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Fintech innovation is on the rise in regions across the world, driven by a multitude of influences, from technological advancements to socio-economic factors. Uzbekistan presents an interesting case study, where the government has made concerted efforts to advance digital finances while managing the knock-on effects from an influx of immigrants as a result of the war. Here, Sam Boboev evaluates the fintech landscape in the region, the role the government has played in its progress and who is winning the payments race today.
Uzbekistan is a country in Central Asia with a population of about 34 million and a GDP of about $58 billion. The country has been undergoing economic and political reforms since 2016, when President Shavkat Mirziyoyev came to power. One of the areas that has seen significant changes is the financial sector, where fintech and payments have been growing rapidly.
The main drivers of the fintech boom in Uzbekistan include increasing smartphone and internet penetration, growing demand for convenient and secure payment solutions and the emergence of local and foreign players offering innovative products and services - as well as a relatively enabling regulatory environment. For example, licensing was made available for crypto players in 2022.
The government has also taken notable steps toward digitising services and payments in the country. In 2020, President Mirziyoyev approved a Digital Uzbekistan - 2030 Strategy. According to this decree, “all state mandatory payments in the form of fees and fines are made through the provided online payment services.” This program also aims to provide funding and increase the digital literacy of the population.
However, there is also some inhibitive legislation - for example, due to an influx of Russian migrants in early 2022, bringing with them a rise in cross-border transactions, banks in Uzbekistan “began to ask people where their money was coming from when they attempted to take out more than $1,000.”
Among fintech segments in Uzbekistan today, digital payments is the largest and most dynamic, accounting for 97% of the total transaction value in 2021. This includes online payments (such as e-commerce, bill payments, remittances, etc.), mobile payments (such as mobile wallets, QR codes, NFC, etc.) and digital currencies (such as cryptocurrencies, stablecoins, etc.).
Uzbekistan has two domestic card schemes: Uzcard and Humo. Uzcard was launched in 2004 as a national payment system. For a long time, Uzcard was the only card scheme that processed transactions in local currency in Uzbekistan. However, in 2018 there was a major system outage. Humo was launched in 2019 by the Central Bank of Uzbekistan (CBU) as a new payment system that aims to compete with Uzcard and international card schemes.
According to the CBU, as of 2022, there were about 34 million cards issued in Uzbekistan, of which 23 million were Uzcard cards and 7 million were Humo cards. The number of cards increased by 17% compared to December 2020. The number of POS terminals also increased by 33% to reach 140,000 units.
Interestingly, in Uzbekistan, international payment systems are referred to as “currency” or “conversion”. Opening a currency card in Uzbekistan can be expensive and time-consuming. As a result, local cards are still favored.
Both Uzcard and Humo have several advantages over international card schemes such as Visa and Mastercard. First, they offer lower fees for card issuance, transactions and maintenance. Second, they are widely accepted across the country, especially in rural areas where international cards are less common. Third, they are integrated with various payment services and platforms that allow users to pay bills, transfer money and buy goods and services online and offline.
However, Uzcard and Humo also face challenges. For a long time, interoperability between the two systems was one such challenge. This limited choice and convenience for customers and merchants. However, the interoperability issues between the two card schemes have been removed and, starting in May 2023, customers can use ATMs and POS terminals to make payments from any card they own. By presidential decree, by the end of the year, all terminals will accept both types of cards.
Another challenge is the security and reliability of the systems, which have been affected by cyberattacks and technical glitches in the past. As well, today there is increasing competition from international card schemes, which have been expanding their presence and partnerships in Uzbekistan.
There are a number of key payments companies leveraging these national card schemes that have gained traction in Uzbekistan:
In June 2023, Uzum and CLICK announced a merger. Today these payment platforms compete for market share by offering attractive features, competitive fees, user-friendly interfaces, and wide coverage of merchants and services. They are also collaborating with banks, telecom operators, e-commerce platforms, government agencies, and other partners to expand their customer base and enhance their value proposition.
E-commerce in Uzbekistan: a growing market with high potential
E-commerce is one of the fastest-growing segments in the fintech and payments industry in Uzbekistan, as more people gain access to the internet and smartphones, and demand more convenience and choice in their shopping experience. According to Statista, revenue in the e-commerce market in Uzbekistan is expected to reach US$ 1.4 billion in 2023, with an annual growth rate of 13.5%.
However, there are challenges, such as low internet penetration, lack of trust in online transactions, high delivery costs and delays, and regulatory barriers. For example, as mentioned above, customers need to provide proof of income for transactions above US$ 1,000, which can discourage online purchases. Moreover, some e-commerce platforms are not fully compliant with local tax laws and consumer protection regulations, which can expose them to legal risks.
One of the key factors that influences how customers make e-commerce purchases is the payment methods available. In Uzbekistan, cash is still the dominant mode of payment, especially for small transactions and rural areas. However, online payments are gaining popularity among urban and young customers, who prefer more convenience, security and speed.
Today, CLICK and Payme have over a million installs on Google Play and are in the first and second places respectively on both mobile markets. These platforms allow customers to link their bank cards or mobile wallets to their accounts and pay for various goods and services online or offline. They also offer features such as bill payments, money transfers, QR codes, cashback and loyalty programs.
As in many other markets, another payment option that is quickly gaining traction in Uzbekistan is BNPL (buy now, pay later). Some of the leaders in this space are Uzum Market and Asaxiy.uz.
Sam Boboev is the COO and Co-founder of social commerce platform Botcommerce, with expertise in fintech, e-commerce and digital banking. In the past, he's successfully launched projects such as payments company StormPay in the UK and was part of the team at Click, one of the leading payment companies in Uzbekistan.
Sam also launched newsletter and blog “Fintech Wrap Up” where he shares news and insights about fintech, neo and digital banking, payments and more.