From bank cards to e-wallets: How new legislation is changing the Russian e-payment scene

Originally posted by Elena Orlova, General Manager at Sun Consulting

Since 2013, the Russian legislation on electronic payments has undergone several changes, in parallel with the development of a national payment platform. This article on Russian e-payments reviews the most significant developments as far as international players are concerned.

E-wallets and prepaid cards

In 2011, the law on payment systems changed Russia’s e-payments scene dramatically, with all e-wallet issuers and payment aggregators becoming subject to the central bank regulation. Several additional specifications or rules were further introduced. Among the most recent ones were those concerning the identification of e-wallet and prepaid card users.

From the very beginning, the rules for user identification contained only two possible options:

  • Full user identification, requiring users to personally visit a physical office of the e-wallet issuer, present their ID card and sign the corresponding papers. Such users may use e-wallets without restrictions. (A bank card has always been treated as a fully identifiable token for its holder)
  • Non-identified users may make transactions of up to 15,000 rubles (approximately $240 at the current exchange rate) with a total monthly transaction cap at 40.000 rubles (approximately $650)
  • Such limitations led to significant restrictions for users making online purchases over the 15,000 ruble threshold – for example, flight tickets, electronic devices, etc. For many such consumers, bank cards or online bank transfers were the only available payment instruments. The situation needed to be changed.

In May 2014, new rules introduced a “simplified identification” procedure. This procedure required users to provide their mobile phone number, passport number and a secondary identification number (tax payer or insurance numbers). Under this procedure, there is no limit for one transaction, but the total monthly payment amount must not exceed 200,000 rubles ($3,250), while the e-wallet’s daily closing balance should not be higher than 60,000 rubles ($1,000). This simplified identification procedure applies to cross-border transactions.

epayment ewdn

Personal data

According to new legislation, which came into force on 1 September 2015, only databases located in Russia may be used to store Russian citizens’ personal data (See white paper by EWDN and EY). Thus, e-merchants and PSPs have been required to transfer the data to Russia in case of foreign data centers which were used before the new regulation.

Meanwhile, some companies have kept storing data abroad by making it “impersonal,” i.e. excluding names and other identifying information. A few companies have not taken any measures to comply with the law, hoping to remain unnoticed – or considering leaving the Russian market due to the legal complexities or market conditions.

The National System of Payment Cards

Additional amendments to the payment legislation were passed in May 2014. They opened the way to the development of a National System of Payment Cards (NSPC), operated by a central bank company called ‘NSPC.’
The development of the NSPC platform has been scheduled in three stages.

  • Stage 1 (completed in March 2015)

– An independent platform to operate local payments and clearing operations was launched.
– MasterCard, Visa and other international operators adhered to the NSPC, settling security deposits in accordance with the law. Their cards will continue to be issued and accepted in Russia with the processing traffic transferred to the NSPC platform.

  • Stage 2 (April-December 2015) 

– The NSPC published its tariff policy. The fee structure is rather complicated, with some emphasis on premium cards. However, banks will not be charged for operational and clearing services until 31 March, 2016.
– Called “MIR” (“peace” in Russian), the national payment cards are expected to be issued by the end of 2015, complementing the cards already in use in Russia. MIR cards will integrate a new standard for secured ecommerce transactions.
– Pilot banks such as Moscow Credit Bank, VTB24, Russian Bank for Regional Development will be issuing the cards in October 2015.
– Initially, newly issued MIR cards will be accepted in Russia only. However, co-badging agreements with international operators will allow Russian cardholders to use MIR cards abroad, as well.

  • Stage 3: 2016 – 2018 

New NSPC cards are scheduled for launch in Russia somewhere between 2016 and 2018, providing cardholders with wide card acceptance and various services, such as premium cards and related benefits.

– The Russian cards and payment instruments will be promoted internationally.
– Co-badged cards will be issued with international operators, allowing cardholders to use the cards both in Russia and internationally. NSPC has already signed agreements with American Express, JCB and MasterCard. Visa has not signed such an agreement yet.

According to NSPC statements, the MIR cards will be developed in “fair competition” with other card systems, in spite of some privileges provided by the law.

Expected consequences for foreign players and cardholders

  • As in the past, in order to provide processing services for transactions made in rubles, international PSPs should be integrated to Russian acquiring banks. In this scenario, they will be able to accept MIR cards. In addition, international PSPs should comply with the new requirements on personal data storage and processing – which cannot be enacted without technical and business consequences for them.
  • International e-merchants should not be affected, since co-badged cards will be used in the same way as the currently existing Visa or MasterCard cards.
  • Foreign cardholders should not be affected, since their Visa or MasterCard cards will be accepted in Russia as it was in the past.

This article is published jointly by East-West Digital News and The Paypers, an online publication covering the international payment industry.