Faster Payments

Russia Joins The Faster Payments Revolution

The rise of faster payment systems has become a global phenomenon. In the past few years, several global markets have invested resources into developing payment systems and infrastructure that enable funds to be delivered in real-time and that operate on a 24/7 cycle. The U.K., the U.S., Hong Kong, India and Australia are among just a few of the nations to launch their own local faster payment systems while a host of other countries are moving forward with their own plans to launch a faster payment scheme.

Earlier this year, the Russian Federation joined the ranks of these nations when it launched its own faster payment system, known as the Faster Payments System (FPS). FPS aims to enable users to make instant person-to-person (P2P) transfers using personal identifiers like mobile phone numbers, including between two parties who belong to different banks. Later this year, users’ FPS will enable users to make payments to legal entities using QR codes according to the FPS site.

FPS was developed and piloted with the collaboration of a dozen Russian banks and payment service providers, including Alfa Bank, Gazprombank, Raiffeisenbank and TB, all of which belonged to the FinTech Association founded by the Central Bank of Russia. Another member of the association involved in the development of the service was QIWI, a provider of several payment solutions including ATMs, bank cards, digital wallets, virtual cards and eCommerce solutions. As Andrey Protopopov, QIWI’s head of product and IT, recently explained to PYMNTS, the availability of the FPS in Russia could prove disruptive by making a wide range of swift payment services available and bringing new users into the nation’s financial services system.

“[Among the] important features of the system are independence and equidistance from market participants,” Protopopov said. “This means that the FPS implies equal rights and opportunities for all participants.”

Expanding financial access, boosting financial competition

As a member of the FinTech Association since 2017, Protopopov said QIWI played an active role in the creation process of FPS, including establishing the rules of operation and the system’s business model. While members encountered “contradictions and technological nuances” along the way, Protopopov said the end result was the launch of a Russian faster payment system in “the shortest time possible.”

Now that the system is live, Protopopov expressed excitement for how the system’s launch will be received among Russia’s financial service customers. One of the biggest changes he anticipates is greater competition among Russian financial institutions for consumers who will expect and demand access to faster payment services.

“The implementation of instant payments through FPS directly affects the increase in the availability of financial services for the population,” he said. “[This] leads to an increase in the loyalty of customers to banks that are members of FPS.”

The launch of FPS, he said, could do more than boost customer loyalty for banks that have signed on to the system. In addition, it could also help to bring residents in rural areas into the financial services sector and expand the reach of banking services to these groups. With new customers joining the ranks of financial services, Protopopov said banks face new pressure to develop and release the services these customer value most.

“Instant payments can be a trigger for increased competition,” he said. “Now the struggle for the client will occur, including at the overlay level, and what new services will be provided through it.”

Smartphones take center stage

The rise of smartphone technology will only serve to further expand participants in Russia’s financial services landscape, according Protopopov. He pointed out that earlier this year, half of the nation’s payments made at POS terminals were made using cashless payment methods, a sign that Russia’s consumer base is embracing digital payment technology and has come to expect faster and more efficient methods for making payments.

“From year to year, customers are becoming more sophisticated,” Protopopov said. “The ease and simplicity of making a payment, the availability of loyalty programs and a developed ecosystem around a financial organization, of which they are customers, is important to them.”

These shifting attitudes will put the smartphone at the center of many Russian customer’s financial lives, he added.

“Customers are already accustomed to receiving the majority of financial services remotely, and digital distribution channels are becoming a priority,” he said. “Therefore, we predict that the consumption of financial products and transactions with them will increasingly occur through mobile devices.”

The future of payment infrastructure

P2P transactions were among the first services to become available from FPS and are currently one of the most popular use cases. In the future, Protopopov expects more merchants to join FPS and be able to accept payments from customers using QR codes for payments. This, in turn, could reduce the number of paper documents and the costs of maintaining and updating POS terminal software, he said.

Additional use cases could also include the ability to offer B2B payments as well as enable Russian citizens to make payments for government services (C2G payments).

“The wider the capabilities of the system, the higher the likelihood that it will be able to cover the largest number of different groups of clients, both legal entities and individuals,” Protopopov said.

For its part, QIWI is looking ahead to prepare for younger individuals — both millennials and members of Generation Z — to command a larger share of the financial services market, and is taking steps to make sure its financial infrastructure is ready to meet the expectations of both these groups. Last year, the company acquired the rights to mobile banking app Rocketbank and to Tochka, a banking solution for small- to medium-sized enterprises (SMEs), as it seeks to deliver payment solutions via mobile devices and enable SMEs to more easily accept mobile payments.

With the launch of FPS, Russia joins a growing list of nations that are making financial services more easily available to residents and expanding the reach of banking services. As these systems rise and the infrastructure capable of supporting new financial services expands, banks will face increased pressure to provide new customers with the services they have come to expect.

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