Despite its size and population, Russia has been
reticent when it comes to card payments, with card numbers and
volumes far away from reaching critical mass. But payment players
in the country are optimistic about future prospects, despite the
country’s recent economic upheaval. Victoria Conroy

A population of around 141 million is a number big enough to get
most card issuing strategy managers cheering at the thought of
tapping into a country with such a vast base of potential plastic

However, if that country is Russia, chances
are that groans of frustration will be emitted instead of whoops of
joy, if only because of logistical hurdles that need to be overcome
before Russia can consider itself a fully developed card

There are still certainly pools of
profitability to be found, thanks to Russia’s huge wealth of
natural energy and mineral resources, helping the country’s GDP
grow for eight consecutive years to stand at 7.6 percent in 2007
and six percent in 2008, fuelling household disposable income. But
Russia’s economy has plunged in recent months and more recently,
upheaval in the country’s banking sector has cast doubt over the
long-term survival of the largest bank players.

Card usage trends

Despite having one of the largest
populations in the world, Russia remains a vastly underpenetrated
card market, with just 0.8 cards per inhabitant, compared to an
average of three per person in the rest of the world.

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Figures from the Bank of Russia show that as
of the end of 2008, there were 119 million bank payment cards in
issue to individuals, compared to 103 million in 2007 and 54
million in 2005. The total value of bank card transactions in 2008
amounted to RUB8.87 trillion ($264.7 billion) of which RUB8.07
trillion was cash withdrawals and RUB802 billion in payments for
goods and services.

Maarten van den Belt, general director of Visa
Russia, told CI: “In the last few years, we have seen
growth in the number of cards and it looks very impressive, but
there is still a relatively low number of cards compared to what we
would see in other developed markets. Having lots of cards
outstanding is not a panacea for a functioning payment card

Although Russian banks have been successful in
rolling out debit cards as part of salary and payroll migrations
(between 90 percent and 95 percent of cards issued in Russia are
payroll or salary cards, a form of debit card through which the
salary is directly paid into the cardholder’s account), Russia
remains a cash-heavy society, and cash withdrawals account for
around 91 percent of all card transactions.

“A specific characteristic of the Russian
market is that if you receive your salary as an employee of a
Russian company, that company will make the choice of which bank to
deposit employee salaries,” van den Belt explained.

“In Russia employees receive their salary
twice a month, so employees go twice a month to the ATM at salary
payment day and withdraw cash and keep that cash at home or deposit
it into their own bank.”

Inactive cards a stumbling

One of the big stumbling blocks for
card players in the country is the amount of cards issued but never
activated by customers.

It is estimated that more than half
of all issued cards in Russia remain inactive (classed as cards
which haven’t been used for any operation for three months), but
cards belonging to the domestic bank ATM card schemes have a far
higher proportion of active cards compared to
internationally-branded cards (see table below).

One of the reasons for the higher percentage
of active domestic cards compared to internationally-branded cards
is differences in distribution methods – according to domestic card
scheme Zolotaya Corona, internationally-branded cards are mostly
distributed by post and only around 20-25 percent of those cards
are ever used and activated. And although internationally-branded
cards have seen issuance volumes jump over the past few years,
spending volume has not risen proportionally.

Of those cards that are initially activated
then fall into dormancy, MasterCard attributes this to those cards
being used for infrequent large-value purchases with the cardholder
not using the card while making repayments on that purchase.
According to MasterCard, the majority of credit cardholders conform
to this pattern, suggesting that banks and the payment networks
themselves need to do a much better job in educating customers
about the features and benefits of credit cards and how to use them
for regular spending.

Kamal Boushi, executive director of Russian
Standard Bank, told CI: “Card activation is always a
function of product development, and various banks will have
various strategies to maximise card spend.

“As a bank we have been very active in
developing spend stimulation campaigns for our cardmembers, and we
have seen significant shift from cash usage to purchases,
indicating that our offering to our customers is in line with their

A CI analysis of cash withdrawal and
POS spending volumes (see above) indicates that Russian
banks are beginning to get the message through to their customers
that their cards can be used at the POS as well, thanks to
intensified efforts by banks to run promotions and offer perks to
cardholders that are only available once the cardholder activates
the card, such as prize promotions or bonus air mile or loyalty

“Because of the current situation, lots of
banks are now realising that they have a fantastic opportunity
within their own portfolio to grow their business, and they
suddenly want to activate those salary cards,” van den Belt

“There has been a lot of focus in this market
on issuing cards but not always enough effort on the part of banks
and merchants in getting these cards accepted. A lot of people
still do not realise that it’s not only a card they can use at the
ATM, but also a card which they can use at the POS.”


Active cards as of July




Zolotaya Corona


Number of cards issued (m)





Number of active cards (m)





% of active cards to total issued





Source: CI, Bank of Russia

Credit cards make gradual

Despite double-digit card growth
rates year-on-year from the period 2004 to 2007, suggesting an
accelerating trend of migration away from cash and paper-based
payments, 2008 saw the rate of card issuance drop to just 15.2
percent by December 2008, compared to 38.6 percent in 2007.

