Merchant adoption of NFC has been slow and those who have adopted it are unconvinced. Many experts think that just replicating the ecosystems of Korea and Japan will work in the west. Those familiar with Asian markets realize that consumer behavior and the payments ecosystems in those markets are far too different than they are in the west to just be copied. An often overlooked mobile payments market is in Russia — a payments market and consumer market much more similar to the western markets. Much can be learned from how RURU is driving consumer and merchant adoption of mobile payments.
What is RURU?
VimpelCom (“Beeline” — one of Russia’s three largest carriers) and Alpha Bank (4th largest bank in Russia) launched a new universal payment system RURU (“National Service Company”in 2011.
RURU payment system is an exclusive mobile commerce services provider for “Beeline” subscribers, and partner of MTS, MegaFon and Tele2
RURU connects three parties — referring to the 3 party payments ecosystem — of funding sources (banks, cash ATMs), acquirers (Ruru), and issues (Carriers) that connects merchants and funding sources. Today, RURU provides white-label mobile payment services to the entire major operators — Beeline, MTS, Megafon, Tele2 and Rostelecom, It is the leading mobile payments company in Russia. Over 3mm regular users purchase more than 3x in 2 months and since the launch 3 years ago, more than 18mm unique people have used RURU.
How does it work?
Users top-up the mobile operator wallet –through direct bank transfer, ATMs or kiosks. Those without bank accounts who usually reside in rural areas or those who prefer cash spending generally top up via kiosks with an additional end user fee. This balance can be used for one’s phone voice minutes, bill payments, money transfer, or to buy something online or at over 35,000 services such as sim-enabled vending machines , train or air tickets, or digital content in the web. Payment limits for digital goods are limited for example to 5000 rub ($130) each transaction, $450 per Week and $1200 per month. Physical goods limits are $450 each transaction. RURU also provides credit facilities to consumers. If a consumer makes a purchase that is more than the balance in the wallet, RURU will allow the transaction after a success scoring to take place, credit the user, and debit the remainder of the balance when the user tops up again.
Why people use RURU?
There are three types of RURU customers. First, ‘savers’ are the biggest users. This may seem counterintuitive but savers can track disposable spending via his wallet. Once savers run out of money in the wallet, they have hit their spending for the month. Most users have $20 on average in their wallet and the average purchase size online is $6.50. Next, Russian users do not like making purchases with credit or debit cards online due to security risks. Consumers simply do not trust websites with their credit cards. In the case of a security compromise, mobile wallets are only susceptible to the amount in the wallet ($20) as compared to credit card limits (several $k). Lastly, users enjoy the simplicity of use. Today, over 3mm regular users who purchase more than 3x in 2 months and in 3 years more than 18mm people — one out of eight people in Russia — have used RURU.
How do consumers use RURU?
The largest use cases for RURU wallet are as follows.
1. Sending money.
· Money Transfers outside of countries, especially to CIS countries.
· Friends top-up friends account. Parents top-up kids accounts for allowances.
· B2B services for smaller tasks. (Payment for Freelance service)
· Payments to credit cards and bank transfers. (Mobile 2 Visa/Mastercard)
2. Telecommunications and internet payment bills
3. Games & Social networks
4. High growth services mostly in-mobile application: Many of these services are made available on mobile applications of the merchant, the RURU or Beeline mobile application / portal.
a. Parking and Speeding Tickets
b. Cinema, Concernt, and Sports tickets
c. Community shopping: Avon, Mway, Mary Kay
d. Play lotto
e. Transport applications: Taxi app, Parking app, Subway, Parking
f. Travel: Hotel tickets, Airline tickets via ‘on-the-go’ mobile users
Why do merchants adopt it?
Merchants adopt RURU because it simply increases conversion of users at checkout due to spontaneous purchases and customer preservation. When asking merchants of the benefits, most simply respond with ‘spontaneous’. Mobile payments facilitate spontaneous purchases due to the ease of payments. While many users may not have credit card or cash handy to make these expenses, they always have money on his mobile phone accounts and if the user runs out, RURU will credit the user additional money.
Merchants also mention customer preservation as a key value addition. RURU preserves customers who tried to make a purchase but failed for a variety of reasons such as not having enough cash on hand or failed credit card. Decreasing checkout rate abandonment is essential for merchants.
Even though RURU can adjust merchant fees based on type of product. RURU fees are generally higher than credit cards and other payment methods but merchants still find that offering RURU to users, net-net, vastly increases both customer acquisition and customer preservation. Consumers will even accept a small surcharge that merchants pass to them to cover the increase in merchant fees.
What can be learned from RURU?
Recognize Early Adopters and Loyal Customers
Early adopters of mobile payments may be young, social media, and gaming types. Loyal customers tend to be people who are conscience about their spending patterns and security. Customers also tend to be ‘on-the-go’ and will pay an extra fee for the increased convenience of the payment method.
Identify the Early Merchant Adopters
RURU’s, today, single largest merchants are online game companies whose tech savvy consumers adopted the convenience and safety of the wallet for online purchases. Paypal recently announced that they viewed the massive $78bn games market (of which $17bn is PC) as a future growth area. In Russia alone, the PC online games market is over $1.5bn.
Uncover Unique Merchant Needs
A widely used scenario is when consumers pay for their parking and speeding tickets online. Perpetrators can actually pay directly from his phone with directions on the tickets so they do not forget to pay or lose his ticket.
A clever use case is when users who participate in small buying communities of Amway and Mary Kay use RURU because of the ease to transfer money to the seller while they are buying the gifts. This is a brilliant use case!
RURU has recently found a niche in the Russian travel segment for smaller ticket travel prices — one night in a hotel or a short plane ticket. Many of these purchases are done through the mobile phone applications and users prefer to use his phone for these purchases over credit cards.
Facilitate the Offline World via Mobile In-App
The offline world poses many challenges for mobile payments companies. Though, NFC has not been adopted in Russia — like most places in the West — RURU still tries to work with offline merchants to provide after market technology. They are working closely with vending machine and parking meter companies to enable SIM based machines so they can accept text messages purchases. In Moscow, over 80% already know how to do mobile payments but going 10k outside of Moscow, maybe only 5–10% are aware. So once this extends outside of Moscow, growth will be large.
RURU is not waiting for this adoption of new retail acceptance terminals. Many merchants are launching in-app applications and even RURU has built an online portal and mobile application that invites merchants to sell their products including movie and sporting tickets, airline tickets, taxi rides, subway passes, and more. This is the fastest growing part of the business.
RURU has proven the success of mobile payments. One in Four Russians have already made a mobile payment purchase in Russia — half of those with RURU. Western mobile payments companies may look towards Russia to understand how consumers quickly adopted mobile payments via online and digital purchases.