Founded in 2003, ChronoPay was one of the first to enter the online payment market in Russia. In this exclusive interview, the company’s general director Jeroen Smit shared his view on the Russian e-commerce market and its appeal to international e-commerce companies. He also commented on the consequences of the legal matters which involved Chronopay’s founder Pavel Vrublevsky in the past.
— The Russian payment service market has seen many changes since you were appointed as Chronopay’s managing director in 2011. Which of these changes have been the most significant?
The Russian payment market has seen many changes during the past years and most of them are positive. The market is better regulated. An example of this is the recently introduced legislation on personal data storage.
Russia has a huge growth potential in regards to e-commerce and the related internet payment industry. Historically, Russia was a cash-economy with low trust, from a consumer perspective, in the banking systems. This is changing fast with the new generation seeing great benefits in bank cards. The move ‘from brick to click’ has started to pick up pace in Russia and is developing fast.
— To which extent have the Russian operations of your clients been affected by the crisis since 2014, as international tensions were growing and the ruble fell sharply?
In general, the whole Russian economy suffered from the crisis which started in 2014. The sharp drop of the ruble hit every business in Russia. On top of that, the imposed sanctions led Western European financial institutions to take a passive role towards Russia.
However, e-commerce in Russia remains a growing market and now that the value of the ruble seems to be stable and tensions seem to stabilize, the e-commerce industry is showing healthy growth numbers. As a consequence, the interest of Western European e-commerce businesses is on the rise again.
Recently, for example, H&M fashion successfully launched its online webshop in Russia. Many western retailers with a physical presence in Russia are following.
It is true that Russia, even though she offers the same kind of potential as Asian and Latin-American markets, has not attracted the same level of attention from international e-commerce players over the past years. Many e-commerce businesses are a bit hesitant to enter as they are not familiar with the rules and regulations. Here is where we can offer our expertise as we are on the Russian market since 2005.
— Chronopay is in the particular situation of a business operating mainly in Russia with headquarters in the Netherlands. Please explain.
Chronopay considers itself as an Internet payment service provider (PSP) operating internationally and one of the very few with strong connections in Russia. In this way we are capable of offering payment services for companies which are located in Western Europe and need to make full use of the available payment methods in Russia and vice versa.
Today the company consists of a holding company headquartered in The Netherlands and representative offices in several countries. One of the offices is located in Moscow, Russia.
Our IT-back office is located in Moscow, and is complying with the requirements of the recent law on personal data storage and of course is fully PCI-DSS compliant.
— How many transactions do you process? Which turnover do these transactions generate?
Chronopay’s online payment platform is capable of processing more than 3,000 transactions per minute.
— Tell us a bit about your client portfolio
Our client portfolio is very diverse and covers many industries, like travel, telecom, cosmetics, fashion, retail, forex/betting etc, etc.
Among our customers are both corporations and representatives of mid-sized and small businesses. We do not divide them into categories or levels of significance.
— A few years ago, Chronopay’s founder and former CEO Pavel Vrublevsky was sentenced to two-and-half years in a Russian penal colony, having been accused of organizing a cyber attack on a rival payment processing firm. What has been the impact of this tumultuous story on Chronopay’s business?
Very soon after the accusations were made, it became clear that they were addressed at Mr Vrublevsky personally and not involving the company itself.
Chronopay continued business as usual and our clients stayed with us because of our excellent services. The reputational damage of all of this seems more caused by certain journalists who jumped on the story in those years; and one has to consider if all that is written reflects the truth.
We recently welcomed The Moscow Times as a new client which says it all and we are rapidly expanding our base of well-known e-commerce clients in Russia as well as in Western Europe.
[Mr. Smit declined to comment on Vrublevsky’s current role or ownership in the company.]
— What are your plans for the future?
Domestic e-commerce is rapidly growing in Russia – with growth numbers exceeding 25% annually – and I believe that this will bring an important contribution to the growth of the company.
In a cross-border persective, it is of course a different story. But we are strongly noticing an increase of interest of Western-European e-commerce businesses who are expanding their activities cross-border. Russia offers an interesting potential here, and our company is the perfect solution for these companies to manage payments in Russia through our Dutch entity.
