PYMNTS Deep Dive: Consumer Payments In Russia

Russia has taken center stage for emerging markets, and businesses old and new are racing to claim their stake.

Despite being the world’s largest country, Russia has one of the smallest card penetration rates in the world and is still struggling to find financial stability.

Russia’s lack of payments innovation and a poor financial infrastructure is largely due to the country’s deeply rooted history of political chaos and strict regulation.

However, unlike other emerging markets, the majority of Russian consumers are highly educated and are not living under poverty levels. Furthermore, Russia is a country full of natural resources that represent great business opportunities.

The consumer lifestyle in Russia is still a mystery to most, but as the country rises to prominence in the global market, industry leaders are desperate to learn more.

This PYMNTS.com Deep Dive is pulling back the curtain for financial on-lookers eager to catch a glimpse of Russian consumers’ lives, and what payments are like in such a vast country.

Electronic Transfers Are A No-Go

Generally electronic payments are advertised as a cheaper and safer way to send money. However, in a country like Russia, this isn’t the case.

Russia suffers from an underdeveloped financial infrastructure, which unfortunately means banks still charge a high commission to complete such transactions.

Consumers also complain the process is time-consuming and inconvenient because many merchants take a long time to check passport details.

Adding to the poor acceptance of electronic transfers is the country’s high crime rate and high volume of bank fraud. According to a 2012 Anti-Phishing Working Group report, Russia made the fourth spot on the most malware-affected countries list. The most popular form of cybercrime in Russia is online fraud, which cost an estimated $942 million at the beginning of 2012.

Money crime and fraud have somewhat lessened thanks to slight improvements in terms of regulation since then, but consumers still don’t feel electronic payments are safe enough.

Online Banking Anyone?

The Internet isn’t part of the Russian payments routines, and very few consumers will use online banking to make bill payments or transfers.  

However, there is still hope. According to Russia Beyond The Headlines, a poll by the Public Opinion Fund determined that in 2012, 13 percent of Russians were indeed making use of Internet banking services.

About 75 percent of the same respondents revealed they used online banking to submit payments for mobile phones, Internet services and cable bills.

Russians Can’t Let Cash Go

Russians have had a long love for cash because they think it is the most trustworthy form of payment. Even despite the vast majority of Russian employees who receive salary through financial accounts, they still choose to withdraw cash from ATMs for spending.

Naturally, cash is still the most popular form of payment in Russia. Areas outside of main cities are especially cash-based, although large cities such as St. Petersburg and Moscow are typically card-friendly. CreditCards.com reported that in 2011, only 24 percent of Russian families had a bank account.

To read the report at CreditCards.com click here, for the Anti-Phishing Working Group report click here, or to read the full story at Russia Beyond The Headlines click here.