On May 16, amendments to the Russian legislation on payments came into force with potentially far-reaching consequences for e-payment and e-commerce companies working with Russian customers – including those operating from abroad.
The amendments, included in an “anti-terrorism” package adopted by the Russian parliament on May 5, make user identification mandatory for electronic payments in certain situations where anonymous payments were previously allowed.
Three levels of transactional anonymity are now established:
- The anonymous use of electronic payments remains possible for individual transactions under 15,000 rubles (nearly $440), with a monthly limit of 40,000 rubles ($1,170). The change here is that anonymity is no longer permitted for money transfers of any size between individuals, and as payments to foreign e-merchants operating without a Russian representative.
- In these last two cases, users are required to identify themselves under a “simplified” procedure. Users must provide their mobile phone number, their passport number, and a secondary identification number – either their tax payer number (ИНН), individual insurance number (СНИЛС) or medical insurance number (OMC). Under this procedure, individual transactions can be made for amounts of up to 60,000 rubles ($1,750), with a monthly limit of 200,000 rubles ($5,830).
- Fully identified users – those who present their original or notary certified passport – can make e-payment transactions of up to 100,000 rubles ($2,915).
These new rules are significantly less restrictive than those initially considered. In their first reading earlier this year, the amendments established a threshold for user identification in all types of transactions at 1,000 rubles (around $30).
However, intense lobbying from payment industry players and associations resulted in a more liberal – are arguably more reasonable – approach to fighting terrorism.
Good news for domestic payments?
Anastasiya Muhina of RBK Money believes that “the industry will not suffer significantly.” She sees “no reason for the number of e-currency users to decrease significantly” since the average [electronic payment transaction] is between 1,000 and 5,000 rubles” – well under the 15,000 ruble threshold, she told the Russian business daily Vedomosti.
WebMoney, one of the top three Russian e-currency companies, noted that it introduced user identification by mobile phone number several years ago – which already fulfils a part of the new requirements under the “simplified procedure.”
In an exchange with East-West Digital News, Nadezhda Kiyatkina of Yandex Money, another leading e-currency player, saw a “positive change” in the fact that users are now able to spend up to 60,000 rubles in one transaction under the simplified identification procedure. “A lengthier full identification procedure was previously required for any payment above 15,000 rubles,” she noted.
Kiyatkina added that Yandex Money warned its users about the new rules some time ago, and they are actively upgrading their accounts.
The company has also begun integration with government databases to verify users’ identification numbers. This procedure, which is supposed to be completed automatically and instantaneously, will become mandatory on November 1.
System integration in a hurry
Meanwhile, the new rules pose problems even beyond the particular case of interpersonal money transfers and cross-border payments.
The amendments came into force a mere 10 days after their adoption, which obviously did not leave enough time for payment operators to adapt their systems. As a result, some operators simply suspended services related to certain types of electronic payments.
Thus, the major Russian mobile operator Beeline has informed its users they can no longer make transactions using their VISA-RURU-Alfabank virtual bank card. Nor can they transfer money from their mobile accounts to the e-wallets of Yandex Money, WebMoney, VISA-Qiwi Wallet, and other e-currency platforms.
“It will take at least 3-4 months to enforce and implement a compliant identification process for those companies who already have it in place, and up to a year to for those companies who currently do not have it,” stated Oleg Poskotin, VP of Finance at Xsolla, an international payments service provider.
Unknown future for foreign e-merchants
Xsolla also fears “a large drop in revenue” for foreign e-merchants due to the new user identification requirements on small transactions.
Indeed, Russian e-currencies, as well as cash-in kiosk operators like Qiwi or Cyberplat, have a non negligible piece of their business related to cross-border payments. Millions of Russian users on international gaming sites, and online services like Skype, have until now also paid for their accounts anonymously.
It is hard to predict at this stage to what extent the new identification requirements will affect these businesses. However, payments with bank cards – which represent a significant part of cross-border transactions – are not affected by the new rules, since they already imply user identification.