by Roland Toch
June 30, 2016

Contactless payments, e-commerce and investment in consumer education about financial cards are creating new opportunities for growth in Romania’s payments market.

The future of payments is already tangible in some parts of Romania, if you know where to look. Commuters in Bucharest have been able to use their mobile phones to pay for public transportation since 2013, while shoppers at the city’s Carrefour hypermarkets now receive personalised promotions and offers on their smartphones, thanks to 600 BLE beacons placed throughout the stores.

True, the vast majority of payments are still made in cash in Romania, where people are accustomed to withdrawing most of their salary to pay bills, expenses, and instalments each month. But there are also encouraging signs of Romania’s growing interest in alternative payment methods.

For instance, transactions at the POS have been increasing at a rate about 10-fold higher than at the ATM in recent years, according to a local industry expert. A 2016 survey by MasterCard provides further details: 85% of respondents said they now use a payment card for their daily shopping. And even as the total number of card transactions has grown each quarter, the average transaction value has remained roughly the same. This suggests that Romanians are growing more comfortable with the convenience and security of cards and are now using them for lower value transactions.

Romania is the fastest-growing market for card payments in Europe

There are a few reasons behind this changing mentality. For one thing, the Romanian government and banking institutions have long invested in educating consumers about the basic features and benefits of payment cards. And a number of new financial policies have gone into effect, which aim to encourage electronic payments and increase transparency.

For another, contactless payments have found firm footing in the Romanian payments market. Between March and December of 2015, the number of contactless payments increased by 160%. MasterCard Romania has issued about 1.3 million contactless cards so far, but one local expert predicts that at least half of the market will adopt contactless cards in the next two years.

All of this is contributing to make Romania the fastest-growing market for card payments in Europe. 

E-commerce boom leads to innovation in payments

One industry already eyeing the card payments trend is e-commerce, valued at 1.5 billion EUR for products alone, not including services, airline tickets, hotels, or holidays. Online retail in Romania has grown so quickly in recent years that courier services have struggled to keep up. The problem is compounded by the fact that most Romanians prefer to pay cash on delivery for their purchases, so they can verify and test the product before settling the bill. In order to increase the efficiency of this process, couriers will make card payment upon delivery an option in cities in future.

Currently, less than 10% of online purchases are made by card, but that figure is increasing steadily. According to Visa, card payments for e-commerce grew 20-25% last year. In the first quarter of 2016, payments jumped 62% compared to the same period in 2015.

Romania has one of the world’s fastest internet connections

One factor cannot be overlooked when examining Romania’s e-commerce growth: the country’s superior internet connection speed. Nine of the top 15 cities with the fastest internet worldwide are in Romania. And as a whole, the country outranks the USA, UK and Germany for both average and peak connection speeds. Over half of Romanians use the internet, with more coming online every year, and everyone owns a mobile phone. Smartphone penetration is around 50%.

While many people use their mobile devices to shop for goods online, mobile payments – whether online or in-store – are less common. In theory, however, if not in practice, the ability to pay with a mobile device is becoming increasingly popular in Romania’s urban areas.

This may be as clear a sign as any that mobile payments have a future in Romania. Whether it is card payments at the POS, contactless card use, or e-commerce adoption, advancement in Romania’s payments market seems to be only a matter of time.