The Bank of Latvia

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Bank of Latvia

In Latvia, data on payment services rendered by banks (including the Bank of Latvia) and the non-bank sector are included in payment statistics.

In 2000, the payment infrastructure developed rapidly. Institutions providing payment services expanded the range of payment instruments, using the latest technologies and existing telecommunications.

Banks offered to their customers a wide variety of payment instruments, maintained and serviced accounts, issued payment cards, and expanded ATM and POS networks. The non-profit organization public JSC Latvijas Pasts (hereinafter, Latvijas Pasts) also rendered payment services (such as opening and maintenance of accounts, transfer of salaries, pensions or benefits to accounts in the Postal Settlement System, which can be accessed in all branches of Latvijas Pasts), and it was possible to make payments by retailer cards.

Key payment statistics continued to increase in 2000. Electronic credit transfers and payments by payment and retailer cards were increasingly used. Likewise, the number of POSs and ATMs grew. In the banking system, paper-based credit transfers decreased; moreover, they were not used as of the latter half of 2000, when Bank of Latvia payment systems and banks started executing payments only electronically.

Non-Bank Accounts

At the end of 2000, 41 institutions provided non-cash settlements in Latvia: the Bank of Latvia, banks, credit unions and Latvijas Pasts. In 2000, the number of these institutions increased by 10.8%, mainly on account of growth in the number of credit unions. The number of service points opened by banks and Latvijas Pasts (bank branches, service points and post offices) decreased by 2.8%, because institutions optimized the network of payment services.

In Latvia, non-cash settlements are mainly conducted via customer accounts with banks. At the end of 2000, 1.4 million non-bank accounts were used for making payments, and their total credit and debit balances were 1.1 billion lats and 54.1 million lats, respectively.

By the end of 2000, 47.1 thousand non-bank accounts were opened with Latvijas Pasts. This number was 29.7 times smaller than the number of non-bank accounts opened with banks. Although the total balance on non-bank accounts with Latvijas Pasts increased by 33.3%, it amounted to only 1.6 million lats at the end of 2000. Services provided by Latvijas Pasts are very convenient for people living in those parts of Latvia where banks have not opened their branches and service points.

Use of Payment Instruments

In Latvia, the dominant means of payment is electronic credit transfers. Electronic credit transfers are mainly provided by banks and the Bank of Latvia.

In 2000, the volume and value of electronic credit transfers executed by banks and the Bank of Latvia were 30.6 million and 193.6 million lats, respectively. Both indicators rose 1.6 times compared with the 1999 level. Electronic credit transfers comprise electronic credit transfers by banks and non-banks, funds transfers from automated teller machines, standing orders and trade financing transactions.

In 2000, interbank credit transfers (both the payer and the beneficiary are a bank, including the Bank of Latvia) accounted for only 0.7% of all electronic credit transfers in terms of volume. Nevertheless, in terms of value, their share was significant (42.8%). In 2000, the volume of interbank credit transfers grew (by 5.2%, to 210.9 thousand), as did their value (by 42.2%, to 82.8 billion lats).

In the banking system, the volume of electronic banking services increased 2.0 times, reaching 4.6 million, while their value rose 2.4 times, amounting to 31.4 billion lats.

The most rapid rise in 2000 was recorded for Internet and telephone banking transactions, as a number of Latvian banks started offering these services. The volume and value of Internet banking transactions grew 6.0 times (to 570.6 thousand) and 8.2 times (to 6.1 billion lats), respectively. The volume and value of telephone banking transactions also increased (7.5 times, to 21.7 thousand, and 10.1 times, to 16.1 million lats, respectively).

Latvian banks enhanced internal payment processing systems. Likewise, they ensured execution of payments by electronic means (without paper documents). Interbank payment systems processed all interbank payments electronically. As a result, paper-based credit transfers decreased in the banking system in 1999 and 2000; moreover, as of the latter half of 2000, no paper-based non-bank credit transfers were executed.

In 2000, a significant part of all non-cash payments were effected by Latvijas Pasts (23.1 million; by only 24.7% less than electronic credit transfers processed in the banking system). In 2000, the value of payments executed by Latvijas Pasts (514.6 million lats) was 376.3 times smaller than that of electronic credit transfers by the banking system, because customers of Latvijas Pasts mainly made retail payments. In 2000, Latvijas Pasts, along with banks, offered its customers standing orders and electronic non-bank credit transfers. Paper-based credit transfers, however, accounted for a large part of all credit transfers executed by Latvijas Pasts (98.3% of total volume and 97.2% of total value).

Debit transfers, such as cheques and direct debit, are executed only by banks. Debit transfers are less common than credit transfers in the Latvian payment system.

In 2000, the volume of cash deposits and withdrawals at banks and the Bank of Latvia and cash withdrawals from automated teller machines was 30.1 million, while their value was 11.9 billion lats. Likewise, cash deposits and withdrawals are among the principal services rendered by Latvijas Pasts. In 2000, the volume and value of cash deposits and withdrawals at Latvijas Pasts respectively were 23.4% and 23.4 times smaller than in the banking system.

Payment and Retailer Cards, ATMs, POSs

Payment cards, which enable the holders to pay for goods and services, are widely available at Latvian banks. Bank customers use different types of cards: credit cards, which enable the holders to obtain goods and services within the credit limits set by a bank, and debit cards, which enable the holders to pay for goods and services by directly debiting the credit balance on their account. Banks issue also debit cards with an overdraft facility and local cards for cash withdrawals.

By the end of 2000, banks had issued 634.9 thousand cards. The year-on-year increase of 1.9 times in the number of cards mainly resulted from the growing number of debit cards and debit cards with an overdraft facility (2.0 times and 2.1 times, respectively).

In 2000, banks expanded ATM and POS networks, thus improving the servicing of cardholders. The number of ATMs grew (1.7 times, to 643), as did that of POSs (by 20.6%, to 5.4 thousand). Of all ATMs, 61.4% was machines that enabled cardholders not only to withdraw cash and obtain the statement of account balance, but also to make funds transfers and access other services. At the end of 2000, 80.9% of all POSs was EFTPOSs ensuring on-line authorization. In 2000, the volume and value of payments by bank payment cards also increased (to 5.3 million and 159.5 million lats, respectively).

In Latvia it is possible to use also retailer cards, which are non-bank cards and are issued by companies. These are single-purpose cards, and unlike bank payment cards, they can be used to pay for goods and services of the issuing company only. Such cards are mainly issued by petrol companies. The number of retailer cards issued by the non-bank sector (50.4 thousand) was 12.6 times smaller than that of bank cards (cards other than payment cards, e.g. discount cards, are not included in statistics). In the non-bank sector, the volume and value of payments by retailer cards totalled 2.2 million and 39.8 million lats, respectively (these indicators were smaller than the same indicators of bank cards, by 2.4 times and 4.0 times, respectively).