From micropayments to the electronic state

The SAGA Technologies senior executive tells about the role of service automation in the life of the society on the pages of the Retail Finance journal

The automation of payments is one of the flourishing sectors of the IT-market. The express payment terminals became a part of the city landscape in a matter of years, they received new functions, made hundreds of services more accessible, from mobile payments to the transactions with bank credit loans. And in what direction will the technics develop tomorrow? We made an attempt to dip into the future with the experts from the SAGA Technologies CJSC. Our guest is the company’s business development director Oksana Kalashnikova.

tRF: Oksana Aleksandrovna, today we have an unusual interview. I think that you have never acted as a futurist?

O. Kalashnikova: It depends on what is meant. We do not read coffee grounds (laughs). But you can’t choose the business development strategy without the long-term forecasts. Consider: we began to form our understanding of the outlook of the instant payments market even in 2001-2004. The start of the market in 2005, explosive growth in 2006-2007, big increase of the banks’ role in 2008-2010, which is continuing now, – all this was generally clear and expected for us, we had been preparing for this and in fact adjusting our plans to our own forecasts.

tRF: You stood at the origins of the market?

O. Kalashnikova: We were among the companies of the first wave. When in the beginning of 2006 the SAGA Technologies began to work actively, it all was just beginning.

tRF: Let’s determine the benchmarks in the interview. How did the sphere of instant payments develop and what is it like today?

O. Kalashnikova:The development proceeded by two parallel directions. Some people were creating and developing the payment systems and payment acceptance networks, the others were concentrating on the development and production of equipment – payment terminals. The SAGA Technologies company is a vendor, producing company which has chosen the way of arranging its own full-cycle manufacturing, from the engineering office to assembly rooms and software designing.

The idea of a payment terminal is very simple. It can be said that it is self-explanatory. Because of the increase of the volume of services which require regular and, what was important in the beginning, cash payments, there was raised the question of its collection within easy reach. First of all, this is referred to the mobile telephony – this gave the impulse for the development of this sector of the market. I think, everyone remembers the first mobile phones of enormous size and one or two provider offices situated very far. Then the express payment cards emerged and the payment acceptance networks, consisting of protected cash desks with 1 – 10 persons of staff, were created.

But it is far considerably cheaper and easier to install an automated terminal on 1 square meter than an armored cash desk on 10 square meters, – including all the arrangements, agreements, costs, wages of the personnel and other aspects.

This is how the market of instant payments began. It started with a lot of difficulties, to the point that we had to explain the users what are these devices and what are their purposes. And when the general concept was accomplished, the market began to expand quickly, as we call it today. We can find other terms, including less flattering. The number of producing companies had increased to tens, then to hundreds and then to thousands. The devices of completely different quality were produced literally in garages. This disorder and «Wild West» capitalism was ended by the state market regulation, the development of rational legislation on instant payments.

In spring 2009 the law No. 103-FZ «About the activity of accepting of the individuals’ payments conducted by the payment agents» was adopted. According to this law, any payment terminals should be equipped with fiscal data recorder, except for the terminals belonging to banks. Thousands of units instantly became obsolete. Considering the fact that the «garage» companies which manufactured them mostly disappeared at that moment, there was no chance for modernization.

But this is only one side of the issue. The other was in the increase of interest of the banking sector to the instant payments market. Our first clients were mostly individual entrepreneurs. Since 2008 the banking expansion began. The cash flows passed over the banks via payment terminals. But a payment via a terminal in practice is little different from the payment via a cash desk using a transfer order. Potentially this is a classic banking operation. Moreover, a terminal is a branded presence point, a means of expansion of banking services, a means to increase the client loyalty.

Let’s think about what is a modern payment terminal. In fact, this is an automated cash desk used for public service within walking distance. It provides services of account crediting, loan paying-off, housing utility payments, mobile and fixed phone services, Internet, TV, fines etc. And, what’s more important, it is absolutely new client group for the bank. It is the people accustomed to operate only with cash, who haven’t worked with banks before and who keep their savings «under the pillow». There are lots of them actually, more than 120-130 millions, including guest workers.

At the present day the majority of retail and multidisciplinary commercial banks accept cash via the system of instant payments. During the last couple of years, the consumer loan credit payment arrangement has developed significantly. Also developed the system of credit and debit cards crediting. There are clients who use their own bank terminal for payment of services using a card, like in ATM, their number in the whole amount of micropayments is increasing.

tRF: So, the concept of terminals was born in 2001-2003, the market was developing since 2006. You assert that even at the moment of developing an idea there was a clear image of what this sector will be alike today?

O. Kalashnikova: The majority of our competitors did not have such an image. And we were initially aimed, as I noted before, at the banking sector. The company’s development strategy comprises the orientation on banks, on the development of devices with capabilities close to the capabilities of a full-service banking device, a cash-in/cash-out ATM.

This helped us in 2009, when the midstream of crisis, to offer a range of products to our clients, from informational terminals and systems which are based on them (help desk, queuing system) to cash-in/cash-out terminals, equipped with the systems of barcode and card reading, cash and coin acceptors. We have such exclusive designs, which we cannot discuss because of the agreements with our clients. But you can believe us, these are very interesting and advanced devices.

tRF: And how big is the share of banks in this sector? How did it change over time, what are your forecasts?

