Russian Savingsbank
Issuer
Savingsbank of the Russian Federation
System Description
Nationwide Interbank Payment System
Business Sectors
Retail, Salary, Wholesale Networks, Petrol Stations, E-Government (Social Smart Card), Loyalty, Online Trading with Stocks
Facts & Figures
Started in 1993 with 3000 cards and 30 POS
Status 2/2008: 3 200 000 cards, 23 900 POS, 12 000 ATMs
Why Shift To Smart?
- To offer cashless payments to its mass clientele
- To reduce cash-related fraud
- To reduce the cost of handling and processing cash
- To generate additional revenue from a float account
- To enable full tracking of transactions that pass through the system
- To implement a system that is easy to maintain, operate and administer
- To offer new card-based customer services
Background
The Savings Bank of Russian Federation was founded in 1841 and is the oldest financial corporation in Russia. Such a long period of service on the Russian financial market clearly confirms its high reputation as a reliable and stable partner.Enabling clients to pay with the help of a plastic card is an indispensable part of a modern bank's services. This service becomes especially relevant if a bank prioritizes the servicing of mass markets from the very start. Traditionally the Savings Bank (Sberbank) of the Russian Federation is such a bank. As the biggest banking institution in the country, based on the number of private and corporate clients as well as infrastructure, the Savings Bank of the Russian Federation intended to introduce a secure, reliable and profitable card payment system guaranteeing the successful functioning in every region of the country and the possibility to continuously expand the system. Meeting these objectives, neither a magnetic card based system nor a system requiring online certification at the point of sale proved viable. In 1993 the Savings Bank of the Russian Federation decided to deploy a smart-card-based project in order to profit from the advantages of cashless electronic payments. The pilot project provided 3,000 DUET smart cards to some of the Sberbank customers. The cardholders could use their cards for basic financial transactions (funds deposit, cash withdrawal, account statement, etc) in two main cities of the Russian Federation: Moscow and Saint-Petersburg.The bank was aiming at “the successful attraction of funds from the public, offering payment and cash services to physical as well as to juridical persons as its main objective within its retail policy”.
Pioneering the Russian Payment Market
About 85% of all funds deposited in commercial banks throughout the country (in more than 230 million accounts) are concentrated within the Sberbank’s network. The Sberbank is the only bank in the Russian Federation with a governmental guarantee of preservation and repayment of citizens' deposits – therefore the bank could only use a card payment system whose successful functioning would be guaranteed throughout Russia.The smart card based payment system developed by the Austrian company BGS Smartcard Systems AG, has proved to be the turn-key solution that met the strict requirements of the Savings Bank of the Russian Federation. In 1995, the Executive Board of the Savings Bank decided to introduce the DUET system in 16 regions of Russia. In 1997, the Savings Bank's Board issued a resolution on introducing the system in all regions of Russia. According to a declaration made by Vladimir Simonov, co-chairman of the Interdepartmental Commission for Smart Cards (ICSC) of the Russian Government, "a basis for building a universal payment system in Russia should be the payment system SBERKART" ("Vremya novostey" (News Time) No. 173, November 23, 2000). In 2003, the Savingsbank of the Russian Federation, MICEX (Moscow Interbank Currency & Stock Exchange) and VEO-Otkrytie (one of the biggest brokerage houses in Russia) joined their market expertise and technological know-how to introduce a product innovation for all Sbercard holders. Further enhancing the functionality of the successful Sbercard payment system, this product enables fast, secure and convenient trading of stocks and derivatives between brokerage houses and their clients using Sbercards. Individual and corporate investors can conveniently transfer funds through the Internet from their client card to the broker’s merchant card with the help of a smart card reader attached to a PC in order to trade currencies, shares, bonds, futures, derivatives etc. through any brokerage house participating in the new system.With this new functionality, the Sbercard not only acts as a secure communication platform (in an insecure environment such as the Internet) for encrypted card-to-card transactions, but also as the payment guarantee within the broker-client relationship. Instead of having to open a trading account that acts as the payment guarantee for the brokerage house, the Sbercard itself serves as the payment transactor enabling fast payments from buyer/client to stock broker.
Smart Payments from White Russia to Vladiwostok
In June 2005, Russian state-owned bank Sberbank has acquired a 19,9% stake in the Austrian company BGS Smartcard Systems AG. Andrei Pogodin, Sberbank’s Deputy Chairman, confirmed that Sberbank will open its smart card payment system to other Russian banks, so that it will become the nation-wide interbank payment system in Russia.The system is one of the world's largest interbank payment systems. The Sbercard has become an item of everyday life and is accepted in various business environments such as networks of trade and service enterprises like supermarkets, retail shops, petrol stations, air cargo and transport companies, wholesale companies and online brokerage.
