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06 September 2019

By cash or card? HCA releases findings of sector inquiry into bank card acceptance market

When buying goods and services, consumers are often asked whether they want to pay by cash or card. Bank cards are now a part of everyday life; according to a recent sector inquiry by the Hungarian Competition Authority (HCA), the number of Hungarian merchants which accept them increased by approximately 76% between the first quarter of 2013 and the first quarter of 2018.

The increase is partly due to initiatives encouraging merchants to accept bank cards, such as the interchange fee cap which was recently introduced by the legislature. Further, the Ministry of Finance introduced a point-of-sale (POS) terminal installation programme to encourage small merchants (with a quarterly payment turnover of less than HUF1 million) to enter the bank card market, which has contributed to a significant reduction in transaction costs.

However, quick growth such as this always poses a risk to the balance between market players and competition.

Sector inquiry

In 2017 the HCA initiated a sector inquiry into the bank card acceptance market.(1) The scope of the inquiry included:

  • the market's structure;
  • the competitors on the market; and
  • the intensity of competition.

The HCA will launch a sector inquiry if it suspects that competition might be distorted in a specific market sector. In so doing, it asks the major market players to collect data, which it compiles into a final report. This report can form the basis of numerous other actions (if required), such as the initiation of competition supervision proceedings or the issue of recommendations to all market players.

The sector inquiry into the bank card acceptance market predominantly focused on whether:

  • the maximisation of the interchange fees as a legislative measure has resulted in a cost reduction for merchants and, if so, whether this has been passed on to merchants in its entirety; and
  • service provides offer services to small merchants at higher costs than larger merchants and, if so, whether this is due to a market failure.


The sector inquiry established that the card acceptance market is highly concentrated, with OTP Bank being the most significant market player. New players have recently entered the market and subsequently increased competition, but the market is still considered to be oligopolistic.

The information and data provided by the Hungarian National Bank and other market players revealed no market failures that required the HCA to undertake competition proceedings. The market was found to be competitive and functioning in accordance with the relevant regulations. Further, the inquiry did not establish that the cost difference between the bank card acceptance services of smaller and larger merchants was a result of distorted competition on the market.

However, the inquiry revealed certain circumstances which affect competition on the market, which prompted the HCA to propose legislative changes and provide recommendations in its final report.

HCA recommendations

To stimulate further growth in the market, the HCA made a number of recommendations to both the legislature and market players.

The HCA recommended that the legislature:

  • extend the POS terminal installation programme to merchants in a higher turnover category (ie, those with a quarterly card payment turnover of HUF1 to HUF2.5 million) because their fees have increased unproportionally compared with small merchants, which have benefited the most from the POS programme and cost reduction;
  • consider tax promotions; and
  • enable merchants and bank card payment service providers to enter into contracts online.

The HCA recommended that market players revise their fee policies, especially with regard to:

  • fees which depend on the number of transactions, as such fees are detrimental to small market players; and
  • fixed fees which are incurred after a transaction and are independent of the transaction's value, for the same reason as above.

Further, merchants have claimed that they do not receive payment for purchases until several days after they have been made. In this respect, the HCA recommended that banks speed up the crediting process of card transactions. Finally, the HCA has suggested launching awareness programmes, as its inquiry outlined that neither merchants nor consumers on the market in question are aware of the benefits of card payments.


Accepting bank cards is advantageous for all and helps to curtail the grey economy. The extension of the POS terminal programme, tax promotions and faster crediting of card transactions could contribute to fair competition and encourage more merchants to enter the market. The HCA's inquiry demonstrates that the card acceptance market has been successfully promoted, which has helped new market players and small merchants to enter the market. To achieve further growth, merchants and the legislature should follow the HCA's recommendations in order to achieve a cash-free future.

(1) Further information is available here.

This article first appeared on International Law Office.