According to the latest surveys, cash remains a strong element of Hungarian economy, while digital payment methods are slowly gaining ground.
Payment preferences in Hungary
Financial information can come from various places. Mastercard has its own digital intelligence service that continuously monitors and regularly surveys the landscape of digital payments, and then it assigns a score to the developments. According to its latest publication, Hungary has reached a score of 62/100 in 2023, which shows a slow but steady progress in the use and acceptance of digital payment methods. At the same time, cash transactions are still integral to Hungarian economy.
The survey uses a Digital Payment Index (DPI), which examines various factors and assigns scores from 0 to 100, and then calculates a main score. The DPI of Hungary increased by 11 points since 2020, from 51 to 62.
The DPI has three pillar areas: Infrastructure, Knowledge, and Usage. In Hungary, growth is most visible in the availability of infrastructure (from 64 to 78 points), and usage also increased visibly (from 38 to 54 points), especially during the pandemic. Knowledge, however, seems to be stagnating (changed from 51 to 54 points), while there is obviously room for growth there too.
1. Infrastructure (78 points)
POS terminals are the backbone of the digital payment infrastructure in Hungary. Their number has increased by 73% since 2018, and tripled since 2020, but the rate of increased slowed down in 2023. Based on data from banks, around 46% of businesses have a POS terminal of their own. Offering a digital payment option is now mandatory in every store, and this requirement is most often fulfilled with a POS terminal.
At the same time, businesses this requirement does not apply to often do not make the extra effort (especially since maintaining a terminal might not be cost-effective for them). This includes various micro-businesses and freelancers, such as beauticians, tutors, and skilled workers (e.g. plumbers, electricians).
Alternatives to having a POS terminal include SoftPOS, which is a solution letting NFC compatible mobile phones be used to manage card transactions. The National Bank of Hungary (MNB) is also trying to promote digital payment through Qvik, its new package of services that support payment with QR codes and payment requests as well as NFC.
2. Knowledge (54 points)
Hungary’s Knowledge score in the DPI has been stagnating just above 50 points since 2020. While more and more people trust these payment methods and find them convenient, they cannot keep up with how more and more innovative and secure solutions are becoming available, and the gap between knowledge and availability is increasing. This is most prevalent among those with lower income, lower education, and the elderly. Targeted education campaigns could probably improve these conditions.
At the same time, users seem pretty confident about their knowledgeable about safety measures relevant for digital payments (PIN codes, 2FA). Their score in this area, however, is only 60 points, which supports that more education is needed, especially for the elderly and concerning recognizing scams.
3. Usage (54 points)
Although there was a jump in 2021 (from 38 to 49), since then, this score has stayed around 50 points. Cash is still perceived as safe and comfortable, while many people still receive most of their income in cash (especially skilled laborers and pensioners). Only 71% of the population receives all their income electronically, although 20% already pays for everything this way (which is in fact a 3% decrease compared to the previous year).
However, the value of card transactions is now more than double the value of cash withdrawal – not surprisingly, this is a trend that turned around at the start of the pandemic. Until then, the value of cash withdrawals prevailed. Moreover, above 30% of cards have been added to a mobile payment app, which shows an increased trust toward mobile payment functions. At the same time, immediate personal loans and payment with cryptocurrencies remains less popular, alongside the use of credit cards (there are only about 1 million credit cards in use in Hungary, which a low rate compared to the more than 10 million debit cards).
Summary
The Hungarian digital payment infrastructure is growing steadily. Digital payment methods are gaining trust and popularity, and this is especially true for mobile payment options. At the same time, it would be crucial to make information more readily available to the population so they understand their options better and can avoid scams more easily.
Helpers Finance offers accounting and financial services to small and medium sized businesses in Hungary, making sure the business will always remain compliant with regulations, and doing our best to provide foreign owners with information that can help them make solid business decisions.
Did you like this article? Follow us on Facebook and never miss an update.
