Andrey Mikhaylishin: "Sanctions have prompted a desire to detach from Western payment ecosystems"

      How a domestic startup is solving the problem of international settlements for businesses, Russians abroad and foreigners

      Photo: provided by the press service of the Association of Russian Banks

      Creating payment solutions for international settlements requires overcoming complex technical and regulatory barriers. Today more than half of importers and exporters in our country experience payment problems. The strong growth in tourist flows also confirms the prospects of this direction. In Russia a payment service was created for B2B settlements with foreign partners, for foreign tourists and for our compatriots abroad. The tool should allow Russians to pay with Mir cards abroad, and foreigners to use Visa and Mastercard in our country. How the difficult technical tasks are being solved and how compliance with regulatory requirements in different jurisdictions is ensured was explained to Realnoe Vremya on the sidelines of the International Banking Forum by Andrey Mikhaylishin, CEO of JSC "BRICS Pay" — the company developing payment solutions for international settlements.

      "We are working on creating gateways with national payment systems of friendly countries"

      — Andrey Yuryevich, what are the main challenges when integrating BRICS Pay with banking infrastructure? Are you considering direct integration with POS systems?

      — We are considering two approaches to integration. The first is using existing payment infrastructure. This minimizes investment and speeds up time to market. However, this affects the financial model due to differences in fees.

      The second approach is direct integration into POS software. It opens up opportunities for more interesting tools. The technology supports different QR-code operation scenarios, including the ability to pay without internet. This is important for international tourists who often do not have a stable connection while roaming.

      As for standards, we are technologically flexible. If a country has a national standard, we support it. If not — we offer to implement ours. We choose the most effective solution for each market.

      — Which payment systems are priorities for connection? What difficulties are you encountering?

      — The key task is to expand the list of countries whose citizens will be able to use the service. We are currently working on connecting several international payment systems.

      The main priorities are the countries of the Persian Gulf, from where a large flow of tourists comes, and China, where the introduction of a visa-free regime is expected to bring a significant stream of travelers. This involves, in particular, integration not only with WeChat Pay but also with Alipay. There is a company, NetsUnion Clearing Corporation (NUCC), under the management of the People’s Bank of China, that unites both services. India’s payment system UPI and the systems of Central Asian countries are also of interest.

      The main difficulties are not technological but rather regulatory. We are working on creating gateways with the national payment systems of friendly countries. We plan for the launch of the main BRICS Pay service at the International BRICS Municipal Forum in St. Petersburg on October 29–31, and soon after that BRICS Pay Wallet will be announced.

      provided by the press service of the Association of Russian Banks

      Countries began developing national payment systems, engaging in import substitution

      — Is the use of blockchain or central bank digital currencies planned?

      — As for central bank digital currencies — that is the prerogative of regulators. We are technologically ready to make a gateway for such solutions when they become available to citizens.

      The use of blockchain in retail payments does not yet make practical sense, because national payment systems do not operate on that technology. That would complicate integration without real advantages.

      — How is economic efficiency ensured with low fees?

      — Economic efficiency is achieved through minimal marketing costs and the fact that the main investments in development have already been made. Monetization is built on merchant fees and a small fee on currency conversion for the user.

      — How does the system cope with currency regulation in BRICS countries?

      — We work through financial institutions — banks and payment systems that already have licenses and operating mechanisms in each jurisdiction. We don’t invent anything ourselves; we follow the requirements of national regulators and the rules of payment systems.

      — How are data security and confidentiality ensured?

      — We devote key attention to security. The user undergoes a full verification procedure. Technologically the system is built to the security standards of payment systems. We plan to undergo a voluntary audit.

      Regarding data localization, requirements are fully complied with in each jurisdiction by choosing appropriate technology partners.

      — How has the development of national payment systems and import substitution in the financial sector affected competition in the cross-border payments market?

      — This question can be answered from two sides. I’ll start with the BRICS agenda, broadly the international one. Sanctions against the Russian financial sector and secondary sanctions against financial players in other countries have undoubtedly led to a desire among countries to distance themselves from Western centralized payment ecosystems, infrastructures, and payment systems, both in retail and in the financial sector, in business-to-business settlements. Countries actively began to develop and create their national payment systems, directly engaging in import substitution. Then the question of their interoperability arises and the possibility of seamless payments between national systems.

      provided by the press service of the Association of Russian Banks

      "A lot of agents have appeared. This is not the place to talk about import substitution"

      On the other hand, you can look strictly at the Russian market. And if we talk about retail, the infrastructure that NSPK long built, creating bilateral links modeled, say, after China UnionPay, became unusable after stringent restrictive measures were introduced against the Russian financial sphere. And to date no other infrastructure has been created that would allow Russians to pay abroad or foreigners to pay in Russia so smoothly. There are various services that, for example, allow Russians to be issued a foreign card, but it usually costs a certain amount of money, from 20,000 to 40,000 rubles, or sometimes requires personal presence in countries, say in the near abroad, Central Asia, where such cards are issued. Some issue corporate cards, but then you must understand that the money is not yours but belongs to the company issuing the cards. In general, there are certain instruments, but each of them still raises questions.

      One can also look at B2B settlements. Unfortunately, no systemic solutions have yet emerged that would fundamentally solve the problem of financial restrictions and the collapse of correspondent banking relationships. A multitude of agents has appeared, each offering money transfer solutions. Now one, so to speak, super-agent A7 has emerged that is gradually taking over the agency payments market. This is not the place to talk about import substitution. Many payments use USDT or the good old promissory notes.

      — Have new market niches formed and which players occupy them?

      — Perhaps there are three big niches. The first is B2B settlements. I would say this niche is still partially occupied by Russian banks such as VTB and Sber, which have overseas infrastructure: foreign branches and correspondent banks through which they, in limited volumes but nevertheless, continue to provide cross-border payment services. It is also impossible not to notice agent A7, which quite a large number of smaller agents have reoriented toward; they provide their liquidity or receive customers from them and conduct such payments for them. I would also note a large number of different agents; major exporters such as Nornickel and Rosneft have created their own infrastructure, and logistics companies that, aside from commodity logistics, have now mastered financial logistics as well. Therefore, the time has come for systematization and fundamental solutions for cross-border settlements.

      provided by the press service of the Association of Russian Banks

      The second niche is retail payment infrastructure. We see this for foreigners in Russia as providing an easy, seamless service allowing them to pay for purchases in the Russian Federation. Not having to obtain a Russian MIR card in a bank and then somehow try to top up that Russian card account. That takes a lot of time, and in large part they open accounts in sanctioned banks, which can also in one way or another indirectly affect restrictions personally against the holder of the Russian card.

      And the third niche is Russians paying abroad. Here, as I said, most large banks offer services to obtain such a card, but this entails, for example, if these are cards of countries not part of the EAEU, the requirement to notify the tax authorities about opening accounts. To report if turnover exceeds a certain size established. If these are corporate cards, as I already mentioned, there is a risk of losing your own money — you cannot keep large amounts on such cards and should top them up immediately before spending.

      Interview conducted by digital economist Ravil Akhtyamov