MOSCOW. (RIA Novosti economic commentator Nina Kulikova). The Russian plastic card market emerged just 10-15 years ago, but is growing very rapidly.
The Central Bank reported that by the end of 2004 there were about 35 million bankcards in circulation in Russia, an increase of 46.3% in comparison with the beginning of the year. In the last twelve months the value of plastic card transactions increased by about 57%, from 363.4 billion rubles to 570.5 billion rubles.
Like many other sectors of the Russian economy, the cashless payment market is developing in a different way in Russia than in other countries. In the West, the first payment cards were credit cards. But in Russia, when plastic cards were first being introduced, general economic instability and a lack of confidence in financial institutions meant there was no point offering the population credit cards, because people simply did not want to keep their money in bank accounts.
As a result, the development of the cashless payment system began with wage projects, whereby organizations stopped paying their employees in cash and began paying their wages into bankcard accounts instead. Even now, most Russians use debit cards rather than credit cards, so they cannot withdraw more money than they earn. They do not use their cards to make payments, but instead use them to withdraw cash from ATMs. Moreover, even although the total number of cards in circulation has increased in the last few years, there has not been a corresponding increase in the number of people using plastic cards to pay for goods and services. In 2001, card payments accounted for about 15.3% of the total number of transactions, in 2002 - nearly 15.2%, in 2003 - about 12.9%, and in 2004 - 14.9%. In European countries, card payments account for 50% of all transactions.
Nevertheless, credit projects are under way in Russia, albeit within the context of consumer lending. It is much easier to obtain a credit card than it was two or three years ago, as banks do not demand to see as many documents as before. However, because Russia does not have a Credit History Bureau and the credit rating system is underdeveloped, banks prefer to only issue credit cards to their regular clients.
There are two types of credit cards in Russia today: overdraft and revolving. Overdraft cards require the balance to be repaid in full within a certain period of time (usually a month), and then the credit line is restored. Revolving cards allow the cardholder to repay the balance in installments, and continue to use the remaining credit line. Overdraft cards appeared early on the Russian market of cashless settlements (they were issued in small numbers, mostly to exclusive clients), whereas revolver cards appeared only recently. Delta Bank and Russian Standard Bank are the leading players in the revolving card market, while Sberbank is the leader when it comes to overdraft cards.
There are a number of reasons why card payments have yet to really take off in Russia. Firstly, there are not that many cardholders: only 13.1% of the Russian population owns a bankcard. Cardholders mostly live in urban areas and have higher than average incomes. The largest number of bankcards can be found in Moscow and the Moscow region (11.27 million), followed by St. Petersburg (2.56 million), the Tyumen region (1.78 million) and the Sverdlovsk region (1.46 million).
The Russian mindset is another obstacle. The Western culture of living on credit is yet to develop in Russia and it is not known how long it will take for attitudes to change.
Finally, some small and medium-sized retail and service companies continue to use "gray" tax avoidance schemes, and these companies would rather not take card payments, as they cannot be concealed from the tax authorities. Other retail companies are reluctant to start accepting card payments because they believe that the bank charges that they would incur are too high.
The government is working hard to promote card payments in Russia. In February, the Tax Code of the Russian Federation was amended with the aim of making credit cards more attractive for consumers. Previously, borrowers were charged 35% on their overdrafts. But now Russian banks can offer a grace period during which the cardholder does not pay interest on the overdraft. Several Russian banks, including the Russian Development Bank, Impexbank, the BIN Bank and the Uniastrum Bank already offer their clients this option.
The new regulations of the Bank of Russia, "On the Issue of Bank Cards and on Payment Card Operations", will enter into force in April. Though specialists are saying that the regulations are too evasive, they should still resolve the contradictions found in the previous regulations and simplify matters for banks.
The law "On Credit Histories" will come into force this summer. Within the framework of the country's monetary and credit policy for 2005, the Bank of Russia is planning to further improve the regulatory base for the cashless payment system. The general conclusion that can be drawn is as follows: to date, bank cards in Russia have been underutilized as a means of payment, but the increase in the number of cards being issued and the development of the infrastructure to support card services suggest that this will change. Experts predict that the next two to three years could see a substantial increase in the volume of card payments in the retail sector as the population grows more accustomed to this form of payment. The marketing campaigns by banks and payment systems will also have an impact, by making consumers aware of the new technologies, services and products available to cardholders.
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