On 1 July Pridnestrovie's national payment system employing plastic bank cards will come into operation. At the end of May, Yevgeny Shevchuk signed the decree «On general conditions of organisation and functioning of the National Payment System in the Pridnestrovian Moldavian Republic», where he directed the Pridnestrovian Republican Bank to establish the NPS. The establishment of the national payment system has been under way for a number of years. The PRB started creating the nucleus of the system — its processing centre — in autumn 2013, and in December of that year the president submitted a draft law on the payment system to the Supreme Council.
Since then the draft law has been waiting for its second reading in the parliament, whereas hardware and software of the payment system has already been operating in the test mode. There is barely a month to go until the ultimate launch of the NPS.
300,000 cards by 2023
The national payment system aims at increasing the number of non-cash transactions, first of all, in the retail sector and providing additional comfort for both customers and shop assistants. According to the presidential decree, sales outlets will have to be equipped with payment terminals and since July enable their customers to pay the purchases using NPS bank cards. However, this will apply to those organisations only whose selling space exceeds 50 sq. metres or whose annual retail turnover exceeds 6.6 million roubles. The government moved the corresponding amendments to the Trade Regulations last year. This January the PRB brought to the notice of all authorised banks the requirements to the terminal equipment that sales outlets should be equipped with by the launch of the system.
The central bank, which is both NPS operator and owner, will be directly accountable for processing operations and payments within the system.
«Since 1 July our centre will be ready to process transactions made with NPS cards," said Sergey Russov, PRB deputy chairman, in an interview with Novosti Pridnestrovya.
According to him, at the first stage Eximbank will issue cards, following which Sberbank and other banks that have concluded the agreement with the PRB will also start issuing cards. Sergey Russov noted that all Pridnestrovian banks except Agroprombank had confirmed their desire to join the national payment system. Although Agroprombank is the owner and operator of the largest local payment system Raduga (Rainbow), accounting for over 70% of Pridnestrovie's bank card market, it intends to organise its own processing centre based on the same technology as is the national payment system.
The PRB has estimated that there may be 300,000 NPS cards issued by the end of 2024. The deputy chairman clarified that the target figure for the emission during this period was «more than a card per person».
As for the targets to increase the number of non-cash transactions, the regulator follows Belorussia's experience (Belcart payment system) as the both systems show similarity with each other.
«The share of non-cash payments has increased one and a half times. This is a good guide to follow," believes Sergey Russov.
Technologies and entry to Russia's market
Pridnestrovie's national payment system is based on the global standard for integrated circuit cards EMV (Europay + MasterCard + VISA) and payment application PRO100. The latter belongs to Russia's payment system Universal Electronic Card (UEC), which the PRB has joined as a direct participant.
«Thanks to the UEC, we have had an opportunity to make our card serviceable in the Russian Federation," said the head of the NPS department of the PRB, Aleksey Kochetov, to Novosti Pridnestrovya.
Aleksey Kochetov pointed out that Pridnestrovie's central bank as a UEC direct participant «have the right to connect indirect participants to the Russian system through its processing centre," in this case banks participating in Pridnestrovie's payment system.
So, any Pridnestrovie's NPS card holder can use it in Russia in the network of payment terminals and cash dispensers that support the PRO100 payment application. Pridnestrovie's national system, according to Aleksey Kochetov, features an integrated opportunity to pay any currency comprehensible for the issuing banks regardless of account currency.
The EMV standard allows NPS card to operate in online mode, which in turn makes it possible to effect payments directly from the client's account. Offline cards with wallets (e.g. Raduga), as opposed to online cards, require the client to transfer funds from the account to the wallet, which is inconvenient.
«From the client's point of view, the online card is more convenient. This is the key to your account: you do not need to be concerned about how much you are going to spend at the moment and how much money it is necessary to download," said the head of the department.
The PRB has chosen Russia's BPC Group as a vendor of software for the NPS processing centre. According to Aleksey Kochetov, the company has a lot of projects successfully implemented in the banks, including central banks, both in the CIS states and across the world.
