Digital payments are still taking shape in developing countries like Russia, where only about one-third of Moscow residents rely on in non-cash payment methods for transactions. The fact that the Russian market is coming from a lower base compared with more mature markets, however, suggests that the country could be poised for robust growth.
Statistics show that developing economies are leading the charge for non-cash payment growth, including countries like Russia, India and China, all of which experienced a double-digit compound-annual-growth-rate from 2015-2016, the most recent period cited in a November 2018 IBS Intelligence report, at 36.5%, 33.2% and 25.8%, respectively. Meanwhile, China is the world leader for mobile payments, where adoption has caught on like wildfire surpassing even the United States where Apple is pushing its mobile-fueled Apple Pay system.
China Targets Russia for Mobile Payment Adoption
A key strategy for China-based mobile payment companies like AliPay and WeChat Pay is to target Chinese tourists who doled out $115 billion on more than 100 million overseas trips last year alone, figures that are on the rise from 2016 levels. It could prove to be a model that lifts Russia’s profile for digital payments. Chinese payment companies have already tested the strategy in the U.S. and Canada, and it makes sense that they’ve most recently set their sights on Russia. After all, more than 1 million Chinese tourists flock to Russia each year, many of whom have come to rely on mobile payments.
So when a company like WeChat Pay expands into Russia, which it has recently done, it means they are looking to provide a familiar payment option for Chinese locals while capturing the payment transaction volume in the process.
WeChatPay’s Russian push has received participation from the likes of Russian Standard Bank and the Novotel Moscow Center, with additional partners reportedly in the pipeline. Most recently, Yandex.Checkout, which boasts 90,000 businesses on its platform, has announced it will support WeChatPay in Russia with a focus on contactless payments. One of the first merchants to be spotlighted is Citilink, a home appliance and electronics retailer. They’re reportedly pursuing QR code payments in Russia, which is expected to be an area of growth.
Digital payment startups in Russia must compete with MIR cards, which are issued by Sberbank, the country’s biggest financial institution, and are designed to decrease Russia’s reliance on payment leaders Visa and MasterCard. The system appears to be catching on, as evidenced by tens of millions of MIR card-fueled online transactions having unfolded through the first eight months of 2018. That amount is likely to grow, as payment company Ingenico Group recently announced it would facilitate MIR transactions for international e-commerce plays.
Non-Cash Payments in Moscow
Meanwhile, despite the potential for a market like Russia, the capital city of Moscow has yet to show robust adoption of non-cash payments. For instance, according to a report published by Yandex.Money and the Information Technology Department (DIT) city of Moscow cited in Forbes, about one-third of Moscow residents rely on non-cash payment methods across bank cards, mobile payments, internet banking, and cryptocurrencies. Breaking the data down even further, most of this cohort do so at least one time daily. A mere 1% of the non-cash payment crowd in Russia transacts in cryptocurrencies such as bitcoin, while as much as 5% of them are interested in doing so.
Mobile Payment World
As digital payments make their way into developing countries like Russia, mobile-fueled payments, in particular, are on the rise around the world from Kenya, which is home to SMS-powered payment company M-PESA, to China, where even the homeless accept mobile donations. Meanwhile, despite a slower pace of mobile payment adoption across Europe more broadly, cash is being phased out in countries like Sweden where payment apps are taking over and mobile payment systems like Swish boast millions of users.
Image Courtesy: Bloomberg
In China, mobile payment popularity has been fueled by internet leaders WeChatPay and Alipay, the latter of whom’s transactions per second outpace Visa tenfold. While other countries may be looking to China as a model, where mobile payment users have been on the rise since 2011, they may also want to know the risks. For instance, WeChatPay and Alipay have become so popular among merchants for the perks that the payment companies provide, leading some businesses to abandon other payment methods like cash altogether.