"Mobile operators can offer the market
all the bank card functions,
but on better terms"
"Mobile operators can offer the market all the bank card functions, but on better terms"
Journalists of AIN.UA prepared this article following editorial standards and published it under the sponsorship of an advertiser
Serhii Koptik runs Kyivstar's Mobile Financial Services Department, along with Starmoney, a financial company. Serhii hails from Belarus, previously heading a mobile financial service in Kazakhstan's Beeline, as well as working at MasterCard, Visa, and Raiffeisen Bank Aval in Ukraine. In Beeline Kazakhstan, he successfully implemented an e-money project in collaboration with Alfa-Bank – issuer of Visa and MasterCard cards linked to Beeline mobile phone account balances. The high popularity of these bank cards was largely due to the fact that, instead of making p2p transfers, clients only had to refill their mobile phone balance (unlike interbank money transfers, this transaction is generally free for users). As soon as the balance is credited, the card could be used for payments, cash withdrawal, transfers, etc.

We asked Serhii, how mobile operators could offer better terms than banks and what hinders the development of mobile financial services in Ukraine.
— Starmoney cannot issue e-money yet. How does it function?
— It is a middleman between the subscriber and the bank. It fulfills the subscriber's order to sell him/her e‑money and, within the payment system, transfers these funds to where the subscriber has bought something.
— Do you work with Prostir National Payment System only?
— So far, yes. With the development and appearance in the market of new mobile financial products and services, we may use the most suitable and, let's say, comfortable, from the business model and technology standpoint, e-money systems. New payment services legislation will greatly expand the transaction potential and allow for e-money to be abandoned entirely.
— And what is the role of Leo and Kontraktovyi Dim – the companies that you work with?
— They connect and sign contracts with vendors. We intend to set up an e-window through which vendors would be able to connect to our payment system independently. They would be willing to pay 0.5%, rather than 2%, for payment acceptance services. Our costs are minimal, without either huge processing overheads or monthly external commission fees.
— You have recently reduced the fees for transferring funds to other operators. Why?
— We at Kyivstar are actively working to make subscribers aware of the potential applications of operators' financial services. Together with lifecell and Vodafone, we have therefore launched a promotional campaign that offers users an opportunity, until the end of 2019, to transfer money to accounts opened with other mobile operators at a reduced commission fee of 0.5%. It is a simple and affordable alternative to bank cards. Minimum commission fees, instant crediting, user-friendly transfers, an opportunity to use funds to pay for goods and services – all this will make the service competitive and attractive to subscribers.

This sends a strong signal to the market that mobile operators are serious in their intentions to develop mobile financial services to grow from startup into a core business. Strategically, we focus on public transport fee payments. We see a great potential here for expanding our services.
— Please tell us about the plans to develop e-money services in our market in the context of your Kazakhstan experience. How different is the Ukrainian market?
— To be honest, working in the Ukrainian market is more challenging, but at the same time is highly promising. The market currently lacks strong mobile financial services or high-profile FinTech projects. According to the National Bank's statistics, the total volume of e-money transactions in the first half of 2019 amounted to UAH 4.9bn, whereas the six-month turnover on bank cards was almost UAH 1.7trn. In other words, e‑money accounts for only 0.3% of the entire turnover, and, even then, the lion's share in this figure is taken by interwallet transfers. I don't see any FinTech here. It is still too early to talk about mobile financial services becoming a tool for growing financial inclusion.

As regards bank cards, 50% of transactions in Ukraine are now cashless, although their lion's share is taken up by p2p transfers, rather than by retail transactions or in-store card payments. I see many people in Kyiv paying via GooglePay or ApplePay in large supermarkets. This is wonderful, but you cannot extrapolate Kyiv on the rest of the country. We, mobile operators, can offer the market the same transactions at much lower costs. We have neither interchange nor commission fees from payment systems. The cost per transaction from a mobile phone balance is many times lower than that of bank cards. Our objective is to increase the number of monthly active users, in other words, subscribers who pay from a Kyivstar mobile phone balance on a monthly basis.
— How are you going to accomplish this?
— Our priority task is to build the footprint for accepting payments from a mobile phone balance. I want to see a Kyivstar mobile phone balance as a source of payment in all retail outlets and mobile apps, in addition to payments made with bank cards or via other wallets. The subscriber him/herself will choose a convenient and, more importantly, advantageous payment method. For me, emitting payment system cards linked to a mobile phone balance is an opportunity to enter an ecosystem that is already in place on the Ukrainian market. The key accent is to make the "Pay Kyivstar" logo visible.

