Яндекс.Метрика
14:03, 15 December 2015 Page views 21686 views

Payment Card Market of Russia in 2015. Inevitable growth

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In 2015, despite the impact of external and internal adverse factors, the card market in Russia continues to show steady growth.


Payment cards issuing in Russia: the dominance of debit products
According to the Bank of Russia, banks of the Russian Federation issued 234.11 mln payment cards as of July 01, 2015 (the annual growth of 6.44% compared to 219.945 mln cards as of July 01, 2014): 203.703 mln debit (charge) cards (87% of cards in issue), and 30.407  mln credit cards (13%). At the same time, the number of debit cards in the Russian Federation increased by 7.9% (up to 188.776 mln), while the number of credit cards in issue, decreased by 2.44% (primarily, due to the revocation of the licenses of a number of issuers of such cards). Banks also issue prepaid cards, with their total number in issue being quite considerable and reaching tens of millions, according to various estimates. However, the Central Bank does not include the data on these products in their information bulletins. That’s why it is diffi cult to accurately assess this market segment without additional specifi c calculations.

It’s necessary to note that as a result of the Central Bank’s policy of rehabilitation of the banking system the total number of credit institutions issuing or acquiring payment cards dropped by 7.8% as compared to 01.07.2014 and reached 572 banks. The number of issuers and acquirers as of 07.01.2015 amounted 568 (a reduction by 7.2% YoY) and 522 (a reduction by 6.6% YoY), respectively.

According to the Central Bank’s data on the cards issue structure, the payment system of the Russian Federation is characterized by the absolute prevalence of debit cards (87%) over credit cards (13%). The largest issuers of payment cards are Sberbank of Russia, VTB24, Alfa Bank, Gazprombank, Rosselkhozbank, URALSIB, Rosbank and others. Some experts believe that the Bank of Post of Russia (“Postal Bank”) can become another major player in the market of mass payment cards.

Among all Russian banks, Sberbank of Russia today is the absolute market leader in the issue of both debit and credit cards. The total number of cards issued by this Russia’s largest credit institution as of January 01, 2015 was 101.9 mln. Among them, debit and credit cards account for 85.67% and 14.32%, respectively, and this ratio virtually represents the general structure of card issuing in the country.

The penetration of bank cards in Russia shows quite steady growth as well. According to estimates of the National Agency for Financial Studies (NAFI), the share of bank card holders among the population has grown

by more than 20% within 2013-2014 (from 58% to 71%). Minimum level of penetration (about 50%) is observed among pensioners and unemployed.

The share of non-cash card transactions in Russia is growing
The number of non-cash transactions on payment cards in Russia clearly demonstrates a positive trend. Their share in the total number of card transactions is growing and already exceeds two-thirds, as specified by the Central Bank of Russia.

So, while 62% (2 679.9 mln) of the total number of card transactions (4 285.9 mln) were payments for goods and services in the first half of 2014, in the same period of 2015 their share reached 70.74% (3 863.7 mln of 5 461.6 mln transactions), and as few as 29.6% of card transactions (1 597.8 mln) accounted for cash withdrawals.

While the volume of non-cash card transactions, demonstrates less impressive growth rates, this indicator demonstrates a steady trend of gradual increase. Thus, according to the Central Bank of the Russian Federation, in the first half of 2015 the share of cashless payments for goods and services in the total volume of Russian cards transactions amounted to 23.85% (RUB 3 568.4  billion of the total amount of RUB 14 963.7 billion). In the first half of 2014 the figure was 20.05% of the total card transactions volume equal to RUB 13 834.9 billion.

International payment systems and NPCS factor (Mir (World) cards)
Today, over 90% of the cards in issue in Russia are Visa and MasterCard products. According to experts, in 2015 the share of MasterCard in the Russian card market is 35%, and the share of payment system Visa exceeds 50%. Remaining 10-15% fall on Russian local systems (Zolotaya Korona, PRO100, NCC/UnionCard). In 2015, MasterCard and, a bit later, Visa transferred Russian domestic transactions for processing to the National Payment Card System (NPCS) according to the new requirements of the Russian law “On the national payment system.” The final migration of the intra-Russian traffic of other IPS (JCB, UnionPay and American Express) to the NPCS was scheduled for January 01, 2016. However, the media are discussing information – officially unconfirmed – that the Central Bank may defer this step to a later date.

