Retail Banking in Russia: Innovation Unfolded

Russian Banks processing auth centres supposedly pwned by hack of Russia's own creation

noreply@blogger.com (Anonymous) — Fri, 09 Jun 2017 19:58:00 +0000

First, some math you might not have heard of, after this blog has been in disrepair for over half a year and before that - almost neglected for more. I am hoping I am back for good after breaking a solid streak "writer's block" - but more thoughtful and analytical posts on fintech I will push through Medium's Fintech Moscow channel. - and here, more arguable and acid thoughts would continue to appear.

So now, to the news that broke down this evening that Russia's major bank's POS networks stopped accepting cards and numerous calls about inability to pay with the card crashed call-centres.

Paying with a card is already big deal since 2013 when the number of cashless transactions surpassed the number of ATM withdrawals and the trends went onwards, supported by swift renewal of POS installed base - where new models almost all came with contactless option - while cards - almost all of them reissued with EMV chip, came with the contactless antenna (marginal compared to the cost of the chip itself).

It appears that the problem was misused by crafty hackers who have recently found a hole in the Russian internet domain blocking infrastructure. Based on Russian legislation recently adoptied, certain websites peddling certain information or otherwise incompatible with local regulations on information dissemination or data storage (like, eg., Linkedin that is blocked) - are blocked. The Russian Communications Authority orders IP providers to black-list the IP associated with the service - and somehow recently a whole was found that enabled hackers to blacklist legitimate resources.

Today it may have backfired on banks, as someone found a way to blacklist IPs associated with card authorisation centres of major acquirers. What does it mean:

> Payment security innovation should go hand in hand with cybersecurity - now a burgeoning market in Russia as it onboards cashless payment afficionados and is even leading by value of Apple Pay transactions (there is no cap on amount with one bank reporting a EUR 82 000 transaction being done via the service).

> The intricacy of systems (NSPK, the operator of Mir scheme, managing local transactions and switching to Visa and MC for external or 3DS) require constant attention - as to how other limitations with regards to "national security" would impact the growing complexity of the system - noone knows.

My first chapter in a good book on payments - telling a tale about the national payments scheme

noreply@blogger.com (Anonymous) — Sun, 18 Dec 2016 13:19:00 +0000

I’ve late last year contributed to a bold beginning of Bernardo Batiz-Lazo and Leonidas Efthymiou, who have edited a compendium of articles on different aspects of payments in history and the world of today.

Available at Palgrave, it included my input on the context, conditions and strategic imperatives for the National Payment Scheme (NPS) of Russia and its ensuing foray to issue a Mir card.

Politics and lobbiying of special interests pervaded the creation of the scheme and forced the hand of the regulators to institute a greenfield approach — where no existing infrastructure was part of the solution — it also enabled those behind to keep the exact configuration and locations in near secret (built on Huawei hardware with local software used for processing hub) — allowing for Russia to rapidly rollout a local switch solution to maintain the robustness of the market as cashlessness is a high-level priority to scale financial adoption to part of the country where physical cash delivery is a pain (sometimes Central Bank has to use cargo-drop by helicopters to service distant parts of the land), support the growing interest for ecommerce consumption (see my other posts on ecommerce here) as well as limit the corruption opportunities.

Still, creating a switch is a denial-of-access rather than a tool to develop a coherent use-case of existing and emerging payment tokens — and from the very begining the opportunity cost has been exhorbitant, exacerbated by the exchange rate, the slump in oil revenues — in the end it rather helped, as the frugal MVP approach prevailed over the lavish plan to build the payment functionality as part of the botched national ID card.

Developing an infrastructure appropriate for the world of today requires a skillset quite different from the card infrastructure tool-set. Early on, NPS struggled to offer 3DS (as it required a direct connection to MC and Visa networks) and service ecommerce transactions (reconciliation of Visa and MC traffic serviced by the switch was prone to errors), as well as offer mobile payment options.

You can read the chapter or the entire book with many other great stories on the proliferation of payment methods by ordering it here

Startupbootcamp FastTrack and Skolkovo Fintech harvesting in Moscow

noreply@blogger.com (Anonymous) — Tue, 07 Jun 2016 14:58:00 +0000

Originally Published at http://d1g1tl.space/1XztW5Y

Digital Space Ventures contributed towards hosting and managing the Startupbootcamp FastTrack day in Moscow, done in close collaboration with the Skolkovo Fund, that organised the 2 day startup trade-show event, Startup Village.

It was the second year that tried to assemble on Skolkovo pitch the numerious fintech teams, and by account of the organisers, it was a much more robust and active scene this year. 6 events focused on financial technology were organised, among them, 2 Skolkovo startup pitches with 14 startups selected, with those winning the simpathies of the jury from banks and venture firms, achieving the status of a Skolkovo resident, a fund infusion and tax rebates.

Startupbootcamp were able to listen to 11 startups, pre-selected by the fund and admitted to demo through SBC owned social media call, with 2 or 3 companies being of interest from the organising party, having good chances to apply for startup acceleration in London.

The fintech ecosystem in Russia is still in its early formative stage, where still a sizable share of poor pitches and half-baked ideas contract with the number of startups or ideas solicited by leading bank’s accelerators, where transparency and overall market impact assessement is low. Some of the ideas are too technical as the founders team don’t think properly about the business side, and most ignore the market dynamics or are unaware of formative processes for key FS market players that are potential consumers or partners. There is as yet no formative launchpad that would have contributed to the sound development of the market overall, while certain steps are being made by both the Central Bank and independent interested parties.

Facilitating trust and openness is required

Where most players are either ‘acquihiring’ or mentoring for their internal purposes, no solid and independed fintech movement is possible (to closed in). Provided the market is prised for engineering skills and entrepreneurship of younger generation, providing an open platform to learn from the best cases and build trust (the core recipe that the market is still to learn is not about mulling ideas independently but bringing them to market faster and at scale (what DSV is specialising in — fast-track scaling of fintech ideas it invests in).

Education and pvoviding context or narrative is important

Creating an international bridge, inviting good speakers and practitioners could facilitate the openness culture, as well as to provide context and global narrative of key trends that are sometimes misheard or incorrecrly understood.

Inspired by the energy and willingness to develop the gound of fintech, DSV will fastidously contribute in terms of its past experience of innovation and fast track framework development, mobilise its international resources to provide context and narrative for fintech development in Moscow — as it prepares to formally open the Moscow Space preacceleration course.

Startupbootcamp Fintech Fasttrack Moscow

Portfolioandme developed by Art_quant
A platform to allow mass audience to invest in stocks and ETFs, with social elements allowing them to exchange tips and share trading strategies. Promises to open access to thousands of stocks and ETFs, while also mulling a B2B strategy to contextualise formal advice given by brokers. Resembles more of a social platform intermediary with core functions still provided by traditional players. Minor errors discount of speaker ambition include counting in all Russian population including tech conservative elders and babies as a target audience and ignoring Russian requirements for brokerage service provisioning (where the haggle around qualified investors requirement is being fought around ferosiously by main players). Also to take note of is that several players are already investing in social platforms on top, following the trend shown by eToro, that has recently entered the Russian market.

Skorista

A credit scoring, underwriting and fraud prevention SaaS platform to aid micro- finance companies (where digital consumer lending on the lower end grew rapidly during past 3 years and is tallied in ca. 5 USD billion worth of loans extended. Where small MFI cannot achieve through representative loan portfolio to properly calculate the loan loss provision (while the APR is huge, the businesse can be quickly depleted due to voracious demand) or calibrate the scoring model, Skorista is there to help with the data it has already accumulated, accessing both traditional credit reference bureau files (it does not want to offer a geeky alt finance scoring, seeing this as a hype trend to be aware of) and adding additional sources of data — cookies, social media profiles etc. Provided the interest for hassle-free short term loans, the company is looking at SE Asian market, potentially hepled by Life.Sreda VC, who is an investor. A good point from the company to win new customers is that it tries to guarantee the results, with a ‘no gain — no pay’ rule.

