17 June 2019
Russia Trials Low-Cost QR Code-Based Payment Processing System
Proposed national system set to drastically undercut credit-card payment processing charges.
Trials of a new QR payment system are to begin in Russia at the end of August. Announcing this pilot phase of the initiative, the Central Bank of Russia (CBR) indicated that, assuming the trial is a success, the scheme would ultimately be rolled out on a nationwide basis.
The move has been seen as a further enhancement to the country's National Fast Payment and Clearance System, an initiative designed to ringfence Russia's financial system and reduce its reliance on the big US-based payment processing platforms, most notably Visa and MasterCard. With the concern being that the US-led sanctions may be extended to blocking such payments, Russia has scrambled in recent years to insulate itself from any such move. In line with this, last year it introduced its proprietary take on the SWIFT international money transfer system, which would allow Russian funds to remain globally distributable even if Washington insists the country is denied access to the widely used channel.
Among the keenest participants in the QR code trials are several of Russia's largest banks, including Alfa Bank, Reiffeisen Bank, RosBank and SovKomBank. Within this group, the consensus is that introducing and processing static QR codes – one of the two options to be available – is relatively straightforward. Such vendor codes would be available in a printed format and a purchaser would just have to scan it using their smartphone and their bank's designated app and then key in the payment details before the funds were transferred.
It was also thought that the second option, the dynamic QR code, might be more of a challenge to implement given that each code will need to be generated on a bespoke basis in order for the exact amount of the transaction to be incorporated. In such instances, it is believed that the paper option will be dispensed with, with customers needing to directly scan the cashier's screen in order to initiate any payment.
Initially, trials of both options will focus on the B2C segment, where they are expected to be widely adopted by high street retailers, as well as bars, restaurants, cafes and fast-food establishments. At a later stage, the pilot programme will be extended to include B2B payments. At present, there are no plans to make it mandatory for businesses to offer both QR payment options but it is expected that, given its greater flexibility, the dynamic model is the one most likely to prevail.
Overall, the comparatively low processing cost is seen as the aspect of the system that will most appeal to vendors and ensure they offer either one or both of the available options. Accordingly, it is thought that the CBR will set the QR code clearing and processing charge at somewhere between 0.4% and 0.5% of the total value of the transaction, which is about a third of the comparative fee levied by credit-card payment processors. For their part, the banks facilitating the transaction will receive a share of the CBR's commission, which is estimated to equate to between 0.1% and 0.125% of the total transaction value.
Although most retailers will not be obliged to drastically overhaul their checkout tills in order to offer this new payment option, it is expected that many will accelerate and broaden their planned upgrade schedule to ensure they fully benefit from the associated low processing costs. The participating banks, too, will have to invest in new kit in order to handle the huge volume of transactions anticipated.
With Russia's more retail-oriented banks seen as certain to be early enablers of the payment system, it is thought that VTB, Alfa Bank, Tinkoff Bank, GazPromBank, PromSvyazBank, Raiffaisen Bank, RosBank and SovKomBank will be among the first to invest in the required technology. While SBERBANK, Russia's largest lender, is not participating in the pilot scheme, it is believed that customer demand will ultimately oblige it to get on board.
For Hong Kong businesses, the opportunities on offer from this new payment option are two-fold. For those in the electronics sector, it should be clear that there will be explosive growth in demand for terminals from Russia's banks and retailers, demand that Hong Kong manufacturers could certainly play a part in meeting.
Of possibly wider benefit, though, is the savings in processing costs to be made from switching from a credit card-based payment model to one that forefronts the QR option. Such a change would clearly benefit any Hong Kong-based business engaged in cross-border trade with Russia or a number of the other former Soviet bloc nations.
Leonid Orlov, Moscow Consultant