National payment system: what is it and who needs it?

What a national payment system is knows exactly only economists and financial analytics. For the ordinary mortals this mysterious term sometimes sounds from TV-screen surrounding with such complex words as clearing, transaction, initialization and, as a rule, never promises anything positive.

Actually national payment system is a combination of all interaction forms in country’s financial system applying at transfer funds from a payer to a payee without conversion into cash. This system is governed by the national bank. In other words this is a system which allows ordinary people to get along without cash at all. Theoretically all operations starting from salary payment to a worker and finishing with gum buying and pay of hairdresser’s saloon services should be made with cashless transfers.

Today Russian people use international payment systems Visa and Mastercard. Most of Russian banks have a status of member in one or another system and sometimes even in both systems. International payment systems allow average people to pay with their cards in any place of the world where you can find the banks entering into the same payment system.

About six years ago in Russia they made a decision to create an own payment system on the basis of internal payment system «Sberkart» which had been created by OJSC «Sberbank of Russia». In principle it should become a competitor to the West monsters and, if possible, to substitute them on the Russian market.

The decision about creation of the Russian payment system was made in 2004 by “Sberbank” Council. The reason for it was loss-free activity of “Sbercart” system which at that moment had already worked for ten years. By that time it was issued about three million cards. Total turnover by them was about five hundred milliard rubles. But the volume of investments for this decade to a “mother” of the national payment system was large as well – about thirty million dollars.

In 2005 the project of creation of the national payment system came into implementation phase. For these purposes it was founded an operator – CJSC “Sberkarta” which had to issue cards, perform marketing activities and, finally, to develop a net of cashpoints on the territory of the Russian Federation.

At formation of the system the main focus had made on replacement of magnet cards on chip ones as they were cheaper at service and possessed better speed capability. The payment system had had to cover a segment of micropayments of Russian population or, put it another way, lead that even payments at simple purchases in shops and shopping centers would have become cashless.

It was planned that participants of the national payment system would become also small Russian banks which would conduct contracts with CJSC “Sberkarta” similarly as with Visa and Mastercard systems. The main shareholder of a new company became without doubtless “Russia Sberbank”. The second one was the state and some private investors though size of their shareholdings was not disclosed. That is to say Russia has got one more state corporation which planned, in point of fact, to monopolize the future national payment system.

As of today some likeness of Russian national payment system has been created and operates. But hopes on small banks support have not been justified. Commercial banks did not support the national payment system. However it was clear from the very beginning. What is the reason to issue cards which will be valid only in Russia if it is possible to issue cards by which clients can use all over the world.

In 2008 the question about creation of the national payment system, more exactly, about its reforming raised again. At that time it was planned to connect to it Centrobank of Russia which was assigned a central role in its formation. Now the main competitor of the reformed NPS has become not international payment systems but cash money which is in the population hands. The target to create such system was announced development of unified, easy to use in all standards payments. But this reform has been noticed in the life of Russia with nothing significant.

In 2010 the question about system creation stays as before open. Nevertheless today it is supposed that the Russian national payment system will be integrated with the international ones, and offer full spectrum of services to the clients. As system’s operator it is offered «Vneshekonombank». But except loud statements the affair does not go forward.

Russian people do not believe the state and “Sberbank” is trusted only by senior people as there is no bank to trust except the above said. Even though how their savings on the passbooks during “perestroyka” were lost inhabitants of our country have remembered still. And pass this memory to the younger generation. That’s why only few people willingly make a decision to transfer their earned rubles to ephemeral monetary units on the cards. As a result at creation of NPS Bank of Russia comes by the way of attraction of “administrative resources” as always. In 2005 budget organizations’ employees got salary cards of “Sberbank” in «voluntary-compulsory” order and started to get salaries through them. It is worth to notice that Sberbank was not a pioneer in this affair. The first cards were got by employees of oil-and-gas industry. But they took an advantage from them as their cards were integrated into the international payment systems.

As a result of people’s distrust struggle with “cash trillions” was fully lost by the Russian national payment system. You can pay everywhere with “Sberkarta” card probably only in Moscow. And province withdraws salary in the cash machines fully at the day of its receipt. However it is not strange as most of provincials buy foods and clothes on the markets where they accept only cash. Knowing about it the owners of hypermarkets in the small towns install card reader in the cash machine very seldom. So cash in Russia has lived, lives and will live notwithstanding the all payment systems both national or not.

However e-money exists in Russia in the nation-wide scale. Each day with its help payment for goods and services is made. Of course what are meant here are e-payment systems where rubles and dollars are replaced with title symbols as well as mobile banking and SMS-billing.

