Payment News

Russia’s National Payment Card Network Making Progress

In 2015 Russia set up a national payments card network called Mir. It was set up with government backing after MasterCard and Visa cut off services to a number of the country’s banks following the annexation of the Crimea. In 2020 28.6% of all debit cards in Russia have been issued by Mir, according to GlobalData, giving it 25.3% of transaction value.

Mir has achieved this with the active support of the government. For example, pensions are paid using Mir and public employees receive state funds and welfare benefits using Mir payment cards. Initially merchants with an annual turnover of over RUB40 million, about $0.5 million, have had to accept Mir cards but this was reduced to RUB30 million in March and will fall to RUB 20 million in July.

The European Payments Initiative has a similar goal, wanting to create a unified pan-European payment system including a digital wallet and person-to-person payments. Whether it will follow Russia’s use of regulations to drive acceptance waits to be seen.

The Challenge of Digital Inclusion in the US

Mercator Advisory Group have issued a report ‘The US Unbanked Issue is Improving; Are you Part of the Solution?’. 

The title itself demonstrates a mindset of electronic payments good, cash bad. The report comments that fintechs, neobanks and challenger banks in particular are playing a big role in bringing people into the banking system. They are doing this by offering easy access, smart user apps and nearly free banking solutions.

As the report’s author says, though, ‘their sustainability is certainly in question, however. Currently these businesses operate at a loss or with thin margins and recent efforts to reduce debit card interchange, neobanks’ primary source of revenue, creates a new threat.’

Normally, businesses may run a ‘loss leader’ to build their business, but that assumes those enticed in have the financial robustness to stay with them when prices return to where they should be. It will be interesting to see what happens.

The Rise of Virtual Cards?

RBR issued an interesting press release about ‘virtual cards’. Virtual cards are where digital card numbers are generated centrally or are instantly issued. This is not the same as tokenised versions of plastic cards in mobile wallets, ie. the details of a physical card are represented digitally on the wallet.

Virtual cards are almost exclusively used commercially rather than privately but, according to the RBR’s ‘Commercial Cards in Europe 2021’, in 2019 they accounted for 12% of expenditure made using commercial payment cards, €42.7 billion.

The press release is ‘interesting’ because the advantages of these virtual cards may suit the post-pandemic digital world, leading to an increase in their use both in and beyond the commercial sector. The advantages are security and control. A virtual card cannot be lost. Often the virtual card numbers are generated for a specific invoice or time limited period after which they expire, reducing fraudulent use. Maximum spending limits and where the card can be used can also be set.

These cards can, of course, be issued quickly, easily and cheaply, making them suitable for use where traditional physical cards are hard to deploy, for example for temporary workers or home-based workers. Presumably, this also reduces the need for plastic cards and their secure delivery to offices and homes.

Chris Herbert, from RBR, made the comment, ‘the expansion of NFC acceptance will also open up more opportunities in face-to-face payments, with virtual-only cards embedded in mobile wallets increasingly substituting plastic cards’.

Further Branch Cuts in Spain

BBVA in Spain will close 480 branches as part of a major cost-cutting exercise. It had wanted to close more, 530 branches, but a political backlash stopped this.

The bank has said that the cuts are needed, ‘to ensure the competitiveness and the sustainability of employment in the future given the current context of profound transformation in the sector, marked by a tremendous competitive pressure, low interest rates, the accelerated adoption of digital channels by customers and the entrance of new digital players’.