Card-to-card limits in Azerbaijan: the right diagnosis - the wrong medicine?
In early February 2026, the Central Bank of Azerbaijan and Mastercard Advisors published a joint study, "The Next Wave of Digitization in Azerbaijan" — a comprehensive diagnostic of the country’s payment ecosystem, drawing on surveys of more than 800 businesses and 600 consumers, dozens of stakeholder interviews, and an analysis of transaction data at the national level.
Mastercard’s press release struck an upbeat tone: progress in digitization, growth in card transactions, promising prospects for small and medium-sized enterprises. The data in the report, however, told a different story — a story of a parallel payment system that had grown from nothing to absolute dominance in three years.
On February 25, our publication ran an analysis by the First News Intelligence Unit under the headline "Card-to-card: how 71% of Azerbaijan’s e-commerce ended up beyond the reach of tax reporting" — the first detailed critical examination of the study’s data.
The article demonstrated that behind the headline figures on e-commerce growth lay a structural reality: an estimated 16 billion manats in commercial transactions per year were bypassing the formal reporting system through card-to-card transfers — and that the causes were not entrepreneurial bad faith but rather the architecture of incentives: tax thresholds, the cost of banking services, sparse POS terminal infrastructure, and a blurred boundary between personal and commercial accounts.
The article concluded with a question: would the speed of the institutional response match the speed at which the market had created the problem?
Five months after our article and six months after the report’s release, the answer came. The speed of the response deserves recognition. But was it the right instrument?
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Since August 1, 2026, new restrictions have been in force in Azerbaijan on inbound crediting operations to payment instruments (incoming card-to-card, or C2C, transactions). The decision was taken at the level of an industry agreement between the Azerbaijan Banks Association (ABA) and the Azerbaijan Fintech Association (AzFina), and has not been formalized as a separate regulatory act by the Central Bank.
The restrictions work as follows: no more than five incoming transactions (credits) per payment instrument per day. The total monthly volume of incoming transactions is capped at 20,000 manats. Banks and electronic money institutions are to issue only one payment instrument per financial product linked to an account.
Transfers between a customer’s own accounts and cards, as well as transfers to close relatives, are exempt. Limits also do not apply where a customer provides justification and the transactions are consistent with their risk profile.
Outbound transactions (card payments at merchants, online purchases) are not restricted.
The restrictions are officially positioned as a “risk-based approach” aimed at “improving the effectiveness of combating illicit financial transactions” and “strengthening the security and transparency of digital payments.”
What we said and what happened
In our February analysis, we posed five questions that the regulator and the banking sector would need to answer. The newly introduced limits most closely correspond to the second of these — the identification question, which we formulated as follows:
“The study demonstrates that threshold-based methods (frequency and volume of inflows to a single card) can identify recipients who are de facto merchants with high accuracy. Can these thresholds be implemented at the banking system level — not as a punitive mechanism, but as a tool for informing merchants and facilitating their soft migration into the formal POS acquiring space?”
The critical difference lies in what was proposed and what was implemented.
The CBAR × Mastercard study proposed analytical identification: detecting cards with inflow patterns characteristic of commercial activity and engaging their holders through information, consultation, and support in transitioning to formal acquiring.
What was implemented was the opposite approach: a blanket limit for all users (5 transactions, 20,000 manats) with no distinction between commercial and personal inflows.
The difference between these two approaches is not stylistic. It determines where the money will go.
The central question: where will the transactions go?
This is the key analytical question on which any assessment of the limits’ effectiveness depends.
There are two possible trajectories.
Trajectory one: entrepreneurs, faced with restrictions on accepting C2C transfers, migrate to formal POS acquiring. Transactions shift from an informal digital channel to a formal digital channel. The tax base expands. The regulator gains visibility. Objective achieved.
Trajectory two: entrepreneurs, faced with restrictions, revert to accepting cash. Transactions shift from an informal digital channel to an informal analogue channel. The tax base does not expand. The regulator loses even the limited digital trail that C2C transfers provided.
Which trajectory is more likely depends not on the regulator’s intentions but on the state of the infrastructure into which the restricted transactions are supposed to flow. The data from the very same CBAR × Mastercard study that underpinned our February analysis provides an unambiguous answer.
POS terminal density in Azerbaijan stands at 8.5 per 1,000 people (Georgia: 23.9; Kazakhstan: 51.6; Türkiye: 60.7). Fifty-six per cent of SMEs have never had a POS terminal. Only 30% currently have one, and of those, only around 48% use it actively. Sixty-nine per cent of SMEs consider the cost of business banking services too high. Of 22 banks, only four can provide fully digital onboarding for SMEs.
In the regions, the picture is starker still: 2.8 bank branches per 100,000 adults (versus 11.1 in Baku), and 61% of employed residents receive their income in cash.
The infrastructure into which the entrepreneur is supposed to migrate from C2C simply does not exist for most SMEs. A POS terminal is expensive, hard to access, subject to fees, and makes turnover visible to the tax authorities. Cash is free, instant, and completely invisible.
