The Hungarian government has made efforts to reduce the volume of cash in circulation and promote the use of electronic payments in a bid to improve the country's competitiveness, local media reported on August 25.

Hungarians use some 9mn bank cards, 75% of which are contactless cards, and modern electronic payment solutions are now accepted at 110,000 shops and service providers using almost 140,000 POS terminals, Finance Minister Mihaly Varga said recently. 

Digitalising the payment system has a considerable impact on competitiveness since cashless payment options make it quicker, safer, cheaper and more convenient to execute payment transactions. 

The volume of cash in circulation in the Hungarian economy equals 14% of GDP, compared with 8% in the EU. Manufacturing, safekeeping, transporting and processing cash incurs costs amounting to several hundred billion forints each year. The transition to a digital economy has become a high priority of the government.

The Magyar Nemzeti Bank (MNB) recently presented a package of proposals consisting of 180 points to towards improving Hungary’s competitiveness to the National Competitiveness Council, a body of business leaders and experts set up last year. 

Surveys have shown the country slipping in various competitiveness rankings, which may impede the government's ambitious long-term sustainable growth target of 4%.

The MNB advocated, amongst others, increasing the efficiency of the state by cutting red tape and extending digitalisation in state administration digital technology.

Varga said the government has provided subsidies to support the installation of POS terminals since the end of 2016, which has led to the installation of some 30,000 units nationwide. POS terminals were installed in some 1,000 villages and now two-thirds of the 3,200 municipalities have shops that accept bank cards, which at the end of the programme will rise to 100%.

The value of payments with bank cards rose from HUF4 trillion in 2016 to HUF5 trillion by mid-2018, but electronic payment still only accounts for one-fourth of all transactions, so there is still room for further expansion, the minister said. 

The ministry also plans to launch a pilot programme to introduce cashless payments at schools, as part of which POS terminals will be installed at some secondary school cafeterias.

Strengthening financial awareness and encouraging the use of modern electronic payment options instead of cash is in everyone's shared interest, Varga added.