III. Funciones principales del Secretario Judicial: La fe pública judicial y la actividad
5. Notas características de la fe pública judicial
In accordance with the point above, we surveyed costs separately on the issuer and acquirer side of the payment service provider sector. Since the payment service providers do not pay any fees to the other two sectors − corporate and household sector − participating in the payment chain, the private and social costs are identical in relation to the payment service provider sector.
4.2.4.1 costs relating to debit card payments in the payment service provider sector on the issuer side
Within the payment service provider sector, we estimated costs relating to debit card payments in 2009 at HUF 16.64 billion on the issuer side. In view of the fact that the number of domestic payments transacted with the debit cards of payment service providers included in the sample amounted to 97% of total payments in 2009, we used this ratio to multiply the costs of the credit institutions in the sample.Table 24
costs relating to debit card payments in the payment service provider sector on the issuer side items Private/social costs (HUF billions) On the basis of social costs (share)
1. Acquiring new customers 1.80 10.82%
2. Risk analyses 0.11 0.67%
3. Issuance of cards 2.27 13.64%
4. Transaction (non-payment) processing 2.50 15.05%
5. Domestic interbank clearing and settlement costs 1.12 6.72%
6. Fraud prevention and management, and fraud loss management at payment transactions 0.39 2.37%
7. Costs of additional services for customers 1.35 8.09%
8. Visa/MasterCard/Amex licences and other fees 1.75 10.50%
9. Customer services 1.04 6.22%
10. Management and monitoring of activities 1.95 11.7%
11. Advertising and marketing 0.27 1.63%
12. Document management and archiving 0.20 1.18%
13. Money laundering monitoring 0.08 0.46%
14. Other activities 1.82 10.95%
Total (1−14) 16.64 100.00%
Source: MNB.
The processing (authorisation) of non-payment transactions, card issuing, customer acquisition and the conclusion of service contracts comprise a large portion (approximately 40%) of the above total costs. The cost of one debit card payment on the issuer side amounts to HUF 110.74.
4.2.4.2 costs relating to credit card payments in the payment service provider sector on the issuer side
In the payment service provider sector, we estimated that the costs relating to credit card payments in 2009 amounted HUF 17.35 billion on the issuer side. In view of the fact that the number of domestic payments transacted with the credit cards of payment service providers included in the sample amounted to 91% of total payments in 2009, we used this ratio to multiply the costs of the credit institutions in the sample.Customer acquisition and auxiliary services provided to customers account for a significant share of total costs (over 30% combined). The cost on the issuer side equals HUF 706.15 per transaction.
4.2.4.3 comparison of issuer side unit costs relating to debit and credit card payments
In view of the fact that the unit cost of credit card transactions on the issuer side is over six times the cost of debit card transactions, we compared the unit costs of individual activities.
Table 25
costs relating to credit card payments in the payment service provider sector on the issuer side items Private/social costs (HUF billions) On the basis of social costs (share)
1. Acquiring new customers 3.83 22.08%
2. Credit risk analyses 1.01 5.81%
3. Issuance of cards 0.65 3.77%
4. Transaction (non-payment) processing 0.58 3.36%
5. Domestic interbank clearing and settlement costs 0.21 1.20%
6. Fraud prevention and management, and fraud loss management at payment transactions 0.38 2.16%
7. Costs of additional services for customers 1.48 8.55%
8. Visa/MasterCard/Amex licences and other fees 1.48 8.55%
9. Customer services 0.96 5.53%
10. Management and monitoring of activities 3.39 19.56%
11. Advertising and marketing 0.44 2.55%
12. Document management and archiving 0.29 1.65%
13. Money laundering control 0.04 0.26%
14. Other activities 2.60 14.97%
Total (1−14) 17.35 100.00%
Source: MNB.
Table 26
Unit cost elements of one debit and one credit card transaction arising at the issuer bank
items Debit card (HUF) credit card (HUF)
1. Acquiring new customers 11.98 155.94
2. Credit risk analyses 0.74 41.00
3. Issuance of cards 15.10 26.61
4. Transaction (non-payment) processing 16.67 23.74
5. Domestic interbank clearing and settlement costs 7.44 8.47
6. Fraud prevention and management, and fraud loss management at payment transactions 2.62 15.28
7. Costs of additional services for customers 8.95 60.36
8. Visa/MasterCard/Amex licences and other fees 11.63 60.34
9. Customer services 6.89 39.08
10. Management and monitoring of activities 12.97 138.14
11. Advertising and marketing 1.80 18.04
12. Document management and archiving 1.30 11.62
13. Money laundering control 0.51 1.83
14. Other activities 12.13 105.70
Total (1−14) 110.73 706.15
CURRENT COST SITUATION
The table shows that the unit cost of credit cards is higher than that of debit cards in relation to all activities. Economies of scale is a contributing factor (7.27 million debit cards and 1.52 million credit cards); as a result, for example, the unit cost of one plastic card is higher in relation to card issuance due to the printing of the cover letters. We discuss below the largest differences and their reasons.
