Despite economic turmoil, the Russian payments card market grew substantially between 2011 and 2015, in terms of both volume and value. Economic growth has been slow, mainly as a result of falling global commodity and oil prices, and US sanctions against Russia.
The Russian government took several initiatives to promote electronic payments in the country during the last five years, in the form of financial inclusion programmes, regulation to cap cash payments and the introduction of a domestic payment card system, the National Payment Card System (NPCS).
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A number of initiatives were taken to speed up the pace of financial inclusion in the country. These include the appointment of non-banking agents, allowing them to offer services such as opening savings accounts, loan repayment, money transfers and tax payments. The ‘Financial Inclusion and Shadow Banking: Innovation and Proportionate Regulation for Balanced Growth’ seminar, featuring 100 participants from 28 countries, was co-hosted by the central bank of Russia and the Alliance for Financial Inclusion (AFI) in Moscow in November 2015. Previously, in October 2014, the central bank of Russia and AFI co-hosted a similar workshop in Moscow to improve financial inclusion.
Consequently, Russia has made substantial progress in terms of financial inclusion according to the World Bank Global Findex survey 2014, with the percentage of the Russian population aged 15 or above with an account at a financial institution increasing from 48.2% in 2011 to 67.4% in 2014. These initiatives are anticipated to encourage electronic payments and reduce dependence on cash.
Russia develops its own domestic payment system and payment card
Following an invasion on Crimea on March 18, 2014, the US government imposed sanctions against Russia; consequently, Visa and MasterCard stopped processing card payments in Russia. To counteract this move by the US, the Russian government created the NPCS in April 1, 2014, and the national payment card, Mir was launched in December 2015. The Russian government plans to issue Mir cards on a large scale, and promote the card among government employees in 2016. A total of 35 banks have expressed their interest in issuing Mir cards, and seven banks have already issued these cards during the pilot.
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By GlobalDataTo give a fillip to the new payment system and Mir cards, the Russian government put forth a condition for Visa and MasterCard to make a security deposit equalling 25% of their average daily turnover with the central bank, if they wanted to operate in Russia. After a series of negotiations, however, Visa and MasterCard agreed to join the NPCS. On January 12, 2015, MasterCard signed an agreement to join the NPCS, while Visa signed the agreement on February 19, 2015, and from April 1, 2015, both companies started processing domestic card payments through the new system.
Gradual uptake of contactless technology among Russian consumers
Contactless technology is expected to gain prominence among Russian consumers. The Russian government is also actively involved in the promotion of contactless technology, especially in the areas of public transportation. Banks and payment service providers are also keen to promote contactless technology, and are launching a new service to increase its uptake.
The latest of these is the launch of the Visa Qiwi Wallet in August 2015, which incorporates Visa’s payWave contactless technology by Visa and Qiwi. Previously in June 2013, Russia Standard Bank, MasterCard and Mobile TeleSystems launched contactless m-payment service. Similarly, Mobile Telesystems (MTS), a leading telecommunication operator, introduced contactless payment facilities in Lukoil petrol stations in Perm and the Moscow subway in 2010, followed by Megafon in 2011, which launched contactless payments in the St. Petersburg subway.
