This material is provided by the PLUS Journal (www.plusworld.org) - the most competent specialized multiregional periodical on Eurasian market (Russia, FSU countries etc.).

Russian market of payments and innovations: Right time for new opportunities

Notwithstanding the continuing global economic crisis, Russia is still one of the most innovative and fast developing markets of payments

To get more detailed information about the Russian and CIS payment card market and its infrastructure please contact:

Vice President, Member of Board | Business Development
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Contents: 

Part 1: Issuing
Part 2: Acquiring Infrastructure
Part 3: Russian payment card market in comparison
Part 4: Trends and Prospects

Part 1:

Issuing

According to the Central Bank of Russia as of August 16, 2010, the number of Russian lending institutions engaged in issuing or/and acquiring plastic cars equals to 705 banks, including 672 issuers and 632 acquirers.

As of April 1, 2010, Russian issuing banks issued 128,620 thousand cards. Hence, the card issue in the first quarter of 2010 gained more than 2% (the issue as of January 1, 2010, equaled 126,033 thousand cards), making 5.6% within the past 12 months (as of April 1, 2009, Russian banks issued 121,728 thousand cards).

Cards market penetration level increased as well, the results of 2009 show that each 1 thousand Russian residents possesses 890 cards, which is by 40 cards more than in 2008, and by 160 cards more than in the end of 2007.

Moscow and Moscow Region remain to be leading regions in terms of the number of issued cards - according to the Central Bank of Russia, together their residents hold 49,557 thousand cards (38.5% of the total card issue).

Saint Petersburg (over 7.7 million cards, 5.6% of the total card issue) and the following regions, that proved to be most promising in the development of the card market for the past several years, keep their leadership positions:

• Sverdlovsk region (over 4.2 million cards, 3.26% of the total card issue);
• Tyumen region (over 3.3 million cards, 2.57%);
• Novosibirsk region (over 3.2 million cards, 2.49%);
• Krasnodar Krai (over 3.2 million cards, 2.49%);
• Chelyabinsk region (over 3 million cards, about 2.3%);
• Samara region (over 3 million cards, about 2.3%);
• Nizhny Novgorod Region (over 2.1 million cards, 1.6%).

The Republics of Tatarstan (over 3.1 million cards, 2.4%) and Bashkortostan (over 3 million cards, 2.3% of the total card issue) as well showed feasible development trends.

In the first quarter of 2010, the activity (including transactions made abroad) on cards issued in Russia totaled 667,158,561 transactions for 2,494,238.8 million rubles. These values are higher than the same indexes of the first quarter of 2009 by 22.8% and 20.5% correspondingly.

The total amount of operations on cards issued in Russia in the first quarter of 2010 includes 455,609,304 cash withdrawals (68.2%) in the amount of 2,220,878.3 million rubles (or 89% of the total amount of transactions on cards issued in Russia). The number of installed ATMs on the Russian market is 92,530: 84,498 cash dispensing ATMs and 23,250 ATMs enhanced by cash depositing functions.

According to the Central Bank of Russia, the total card issue includes 88.5% of international payment card products and about 11.5% of Russian payment cards. At that, transactions on international payment cards equal to 86.5% of the total number and to 88.4% of the total volume of card operations.

Although international payment systems hold leadership positions on the Russian card market, international payment card holders are mostly focused on cash withdrawals rather than on cashless payments for goods and services. The share of cashless payments for goods and services in 2009 was 27.6% of the number and 11.2% of the volume of all operations.

The same figures for Russian payment cards were much higher and equaled to 38.8% and 25.1%, correspondingly.

The following Russian payment systems have the highest share of transactions, in terms of number and value, as well as of the acquiring infrastructure - United Russian Payment System (ORPS), Zolotaya Korona, Union Card|NCC and Customs Card. The aggregate share of these payment systems has reached 89.9% and 87.7% in the total number and volume of cash withdrawal operations, correspondingly, and 52.8% and 73.6% in the total number and volume of cashless payments (correspondingly).

It goes without saying that there is a tendency towards cooperation between international and Russian payment systems. According to paragraph VIII of Minutes of the Meeting dated June 20, 2008 No. 28 (Interbank Monetary Council Session held by the Bank of Russia and the National Bank of the Republic of Belarus), joint efforts are undertaken in favor of integration between retail payment systems, including those operating payment cards, both in Russia and Belarus to create conditions for mutual acceptance of Russian and Belarus payment cards within the territories of Russia and Belarus.

Another example of integration efforts pursued cooperatively by the Bank of Russia and the People's Bank of China is a mutual integration of the Russian payment system, Union Card|NCC, and the China national payment system, China UnionPay, that resulted in a joint issue of co-branded cards of these payment systems. Payment cards issued within the framework of this project allow their holders making payments in acquiring infrastructure of both payment systems.

Experts say that in the competition between Russian and international payment systems the latter have been winning for the last 5 - 7 years; and it will be impossible for the local payment systems to win back any significant share of the card issue market.

It is also important to remember that Russian card systems are equal to their foreign competitors in terms of technologies, including proven security levels and acceptable cost of transactions.