Cash Meets Online Bill Payments

As people formed a habit of pressing on the buttons of ATMs, they began to require services (such as paying utility bills) that banks were initially unready to meet. This was to change with the introduction of a new agent—a cash kiosk: a simple ‘reverse ATM-machine’ where people would (pre)pay for utility bills and purchase mobile airtime. It could be said that the payment revolution in Russia started with the roll out of the prepaid kiosk. As the latter proved an effective and convenient alternative to queuing at bank branches, the size of this network grew quickly and by

2009 it surpassed 100,000 machines. This was significantly bigger than the ATM network. Prepaid kiosks not only helped to mould user behaviour but also their expectations as banks later had to face users demanding greater simplicity in the user-interface of the ATMs.

The prepaid kiosks network was scalable and sustained the growing demand for the payment services as its installation was managed by retailers and not banks - and the former knew best where to place them to monetise the footfall. As the network grew in size several players competed for domination. Eventually, Qiwi came to be the only operator. Launched in 2007 through the merger of two large players, Qiwi grew to launch an initial public offering (IPO) in NASDAQ, the US-based electronic market, in the early summer of 2013. The business model of Qiwi was to install kiosks amongst shop owners and other places of large “footfall” to charge end-user-fees (later changed for service discount fee, which was split between payment network operator and the agent).

Later on the kiosks started offering wallet functionality by enabling people to store monetary balances without payment of interest for later use, while Qiwi increased its revenues by using those balances to finance trading in the money market. However, due to the fact that deposits were largely unidentified, they opened up the network to allow money laundering but that is a completely different story. The point is that the prepay network was critical in the formation of an online purchase culture in Russia.

A Russian National Payments Scheme then started to emerge and formed gradually thanks to, first, a consumption boom and greater availability of credit, which together demanded new and swift payment methods. Second, newly formed habits of consumption in terms of user experience and simplicity put pressure on financial institutions to match or even offer better services. Specifically, prepaid payment tokens by a non-bank were well received by the majority of people and attracted substantial new users. These paved way for online banking distribution. Interestingly, this was a realization of McLuhan’s promise of ‘medium being the message’, hence people changed their behaviour around the objects they acquired. As banks responded, demographics started to dictate the terms of engagement, or rather disengagement from classical branch-banking.

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