How Georgia became a world leader in contactless

A culture of innovation, a proactive approach by regulators, and strong engagement from leading banks and companies: these factors have made Georgia a world-leader in contactless payment.

The small Caucasus country has GDP per capita roughly a third of that of the European Union average, yet ranks in the top three countries in the world for domestic contactless payments, which accounts for more than 95% of all domestic F2F transactions.¹

“There’s something special about Georgia," says Vira Platonova, Senior Vice President and Group Country Manager, CISSEE, Visa. “Contactless became the default for both enterprises and the consumer some time ago. Consumer habits are key, and there’s a strong correlation with a passion for innovation.”

The high penetration of contactless payment has its roots in Georgia’s post-communist transition, says Platonova. From the early years following Georgia’s independence from the Soviet Union in 1991, the central bank, the National Bank of Georgia, took an open and proactive approach to banking sector development, including new technologies. The National Bank of Georgia’s promotion of a free and open economy and a well-regulated financial system has gone hand-in-hand with adoption of technology. The bank has long made digitization a priority, given its benefits for reducing fraud and formalising the grey economy, and taken a progressive stance towards actions boosting contactless growth, like increasing CVM limits on payments.

"Visa launched its first contactless payment pilot in the CISSEE region in Georgia in 2009. Since then, the technology has steadily rolled out and gained momentum”, explains Andriy Shcherbina, Senior Director, Digital Solutions, CEMEA, Visa. Banks made contactless capability an integral part of their product lines, not just a standalone product for those interested. Concurrently, a massive push was done on the acceptance side where, on top of establishing the contactless acceptance infrastructure, cashiers were motivated to conduct transactions in contactless mode. In 2013, McDonald’s launched contactless payment in partnership with Visa and Bank of Georgia and, similar to other countries, the launch of contactless payments in the target merchant segment with a marquee merchant, boosted the usage of contactless cards. Two years later saw the first mobile NFC transactions, and in 2016 Visa brought Visa Token Services to the Georgian market, allowing simpler, more secure payments with the smartphones of consumers. Apple Pay was launched in the country in 2019. “During this time, mobile contactless technology has evolved from payment stickers attached to phones externally to digitally embedded credentials – and now via facial recognition and payment rings”, says Shcherbina.

“We kept traction, and kept introducing new factors and forms of payment,” says Cristina Doros, General Manager, Visa Caucasus, CISSEE, Visa. “We engaged with issuers, merchants, and consumers. McDonald’s brought a new level of awareness as an anchor merchant, and Apple coming is another big boost.”

Adoption of tech has also been supported by the structure of the Georgian banking system. Two major commercial banks – Bank of Georgia and TBC Bank – dominate the market, covering together an estimated 75-80% of total assets. From an early stage, both banks invested heavily in in-house IT systems and teams. The market leaders and their payment systems partners also dedicated substantial resources to marketing and education campaigns that have spread awareness, including benefit points for use of contactless payment.

“One of the lessons of the Georgian story is that early investment pays off,” says Doros. “Be a first-mover, be a market-leader. Invest in acumen and technology, and ensure that the customer experience is very good.”

The process has not been without challenges. Ensuring merchants have terminals that accept contactless payment has required investment in infrastructure and training. In some rural areas of Georgia, contactless payments are still uncommon. As elsewhere, there was a need to convince consumers that the technology is secure and worthwhile.

Doros notes that, unlike in almost all other markets, the COVID-19 crisis has seen a slight dip in the proportion of payments made by contactless technology in Georgia. She attributes this to two factors. Firstly, older customers switching to plastic from cash for the first time and being unfamiliar with contactless payments. Secondly, a decline in the use of facial recognition transactions via mobile phones due to mask-wearing. For the same reason, the expansion of a pilot project by Ukrainian start-up Riddletag installing facial-recognition turnstiles on the Tbilisi metro has been delayed. The pilot project meant that Bank of Georgia became the first bank in CISSEE to launch Face ID based payments in transit.

Nonetheless, the long-term development of contactless technology in Georgia and the wider region seems assured. Hadi Raad, Vice President, Cross-Functional Projects, CEMEA, Visa expects public transit payments, quick service restaurants and self-serviced desks at supermarkets to be among the areas of growth.

While Georgia saw an incremental expansion of contactless payments, other markets in CEMEA have seen accelerated adoption in recent years. Both Saudi Arabia and Russia have over 90%³ contactless penetration, says Raad. The development of mobile payment options by Apple, Samsung, Google and a range of regional players are driving growth across the region. This year, Visa has been focusing on tap-to-phone technology, where consumers can tap their contactless card or their own mobile to complete the purchase using phones as point-of-sale machines, while forging partnerships with wearables developers – a growth area for the future.

“Georgia is one of the success stories,” Raad says. “But now we see other regions with even faster growth. People’s habits are changing, and they are shifting towards contactless.”