− The costs of customer acquisition are significantly increased by the education of potential credit card holders in know- how relating to credit card products.
− Credit risk analysis is much more thorough than the common risk analysis relating to debit cards.
− Obviously, due to the higher number of services provided to customers, costs related to credit cards are significantly higher than in the case of debit cards.
− Card company fees are also higher in connection with the issuance of credit products (e.g. credit card module licence). − The cost of customer service is increased by information provided in relation to credit repayment (amount of debt, the
amount to be repaid, etc.).
− Credit and collection monitoring, for example, increases the cost of management and monitoring.
− Issuer banks spend more on the advertisement of credit cards than debit cards, considering that the issue of credit cards is much more profitable than debit cards.41
4.2.4.4 costs relating to payment card payments on the acquirer side in the payment service
provider sector
Table 27
costs relating to debit and credit card payments in the payment service provider sector on the acquirer side items
Private/social costs (HUF billions)
share on the basis of social costs
Debit card credit card Debit card credit card
1. Acquiring new customers 0.50 0.08 6.30% 6.32%
2. Risk analyses (merchants) 0.06 0.01 0.77% 0.77%
3. Transaction (non-payment) processing 0.39 0.06 4.89% 4.90%
4. Domestic interbank clearing and settlement costs 1.08 0.18 13.59% 13.62%
5. Fraud prevention and management, and fraud loss management at payment transactions 0.20 0.03 2.57% 2.57%
6. Costs of additional services for customers 0.08 0.01 0.96% 0.96%
7. Visa/MasterCard/Amex licences and other fees 1.13 0.18 14.17% 14.20%
8. Customer services 0.16 0.03 2.06% 2.06%
9. Management and monitoring of activities 1.03 0.17 12.93% 12.96%
10. Advertising and marketing 0.01 0.00 0.14% 0.14%
11. Payment transaction management (without interchange and fees paid by cooperative bank branches) 0.44 0.07 5.53% 5.34%
12. POS management 2.26 0.37 28.44% 28.49%
13. Document management and archiving 0.10 0.02 1.21% 1.21%
14. Money laundering control 0.05 0.01 0.65% 0.65%
15. Other activities 0.46 0.08 5.80% 5.81%
Private and social costs of payment card acceptance 7.94 1.30 100.00% 100.00%
Source: MNB.
41 This is so even if we take into account that in relation to credit cards, the payment service providers must also cover their crediting costs (provisioning, net crediting loss, collection cost, capital cost).
In the payment service provider sector, we estimated that the costs relating to payment card payments in 2009 amounted to HUF 9.24 billion on the acquirer side. Extrapolation was not necessary in this case, as the credit institutions participating in the sample fully cover the domestic acquirer business. We did, however, distribute costs among credit and debit product groups in proportion to transactions (85.95%−14.05%), in accordance with point 4.2.3.
On the acquirer side, the largest cost items are POS management (28.4% and 28.5%),42 fees paid to card companies (14.2%) and the cost of domestic interbank clearing and settlement (13.6%). The unit cost of a transaction for an acquirer bank is HUF 52.80 in relation to both debit and credit products.
4.2.4.5 Total costs relating to debit and credit card payments in the payment service provider sector
Summarising the costs incurred on the issuer and acquirer side, it can be established that a total cost of HUF 43.23 billion arose in the payment service provider sector in relation to payment card transactions; nearly 57% of such cost is linked to debit cards.Table 28
Total costs relating to debit and credit card payments in the payment service provider sector on the issuer and acquirer side
items
Private/social costs (HUF billions)
share on the basis of social costs
Debit card credit card Debit card credit card 1. Costs of payment card issuance at payment service providers 16.64 17.35 67.70% 93.03% 2. Costs of payment card acceptance at payment service providers 7.94 1.30 32.30% 6.97% Costs of payment service providers in connection with payment
cards 24.58 18.65 100.00% 100.00%
Source: MNB.