Can we do it? I think yes. It will be hard and won't happen soon. But if an optimized process is developed for remote linking of retailers using e-signatures and open APIs, they may be connected soon enough.
— Do you intend to use QR codes?
— It can be a QR code or just a transfer to a vendor's account, payments via the SMART-MONEY app, on a web portal, the "Pay Kyivstar" button on websites and in merchant's apps. Our segment is micropayments.
— The NBU is developing a bill that is based on PSD2 and the E-Money Directive. Will Kyivstar support its passing?
— Sure. I am sure that the new law, inspired by PSD2 and the E-Money Directive, will open up new possibilities, eliminate rudiments of the past, and offer an opportunity to build a balanced payment landscape in Ukraine as a European state.

I am very enthusiastic about the initiative to implement the PSD2 Directive, I really believe that it will happen sooner than in 2022. This is because the scheduled adoption of this law in 2020 will entail at least eighteen months of its implementation.

We need to build upon the European experience and make it happen faster. I think we have people who can figure out how to speed up these processes. Next is amending all the subordinate legislation. Starmoney, being a financial company, a Kyivstar subsidiary and, subsequently, a payment service provider, would be able to open payment accounts, emit e-money, issue cards, and, most importantly, to open accounts and effect payments. As a telecom operator, Kyivstar. This has to be laid down in the legislation.
— If a client has been identified and all transactions are in the databases, why do we need transaction limits on such electronic money wallets?
— In Kazakhstan, for example, a quite comfortable environment has been created for the FinTech development. They have introduced the concepts of unidentified and identified wallets. Only two restrictions are imposed on an unidentified wallet, associated with a single transaction amount and the wallet balance. And nothing else! Limits for identified wallets are higher and quite convenient at that. We too have AML control, risk monitoring, we check all suspicious transactions, and keep a complete record.
— What limits shall be put on unidentified wallets in Ukraine?
— Let's say, 50 euros per transaction and 500 euros a month. These are comfortable amounts to develop an alternative payment channel. All this, however, needs to be synchronized with the implementation of modern identification rules. We would be able then to engage all those who still remain beyond the financial services market.

We launched the Direct Carrier Billing product in Kazakhstan, which is a global practice. In GooglePlay Market or AppStore, you link a mobile phone balance, rather than a bank card, when paying. This option is enormously popular because people still share concerns about linking a bank card on the Internet. Here is another example: if I can't open a card for a child who has a phone number, I can put money into his/her mobile account that he/she can use. Unfortunately, this is still not possible in Ukraine.
— Why?
— The mechanism that we suggested has been considered by the National Bank for eighteen months now. Regretfully, applicable laws prevent even such simple transactions. I sincerely hope that it will change soon.
— Hryvnia-denominated e-money may only be purchased and used within Ukraine. Should these obsolete rules be repealed?
— Electronic money is "cost units", it is merely a cash equivalent or, in our case, – a middleman of sorts between the subscriber's funds on his/her mobile account and the funds credited to the provider's current account for the services and goods sold. Hopefully, the new law will set out alternative channels and means of payment (not only e-money) for telecom operators.
— Once your customer base has been formed, you will be able to expand your range of services, grant microloans under a credit card scheme, using big data scoring. Perhaps, even offer interest-bearing savings wallets?
— Indeed, this could potentially be a new ecosystem. We hope very much that the NBU will provide us with these opportunities. It would revive competition in the payment services market and offer a convenient, affordable and, to emphasize once again, advantageous service to the public.
The views and opinions of the author expressed herein do not necessarily state or reflect those of the U.S. Government or USAID.
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© 1999-2019 AIN.UA

При использовании материалов сайта обязательным условием является наличие гиперссылки в пределах первого абзаца на страницу расположения исходной статьи с указанием бренда издания AIN.UA. Материалы с пометками «Новости компаний» и PR публикуются на правах рекламы.