A Bankcard with Belarusian Zest
The recent “card sanctions” of international card payment systems against Russia made many Belarusians reconsider their views on the decision of the Belarusian government to set up the country’s own card payment system 20 years ago. Today BELKART is not only a safeguard against similar troubles but also is one of the most successfully operated local payment systems in the CIS and a leading card processing system in Belarus. BELKART services 45% (or 5.4 million) of all payment cards issued in Belarus. The beginning of the year was marked by a number of innovation projects and also the advancement to the international market. BELKART Director Alexander SOTNIKOV tells the Economy of Belarus Magazine about his thoughts regarding the creation of the Russian national card payment system, the way the Belarusian system is going to grow and what everyone should take with them when going on vacation abroad.
On International Business
Mr Sotnikov, how can a state benefit from having its own payment system?
The main advantage is having control over the system within the country. There is no direct dependency on payment systems of other countries. The current situation in Russia proves that Belarus made the right choice to set up a national payment system.
Apart from other things, it allows the state and the government
to influence business processes and to implement necessary strategies through such instruments as a payment system and plastic cards. This means that the national payment system can be used for depositing wages and salaries and other payments such as social benefits.
Belarus has not started depositing benefits through the BELKART system yet, but as far as the wages and salaries are concerned, the preference is given to our products.
One more indisputable advantage of the national system is the proximity to the end user and understanding of the local market. For instance, an employee of the participating bank can drop by to our office in downtown Minsk to settle some issues. I doubt that the same can be easily done at a regional representative office of an international payment system.
Given the special role and status of BELKART we try to adopt the best international practices and consider specificity of the Belarusian market.
When faced with the “card sanctions” this spring Russia started seriously thinking about creating its own national payment system. Since BELKART has a long history of operation, have Russian colleagues asked you to share your experience?
No, they haven’t done so yet, although we are ready to share our experience with our colleagues be they from Russia or other countries.
However, in case with Russia we have to understand the difference between our people, territories, and state management systems. Besides, the Russian banking system is drastically different from the Belarusian one. They have several major players and each of them can claim the role of the key national card payment provider. In our case, the main shareholders are major Belarusian state-run banks. Yet, private banks function perfectly well within the BELKART system. We do not give preferential treatment to anyone.
The Russian situation is also aggravated by the fact that our colleagues have not decided yet if they want to set up an independent or an affiliate payment system. For instance, a possibility of cooperating with China UnionPay is being considered.
I believe that Russia has all necessary business cases, technological potential and political will to set up its own payment system. I am a proponent of a manageable payment system. Besides, drawing from my experience, I can say that the vast majority of people do not use international transactions in everyday life. Therefore both Russia and Belarus have all the prerequisites to keep the domestic transaction traffic inside the country.
At the same time the exterior traffic can be handled on the base of partnerships with international payment systems.
What countries can be an example of successful development of the national payment systems and can a national system grow into an international one?
A good example is China UnionPay which was set up as a domestic payment system of China and now is a leading issuer of plastic cards in the world. However, this can be attributed to numerous Chinese expatriates and significant economic and geopolitical interests of this country abroad.
As far as Russia is concerned, I do not rule out that their system may become international and grow to cover at least the CIS countries. Putting politics aside, I even think that in the future it could go beyond the post-Soviet area to Europe. It is not a secret that even now international payment systems have options to choose the Russian ruble as a transaction currency, for instance, in France.
By the way, payment systems similar to BELKART operate in many former Soviet republics such as Armenia, Ukraine, and Uzbekistan.
On Breaking Stereotypes
When BELKART was getting its status of legal entity in late 2013, a lot was said about the necessity to break stereotypes in respect to national cards. What
progress has been made in this area since then?
Since the beginning of 2014 we have passed several milestones on the payment cards market thanks to BELKART. For instance, Belarusbank issued the first co-badging card in Belarus, namely BELKART-Maestro which is accepted abroad and online. In fact, the Belarusian payment system has entered the international market. The new product is the result of cooperation with MasterCard.
In addition, the first pre-paid BELKART card was issued in partnership with Priorbank. By the way it was launched on the occasion of the 2014 IIHF Ice Hockey World Championship. In cooperation with Alfa-Bank we have launched a premium rate card.
This means that since the beginning of the year we got rid of the stereotype that BELKART is used exclusively for salary deposits and domestic transactions. I do not claim that we have changed the market or made a revolution. Yet, our company has its voice in the market and does not stand still. We did not coerce anyone to do business with us! All our partnerships are based on mutual benefits.
What are your plans for the future?
In short, we plan to promote our brand relying on technical innovations and new products.
In particular, right now we are looking to set up loyalty programs and analyzing submitted proposals. I think that if everything goes well we will be able to offer our customers some loyalty programs by the end of the year.
The issue of regulating BELKART transactions in the Belarusian segment of Internet is at the same stage. We have given this option to banks and they can either use it or leave it. There was no such a possibility before.
We also plan to launch a number of new products. In particular, we believe that pre-paid and premium-class cards have great potential.
Besides, I think that we will continue developing co-badging projects, first of all, from the technical point of view. We recommend all banks to consider issuing this type of cards with the use of touchfree technologies. Our agreement with MasterCard allows doing so.
Given the recommendation of the National Bank to switch to chip cards, we are considering the feasibility of developing our own software support for these cards. At the moment there is only one chip card in the BELKART line using the Visa system.
You have mentioned premium products. Does that mean that BELKART Premium is an analogue of Visa Gold in the VIP line of Belarusian cards?
Perhaps, BELKART Premium can be called that. In any case, this product is of a higher level as compared to BELKART Standard.
