Earlier this year, after speaking at the Russian Internet Forum at St. Petersburg, I put together a blog post entitled Russia Open to Performance Marketing, But Lacks Basics. In it I wrote that one of the basics that is lacking is payment-related, namely the fact that “some 90% of Russia’s payments for online orders are cash on delivery”.
This morning, as I was discussing the specifics of Russian ecommerce with an Israeli colleague, a hypothesis occurred to me, and I’d like to share it with you today.
Why is it that Russians prefer to avoid payments by bank cards?
I believe that the reason may be in the fact that the vast majority of plastic card holders have a very specific card in their hands/wallets — a so-called “salary card”. Russians were introduced to salary cards around the dawn of the 21st century, and unlike any other type of plastic these cards quickly took root. No surprise there. People had little choice: either learn what it is, and how to use it, or forget about your salary (which started being paid to the bank account tied to your “salary card”).
As a result, (a) 80-90% of all bank cards in today’s Russia are salary cards [source], (b) people learned how to use them, but in 90-98% of the cases use them only to withdraw money from ATMs [source], and (c) even though the market of credit cards is developing dynamically — in 2003 there were only about 200,000 credit card holders in Russia, while in 2010 some 9,000,000 [source] — 85% of bank card holders believe that one card is more than enough [source], and taking the stats from point “a”, for the vast majority that one card is naturally their “salary card” (essentially, a debit card).
Now, a “term” which I find perfectly illustrative of what causes problems with
people agreeing to make payments over the Internet is how Russians often describe how they get paid. “I get paid «на карточку» (on a [bank] card)” many say… And since we’re talking people who for years were carrying only cash in their pockets, the “card” then becomes an equivalent of that cash wad for them. And who would entrust a stack of cash to an online processor?
I know, my blog is being visited by many Russians, as people who work in/with Russia. If you have something to comment about the problem of online payments in Russia, the comments are all yours; and I would love to hear from you.