How do Russians dig into digital payments?

Russia has often been described as a “cash land”, a country with a cash-based economy and in which the vast majority of retail payments are made in cash. In this context, what is the current state of online payments and in what way does the country`s ecommerce and online payments market distinguish itself from the rest of Europe/the world?

Russia is often seen as a country where cash is the king, which definitely has something to do with the real state of things. On the other hand, online payments are quickly gaining popularity among Russians. According to the latest TNS stats on the country, 92% of Russian internet users pay online for their purchases at least once in a year. Russians choose various online payment methods whereas the majority opts for paying by bankcards, online banking and e-wallets. By the way, 62% of those paying online choose to pay with e-wallets at least once a year.

What is going on with the ecommerce industry in Russia?

Cross-border trade requires people to prepay, online payment is the only option in this case. There has been a significant rise in cross-border trade in Russia for the last couple of years. According to the latest figures revealed by the Russian Association of Internet Trade Companies, in 2016 cross-border ecommerce market rose by 37% (cross-border equals one third of the overall online retail in Russia, which is USD 5.2 billion). While on average every Russian makes 8-9 online purchases in a year, half of these orders is made abroad. Last year 233 million orders were imported to Russia, 90% of which were made in Chinese stores, 4% - in Europe, 2% in the USA. When we look at the amount of money spent in these stores, the figures are slightly different: 52% of the money was spent in Chinese stores, 23% in European and 12% in the US. This proves that Chinese stores have the lowest prices, which makes them very attractive for Russians.

Any other reasons why Chinese stores are so popular in the country?

It is extremely difficult for Russian stores to compete with Chinese merchants, that are offering a wide variety of products with the lowest prices. Interestingly, Chinese stores formed a new pattern of shopping among Russians – spontaneous shopping, where the decision is based on emotional judgement. Images and reviews define the decision to purchase something since the price is very low and Chinese products are affordable for everyone. People started to shop for cheap small things not because they need them but because they just like them. This is a completely new niche of consumer entertainment, which is very appreciated by people in the regions, where the choice is limited and people can’t afford expensive things. Chinese stores are invincible in this context.

Could you indicate some of the challenges to ecommerce development in your country?

I guess one of the major challenges to e-com development in Russia is the lack of consumer trust to merchants. People are afraid to prepay because they are not sure they will receive their purchase on time or whether the quality will be high. Besides, the return procedure is long and complicated. In Russia, the return rate is very low since the whole procedure requires a lot of effort from the consumer side.

In order to find a solution to the problem the industry has either to improve the work of the post or to find a way to regulate the process of returning goods.

What factors influence consumer adoption and the use of payment options for online shopping in Russia?

There are a couple of such factors. First, growing sales of services and intangible goods (entertainment, online gaming, online videos, etc.) can drive online payments since there are no issues of delivery and returns – it is actually impossible to buy them paying by cash on-delivery. Second, state initiatives can do good work and here in Russia we have a great example of digitalization of services initiated by the state (traffic fines, utility, etc.). Last but not least, cross-border trade can drive the industry quite fast.

What are some of the general trends in the Russian mobile payments ecosystem?

Large banks and payment services started actively involving mobile gadgets in various payment scenarios. Users receive a simple text-message from a bank or PSP on a mobile device and they just have to answer ‘yes’ by text in order to fulfill the payment. Smartphones with special financial apps are not even needed, everything can be done with a simple mobile phone.

Another important trend is the development of mobile ecosystem as a result of key market players initiatives. Leading Russian banks accelerate the migration of their merchant acquiring networks to 100% support of contactless transactions. At present, half of POS-terminals are already equipped with NFC-readers. This process is thought to be completed by 2020, which can significantly strengthen the positions of contactless payments. PayPass enables consumers to tap their PayPass card or device (smartphone, watch) on PayPass enabled terminals, allowing for a quicker and more convenient payment experience.

With all that in mind, we can hope for a bright future of the offline and online retail industry in Russia. There might be a real breakthrough in 2-3 years with the market going through dramatic changes, but eventually becoming mature, Omni channel, and truly personalized. As a result, e-wallets will find a new place in the ecosystem, becoming much more than just an ecommerce payment tool – but a smart, flexible and handy essential.

About Maria Gracheva

Maria has spent around 20 years in the IT sphere, 9 of which have been with Yandex.Money. First, she worked as director of marketing, then director of development of Yandex.Money’s services. In March of 2014, Maria was offered the chance to head up Yandex.Money. In 2011, the service was recognized as the most popular of its kind among Russians and has held that status ever since, according to data by TNS. Also, Maria was an important speaker at the European Payment Summit.

About Yandex.Money

Yandex.Money is the largest electronic payments service in Russia, according to a 2016 survey by TNS. The service is the joint venture of the search engine Yandex, and Sberbank. The service hosts about 30 million user accounts with about 15,000 new accounts opened daily. Yandex.Money also offers online merchants Yandex.Checkout. The service allows merchants to accept all the online payment methods most popular among Russians: credit cards, e-wallets, mobile billing through the top Russian providers, and cash via over 250,000 cash-acceptance points all over the country and CIS. Currently, more than 76,000 online stores across the globe use Yandex.Checkout. The service received the Emerging Payment Award at the Merchant Payments Ecosystem conference (Berlin) in 2017.