UnionPay has united the demand for abroad

The payment system (PS) UnionPay last year showed a multiple growth both in terms of the number of cards issued by Russian banks and in terms of transaction volumes. At the same time, the absolute majority of payment transactions (online and offline), as well as cash withdrawals using cards of this payment system, took place abroad. And if in the first half of the year they were mainly used for transfers to electronic wallets and withdrawals from ATMs, then in the second half of the year there were more payments.

According to the Russian banks interviewed by Kommersant, in 2022 the volume of UnionPay cards issued by them and the turnover on them increased several times. According to Post-Bank, by the end of 2022, it had already issued more than 246,000 UnionPay cards. In one large Russian bank, the total issue of issued cards last year exceeded 200,000. “At the same time, in the second half of the year, the demand for cards increased by almost 40% compared to the first half of the year,” they noted. In another large Russian bank, they said that from March to the end of the year, the issue of cards of this PS increased 20 times. Banks also note a significant increase in turnover on UnionPay cards last year.

At the same time, according to Russian bankers, more than 90% of all transactions with these cards take place outside our country.

So, Post-Bank noted that the volume of transactions with UnionPay cards grew noticeably every month during the year, showing maximum levels in May and November, while the number of purchases in the last months of the year was twice as high as in April. “The largest number of transactions are carried out in euros and dollars, Turkish liras and dirhams,” the bank said.

They noticed that in the first half of last year, the main expenses on UnionPay cards were transfers and replenishment of electronic wallets, air tickets, buying clothes and paying for business services. The most popular spending categories for UnionPay cardholders in the second half of the year were auto parts, clothing and supermarkets, while transfers to e-wallets fell by almost half, Postbank noted. “Customers of Zenit Bank pay for goods more often than withdraw funds,” the credit institution said. “The largest growth in payments on UnionPay cards is observed abroad – five times,” said another Russian bank. They also calculated that UnionPay cash withdrawals quadrupled in the second half of 2022 compared to the first. “The volume of cash withdrawals abroad is higher than in Russia: if we compare the second half of last year with the first, it grew 4.5 times abroad and twice in Russia,” the bank noted.

According to the head of the board of the Financial Innovations Association (AFI) Roman Prokhorov, UnionPay is the only international payment system that has continued to work in Russia. “Last year, there was a high demand from Russian citizens for cards of this system to enable cross-border transactions,” he says. And the disadvantages of UnionPay cards (unpredictability of acceptance in various countries, work not with all foreign online stores), according to him, for many Russians were blocked by the lack of the need to open and maintain an account in a foreign bank in a friendly jurisdiction to receive “full-functional” MPS cards.

“At the same time, the share of UnionPay cards in the total number of cards in the Russian Federation did not exceed a few percent, and given the settlement of the basic needs of citizens in cards for cross-border payments, it is unlikely to continue to grow,” says Roman Prokhorov.

Dmitry Vishnyakov, an independent expert in the payment card market, believes that in order to increase the share of UnionPay cards in Russia, serious work is required to increase acceptance points and comply with the requirements of the regulator. In his opinion, the payment system itself is not very interested in developing the domestic segment of the business. Roman Prokhorov also agrees with him, who notes that UnionPay itself does not demonstrate aggressive promotion on the domestic card market. “There are practically no grounds for intensifying the use of UnionPay cards for domestic transactions in Russia, given, among other things, more interesting loyalty programs for other cards, as well as the promotion of a fast payment system,” he is sure.

Nevertheless, in an environment where competition between payment systems has practically disappeared after other MPS left the market, the banks themselves are trying to develop the acceptance of UnionPay cards within Russia, offering various loyalty programs. Moreover, in comparison with other PSs operating in Russia, they look more profitable.

Thus, according to experts, over time, domestic traffic on the cards of this payment system can reach significant volumes. In the meantime, according to bankers, it mainly falls on co-badged cards, which in Russia work like Mir cards.

UnionPay did not respond to Kommersant’s request.

Maxim Buylov