Cardberry is a hardware loyalty platform allowing users to aggregate their cards into one BLE enabled hardware unit. The company also operates a card marketplace to allow other users to download cards (and personalise them with their credentials). With many of companies already present on the market and adoption limited to geeks, the company chances can be greatly accelerated by pivoting towards software loyalty service provisioning, where cards being digitised to a mobile platform is just a first step, with nuts and bolds provided over the air. The company can also look at a more lucrative segment of prepaid closed-loop cards, where people could not just share the shells of the cards they have difgitised, but sell the balance of these cards.

Cashoff is a PFM / spending analytics service, offered to banks as a white-label solution. It tries to partner with leading retailers to receive the level 2 data of people receipts to offer this contextual information through bank interfaces. The offering it too broad, with not realised receipt capture technolgy, similar offers with regards to PFM functions as big banks already do them and more powerful providers operating on the market. Another trend that would render the innovation obsolete is the motion by the russian regulation authority to mandate merchants send the receipts (for tax purposes) to the cloud — ie., digitse them that would let this information to be utilised for the very same purposes.

Identification of users — only possible with those merchants who run their respective id programs. Should propse this as a service to merchants. API. Drive demand from merchants to build presence to create engagement. Warranty, no need to keep the receipt. Capture banks attention, inegrate data in their standard PFM.

Farzoom is an Open Banking Project type of platform in Russia, pushed by an API evangelist and former executive from Russian PSBank — to develop and standard API framework and a marketplace on top of it, that would streamline the development of 3rd party apps and let fintech communicate more closely with the Russian banks, saving development and negotiation costs for both parties. This is for now only stopped by relative insecurity and suspicion that limits the cooperation potential, while EU and US initiatives are partly sponsored by the regulation authorities.

iBox and 2Can is a leading mPOS project in Russia, with volumes exceeding 110 mio USD per year, updating the audience on its progress as well as announcing its forays in SE Asia (Vietnam).

The WAAY is a sociology driven platform to contextualise user profiles alongside 27 ways of life and target specific advice, to nudge users towards goals and opportunities that can be connected with the proposed ways of life. Disclaimer - DSV is supporting the about to be publicly available FF (Finfit) project that share some of the elements and the overall belief system that succint financial data reporting should be changed by more proactive and human communication, as consumers are getting used to be treated on social media, and where the trend of AI and chatbots is driving most industries.

Teamconnect is a mobile banking SDK to allow banks offer rich graphics, push notifications, geofencing features instead of SMS notification. Where banks are currently spending big amounts on SMS notifications or are envious of the push notification offered by challenger or mobile-first banks and fintech startups, they can play catchup and utilise Teamconnect notification platform, on which the team has already spent over 1 mio USD to switch from SMS to push as well as embedd the message with relevant information such as location, contextual or proximity based services and offers). The company now operates in 4 countries - including Russia, Kazakhstan and Switzerland.

Suretly develops a cross-country micro-lending service platform, where people can disburse small amounts of money to help those in need. The team tries to merge certain Lending Club and Tinder visualisations for ease of use on their yet to be announced mobile app.

Cyber Fund was the most geekiest project and the last from the deck - offering a platform to invest in cryptocurrency projects, trying to both account for the opportunity of any project (that they try to codify as part of the arbitration algorythm), as well as present the utility of buying and selling assets. The arbitration paper, based on what the co-founder told DSV, is pending review from Vitalik Buterin whom they met at a recent Etherium event in Moscow.

Out of the Skolkovo fintech demo day, those startups (not double-counting those pitching at SBC as well) made notable presentations:

DLS — a checkout platform in offline commerce, decreasing churn rate, cart abandonement and offering a strealined loyalty automation for merchants, with potential extention over to banks where customers can view their loyalty stats. The team is also vying to create a white label loylaty programs for banks, as they pitched before the bank dominated jury at Skolkovo. The platform integrates with standard POS hardware (Verifone and Ingenico) and allows to link a participating user card used with predefined rules and merchants available as part of the loyalty program.

Double Data is data aggregator with 3 billion users outreach, 150 tb and avilable hit-rate of 60 per cent of users along the board of social networks in Russia as it offers auxillary data for ID, underwriting and fraud prevention processes of financial services. The innovation it presented before the jury was an online brokerage — a marketplace service for end customers to assess credit decisions chances for online users. The customer can login with his of her social media ID to learn the percentage of approval rate within those banks that work with DD. A potential extension can be a service upgrade to both advise to customers on what they need to improve and what other digital assets to demonstrate to improve their creditworthiness ranking.

Cards Mobile presented its payment and loyalty tokenisation platform for banks and retailers, as they helped a number of financial institutions in Russia to launch NFC wallets using their provisioning platform. Presently the company tries to extend over to wereables to enable them with a payment functionality.

Overall, intertesting too days with much to improve on — but that is the true essense of innovation when one live and learn by the day.

A short update on this blog

noreply@blogger.com (Anonymous) — Thu, 14 Jan 2016 15:01:00 +0000

Dear readers, as my time is taken by a number of initiatives that I am part of a trying to push them to the limelight of fame, glory and adulation, I find it very hard to resume my usual incessant rant about things fintechy and geeky as I did earlier. I am migrating my strategy-obsessed and global topics to my Medium channel to continue my rumbling on a platform that gives back in worthy reads as much as it takes in editing.

There is also a book chapter on the rise of Russian National Payments Scheme and how personal ambition allowed for both fallacies and first successes of it - that I am about to complete and sent to my friends Bernardo Batiz-Lazo and Leonidas Efthymiou, so stay tuned in coming weeks.
Still, there is a lot going on in Russian fintech and banking / payments segment, so I would try to cover those with succinct items, complementing those with a number of other mediums I would tell about soon.

This blog gave a lot in terms of recognition and mastery, humility and adoration for words of others, so hard it will be to discard a period of time that was invested in this, but new channels appear and I will try to specialise.

Here I will sometimes share my personal memories of different bank projects I was part of in Russia and abroad, of the successes I had and mistakes I made, as well as give semi-masked portraits of those people I followed and worked with, and those who've nudged me to do more.

Good times are ahead.

A "Russian Klarna" is being born to capitalize on booming ecommerce growth

noreply@blogger.com (Anonymous) — Mon, 10 Aug 2015 09:10:00 +0000

Recently, the author of this blog has been helping the creation of a big innovation related conference, to be held in September (more on this in another post) and while assiduously crafting the motion plan for it, he was guided to yet another clone of a respected international financial services company - this posing to be a Russian Klarna.

A company goes by the name of Kuppi - or to paraphrase - “Buy-ee” where a consumer is enticed to distribute the weight of a purchase he does not have enough money for between equal annuity payments. The company positions itself as a micro-finance organization, thus structuring the loan differently from what would do a bank (where micro-finance loans are not required to be account in the reserves and where the APR is not (as of right now) a subject of regulation.

Other than that, it is a plan vanilla Klarna model, where each purchase can be turned into annuity. The business have only just started and is about to get good merchants from where to grow - good quality ecommerce platforms is as important for the business to thrive as the risk management or funds on hand, as the model itself is pretty much useless without data.

Where the rate of growth for Russian ecommerce (calculated in tens of billions of USD) is in double-digit space and so the market continues to solidify, while big players like Yandex Market is investing heavily in its aggregation service (basically turning itself into a major player from a information services player - more on that in another post), Alibaba investing in the market and Ozon trying to protect its market share, loan services applied to the turnover will be of interest to them. While alternative lending projects try to enter the market, there are already big players:

- Kupivkredit (an e-commerce loan service from Tinkoff bank) is the most aggressive from a digital-only bank, but the volumes issued through it has gone down lately, given the credit crunch amid the bad economic outlook that pushes down consumption, get people unemployed or make them averse to sudden impulses to buy

- There is also loans one can get from Alfa Bank and Leto Bank, but these too wound down to return the other day when the economy improves.

That leaves all alternative funding projects in a precarious position. To prove on the concept, one need funds and data, where the two getting along in a perfect mix is hard to create. Also, several key differences from the e-commerce market of Russia and the international markets should be acknowledged.

