The SAGA Technologies business development director gave a broad interview to the National Banking Journal

Oksana Kalashnikova told the readers of the NBJ about the history of the payment terminals market and its prospects. You can read this interview below

Payment terminals are the unique and massively underestimated Russian know-how, one of business spheres which experience rapid growth in Russia and entering steadily into the foreign markets. The multiple growth of export during the last year speaks for itself. We have a talk with the business development director Oksana Kalashnikova about the current state of affairs and the perspectives of the industry which has been underestimated by the banks for a long time.

NBJ: Oksana Aleksandrovna, how long your company has been in the market?

O. Kalashnikova: Since the beginning of 2006. It is almost seven years. But the core of the team was formed in the electronic payments market even in 2001. In fact, we stand at the origins of the terminals market.

NBJ: Everyone has to start with something. What did you start with?

O. Kalashnikova: With the development of the sphere itself. We had to explain people what is payment terminal and what are its applications, to tell that a terminal is a business unit and each installed terminal produces profit.

The first to respond were individual entrepreneurs. They used to create the networks of two-three devices. This is how the idea was tested in practice. Then it became easier – we based on the ready examples, on particular operating individual entrepreneurs’ networks.

At the end of 2008 the legal framework on payment terminals began to form. And at the same time a change in attitude to these devices took place – the banks became interested in them. Any cash turnover relates to banking sphere. And sufficient amounts of cash, even in form of micropayments, bypassed the banks.

NBJ: So, in Russia the terminals market started in 2006?

O. Kalashnikova: Yes. Though the concept appeared even in 2001, but in 2006 we entered into a completely new and not developed market which was in its infancy. A small group of people had a concept of what the instant payments are and what are its purposes. And in 2006 the market began to grow quickly.

NBJ: Did you draw upon the western experience or on your own analytical developments? How did the idea of terminal production come to your mind?

O. Kalashnikova: Terminals are exclusively Russian development and know-how. Now in the West it is just starting to develop. And they look at us, borrow our experience and adopt it.

Concerning the origin of the idea... Previously there were payment acceptance outlets with human cashier. They have transformed into terminals. It is cheaper to set one terminal on one square meter than to make a protected cash desk on 10. The idea was in the automation of payments. And, above all, the human factor was eliminated.

And terminals are not only the devices for mobile payments. It became clear very soon that the bank can increase the number of presence points, get the possibility to increase the range of services and develop banking products. For example, consider credits. The more terminals (branded presence points) a bank buys, the more locations within easy reach the clients have for credit payments. And they can pay not only in cash, but also by card. There are less arrears and finally the loyalty and the number of visits to the bank increases due to simplicity and convenience of working with bank.

Essentially a terminal is an automatic cash desk receiving cash or electronic money, which can be used for crediting the bank account and for service payments. Moreover, people who conduct cash micropayments, – are the new clientage of the bank, which has never worked with banks and which store their savings «under the pillow». There is a lot of these clients – not less than 120-140 mln people, including guest workers.

NBJ: Why this sector in particular? Your company is a vendor with full production cycle, engineering office, metalworking and own software. Why, for example, you did not choose restaurant business?

O. Kalashnikova: Why we did not choose restaurant business? Probably, because we know nothing about it. Jokes aside, first of all, our sphere is the Russian know-how, and this inspires. Secondly, it has promising outlook. At the present day there is equipment which can receive and submit cash. This can be automated exchange points, ticket selling complexes, informational terminals, terminals capable of ordering goods or services (and instant payment for them), of calling a taxi, or just of printing a map – of underground or a city district where the user is. We have such devices.

There are technically competent people who can arrange and launch production as well as to control it, people who can sell, know financial markets, ready to try something new. Yes, this is difficult, but we are not afraid of it. We are interested in it.

And after all, we feel the market growth along with our own. We started from the ground up and became the silver partners of Microsoft and platinum partners of ASUS the first among the producers of similar equipment.

NBJ: I want to ask a question: is it difficult for a girl to manage a company which has manufacturing and even metalworking?

O. Kalashnikova: Now I do not think much of this. This has become my life – everything related to metal, technics and electronics. I live in this sphere and I can hardly imagine myself anywhere else, although I have legal education. But this only helps in my work. And, after all, we have a strong, young and talented team.

NBJ: Is the competition high in this sector?

O. Kalashnikova: There was a time when companies presenting themselves as terminal producers were emerging like mushrooms after the rain. Before 2008 there were several hundreds of these companies – terminals were manufactured in almost any garage. During the crisis the sharp decrease of the number of terminal manufacturers took place. Primarily at the cost of the «garage companies», of course. In the time of crisis people began to choose suppliers more responsibly. They did not more buy equipment from the «garage cooperative» existing for half a year. Yes, this equipment is cheaper and more simple (there were precedents when the clients received an offer to buy terminals which cost less than ours), but it is significantly less reliable. There is no guarantee that this «cooperative» will exist for the next half a year or even month. So, no warranties of operability of this equipment were provided.