Today we can say that “Sberkarta” NPS relations with the private payment systems are “nothing”. Procedures of e-money withdrawing to “Sberkarta” are very difficult and take a lot of time. To receive money on the card is possible in a week or even in two weeks. High-speed withdraw through the private structures is very expensive – commission for this transaction may be up to 20% from the money to be withdrawn.

As the result most of inhabitants in Russia prefer to withdraw money to the cards of private banks such as “VTB 24”, “Alfa-bank”, “Trust-bank” and use by the similar Visa and Mastercard systems.

One more way to convert to e-format cash in the private payment systems became payment terminals. Today in the number of their services includes money deposit to e-account of any payment systems operating in Runet. Moreover terminals give a possibility to deposit funds not only to personal purse but transfer them to accounts of other physical persons.

“Sberkarta” system actually does not posses such flexibility and cannot offer to their users both such operating speed and wide spectrum of services. Moreover it combines mobile banking and e-payment systems resulting to the fact that bank account stops to be necessary.

Today the evident confrontation has outlined between Russian NPS “Sberkarta” and complex of e-payment systems and systems of mobile banking.

In fact as the national payment systems it may be named Yandex-money and Webmoney. Following them are payment terminals and, finally, mobile banking. Russian people use specifically them more often than other means.

It is worth to say that NPS as any state corporation in our country does not try to attract more clients by means of improvement of services quality or widening of their spectrum. Against the private payment systems “the heavy artillery” – legislation has been used. Today most of experts acting in behalf of the state structures tell that operation of e-payment systems and payment terminals does not have clear legal framework. But attempts to prove illegality of activities of organizations back of these systems do not succeed.

Attempt to limit operation of the payment terminals through legislation was not successful as the proposed limitations were not systematic and had random nature.

State authorities try repeatedly through mass-media to inform population that payment systems are not reliable and do not confirm requirements about confidentiality of the information which can enter the swindlers’ hands. However facts and public hearings show that most of all information about clients is “poured” to the tax authorities by the state banking institutions.

The national payment system in Russia has been creating for about six years. This matter dramatically is discussed in the high state and bank spheres still. However notwithstanding invested funds and spent time nor Centrobank neither Cberbank could develop principles and standards for this system. Processing activities were failed as well as attempts to assure country population in necessity of such system and easiness of its usage. In practice for this period none positive results were received. But OJSC “Sberbank of Russia” with the help of CJSC “Sberkarta” has got several millions clients – card owners which would decide themselves to open card account not so soon.

As president D. Medvedev promises that in the near future in Russia it will be made one more attempt to create NPS. Everything will begin again from development of principles and finish with issue of cards for almost each of Russian inhabitant. And again a lot of money will be invested. It is not clear now if CJSC “Sberkarta” participates in this future process.

Though several analytics are inclined to consider “Sberkarta” system as some similarity of NPS. Today its users are actually pensioners from the province and employees from the budget sphere with average monthly profit 150-250 dollars. Through most of such clients’ cards only two transactions are performed: salary deposit and withdraw in the day of its receipt. In the rural regions the distance between two cash machines may be 100 km, that’s why it is not worth to say about its convenience for country inhabitants.

The history of creation of the Russian national payment system reminds very much the process of “elevation” of another domestic economy legend – “Autovas”. For Russian NPS, more exactly at attempts of its creation as well as in the case of “Autovas” have been spent milliards of rubles. And similarly with null result. In the end Russian government summarizes strange results and is glad with some achievements which have no effects on the life of an ordinary Russian resident. And it is hard to believe that the national payment system will increase citizens’ protection level from the negative financial events. The world experience shows that the national and international payment systems are created only in the cases when they meet daily living needs. So Visa and Mastercard systems give a possibility for their clients to use bank accounts in any place of the world, make payments through the Internet, and allow not taking large cash amounts at traveling. They have appeared only when total standard of well-being in Europe and America allows most of Europeans to travel freely and acquire properties abroad.

In Russia the population layer, for which everything above said is actual, is very small and equals less than 15% of population. For the others NPS will not bring any additional advantages but only additional expenses: cards’ payment, bank service of accounts, loss of commission at conversion into cash in a “strange” cash machine. Today for Russia it makes sense to talk about unified intrabank payment system which allows decreasing transactions’ time and minimizing “red-tape” with which ordinary residents of our country face at addressing to a bank. Then very much so that Russians will prefer fast and reliable bank service within the national payment system to operation with e-payment systems and terminals.

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