Exclusive interview with Jane Zavalishina, CEO of Yandex.Money

The Paypers: Russia has often been described as a “cash land”, a country with a cash-based economy and in which the vast majority of retail payments are made in cash. In this context, what is the current state of online payments and in what way does the country`s e-commerce and online payments market distinguish itself from the rest of Europe/the world?

Jane Zavalishina: Russian e-commerce market is indeed developing differently from Europe and the rest of the world. As you correctly mentioned, Russian internet users have definitely preferred cash on delivery over any other payment method for many years. The situation finally changed in 2008, when the trust barrier was broken and customers began making advance payments for their orders. The share of e-money preference grew almost 4 times, at the same time card payments share changed very little, and cash preference decreased by 30%. Russian e-commerce is steadily growing in terms of e-money users, unlike in Europe and rest of the world, where the most popular payment option are banking products – credit cards, direct debit, etc.

The Paypers: Yandex.Money has been developed for the unbanked and underbanked consumer segments. When was the company founded and what can you tell us about its value proposition, payment volumes over the years, number of e-wallet owners, etc?

Jane Zavalishina: Yandex.Money service was launched in 2002 and has been evolving ever since as simple and fast payment method for Russian internet users. Our core customer features are convenience (simple and fast checkout), global access (web-interface available from anywhere 24/7), user safety (double password authorization or single use code authorization with token) and reputation (Yandex.Money meets high quality requirements and standards of all Yandex services). As of April 2010, we have more than 5 000 000 e-wallet owners, 2 000 Russian and international merchants, and payments volume that increases by around 50% every year.

The Paypers: What are the main obstacles for e-payment collection in Russia and what solutions does the Yandex.Money payment system propose in this respect?

Jane Zavalishina: Card fraud and limitations for internet-acquiring associated with it give the most trouble. Unfortunately, online card fraud is very high in Russia, so merchants are torn between paying penalties and setting limitations for card transactions. Customers are on the losing side here – they have normal credit cards loaded with money but can’t use them either because the issuing bank transaction refusal or acquiring bank fraud-monitoring mechanisms. Although the majority of Russian population has plastic cards, they are mostly payroll cards and many people do not like the idea of using their precious card online. Yandex.Money is basically a fail-proof solution – all payments are irrevocable thus free of fraud and chargebacks, as all funds in the system are prepaid. Moreover, we have direct agreements with quite a few banks and their cardholders can upload funds to e-wallets without any extra charges and without giving out their personal information. There also many other ways to top up – cash-in terminals, prepaid scratch cards, bank transfer, etc.

The Paypers: The service is aimed at Russian customers and the only currency which is operated in Yandex.Money system is the Russian ruble. Have you ever considered the possibility to expand on international markets?

Jane Zavalishina: As long as Russian e-money market and our service grow by 40-50% a year we don’t think focusing on foreign markets is timely. When we are sure we have maximized our share of the market here, we will definitely look into geographical expansion. Plus, although the system currency is Russian Ruble, you can pay for many foreign services like Skype and online games.

The Paypers: October 2009 marks the date when the Electronic Money Association (AED) was set up. What is this organization`s goal and what can you tell us about Yandex.Money`s activity as one of its members?

Jane Zavalishina: The Russian E-money Association (REMA) was founded with the same objectives as similar organizations around the world, for example the European EMA. The REMA members are working together to create industry standards and market transparency, as well as to find better ways for cooperation and raise e-money awareness among merchants and customers. One of the duties of REMA members is participation in governmental work groups that are developing drafts for e-money legislation. Yandex.Money is the most active of the 5 founders of the REMA.

The Paypers: The use of e-money has grown in popularity in Russia, but as the government begins to call for more regulation, such a growth could be stalled, according to some media reports. How do you comment on such affirmations?

Jane Zavalishina: Any industry development inevitably comes to a point when it needs to be regulated. Increasing transparency and standardizing relations is not a restrain but a driver, provided such regulations are aligned with industry needs and specifics. Foreign colleagues’ experience shows that separate e-money payment systems licensing as nonbanking and noncredit organizations helps making e-money services better, more open, and user-friendly.

The Paypers: Could you indicate some of the challenges to e-commerce development in your country?

Jane Zavalishina: The main issue of Russian e-commerce industry is delivery. Russia is a huge country and transporting the goods from the storehouse to customer home becomes costly and risky, depreciating all marketing twists of e-merchants. The order may be damaged, lost, sent to the wrong address, or get there three months past the deadline. Parcels from abroad suffer even more at the customs clearance; delivery time becoming intolerably long.

The Paypers: In March 2010, eBay has opened its local website for the Russian users, as part of its strategy to boost international transactions. According to some media reports, the company has held talks with some local payment companies, among which Yandex.Money, regarding a possible collaboration. Do you think that eBay`s initiative will succeed, taking into consideration the main problems it might face, namely payment methods and delivery?

Jane Zavalishina: eBay’s level of success in Russia is directly linked to its ability to overcome the delivery and payments acceptance problems. As far as I can tell, Russian delivery companies aren’t quite ready to handle and deliver vast amounts of small parcels from abroad across the whole country. The local eBay-like projects that have been on the market for some time and do not have any payments acceptance issues are far from reaching the level of success comparable to eBay in USA.

The Paypers: In recent years, the aggressive development of social networking websites has had a significant impact on the way consumers around the world interact with each other and what products they buy. Is social media playing an important part in the buying decision of internet users in Russia?

Jane Zavalishina: Not yet. Social media in Russia is mostly grounds for networking and p2p opinions exchange on goods and services. There is no Russian Yelp yet, and it’s not quite clear what Russian social network it could grow out of. Apparently, we need to let social media develop from being a platform for blogging, connecting with people and photo hosting to a life-reflecting environment.

The Paypers: In your opinion, to what extent can online payments and e-commerce help Russia boost its international competitiveness?

Jane Zavalishina: E-money itself is a huge driver for e-commerce with its easy payment process for user and risk-free payments acceptance for merchant, generating fast turnover which is profitable economy-wise. Russian e-commerce and e-payment progress is indeed moving faster than its business infrastructure and legislation. Although this progress will most likely not echo on country’s foreign policies, but will hopefully help Russian customers take advantage of the benefits available to other countries’ residents.

The Paypers: What factors influence consumer adoption and the use of payment options for online shopping?

Jane Zavalishina: The key factor defining customer’s payment system choice for online shopping is accessibility. It’s even more important than user-friendly interface and security. The less is the number of actions needed to complete a payment, the more preferable is the payment method. Ideally, such actions are online and real time and do not involve bundles of paper or standing in line at the bank office. E-money is a winner again.

The Paypers: Is it fair to say that the Russian consumers receptivity to online purchasing/online payment has changed throughout time? How do you think the e-payments market will evolve?

Jane Zavalishina: It definitely changed. On the one hand, the users are more open to online shopping now. They are more willingly using remote management systems for their accounts and payments, easier finding their way around online shops, web services, and virtual products. The number of internet users and thus customers is skyrocketing. At the same time, customers are drawn to easy-to-use, clear, and obvious instruments. The least clicks and downloadable software that must be individually configured - the better. Sooner or later, making an e-payment will become as easy as taking a quarter out of the pocket or swiping a card.

The Paypers: Any future plans?

Jane Zavalishina: We are most attentively looking into new authorization technologies, something easier but still safe; actively discussing integration options with different digital systems used every day by our customers – from State Road Safety Inspectorate billing system and utility bills to tax payments. We are sure that the time that e-money becomes as common among modern Russians as a payroll card is near, and we are getting ready for it.