Hungary: The Hungarian Competition Office Investigation Into The Use Of ‘Cash Substitutes'

Last Updated: 16 October 2017
Article by Szabolcs Mestyán and John Fenemore

In Hungary, the country's Competition Office has begun an investigation into the use of so-called 'cash substitutes' such as mobile payments and cards for the making of payments, with the main goal of such investigation appearing to be to explore the conditions applicable between traditional credit institutions and retailers. Dr Szabolcs Mestyán and John Fenemore of Lakatos, Köves and Partners discuss this investigation in the context of regulatory and policy developments surrounding payment infrastructure in Hungary, and analyse why the Hungarian Government is paying particular attention to the retail payments sector.

On 20 January 2017 the Hungarian Competition Office (Gazdasági Versenyhivatal) launched1 a targeted inspection in the field of payments via 'cash substitutes2' (e.g. cards, mobile phone payments). Whilst 'cash substitutes' cover a broad range of payment mechanisms - and according to the Hungarian Competition Office's order dated 20 January 2017 more innovative methods of payment will also be explored in the course of the inspection - the primary goal of the inspection seems to be the analysis of conditions applicable between traditional credit institutions and retailers.

The launch of the inspection was preceded by a study which concluded that small retailers face more adverse conditions from banks compared to their larger counterparts, a phenomenon that has been 'known' to market players for many years. Given this, what lies behind the timing of the inspection?

The Hungarian Government, and in particular the Ministry of National Economy, has been committed in recent years to facilitating a reduction in the number of cash payments (which add the greatest costs to a transaction) and to promoting the wider use of alternative payment methods. The inspection of the Hungarian Competition Office and the measures taken by the Ministry of National Economy are seemingly independent but it is no coincidence that the inspection was launched only a month after the Ministry of Economy issued its ministerial decree3 on subsidising the acquisition by businesses of the necessary infrastructure (in particular POS terminals) required to be able to accept payments by bank cards. The number of POS terminals (and thus the number of businesses accepting card payments) has increased gradually over the past decade, but such increase has been modest from year to year. In turn, the Hungarian Government expects a larger increase by the end of 2017 as a result of the subsidies introduced by the ministerial decree.

Among the few conditions of granting the subsidy the ministerial decree sets one that is interesting from the perspective of the inspection of the Hungarian Competition Office: the retailer is eligible for the subsidy only if the commission of the bank (the provider of the POS terminal) does not exceed 1% of the gross payments made by payment cards on a monthly basis. It is assumed that such commissions currently range from between 3-5% and therefore a suspicion has emerged among market players that one of the implied goals of the inspection by the Hungarian Competition Office is the reduction of these commission rates.

In any case, should the Hungarian Competition Office raise concerns in connection with the different costs, commissions and possibly rates quoted for retailers of different sizes, assuming that such intention will or already exist(s), it will be a difficult exercise to prove its detrimental effect on competition or on the fair operation of the market. Given the proposed timeline of the inspection, which is only planned to be completed by around the end of the second quarter of 2018, the Hungarian Competition Office seems to be aware of this. The difficulty is due not only to the issues the authority would normally expect to encounter when exploring new areas, but also to the fact that the inspection relates to a highly regulated area where, in addition to conventional considerations, pricing is also influenced by the large number of compliance and risk taking (exposure limit) rules imposed on financial institutions. Although granting infrastructure and settling payments does not create a lender-debtor relationship between the bank and the retailer per se, the risks for the banks are similar in these transactions to those in respect of an overdraft. The risks of non-payment by a small business are usually higher than those in respect of a large business. It follows that as with a loan, where conditions are often softer and individually negotiated in respect of a large corporation, the conditions of providing payment services are also softer for such larger corporations due to the long-term (usually even global or multi-jurisdictional) relationship, sound liquidity history, and risk and collateral profile of these larger retailers. However, even if one sets aside the regulatory and risk related considerations, it may still appear somewhat justified when a bank argues that installing a hundred or more POS terminals with a retailer client is obviously cheaper (per terminal) than the installation of only one.

At this point one faces the general and widespread phenomenon that large players in any market usually operate at significantly lower costs than their smaller counterparts simply because they, due to their size, are able to benefit from economies of scale. This is an advantage that forces small businesses either to leave the market, to operate with lesser profit margins or to offer goods and services at a higher price. The catch-22 nature of this is far from new in a region where decades-long attempts to favour small and medium sized businesses has resulted in only very modest achievements.

Nevertheless, the policy of favouring small businesses backed by the central goal of reducing the number of cash payments may well justify the Hungarian Government's close scrutiny of the retail payment services industry in Hungary. In fact, from the Government's perspective it is high time for such an approach and one might wonder why this has not been in focus in previous years. Whether or not there is an implied intention to rearrange the market or attack current established participants is a question for the future. Current sentiments are that the 'battle' between the Hungarian banking sector and the Hungarian Government is over and thus banks are not preparing for or expecting hostility in connection with the inspection. One could even hope that if the Government achieves its goal and payment card acceptance becomes widespread, the banks will naturally also benefit from such a change even with lower commissions. On the other hand, the Hungarian Competition Office does indeed need to take a thorough view of the market and consider the results of its inspection accordingly. If a constructive discussion could be had during the next 16 months between banks, the Hungarian Competition Office and the retailers, and if during that period the initiatives of the Hungarian Government to subsidise the installation of POS terminals at small businesses pave the way for a larger market by the time the inspection closes, it could easily become unnecessary to conclude the process with sanctions against particular participants. The press release of the Hungarian Competition Office on the launch of the inspection itself emphasises that the inspection does not mean that a formal sanctioning procedure will automatically follow. This also gives rise to optimism that the Hungarian Competition Office will be open for constructive discussion and that this process provides room to reshape the market (to the extent necessary) for all stakeholders' benefit.

The article first appeared in the March 2017 issue of Payments & FinTech Lawyer (a Cecile Park Media Publication, March 2017).


1. Order of the Hungarian Competition Office dated 20 January 2017.

2. Defined under Act CCXXXVII of 2013 on credit institutions and financial undertakings.

3. Decree 47/2016 (XII.6) of the Ministry of National Economy on the subsidy for increasing the number of terminals required for the acceptance of payment cards.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions