislative measures that can have a direct impact, but I especially want to point out the social programmes developed by the Romanian Government, in which Mastercard is a proud partner. We are talking about 400,000 elderly beneficiaries of the “Hot Meals” Programme, 235,000 children included in the “Educational Support” Programme—which aims to prevent school dropout among children from disadvantaged backgrounds by purchasing the school materials and clothing items they need to attend school and kindergarten—, and 2,5 million Romanians in risk of poverty who were beneficiaries of the “Support for Romania” Programme.
What have you observed regarding Romanian consumers’ behaviour in terms of payments?
Romanian consumers have embraced the advantages technology can bring to their daily lives, and in the context of the last two years, more and more of them have turned to digital payments. Still, there is plenty of room for growth.
Taking a look at the numbers, according to the Digital Payment Index, 2 out of 5 Romanians do not have access to financial products and services and therefore cannot use digital payments. Cash is still considered to be the safest and most convenient way of payment by a good part of the population. This situation is related both to the infrastructure and the level of knowledge regarding the use of electronic payment methods, but also to the avoidance of sales transparency.
Access to banking services is also determined by demographics. In general, younger, higher-income, college-educated generations have stronger financial literacy and are more likely to use banking services than older and less educated consumers. At the same time, people living in large and medium-sized cities have a better level of knowledge than those in rural areas. Therefore, the most important actions are related to investments in infrastructure and education, especially in small towns and rural areas.
Is Romania similar to other CEE countries in terms of consumer behaviour when it comes to using payment methods?
There is a pattern when it comes to demographics, and by that I mean criteria such as age and place of residence, and a correlation between the level of knowledge and the pace of adoption of a new technology or payment method.
We noticed this in the findings of the Digital Payment Index, which was carried out last year across seven markets where we operate—Hungary, Austria, Bulgaria, Croatia, Greece, Hungary, Romania, and Serbia—, so it provides an overview and a synthetic comparison of each country’s performance.
The global 2021 Digital Payment Index scores range from 45 to 61 points on a scale of 1 to 100, with an average of 56 points across the seven countries. With 54 points, Romania is behind Croatia (61 points), Austria (60 points), Greece (60 points), Hungary (58 points), but ahead of Bulgaria (53 points) and Serbia (45 points). The variation in index scores is primarily driven by Infrastructure scores, the sub-index in which countries scored the highest, implying that most have a strong foundation for digital payments. The Knowledge and Usage sub-indices scored lower, suggesting that it takes time for payment solutions to gain consumer adoption after being introduced on a given market.
To what extent is Romania a digital economy at this moment?
Romania ranks 27th among the 27 EU member states in the 2022 edition of the Digital Economy and Society Index (DESI), an annual report conducted by the European Commission. The country is lagging behind on several indicators in the human capital dimension, with a very low level of basic digital skills compared to the EU average, but maintains its high rankings in the share of female ICT specialists in employment (ranking 2nd) and ICT graduates (ranking 4th).
Digitalization is a key priority of the government, and there are cross-cutting measures within the Romanian Recovery and Resilience Plan (RRP), such as the adoption of the legislative framework for the digitalization of education, public services, and SMEs.
Digitalization comes with numerous advantages and benefits, at the same time being a catalyst for supporting digital payments, which provide increased revenue opportunities for businesses, more payment options for their customers, in physical stores or online, and contribute to a healthier economy. Therefore, the digitalization process must include both the public administration and the private sector, and here we are talking about companies of all sizes and from all sectors. More precisely, we are talking about the digitalization of the interactions Romanian consumers have in all aspects of everyday life, from paying for a public transport ticket to issuing a building permit.
How does Mastercard contribute to the digitalization of the local economy?
Digitalization is a topic of strategic importance for Mastercard, with our initiatives being structured on 4 dimensions: society and citizens, digital economy and entrepreneurial environment, integration of the digital economy, e-government and infrastructure. We are partners in more and more initiatives for the digitalization of public transport, traditional retail, the local business environment, and payments for taxes and public services.
For example, Mastercard has been at the forefront of developing the Ghiseul.ro mobile app, which allows Romanian citizens to pay their taxes and public services in a secure and easy manner, using their phones. It integrates the latest security standards, compliance requirements, technologies, and options such as biometrics, transaction history, useful notifications, information filtering options, and the up-to-date status of debts and payments in terms of taxes, services or fines.
