Croatia's Contactless Payments Trending for a New Digital Age
Introduction to Croatia
An overview of Croatia's currency, population and key statistics.
Croatia adopted the euro (€) for daily transactions in January 2023. The country became a part of the European Union in 2013. Euro banknotes come in multiple denominations, €5, €10, €20, €50, €100, €200 and €500. The common currency also comes in coins, including €1 and €2.
Between 1994 and the end of 2022, Croatia used the kuna for conducting transactions. Since the country joined the EU, people could already use the combination of the euro and the kuna for various payments.
Croatia is among the most pro-crypto countries in the Balkan region. Many of its citizens invest in various cryptocurrencies, including Bitcoin and Ether. Crypto companies in the country operate under the supervision of the Croatian Financial Services Supervisory Agency.
The government requires all crypto transactions to be accompanied by confirmation documents, such as the exchange certificate, record on an e-wallet, and record of bank transactions for purchasing digital currencies. Croatia also imposes taxes on various cryptocurrency transactions, such as sales, mined crypto, incentives, and exchange.
Croatia has a population of 4,007,469 people as of the middle of 2023, according to United Nations data. The country has a total land area of 55,960 square kilometres, meaning that it has a population density of 72 people per square kilometre. According to the most recent census, 59.1% of the population lives in urban areas, including the capital Zagreb. The median age of Croatian citizens was 44.2 years in 2023.
About 95% of Croatians speak the national language, Standard Croatian, or Hrvatski. The government recognizes three dialects of the language, namely Chakavian, Kajkavian, and Shtokavian. In addition to Standard Croatian, Bosnian and Serbian are also commonly spoken in the country. Many Croatians speak more than one language.
According to World Bank data, Croatia's gross domestic product was $70.96 billion in 2022, having increased from $68.84 billion in 2021. Despite the increase, the annual GDP growth rate was 6.3% in 2022 compared with 13.1% in 2021. The country had a GDP per capita of $16,477.08 in 2022.
The World Bank reported that Croatia had a gross domestic savings rate of 21.8% of GDP, or equal to $15.44 billion, in 2022. It was an increase from the 20.3% recorded in 2021.
Internet & mobile phone trends
The internet penetration rate in Croatia was around 81.3% in 2021 according to World Bank data, with experts projected to increase to 87% by 2027. Meanwhile, the use of smartphones in Croatia is expected to grow by 4.8 percentage points between 2023 and 2028. Around 87.2% of Croatians will likely be smartphone users by 2028.
Croatia's internet and smartphone penetration rates are relatively low compared with those of more developed European countries. It is also one of the reasons for the slow growth of e-commerce in the country.
Due to its small population, Croatia's e-commerce market is relatively modest. The country was projected to post $1.30 billion in e-commerce revenue in 2023. Market experts meanwhile forecast a compound annual growth rate of 10.4% for Croatian e-commerce from 2023 until 2027, when it is expected to generate around $1.92 billion in revenue.
EcommerceDB noted that the electronic and media sector is the largest contributor to Croatian e-commerce revenue, accounting for 35.6% of the total. Fashion takes second place by contributing 21.3% of the total revenue.
Summary of fiscal policy
Croatia launched its long-term decentralisation plan in 2001. Its aim is to ensure self-sustaining local and regional governments with a decentralised financial system. However, analysts point out that the coronavirus pandemic caused financial disparities across various levels of government. Some local governments were forced to tighten their budgets due to the slowdown in economic activities.
The country has a three-tier government structure – central, county and local. Local governments include towns, cities, and municipalities. The Law on Local and Regional Self-Government Financing is used as a reference for the local government finance system.
The fiscal decentralisation system provides local governments with the authority to manage their finances. They use equalisation grants, shared taxes, national budget grants, and other resources to finance their programs. Although local governments raise revenues from local taxes, the rates are set by the central government. Grants also vary among regions, depending on their fiscal capacity.
How people pay in Croatia
An overview of how people in Croatia choose to make payments.
Most popular payment methods
Traditional payment methods
The primary traditional payment methods used in Croatia
Visa is one of the world's largest payment processing systems. It provides payment solutions via debit or credit cards that show the brand's logo. Most commercial banks in Croatia, like Addiko Bank and Privredna Banka Zagreb, provide Visa cards to their customers.