Previous high growth rates came in tandem with
mass-scale salary programme migrations onto debit cards, most of
which have now been completed, and future growth is expected to
come mainly from credit card issuance, given that only 10 percent
of all cards in Russia are credit cards.

Credit cards have been slow to make an impact
in Russia, as consumer credit instalment loans have been in
existence for several years, but consumers appear to be migrating
to credit card facilities in greater numbers. However, payment
players in the country are expecting growth rates to dip over the
coming year, in large part due to the economic crisis.

“When Russian banks were making their
multi-year planning for their retail businesses, they were counting
on mortgage lending and that opportunity to a large extent has
dried up, because of the economic situation,” van den Belt

“Banks have been counting on getting further
into personal lending such as consumer credit, such as car loans,
but that has also dropped dramatically. The credit card business
has dropped for the same reasons – it has not disappeared but has
fallen to a large extent.

“Initially credit card issuance was held back
by cultural factors. Russian banks are inherently very conservative
and they are very conservative when dealing with people they do not
know,” van den Belt told CI.

“Established banks are very gradually starting
to move into the market. In the meantime we’ve seen other banks,
especially monolines, moving into that market very quickly because
they saw the market opportunity. For a monoline, there are
advantages and disadvantages. In a market where funding is very
tight, their activities are being curtailed because of lack of
access to funding, domestically as well as internationally.

“We see that monolines will still do a bit of
credit card extension, but in a very limited amount and far off the
scale they originally planned.

“The established players will continue to move
into the credit card market but still very slowly, slower than
initially anticipated. The third factor around credit bureaus is
that there is no centralised credit bureau but several bureaus in
the market.

“Because of peculiar reporting requirements
it’s not developing as it would be in Western markets, but it’s
only a question of time before that will work properly,” van den
Belt explained.

One knock-on effect of the recent economic
crisis is that several Russian lenders are reporting a contraction
in the growth rate of credit card debt. However, banks themselves
are suffering from a distinct lack of trust and this has seeped
into payment card usage. Figures from the Bank of Russia for the
fourth quarter of 2008 revealed that cardholders were starting to
use their cards less frequently to pay for goods and services, with
payment volume dropping almost 4 percent compared to the third
quarter of 2008 to RUB214.8 billion.

However, cash withdrawal levels are continuing
on their upward trajectory, with the volume of cash withdrawals
rising by 11 percent in the fourth quarter of 2008, fed by people’s
fears over the survival of banks which led them to withdrawing cash
more frequently and in greater amounts than seen previously.

Card payment network

Around 80 percent of all cards
issued as of July 2008 were Visa or MasterCard-branded, with the
remainder belonging to the proprietary Russian bank card schemes,
such as United Russian Payment System (URPS), formerly known as
Sberkart, NCC and Zolotaya Corona, which have positioned themselves
as direct competitors to Visa and MasterCard. In recent years, the
domestic schemes have intensified their efforts to hold back the
advances made by the international schemes.

Zolotaya Corona in particular is making
efforts to expand its technology into other areas such as driver’s
licences. The Driver’s Card project, based on Zolotaya Corona’s
payment system, is being extended to 20 Russian cities, with cards
issued by several banks. ZC is also working on integrating its
systems with those of the Money Transfer System and the
International Money Transfer System.

In its 2008 results, ZC stated that the total
number of ZC bank cards in issue amounted to 5.54 million as of
December 2008, with bank card turnover increasing by 31 percent
compared to 2007 and the total number of transactions rising by 16

Given Russia’s vast geographical size (the
country spans eleven time zones), implementing a country-wide ATM
and POS network infrastructure was always going to be something of
a challenge, especially in a country not known for the reliability
of its power and telecom supplies. But in recent years, payment
players in the country have accelerated the rate of implementation
and made efforts to expand into the more rural areas of the

There were roughly 275,000 ATMs across the
country as of mid-2008, compared to 181,000 in 2006, and ATM
numbers are growing at a rate of 35-40 percent per year, although
60 percent of all ATMs are concentrated within 8 regions of the
Russian Federation, including 45 percent in Moscow and the Greater
Moscow region.

According to Visa’s van den Belt, it is
acceptance expansion that is one of the biggest opportunities for
payment players in Russia and not just for cards but for all forms
of electronic payment.

“People will start to use more cards but very
quickly we will also see a trend of people using their mobile
phones for making electronic payments,” he said.

“That is going to be a very quick development
in this market, probably quicker than in established markets like
Western Europe because Russia doesn’t have a legacy of cheque
payments as they simply didn’t exist as a way of personal payment.
The major driving factor of our success here will be is the success
of our bank clients and increasingly the merchants.

“What needs to be done to make electronic card
payments more popular is going to be acceptance development. Can we
do that on our own? The answer is clearly no. We need to work
together with our partners.”

Issuer profiles

Russia: Credit card receivables market shareRussian Standard

Russian Standard Bank (RSB) is one of the largest consumer lenders
in Russia with more than 23 million customers, a 30 percent market
share in POS lending and 44 percent of credit cards in issue,
according to figures provided to CI by RSB. RSB had issued
around 21 million cards by the end of 2008 and had 90,000 merchant
acceptance locations.