Basic differences

Klarna is increasingly a sales-optimization platform based on rigorous scoring and risk management. Where one would not deny the right for fame to a Russian aspiring enterprise, the lack of data makes this venture a big enough bet to savour. Russian credit reference story is still developing where the uptake of ecommerce consumption is driven by younger customers who have a limited presence in the vaults of the bureaus.

E-commerce in Russia is also one of the most fraud-prone and default-ridden sectors, where maintaining a reasonable APR is extremely hard. While the organizational setup of Kuppy as a micro-finance lender allow for a big APR, it is still covering enough risk to be a marginal service.

More soon on Russian e-commerce trends as they hugely impact the uptake in digital payment instruments for digital generations.

Mobile wallet creators still need to account for how people use physical ones

noreply@blogger.com (Anonymous) — Mon, 10 Aug 2015 03:38:00 +0000

A mobile wallet is a misnomer. While experts devising a new way for end customers to transact with them and carry their identity tokens in them had to relate the new digital experience to an old container that is still with us, the behavior one develops is still different.

This post was influenced by “yet another wallet announcement”, where those backing it, MasterCard and Citi priming their efforts for a wallet. They both were behind Google’s charm offensive several years ago, alas, bringing them PR from peer network and hardly from end customers who had to recharge the wallet and seek an incentive to use it.

Paying with a wallet has never been the case for a user, it was a container where units of value were stored and it was them that were exposed to the eyes of a merchant or a teller. The entree for a process was in itself important: the casing of a wallet, the logic of the insides had its own symbol for a customer. For wallet owners even the slightest detail was important: whether a clutch, a purse, a port-monae has been carried on certain occasions.

Both the outside and the inside has been carried with dignity, not just for the preservation of value - even the cheque book was a status process, not just a carrier of one’s "ones and zeroes”.

The whole ritual of what the wallet was and how it was used will becoming obsolete today. Recreating it is foolish and only leads to confusion and wasted resources. Creating new habits is only possible with the orderly generational change - through the eyes and minds of a new generation that is quickly adapting new habits to differentiate from the old folk and then take the new age for granted: mind you, rock and roll happens with all of us, rebels.

Still, the uptake through retirement is still prone to numerous flops of handful of wallet projects and those truly desiring to have their project recorded on the scales of history, should take-up these simple lessons:

1) To make a wallet as a mean to pay, one has to relate the end-goals of it, not to the primitive form it had when it carried our tokens: we care about how we spend money, not that we carry them. The wallet can reflect and advise us on the levels we carry and whether we have enough, whether we have had a good time for the spend we did and how to improve the odds, whether we achieved what should be desired instead of what we got on the way. In general, wallet becomes a retail story: a collection of our preferences towards this merchant and that product - all it matters for a user is spending on brands and “wants" and “needs”; channeling them through this or that technology is entirely subjective.

2) Merchants and preferences are crucial for a new wallet design, money management becomes

a) contextualized as people have less and less time really managing the money on the go

b) pushed back to a web interface or even more, to an algorithmic engine that feasts on one preferences and try to plan your paycheck so that most bases would be covered

3) Another worthwhile advice to follow: what disappears with the old wallet is the ritual: a habit of carrying it and showing it and opening it - and while trying to form a new habit of using the mobile wallet, one should also redo the old habit of status, the posture, the aplomb. Gamification trick is subtle and missed by many - it is not the points the person is after that can engage the usage, it’s the end goal of gamification that can support and entrench the habit of one using it.

Overall, with money tokens and physical containers disappearing - to thrive, mobile wallets need to sustain their mind share. Some do this through retail connection (Starbucks, Apple), others have to find new vs. old routines, but never would wallets win through technology.

[1] - The coming era of private money domains - July 29th 2013

[2] - Money is data - March 2nd 2013

[3] - Banks as consumption finance agents - June 11th 2013

Tinkoff announces a financial messenger to prove banks can do more

noreply@blogger.com (Anonymous) — Tue, 03 Mar 2015 11:51:00 +0000

Oleg Tinkov, the major owner and brand-name giver to Tinkoff Credit Systems (today, a major credit card / online banking institution), that has earlier this year rebranded itself as Tinkoff, teased the crowd with a "white label" app, called MoneyTalk, soon to be offered to all major mobile platforms users, that would connect their desire to chat with the ability to send money.

The general drive to embed payments functionality in communication application has been present on the market for quite a while: here sits the Yandex hack with Twitter API, that let them launch the app, where users could send money using only their @Twitter handles [6]. There is also a number of simple P2P services that let bank customers send money to each other, but none of the banks, as of today, did a messenger driven payments app - as it goes outside of banks' traditional area of expertise.

A teaser website showing the UX flow

In short, the user can attach his card to fund P2P payments to other users, where money becomes the social token sent to other users. The funding costs are covered by the sender.

This may be risky from the mere sense of competition, as a good number of messengers, that already exist, serves the audience well and some are even working on making payments part of the equation.

This is a test where the bank's engineering team quickly concocts a working proof of concept to see whether those already loyal to Tinkoff services would use the app. Given the free debit cards offered by the bank, a good number of people looking for a simple and yet powerful medium of banking, are already onboard and would use this interface for the transactions they already do.

Tinkoff launched its own wallet nearly 18 months ago to attract the same users (where it profits from offering them credit cards, where debit / payments serve as attractors), where MoneyTalk can be viewed by experts as a relaunch of the bank's "wallet game".

This is but one app in the ecosystem carefully crafted by the bank that rather sees itself as an IT driven institution. The author of this blog can attest to the highest standards of engineering operated by the team that tries to take the best form the world of financial services - as it sometimes copy the apps and use-cases and redo them in its own fashion [2, 4, 6]. It is no longer an ontological problem for innovators of who created what, but who was best in scaling and getting revenues from the hack.

This manifests a new reality for financial app engineering in Russian FS space. Tinkoff has been on the offensive since last year, where it made one of the most appealing credit / debit cards and relaunched its online / mobile banking apps (that this blog very much intends on covering in detail). Overall, the hack manifests a changed culture for teams vying for customers in a dire economics and traditional channels being disrupted by mobile connectivity.

[1] Time for a great renewal for traditional banking players - December 18th, 2012
[2] Tinkoff borrows from Simple - November 26th, 2012
[3] Tinkoff launches a Backbase online banking - July 26th, 2012
[4] Tinkoff borrows from ING Direct playbook - April 26th, 2010
[5] Tinkoff launches a card linked rewards program - March 8th, 2013
[6] Yandex.Money plays with Twitter API to launch a P2P service - March 17th, 2013

Bank as a service - a full stack manager of a money communication era

noreply@blogger.com (Anonymous) — Tue, 23 Sep 2014 16:24:00 +0000

Numerous post in this blog (and talented blogs of others) have dedicated their space to bank as a service, bank as a platform. Here is a variation of sorts, thinking through different layers of the stack, where banks can completely reinvent their role as financial middlemen into the financial communication stack owner / manager, enriching their services with added value provided by others.

Persistence layer - financial communications is what stands behind banks modus operandi. Extending credit at a large scale is not possible without scalable systems, rules and protocols, and whereas banks still own their hardware, they interrelate with others at a software layer - and adhere to the rules of SWIFT, Visa, MasterCard and others. These rules can be made public so that developer key outfitted startups could adhere to the rules to make their offerings available through banks.

The discovery mechanisms of today enable to operate without big brands and umbrellas of services, people can just follow the recommendation services and formulate their requests in a natural parlance. From here, it is even better to reuse and cooperate at a product layer, so that banks risk and profitability teams would rather manage risk/ margin utilization ratios. Banks would (even should) be real platforms and reuse products of others.

This would compensate and alleviate the marketing cost, where all are trying to create their own visage (channel) that deliver bank services to customers. Technology companies, account aggregation platforms all lay waste to banks assiduous efforts to craft a "bank with me only" channels and rightly so.

Marketing in general - can rely greater on the voice of the community - and source in ideas about products and desires through crowdsourcing platforms more openly.

Product ideation and development is already looking like a startup ground, with a number of leading banks opening their incubators doors and soliciting help from the brightest minds of the world. The human network and its drive to make FS a better place should not be trifled or messed with, it should be rather put to good use.