By the way, now in the lowest price tier there is a fair amount of such terminals from the past, which were bought, corrected quick and dirty, repainted and sold as new ones. But if someone offers you to buy an apartment in the centre of Moscow for 5 million rubles instead of 20 million, there are reasons to think about the honesty of the deal.

NBJ: How many real competitors do you have now?

O. Kalashnikova: Now there are 5-6 serious competitors which manufacture and supply the devices. But also we have to take into account the fact that in our market there is differentiation, and each company is strong in its own sphere. We are in the top five manufacturers, we are the first in some indices, and, probably, fifth in other indices. For example, upon such index as the number of client banks, we are the first. And upon the number of the sold terminals we are probably the second. I would clarify that there is a number of companies which install vending machines, coffee machines, snack machines etc. If we sum it up we will go to the third place. But these companies have less positions in the banking field.

NBJ: While preparing for the interview, I came across the opinion in press that the terminal market is oversaturated and it is choking.

O. Kalashnikova: Even two or three years ago the market was oversaturated with payment terminals belonging to individual entrepreneurs. The banks controlled not more than 5 percent of the market.

Which changes happened during the last years? The first is crisis. The second – the legislative development. Since 2010 all payment terminals except the ones owned by the bank, are to be equipped with fiscal data recorder. As a result, we get a significant amount of equipment, which is obsolete and off-market, and also not having maintenance service.

We should not forget that the terminals are reshaping and acquiring new functions, the cash-in/cash-out devices replace the cash-in only payment machines. Due to the fact that the role of coins increases, terminals get coin acceptors, sealed bank cassette for coins, also they become capable of operating with bank cards, barcodes etc.

Finally, there is a considerable growth of interest from banks. Now their role in this sector is about 20-30%. But banks do not need old terminals, they require the equipment that is modern in functions and style, that is capable of operating continuously for years, matching the image of the bank and having the client’s credibility.

The banks are gradually acquiring control over the market and their share in this field is just growing. The Moscow credit bank among the first (with Sberbank) developed the understanding that the development of terminals lies in the sphere of banks, the terminal is a unit of banking equipment which gives liquidity, recognition and increases the number of the presence points. The oversaturation of market is out of the question. In the banking sector of our market experiences a fast growth.

NBJ: Do you have regional representatives and offices?

O. Kalashnikova: We supply equipment to regions since 2006. This is related to our company’s reverential attitude to the technical oversight department. Terminals which are assembled here in Moscow, should come to any part of Russia and operate sustainably for years. The requirements to the equipment are very strict.

We have partner companies in the regions. There is a system of warranty handling – both remote and with on-site visit in any part of Russia. Moreover, large terminal networks (500 and more units) have their own team of technical experts. We have our own service of training and certifying the experts for our clients. Banks can enjoy this service for free.

NBJ: Could you say, ATMs are your technical competitor or a parallel branch of banking equipment development?

O. Kalashnikova: Initially the terminals were not perceived as the competitors for ATMs. But technics forge ahead, we have already talked about how significantly increased the functions of our products. Certainly, a terminal will have smaller cassettes for cash and lower vandal-resistance. That’s why it is called a cash-in/cash-out terminal and not an ATM. And its costs differ by several times.

These are still different segments of the market, but, beginning with the last year, we gradually enter into the ATM market, and the cost of our devices is 15-30% lower than the prices of the European counterparts. And the biggest advantage – we have created an ATM which is fully adjusted to the Russian conditions. It can also be customized according to the requirements of a client bank.

NBJ: I would like to clarify: are there in Russia companies producing ATMs?

O. Kalashnikova: Now the company, presenting a cash-in/cash-out terminals as ATMs, is entering the market. This is not correct: an ATM should be certified according to the first class of tamper-resistance. Nowadays there are only the western producers and us.

Our ATM has the first class of tamper-resistance and it is certified in Russia. It has additional functions which are tested on terminals, including operations with token money and barcode reading.

NBJ: You also produce informational terminals. What is the range of their applications?

O. Kalashnikova: I would like to give some examples. We offer electronic reception for medical institutions. For example, if we win a tender and start a project of the queuing system installation in the Moscow credit bank. We have already started supplies of the modular software-hardware complex. I would say without false modesty that at the moment it has no equals.

NBJ: Are the western companies interested in your products and do you plan to export it abroad?

O. Kalashnikova: During the last several years we have been exporting our products abroad. Now into the European Union and CIS countries, we have also begun working with the countries of Southeast Asia, Middle East and South America. We have partner companies in the former Soviet Union and far abroad.

The amount of supplies abroad has increased almost 5 times during the last year, that’s why in 2012 we increased our production spaces sufficiently.

NBJ: Let’s look ahead. What is the outlook of this market sector?

O. Kalashnikova: To maximum exclusion of the human factor. For example, a big bank from the top-20 is not interested in opening of a full office in a small town. It is far more convenient to make an automated office in such town, which would be able to supply all the range of banking services. For a middle bank this is the means to create its presence points, the means to get clients. And we know that there are banks which now come to the idea of creation of the automated offices.

Source: The National Banking Journal