The Cards and Payments Industry in Russia: Emerging trends and opportunities to 2020

Summary

Cash is the preferred payment instrument in Russia, accounting for 60.3% of total transaction volume in 2016. But despite economic turmoil the Russian payment card market grew substantially in terms of both volume and value during the review period (2012-16). The uptake of electronic payments can be attributed mainly to government initiatives such as financial inclusion programs, regulations to cap cash payments, and the introduction of the National Payment Card System (NPCS). In October 2013, the Russian Ministry of Finance introduced regulation that dictates retailers with annual sales of over $1.0m (RUB60m) are required to install point of sale (POS) terminals to accept card payments. In addition, the cap on cash payments was reduced from $9,793.30 (RUB600,000) to $4,896.70 (RUB300,000) in 2015.

Debit cards dominated the payment card market in terms of transaction volume and value during the review period. Growth was supported by the increased banked population, consumer awareness about the benefits of debit cards, improved banking infrastructure, and growing awareness of debt control. Payroll programs are a leading way of issuing cards, and have led to the widespread issuance of debit cards. All major banks in the country – Sberbank, VTB24, OTP Bank, and Raiffeisen Bank – offer payroll cards.

Consumers in Russia mostly opt for traditional payments such as payment cards to pay for online purchases. To further boost e-commerce transactions via payment cards, banks are offering virtual cards, and with the availability of alternative payment solutions such as PayPal, Yandex.Money, Masterpass, and MTS Money Wallet, digital wallets are slowly gaining popularity among Russian consumers. In terms of e-commerce transaction value, the stake of digital wallets increased marginally from 25.5% in 2012 to 26.7% in 2016.

Value of e-commerce transactions has grown rapidly in Russia, increasing from $11.9bn (RUB730.5bn) in 2012 to $23.5bn (RUB1.4tn) in 2016 (18.5% compound annual growth rate [CAGR]). The value is expected to increase further at a forecast-period (2016-20f) CAGR of 7.9%, to reach $31.9bn (RUB2.0tn) by 2020. An increased number of internet users in Russia, a growing preference among consumers for online shopping, and the availability of online sites all supported growth in e-commerce. Digital wallets are gaining popularity among Russian consumers, accounting for 26.7% of the total e-commerce transaction value in 2016.

Contactless technology is expected to gain prominence among Russian consumers. Almost all the major banks – including Sberbank, Alpha-Bank, MTS Bank, Russian Standard Bank, Tinkoff Bank, Gazprombank, and Raiffeisen Bank – issue contactless cards in the country. According to a Visa survey conducted in September 2016, 41% of Russian consumers own a contactless payment card, out of which 38% use them. The Russian government and scheme providers are actively involved in the promotion of contactless technology, especially in the public transport space. For example, Mastercard collaborated with the St Petersburg government in 2015 to introduce contactless payments via Mastercard PayPass technology on the St Petersburg subway.

The report “The Cards and Payments Industry in Russia: Emerging trends and opportunities to 2020” provides top-level market analysis, information and insights into the Russian cards and payments industry.

In depth, this report provides the following –
– Current and forecast values for each market in the Russian cards and payments industry, including debit, and credit cards.
– Detailed insights into payment instruments including credit transfers, cash, cheques, direct debit, and payment cards. It also, includes an overview of the country’s key alternative payment instruments.
– E-commerce market analysis and payment methods.
– Analysis of various market drivers and regulations governing the Russian cards and payments industry.
– Detailed analysis of strategies adopted by banks and other institutions to market debit, and credit cards.

Companies mentioned in this report: Sberbank, VTB24, Raiffeisen Bank, Russian Standard Bank, OTP Bank, Tinkoff Bank, Alfa-Bank, Global Payments, Gazprombank, Credit Europe Bank, Visa, Mastercard, Golden Crown, American Express.

Scope

– Alternative payments are gaining prominence in Russia with the launch of global payment solutions including Apple Pay, Android Pay, Samsung Pay, and Masterpass. Google launched Android Pay in Russia in May 2017. The solution enables users to make in-app, in-store, and online payments by storing debit, credit, loyalty, and gift cards on the wallet. The solution is now supported by 15 banks. Apple and Samsung previously launched their payment solutions Apple Pay and Samsung Pay in the country in October 2016. And in 2014, Mastercard launched the Masterpass digital wallet in Russia. Masterpass users can shop online without providing payment and shipping information with every purchase. The service allows merchants a faster and easier way to process payments, and helps decrease checkout abandon rates.
– To disrupt the debit card market, which is currently being dominated by international scheme providers Visa and Mastercard, the Russian government launched the Mir national payment card in December 2015 under the NPCS. 376 banks (including all of the country’s major banks) have joined the system and started to issue these cards. As of April 2017, more than 5 million Mir national payment cards had already been issued in the country. The escalating number of Mir cards is anticipated to pose serious competition to Visa and Mastercard in the long run.
– To provide acceptance of international cards in Russia, domestic merchant acquirers have entered into agreement with international schemes. For instance, the leading Russian acquirer Sberbank partnered with Chinese scheme UnionPay International in May 2017, allowing Asia Pacific and China tourists to make payments with UnionPay cards at Sberbank’s merchant network in Russia. In the same month, Sberbank entered into a similar agreement with JCB International to allow merchants to accept payments with JCB cards by 2018.

Reasons to buy

– Make strategic business decisions, using top-level historic and forecast market data, related to the Russian cards and payments industry and each market within it.
– Understand the key market trends and growth opportunities in the Russian cards and payments industry.
– Assess the competitive dynamics in the Russian cards and payments industry.
– Gain insights into marketing strategies used for various card types in Russia.
– Gain insights into key regulations governing the Russian cards and payments industry.