In general, a bright future of multibanking where banks are service providers and channels are outsourced to tech vendors awaits. For sure, it would require branches to change their nature (more of an financial literacy centre) and banks to rethink their marketing and sales matrix, but it would give more output for a buck now spread thinly between sales and marketing opex

Replicating data is easier than replicating the process of getting it - real knowledge

noreply@blogger.com (Anonymous) — Tue, 23 Sep 2014 16:06:00 +0000

This post is a stub from an earlier set of notes scribbled during these past 2 years, where the author of this blog would not want those to disappear in the oblivion. One of the thoughts written down was a notion of the futility of trying to get an idea that is being used or expressed by a different organization, where despite all the coolness of this idea, it would be near impossible to act on the idea.

Real knowledge comes from putting the idea - whether generated by a genius mind in a shower, or by a brilliant team - to a test, and that test is a process crafted by this lone wanderer or the team. Crafting of a diamond takes time, whereas knowledge is produced by challenge, the pressure driven on the idea.

This leads to several truths:

- openly sharing ideas is good. Understanding it in a moment means it has merit, the author might get a partner in crime, as keeping ideas to oneself either mean the idea is not properly articulated, is raw, or that the listener is not that interested in it

- ideas need hands and minds to lead it to perfection. An idea of a startup, a business might take one person through several rounds, where it is the road and knowledge received throughout the journey that matters. It is not the idea that is the destination for a dreamer, it is a only a starting point.

QIWI gets Osama Bedier as member of its Board of Directors as it opens a new chapter for itself

noreply@blogger.com (Anonymous) — Tue, 02 Sep 2014 18:53:00 +0000

I can't believe I missed the news, but just can't miss and not blog about it - as Osama Bedier, known as the architect of PayPal mobile payments operations and later the pusher behind Google Wallet, got signed as a member of the management board of QIWI, the Russia's designated champion of retail payments.

The acquisition bodes well for the company's image, the market has seen little lately from it in terms of new products after it barraged firing all cannons in terms of redesign, new global partnerships with Adyen, Global Collect and others as it prepared its successful IPO last year.

Whether the company benefits in terms of ideas for new products or localizing its wallet solution for international audience remains to be seen, Bedier's experience in managing payment project in a big corporations would suit a company that opened a new chapter after the offering - a chapter of a big established corporation that now innovates through partnerships and external attraction.

QIWI has recently followed a modern attraction of helping a hackathon and announcing an incubation program that has signed up a dozen or so projects from about 500 applications. It also continues to operate a venture fund but the scale of operations puts it off the radar of conventional fintech funding activity.

[1] - QIWI - a post IPO story - August 14th, 2013

[2] - Visa sides with QIWI for a local alliance - December 18th, 2012

[3] - QIWI launches a plastic card - November 15th 2011

Big perspectives from a (small) turf war between eBay and Alibaba in Russia

noreply@blogger.com (Anonymous) — Mon, 01 Sep 2014 04:00:00 +0000

While Russian ecommerce prospects are getting more rosier by the day, with both the generational and technological readiness supporting the volumes increase, now estimated at around USD 12 billion (RUB 470 billion) from estimated USD 8,5-9 billion in 2011 (this blog rebased the volumes to USD as the majority of goods ordered are in fact imported from overseas., in RUB the increase is a more solid 74% over two years from 33% in USD terms).

Where we would leave a detailed analysis on what are the trends for the market for another post, here is a snapshot on how the market growth changes the established position of a global online marketplace-turned merchant platform - eBay. The company quickly became the darling of emerging RuNet consumers since early 2000, that had led to the launch of a Russian language interface in 2010, as well as the independent creation of several businesses that allowed consumers to get the goods from those merchants that did not ship to Russia. Such grey area commerce give an additional 5 to 10 percent for country-bound volumes for big retailers, for example Amazon that also prohibits certain items to be shipped.

eBay also prioritized the localization of its PayPal business, when it turned out that the company enables at least a third of the volumes from Chinese merchants that accept PayPal. Payment terms and logistics efficiency are the two critical factors that allow the razor-thin marketplace business and PayPal business is therefore important for eBay in terms of lowering the access bar for consumers. But it is meeting its worthy opponent by the name of Alipay that has, as of this year, surpassed PayPal's volumes... three times.

The total volume of Alipay’s mobile payments has surged past 900 billion yuan, or $150 billion, surpassing the combined volume of U.S.-based rivals PayPal (owned by EBay EBAY ) and privately held Square Inc. , which was about $50 billion last year, Alipay estimated.

Sorry PayPal, China's Alipay is world's #1 - Marketwatch

On the shipping end, Alipay's parent, Alibaba that also operates an online marketplace AliExpress wins in Russia thanks to geographic proximity and growing reliance on China as original manufacturer, helping the latter to increase its volumes sold to Russian customers.

Where eBay launched its Russian language interface in 2010 and slowly progressed to win 1 million registered users in 2011 and 2 million in 2013, Alibaba got the near same numbers in 1 year:

By end of 2013 Alibaba Russian-born orders quadrupled to 20 million from 2011 (when it was still operating in Chinese). Average monthly auditorium is about 2,3 where for EB it is around 2 million registered users where it was 1 million in 2011.

This blog believes that eBay response had to be - and is tiered:

1) eBay had to increase the margin for low-value purchases that take slightly less than a quarter of turnover but contributes ca. 50% in package volumes - and for that it looks to further improve PayPal local operations, lowering the money upload to the wallet and redoing fees it takes from merchants.

It also tries to push down the shipment duration time to better compete with Alibaba volumes and has recently initiated a partnership agreement with Russian Post that is creaking under the volumes of e-merchants. eBay still relies heavily on big cities (54% from Moscow and 30% from St Petersburg order origination in 2012), that contribute to the high-end, bulk purchases from Europe and so it has to increase convenience and cut waiting times. Where orders per day increased from 29 000 in 2012 to 90 000 in mid 2014, logistics network has to support the flow accordingly.

2) It also tries to improve business margins on the high-end - from goods going from Europe and US. For example, eBay also help to operate a Dostami.ru reseller hub, that allows russian buyers to get goods from those EB merchants that do not ship to Russia. Dostami contributed 500 000 orders fulfilled through the hub in 2013.

Overall, protecting the turf from a big Chinese marketplace sits on logistics efficiency at the lower end and increasing convenience at the high-end segments, but the challenges would only increase as the market enters a new phase, where a new merchant can set up his shop in several clicks and start doing his own business propagated through online web search engines, that are eating in the business.

Startups build to impress the technologists, where banks have to not disappoint the "legacy generation"

noreply@blogger.com (Anonymous) — Fri, 29 Aug 2014 10:00:00 +0000

In this somewhat deviant thinking post, this blog would like to postulate on the inherent problem that incumbent big financial institutions stand - and what makes it difficult for them to follow and implement the latest features proposed by the innovators from the "amateur community" (see Clarification).

It is not about the lack of vision and capability, but because of the visibility that big players have and the impact it might have on their processes if they change their stance and follow the early majority.

1) IT legacy is still paramount - prohibiting changes in transaction related blocks of banks systems as they manage billions worth of money and support millions of customers, so there is a small room allowed for experimentation and the chance these banks have is to experiment "outside in" based on a set of limitations external players might not have.

2) Compliance and cost-aversion policies have a big impact, as banks see all changes through the lens of not having a negative impact in terms of compliance costs, not benefits of customers. The cost structure of big institutions create a prohibitive environment for those customer that appeal to startups - as the free (indefinite) business, or fees waged by online-only operators does not fit revenue requirements of banks.

3) Experience burden - big banks still operate their business as P/L, S/L net-margin-after-risk type of business, where places people find attractive are consumer driven environments. Changing the internal processes is hard because of the experience burden that one need to flush out and interchange with other core skills. It is not that new FS players ignore risk management, but they see it differently. Like the lens set of a telescope, these skills are primed at different objectives.