According to the NPCS strategy, the company intends to issue about 120 million Mir-branded cards by 2019. This will certainly change dramatically the structure of the Russian card market, where slightly more than 234 million payment cards of all types and systems are circulating today. According to the data of the NPCS itself, the large-scale issue of Mir cards will start in 2016.

Card acceptance infrastructure in Russia: POS-terminal network expands
The trends seen in the dynamics of the bank cards acceptance infrastructure in the Russian Federation correlate with the growing number and volume of cashless transactions on bank cards.

According to the Central Bank of the Russian Federation, the payment cards acceptance infrastructure in Russia included 1,299,418 POS-terminals installed at merchant locations and 158,711 POS-terminals in cash points as of July 01, 2015. It also includes self-service devices (ATMs and banking information and payment terminals), with their total amount of 218,768 devices at the above mentioned date. Of these, 125,105 machines have cash-in functionality.

The dynamics of the self-service devices network in Russia demonstrates the reduction in the number of ATMs and information and payment terminals. As  compared to the data of Bank of Russia as of July 01, 2014, the total number of such units reduced by 7.1% (from 235,505 to 218,768 pcs.). It should be noted that the reduction affected both devices with cash-in functionality, and traditional ATMs, with cashout functionality only.

The POS-terminal network in Russia, on the contrary, shows a strong upward trend. Thus, within one year since 01.07.2014, the number of POS-terminals installed at merchants’ locations increased by 27.8% (from 1,016,516 to 1,299,418 machines), while the number of POS-terminals at cash points decreased by 7.8%.

NFC technology: contactless cards and mobile payments in Russia
According to estimates of Gemalto and Ingenico, the number of NFC-enabled POS-terminals more than tripled within the year in 2015 to reach the milestone of 100 thousand. J’son Partners gives more modest fi gures – an increase of 136%, from 25,000 to 59,000 installed devices. The number of NFC-enabled POS-terminals Russia, according to Gemalto’s forecast, should grow to 235,000 by 2016, to reach 25% of Russia’s total of POS-terminal solutions installation base.

The rate of penetration of cards with a contactless interface and the frequency of their use in Russia are growing rapidly. According to MasterCard, the number of MasterCard PayPass contactless transactions in Russia increased more than fourfold within the year.

According to expert estimates published in the report issued by J’son Partners Consulting, the maximum estimated number of potential users of NFC technology in Russia in the midst of 2015 didn’t exceed 2 million with the prospect of growth to 7.5 million as soon as 2016 (an optimistic scenario). Also, according to forecasts of the Euroset company, by 2017 the contactless payments market in Russia will reach at least 20 billion rubles, and even 50 billion in case of favorable circumstances.

The market of bank cards manufacturers in Russia
Domestic production of bank cards meets the needs of issuing banks in the Russian Federation almost completely (except for some niche projects).

Rosan Finance, Alioth and NovaCard are three leaders among the Russian card manufacturers. The positions of other manufacturers such as “NIIME and Micron”, “Sitronics” and “Orenkart” are also quite noticeable. Herewith “NIIME and Micron” the Russian manufacturer of bank chips thinks to increase their market share after the beginning of the mass issue of “Mir” cards relying on their ability to supply domestically made chips as well as the fi nal product – bank cards.

Developing not only a bank chip, but also an operational system for it, “Micron” can quickly hand in hand with NPCS settle problems on changing of payment application specifi cation at the stage of project pioneering. The fi rst bank cards with domestically made chip of “Micron” have already been functionally tested in NPCS and received positive conclusion. Along with preparing to the serial manufacturing “Micron” is working on modernization of its chip and plans to launch the updated version with native realization of the payment application in the spring time of 2016.

The largest foreign player on the payment cards market in Russia is Gemalto. Experts also give a high rating to the potential of Chinese manufacturers and suppliers of cards to the Russian market, though most of them have had diffi culties in adapting to the realities of the Russian business so far.

More information about the Russian card market
If you are interested in more information about the Russian card market, analytical reviews, expert evaluation of business opportunities of your company in Russia or need to get in touch with the Russian card market players, 

please contact Konstantin Grizov, Business Development Director, PLUS-Alliance:

Tel: +7 495 961 10 65, (1201)
Cell: +7 925 005 40 05
E-mail: konstantin@plusworld.ru

Skype ID: konstantin.grizov

Also, we are pleased to invite you to take part in our upcoming Forum “Cards, Payments and Mobile 2017”, which is dedicated to the analysis of the current state of the banking and payment industry in Russia and globally. The Forum will take place on 7-8 June 2017.

For more information, please follow the link.

For registration, please click here.

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