Digital payments and banking in Uzbekistan

Jun 7, 2021

Why have digital payments and banking been in the Uzbek news?

On 18 May, TBC published their Q1 2021 results. The report was hotly anticipated as it represented one of the first real indications of the success (or otherwise) of TBC’s pioneering entry into Uzbekistan’s digital banking space.

TBC initially entered Uzbekistan in April 2019 by acquiring 51% of ‘Payme’ for $5.5m, Uzbekistan’s leading digital payment platform. In April 2020, TBC received a licence to open a fully-fledged digital bank called ‘TBC UZ’ – powered by Mambu-developed banking software. Although TBC UZ and Payme are not officially integrated, the former also harnesses the data harvested from customers on the Payme app.

A short history of digital payments and banking in Uzbekistan

The fintech market came to life in 2004 when several state-controlled banks created the ‘common republican processing centre Uzbekistan’ (CRPCU). The first real fintech player was Paynet in 2005. Paynet’s service proposition was simple; they accept cash from customers at their stalls (set up in retail stores – today they have 21k payment points), and then make digital payments to mobile operators and utilities on their customers’ behalf. Paynet quickly became an enormous business, transacting more payments than the entire banking sector in Uzbekistan. In 2009, a controlling interest in Paynet (62.5%) was acquired by the Uzbek government (through state-owned bank Xalq Bank), with the owners retaining the remaining shares.

The CRPCU launched simple offline DUET payments in 2006, and then in 2011, they launched Uzcards, which could also be used online (enabling the first wave of online payment apps). DUET cards remained dominant until 2015 when Uzcards truly entered the mainstream. The launch of the ‘SMS payment notification system’ by the CRPCU in 2012 was also an important input for the first wave of online payment systems. CRPCU integrated with MasterCard in 2018 and Visa in 2019. After a series of serious malfunctions by the CRPCU-run UzCard payment system, the government instructed the central bank to create a new competitor national processing system – and associated payment system – that was ultimately called HUMO. With the launch of HUMO in 2018, employers now had a choice of two providers when making salary payments to employees.

The launch of Uzcards in 2011 allowed online payment platforms to emerge, the most successful of which was Payme – followed closely by their main rival Click. Click was favoured outside Tashkent given its unstructured supplementary service data (USSD) functionality which facilitated offline payments. Although Payme could only be used online, its interface and speed, allowed it to become the market leader. The proposition for digital payment platforms like Payme and Click was similar to Paynet but instead of visiting a physical payment kiosk, you could link your UzCard or HUMO card to a mobile app, and also make P2P payments – not previously possible with Paynet. By 2016 Payme and Click were far ahead of competitors, including distant third UPAY, a 100% government-run online payment platform that was slow to evolve, and other efforts by local banks. Paynet was also slow to respond to new entrants in the payments space and their market share declined significantly.

Despite increased competition from the likes of Apelsin, Paynet’s app, local bank offerings, and even Uzcard’s own payment processor, Payme remains the market leader. Another competitor, Paymo, has partnered with Sturgeon’s portfolio company, Billz, to allow them to offer credit to their retailer clients – Paymo seamlessly integrates with credit scoring agencies, tax authorities, UzCard/HUMO, and automatically debits payments.

In 2020, Turkiston bank obtained the first electronic money licence and developed an app called Oson. Oson was designed for those who wanted to add money to an e-wallet to make payments – customers have many options to top-up their e-wallet including Uzcard, HUMO, VISA, MasterCard, WebMoney and physical Paynet kiosks. The app is popular with Uzbek migrants who can top up their Oson e-wallets with their international cards (they do not need an Uzcard, HUMO, or even an Uzbek bank account) to send money or pay utilities for their relatives living in Uzbekistan.

Fully fledged digital banking in Uzbekistan is still in its infancy. Unlike digital payment services like Payme, full digital banks can provide services such as loans, deposit accounts and FX. To date, there are only two truly digital banks, Anorbank and TBC UZ. To provide some context on the scale of growth of FinTech payment services in Uzbekistan from 2011 to 2019 $1.5bn was transacted digitally, in 2019 $800m was transacted alone and is growing rapidly. Pricing transparency in the retail banking sector increased substantially in 2020 with the launch of, a financials comparison site on which banks such as TBC feature. The scale of the opportunity in digital banking (for both consumers and SMEs) is enormous and is consequently a strong theme in Sturgeon’s latest frontier markets fund.

TBC’s purchase of Payme

TBC entered Uzbekistan by purchasing Payme to gain a foothold in Uzbekistan’s attractive banking sector. By conservative estimates, 50% of the population is yet to have a bank account and only 3% of the population has ever taken a loan from a formal financial institution.

TBC used data from Payme’s existing client base (1.3m customers) to advertise their full banking services via their TBC UZ app in order to start developing a banking ecosystem. TBC has one offline branch for customer services – the experience can be entirely online through a mobile app if required. Partly a result of Payme having its own distinct shareholder base, TBC UZ and Payme are still two distinct apps with the former providing regular banking services and the latter still acting as a payment app. Payme is still considered the most reliable payments app in Uzbekistan, anecdotal evidence suggests money can still go missing on less reputable online apps.

TBC has already invested US$22 million into the charter capital of TBC UZ and has secured interest from the EBRD, IFC and the Uzbek-Oman Investment Company. TBC have expressed their intention to maintain a minimum 51% shareholding.

How is TBC doing in Uzbekistan?

TBC launched digital banking operations in Uzbekistan for retail customers in October 2020 and started lending operations in January 2021. As of 11 May, the number of registered users reached 192k, while their loan-book reached $2.7 million. In Q1 2021, they managed to attract around $2.6 million in deposits. The number of transactions is also growing, especially in POS terminals, which is being driven by the growing number of TBC cards, which reached around 47,000 as of 11 May 2021.

Payme, also continued to grow, with registered users reaching 3.4 million, up by 72.5% year-on-year. Payme’s revenues during the quarter increased 100.8% year-on-year to $1.5 million, while net profit grew by 134.1% year-on-year to $900k. Growth was driven by the increased number of users as well as the expansion of services. The number of transactions per active user stands at 10.8, compared to 8.9 a year ago.

TBC launched their digital bank during the height of the covid pandemic, and as a result of quarantine restrictions, uptake has been less than would have been expected. Although TBC’s longer-term trajectory is likely to be sharply positive given how unbanked/under-banked the population is, we should see increased competition from other digital banks, potentially including regional superstar Kaspi (Kazak banking ecosystem listed on the LSE). We will continue to keep our readers updated on the progress of digital banking in Uzbekistan.