4) Managing for a particular behavior - one issue that escape most spectators is that startups operate for the awe and enjoyment of the advanced group - technologists and geeks who instantly recognize the coolest UX features an FS amateur would present to them. They would also try out the service, would be willing to educate and master the service themselves or learn more about it through chats and clever tutorials. More importantly, they would behave. For big banks, they have to design their interfaces bearing in mind of the conservatives who don't introduce themselves with cool UI features every day. Moreover, part of the population using the big balance player will be the hackers - or those who would like to take advantage of the contextual helping features to either get access to other people's money, or other people's data. Banking is becoming an arena of data theft as much as money and FS specialists have to be careful not to give users hints that might help them make a sense of other people's identity.

Building a new player on top of old processes is particularly hard, because the established institutions still deal with millions of customers who have no time to change their habits, or who got themselves used to deal with FS the way the latter were designed. Still, crossing the chasm will happen quickly and not preparing for the new ways would mean joining the obsolence pit.

Clarification: the naming of "amateur" should not confuse you, readers, as the ensuing moniker because of minor implication the newcomers have on the market, but on the first impression they create on these established players (where this is becoming no longer the case with proliferation of FS incubation funds sponsored by banks, I'd prefer to leave the name to properly distinct between the camps).

[1] Amateur ecosystems in financial services - June 6th 2011

Apple should be the account (wallet) aggregation platform

noreply@blogger.com (Anonymous) — Fri, 29 Aug 2014 06:43:00 +0000

I would add to with a small post responding to Dave Birch post about Apple (not) announcing NFC in their upcoming iPhone model.

Even if Apple does put NFC in the iPhone 6, I do not see why they will use it to implement the existing industry model for contactless mobile payments.

Apple Speculation - Tomorrow's Transactions Blog

Yet, I would like to orient it not around the payment implications, but around the convenience that Apple (almost always) adds to the services consumption. Changing music and video industries with their "hardware meets software meets services" triple-play, the same effect is already being recognized in commerce - where already billions of dollars go through Apple hardware and for them - sustaining the flow would mean selling more hardware in the future (remember that, as services of Apple support their main hugely-marginal hardware business).

Apple's payment revolution has already happened - they are just closing the dots:

PayPal reported numerous times about the rapidly growing (and already impressive) volumes of mobile driven commerce. Square has build a big business out of smartphone (iOS) platform. Stripe is focusing on pushing their API of one-click commerce to mobile. Banks are aggressively advancing with the mobile wallet game. IPSs are changing their card tokens for invisible one-off passwords that would communicate with cloud-based storage of prime financial denominators. All this points to a near future of instant purchase and gratification, yet there is no single protocol to unite the disparate movements - or at least - a platform as desirable as Apple - to unite the tokens under one banner (a secure safe that is equally accessible by the rightful owner).

The patent applications signal more about a "safe"б where payment service developers might thrive, rather than about an Apple-patented payment service (they can still keep their prepaid business, but the bigger promise is about greasing the wheels of trillions dollar worth of commerce).

They are following the trends and shaping them up properly:

Apple is savvy in connecting the dots and making perfect use of disparate services, a platform creator. The upcoming HealthKit connect the dots around people growing interest in quantified self, when tracking technology, investment in cognitive sciences come together to reimagine peoples understanding about their behavior - and implications of such.

Apple might aid the account aggregation movement, where balances held by individual wallets can be opened (like HealthKit data) and shared with other applications at the iOS level, paving a new way for super-wallets and PFM account aggregation.

An attempt to predict what will happen after 9th of September:

- NFC would be used for close-range communications (better aim at locks and passwords)

- NFC might be used for secure communications between Apple devices (meaning these would be installed on other Apple hardware)

- Apple would not be a store of value, but a an account aggregator, improving the odds for super-wallets and PFMs

[1] NFC = API - March 6th 2013

Proactive everything - part 2: debilitating pains in FS back-office are solved by new concepts

noreply@blogger.com (Anonymous) — Thu, 28 Aug 2014 19:05:00 +0000

The late surge in number of legislation like MIFID, Basel 3, Dodd-Frank, Durbin etc., exacerbates the pain and costs waged by big institutions so much that they sometimes rule against the will of a customer: cutting down the number of correspondent relationships, putting certain accounts offline due to costly OFAC and FATCA compliance, raising fees for international money transfer due to increased FATF oversight over digital payments, openly revolting and lobbying against anonymous currencies etc.

It all runs countercyclical to the waves of innovation that bring the new ways to transmit money, present one identity, trade on the stock market - and the barriers set up by FS lead to new, even more detached ways people would settle with their financial lives.

Some FS players are protecting themselves from the growing divide between the two worlds and side with amateur ecosystem players to solve their problems via new means.

This post, effectively, was born after reading about a promising big-data company - Digital Reasoning that came on board to help financial services manage their compliance policies after working in the dark for US Government. The promise of their proprietary tech is that it sifts through the structured and unstructured data to uncover patterns of misuse of corporate information, something that is costing billions in terms of provisioning for litigation losses and internal controls for big banks.

Such deep dive into the realm of seemingly unconnected data is promising. Bringing to life the larger concepts of uniting the seemingly disconnected like Identity - promises to solve the pain of a costly KYC procedure that is partly to blame on the banks incessant desire to have branches. Federated identity - that sits on the same principle of verifying a person based on his digital fingerprints - tokens or actions he did in certain places - is something that such a stringent operator like FATF is willing to allow to introduce.

Talking about payments - block-chain signed currencies are on a path to reinvent commerce and low margin money transfer - making the promise for free value movements a reality. It, again, sits on a principle of account for the small and untraceable bits of information.

Next-best offers have the potential to be reinvented by mingling social media data - again - processed unconventionally by fringe world players.

The back-office game with be different if banks let the new operators to become part of it.

Proactive everything - part 1: moving from "past" to the "future" is an act of necessity, not of modernity.

noreply@blogger.com (Anonymous) — Thu, 28 Aug 2014 18:28:00 +0000

B2C communications in FS has to change

Amazon announces a service to predict what a customer might order next. Real Time Bidding technology in advertising narrows the reaction time between someone searching for data and getting a connected bid about a service he might want to have as well. Next-best-offer is on nearly every presentation of a pre-sales person on the offensive to bring new software to banks. Facebook patents a PFM like service to match people interests with their actual spending...

The question mark of what might he want to have next is captivating, so generating lots of buzz and attracting millions of dollars in funding.

The humming sound is greeted by in the same manner by millions of people using the web and getting increasingly distracted by traditional ads and creaky voices that try to cater them something. The rejection rate for traditional web rises and understandably so.

1) The multiplicity of channels effectively creates a vortex of ads and messages as budgets proliferate alongside them. All content delivery platforms are pushing advertising networks of their own as they justify to advertisers the millions of users they command. The problem here is that the same millions proliferate on a growing number of same services and they dilute the amount of time they would have spent on just one - as was the case with TV and MTV in the past. Trying to get their attention by traditional means only raises people's anxiety.

2) The anxiety factor is supported by "norms de coms" of todays generation. Y generation prefers to communicate silently, where it is only the neural network that connect them to the web - via chats and IMs - pictures and small clips. The parlance we prefer when talking to masses has gone from loud to silent. Hence, ads need to take account of that and be shown at the right time in the right manner

3) The amount of information people consume has increased drastically - impact coming from richer content we get thanks to broadband, and the richness of services we consume, created by tinkerers gratified by the accessibility of production means. This conundrum of people consuming more content and searching for better content created filters of all sorts that people look for ways to know more by doing less. The services of late take not of this and are designed to proactively deliver on the promise they give to a user.

In the end we have people spending less actual time using a service that have to survive on thin margins to deliver a smart service at the right time.

Banks have navigated through the generational and technological divide without second thoughts on how it would impact their models. They have first played with digital as just another channel (announced as wrong by the likes of Brett King), missed on the requirements to re-design their processes around digital and abandon the multi-channel plan (brilliantly described by Chris Skinner) - yet what about marketing?

The late returning promise is that banks will be able to sell advertising coupled with transactional spend - just like the early promises of NFC marketed the ability to capture coupons. Is is what the customers want from banks? Hardly.

