As Russians become more technology conscious and the number of Internet users steadily increases, IT companies and banks are offering convenient and quick ways to pay for goods and services.
They say everyone can benefit from IT-based cooperation. The only problem is to convince skeptics and promote new services to conservatives.
While 60 percent of regular utility payments in Europe and 80 percent in the United States are conducted via Internet and banking systems, not to mention Internet shops, in Russia Internet payment services have only recently gained relative popularity.
The volume of electronic payments doubles every year as the number of card owners increases. A total 3.6 million bankcards are registered in St. Petersburg, though not all of them can be used for Internet transactions.
In the first quarter of 2005 the value of card transactions reached 54 billion rubles ($1.9 billion), but only 6 percent were conducted through terminal devices, said Vadim Konoplyov, general director of Sapsan, an online payment provider.
Already there
Mobile operators were the first to offer forms of electronic payment, starting with pioneer IT payment systems as early as 1996, Konoplyov said. The latest to enter this area were conservative municipal services.
The range of goods and services available online varies from flowers and books to electronics, from ticket booking to communal services.
You can easily find online ticket booking agencies such as kassir.ru, mariinsky.ru, and bileter.ru, transport ticket agencies like e-ticket.ru. Books, music, DVD, flowers and tickets are the most popular items, online payment provider ASSIST said.
Russia is far behind Europe and the United States with such giants of online commerce as eBay. In Russia most Internet shops provide courier deliveries only in Moscow, and rarely in St. Petersburg with other regions covered only by postal services. Universal web sites are even rarer.
The Sapsan24 project was launched two years ago. The company invested several thousand dollars hoping to turn a profit after two to four years.
The idea was to present the maximum number of goods and services on one portal available for St. Petersburg citizens. The system has been on trial since April. By 2006 it will be in full commercial operation.
Sapsan develops four areas: municipal payments, St. Petersburg telephone (including local and international telephone, Internet, information services) and mobile operator bills and insurance policies.
The company works with all St. Petersburg mobile operators with the exception of Vimpelcom (Beeline) and eight insurance companies. It started with third-party auto insurance and increased the range of polices to 26, including automobile, medical, property and life insurance.
Sapsan is completing the negotiations with core suppliers such as the St. Petersburg telephone and collective housing service computing center. They have also had several applications from other city housing services to join the project.
Yugra bank uses I-banking through Sapsan for mobile operator payments.
Managers said they are negotiating with four other banks and will spread Sapsan’s system to other retailers.
Konoplyov said similar projects operate in Moscow, Chelyabinsk and Novosibirsk.
Kommunalka.ru was launched by ASSIST in 2004 offering online housing services payments.
ASSIST appeared in 1998 as a project of St. Petersburg software designer Reksoft to provide Ozon.ru online bookshop payments. Later it became an independent project.
ASSIST runs a number of other services, including mobile service payments, railroad and air ticket booking, and follows a strategy of offering the maximum range of services.
ASSIST has signed an agreement with airline Transaero and is in negotiations with Krasair and Ural airlines. It works with Alfa-Bank, Baltiisky bank, Rosbank, Impeks-Bank and Web-Invest bank.
Mutual interests
Konoplyov named Cyber Plat and
e-port as the main electronic payment systems and Sapsan competitors. Cyber Plat reported a profit last year of $500 million. Since 1998 the company has had revenues of $1 billion, Konoplyov said.
Denis Kurnakov, technical director of ASSIST, said his company’s turnover is 1 million euros ($1.2 million) per month with 15 percent monthly growth.
Industry players focus on different core services. Cyber Plat works closely with mobile retail chains. St. Petersburg housing services and regular payments are the most interesting segment for Sapsan.
The St. Petersburg telephone network has 2 million subscribers. A total of 300,000 of them are interested in Internet payments, according to SPT statistics, said Alexei Kultyshov, marketing and PR director of Sapsan.
St. Petersburg heating company and electricity distributor Petroelektrosbyt use Sberbank branches, post offices and its own outlets to collect payments.
“This system is heavily overloaded,” Konoplyov said. The service is time-consuming and suffers from working with monopolies. In addition, Sberbank has a 3 percent commission, he added. The undeveloped payment system hinders provider business growth.
Online payments are believed to be able to resolve the problems without having to increase charges to clients.
Mobile operators estimate Sapsan’s revenue percentage at between 1 and 2 percent. In turn, they benefit from sub-dealer networks, process automation and savings on accounting and staff. Commercial service providers usually charge 1 percent, Kultyshyov said.
He declined to release any figures on the insurance business, saying only that the Russian Insurers Union doesn’t pay commissions of more than 10 percent.
Sapsan’s web site reports that e-shops must pay Sapsan $200 to be included in its system. Sapsan charges between 2 and 5 percent of turnover, and banks charge between 10 and 20 cents for each transaction.
Getting used to it
Industry players say consumers are insufficiently stimulated to use bank cards online.
“This pattern is rooted in the habit of using cash in the undeveloped market. Cards are introduced through payroll schemes, so the idea of paying with a card doesn’t become popular. Wages cards are used only to get cash. Low profit levels don’t stimulate card buying either,” ASSIST’s Kurnakov said.
“Unfortunately, many retailers force consumers to pay in cash. Tourist agencies may demand an additional fee to cover their bank’s charges for processing a card payment, so clients take out cash and then pay for the ticket,” Kurnakov said.
Kultyshyov also suggested St. Petersburg Telephone could use bonuses to promote virtual payments.
“One of the new and actively developed projects is co-branding — joining ASSIST cards with retailer cards so that clients get safe payments and discounts,” Kurnakov said.
ASSIST payments are conducted through VISA, EuroCard, MasterCard, JCB, DinersClub, WebMoney, Yandex.Money, E-port, KreditPilot and Rapida.
Recently ASSIST invented V-POS — virtual POS — terminals for off-line shops working with bank cards and providing all ASSIST services. V-POS turnover grows 15 percent every month, Kurnakov said.
Cash counts for 90 to 96 percent of payments, Konoplyov said. Two payment spots operating in the Midel and City business centers give Sapsan several thousands of transactions every month.
Sapsan will provide off-line cash payments through Post-terminals, self-service kiosks, cash machines as well as web-payments (Yandex.Money, web-money, e-port). The company plans to introduce Visa and Mastercard payments.
Banks are also promoting online payments.
“Alfa-Bank provides Internet-acquiring since 2000. We work with ASSIST and RunetBusinessSystems as service providers,” said Valentin Timiryazev, Alfa-Bank processing center director. Alfa-Bank has agreements with 147 Internet-shops.
Apart from Visa and MasterCard, Alfa-Bank also issued a special Internet card MasterCard Virtual “to separate Internet payments from other expenses.”
“Citibank Online system allows our customers to make any funds transfers through Internet. For UBP (Utility Bills Processing) we have an agreement with Rapida system. In conjunction with its high-tech system platform we can simplify transaction processing from the bank’s point of view,” said Adrian Cristiani, vice president, retail banking business manager of Citibank.
“Now the market for such payments is relatively small but it is growing rapidly and we expect the appearance of new players on the market in the future,” Cristiani said.
