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- The increase in demand is most pronounced in the hospitality sector and hairdressing and beauty salons
- On KEKS Pay, the number of transactions in January increased by more than 80 percent year-on-year
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In the last three years, there has been a continuous increase in cashless payments, with the pandemic having a significant impact on the rise of card payments, and this trend has further accelerated with the introduction of the euro.
‒ The number of installed POS devices in January this year increased by 30 percent compared to the same period last year, while the number of card transactions on the ECC POS network in January rose by 17 percent compared to the same period last year ‒ stated Erste Card Club, adding that the increase in demand is most pronounced in the hospitality sector and hairdressing and beauty salons.
Furthermore, they noted an increase in the number of transactions made with debit cards of Erste Bank clients on POS terminals by 33 percent and an increase in volume by 40 percent compared to the same period last year.
‒ At the same time, the number of cash withdrawals using Erste Bank debit cards decreased by two percent, with an increase in volume of one percent ‒ they stated, emphasizing that in January there was a six percent increase in the number of debit cards, meaning the number of active debit cards is eight percent higher compared to the same period last year.
In line with this, KEKS Pay, Erste Bank’s digital platform, currently has around 329 thousand users, while at the end of last year, the number of users was around 317 thousand.
‒ When it comes to transactions via KEKS Pay, comparing January of this year with the same period last year, there is a noticeable increase in the number of transactions by more than 80 percent ‒ they claim.
Decline in Cash Payments
That the share of card payments in Croatia has been continuously increasing in recent years has also been confirmed by the Croatian Banking Association, and consequently, the number of contactless payments has also increased.
‒ Although citizens of the Republic of Croatia still traditionally prefer cash as the most common form of payment, the pandemic has certainly left a mark on consumer habits in terms of increased inclination and acceleration of the growth rate of cashless payments compared to cash ‒ stated HUB.
Card payments have certainly increased in the first two weeks of this year, as shown by preliminary data from the Croatian Banking Association, due to the dual circulation of money, as all financial institutions advised citizens to use cards as much as possible to facilitate the adjustment process for merchants.
The trend of cashless and contactless payments will certainly continue in the future, and according to data from the Croatian National Bank published in the annual publication ‘Payment and Card Transactions’, as of December 31, 2021, there were a total of 118,731 POS devices recorded in Croatia. For comparison, on the same day the previous year, a total of 83,204 devices were recorded. Data for 2022 has not yet been published.
‒ The average value of cash payment transactions in 2021 was 44 kuna, while the average value of national card payment transactions was 204 kuna. Available data on fiscalized invoices shows that the shares of the number and value of transactions of fiscalized invoices paid in cash have been decreasing over the last few years ‒ stated HUB.
Thus, in 2019, the number of transactions paid in cash was 84 percent, in 2020 it was 79 percent, and in 2021 it remained at 78 percent. The value of transactions of fiscalized invoices paid in cash in 2019 accounted for 56 percent of the total value of fiscalized invoices, in 2020 for 54 percent, and in 2021 for 51 percent. The remainder related to the value of transactions of fiscalized invoices paid by card.
Taxation of Tips is Not a Novelty
Although everyone is talking about the increase in demand for POS devices in hospitality, a significant boost for hospitality workers should also come from the announced regulation of the tax treatment of tips, which was announced earlier this year by the Ministry of Finance, the Tax Administration, and the Croatian Chamber of Commerce.
Namely, tips are currently not even recognized as a concept in Croatian legislation but are treated the same as basic income. As reported by Hina, with the introduction of tips into the tax system, they become a non-taxable income up to a certain amount annually, and all income from tips above the agreed non-taxable threshold will be taxed as other income to avoid the risk of abuse of non-taxable income.
Tips are indeed a significant problem with card payments, as confirmed by the Association of Caterers, because, as they claim, employees in hospitality establishments where card payments are prevalent often end up without tips, which the announced reform should address. However, it is still necessary to define the annual non-taxable limit and submit legal amendments for processing.
According to market practice, the Association of Caterers stated that there is a visible increase in demand for POS devices, and this reform should result in retaining the workforce in hospitality and service sectors, which have been significantly lacking in recent years.
Earlier this month, the Association of Entrepreneurs also expressed their views on the topic of tips, stating that all service activities should have a non-taxable portion of tips, as they currently have to pay tax, surtax, and contributions on them. They explained that this means when you leave a tip of two euros to a hospitality worker via card payment, they are left with just over one euro. Therefore, they proposed that the upper limit of the non-taxable amount should be 20 thousand euros annually per employee, and that everything above should be taxed as income tax.
‒ Taxation of tips is not a novelty, but in Croatia, we can find only a handful of establishments where it is possible to leave a tip when paying by card, and this is increasingly becoming a common practice ‒ stated the UGP earlier this month, emphasizing that increasing income must be the goal of government action.
The topic of the fiscalization of tips was opened back in early 2021, and its implementation will likely not come into effect this year.