The real promise of contextual advice waned and is rather better captured by the FS "fringe-world amateurs" [4] [5] and the promise of delivering more on the knowledge of peoples finances is wasted - on the contrary, banking is adding to the disenchantment of the public with the litigation processes uncovering wrongdoing, insider trading, black pools and other deeply professional tactics of getting more money at the expense of the uninitiated.

Control over information is leading to peculiarities where people resort to using costly services of alternative finance just because they are more appealing in terms of language and access

People would rather bank with Googles and Apples not just because of the brand, but because of the design driven proposition that is delivered.

Getting back to proactive movement

To be meaningful in todays world, the whole set of marketing mechanics has to be reinstalled. Banks have to first listen to the financial life of their customers and plan from their best and worst possible day - and take into account that sometimes people don't want to spend up.

Proactive means listening to what had happened today and extrapolating on what would be required tomorrow, not repeating and / or x-selling the same message over and over

Proactive means hearing small signals and giving bigger values to the unseen - psychology, human decision systems (i.e., better emphasis on multi-disciplinary teams guiding the process).

In other case, banks would be circumvented by the amateurs that deliver on the message and rather use banks as "pipes" they are all so fearful to be.

[1] An emerging role of banks - a consumption finance agent - June 11th 2013

[2] Banks as consumer experience agents - March 6th 2013

[3] Banking is about managing habits - April 8th 2012

[4] Amateur ecosystems in FS - June 6th 2011

[5] The future of FS is now - and different from what banks want it to be - April 15th 2011

Politics and banking have a lot in common - and much to lose if they won't adapt

noreply@blogger.com (Anonymous) — Sun, 24 Aug 2014 12:55:00 +0000

The September issue of Foreign Policy magazine chronicles a dearth of problems that bedevil US politics: its foreign policy being torn between realism that is prophesied by the White House administration, its legislation process mired in the special interest groups debate - and the overall sentiment of impotency is similar to what is voiced in the financial services innovation crowd: the "do or die" call to arms, the blatant display of stalled initiatives in numerous committees of a typical big bank etc.

The reason why politicians and the institutions they represent get only single-digit approval ratings stems from the insider politicking that confuse the end goals and means to achieve them, where wealth generating potential is squandered for rent seeking of the near moment. The trust factor is further exacerbated by the slow motion process that is intoxicated by the political cycle, where a noble goal is undermined by the mid-term elections agenda.

In financial services and big banks it all sound the same:

- a noble idea stays noble when pushed by a lone pioneer fighting big committees with vested interests to keep things as usual, as it gives them the peace of mind

- an idea may go and pose risks for an executive retirement plan and the coloration of his "chute"

- an idea will always be overburdened by a number of useless additions that would help the other parties to attach to the movement and either protect their interests, or make the original shine like a dying christmas tree.

A new call for action:

It may sound ludicrous to compare the 99 per cent movement with the innovation crowd in FS - yet the stalled initiatives, the overprotective nature of establishment and bogged down reforms that the public would love to see implemented - all contributed to the resurgence of a radical left that fight for data freedom, alternative structures to make things happen etc. One may even see the links that helped bitcoin to take the stage after the 99 per cent movement, where a big number of speeches and papers appeared on federated currencies, distributed networks and other things apostate to the status quo.

The "block chain" element forged in the discussion pose a big threat to the established financial services links serviced by traditional players, like the social impact of it threatens the political agents that benefit from these.

People are seeking to circumvent the political debacle by looking at how new elements and atoms proposed by the misfits would make a stand against the vested interests of those currently in power.

This leads to an interesting question on whether try and regulate these urges and suppress them or try and adapt and ingrain those so that a reformation from within would help to mellow the divide that inhibit growth and progress.

A new chapter opens

noreply@blogger.com (Anonymous) — Wed, 30 Jul 2014 05:40:00 +0000

Where it has not been possible for me to keep on with the good word on these pages for quite some time, I have still kept a record on what is transpiring on the fin-tech grounds and tried to make sense on the bigger picture that sometimes lie hidden behind the bursts of hot bubbles of news. I solidly believe now, that it is time to move on with the next chapter of this blog, progress with a natural expression of evolution. Why? Here is a story on the thinking behind it:

After we have concluded the RNPF 2013 - a great first event in Russia on the payments matters, there was another great breakthrough for me as a person, a human being, my son saw this world soon after in December and this magical act has made me into a different person.

Parenthood is a bliss, devoid of grey emotions - and a changing agent that catalyzes oneself for what is truly important. Dabbling with concepts changed places with focus on several things.

1) Me and my team got high marks from our advisory group and alpha users for the latest iteration of our FinFit application that creates another gamification layer on top of a PFM platform - a task to radically improve the characteristics of one I have put myself since 2010. We are happy to partner with one of the leader in the PFM industry - something we would be spreading the proper word about shortly.

2) We are doing what is possible to create a local NextBank community in Russia, that amid the political debacle of late, still possesses a vibrant fin tech community with robust ideas and technologies to help out the outside world. We hope that we would be eagerly reporting back on the progress v. soon [3].

3) Several partners of mine are now contributing the lasting efforts to create a new account aggregation and payments platform that should go from beta this early fall and allow a user to simplify his finances at many banks through one of the best interfaces possible, with smart cards to assist him on the road or on the Web and a robust mobile app to match.

Getting back to blogging is tough. Writing skills require constant activation or else they go into hibernation. It require discipline amid the ruckus of a born child requiring his own time that one did not have need to delegate before. Moreover, it requires good ideas to ruminate over, so that the activity itself would contribute and not steal.

Among the topics stored in the backlog when this blog's author took a leave of absence are: the rise of open prepaid, trials to launch bank innovation labs and startup programs, APIs, the drawback on emoney legislation, latest figures on cards/cash usage, the political ramifications for retail payments.

The style might be a bit different: putting more thought over the piece of news and proposing a rather analytical style of FS and innovation topics coverage.

Several of the news I will be happily syndicating with the likes of Paypers and Finextra and NextBank, to add to the good fight.

I would also love to be of assistance to cover a topic you find challenging and want to know more from "beyond the wall", so feel free to drop me a tweet or else

Good to be back.

[1] Social banking concept that helps FinFit to move forward - March 1st, 2013
[2] Gadgets vs Sensors - building action vs. engagement - July 13, 2013
[3] NextBankMoscow mission statement - ext. website

A brief note to compensate for absence

noreply@blogger.com (Anonymous) — Mon, 04 Nov 2013 21:41:00 +0000

I am a bit sorry, as due to projects to fund the startup, the startup gig that takes long nights, and now the Forum - I have last posted a worthy note here in late August, as the notes deemed worthy for future posts are piling up.

Yet, we are only 2 days away from the event: and here I am again, but posting pieces of news on the official news-piece of the Forum. You might like it and hear you all real soon!

A brief absence to launch another great feature

noreply@blogger.com (Anonymous) — Thu, 22 Aug 2013 19:11:00 +0000

I am being teared apart by the FinFit that now requires nearly all of my time, yet, I can't stop sharing and helping the global innovation movement, spreading good and solid knowledge about money, payments, design and financial innovation that takes it all together.

This is what I feel necessary to do to pay back to those who've been on track before me. Following this route, I have volunteered to assist with the launch of a local NextBank community - NextBank Moscow, and through it - to beam good examples of innovation as it should be in the region, and help out the local champions to let the story of theirs to be heard internationally.

To achieve both, and to satisfy my love for payments and money (the topics for what I would be eternally grateful to @dgwbirch for he educated (and continues to educate) me on those), I have set on course to help a Russian-based National Payments Council with the launch of their maiden Payments Forum . Already the course is finding good support from the international community, making the journey and the foreplay before the expected great event a sweeter still.

Join the movement!

[1] The role of my life - August 9th, 2011

[2] FinFit concepts - March 1st, 2013

[3] Gadgets vs. sensors - July 13th, 2013

QIWI: a kiosks story

noreply@blogger.com (Anonymous) — Thu, 15 Aug 2013 07:30:00 +0000

Continuing with the earlier post, a recap on what happened with QIWI's kiosks, that for long were its only line of retail payments business (a kiosk being a reverse ATM machine through which cash-totting users can pay for different services).