AmEx is a popular payment processing service in Croatia. It offers numerous benefits to users, including reward points on various transactions. Cardholders can convert these points into frequent flyer miles if they want to. AmEx also works together with banks to offer other attractive offers to consumers.
This payment provider is among the most popular modern payment methods in Croatia. Many merchants within the country are connected to the provider, making it convenient for people to pay using Diners cards. The Diners card is also accessible via mobile app, improving user accessibility.
Alternative payment methods (APMs)
Alternative payment methods
This payment method is designed for iPhone users whose devices contain an NFC chip. Users must load the digital wallet via debit, credit, or prepaid card to use the service. Many Croatian merchants allow customers to use this digital payment method because of the growing number of smartphone users.
This payment provider connects with over 650,000 merchants in more than 50 countries. It is a convenient option for consumers because it ensures that they can remain anonymous. The prepaid card can accommodate e-commerce transactions without the consumer needing to enter banking and personal details.
Mobiamo is one of the world's leaders in mobile payments and carrier billing. The payment provider operates in 110 markets. With this provider, users use SMS to make payments on physical and virtual items at participating merchants. The purchase price will be added to the users' regular phone bills.
How to accept payments in Croatia
A guide to accepting payments in the UK.
How to accept online payments in Croatia
The digital payment scheme may involve four parties: the card user (buyer), business or merchant, issuing bank, and acquirer. Multilateral interchange fees usually apply in a four-scheme payment system like this.
Numerous payment gateway providers and authorisation services operate in Croatia. However, they generally follow similar payment procedures to other countries. Here is how merchants accept online payments in Croatia:
The cardholder or buyer chooses their preferred payment method for that specific transaction. After that, they send the payment details to the business for purchasing goods or paying for services.
The business delivers the buyer's payment details to the acquiring institution or the payment processing firm. They will then send the payment request to the issuing bank or other licensed financial institution that issued the payment account to the customer.
The issuer will confirm whether the customer's fund can cover the complete transaction. It will approve the request and send an authorisation code to the acquiring institution if the funds are sufficient.
The acquiring institution then forwards the code to the merchant to complete the transaction.
How long does it take to make an international payment from Croatia?
The time needed to complete international transactions is influenced by payment methods. Certain methods may take a longer period than others.
Debit/credit cards: Paying by debit or credit card may take up to one to three business days.
Wire transfers: International wire transfers from Croatia can take up to five business days.
Online money transfers: Online money transfer is a favourite method because it is quicker. The process may only take hours to a day.
Merchants' operational costs are not only related to the production of goods and services but also their payment processing systems. Payment providers usually charge businesses for using their services. Businesses can choose whether to shoulder the fees and limit the profit margin or pass the costs to customers.
Interchange fees: Banks charge this fee to businesses to cover the payment processing costs. According to recent data, interchange fees in card payments in Croatia are relatively higher than the EU average.
Payment gateway fees: Payment gateway providers charge businesses that use their platforms. They may charge fees based on each transaction value or apply a predetermined fee.
Businesses operating in Croatia will pay extra fees for accepting payments from outside the jurisdiction. The fees include international processing and currency conversion costs.
Security challenges of online payments in Croatia
Security concerns are still a major issue in the use of digital payment systems in Croatia. Similar to many other parts of the world, Croatians reported wariness about the safety of their personal and financial data when using digital payment systems. Nevertheless, experts say many people still use digital payments for convenience despite the risks.
The government has pushed for the adoption of cashless payments in the country, supported by steadily increasing use of the internet and smartphones. Croatian authorities have introduced regulations to safeguard consumers' data privacy. The country also collaborates with international institutions to deal with cybersecurity issues.
Furthermore, more Croatians have participated in the banking system, making it easier to transition toward digital payments. The country has also reported a steady increase in debit and credit card uses.
The World Bank still pointed out gaps in adopting the modern financial system in Croatia. According to the World Bank, a significant portion of working adults still receive payments in cash. It reduces the urgency for this working class to use the banking facilities.
Key sectors & industries in Croatia
Croatia has several key sectors and industries that are expected to push its economy forward.
Tourism accounts for 19.6% of Croatia's GDP, making it one of the most important sectors in the economy. Official data shows that the tourism sector employs more than 99,000 people. Croatia has attracted numerous foreign investors in this sector, including Hilton and Kempinski.