O. Kalashnikova: It has been changing from zero to 30% in my opinion at the present day. In the nearest few years, maybe even in the nearest two or three years, I think, the share of banks will reach the 80-90% level. This means that nearly all the payments market will belong to banks.

One more factor which has influence on the increase of the market volume and the share of banks in it. Now the concept of a universal electronic card, national payment system and state services portal are getting legislative framework. What are the new capabilities for the banks? We will not consider payment and social capabilities of the universal card because it is irrelevant to our topic – they have bean already implemented in social, bank and transport cards. The main aspect is that it will be an identity card, including in the electronic environment. Finally, it will remove the essential hindrance for remote contract signing, what banks face every day, and still cannot overcome. This hindrance is that the contract is signed if the client submits the passport.

tRF: So the future lies with fully automated services?

O. Kalashnikova: Certainly! A large bank is not interested in opening a full-service office in a small town. But it can open a fully-automated office with minimal amount of staff. It is an option for promotion for any bank, an option to establish offices at the local level, points of presence which do not require big expenses.

In general, I see the future in the following manner: a banking office will be a small room with a security guard and a couple of managers. There will be a row of cabins similar to talk rooms on the telegraph. Do you remember them from the Soviet times? In each cabin there will be a full-service terminal with a camera, capable of providing video call to any specialist of the bank. And the specialists could be situated in any part of the world: in Kiev, in Zurich, in Moscow etc. The point is that the system enables to use such organizational principles of client service.

tRF: How high is the conference in this market sector?

O. Kalashnikova: It is not limited. I can list the areas of activity in which we operate as the supplier of hardware-software complexes. Hospitals and other medical institutions, schools and vocational colleges, housing utility services, road police, law enforcement, courts, technical inventory bureaux, railway and bus stations, cinemas, local governance agencies, prefectures, Mayor’s offices, different public bodies which receive citizens.

Ways of automation can be various: from arrangement of electronic reception in a hospital and electronic queuing system in public places, to the capability to pay services instantly, receive documents from an informational terminal, have a link with consultant or a specialist via audio and video call.

But in fact there is no magic in all that. Many of the things noted by me, had been implemented earlier and now seems quite usual. For example, there are company call-centers where a client can call from fixed or mobile phone and, having chosen the necessary specialist in the voice menu, receive his advice.

But the issue is not only about the automation of these institutions. Of course, from the external side this will look like a set of informational terminals. But we are an integrating company. The issue is not hardware, there should be also the special software in a box solution. Now we operate in the sphere of integration of such terminal networks into a unified worldwide structure.

tRF: Wait a minute, the question is about the creation of a sort of global network of informational and payment terminals?

O. Kalashnikova: Yes. For example, a person is able to make a medical appointment in the entrance of his house, in the street or in a post office. He can make an arrangement to the chosen doctor in a chosen hospital at a chosen time. For confirmation he receives a printed quittance. Maybe, a this is not necessary, because the system accounts the time of visit and the number of the people registered. But the human psychology should be considered anyway – the electronic transactions have to be confirmed by some physical document.

In a similar manner a person can enroll a child to kindergarten or school. He confirms his identity, gets the information about the number of free places in kindergartens and schools, chooses the needed institution and submits an application.

tRF: It is not clear, how this relates to banks.

O. Kalashnikova: Directly. The banking services are the engine of the terminal network evolution. All the state services are in fact non marketable. And the installation of this expensive set of equipment for state services is lossmaking, this is unattainable burden on the budget. And if we give pride of place to banking services, any bank will be glad to buy and install this equipment. Considering that it will be given an option to deploy the network of its devices in hospitals, passport offices and other public places.

tRF: Good. But now the internet-banking is quickly developing. Aren’t you afraid that the terminals will become history?

O. Kalashnikova: No, we don’t see this threat.

A simple example: people receive salaries on the card and at the end of the day they line up to the ATM to withdraw cash. Why? They explain this simple: people withdraw cash because the cards are not accepted at the market (laughs). One more example, a bit funny: people withdraw cash, and then, after 100 m, pay for mobile services via a terminal. This is just psychology: to feel money in hands and to administer it.

The internet-banking is developing, and this is very good, we can only be glad about this. But we should understand that there are social gradation even in big metropolises, whether it be Moscow, New York or Shanghai. The entire districts live beyond the sphere of electronic payments and bank cards, within the sphere of cash turnover.

And even if we consider the most futuristic option if money will be completely out. Even in this case a terminal will not become history, it will evolve. No matter whether a person has a banking card or an implanted microchip. To buy a ticket for a train or a plane he will need (in particular, if this decision is spontaneous), he will need a «point of presence» – an automated device of some kind which supplants a cash desk. It is possible to set the destination point, pay and receive ticket in this device.

It is important to give person a choice. He can execute the needed transaction using a personal computer or a smartphone, and also by a specialized device – a terminal, infomat or an ATM. It depends on the person’s habits and the current situation. You may call it a question of personal freedom.

tRF: So, the computerization is the thing of the future. Oksana Alexandrovna, this was a very interesting conversation, which opened interesting prospects, I must admit. I hope that we will see this electronic world in the nearest future.

Source: the Retail Finance