how the Russian money transfer market has changed

The transformation of the Russian money transfer market, which began last spring, has taken, according to experts, more or less stable outlines. Large banks are actively developing transfers to friendly countries, gradually increasing their coverage and currencies available for transfer. Money goes to unfriendly countries without serious problems through money transfer systems and medium-sized banks that have not fallen under sanctions. However, according to market participants, everything could change dramatically again if the FATF blacklists Russia.

New channels of cash flow

Bank statements or simply the appearance of information about the tightening and relaxation of bank transfers abroad evokes a lively response from many Russian citizens. Especially taking into account the fact that almost four dozen banks, including the largest ones, have come under certain tough sanctions from the United States and European countries over the past year and a half.

Therefore, Raiffeisenbank’s announcement of limiting payments in euros to banks in the Russian Federation and 12 countries of the near abroad and the Middle East from July 3, as well as the previously introduced commission of 50% on dollar transfers, caused a negative reaction. And few people are worried that the bank does this not on its own whim, but “in connection with the restrictions imposed on the side of correspondent banks.” The news that a number of banks have launched transfers for individuals to India – at Sberbank in rubles, at Tinkoff Bank in rupees – were received positively, even taking into account all possible restrictions.

Experts note that in the conditions when the international money transfer systems WesternUnion and MoneyGram, as well as the Visa and Mastercard payment systems left the country last year, Raiffeisenbank, which has the Austrian Raiffeisen Bank International as a shareholder, remained one of the major Russian players that carried out transfers of dollars and euros around the world. Now, for ordinary citizens, this channel of both sending and receiving hard currency is actually closed, at least for small amounts.

Over the past year and a half, the Russian market for cross-border transfers has seriously changed. The head of the board of the Financial Innovations Association (AFI), Roman Prokhorov, explains that until 2022, in the direction of Russian citizens, these were mainly European countries and the United States, a little Asia, while labor migrants sent transfers to neighboring countries. Thus, according to the Central Bank, in 2007–2021, non-CIS countries accounted for 60–72% of all cross-border transfers of citizens. At the same time, in 2021, Turkey accounted for 2.5% of transfers, Georgia for 1.4%, and China did not even make it into the top 20 (although the minimum threshold was 0.3%).

In such conditions, according to the Central Bank, in 2021, in cross-border transfers from Russia, 42% was occupied by the US dollar, and 27% by the euro. Other currencies accounted for only 8% (the rest of the transfers were made in rubles). As Mr. Prokhorov notes, the main purposes of transfers from individuals from Russia were: education, treatment, and the purchase of assets.

After the outbreak of hostilities in Ukraine, restrictions were quickly introduced by both sides – both the West and Russia itself. But already from July 1, 2022, the Central Bank of the Russian Federation raised the maximum bar for transfers per month to $ 1 million (transfers to their accounts and accounts of the next of kin). Even for wealthy citizens, such amounts cannot be considered insignificant. So, since then, restrictions on both outgoing and incoming transfers from the Russian Federation have been mostly formed in foreign jurisdictions.

“In 2022, transfers to the EU and the US first grew significantly, and then fell, but transfers to Asia grew — the money flows of temporarily relocated Russian citizens were added to the transfers of migrants to the neighboring countries,” says Roman Prokhorov. As a source in the payment market explained to Kommersant, last year, during the hype, citizens transferred funds to relatives and acquaintances who had gone abroad in any way that they could.

Now the situation has returned to normal and funds are transferred to neighboring countries through money transfer systems without opening an account, such as Zolotaya Korona, Unistream or Contact, again mainly transferred by migrants. The Russians, the interlocutor of Kommersant explained, mainly transfer money through banks – from account to account, as well as by card number or phone number. “The exception is the countries of Europe, there are transfers without opening an account, since the possibility of transfers through banks is limited there,” he said. At the same time, according to a Kommersant source, there are no serious restrictions on transfers without opening an account.

For example, about $1 billion has been transferred to Kazakhstan since March last year. Transfers from Russia peaked in June and July 2022 — $150 million and $110 million, respectively. Transfers from Kazakhstan were 3-3.5 times less. But this year the situation is reversed. First, there is a general decline in the flow of money to Kazakhstan through money transfer systems ($27 million in March, $23 million in April). Secondly, the flow of funds from Kazakhstan was higher – $44 million in March and $47 million in April.

Transfers from Russia to Kyrgyzstan through money transfer systems since last spring amounted to about $3 billion and exceeded $300 million in the record June 2022. This year, the volume of transfers to Kyrgyzstan has never risen to $200 million and only once – in March – turned out to be slightly over $150 million

Transfers to Armenia in the second half of 2022 steadily exceeded $400 million monthly, and this year in March-April they were only a little more than $300 million. Since March last year, about $3 billion have been transferred to Georgia from Russia. last year – more than $300 million in May and November, this year the figures are noticeably lower – $160 million in April and $155 million in May.

Features of the national translation

Against this background, transfers of Russian banks to friendly countries in rubles and national currencies increased, which is especially noticeable in the example of VTB. During the first quarter, 34,000 transfers worth RUB 11.6 billion went through the bank in soft currencies. This is 1.4 times higher than before the sanctions. By mid-June, the number of transfers reached 85 thousand, and their volume amounted to 17.8 billion rubles.

