This post is written by Paul Wild, the owner of Mobile Money Sh.p.k, a consultancy company focused on e-commerce, financial services, SME and management consultancy. Paul has worked in the banking and commercial sector for over 20 years and is based in Tirana, Albania.
Albania remains a mixed market with 50% of the population outside the capital Tirana, located in secondary cities, towns and rural areas, the majority of which remain unbanked. Even the banked population can be described as under banked, meaning that they use very few banking products and prefer to withdraw their entire balance on pay day and deal in cash! This is something the banks are failing to address.
There are numerous reasons for this behavioral trait, which stem from poor civil infrastructure, little town planning, chaotic construction resulting in an unclear property system, and thus a poorly functioning postal service.
State utility companies and private utility companies struggle to deliver utility bills, resulting in poor collection and lack of revenue, which in turn results in little investment into systems and services that could improve the situation, creating an ever decreasing circle.
Typically, state utility companies do not accept bank transfers to pay utility bills, even now that the state electricity company is privatized and are encouraging direct debit payments, people remain nervous about paying through this channel as they do not trust the electricity company to recognize the payment. Consumers prefer to have an official receipt of payment from the electricity company which they can show if required. Consumers also do not trust the banks to make the payment correctly and often when problems are encountered both parties point the finger of blame at each other, resulting in the consumer having to solve the issue themselves. So what better than having that official receipt of payment stamped and signed by the utility company! The result is that cash is king.
Due to this environment the mobile communication market is predominately a pre-paid market, post paid is available but of course when it comes to issuing monthly bills they too encounter all the problems mentioned above. Thus cash remains king to consumers.
Payment card acceptance has also been slow to grow in the country, as retailers who are often small SMEs and not large international retailers refuse to accept cards and actually offer a discount to buyers that pay in cash. Interestingly, the discount is often deeper than the 2 to 3% that the bank would charge the retailer for such a transaction. The reason for this is poor tax reporting and collection. However, since the government introduced a mandatory requirement for a tax receipt to be issued to consumers, this practice has declined and rather than offer a discount, retailers simply refuse to accept cards. That said, the retail environment is changing in Albania with several large malls opening which contain international brand names who do accept cards. Consumers are quickly catching on to the convenience attached to using a card and are beginning to shun retailers that do not accept cards. This change in consumer behavior will help encourage the use of e-banking products. Continue reading