Mobile Payments Igniting In Russia

AC&M Consulting found that the Russian mobile payments market grew by almost 40 percent in 2015, to 70.4 billion rubles ($1.1 billion), but this represents a small portion of the 650 billion ruble ($10.1 billion) eCommerce market in 2015, according to Telecompaper.

Only 20 percent of smartphones connected to Mobile TeleSystems (MTS) used NFC technology at the end of 2015, according to Russian newspaper Vedomosti. However, an MTS representative, Dmitry Solodovnikov, predicts that percentage to increase by over 30 percent next year, with contactless transactions amounting to $770 million.

Statista estimates 60 million smartphone users by the end of 2016. MegaFon is responding and has introduced a contactless payment card that uses the subscriber’s mobile phone balance rather than their bank account.

The MegaFon card enables payments from a device wherever Mastercard bank cards are accepted, but what is unique is that users will receive an 8 percent interest rate on their balance and 10 percent cash back in some locations. Also, money transfers are free within Russia.

MegaFon competes in the public transportation space with VimpelCom and Gemalto for NFC-based mobile ticketing. Russia is a vast country with a large population of 145 million people. The mobile penetration is reported to be 176 percent, but many people use multiple SIMs and providers must accommodate these users also. There were around 10 million MegaFon users in 2015, and MTS has now launched payments via SMS so feature phone users can also use mobile payments.

Also, MegaFon and VimpelCom are supplying UpTeq Multi-Tenant NFC SIMs to their subscribers free of charge. This allows tickets to be purchased directly via the Troika application with payment debited from the user’s regular mobile phone balance.

Another mobile payment initiative making headway in Russia is the Yandex.Money app, which allows users to make payments and to withdraw cash at ATMs via their NFC smartphones. Also, SPSR Express, a delivery service, added a payment function to its mobile application in Jan. 2016, enabling 1,500 couriers to now accept mobile payments.

VimpelCom’s payment system, Ruru, was launched in 2011 in partnership with Alfa Bank. Customers can use their VimpelCom phone credit or a Visa or Mastercard bank card, and the VimpelCom system is now open to subscribers of MTS, MegaFon and Tele2.

In May 2016, the Visa QIWI wallet was launched by Tele2 in partnership with QIWI. Tele2 had already launched mobile payments on the Mobi platform in 2011 using SMS or USSD. In 2013, Tele2 allowed customers to top up the balance of the Visa QIWI wallet from their mobile credit.

Meanwhile, most of the banking apps are limited to money transfers and do not extend to the payment of goods or services.

The MegaFon service will be available nationwide on Oct. 1, 2016.