Cash remains the preferred method of consumer payment in the Czech Republic, accounting for 65.9% of total transaction volume in 2017.
Consumers generally use cash for day-to-day, low-value transactions. However, its use declined during the review period due to a growing preference for payment cards and a rise in contactless transactions.
The total number of card transactions recorded a strong CAGR of 17.2% from 542.6 million in 2013 to 1.02 billion in 2017. Government financial inclusion initiatives increased consumer confidence, and improved payment infrastructure all helped drive this growth. The advent of contactless technology and a robust e-commerce market also supported growth in the payment card market.
Frequency of payment card use increased while the average transaction value fell from CZK1,747.70 ($82.11) in 2013 to $60.03 in 2017 as a result of the migration of low-value cash payments to payment cards.
Debit cards dominant
Debit cards remain the preferred card type for POS transactions, accounting for 83.9% of total payment card transaction value at the POS in 2017. Consumers are gradually switching from cash to cards, supporting the growth of debit card use.
Debit card use gained traction during the review period, with frequency of use at POS recording a strong CAGR of 18.5%.
In 2017, consumers used debit cards an average of 77 times at the POS, compared to 19 times at ATMs, indicating that consumers favour the cards for in-store payments rather than cash withdrawals.
Pay-later cards are yet to gain ground in the Czech Republic. Just 17.5 pay-later cards per 100 individuals in 2017. This is partly due to consumer reluctance to enter into any kind of debt.
However, in terms of transaction value and volume, pay-later cards recorded healthy growth, mainly due to rising merchant acceptance and enhanced security measures. Banks also offer reward programs and other incentives to boost their use.
Access to international airport lounges, air miles and discounts on shopping and dining are some of the benefits available.
E-commerce on the rise
E-commerce in the Czech Republic posted a review-period CAGR of 18.7%, growing from $2.7bn in 2013 to $5.4bn in 2017.
According to APEK, e-commerce accounted for 10.5% of the total retail sector in 2017, up from 9.5% in 2016.
The growing e-commerce market has encouraged international companies to establish and enhance operations in the country.
The availability of virtual payment cards and alternative payment solutions including PayPal, Masterpass, and paysafecard have also supported e-commerce growth.
Prepaid gains traction
The number of prepaid cards in circulation rose from 392,379 in 2013 to 506,888 in 2017 at a review-period CAGR of 6.6%.
The value of transactions via prepaid cards rose from $4.0m in 2013 to $11.7m in 2017.
Prepaid cards are increasingly gaining acceptance among consumers as they do not require a bank account. They are also accessible to individuals who do not qualify for a bank card.
ČSOB offers the COOL prepaid card in collaboration with Mastercard. The card is primarily aimed at children and students. It is not linked to any bank account, and can be applied for online without any agreement.
Banks also offer prepaid cards for corporate users. For example, CSAS offers the reloadable Maestro corporate business prepaid card. The contactless chip-and-PIN card can be used to manage employee expenses and company purchases.
The number of POS terminals recorded a CAGR of 16.2%, rising from 94,914 in 2013 to 172,954 in 2017; the increase was supported by an increase in the number of POS terminal installations at smaller retail outlets.
mPOS solution provider SumUp entered the Czech Republic in October 2017. The company offers its mPOS solution SumUp Air, which is a contactless and chip-and-PIN card reader that can be connected to tablets and smartphones via Bluetooth, enabling merchants to accept card-based payments