Business

PayPal launches in Russia while Russian e-currencies go global

Above: Old Soviet kopecks, used during the USSR era.

Image Credit: Sean Ludwig/VentureBeat

Yesterday PayPal became available to Russian users for domestic operations with the ruble as its 26th currency.

The international payment company started serving Russian users in 2006. So far, however, Russians could only use PayPal on foreign sites and via other currencies. Furthermore, they could not withdraw their money from PayPal account to Russian banks.

This past spring, the international payment operator received at last its license to work in Russia as a “non-banking credit organization” in accordance with a 2011 law on payment systems.

Thirteen major Russian online retailers have begun accepting the international currency, PayPal’s press service told East-West Digital News. These e-merchants include Anywayanyday.com and Tutu.ru (travel), Biglion.ru (daily deals), Emex.ru (car spare parts), Enter.ru (online-offline hybrid), Holodilnik.ru (household appliances), KupiVIP (fashion flash sales site), Lamoda.ru (footwear and apparel), Mywalit.ru (handbags and other accessories), and Svyaznoy.ru (mobile devices), as well as grocery retailer Utkonos.ru, elite interior design site Westwing.ru, and Russian e-commerce pioneer Ozon.ru – which also offers 16 other payment methods to its customers.

Some of these players are planning to launch loyalty programs with special discounts for PayPal users.

PayPal announced that its standard commission fee — which is paid for by the merchant — will amount to 2.9 percent to 3.9 percent plus 10 rubles ($0.3) per transaction. However, Russian Internet stores with a monthly turnover exceeding 300,000 rubles (approximately $9,100) may apply for lowered rates.

These rates are not far from those of e-currencies competing on the Russian market, which have tended to decrease over the past few years. PayPal’s arrival might stimulate further decreases, believes Oborot.ru, an online publication covering the Russian online retail market.

In addition to online purchases, PayPal may be used to transfer money to other users’ accounts and withdraw money from Russian bank accounts.

PayPal now has three million registered users from Russia, with just one million “actively” using the service, said Vladimir Malugin, PayPal’s regional director for Russia, at yesterday’s press conference. However, he added, “When PayPal arrives on a local market, the number of users grows quickly.”

A global giant vs. domestic behemoths

Industry experts and market players have mixed views on whether or not PayPal could change the game in the Russia’s e-commerce and e-payment markets. Many have underscored that the US giant will be competing with such well-established players as Qiwi, WebMoney, and Yandex.Money (in Russian: ‘Yandex Dengi’).

The last — a joint project by Yandex, the Russian search giant, and Sberbank, the national savings bank — has been operating for years on the market with a local user base exceeding 13 million. Its virtual currency is accepted by more than 20,000 Internet stores.

On the other hand, in addition to being accepted almost universally in the world, which is not the case for its Russian competitors, PayPal brings new interesting features to the Russian market.

“PayPal’s Buyer Protection Program will be extended to Russians and stores. This program allows users and stores to use PayPal to resolve mutual claims. If one party is not satisfied with the transaction, then PayPal will help to resolve the situation,” Malugin said last month in an exchange with Russian news agency RIA Novosti.

Vsevolod Strakh, general director of the online store Sotmarket underlined the importance of such a function:  “It is believed that the PayPal Buyer Protection Program adds credibility to an online store, and consumer confidence is still lacking in all Russian e-commerce.”

Russian electronic currencies go global 

While the volume of online purchases made by Russians on foreign sites – nearly $2 billion last year, according to EWDN’s report on Russian e-commerce – is growing dramatically, Russian virtual currencies have begun internationalizing their activity.

Just one day before PayPal’s Russia launch, Yandex.Money announced its first steps in dozens of foreign countries, including the USA, China, Germany, France, Spain, and the U.K. You can now wire funds from a Yandex.Money e-wallet to individual and corporate bank accounts in these countries.

Yandex.Money users can thus rent a car in New York, book a hotel in Madrid, or send money to a friend or a freelancer in London. Yandex.Money will retain a commission fee of three percent plus 15 rubles ($0.45) per transaction.

“We’re also developing partnerships with foreign e-commerce sites, such as Skupido.com, and Yandex.Money will soon work with Wholesale-dress.net, Hairextensionsale.ie, Shopdiaper.com, Soufeel.com, and others,” said Yandex.Money’s press secretary Nadezhda Kiyatkina in an exchange with EWDN.

Yandex’s internationalization is being aided by Skrill, a leading European payment operator with which it started cooperating earlier this year, as well as by partnerships with Mastercard and Visa.

Another major Russian virtual currency, WebMoney is even more internationalized, having organized online payments and transactions to foreign corporate bank accounts since 2003. It targets essentially small online businesses.

Russian cash-in kiosks from India to Peru

Last but not least, multichannel payment operator Qiwi is penetrating a variety of markets across the globe at a fast pace.

Initially focusing on cash-in kiosks — ubiquitous machines through which Russians are used to paying their mobile phone bills, utilities, and other services — the operator launched a virtual currency a few years ago.

In November 2012, Qiwi formed a strategic alliance with Visa to provide its users with a wider variety of international electronic payment options under the new brand of “Visa Qiwi Wallet.”

The Russian operator also cooperates with Mastercard and Maestro.

Qiwi, which raised $212 million in its NASDAQ IPO earlier this year, is now developing its kiosk business globally. “Now all of our kiosks are in Russia and Kazakhstan, but we also work under a franchising model in Argentina, Chile, China, Colombia, India, Panama, Peru, South Africa, and Ukraine,” Qiwi’s President Boris Kim said in an interview with EWDN.

“We’re considering expansion to other countries either by investing directly there or under franchising or licensing agreements with local operators,” he explained.

The Russian company is targeting new countries that have a high percentage of cash payments and pre-paid mobile accounts, among other criteria.

Qiwi’s operations in the USA are now “under test mode,” Kim said. “There will soon be a commercial launch for payments of mobile bills and other bills. This service is likely to become popular in Southern United States due to the high numbers of migrants living there.”

This story originally appeared on EWDN.

More information:

PayPal is the faster, safer way to pay and get paid online. The service allows members to send money without sharing financial information, with the flexibility to pay using their account balances, bank accounts, credit cards or promot... read more »

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