The bank noted that more than 80% of all transfers are made to the countries of the former USSR, and the Belarusian ruble (45% of the total volume of friendly currencies), the Kazakh tenge (37%) and the Chinese yuan (13%) have become the most popular currencies for customers. In total, bank customers have access to transfers to 11 countries, by the end of the year it is planned to increase their number to 25. At the end of last year, VTB launched transfers to Iran, and by the end of this year it plans to connect India and Turkey.

“This year, clients will have the opportunity to make cross-border transfers directly from their ruble accounts, which will eliminate the need to open a foreign currency account,” explained Alexei Khranilov, head of the Transfers department of VTB’s transactional retail business department. VTB expects that its clients will make about 250,000 transfers abroad this year, which many times exceeds the result of not only 2022, but also the pre-sanctions period.

Alfa-Bank sees a great demand for transfers in yuan, rupees and currencies of neighboring countries. “The undisputed leader in terms of demand and settlements is China, followed by Turkey – we see continued demand for payments to this country,” said Irina Ponomareva, head of the department for the development and development of settlement products for corporate business at Alfa-Bank. Sberbank makes transfers to 11 countries. At the same time, as noted in the bank, in 10 countries of the near abroad, ruble transfers are in demand among clients.

In MTS Bank, in the first quarter, compared to the first quarter of last year, the volume of cross-border transfers increased by 4.8 times. Moreover, the volume of transfers to China in 2022 increased by 3.7 times, to Turkey – by 5 times. “The bank implemented instant transfers to bank cards of the CIS countries: national cards HUMO, Uzcard of Uzbekistan, Korti Milli of Tajikistan, Elcard of Kyrgyzstan, all cards of Armenia, Kazakhstan and Azerbaijan,” said the head of the MTS partner network development team and integration connections Bank Mikhail Sharakin. Also, according to him, transfer services by phone number to banks of the CIS (Uzbekistan, Kyrgyzstan, Tajikistan, Armenia), as well as China and Turkey, are actively developing.

According to Mikhail Sharakin, targeted transfers to the recipient’s phone number or bank card quickly replace the previously used forms of sending money, including traditional transfers without opening an account. “The share of targeted transfers in MTS Bank in 2023 is more than 85% of the total volume of transfers,” he said.

No riddle

Setting up translations is actually not that difficult. Aleksey Maslov, co-chairman of the Payment Systems Committee of the Association of Banks of Russia, emphasizes: “Many people might have the erroneous impression that SWIFT has left Russia altogether, meanwhile, today 229 Russian banks use it. Many small banks that are not under sanctions are taking advantage of this by offering foreign exchange transfers abroad.”

And the fact that the banks under sanctions are expanding the geography of transfers, according to him, is no mystery. “Russian and foreign banks open correspondent accounts with each other and agree on the transfer of messages between themselves via a bank-client communication channel, and they no longer need SWIFT,” explains Alexey Maslov.

For transfers in yuan, the expert clarifies, the Chinese MoneyExpress money transfer system is available to Russians. For example, a UnionPay cardholder in Russia can make a transfer via MoneyExpress to a UnionPay card issued by banks in China, Vietnam, the UAE, as well as the CIS countries – Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan.

However, as the Kommersant source explained, money transfer systems are now afraid that the FATF will blacklist them, then with a high degree of probability the current configuration of the transfer market without opening an account will cease to exist. “That’s it, new schemes will be built, like Iran, for example, they, being in the toughest sanctions, found an opportunity to transfer money, so we will also have a completely new market,” the source explained to Kommersant.

Experts point out that schemes for transferring money to unfriendly countries using the conversion into cryptocurrencies have already begun to line up. As Alexey Maslov explains, “a citizen who needs to transfer €200 to his relative, for example, in France, turns to conditional Ivan Ivanov, about whom he knows that he is engaged in such transfers, gives him money, he buys crypto-currency for them on his wallet , transfers it to his friend to a crypto-wallet in France, who, in turn, transfers them to euros, deposits them on his account and sends them to the final recipient. The sender, according to Alexey Maslov, does not need to know all this mechanism, he just needs to be willing to pay a commission to both owners of crypto wallets and be sure that Ivan Ivanov will not deceive him.

Viktor Dostov, chairman of the Association of Electronic Money Market Participants and Money Transfers, also believes that cryptocurrency provides new opportunities: “It, in fact, provides a universal cross-border transfer of liquidity – in any country, if you have a received bitcoin or stablecoin (USDT, for example) , you can legally, semi-legally or illegally exchange it for cash and in many cases for non-cash.” However, in his opinion, it is “difficult, risky, obscure and expensive for the majority.”

As Victor Dostov notes, modern payments often intertwine card schemes and fast payment systems, which allows building more diverse and convenient products: “In other words, if there are powerful fast payment systems in the country of the sender and the recipient, then by building a bridge between them, you get access to the transfer to all banks at once.

It is in the development of fast payment systems in different countries, and subsequently the integration between them, that many experts see the future of cross-border payments. And in rather distant horizons, cross-border transfers can switch to the digital currency of central banks. At least the head of the Bank of Russia, Elvira Nabiullina, admits this possibility: “In the future, of course, it is possible to discuss the issue with different countries on conducting digital settlements on a bilateral basis.”

Maxim Builov, Ksenia Dementieva