Initially a network of cash collection machines, through which Russians pay for virtually everything from mobile phone bills, to online purchases, to fines, QIWI is now an international, NASDAQ-listed, multichannel payment operator working in close partnership with Visa.
QIWI President Boris Kim shared with East-West Digital News his vision of the payment industry, which knows neither national, nor online/offline boundaries. He also unveiled the Russian company’s international strategy, from Africa, to Asia, Latin America, and the USA.
Over the past few years, you have strongly diversified in terms of both business scope and geographic presence. How do you define your company’s identity today?
Our consumers can use cash, store value, and pay for goods and services across physical or online environments interchangeably. Our differentiation lies in this combination of physical and virtual payment services. We believe that this provides convenience to our customers and creates a strong network effect, driving payment volume across our business.
Today we have deployed over 14 million virtual wallets and over 169,000 kiosks and terminals, enabling more than 47,000 merchants to accept over 44 billion rubles (approximately $1.35 billion) in cash and electronic payments monthly from over 60 million monthly consumers.
We operate in and target markets and consumer segments that are largely cash-based and lack convenient alternatives for consumers to pay for goods and services in physical, online, and mobile environments.
Do you believe there is still an important growth potential for this cash-in kiosk business?
Cash is currently the preferred consumer payment method in Russia, accounting for approximately 90% of payment volume in 2012, according to Russia’s Central Bank. Euromonitor International estimates that cash will remain the dominant payment method in Russia for the next several years and predicts that cash will still account for approximately 87% of the market in 2016.
Nevetheless, as Internet penetration is growing in Russia, an increasing number of people purchase goods and services online. The total volume of e-commerce in Russia, which did not even reach $7 billion in 2009, could exceed $30 billion in 2017, according to J’Son & Partners Consulting.
QIWI’s e-wallet has become an important online payment mean. Does it fully compete with e-currencies?
Our electronic wallet, named Visa QIWI Wallet (before November 2012 it was known as the QIWI Wallet), is a real metaphor of a wallet with different types of money inside: coins, bank or other cards…
Furthermore, it can be replenished in several ways: from over 100,000 cash collection points throughout Russia (the QIWI kiosks and terminals), as well as from bank card accounts – just like PayPal – which provides user with a very high level of security. Finally, there are no commissions for users in most cases.
Visa QIWI Wallet owners can also replenish their accounts viatheir mobile phone account. We have fully integrated the system with those of the three main mobile operators in Russia.
Last year, you announced an alliance with VISA, linking the QIWI Wallet to Visa prepaid payment functionality and services. What is the significance of this move for both sides, and at what stage is this integration process now?
In November 2012, Visa and QIWI formed a strategic alliance to introduce a digital wallet that would enable consumers to access a wide variety of electronic payment options – the Visa QIWI Wallet. Our wallet transformed into a digital wallet with a stored value account based on a Visa prepaid card that can be issued by any Visa client-bank. Now we are working to open the QIWI platform to other Visa issuers in Russia and neighboring countries of the CIS.
Working with Visa helps us extend QIWI kiosks and digital wallet services internationally. The combination of QIWI technology and Visa international payment system opens up a wide variety of payment products and services for banks, mobile operators, billers, e-merchants, and retailers.
You are developing your business outside Russia. How important are your operations abroad?
Almost all of QIWI kiosks and terminals business operations are currently in Russia and Kazakhstan. We also work based on the franchise model in Argentina, Chile, China, Colombia, India, Panama, Peru, South Africa, and Ukraine.
We plan to expand our operations into other countries by investing directly in markets where we can leverage our operational experience, either through franchising our operations or licensing our technology to selected payment service providers and networks.
How do you choose new countries and how do you develop your business there?
As a rule, we target countries that meet the following criteria:
- A rather high percentage of cash payments, in particular for mobile phone bills in a fast growing mobile market;
- A rather high percentage of pre-paid mobile accounts;
- The possibility to replenish mobile phone accounts with any sum (and not a fixed sum since terminals do not return change).
Other criteria related to competition and the local banking infrastructure are also considered. Local partnerships are essential because they bring local expertise. We sometimes have a controlling stake, sometimes not. In all cases, we bring terminals.
However, our primary goal now is to intensify our business presence in existing countries rather than to expand to new countries.
Our systems are particularly convenient in countries with high levels of migration. We have already experienced this phenomenon in Russia and the CIS countries, where an important amount of international cash transfers are made by immigrants.The money that people put in QIWI’s terminals may be transferred to a bank account, but more often it is remitted in cash in a bank outlet or an agency of a money transfer company. We partner with with all major money remittance systems with premium positioning, but we are not very strong in the area.
What are your plans for the USA?
US operations are now under test mode. There will soon be a commercial launch, with payments of mobile and other bills. This service is likely to become popular in the Southern United States since a high numbers of migrants live in this region.
We may also further extend our services in the US in a middle or long term perspective.
You have started cooperation with Skype, and Russian users can now replenish their Skype account using QIWI. Has this offer gained significant traction?
Yes, we cooperate with Skype to allow users to replenish their Skype accounts in QIWI kiosks and via the Visa QIWI Wallet. We are also organizing promotional activities to increase users’ benefits while using QIWI’s payment services.
In May 2013, QIWI was introduced on the New York stock exchange. Why you did undertake this IPO? What are the proceeds going to be used for?
This move came as part of a long-term strategy. We had attained certain results that allowed us to declare ourselves as a fast-evolving company at the international level. It thus became a logical step for QIWI to issue public shares.
The IPO took place on May 3 on the Nasdaq Global Select Market under the symbol “QIWI.” The company placed 12.5 million shares in the form of American Depository Receipts (ADR) at $17 per share. All the shares were offered by selling stockholders. QIWI was valued at approximately $887 million at the listing price.
- RUSSIAN E-COMMERCE AND PAYMENTS REPORTS – This interview is an excerpt from an in-depth research by East-West Digital news on Russia’s e-commerce and e-payment industries, conducted in partnership with leading universities and consultancies. To receive free insights or to order the full version (2013 edition), please contact us at [email protected].
