Hungary, positioned in the heart of Central Europe, is an EU member and has a payment sector that uses cash and electronic methods. The country’s regulatory environment has changed to accommodate these shifts, aligning with EU security standards such as the revised Payment Services Directive (PSD2).

As Hungary’s economy grows, its payment sector is set to become increasingly dynamic. Below, we’ll explain what businesses that want to expand into Hungary should remember, including these takeaways:

• Embrace local preferences
  
• Follow security regulations
  
• Build a smooth customer experience
  

The state of the market

Though Hungary is in the EU, the country is not in the euro area; its currency is the Hungarian forint (HUF). However, Hungary’s participation in the Single Euro Payments Area (SEPA) facilitates cross-border transactions within the bloc. SEPA regulations also simplify payment processes and enhance interoperability.

Magyar Nemzeti Bank (MNB), Hungary’s central bank, shapes the country’s monetary policies, and the Hungarian Financial Supervisory Authority (HFSA) oversees and regulates financial markets.

Three major banking institutions are integral parts of Hungary’s financial sector: OTP Bank, K&H Bank, and MBH Bank. MBH Bank is owned by the Hungarian state and transformed with a merger in 2023. The bank focuses on driving digital and fintech innovation. Hungary’s government also encourages payment digitization. For example, in January 2021, it began requiring online retailers to accept electronic payments.

Payment methods

The Hungarian economy is developing, and technologically advanced payment options are gaining traction. However, cash has remained a common payment method.

Usage

There’s a strong demographic divide in cash use. For example, a 2020 MNB survey showed that pensioners conducted 72% of their daily transactions in cash. But there are limitations on cash use: businesses and individuals subject to value-added tax (VAT) can conduct transactions in cash for only up to 1.5 million HUF per contract per month.

And there has been a broader shift away from physical currency.

According to MNB data, about 80% of the population used at least one electronic payment method in 2020. Payment cards, once used primarily to withdraw cash, have been overwhelmingly used to conduct electronic payments. An MNB report showed that in 2021, Hungarians used cards for purchases in about 1.29 billion transactions and for 91 million cash withdrawals.

According to the MNB, more than 97% of credit cards in Hungary have contactless capabilities, and customers often use this payment method for smaller purchases. For instance, in 2021, there were nearly 675 million contactless transactions under 5,000 HUF and about 375 million for larger amounts.

The MNB implemented an instant payment system, Azonnali Fizetés (translates to “immediate payment”), in March 2020; the system lets users make immediate payments to another phone number or email address without needing to know the recipient’s account number. Participation in this system is mandatory for all banks, and they are required to help reverse payments in the case of an erroneous transfer.

Popular B2C payment methods in Hungary

• Credit and debit cards
  
• Cash
  
• Local digital wallets (e.g., OTPay, Erste MobilePay, Viber Pay)
  
• International digital wallets (e.g., Apple Pay, Google Pay)
  
• Azonnali Fizetés
  

Popular B2B payment methods in Hungary

• Bank transfer via Azonnali Fizetés
  
• Credit and debit cards
  
• Cash (for smaller transactions)
  

Trends

Mobile wallet use has also been increasing. MNB data showed a 58% increase in the number of cards registered in digital wallets—including regional options such as Erste MobilePay and Viber Pay—from 2020 to 2021. By the end of 2021, digital wallets accounted for over 12% of all payment card transactions, illustrating the growing acceptance of these modern payment methods.

Ease and friction of entry

The Hungarian economy is becoming more business-friendly. However, businesses operating in the country should keep some key factors in mind.

Taxes

Businesses and customers have to address VAT. Customers pay VAT as part of the purchase price of goods and services, and businesses collect and remit the tax to the government. Noncompliance with VAT regulations can result in fines, audits, and legal repercussions. At 27%, the standard VAT rate in Hungary is among the highest in the EU, but it drops to 18% for certain products such as poultry, milk, and those made from cereals.

Chargebacks and disputes

Hungary’s regulatory framework for chargebacks and payment disputes focuses on customers, following domestic laws such as the Act on Consumer Protection, and EU regulations such as PSD2 and SEPA. SEPA regulations are particularly relevant for direct debit transactions in Hungary because SEPA gives customers the right to request a refund for any direct debit transactions within eight weeks. (This goes up to 13 months if the transaction is unauthorized.)

International payments

International payments are common in the Hungarian economy, especially because of the country’s EU membership. Here’s how they work:

• Currency conversion: Hungary does business frequently with other countries in the euro area while retaining its own currency, so currency conversion is a major part of the nation’s financial system. For individuals, third-party businesses such as Revolut, Currencies Direct, and Wise (formerly TransferWise) help complete these transactions.

• SEPA transfers: As part of the EU, Hungary is part of SEPA. This simplifies euro-denominated bank transfers, making cross-border transactions within Europe easier.

• International trade: Because of Hungary’s strategic position in Central Europe and capabilities in car parts manufacturing, businesses in the country conduct cross-border transactions frequently. Hungary trades with EU countries such as Germany, Slovakia, France, Poland, and Austria, as well as the US and China.

