A Short Historical Background of Retail Digital Payments in Russia

Card as a Cash Carrying Token

The surge in card payments in Russia largely coincided with the consumption boom of the early 2000s. At the time, retail banks began to issue customers with revolving credit as attached to a card, and encouraged the adoption of ATMs for cash withdrawals (earning them considerable fees—a practice which still brings key profit for some banks, despite their adoption of digital payment instruments). Payment cards were previously accessible to a minority of high net worth individuals. This made their entrance rather piecemeal. Payment cards were then offered as part of the so-called ‘salary projects’, where banks pushed employers to pay through direct account deposit while issuing debit cards to employees. Banks hoped people would start using cards instead of cash. But customers were generally unsatisfied—they preferred cash and were also unhappy with having to pay withdrawal fees at ATMs to access their cash.

With the benefit of hindsight, the latter may have contributed to the slow uptake of other digital means of payment. This, according to a study by McKinsey, implied that the geographical proximity of an ATM strongly correlated with the amount people kept in their accounts.

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