As earlier told, cash is still the back-bone of QIWI operations, while the money control is slowly migrating to other channels. For example, in 2011 QIWI Wallet volumes (RUB 67,3 billion) were for 50+ per cent (RUB 32 billion) controlled from kiosks (explained as customers who use a kiosk to pay for service from his personal account, so that he would not be eligible for an agent fee), where the other RUB 35 billion went between the Web channel (RUB 30 billion) and mobile apps (RUB 5,3 billion).

While there is a growing concern on how to properly compensate agents for their work (where QIWI tries to strengthen its advertising services - allowing for b2b partners to target users behavior and show ads on kiosk screens), the number of agents is now over 9000, many of them bringing billions in turnover for the company:

If compared with the overall retail payments market dynamics, the company controls near half of a relatively stagnant cash market, where the role of kiosk migrates to that of an ATM in an era of mobile - a cash digitizer. So it may come in the future, that the diminishing returns and the attack from banks trying to kill the cash problem would drive QIWI's kiosk competition out of business, where the winner should move quickly to reinvent the kiosk role in their range of services.

The kiosk being the branch element in QIWI's channel mix, would become the branch problem in a world of mobile.

[1] How will QIWI deal with the rising problem of their agents' sinking profits - March 28th, 2011

QIWI Wallet: a post IPO story

noreply@blogger.com (Anonymous) — Wed, 14 Aug 2013 19:08:00 +0000

I've been trying to recap on the retail payments market for so many times that I was shocked to see how many different names have I brought to light in the templates section of this blog. Here I am (finally) to deliver on the promise, while taking into account the fact of QIWI, being the champion of this market, successfully faring the NASDAQ waters after its May IPO (where it now has a market capitalization slightly north of USD 1,5 billion).

The move was great for the market - not just for the sake of solidifying the aspirations of others, but also uncovering details on QIWI Wallet operations, as these were published in their F1 document filed with the SEC. Given the previous researches that were done on this blog, there came an instant decision for an update, and a bit of guidance on QIWI Wallet's next potential moves:

The market volumes for the wallet are nothing short of spectacular as the company moves from strength to strength in promoting it's wallet's based services: it has nearly tripled it's 2011 achievement and is potentially holding more than 40 per cent of the emoney wallets market in Russia to this day. Where the major payment service providers for the wallet are still mobile network operators (mobile top-ups), QIWI tries to motivate their regular users to do recurrent payments, transfer money and use a variety of their near 10,000 PSPs and especially their 6000+ Web merchants.

It is easier to say than done, knowing that a majority of QIWI Wallet's customers (13 million as of 1st quarter of 2013 vs. just 5,9 million in 2010) use the wallet functionality to escape kiosk agent fees and that largely contributes to the Wallet humongous turnover:

Despite that challenge, the Wallet is slowly finding its core audience of customers who are increasingly dissatisfied with the online banking experience of their banks and would rather connect their bank accounts and cards with the universal and flexible wallet that would allow them to pay for thousands of types of services. To help them do all that, QIWI progresses with its prepaid platform, demonstrating good results with card issuance during the 2012 (see above). In total, if we would look at historical stats, the total amount of cards issued should surpass 4 million units, a great result for a non-bank.

QIWI Visa Virtual is still being predominantly used for one-off purchases where people don't want to risk with their permanent card details, hence the total ammount spent per one card is slightly over RUB 1000, where on the other side of the spectrum, QIWI Plastic is heavily used by those who receive money transfer payments and are happy to withdraw the money from ATMs.

What are the next moves for QIWI to sustain its course in 2013?

Progress with customers migration, while the competition (big banks with big ATM networks, i.e., Sberbank) tries to strike hard and kill off the cash outflows that goes to QIWI machines

Prove the usability of QIWI wallet is still dominating the market to sustain the flow from bank accounts and cards, where it would also support the company's earlier alliance with Visa to create an open-wallet platform (QIWI issuing prepaid Visa wallets for other Russian banks). The challenge for this is not only other bank's investment in their online channels (and doing alliances with other platforms, like VTB24 business with Mobi.Money, another virtual card player), but moves of other disruptive decoupled debit / prepaid startups that try to steal the banner of being the wallet on the market (more on these soon).

Offering new services, or rethinking old ones (where the Wallet functionality today is dozens of features, if not hundred+) - in order to escape complexity issues, where the market trend is simplification.

[1] Sberbank buys Yandex Money - December 19th, 2012

[2] QIWI - Visa alliance explained - December 18th, 2012

[3] "War on cash" escalates - November 4th, 2012

[4] Retail Payments Market in 1H 2011 - December 11th, 2011

[5] Retail Payments Market in 2010 - April 26th, 2010

Visa Innovation Day: a contactless transit perspective (in Moscow)

noreply@blogger.com (Anonymous) — Sun, 11 Aug 2013 05:31:00 +0000

As it was earlier reported on the Visa drive to market its contactless products on the Russian market, for now it has only one solid pillar to rest on - that being the contactless transit infrastructure.

The reason for such analytical posture is the behavior of end-users who are eagerly withdrawing cash from cards and do not in their majority see them as payment tokens, while they have quickly made up their mind on the easiness of using contactless MIFARE tickets that work in Moscow and Saint Petersburg.

Where the hardware technology has been in place for some time, the reason on why did the authorities not allow for payment with a card was in a different way the system calculate fares, previously just counting a fare of a time-limited ticket, where for a wallet, and a payment card they need to authorize the payment instantly at the gates.

Learning that the opportunity for a payment card pay-through is somewhat far off, the Moscow Transport Authority launched its own wallet with a balance (behaving like Oyster) that can be used for underground and overground transit and commuter trains, and would soon be available as a mobile application too for those phones, that are outfitted with embedded NFC chips.

The Authority has also upgraded its payment processing hub, procuring services from a Breeze Technology startup, that has close links with Mobi. Dengi - a mobile money company, so the expertise in mobile and contactless payments pave the way to a mobile NFC ticketing very soon.

For now, the Authority also supports for banks to install the transit wallet in a separate contactless domain of their cards, while the reason to do so, knowing of a payment card opportunity in transit, is uneven.

As of late June, over 330 000 transit wallets have been issued, while the Authority hopes for a gradual transition for such means of payment in couple of years, where the wallet can be also used to pay for parking, vending services and even Moscow taxi.

Now talking about contactless transit in Moscow: Oyster like card (wallet) since april, 330 K issued #visainnoday #visa
— Daniel Gusev (@dngusev) June 26, 2013

[1] Visa pushes contactless payments in Russia - June 17th, 2013
[2] Moscow Transport Authority borrows from TfL (Oyster) playbook - December 16th, 2012

Thoughts on the past Visa Innovation Day

noreply@blogger.com (Anonymous) — Sat, 10 Aug 2013 16:40:00 +0000

The author of this blog was invited to a Visa Innovation Day in Moscow, the first of its kind for the scheme’s Russian office to pull of in the country where even today 9 out of every 10 transactions are carried out in cash form.

The step is a good one to kick start a thinking process for local banks that do not socialize on bold new initiatives, trying to cook their innovation inside that mostly lead to bloated budgets that don’t deliver.

Visa did try to prove their mettle of their business through good positive thinking around products and services they stand for, as it is now trailing MasterCard in terms of big new technology launches (i.e., contactless, where Visa has recently tried to compensate with a big ad campaign about PayWave).

Save from being just a the technology fair, the event was a bit symbolic, marking the 50th year of Visa’s history and its 20 year mark in Russia, and telling the audience a short milestone ridden story, accentuating on the “Fresno drop”, the story of which was earlier near perfectly narrated by Joseph Nocera in his “A Piece of Action”.

To add on the context, Visa’s Russian drop of 100 million cards (another special number lauded by the event), contributing to c.a. 250 million cards in Russia, lead to users confusion, where a majority now carry several cards (of the total amount, over 170 million cards are debit and the majority of these are payroll).

