New law on payment systems favors mobile payments but tightens requirements for payment operators
New Federal legislation on payment systems was adopted by the Russian Duma on June 14 and signed into law by President Medvedev on June 27. The new law establishes the legal and organizational foundation for the country’s payment system and regulates the procedure for rendering payment services.
The law recognizes four types of players who are entitled to offer payment services: money transfer companies, including electronic money operators; professional securities traders, insurance organisations and the bodies of the Federal Treasury; organisations of the federal mail service; and international financial organisations, foreign central banks and foreign banks.
The law concerns, in particular, payments made with bank cards – a market worth some $90 billion in 2009, according to Chronopay – and electronic currencies like Yandex.Dengi and WebMoney, as well as systems for making payments through mobile devices.
The new rules also affect payments via electronic terminals, these ubiquitous offline machines and virtual wallets through which Russians pay for virtually everything from mobile phone bills to purchases made at e-commerce sites, utilities, taxes, and fines. This thriving market is currently dominated by Qiwi, in which Mitsui & Co bought a stake last January, followed by Cyberplat, Euroset and Eleksnet.
Tightened requirements for payment operators
The law stipulates that electronic currency activity can be conducted by credit organizations, including non-banking ones, which meet minimum capital requirements set at 18 million rubles, approximately $640,000.
No specific license for operating payment services will be required, but operators will have to inform the Russian Central bank of their activity.
“We’ll have to change our status to become a credit organization,” said Yandex.Dengi general manager Evgeniya Zavalishina to Russian business daily Kommersant. “This means new business processes as well as new legal conditions in our relations with contractors and clients. The law offers a 15-month transition period, however, which should be sufficient to adapt.”
“These requirements do not change anything for Qiwi, which includes a bank, or for other major players, which already have such partnerships,” commented Qiwi CEO Andrey Romanenko in an exchange with Telecom Daily. “But this could create difficulties for smaller players. They are now obliged to partner with banks [or other] financial organizations, which requires full transparency.”
“These rules are tougher than in Western Europe,” commented Viktor Dostov, chairman of the Electronic Money association to Kommersant. “It may not be easy for new operators to invest the minimum 18 million rubles. But the alternative is to lose independence by seeking agreements with an existing bank.”
Limits to electronic accounts and transactions
The law establishes three categories of electronic payments and user statuses. Among them is one for “non-personalized electronic payments” which do not require user identification. Such a definition spotlights micro payments.
These anonymous users cannot transfer more than 40,000 rubles, or approximately $1,430, from their account in a calendar month. Furthermore, they cannot keep more than 15,000 rubles, or $535, on their balance.
“This [account limit] is the only change affecting users,” noted Evgeniya Zavalishina of Yandex.Dengi. “Only a minority of anonymous user accounts approach this limit, anyway.”
For duly identified individual or corporate users, the maximum volume for an electronic account has been set at 100,000 rubles, or $3,500. This limit also applies to individual entrepreneurs.
The law does not stipulate any volume limit for amounts transferred by duly identified account holders.
Mobile payments are made possible through contract agreements between mobile operators and electronic payment operators. They will enjoy more favorable conditions under the new law.
“The conditions for mobile commerce have been consolidated,” said MTS press secretary Valeriya Kuzmenko to Telecom Daily. “Operators are seeing their status confirmed and their guarentees increased.”
New legal parameters for mobile payments had already been laid down last July. Since then, the sector has gained considerable traction. VimpelCom, which processes 2 million transactions every month, has just launched a new and ambitious payment system.
International payment systems
In early discussions, Russian lawmakers had considered prohibiting transmission of payment-related information to other countries, greatly curtailing international payment transactions. This move would have forced such companies as Visa and Mastercard to have processing centers located on the Russian territory to facilitate international transactions.
This proposition, however, was opposed by the Ministry of Finance and a compromise was found. The new legislation allows for payment processing to be organized in any country in line with service continuity guarantees, but requires operations and settlement centers to be located on Russian territory.
According to Electronic Money, an industry association founded in 2009, the Russian electronic payment market, not including payments made with banking cards, amounted to 70 billion rubles, or $2.5 billion, in 2010, and is expected to double this year.