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Market Overview: Payments in Russia

On the centenary of the Russian Revolution, we examine payments in the world’s largest country. How do Russians pay today? And given the state bank dynamic, a new domestic card scheme and an internet-connected, tech-savvy population, what does the future hold for payments in Russia?

Russia covers 13 percent of the world’s surface, spans eleven time zones and is home to 143 million people. It is a vast country of contrasts, which is reflected in national payment habits, writes Joyrene Thomas, Editor, Payments Cards and Mobile.

How people pay in big cities differs markedly from payment behaviour in towns and rural areas. And while internet and smartphone penetration in Russia is higher than average for eastern Europe, Russians pay cash-on-delivery for online purchases more than half the time.


The economic downturn in Russia together with the devaluation of the ruble, rising inflation and numerous bank closures have made people cautious about electronic payment. Around 60 percent of all payments are made in cash. “Half the population like to have their savings under the pillow at home. They spend cash as opposed to paying by card or other payment methods,” explains Dmitry Danilenko, vice president, strategy and business development at payment services provider, Qiwi.

The domestic infrastructure is set up around cash. Qiwi is the largest operator of cash kiosks in Russia with around 175,00 nationwide, 60-65 percent of the market. Such kiosks are a popular way for Russians to pay utility bills, taxes, online retailers or each other (P2P), send international remittances and access a range of other financial services.

When not paying cash, Russians prefer cards over other electronic payment methods, such as credit transfers or direct debits. The number of bank payment cards in issue rose to 243.9 million in 2015 from 74.6 million in 2006, taking total card issuance to 1.95 per capita, according to central bank figures.

Eurasian payments card yearbook

This compares to an average of 1.24 cards per capita for the ten countries in the Eurasian Payment Cards Yearbook 2016-17, and a European average of 1.53 cards per capita. Debit cards outnumber credit cards by about 7:1. They are particularly popular as salary or payroll cards. While around 70 percent of card use is cash withdrawal at ATM, habits are slowly changing. The acceptance network is improving and Russians are starting to use their cards more at point of sale.

On the acquiring side, the Bank of International Settlement reported 1,481,469 POS terminals as at the end of 2015, up from 354,491 at the end of 2009 (CAGR 27.8 percent). Based on the 2015 figure, there were 10,109.3 POS terminals per million inhabitants in Russia, compared with an EU average of 21.893.2. Card acceptance is concentrated in Moscow and St Petersburg, although this is expected to change rapidly over the next few years due to new legislation described below.

“The competition is so high that you see excellent branch service, mobile applications, QR codes and a lot of free services.” Maria Vinogradova, OpenWay Group


The recent history of banking in Russia has been one of fragmentation and consolidation. Four-to-five years ago, there were more than 1,000 banks in Russia. But in the wake of the economic crisis, the central bank increased capital requirements and revoked the licences of more than 300 banks. The big players merged to create even bigger players, the biggest of which is Sberbank (The Savings Bank of Russia).

Known within the industry as the ‘big green brother’ on account of its size and green logo, state-owned Sberbank accounts for around half the cards issued (117.9 million) and half the POS terminals (552,000) deployed in Russia. Sberbank also has one of the biggest IT departments of any Russian company. It is held to be progressive and innovative by industry experts, which illustrates a particular characteristic of the Russian market.

“An interesting feature is that payment innovation is very concentrated in big companies. The regulation, market and society work in such a way that the most interesting things do not appear from the garage, but from the likes of Sberbank, Alfa Bank, Qiwi and Yandex Money,” says Dr Victor Dostov, president, Russian E-Money Association.

This seems to run counter to the practice in many other markets, where smaller, more nimble start-ups have a reputation for innovation. “Large Russian companies have managed to keep the innovation impulse and not become corporate players,” says Dostov. They are flexible and implement new ideas quickly, which is positive. “The negative thing is that the regulatory environment is very hard. We do not have waivers or easy licences.” This gives incumbents with both scale and brand recognition the innovation advantage in Russia.


The lack of legacy infrastructure also enables banks to be more agile from a technology and cultural point of view. “In Russia, the infrastructure and systems are much newer than in Europe. Credit cards appeared in Russia around 15 years ago, so the systems are quite new. It’s a classic situation when you can have a lot of functionality in one system — not like the zoo behind the scenes you have in Europe. The architecture is more transparent,” says Maria Vinogradova, director of strategy and market intelligence, OpenWay Group.

As to business culture in Russia, “it’s easier to be agile with Russian banks, similar to banks in south-east Asia. They take decisions quicker,” says Vinogradova. “We had a discussion with one of our acquirer customers, and demonstrated that we could do card migration projects in four months. They told us they could not take a decision within four months, let alone implement the solution. This is the huge difference.” Julia Lutskaya, marketing communications specialist, OpenWay, agrees and highlights another aspect of Russian business culture. “The relationship between vendors and banks is closer. In Europe, it is more formal. But in Russia, informality and relations mean a lot.”

Bank consolidation, big company innovation, lack of legacy systems and a can-do business culture make for a dynamic, competitive and innovative market. “If we talk about digital banking — web and mobile banking — the services we deliver to our customers are very advanced in terms of functionality, such as security services, one-time PIN codes, geo limiters, cash withdrawal limits, ATM cash by code,” says Lutskaya. Indeed some innovative services, such as SMS notifications for card purchases, have become almost a hygiene factor for customers. So, if the offering from big banks, certainly in the larger cities, equals and exceeds that of banks in other regions, what does the future hold?