The earlier joy of volumes did not convert as efficiently in card usage, and so, another task of the event was to push for some bold thinking about how to realize the grand vision of Dee Hock whose quote was voiced in a videoclip at the beginning of the day:

Dee Hock: trying to implement a vision to create a “premier vision to exchange value” / a system where money is photons #visainnoday #Visa
— Daniel Gusev (@dngusev) June 26, 2013

The important thing about the event was that Visa’s officials did really try to convey a good example of innovation vs. marketing blitz or spending on IT, - telling the crowd that the “technology alone is meaningless for real innovation, and one have to meet desires and allay fears of a new behavior, it tries to form with a new product”.

Innovation is about the network properties of the ecosystem, comprising of the schemes, banks, customers and other interested parties enriching the “network connection”:

(1) Schemes need to push forward with finding new efficient and effective measure of connecting recipients and senders of money, (2) banks need to advise on the best ways of doing it, where (3) consumers need to understand the frictionless way of following the advised route, while believing, that other parties are acting in good faith and in the customer’s best interest.

The user experience component is still missing, as, based on statistics cards and account-originated transactions take only a marginal share of USD 750 billion of payments and USD 350 billion in money transfers.

To kickstart the thinking process about customer behavior, Visa invited IDEO’s Tatyana Mamut, who told a (yet another) convincing story on people’s fears and hopes vs. money and how these can be used for creation of great financial products.

@ideo at #visainnoday #visa teaching locals on the approach of design - immerse in real human problem solving pic.twitter.com/PONbqkonnq
— Daniel Gusev (@dngusev) June 26, 2013

Another breakthrough, not seen or heard before even globally, was the announcement of Visa’s launch of a venture fund, that would be managed by the Russian office and would source in FS startups trying to address Visa’s key objectives of driving adoption and card usage.

Fund between Visa and Russian Venture Company - to fund financial services payments startups #visainnoday #visa
— Daniel Gusev (@dngusev) June 26, 2013

While Visa tried to brandish its innovativeness with the promotion of contactless card business, it was hard to discern a real case for it in market still residing on basic heuristics and filled with lots of myths around cashless payments:

25 banks in Russia ready or already issue Visa PayWave (80 per cent by volume) #visainnoday #visa. Is it enough though to win?
— Daniel Gusev (@dngusev) June 26, 2013

The only opportunity to market the contactless rests with mobile (from a issuance standpoint) and contactless transit (acquiring), while the geography for this is limited to just several of Russian major cities and cannot be cited as a recipe for a nationwide “cash cure”.

The overall sentiment from the event was positive as it was the first and, hopefully, not the last attempt to try and push the thinking of other parties for the betterment of end customers.

[1] Prepaid is more than just payment - it's access - June 26th, 2013
[2] People trust to FS is critical to overall financial inclusion - July 15th, 2013

[3] Cards adoption does not (necessarily) mean financial inclusion - March 3rd, 2013
[4] A paradox about contactless in Russia - February 26th, 2011
[5] Financial startups in Russia "get Squared" - October 2nd, 2012

The coming era of private money domains: a giant opportunity

noreply@blogger.com (Anonymous) — Sun, 28 Jul 2013 20:39:00 +0000

Since the author of this blog tries to help out the local (and international) payments industry in any way he can (though an occasional advice, a job or even through a startup of his), he has recently got to assist a local Russian Payments Council for the institution of a National Payments Forum, a premier international platform for long term thinking about payments and how they constitute a wide change for consumption.

Helping out with the agenda and the themes, I've returned to the theoretical niceties you'd hear at a great "un-conference" on the topic of money, the BarcampBank London, that is been organized by Consult Hyperion in the UK each late January / early February for these past 3 years.

On each occasion I was there, my understanding about the world of money and payments changed significantly, moved by the gyrations of the leading provocative thinkers and practitioners of the field. The reason of telling a story that has aged (or, to say it more properly, half-aged as of mid 2013), is that the topic that I was delighted to contribute at one of the sessions, is coming to the fore of the media stream (at least the part I am subscribing).

And it is about the advent of private money. Lately I've seen the demo of Rachel Botsman talking about the trust and relationships becoming the new building blocs of consumption and commerce:

Then I stumbled on another good TED presentation by Paul Kemp-Robertson about the "branded currency" concept, coming closer to a notion of corporations issuing a de-facto private currencies that they hand over to the initiated - to avid fans and frequent customers (in a form of loyalty points and coupons):

Then there is a good "Branded currency revolution" post on HBR.org - heralding the condition brought by both consumption and technology states, where people would honor private IOUs just do with public bills.

The third wave will be the mobile portfolio manager, the automobile to the mobile wallet's horseless carriage, which marries the convertibility of the first wave with the convenience of the second. When you treat coupons, cards, and points as convertible instruments, fully leverage the power of digital and mobile technology, and add intelligence into the system, you get an entirely new possibility: calculating and comparing purchasing power, converting currencies, prioritizing usage, and dynamically creating scannable barcodes or other methods for combined payment.

That created a time-loop, making me remember the roundtable at the #BCBL13, where Dave Birch presided over a roundtable on the future(s) of money:

In the discussion, the author of these words quipped a personal revelation, based on his mediocre knowledge of history (as I did major in the discipline), contributing to the words that premiered the setting: the publicly minted IOUs have a direct connection with power - coinage was controlled to level taxes from vassals, as one of the reasons that China migrated to cash, was to control silver deposits that were used to buy armies and conquer lands. With the world in a state of today - interconnected and digitalized, the power of individual has grown substantially - and with it the private trust and private communities became possible.

The technological means to track specific interests and aspirations became possible and there is further practical confirmation that it is easier to engage in societal acts that were previously possible through rigorous rituals: friendship, fandom, even sex is more "achievable", not (necessarily) because of the fall of morals, but because the sense of trust is given through the mighty lens of technology.

With that, the advent of private currency (a trust token whose characteristics are universally acknowledged within a specific group) is perfectly possible and is already presented to the world. Money is data and FS should see themselves as consumer agents - and clearing houses for all those specialized tokens that the economic agent (consumer) is using - to the conformity of him and the issuer (i.e., merchant).

For example, in a customer's activity, he is issued with Nike Fuel points given his above average exercise regimen, and these can be then converted for a discount or a freebie at a Nike retailer - given the fact that his activity motivates others to exercise and benefit the said apparel company. Competition and gamification redefines the concept of currency - and turns it into a points system - tracking and improving ones progress and his track to a better life.

Given all that, I have several thoughts for the nearest future:
- Consumer banking is quickly becoming an interaction business / not a transaction based.
- Private currencies are the greatest element to influence positive choice (something that public currency can't do, and that gives digital points an edge over cash)

Banks and cities have a lot in common

noreply@blogger.com (Anonymous) — Wed, 17 Jul 2013 06:00:00 +0000

Since what we all share is history and the author of this blog had the chance of graduating from Department of History of the Moscow State University, he has kept the knack for rediscovering the depths of human society past so that to better understand the way it is today.

Society formed and progressed by linking its individual parts through commune mechanisms - language, trade, cities, so these elements were always been favorites of mine when rediscovering the ancient and not so ancient history.

One of the books I love about the history of cities - by P.D. Smith called "Cities: A Guidebook for the Urban Age" - creates an interesting narrative of banks and cities binding together, where the former could not be without the latter and even the opposite.

Cities came into existence as centers of excellence, a booming mechanism of trade and religion, the latter protecting the well being of those engaged in the commerce. For example, the city of Uhr that is believed to be the birthplace of writing, has most all the texts tables dedicated to... commercial relations.

Writing was the tool to record and manage storage, a custom not possible for nomads that were constantly on the go. Cities spawned broad commercial activities and gave way for banking and banks.

Therefore, the life of city and the life of a bank are intertwined. What it means for present banks, especially for retail ones?

- they should feel the way people of those cities behave: how they commute (as they pay for their fares), what they buy and how they spend their time.

- they should help the people city life to be more amenable, since the granaries helped ancient ones to borrow wheat and the like.

- they should try and manage for the end benefit of the population, continuing with the social role the ancient forms of banking carried on (whew those in charge of making the records in the granaries were often chieftains or religious leaders, carrying not for the profit of themselves, while they took the formal recognition of their powers, but for the well being of all of the community.