PayPal Enters Russian Market

• After effective, and long awaited, development of the Russian e-commerce, PayPal decided to enter this market. The law on National Payment System has been under study by the State Duma for a year and PayPal’s offices in Russia will open one year after its promulgation.
• This caution can be explained by the example of previous American ISP Compuserve, which had to close in Russian offices in 1998 after having noted too many fraudulent connections. PayPal is even discussing with local ISPs and mobile operators. Besides, it also intends to cover all the CIS area in the future.
• In 2009, two main online payment players, Yandex.Dengi and WebMoney, monitored over 90% of the Russian market. WebMoney, created and managed since 1998 in Belize (Central America), also operates in several countries and claims it has 11 million customers.

• Every 18 months since 2008, the number of Russian citizens connected to the Internet doubles. This figure should reach 50 million end 2011, to compare with a total population over 143 million people and slightly less than 120 million adults. High-speed connections are 3% faster every month and are now accessed by about 30% of the population.
• In spite of this promising context, e-commerce has to face low payment cards figures. Only few card issued abroad are accepted on Russian websites. Both major local e-PSPs WebMoney and Yandex.Dengi only accept credit transfers to top-up client online account balances. Real-time payments are only possible through surcharged SMSs. Their fees can reach 40% of the purchase amount.
• The law on the National Payment System initiated beginning 2010 was being read for the third time in the State Duma this winter. It sets the legal bases on digital signature, in particular for legal entities, and on a multi-application electronic card to be used for both payments and administrative procedures.

See November 2010 Watch