In the absence of an attractive formal alternative, restricting the informal digital channel is likely to lead not to formalization but to the archaization of payments — a reversion to cash, which represents an even less transparent environment than C2C.
Therein lies the paradox of the new limits: a measure aimed at increasing transparency risks reducing it.
What the study proposed — and what was ignored
The CBAR × Mastercard study did not stop at diagnosis. Drawing on an analysis of more than 60 initiatives across more than 40 countries, its authors selected 22 measures most relevant to Azerbaijan and developed implementation roadmaps.
None of the 22 initiatives envisaged blanket caps on C2C transfers.
The proposed measures were of a different kind. Subsidizing POS fees for new merchants, on the model of Poland’s Cashless programme, which increased terminal numbers by 77% in four years. Tax deductions for accepting card payments, as in South Korea and Italy. Mandatory digital onboarding for SMEs at the banking system level. Analytical disaggregation of commercial and personal C2C transactions, with targeted outreach to identified merchants.
The logic of these measures is one of incentive: making the formal channel cheaper, more accessible, and more convenient, so that the entrepreneur voluntarily prefers a POS terminal to a transfer to a personal card.
The logic of the introduced limits is one of restriction: making the informal channel less convenient, without creating an attractive alternative.
Of the five questions posed in our February analysis, four remain unanswered: the statistical separation of commercial C2C transactions into a distinct reporting category; the creation of incentives for migration to POS acquiring; the establishment of minimum digital service standards for banks; and the elimination of the gap between the legal requirement to conduct business through commercial accounts and the reality in which 59% of SMEs use personal cards for that purpose.
Collateral damage: legitimate users
A blanket limit cannot distinguish between a merchant receiving hundreds of daily payments to a personal card and a family in which working children transfer money to elderly parents.
Transfers to close relatives are formally exempt from the limits. Yet the mechanism for verifying family ties is a separate question, to which the banking system has so far offered no transparent answer. The very requirement to provide documentary proof of one’s right to send money to one’s own mother creates a bureaucratic barrier that did not previously exist.
This is not the central problem with the new restrictions, but it erodes public confidence in a measure that, according to ABA and AzFina, “will not create any additional restrictions or difficulties for users of payment services who maintain a good-faith record of payment transactions.”
A signal from within the system
It is telling that just ten days after the limits were introduced, the executive director of the Azerbaijan Banks Association told the APA news agency that the limits “may be revised in light of best international practice and ecosystem development trends,” and that “alternative measures” may be considered.
This statement suggests that even within the banking community, there is an understanding that the introduced limits may prove an insufficient or imprecise instrument for addressing a problem whose scale was compellingly documented in the CBAR × Mastercard study.
Conclusion: from diagnosis to monitoring
In February 2026, the First News Intelligence Unit conducted the first detailed critical analysis in Azerbaijan’s public domain of the data from the joint Central Bank and Mastercard Advisors study — an analysis that reframed the report’s neutral findings as a systemic problem demanding a response. We identified the structure of causes, assessed the fiscal consequences, described the side effects, and posed five specific questions to the regulator and the banking sector.
Five months later, an institutional response followed and that in itself is significant. However, the chosen instrument — blanket limits on inbound C2C transactions addresses only one of the five questions, and does so in a form distinct from what the study itself proposed.
The central thesis of our February analysis remains intact: the C2C problem is a problem of incentives, not of limits. As long as formal payment infrastructure remains expensive, inaccessible, and fiscally disadvantageous for most entrepreneurs, restricting one informal channel will redirect the flow not into the formal system but into an even less transparent medium — cash.
On this basis, we consider the following forecast well-founded.
In the coming months, the introduced limits will, in all likelihood, either be substantially revised or supplemented with incentive-based measures from the toolkit proposed by the CBAR × Mastercard study. The ABA executive director’s statement on possible revision and “alternative measures” confirms that this scenario is already under consideration.
At the same time, cash turnover statistics for the second half of 2026, if published, can be expected to show a rise in the share of cash transactions in the SME sector, particularly in the regions, providing an empirical indicator of the restrictive approach’s unintended consequences.
The First News Intelligence Unit will continue to monitor the situation. At the end of the year, should the relevant data become available, we will publish an analytical review assessing which of the two trajectories formalization or archaization has materialized in practice.
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This article is a follow-up to "Card-to-card: how 71% of Azerbaijan’s e-commerce ended up beyond the reach of tax reporting," published by the First News Intelligence Unit on February 25, 2026, based on data from the joint study "The Next Wave of Digitization in Azerbaijan" (Central Bank of the Republic of Azerbaijan × Mastercard Advisors, 2025).
Read in other languages:
Лимиты на card-to-card в Азербайджане: правильный диагноз — неправильное лекарство?
Azərbaycanda card-to-card limitləri: düzgün diaqnoz — yanlış dərman?
