When it comes down to timely payments, current Russia’s settlement system doesn’t meet needs of the economy. To illustrate that, it would suffice to compare existing Russia’s payment options with the foreign ones.
Unofficial sources claim that the Bank of Russia annually processes 600 million payments (made by commercial banks) worth 900 trillion rubles. Payments under 100 thousand rubles account for up to 80% of the total number of payments (400 million), which is less than 1% of the total turnover (6 trillion rubles).
Payment fee for banks
Minimal payment fee for banks is set at 7 rubles, with 12 rubles being the average payment fee. Total costs of banks related to the Bank of Russia services related to small payments make up 4,8 billion rubles and 2,8 billion rubles according to the most moderate estimates. Lowering of that figure will have a favorable effect on the costs structure of banks, and will therefore increase reliability of the banking system on the whole.
Current fee for payments made via the Bank of Russia makes up:
- from 7 to 24 rubles for a discrete-time payment processing; processing of a single payment takes from one up to several hours;
- 25 or 30 rubles for a single online Banking Electronic Speed Payment (is unavailable at night and on weekends).
Admittedly, current fees are exorbitant and could be cut several-fold, which is proven by much lower fees for similar services in neighboring countries. Let’s take a look at the fees for similar services charged by the Kazakhstan Center of Interbank Settlements of the National Bank of the Republic of Kazakhstan. That said, all settlements between Kazakhstan banks are real-time settlements and are processed within minutes.
|Payment processing time||Fee amount in local currency (tenge)||Fee amount in rubles|
|from 4pm to 9am||9||2,8|
|from 9am to 1pm||11||3,4|
|from 1pm to 4pm||22||6,8|
Table 1. Payment fees in the Kazakhstan Center of Interbank Settlements of the National Bank of the Republic of Kazakhstan.
From that we can see that fee for the speed payment in Russia is 3.6 (!) times as expensive as the most expensive payment fee in Kazakhstan. And keep in mind that processing of any type of payment in Kazakhstan takes just a few minutes, whereas in Russia it can take as long as 9 hours.
Evidently, this is the case due to the fact that as of now Russia has no full-fledged system for online interbank settlements.
It is worth noting that building a system for processing of small electronic payments became not only necessary, but also quite doable. Technological progress makes it possible to substantially cut the payment processing fees making such payments affordable for every single market player (according to our estimates, payment fee can be as little as 1 ruble per payment). On average, banks will save 4,4 billion rubles 2,4 billion rubles according to the most conservative estimates. That said, one should bear in mind that processing of relatively small payments implies smaller risks, and, therefore doesn’t require as much effort from the perspective of security and settlements control. This nuance allows us to put this type of payments into a separate category that on one hand, should be reliable, and on the other hand, should return the investments and be cost-effective for its users.
Benefits of joining B-SwiftFin
Expected benefits of joining B-SwiftFin will, first of all, present themselves in retail banking and SME market. Besides, B-SwiftFin will lay the groundwork for growth of the payment amount and subsequent emergence of an all-new level of settlements.
For retail banking
Retail banking market got to the point where in order to stay competitive a bank has to ensure highest quality of services provided to its customers. For instance, loan borrowers expect that after depositing money in any way convenient for them they will no longer have to worry about its processing. Depositors prefer to work with banks where deposited funds instantly credited to the account. That said, a system meeting the modern requirements of quick money crediting with a reasonable transaction fee will immediately become in demand.
Besides, once the issue of change given to a specific end-user while making interbank settlements is resolved, Bank of Russia will encourage development of this payment system segment.
One of the main problems of the small business development is absence of any counterparty limits whatsoever. That said, level of trust between counterparties during purchase and sale of goods or consumer services is extremely low, even more so in distant regions of Russia. The risk of losing assets and proceeds for a small business is going through the roof, because careless behavior of counterparty can jeopardize the entire business.
For instance, a truck with grain stays on elevator until elevator gets paid for the shipped goods. And even if everything is paid in advance, before the truck arrives, discrete-time processing can take hours, and that is hours of the driver’s working time; moreover, untimely grain delivery even if for a couple of hours, can have a negative impact on operation of the entire flour mill or bakery.
One of the problems of retail and small-scale wholesale trade is that it’s impossible to make electronic payments during operating hours of points of sale, which would be seven days a week, 24 hours a day. Revenue from sales that builds up during the weekend can be used to pay for new small-scale wholesale shipments of necessary goods.
Without enough trust between wholesale and retail merchants the former expect goods to be paid for prior to the shipment, whereas the latter are oftentimes reluctant to pay substantial amounts prior to shipment. This issue is especially relevant during national holidays, when turnover skyrockets and operating hours of banks are short. To maintain the turnover by storing up enough goods, points of sale are forced to take bank loans in advance. However loan is not always an option and loans are rather expensive, whereas storing up surplus is unacceptable when it comes to perishable goods.
Trust issue between retailers and individuals was resolved long ago. Payments are done in cash or through credit cards. In practice, settlements between retailers (especially small ones) and providers also tend to be done in cash with cash being delivered by undesignated persons (drivers, freight forwarders). Such state of affairs clearly stifles growth of e-payments, leads to criminal risks and off-the-book cash.