Security and privacy

Hungary’s membership in the EU means it must adhere to the bloc’s stringent security and privacy rules. Though these might be challenging for businesses to meet, they benefit customers significantly.

• Data protection laws: Hungary adheres to the EU’s General Data Protection Regulation (GDPR), which sets stringent standards for safeguarding customer data, requiring explicit consent for data collection and granting customers the right to manage or delete their collected data. This framework ensures personal information is handled with care and transparency.

• Strong Customer Authentication (SCA) and PSD2 compliance: PSD2 mandates the use of SCA, a security measure that requires multifactor authentication for most electronic payments. This process adds a security layer by verifying the identities of the payer and payee.

• Role of the MNB: The MNB oversees and regulates payment-related activities in Hungary. It collaborates with other regulatory bodies to enforce compliance with financial regulations, including those related to Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF).

• AML regulations: Hungary closely follows EU directives on AML and CTF. Financial institutions operating in Hungary must implement strong systems and procedures to monitor and report potentially suspicious financial activities. Noncompliance with AML regulations can result in severe penalties and legal consequences.

• HFSA: The HFSA plays a major role in maintaining the stability and security of Hungary’s financial sector. The authority supervises financial institutions such as banks, insurers, and payment service providers to enforce compliance with financial regulations and consumer protection measures.

• Hungarian Financial Intelligence Unit (HFIU): The HFIU monitors and investigates suspicious financial activities related to money laundering and terrorist financing, as is required by international standards. The HFIU plays an important role in identifying and preventing financial crimes within the country.

Key success factors

Hungary has a complex economy, which presents challenges for businesses that want to operate in the country. They should consider:

• Limited adoption of emerging payment technologies: Hungary’s adoption of emerging payment technologies, particularly mobile payments, is relatively slow. By the end of 2021, more than 12% of cards were registered with digital wallets and the number of transactions per mobile card increased to 34 in the final quarter of the year, but that number still represents a small share of Hungarian cards. This slower pace of adoption means businesses operating in Hungary need to provide a range of payment methods, increasing system complexity and affecting user experience design.

• Regulatory hurdles in data management: The EU’s implementation of the GDPR has introduced major compliance requirements for businesses in Hungary. Noncompliance can result in substantial fines, with penalties of up to €20 million or 4% of a business’s global annual turnover for the most egregious violations. Meeting GDPR obligations demands substantial investments in data governance, especially in the context of payment systems, in which data security and frequent data exchange are paramount. Addressing the complexities of data protection regulations while providing straightforward payment operations can be difficult.

• Complexity in international transactions: International transactions in Hungary, particularly those that fall outside SEPA, can be complex. Businesses engaging in these transactions must contend with challenges such as exchange rate fluctuations and varying regulatory frameworks. To address these complexities, businesses need to use tactics that simplify cross-border payments and mitigate associated risks effectively.

Key takeaways

Businesses that want to enter the Hungarian market should understand local preferences, prioritize compliance with security measures, and focus on the customer experience. Here’s an overview to help you create and execute your business strategy:

Embrace local preferences

• Accept local payment methods: Hungarian customers have specific payment preferences, including bank transfers via Azonnali Fizetés and cash payments. To enhance the customer experience, consider offering these options alongside international card payments.

• Implement multicurrency options: Hungarian businesses interact with foreign individuals and entities frequently, meaning solely accepting HUF won’t be enough. Account for this in your business plan.

• Localize interfaces for Hungarian: Hungarians speak Hungarian predominantly, so offering payment interfaces in the local language is important. Localization goes beyond mere translation; the text that customers read should be written originally in the local language to guarantee maximum comprehension.

Follow security regulations

• Prioritize data security: Data security is a paramount concern for Hungarian customers. Your organization should invest in top security measures, including two-factor authentication and strong encryption, to instill confidence in customers regarding the safety of their payments.

• Confirm GDPR compliance: Hungary, as an EU member, adheres to the GDPR. Your business must comply with these regulations, adapting its data-handling practices to build customer trust and legitimacy.

• Use SEPA for direct debits: SEPA is influential in Hungary, especially for recurring payments such as subscriptions and utility bills. You can simplify recurring payments by adopting SEPA-compliant payment gateways. Doing so facilitates transactions and aligns with local preferences for direct debits.

Build a smooth customer experience

• Refine for mobile payments: As the number of Hungarian customers opting for mobile payments increases, adapt your payment systems to accommodate them. Providing these methods and more traditional options signals to customers that your business is flexible and forward-thinking.

• Simplify checkout processes: Long or complicated checkout processes can deter customers from completing their transactions, especially in ecommerce. Businesses should simplify their checkout flows, reducing the number of steps required for customers to finalize their purchases. This can lower cart abandonment rates.

• Offer real-time support: Accessible customer support can help resolve payment issues promptly. Providing options for live chat or immediate customer support—especially in Hungarian—can mitigate problems, leading to a smoother and more satisfying payment experience.