Some Reflexions of my Trip to Kazakhstan: the Cash Discussion Put in Another Context

 You're right, as the title explains I've been to quite an unusual holiday location: I've been to Kazakhstan. Like a real back-packer I've been challenging the unknown, and life without internet (that immediately explains why none of you have heard anything form me for three weeks). Don't get me wrong, they do have internet there you know, I just didn't use it, as part of 'taking a distance from regular life'.

I must say it was a real adventure (luckily less than I was afraid of before I left, but still). Anyway, this is a payments platform, so I am not going to elaborate on the whole trip, but there were a few interesting things I noticed. And some of them were payments related, and that is what I want to share with, because I am convinced to some of you it will be as surprising as it was for me. One is on 'micro payments', and one is on the 'walking POS-terminals'.

I know what micro payments are, I have read about it and I have been thinking on the opportunities for contactless cards for example. Let me tell you, when I saw what they sell in Kazakhstan I was convinced that (1) cash is not dead; and (2) cards won't replace all of them cash transactions. A little abstract for you readers I guess. Well, what I mean is that I saw real small payments, so to say ;). The most striking example is that they sell cigarettes: a package is an equivalent of about 1 euro. Next to that you can also buy a cigarette! You can buy single cigarettes on the street, from old ladies of even younger street vendors. A single cigarette would cost about 5 cents, but it depends of the kind of cigarette you want of course.

That example made me realise that the payments world I live in is not a representative one for commenting general payment topics. Of course I knew about that before, that is why most of the time I clarified I was talking from a Western European or even a Belgian perspective, but until this trip I didn't realise the value of this nuance. If people really make money out of it and they have different prices for different cigarettes (then we are talking of differences of a cent more or less), than they cannot afford the transaction cost on these transactions, I guess. If they would have a terminal, it costs them more to get the money then to sell the cigarette. These micro payments cannot be replaced by prepaid cards either, due to transaction cost. Result is that they need to take the whole sum of individual transactions to make it one sum in order to deposit one amount.

The other payments related thing that got my attention was people walking on the bazaar with a POS-terminal in their hands. They just walked on the streets like someone flyering in New York for just another musical. So there was this bazaar: loads of containers next to each other that were arranged as small shops (what an inventive idea, don't you think?). In all these shops you could buy goods: from clothes to food, from candy to even car components and lots more, you name it and they even (yes, even bad-tubs were for sale). So in the middle of that scene I see these people with their POS-terminals.

It might sound naïve, but I taught: are those walking ATMs??? At that time it sounded reasonable to me. People need cash to make payments on the market and other people close that gap with their POS-terminal in their hands and lots of cash in their pocket (it is indeed very risky business, but that didn't come up in my mind at that moment). I saw people going there, making a transaction and leaving again. I watched a bit and then I got too curious. I went to the guy and asked him: "are you a walking ATM?"

So I guess that is the other extreme in Kazakhstan on the cash dilemma. If this way of doing business in prepaid cards is generally accepted, than it can also be used on the bazaar and Kazakh economy could diminish a big percentage of cash I'd say. But on the other hands there still are these very small amounts for which the transaction cost is probably higher than the cost of product, which at this moment still makes it impossible to abolish cash (not taking into account the argument of black money of course!).