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29 октября 2014

Acquiring Practices and Prospects

Vladimir KONONOV, Head of Sales and Marketing, United Card Services, told us about the specifics and prospects of trade acquiring.

NBJ: Vladimir, what do you think of the current state of trade acquiring in Russia?

V. KONONOV: International experience shows that it other countries, acquiring is normally provided by processing companies. It is a business of technologies rather than that of banking. If we use numbers to illustrate this, acquiring is made up of the data transfer and protection technologies by 95 percent and of financial services, by only 5 percent. Back in the day, around 15 to 20 years ago, trade acquiring was a high-margin business, thus attracting a lot of banking institutions.

Now the situation has cardinally changed with the margin lowering significantly, which means you need to process much just to earn something. Currently the market is influenced by two contrary trends. On the one hand, the number of transactions grows, and on the other hand, the average check decreases. With this, banking institutions relocate their resources – the market players who have already achieved large proceeds from acquiring continue to develop this business, while others decide to outsource it.

NBJ: What is the trade acquiring profitability?

V. KONONOV: As I have said, now acquiring is a low-margin business. To earn sustainable profits, you need to closely monitor and clearly measure profitability of each contract. And even with this, you would receive from acquiring about 0.2 percent of net income after covering of all direct costs – IRF (payments to issuing banks), costs of using payment systems, and POS terminal depreciation. In addition, you have to cover indirect costs – subscription to and licenses of payment systems, infrastructure maintenance, qualified staff costs, and compliance with the payment card industry security standards – PCI DSS.

These costs may be covered by only large proceeds. For instance, our company has achieved acquiring income of RUR 350 Bn. in 2013. Since banks do not view acquiring as their prime business, they do not pay much attention to all key indicators and often do not have good monitoring tools. This means acquiring could easily become a loss-maker for a banking institution. And if you try to upgrade technologies for in-house processing, such large-scale investments would be covered by massive income only. That is why banks in the current turbulent times often think of outsourcing such costly business.

NBJ: What concepts does UCS use to partner with Russian banks?

V. KONONOV: When using referral schemes to work with banks, we are committed to ensure our partnership benefits a bank. Any banking institution requests high standards of servicing. We apply all efforts to ensure that each application is processed in time and our service provided promptly and all customers recived hightly service of internet acquiring. We offer equal conditions for all banks and warrant complete confidentiality. From acquiring, a banking institution usually does not receive too much income (considering low margins), yet can expand its portfolio by offering such service without investing too much into the infrastructure and professionals. I would like to emphasize – we are not a bank competitor which means we never pose a risk of stealing key customers.

NBJ: How do you maintain security of personal data and customer card accounts?

V. KONONOV: As for security of payments and personal data, our software fully complies with the latest security standard for the payment card industry – PCI DSS 2.0. All card transactions are made via SSL protocols and all data is transmitted in the encrypted form.

NBJ: What about your competitive advantages?

V. KONONOV: Firstly, I would name security and reliability of all our systems, which means fast and fail-safe transactions for all customers – whether banking institutions or retailers.

Secondly, our terminals are secure and fail-safe which means satisfaction of end users and best efficiency of businesses. During peak hours, you would be protected from transaction failures and lags.

Besides, our retailers and consumer service companies need reports for their operative management and supporting documents for financial accounting. For this, we implemented online Personal Web Portals (Personal Area) to enable our customers to monitor their transactions and use information for their reporting.

In addition, each retailer or consumer service company has been assigned a personal support manager and access to 24/7 support desk. For all customer cashiers and managers, we conduct free trainings in payment card processing, at our training center. For large network customers, we may customize our reports to ensure their smooth integration with their IT systems.  

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