New technology could overcome last Czech resistance to credit cards

Paying by plastic card took off in the Czech Republic after the fall of Communism as the country transformed into a developed consumer society. But surveys still show a hard core of Czechs shun payment cards preferring good old cash because they feel they can better keep track of their spending. Now some card companies are rolling out smarter systems which might help overcome this last resistance.

Figures from the Czech Bank Card Association show just over 9 million bank cards in circulation in a country of just over 10.5 million people at the end of last year. That was an increase of just over 1.37 percent on the previous year but still way behind card ratios in Western Europe.

Photo: Štěpánka Budková

The good news for the big international companies, led by MasterCard and Visa, that provide these plastic cards and services is that Czechs appear to be using the cards more and more. Transactions in shops using cards rose almost 15 percent in 2009 with the value of overall transactions topping 200 billion crowns, around 10 billion US dollars.

But the economic crisis appears to have had a delayed effect in the country with Czechs now being more thrifty about their payments. Brian Lang, head of MasterCard Europe’s Czech and Slovak operations, sums up the state of the market in the first half of this year.

“The transactions in the Czech Republic at the point of sale are going up and they are going up quite well. So the good news is that people are using their cards more at the point of sale. The bad news is that they are not spending as much. They are not buying as high price merchandise so the average spend is a little lower than in the past.”

And there is still a staunch core of Czechs who shun plastic payments. According to a survey by GE Money Bank at the start of this year 13 percent of Czechs do not own a credit or payment card at all. That is about half the number of non-card holders compared with the situation three years earlier.

One of the payment card giants, MasterCard, has rolled out technology which may help it crack some of the Czech resistance to using credit cards in particular. Part of that resistance stems from fears about credit card fraud and some from anxiety they will be tipped into debt by the ease of buying now and paying later.

The new technology allows customers to set more controls about how they use their cards. For example as well as overall spending limits, spending ceilings for particular categories of goods, such as shoes, can also be built in.

In Europe, this technology is being tested first in Britain with a decision still to be made about whether to roll it out in the Czech Republic. Brian Lang again.

Brian Lang

“We need to find out if consumers really want to be this involved in the card business. We hope they do. They do in the United Kingdom where we have launched this. It is a fairly sophisticated consumer there, that is not to say that Czech consumers are not sophisticated, but in the card payment space people in the UK and US and some other western European countries have been around cards a lot more, have had more cards, and are therefore more comfortable about being involved in the payment process.”

Some market experts however believe that this new technology might appeal more to companies than individuals and say other technological advances in the pipeline might make more of an impact turning even more Czechs into plastic people.