Jan. 19 – A lobby group named the National Payment Council has been established by Visa and MasterCard, together with Russian payment services provider Zolotaya Korona, on Wednesday.
The main reason for the decision of the payment systems to create a lobby is the tightening of the domestic card market regulation by implementation of “The Law on the National Payment System.”
“Visa and MasterCard both worked closely with the government and put much effort into creating the National Payment System bill that President Dmitry Medvedev signed last June,” MasterCard Russia Chief Ilya Ryaby said.
The new law on the national payment system has been on the road to adoption for over two years, and although some changes in banking sector legislation have been under discussion for much longer, the national payment system project has been notable for the number of aims and projects that have been linked to it.
In the course of the legislative process, one of the most politically high profile of these related plans – the proposed introduction of a smartcard for receiving state benefits – was split into a separate proposal. The new law thus focuses on the regulation of e-money and payment systems, as well as dealing with issues related to money transfers.
Some of the law’s provisions went into effect last fall, some will come into force at the end of next June, and still other articles in 2014.
The new legislation on the national payment system, or NPS, fills a number of gaps in the prior law –particularly in electronic payment systems and electronic money, which lacked any sort of adequate regulation in Russian law. In this sense, market participants admit that the NPS legislation is both modern and timely.
“Among the priorities this year for the new lobby group will be preparations for the new rules and taking part in the drafting of any bylaws,” Ryaby said.
“The council’s longer-term goals include an effort to measure the market of electronic payments and create standards for new financial transactions stipulated by the law,” said Nikolai Smirnov, Zolotaya Korona chairman.
For e-money regulation, the new legislation has introduced a monopoly for credit institutions to issue and transfer electronic money.
Although the law clarifies that a client is not required to open an account, considerable efforts have been made to ensure that the operator acts in a manner that is compatible with anti-money laundering and consumer credit legislation. For instance, legal requirements are imposed on the application of anti-money laundering rules where the transfer is made in a foreign currency. Further requirements prohibit the imposition of interest charges on the client.
Among other things, the law obligates international payment systems to become “local” in order to be able to operate within Russia and handle local payments.
“Creating a functioning local structure creates favorable terms of a sort for local payment systems, unfortunately at the expense of curbing to a certain degree the activity of international payment systems,” said Elizaveta Ivanova with of counsel at Salans’ Russian Tax Practice. She beleives the local structure creation requirement for international payment systems is “artificial and excessive,” since the local system would duplicate an existing one.
According to experts, Russians make only 7 percent of their consumer payments electronically, while the number for more mature markets is 30 percent to 40 percent.
“The number of cards is growing hugely, but the share of electronic payments isn’t increasing so fast,” Steven Parker, Visa’s general director for Russia, said at a news conference in Moscow yesterday.
Russians mostly use plastic cards to draw their salaries at ATMs. One reason why card payments don’t spread more rapidly appears to be that banks and payment systems charge higher commission than they do in the West.
Given that the NPS legislation is quite skeletal in nature, serious doubts remain concerning the implementation of the new legislation. Thus, a lot will depend on the role of the Central Bank and its implementing acts and policies.
Tags: MasterCard, National Payment Council, National Payment System, Russia Credit Cards, Visa, Zolotaya Korona
