Access to Financial Services: Scenarios for Russia

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(No Transcript)
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Access to Financial ServicesScenarios for
Russia

• Sofia, Bulgaria
• 1 June 2007

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Contents

• A financial system widely accessible to the
  public
• Programs and plans of financial market
  development
• Russias banking system and financial market
• Russias payment system
• Legal regulation of relationships in the sphere
  of remote delivery of financial services to the
  public and SME
• New regulatory initiatives

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Access to financial services in Russia
around 20-25 of the public
Time deposits with banks
around 10 percent of the public
Consumer credits
less than 0.3 of the public
Mortgage loans
no more than 7 of the public
Transactions with securities
around 2 percent of the public
Purchase of shares in Mutual Inv. Funds
no more than 10 of the demand
Microlending
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Bank branches(per 100 thousand population)
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Access to banking services in Russia
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Financial services for all

• Population
• Deposit (saving) products (incl. housing savings)
  
• Credit products (incl. microfinance and mortgage
  loans)
• New payment methods
• Remote access to accounts
• Micro-businesses
• Start-up uncollateralized microcredits
• Microinsurance and mutual insurance
• New settlement mechanisms
• SME
• Uncollateralized microcredits
• Venture capital
• New settlement mechanisms

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Better Access to Financial Services

• More types of financial intermediaries
• NDCO
• Cooperative banks
• New forms of microfinance institutions (MFI)
• Credit brokers, incl. mortgage credit brokers
• Collection agencies and other loan
  infrastructure
• Cheaper customer services and lower market entry
  threshold (microfinance)
• Use of technology (mobile phones, internet,
  card-based payment systems)
• Improved financial literacy of the public
• State-run SME and microbusiness support programs
• Refinancing of financial intermediaries (Central
  Bank commercial banks MFI)
• Branchless banking (remote delivery of financial
  services)

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Branchless Banking

• Postal infrastructure as a tool used by the
  finance market
• MFI and retail chains as bank agents
• Cards expanded use of cards (cash-in and
  cash-out ATM)
• Payment terminals
• Using the capacities of mobile phone operators
• Internet-based systems

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Payment methods and forms 1
Payment methods
Money
Surrogate money

• Cheque
• Prom. Note

Cash
Money transfer
E-money

• Bills
• Coins

• Bank account balances

• Smart card balances
• Network payment system balances

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Payment methods and forms 2
Payment forms
Cash
Non-cash payment
"Semi-cash
Payment by cash deposit to bank account
Conventional settlement by transfer

• Payment by transfer
• Notes
• Coins

• Payment by transfer of
• Smart card balances
• Network payment system balances

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Russian Post

• More than 40 thousand branches of the federal
  postal service
• 27 post offices per 100 thousand people
• 3.2 post offices per 100 thousand people
• Possibility of money transfer without opening a
  bank account
• By the Law on Postal Communication of 17 July
  1999 (No 176-FZ), federal postal service outlets
  are allowed to transfer money on behalf of
  natural and legal persons, i.e. accept, process,
  transport (transmit), and deliver money using
  postal and wire networks

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Post vs. Banks

• Amendment of Article 7 of the Federal Law
• on Combating Legalisation (Laundering) of
  Proceeds from Crime and Financing of Terrorism
• Opening a bank account in physical absence of a
  natural person,
• Identification and physical presence of a natural
  person in the post office

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Plastic Cards in Russia

• Issued by banks more than 60 mln. cards
• Turnover of international plastic card systems
  75 bln.
• Total of cash drawn from plastic cards - 2.6
  trillion rubles (50)
• Payment for products and services 174.1 bln.
  rubles
• Payment for products and services account for 7
  of all card transactions

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New Regulatory Initiatives Cards

• Mandatory acceptance of cards in retail stores
• Draft Law amending Article 284, Part Two of the
  RF Tax Code and art. 26.3 of the Federal Law on
  General Principles of Legislative and Executive
  Government in Russian Federation Subjects
• Taxation of plastic card transactions customer
  loyalty programs (cash rebate)
• Draft Law amending Chapters 23 and 25, Part Two
  of the RF Tax Code

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Payments Using Mobile Phones

• Managing one's bank account
• Without explicitly opening a bank account (mobile
  wallet, web-based payment systems)

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Mobile Wallet
Mobile phone operator
Seller
Payment arrangement
SMS
BANK
Product/service delivery
Client
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Web-based Payment e-money

• Web banking managing one's bank account over the
  Internet or other communication channels
• Without opening a bank account (web-based payment
  systems)

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What is a bank operation?

• List of bank operations (see Appendix 1 to the
  First and Second EC Banking Directives)
• Article 5 of the Russian Law on Banks and Banking
• Banking operations include
• 4) performance of settlements ordered by
  natural and legal persons, incl. correspondent
  banks, through their bank accounts
• 9) performance of money transfers ordered by
  natural persons without opening a bank account
  (except mail orders).

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End to Banks' Monopoly on Payments
(Desintermediation)?

• Article 13.1 of the Law on Banks and Banking
  performance of select banking operations by a
  commercial institution, which is not a credit
  institution
• Commercial institutions may accept cash from
  natural persons in payment for services such as
  electronic communications, rent of housing and
  utilities
• Conditions for acceptance of cash payments
  agreement with a bank and agreement between the
  bank and the service provider

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Or Banking Outsourcing?

• subcontracting an external specialized
  institution (service provider) to perform select
  types of services, to develop new areas of
  operation
• (The Central Bank Letter of 24 May 2005 No 76-T
  on Managing Operational Risks of Credit
  Institutions
• method used to improve subsidiaries' performance
  through focusing efforts on core activities and
  subcontracting select types of work (services)
  from specialist organizations (individual
  entrepreneurs), with corresponding reduction of
  staff
• (Regulation of Russian Railways LLC of 27 April
  2006 No 530 on the Use of Outsourcing by RR LLC
  Subsidiaries)

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Emergence of Branchless Banking new
opportunities for Russia
                                                
                                     
 
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• Mikhail V. Mamuta,
• President, RMC
• Oleg M. Ivanov,
• Expert, Russian State Duma Committee for Credit
  Institutions and Financial Markets Vice
  President, Association of Russian Regional Banks
  "Rossia"
• mmamuta_at_rmcenter.ru
• oivanov_at_rol.ru