NPS development is in the hands of banks
The number of issued NPS cards will depend on the card products that issuing banks want to offer and whether these products will be in demand in everyday life and meet citizens' needs, believes Andrey Galitskiy, Eximbank development director.
«It is not a secret that citizens in the neighbouring countries may own several cards, and these cards may belong to different banks," said the senior manager, adding, «If Pridnestrovie's population is half a million people, one million cards can be issued within the next few years if required.»
The distribution of cards among the banks, according to Galitskiy, is a matter of competition. «Eximbank, however, expects to obtain 30−40% of the bank card market.
The primary support for the national payment system will be payroll card projects (some conditions for that are stipulated in the president's decree). However, there cannot be a single card product covering all target segments, believes Andrey Galitskiy.
The chief of the Eximbank E-Commerce Department, Vladimir Kondratyev, developed this idea and stated the bank's intentions «to form a most interesting product for each target group.» «It will not be a universal card for all. Each target audience will have its own card with its advantages over the other," he noted.
Apart from card products, the development of the NPS will depend on the expansion of merchant acquiring network: increase in the number of sales outlet accepting NPS cards.
«The main focus should be on the network of POS-terminals installed at sales outlets. This is going to be the primary market where NPS participants will compete," added Vladimir Kondratyev.
According to him, banks are not expected to build «a large-scale network of cash dispensers» as cash withdrawal is just a service function within the NPS.
Who is to install POS-terminals?
Despite the fact that trading organisations are obliged to install POS-terminals, international best practices show that it is the acquirer bank that buys and installs terminal equipment.
«Besides, the cost of terminals is negligible for any business entity<…>. Provided that a large quantity of cards is issued, it will be profitable for traders to ask the bank to install its terminal acquiring plastic cards as payment. If the client has a card but has no cash, and the shop has no terminal installed, the client will go to the shop equipped with the terminal. And the numbers of such clients will grow in the course of time.
The approximate size of POS-terminal network in Pridnestrovie, according to Sergey Russov's estimates, is 3,000 devices.
On tariffs in brief
Before the ultimate launch of the national payment system, the central bank will have to work out and approve NPS regulations, including the regulator's operation tariff policy for banks participating in the payment system (tariffs on processing, clearing, etc.).
According to Aleksey Kochetov, «the main task is to make the system really operational and accessible, minimising commission charges.» Sergey Russov also expressed the idea of minimising the PRB charges for domestic operations. «We charge the banks a minimum tariff, and hope that they will charge their clients minimum prices," clarified Sergey Russov.
Eximbank believes that a competitive market will regulate tariffs that NPS banks will charge for merchant acquiring.
«Anyway, every bank incurs considerable expanses for the creation and maintenance of the network. If the tariffs are very low, sooner or later we will face that banks will lose interest in the market, which first of all will affect the quality of services rendered to the client. The price competition is on the back burner here," thinks Vladimir Kondratyev.
Clients will not be charged for making payments with cards. Commission charges are possible only in certain cases, such as cash withdrawal.
Spur to e-commerce
As soon as the card becomes a payment facility, it is ready to use in everyday life.
«Once you have non-cash money and a bank account, you have an immediate access to all its payment services, which are going to further develop as the number of users is growing," argues Andrey Galitskiy.
According to him, the expansion of non-cash funds will spur the development of e-commerce, and market participants will be interested in increasing the number of internet services for paying their goods and services.
«Without any intermediary stages, the card and payment system will enhance the level of convenience. This is a great advantage of the NPS," concluded Andrey Galitskiy.
Long-term prospects
In Russia the use of the PRO100 system is not limited to the payment system only. The next technological stage is the establishment of the Unitary Payment Service System (UPSS). Now the bank card is not only a payment facility, but also an identification tool, that is, an all-purpose device which may be used, among other things, for enjoying public services.
However, The UPSS remains a long-range outlook for Pridnestrovie: the central bank cooperates with the UECARD in terms of the payment application only. Besides, the Russian law prevents the use of the identification software product outside the Russian Federation.
«We consider such prospect (establishment of UPSS, ed.) as a social project, but our primary task is to launch the payment project," concluded Aleksey Kochetov.
Egor Klenovskiy
