According to specialists, Russia is one of the harder markets to penetrate. The world’s largest country holds great untapped potential for newcomers if known how to enter it correctly.
The Yandex.Money platform handles more than 9,000 new accounts and more than 120,000 customer payments for products and services on a daily basis. We were lucky enough to have the chance to interview Dmitry Danilenko, Chief Commercial Director of Yandex.Money, Russia’s largest ecommerce company, specializing in payment processing and money transfers to discuss marketing strategies and advice in understanding the Russian market among other things.
Payment Magnates: Tell us a little about Yandex.Money and its place on the market
Dmitry Danilenko: Yandex.Money is a joint venture of Yandex and Sberbank. To put it simply, I would say the following: many Russians’ online experience starts with the Yandex homepage, and over 70% of Russians are Sberbank clients. Yandex.Money, in its turn, also ranks among the key players on the Russian market. We have the largest user base numbering around 14 million people, and over 120,000 transactions are made through the service on a daily basis. According to the international market research group TNS, Yandex.Money is Russia’s best known and most used electronic payment service as compared to other similar services. For example, only 31% of Russians know what PayPal is, while Yandex.Money can boast 84% brand awareness.
With Yandex.Money, users can make purchases at 50 thousand online stores (Russian stores and international stores that deliver goods to Russia), as well as transfer money to anyone they want – to e-wallets, debit or credit cards, and bank accounts anywhere in the world. Additionally, Yandex.Money can be used to pay traffic tickets and home utility bills, to book airline tickets and hotel rooms, or to reserve a rental car – even if the car is being rented in another country.
Not long ago, we entered the processing services market by launching our universal payment solution, which will provide online stores with one simple tool to accept all the most popular payment methods in Russia (bank cards, Yandex.Money e-wallets, cell phone balances, or cash deposited at payment kiosks). We believe this service will not only resonate with Russian stores, but also with international ones who want to extend their sales to Russian consumers. Our estimates show that by installing the ‘full package’ of our universal payment solution a store will be able to boost conversion on its website by up to 10-30 %. As for our service, we expect to see turnover increase threefold in the next six months.
PM: As the largest player on Russia’s e-commerce and e-payment market, how would you describe those markets today?
DD: Currently, Ecommerce accounts for 2% of all retail sales in Russia (with an average world index of 6%). But analysts agree that the next two years will see Russian online sales volumes at least double to make up 4.5% of all retail transactions.
The majority of consumers come to online stores via search engines. For instance, over 80% of all online shoppers use Yandex to find the product they need and to compare prices. According to the Yandex.Market service, the most sought-after products are cell phones. They are followed, in order of popularity, by computers, consumer electronics, photographic equipment, car and motorbike accessories, construction and repair tools, clothing and footwear, and so on.
But if we are talking specifically about the e-payment market, it has its own particular features: purchasing goods at online stores is the second most popular type of payment on the Russian Internet (with cell phone services leading). Russians also regularly buy airline tickets, online games, books, movies, and music via the Internet. It should be noted that e-money is used to purchase all of the above listed goods. So, 60% of Yandex.Money users use their e-wallets to pay for cell phone services, and about 50% of them – to pay at online stores and on the Internet. As the latest researches show, over 90% of Russians know what e-money is, and 36% of people in large cities use the payment method on a regular basis.
PM: What are your predictions for Russian e-commerce in the future?
DD: Currently, many online payment services are offered by both electronic payment systems and banks. Those services include payment for home utility bills, traffic tickets, and cell phone service. But electronic payment systems appeared in Russia before online banking, and so they tend to be more in touch with the needs of online consumers and more adept at responding to users’ requests. So I believe that in the race for developing ‘breakthrough’ products that ‘lead’ users rather than try to keep up with them, electronic payment systems will always be ahead of the banks.
The second major trend developing in the sphere of e-payments is globalism. On the Internet, national borders are wiped away. Russian users are not very concerned with the country where a particular good is coming from—the US, China, or Europe—they look for what is available and then choose based on the best price and most convenient methods of payment and delivery. And in that kind of world, only a flexible payment system is going to come out on top. Here, an important role falls on integrators who can provide a ‘universal passageway’ for payment systems trying to break into global markets.
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PM: How does your solution compete with other solutions—like QIWI—or how do they complement yours?
DD: We are not really competing with other payment systems, but rather trying, through joint efforts, to reverse the Russian ‘cash habit’ in favor of modern and convenient payment methods. And gradually we will include new payment methods in our solution, as soon as we see they are in demand among merchants.
PM: What are the fees involved when working with Yandex.Money as an online merchant?
DD: If we consider the Yandex.Money universal payment solution, its installation is free for the store. Commission on processing services differs by business type. For example, stores that sell and deliver goods are offered a 3% base rate. For other businesses, our terms of partnership are customized, but we try to offer optimal solutions for everyone.
PM: Many of our readers are interested in entering the Russian market and providing goods and services to Russian consumers online. What do you think are the greatest challenges they will have to face?
DD: In terms of the population’s proficiency in English, Russia is far from the world’s top 10 countries. And so, to successfully sell goods to Russian consumers, an international online store has to think about making a Russian version of their website.
Another important issue to consider is how Russians are used to making purchases at online stores. For now, the most popular payment method is still cash. But this doesn’t have to be a problem for international online stores anymore, since cash payments are now offered as payment code dependent cash-in rather than as cash-on-delivery. To this end, it is easiest for international businesses to use the local processing service, which will direct all payments through the local banks, payment kiosks, and cash-in points (note that using international payment providers will dramatically decrease your success rate). Incidentally, our payment solution includes 170,000 cash deposit points throughout Russia (ATMs, payment kiosks, cell phone outlets). But if we don’t count cash, the balance of electronic payment methods on one website is approximately the following: Yandex.Money accounts for around 20% of payments, bank cards, for around 50%, and other payment methods make up about 30%.
If you sell digital goods, you can start reaping the benefits of the growing Russian market immediately after connecting Russia’s most common payment methods. If your good is tangible, you just need to decide how to deliver it. Russian Post will take no less than 2-3 weeks to deliver a package within Russia. If that works for your business – go for it! If you require faster delivery, it is better to use an express service like FedEx which is experienced in getting small dispatches through customs.
PM: What advice can you give to our online merchant readers in terms of payment processing?
DD: Above all, don’t be scared. There are no absurd hoops or bureaucratic procedures waiting in line for you. You won’t have to register a Russian company, pay Russian business taxes, get a Russian bank account, open a warehouse in Russia, hire Russian personnel, or add anyone at all to your payroll. You can sign a contract with a local PSP for any registered legal entity. You will receive settlements in any currency and to any country in the world. It is simple—one contract and you will be up and running.
Oftentimes, stores will get stuck, wondering whether they should convert their prices into rubles. The best way to decide is to go based on how common your goods are in Russia. If you run a Chinese store selling products that are available—but more expensive—in Russia, display your prices in rubles, so it will be clear just how much your customers will save by choosing your store. That will not obligate you to receive settlements in rubles. We convert rubles and settle merchants in dollars, euros, and even British pounds. If your good is rare in Russia, go ahead and display your prices in euros or dollars. There will be nothing to compare them to and because of the exchange rate (hard currencies are more valuable than rubles) your goods will seem more reasonably-priced.
PM: Do you have an industry-specific customer base and are there any industries that you cannot process?
DD: Naturally, we would never work with businesses selling anything illegal—counterfeit documents or state awards, weapons or drugs. It is not just a question of professional ethics, which we observe, but also of Russian law. Apart from that, we are ready to partner with any store or enterprise that conducts business online and is interested in expanding that business to Russian-speaking users.