How does Mastercard support SMEs in their efforts to implement digitalization projects?
Embracing technology and innovation is the principle based on which business sustainability is achieved. Whereas corporations and the public administration have understood this and have boarded this train, SMEs have not yet fully embraced the possibilities and impact of new technologies.
Small businesses represent the foundation of our communities and they have an outsized impact. But running a small business is increasingly challenging and complicated. More than 40 percent of SMEs have been under risk of closure due to pandemic-related effects, making it clear that they need solid networks, financing, tools, and resources to thrive in the digital economy. We have curated a variety of resources, solutions, and offers to help guide, grow, and protect businesses throughout their digital journey, from payment instruments to cybersecurity or data and insights.
What is included in your portfolio of payment solutions for retailers/companies?
Mastercard goes beyond payments to help grow businesses. Our portfolio of solutions is designed to improve the checkout process, attract more customers, build loyalty, streamline operations, and offer enhanced protection. We are focused on transforming the consumer experience and building trust in the digital economy by ensuring a network that securely and seamlessly connects people with retailers, banks, and businesses around the globe—enabling them to interact however, wherever, and whenever they want, with complete confidence.
How do you see Romania’s economy evolving over the next 10 years from the point of view of digitalization?
With a public agenda focused on increasing the level of digitalization and the open-mindedness of the public and private sectors to adopt new and innovative solutions, I think Romania is slowly, but steadily taking steps into the digital economy.
When did you start incorporating ESG principles into your business strategy?
Our core behaviours of operating ethically, responsibly, and with decency are linked to ESG, making it a vital component of our culture and our future. As a technology company, we are committed to using technology to foster innovative solutions with practical applications, which are needed to achieve global sustainability goals. Our activity is guided by the “Force for good” principle, so that everything we do enables people and the planet to thrive. When growth is sustainable and prosperity is shared, this automatically has a positive impact over the business as well. We recognise that environmental, social, and governance efforts are intertwined with the company’s business, and we’ve channelled our ESG activities into three areas: People (focused on empowering people to reach their full potential), Planet (focused on preserving the planet for future generations), and Prosperity (focused on creating a more sustainable world with a digital economy that works for everyone, everywhere).
What are the key initiatives the company has carried out within its three ESG areas?
We believe that change starts with us and that it’s our responsibility to lead by example. Our People strategy has helped fuel Mastercard’s success, positioning us as a global technology company, a recognised workplace, and a celebrated brand. We provide resources for mental, physical, financial, and social well-being in order to help our employees be at their best and achieve personal growth. We also invest in programmes and practices that improve employees’ daily work habits and routines, helping them find the flexibility they need to support their work-life balance. Our programmes are designed to empower our people to accelerate their career growth, help increase gender and racial representation across the company, while fostering collaboration, accelerating innovation, and boosting customer engagement.
The Planet pillar is built on Mastercard’s continuing commitment to developing a more environmentally sustainable approach. Our priority is to reduce our own carbon footprint and create innovative solutions and initiatives that unite our network of customers, partners, and consumers in climate action. We’ve also moved up our commitment to reach net-zero emissions by a decade, from 2050 to 2040, and by 2028 we aim to remove first-use PVC plastics from payment cards in our network. Since September 2021, the core of our sustainable business model is the global Sustainability Innovation Lab, located in Stockholm, Sweden, the place where the company’s portfolio of environmentally conscious digital products and solutions are created. An example of such a solution is the Mastercard Carbon Calculator, which allows customers to view the estimated carbon footprint of all their purchases and offers them tips on how to make practical and simple changes leading to more mindful spending. The Priceless Planet Coalition is another example that embodies the power of a purposeful cause to rally entities, with the aim of restoring 100 million trees by 2025 in geographies that have the greatest need.
For more than 50 years, Mastercard has been building a more inclusive and sustainable digital economy, ensuring secure access to critical financial services that help create a path to prosperity, our third ESG pillar. We are focused on empowering people by ensuring that everyone has the opportunity to succeed in the digital economy. Our commitment is to bring 1 billion unbanked people into the digital economy by 2025, to support 50 million small businesses globally, and to empower 25 million women entrepreneurs.