The card has enhanced security due to a hologram and embossed personal identification of its holder. Its holder also enjoys zero liability. This principle does not apply to other cards in Belarus. Although the National Bank recommended Belarusian banks to stick to this principle, it is not mandatory and many banks choose to opt out of it.
We are not ready yet to offer the same discount programs as some international payment systems do. But this is the next stage of our development and we are working on it very hard.
How likely is that we will see more premium-class cards in the near future?
As I said, we see great potential in the VIP segment. We pin great hopes on the launch of new premium-class cards within the cobadging project with MasterCard. Several Belarusian banks have already launched such payment
projects and we can be sure that soon BELKART Premium Maestro will appear in the market.
An option to transfer money from one card to another tops the wish list of BELKART customers. How can you comment on this?
This option is already offered by several banks serviced in the Bank Processing Center. Other banks that have their own processing centers are now in the process of setting it up. I believe that by the end of the year we will have a balanced infrastructure in Belarus when every BELKART client will be able to transfer money from one card to another.
Another hot question among BELKART holders is whether we will see foreign currency cards soon?
According to BELKART rules, interbank foreign currency transactions are not allowed. It is a national payment system and the official currency of Belarus is the Belarusian ruble.
I do not see any economic or public necessity to legalize interbank foreign currency transactions. Honestly, how often do we have to use foreign currency on the territory of Belarus? Very rarely.
At the same time the infrastructure of many issuing banks allows some transactions in foreign currency. For instance, you can buy for- eign currency by using BELKART in exchange offices of the bank that issued the card.
By the way, our co-badging card is also denominated in Belarusian rubles, which does not create any problem for using it abroad. The money is converted automatically in line with the rules of the issuing bank and the international payment system.
On Security and Going Abroad
It is not a secret that many people still do not trust electronic payment systems regardless the fact that their security is constantly growing. What steps can a cardholder take to minimize possible risks?
As a matter of fact, the percentage of fraud in the overall number of transactions within the BELKART system is close to zero. In the majority of cases the bank reimburses the stolen funds to a cardholder. It is enough to take reasonable precautions such as not to use an ATM if there are some suspicious appliances attached to it, not to write down the PIN either on the card or on a piece of paper and keep it with the card in your wallet, not to share the card with other people.
However, one should be more careful when using cards abroad or online. Although the security of such transactions is quite high, I would highly recommend having separate cards for online banking, mobile and SMS banking. This way it will be possible to minimize losses in case of fraud. Never use credit cards to pay online or abroad, only debit cards!
Since everyone is in the vacation mode right now, would you recommend using cards, cash or both?
Any risks can and should be diversified. I would not wish anyone to be left with no money in a foreign country. Therefore I would recommend playing safe and taking both.
Problems can occur with cash as well as with plastic cards. Personally I always have some part of the money saved for a trip in cash. As a rule, no more than 25-30%.
Many tourist destinations, especially tropical countries, do not have well-developed card payment systems. That is why the probability that your card will not be accepted there is very high.
I prefer to put the main expenses on my card, such as payment for accommodation, plane tickets, car rentals and food. Note that I use separate cards for domestic and foreign transactions.
On Cash and Plastic Cards
How many plastic cards do you think a person should have?
To enhance security and manageability of your finances I would recommend having at least four cards: a separate card should be used within Belarus, online and abroad. The fourth card should be for savings.
Do you follow your own recommendations?
When my kids ask me how many cards I have, I tell them “About 15”. But I am afraid I have more. Of course, I have all the cards that I recommend others to have. My children also use various cards for various purposes.
Cards of what payment systems have taken permanent residence in your wallet?
All of them, I have all the cards issued in Belarus, such as MasterCard, Visa and, of course, BELKART. There was an announcement of the American Express launch in Belarus. However, I do not think I will use this card as I am not so fond of shopping abroad.
I spend most of my money in Belarus. I try to use the cards that have the maximum security here, i.e. BELKART. I have never had any problems despite complaints of some of our critics. BELKART is accepted in every store where terminals are installed and we have a 100% penetration of the retail market.
Although I admit that our cards are not accepted in every ATM. So far 22 out of 31 Belarusian banks have become members of the payment system and their number is constantly growing. Besides, international payment systems can also face the same problem, so it would be wrong to portray it as an exclusively BELKART’s weak point.
Mr Sotnikov, with 15 plastic cards in your wallet, is there any room left for cash?
Good question. I usually have about Br50,000 just in case. In fact, when you live in a cash-free world it is very difficult to go back to using cash. Now it is much easier for me to make a money transfer than to find some pocket money on me.
Cards are accepted almost everywhere in Minsk. Of course, you cannot use your card at a marketplace, but I tend to plan such visits in advance and prepare accordingly. If I cannot use a card in a store I start expressing my dissatisfaction and demand a complaint book (smiles).
Therefore I adamantly support strategies promoting non-cash payments among people of all ages and social background. There is a stereotype that the elderly are not able to learn how to use plastic cards. They are as smart as their children and grandchildren; they just need to be shown how to do that!
I always cite my mom’s example. When she learned about BELKART, which is used for depositing pensions paying high interest on savings (plus there is an SMS notification every time the money is deposited to the account), my mom became an avid card user. She uses it everywhere she can and enjoys the process, although there were times when she could not comprehend how to buy something with no cash in the wallet.
It goes without saying that people should be ready to shift their priorities from cash to plastic cards. Yet, everything that has been happening recently is pushing them in the right direction. The mere fact that the society has become more open to non-cash payments speaks volumes.