Its main asset is the indented Adriatic coast, which offers opportunities for various forms of tourism. Croatia has abundant natural resources and a centuries-old cultural heritage that attracts tourists worldwide every year.
The industrial sector also plays an important role in Croatia's economy. The sector underwent a transition to adopt modern production trends. As a result, manufacturing accounts for 81% of the country's industrial exports. In 2021, the sales of industrial products amounted to €20.35 billion, with €8.51 billion coming from exports.
Food and beverage production leads the country's industrial sector based on total revenues. The largest export activities in 2021 were related to food products, accounting for 9.5% of total exports. The chemical and oil industries are also among the top revenue contributors in Croatia.
Croatia has 1.5 million hectares of agricultural land, with 0.9 million hectares being arable. The varying climate and soil types make it possible for farmers to produce various products. Croatia's arable land meets the domestic demand for cereals and oil plants.
Croatia is also a well-known wine-growing country. According to 2021 data, vineyards covered 21,000 hectares of land. The country produced 765,000 hectolitres of wine that year. It is also known for olive oils, producing 45,000 hectolitres in 2019.
Fishing happens mostly in the Adriatic Sea, known for its diverse fish species. In 2021, the country produced 84,097 tons of marine fish and 3,970 tons of freshwater fish from capture fisheries and farming. Blue fish such as sardines dominate sea fishing, while popular freshwater species include carp and trout.
In Croatia, capture fishing at sea can be commercial and non-commercial. Non-commercial fishery refers to fishing activities for leisure. Meanwhile, commercial fishery in Croatia includes both large-scale and small-scale coastal operations.
Despite the country's relatively small population, the quality of its human resources has attracted investments by various international technology companies. Notable among these are Siemens and Microsoft.
In addition to international tech firms, domestic IT companies have also gained traction recently. Croatian IT firms Microblink and Infinum are among Europe's fastest-growing companies. The country's tech sector employs around 53,000 people and it is expected to continue growing.
Croatia's transportation sector is also relatively advanced compared with those of its immediate neighbours. It has a road network spanning 26,960 kilometres, with motorways and semi-motorways accounting for 1,417 kilometres of this. Meanwhile, the total length of its railway network is 2,617 kilometres. About 37% of it is electrified.
Croatia is also known for its shipbuilding industry. The local industry boomed between the 1960s to 1970s, with its largest shipyards being among the world's top ship exporters during that time. Because of Croatia's geographical location, maritime transportation is an important part of its economy.
The country's energy sector centres around electricity, oil and gas. However, Croatia's gas and oil production is insufficient to meet domestic demand. Oil fields in Slavonia and Podravina meet 20% to 25% of the country's needs, while natural gas production covers 45% of domestic demand. This necessitates the country to import oil and gas from other countries.
Nearly 50% of the country's electricity comes from hydroelectric power stations. Croatia has pushed for a transition toward green energy, especially wind and geothermal energy. It opened the 17-megawatt Velika 1 geothermal power plant in 2019. The construction of the second power plant began in 2021.
Croatia's pharmaceutical industry has helped to develop the country. It has attracted significant investment in research and development. The sector employs more than 5,000 people across large and mid-sized companies.
The country receives foreign investment in this sector, with several international firms establishing bases in Croatia. Genera, a subsidiary of pharmaceutical giant Dechra Group, has an office in Croatia. Experts forecast continuing growth in the industry, with pharmaceutical preparations accounting for most of this.
The Croatian government has founded regulatory innovation hubs to manage the fast-moving fintech industry. The hubs support various innovative projects, accelerating their plans for market entrance. The neo-banking sector is expected to grow its revenue by 51.3% in 2023. Meanwhile, digital payments could see a transaction value of $5.65 billion by 2027.
Croatia's EU membership also contributes to its rapid development in the sector. Having joined the regional bloc, the country follows its regulations on financial enterprises. Its participation in the EU also increases economic stability.
Regulation in Croatia
The regulatory environment of Croatia
Summary of the regulatory environment in Croatia
The Croatian government has set up regulations for businesses to support the country's economic growth, enhancing local industries, and protecting consumers.
Company law: This law regulates the creation of business entities in Croatia, their operations, and protection for all stakeholders. Croatia follows the EU model for regulating companies.
