Qiwi Plc, which runs a Russian Web-payment service similar to PayPal, could benefit if the country moves to create a national card-payment system as a local alternative to Visa Inc. and MasterCard Inc., its chairman said.
Russia is planning the system after sanctions imposed by the U.S. and European Union against the country for annexing Crimea prompted Visa and MasterCard to stop processing payments at four Russian banks this year. Such a system could work with Qiwi’s service, like Visa does now, Chairman Boris Kim said.
“If a national payment-card system is created, this would be an additional opportunity for Qiwi rather than a problem,” Kim said in an interview in Moscow last week. “The national payment system’s card will be just another additional instrument in our wallet.”
Qiwi shares have lost 21 percent in New York this year as President Vladimir Putin’s government reacted to the U.S. and EU sanctions by tightening regulation for companies including Qiwi’s partner Visa. Russia passed a law in May enabling its own national payment system and imposing rules for foreign companies that include fining them for denying services.
Visa and MasterCard said on May 23 that they’ll keep working in Russia after the government agreed to consider easing demands made on them. Qiwi has worked with Visa since 2012 so its payment service would be accepted globally in online stores -- and even brick-and-mortar shops -- that accept Visa.
Elmira Basharova, a spokeswoman for Visa in Moscow, didn’t immediately return a call seeking comment. Elena Prorokova, a spokeswoman for MasterCard, declined to comment on the national payment system’s potential effect on the company.
Russia has also this year introduced laws that seek to crack down on anonymous electronic payments and paved the way to tax e-commerce shipments exceeding about $200 from abroad -- both moves potentially affecting users of Qiwi payment services. Qiwi’s online service allows users to make payment without disclosing their credit-card details online, with the company earning a commission for each transaction.
The new rules aren’t enough to offset rising demand as Russians gradually move from cash to online payments, Kim said. Qiwi gained popularity with its ATM-like machines introduced in 2004 -- into which users insert cash to allow them to pay bills -- though it expects much of its future growth to come from the online-payment service, called Visa Qiwi Wallet.
Qiwi’s sales jumped 46 percent last quarter as the number of users for its online service rose 20 percent to 15.6 million. Qiwi forecasts full-year sales growth of as much as 26 percent.
“About 90 percent of payments in Russia are still made in cash, which leaves a tremendous potential for electronic payments,” Kim said.
A new law restricting anonymous electronic payments to 15,000 rubles ($440) didn’t hurt Qiwi because it also simplified rules for online identification, Kim said. Customers can use their mobile-phone number, passport, and official IDs to identify themselves online.
“There is nothing bad in the state’s desire to limit anonymous electronic payments -- this is what’s been done in many countries,” Kim said. “It would’ve been a problem if no alternative was given. We’ve got an alternative -- remote identification. Russian authorities have consulted with us and exercised a diligent approach to the matter.”
Qiwi sank 7.6 percent to $43.97 in New York. The company, registered in Cyprus and run out of Moscow, said late yesterday that it and investors including Kim and billionaire Alisher Usmanov’s Mail.ru Group Ltd. plan to sell about $400 million of shares in a public offering.
The shares will probably be “easily absorbed” by the market because of the strength of Qiwi’s business and its growth outlook, David Ferguson, an analyst at Renaissance Capital in Moscow, said in a note. Qiwi has a market value of $2.5 billion.
In another challenge, a slowing economy is hurting mobile operators and providers of consumer loans, whose payments Qiwi processes. Sales at Russian mobile carriers rose at the slowest pace in at least a decade last quarter, according to researcher AC&M. Growth in consumer loans slowed to 29 percent from 50 percent a year earlier, Russia’s central bank says.
“These are elements of slowdown in the economy,” Kim said. “It means we must be constantly looking for new sources of growth. People still need to pay for different things.”
E-commerce is the area with the highest growth potential for Qiwi as Internet retailers are trying to persuade customers to pay for goods online, Kim said. Currently, about 80 percent of Russian online shoppers pay cash on delivery.
Qiwi is also expanding in payments for financial services including online insurance and stock trading, Kim said.