To some extent, the future has already arrived. 83 million Russians are active internet users and mobile phone penetration is high. According to Yandex.Money, 91 percent of online purchases in Russia are via desktops, the remainder via mobile phones. However, mobile devices are involved in around half of all online transactions, as purchases started on a desktop may be authenticated via an SMS code to the mobile phone.

There are no fewer than five different ways to pay via mobile in Russia today. This ranges from mobile carrier billing and SMS check-out via the banking network, to integrated in-app payment, mobile NFC and QR payment. Will all these methods still be available in five years’ time?

“Russia is characterised by cheap, simple mobile devices and big ecosystems.” Maria Gracheva, CEO, Yandex.Money.

Probably, but the marketshare of each will change. Mobile carrier billing with its niche appeal and high merchant fees of 15-20 percent is likely to be a long-term loser. Methods involving heavy merchant integration, such as SMS check-out and in-app payment, may not grow quickly. Host card emulation (HCE), shortly followed by both Apple Pay and Samsung Pay came to Russia in 2016. However, with a large proportion of simple smartphones not equipped with NFC and low contactless acceptance, the ‘Pay’ solutions may struggle to gain traction.

“If we had an audience where everyone had the latest model of smartphone, Apple or Samsung Pay would be very popular in Russia. But we have a very democratic smartphone market, and it allows us as an e-wallet platform to create and distribute alternative solutions available for a wide audience, based not on NFC but on QR code,” explains Gracheva. The future is looking even brighter for the humble QR code, following government intervention on an unrelated issue.


The Russian government introduced the first phase of legislation to prevent tax evasion in the retail sector in 2015. All food and drink retailers were required to install 2D scanners to scan bottles of alcohol sold. From this summer, all small and medium-sized retailers across Russia will be required to provide real-time, line-by-line reporting of all items sold. This is to control goods purchased against those sold for tax purposes.

“These 2D scanners only need a small integration on the back-end of the cashier software to start accepting payments from e-wallets on any smartphone without any additional equipment, such as NFC,” says Gracheva. “I think that a lot of loyalty programmes and data-driven products will be based on this new technology of real-time reporting,” she adds.

Government support in Russia means a lot. Nowhere is this more clear than in the development of a national card payment system. The ‘NSPK law’ was signed by president Putin in May 2014 in response to sanctions, which resulted in the blocking of certain bank transactions by Mastercard and Visa. The NSPK law requires all processing to be carried out within Russia. By 2015, all international payment schemes were processing domestic transactions via the new national switch.

The second phase of the national payments strategy was issuance of domestic cards, which began in December 2015 with the pilot of the ‘Mir’ card (Mir means ‘world’ in Russian). As at mid-October 2016, there were one million Mir cards in market, according to an official press statement. Around 120 million Mir cards are expected by 2019. By January 2016, almost the entire ATM network and 85 percent of the POS network accepted Mir. The third phase will involve the international expansion of Mir card acceptance, variously by co-badging with international schemes, or extending the Mir acceptance network into CIS countries.


National sovereignty and digital agendas collide in Mir. The NSPK has ambitious plans to include government identity, transit and loyalty functionality on the card. Meanwhile, citizen-to-government interactions are already heading in a digital direction with online portals for the issuance of passports, driving licences, registration at schools and municipal kindergartens. “If our government decides to be digital or more innovative, they will be successful,” summarises Gracheva.

Payments are set to become more automatic or invisible. “Payments will not require any activity from the customer,” says Gracheva. This includes road toll payments through licence plate recognition, POS payment through facial recognition as well as recognition-based payment more generally. Sberbank has already started hand payment in schools. An infra-red scan of the hand veins of the pupil automatically charges the parental bank account.

Others are predicting that payments will become more automatic between banks, with significant impact on card schemes. Dostov predicts the removal of the four-party model over the next ten years. “We will have more and more direct payments, namely account-to-account. We already have some interesting signs. Sberbank controls around half of the card issuance and acquiring in the market, and has produced a closed-loop system,” he says. “I believe that banks will start to remove international payment systems and even probably Mir from the chain. Because if you can move inside the bank or have agreements between banks, then you have a good incentive to process transactions directly, as in China.”

Elsewhere the slow erosion of cash continues. For example, Qiwi has launched non-cash-on-delivery — much as a horse-less carriage or a driver-less car, the product is defined by the removal of a key characteristic. Qiwi undertakes to deliver physical goods on behalf of merchants. Consumers are offered various types of payment method; merchants are paid immediately at check-out. “Our first client is the Chinese consumer goods company LeEco, which manufactures mobile phones. 60 percent of all orders are now non-cash on delivery. They avoid this cash relationship,” says Danilenko at Qiwi.

In Russia, as elsewhere, the future will be increasingly digital, or as Danilenko puts it, “people can still like cash, but they can preserve it if they choose to pay by another means.”

Note: This article is compiled using detailed information adapted from the Russia chapter of the ‘Eurasian Payment Cards Yearbook 2016-17’.

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