Employment law: The employment law in Croatia manages various human resource issues, from working hours and wages to pension rights. The regulation also protects employees from unfair contract termination.
Consumer protection law: Croatia protects consumers from the buying agreement to the future use of the products. It also offers guidelines for the advertisement of products and services.
Competition law: Authorities monitor businesses to detect anti-competitive behaviour and market manipulation. Businesses that do not abide by the law may have their permits revoked.
Data protection law: In the EU, authorities also protect consumers' data privacy. Companies must fulfil authorities' requirements for data protection before operating.
How card payments are regulated in Croatia
Croatia has the Payment System Act, which regulates all payments made in the jurisdiction, including card payments. For card-based payments, Croatia refers to Article 2 of Regulation (EU) No 260/2012. The regulation encompasses payments that use any technological means. The law encompasses various card uses from purchases, loans, and other purposes.
Do I need a licence?
Businesses need to apply for a licence to operate in Croatia. As a part of the EU, businesses that are registered under the bloc's jurisdiction can serve Croatian residents. In turn, Croatian businesses can also expand to other EU countries.
Croatian citizens can register their small businesses online. Meanwhile, non-residents can visit government offices to set up their businesses. The licence involves authorisations from the county-based competent registration office, the Croatian Pension Insurance Institute, and the Tax Administration.
Payment solutions in Croatia
An overview of how to accept payments from customers in Croatia.
Payment gateways and providers in Croatia
Providing a streamlined digital payment experience is a necessity for all e-commerce businesses. Most of the time, customers will not close transactions if they perceive the seller's payment system as too complicated or too expensive. Croatian e-commerce businesses can work with APEXX, a payment technology firm based in London.
APEXX offers an all-around solution for Croatian merchants to simplify their payment systems. Its Payment Orchestration Layer (POL) serves as a hub for multiple payment service providers.
POL has several features that improve the payment experience for merchants and buyers. Its smart routing feature will automatically select the right payment providers for every single transaction. The technology takes into consideration the costs, currency conversion rates, and risks of each provider. Because of that, customers will see lower transaction costs and reduced probability of payment failures.
APEXX is also committed to making transitioning toward its system seamless. There are several APIs and pre-built plugins to help integrate POL into the business' existing point-of-sale systems and websites. Customers can immediately use the business' new payment feature with fewer disruptions.
Cheapest payment solutions in Croatia
Croatian e-commerce merchants can use the following tactics to streamline their payment systems.
Select the best pricing model: Choose the best pricing model based on the business size, common transaction types, and transaction volume. A flat rate is the best model for a starting business.
Negotiate the markup fees with payment providers: Payment providers usually increase their fees. Businesses with high transaction volumes can negotiate to lower these fees.
Lower risk of credit card fraud: This is done to avoid chargebacks from payment processors. Keep records of transactions, request signatures for all delivered orders, and establish clear refund and return policies.
Use address verification: Verify the buyer's billing address to minimise the fraud risks. It reduces the rate of chargebacks.
Establish business account and terminal properly: Fill in the business' banking details appropriately so they will not be errors later. Terminals also influence the processing fees.
Track fee changes: Payment providers often change their policies regarding fees suddenly. Keeping up with these changes allows merchants to devise a plan to cut costs.
Payment services like APEXX assists businesses in managing payment systems. It keeps track of the changing fees in the Croatian payment market. Its automated operation reduces the merchant's stress and ensures business efficiency.
BNPL in Croatia
The buy now, pay later (BNPL) market began to thrive in Western Europe and Central Europe after the start of the pandemic. The supportive regulatory environment also boosts the growth of fintech players in this area. This service provides short-term financing with minimum requirements to consumers, making it an attractive alternative payment method for many people. Croatia's growth in e-commerce also enhances BNPL's popularity.
In Croatia and neighbouring countries, BNPL is especially popular among tech-savvy millennials and Gen Z. Young consumers with limited incomes enjoy this payment system because it allows them to buy big-ticket items and choose a flexible payment plan. Nevertheless, experts warn that the trend can lead to an increase in unsustainable consumer debt.
As an EU member, Croatia adheres to the regional guidelines to manage the BNPL market. According to the EU regulation, BNPL companies must assess each client's creditworthiness before approving their loan application. It ensures that clients can repay their loans to these firms. The EU also demands that BNPL companies inform borrowers of the total costs of the credit upfront.