Payment Media

Cash Payments 

Cash payments in LBP and USD are the most common and frequent means used for everyday small-value transactions.

Political instability of the war years greatly affected the Lebanese economy. The Lebanese pound depreciated vis-à-vis the US dollar and became highly volatile, which led to a shift in depositors’ preference from the Lebanese pound to the US dollar. However, the final issue of banknotes with large denominations, in 1994, was considered an important step in encouraging the use of the national currency as part of the de-dollarisation process.

Non- cash payments 

Cheques 

Cheques are the most important medium used for non-cash payments on account of their simplicity of use. In fact, they account for more then 90% of total value of cashless transactions, namely, cheques and payment by cards. All banks operating in Lebanon are bound to participate in the Clearing Houses established at the BDL’s head office and at most of its branches and the cost of operating the Clearing Houses is met by the participating banks. Cheques are cleared in Lebanese pounds and in 3 major foreign currencies: the US dollar, the pound sterling and the European currency, the Euro, as specified by Basic Decision  No.7158 of 10th November 1998. Out of the total value and volume of cheques cleared in foreign currencies, USD cheques account for almost 100% which reflects the importance of the US currency in economic and financial transactions in Lebanon.

Bills of Exchange 

The popularity of this instrument as a settlement medium, particularly between companies, is due to the widespread use of suppliers' credit in Lebanon (e.g. for the purchase of cars, furniture or home appliances).

Credit transfers 

Customers can give their banks standing orders for regular payments to specific payees. The order can be executed by telephone, fax, telex, or following written instruction. Payments are executed on the date specified by the customer. 

Direct Debit 

Direct debits too are used for recurring payments (eg electricity, telephone, subscription and tax bills), simplifying the payee's task of collection. Subject to prior agreement between the debtor (payer) and creditor (payee), a direct debit is made out by the payee and presented to his bank for collection from the payer's bank. The payee is responsible for submitting his claim on time as specified in the prior agreement. There are no agreed rules applying to every bank for conducting such operations and banks use their own message formats in the collection process. Currently no statistical data are available on the number of direct debits in Lebanon.

Payment  Cards 

There are two main types of payment cards used in Lebanon, international and local cards, both of which can be issued by banks and non-banks. In practice, the issuers are mainly banks and credit card companies. Large retailers and other businesses also issue payment cards (proprietary cards) but with restricted purposes. Payment cards are used with a personal identification number (PIN) to identify the cardholder's entitlement to services. The particular range of services provided depends on the contract between the issuer and the cardholder, but the majority of cards used in Lebanon provide three services - cash access, debit and credit card payment services.

Most card issuers charge administrative costs and annual fees. Annual fees vary according to the services provided (international or national payments, immediate or deferred debit, or cash withdrawals only).

The number and use of payment cards is rapidly expanding in Lebanon but is still small compared with cheque payments. Card issuers and merchant acquirers are very selective in admitting new cardholders and in signing up merchants respectively. In addition, the use of cards needs a well-designed network and settlement system that operates within specified laws and regulations. In this context, Basic Decision No. 7548 issued by the BDL constitutes the first step in this direction. It obliges banks, financial institutions and other relevant supervised institutions to notify the BDL before using electronic means to perform any previously approved activities.

Credit Cards 

Credit cards are used as a mean of payment and as a form of credit. A different range of services is offered by different card-issuing institutions. The cardholder holds an account with the card-issuing bank or with any other bank from which the settlement is done (direct debit).

Debit Cards

Debit cards enable cardholders to make payments, which are debited to their bank accounts. Unlike a credit card customer, the holder of a debit card must necessarily hold an account at the issuing bank.

Charge cards

Holders of charge cards must settle the total of their bill at the end of each month.

Automated Teller Machines - ATMs

The first ATM was installed in Lebanon in 1994. Since then, the number of ATMs has grown, as competition has increased in offering new services to customers at convenient times and locations. ATM services can be provided either in the national currency or in US dollars. The ATMs permit customers who have an access card (a credit or debit or cash card) and a PIN to withdraw cash either from their accounts or against a line of credit. They are either located inside the premises of a bank or another company or in outside their walls (universities, hospitals, big stores…).

The installation of ATMs by banks and bank-owned companies requires prior notification to the BDL and is subject to the following conditions:

1. The number of ATMs installed outside a bank's doors should not exceed the number of the bank's branches in addition to its head office.

2. ATMs should accept all types of cards authorised and listed by the BDL, whether issued domestically or internationally and their respective networks should have connections with all other networks used for card transactions in Lebanon.

3. Companies owning ATMs' networks should inform the BDL of the name of the owners and the number of the participants on the network. The companies must also respect the Banking Secrecy Law.

4. Clearing and settlement should be performed domestically - ie without passing through international networks.

5. The use of all cards issued should be subject to the agreed arbitration procedure to settle any disputes.
   

Any other company wishing to install an ATM requires prior approval by the BDL and must enter into a contract with the sponsoring bank to define their respective responsibilities. The number of ATMs installed by the company will be deducted from the sponsoring bank's permissible number of ATMs located outside its premises and these ATMs should accept all domestic and international cards listed by BDL. Banks were given a grace period (ended 30 September 2002) for compliance with the above-mentioned requirements.

The circular also stipulates that proprietary cards which are issued by companies that do not provide financial or banking services and whose object is mainly to serve their customers are not subject to BDL's rules and decisions.

ATMs now operate only on-line. They are directly connected to the operating networks in Lebanon (connected between themselves as well) and to the communication system of bank. The network operator and accounting department verify the PIN and other details centrally. On-line operation reduces credit card fraud. Until end 2002, some ATMs operated off-line, but this has been phased out following Basic Decision No. 7299 of 10 June 1999.