RSB is the exclusive issuer of American
Express (Amex) credit cards in Russia, having signed a partnership
agreement with Amex back in 2005. The partnership was expanded in
2007 to enable RSB to sign up new merchants to accept Amex-branded
cards, manage merchant relationships and process transactions on
the Amex network.

In January, RSB announced the launch of the
British Airways American Express card which is aimed at rewarding
frequent travellers with BA Miles that can be redeemed for reward
flights. The launch marked the first time BA partnered with a
Russian bank. BA Miles can be accumulated from everyday purchases
made with the card and once the card is activated, 5000 bonus BA
Miles are added to the account.

RSB is also developing loyalty programmes
aimed at rewarding existing customers for active and regular use of
RSB products. In July 2008 RSB launched a Membership Rewards
programme developed by Amex, which offers competitions and
promotions to cardholders who activate and use their cards on a
regular basis.

Home Credit and Finance

Home Credit and Finance Bank (HCFB)
reported full-year 2008 net profit of RUB1.9 billion, a jump of 85
percent compared to 2007, with its gross loan book rising by 15.9
percent to RUB82 billion. Net interest income rose by 48.8 percent
to RUB19.3 billion.

HCFB has a 27 percent market share in POS
lending and 10.5 percent market share in credit cards with over 9
million cards in issue. In 2008 it also launched debit cards on its
new IT platform and began the roll-out of its ATM network.

Its financial results for 2008 showed that its
POS loan portfolio fell by 7 percent from 2007 to RUB33.2 billion,
but its credit card portfolio rose by 10 percent to RUB23.6
billion. In terms of its overall loan portfolio, HCFB claims 40
percent market share in POS loans and 29 percent in credit cards.
The bank’s total assets as of the end of 2008 amounted to RUB113.4
billion, a rise of 39.4 percent compared to 2007. HCFB’s products
are distributed throughout 30,000 POS locations across 1,200 cities
in Russia.

ZAO Citibank

In 2007, ZAO Citibank launched the
first cashback credit card in Russia along with a co-branded credit
card with Kuda, a major travel agency in Russia. It also began
online utility bill payments for its consumer customers as well as
establishing a cash deposit function at its ATMs in Russia.

As of the end of 2007, Citi had over 500,000
consumer clients and had issued over 400,000 credit cards. Its ATM
network numbered 300 as of the end of 2007.

Citi credit cards come with a standard credit
limit of RUB160,000 and up to RUB600,000 for gold card products,
along with a grace period of up to 50 days, a monthly instalment
programme enabling cardholders to repay over a period of up to 36
months, and discounts in a range of shops and restaurants.

Its loyalty programmes, including the Miles
& More frequent flyer programme, offer cardholders the ability
to earn bonus points on a range of purchases, with extra bonus
miles or points awarded to cardholders upon initial activation and
usage of the card. Its co-branded credit card range includes
offerings in conjunction with retailers, telecom providers and
major airlines. It also offers the Ultima credit card for selected
VIP customers.

In October 2008 Citi launched the Citi Express
MasterCard-branded contactless credit card, a combined transit and
payment card which can be used on Moscow’s underground rail system.
Citi and its partners are planning to expand the functionality of
the card to be used on all forms of public transportation in


As of January 2009, Sberbank’s total
number of cards in issue amounted to 30.4 million, a 30.5 percent
growth from the year-ago period. Figures provided by Sberbank to
CI show that MasterCard and Maestro cards numbered 15.8
million and Visa and Visa Electron cards numbered 11.4 million,
with Sberbank’s proprietary debit and ATM cards totalling 3.2

Sberbank told CI that the vast
majority of its cards are debit cards, and that credit cards are
not a mass product at the moment. However, the bank has recently
finished a pilot project and has started to issue credit cards for
existing clients with a decent credit history.


VTB24 told CI that as of
March 2009, it had 286,186 credit cards in issue, and 5.04 million
debit cards in issue. Total receivables for all VTB24 credit cards
stood at RUB14.9 billion as of March 2009.

Payment card statistics
  2003 2004 2005 2006 2007 2008
Number of payment cards issued (m) 23.9 35 54.5 74.5 103.3 119
Value of cash withdrawals (RUBtrn) 1.07 1.76 2.62 3.97 5.77 8.07
Value of card payments at POS (RUBbn) 75.7 111.7 174 277 463.3 802

Source: CI, Bank of

Payment card statistics
  2003-2004 2004-2005 2005-2006 2006-2007 2007-2008
y-o-y chg (%) y-o-y chg (%) y-o-y chg (%) % chg y-o-y y-o-y chg (%)
Number of payment cards issued (m) 46.44 55.71 36.7 38.66 15.2
Value of cash withdrawals (RUBtrn) 64.49 48.86 51.53 45.34 39.86
Value of card payments at POS (RUBbn) 47.56 55.77 59.2 67.26 73.11

Source: CI, Bank of