Join us on Facebook and get the news first!
”Am I really the only one who is so smart?”
‘And what do you do if the client has no cash?’ Nikolay Zhmurenko asked the insurance agent sitting in his car. It frequently happens that insurance transactions are closed in cars, but the sum of money can be rather substantial. The interlocutor replied, ‘Then you have to find an ATM.’ After that the client draws out the money and pays, and the agent after completing a transaction, also goes to the ATM, not to hang around the city with the money, and puts it now on his withdrawal card.
On hearing this, normally reserved Nikolay Zhmurenko almost jumped on the spot: here's another category of customers! The ‘Smartfin’ company created by him and operating under the brand 2can, was just trying to solve the problems of such people for whom conventional terminals for card payments were too tedious and too expensive. 2can offers entrepreneurs - ranging from taxi drivers to owners of online shops - to take a penny reading device, connect it to the smart phone via the audio output, install the program and turn the phone into a real card terminal. ‘Not a bad idea,’ the agent said when Nikolay explained him his idea. ‘Please keep us from this senseless rush to ATMs.’
To do this, Nikolay Zhmurenko left his successful career of a chief financial officer and became a startuper, leaving behind a personal driver and a personal assistant, a separate office and a high status, which was given by the position of top manager of the largest Russian corporations. But it turned out to be much more complicated than it had been thought: Zhmurenko was not an only person who was struck by the idea of using a smart phone for posting payments. A year ago when he started his business in Russia there was not a single competitor. Now there are nearly a dozen.
The market of payment startups now resembles a horse race, only rather peculiar: both eminent professionals and amateurs rush on adjacent tracks, and everybody is sure there will be a fantastic jackpot. Nikolay Zhmurenko having risked his career and money for startup and having turned suddenly into a participant in this hectic competition, takes the lead over others. Will he manage to maintain the advantage and win? Indeed, in such races to take off first from the start is not a guarantee of success. And the experience in a big company is an obstacle rather than an advantage.
Obviously, Nikolay Zhmurenko coped with this mission very well. Starting from the bottom rung of an accountant inherited in his student days, he rose to the position of a financial director and worked in the major Russian corporations, such as ‘System Telecom’, ‘The Messenger’, ‘Synterra’. But he had enough of it.
There is generally no less suitable leader for startup than a former financial director. Indeed, in any normal company a financial director is the most hopeless cheapskate and pain in the neck who is afraid of risk, does not believe in luck and all the time strives to turn down any non-standard idea. While others are trying to do something worthwhile, his sole mission is not to spend an extra penny for nothing.
Besides, it is almost impossible for a financial director to become director-general: being a cheapskate it is difficult to demonstrate your leadership and willingness to take risks, even if you are at least three times a visionary. But Nikolay Zhmurenko hardly dared to become a startuper if a promising idea had not turned up, which was prompted by Jack Dorsey, the creator of Twitter, who founded a new company Square which turned smart phones into payment terminals. In the USA it has quickly become one of the most successful start-ups in the recent years and has demonstrated fantastic dynamics. A financial market was not alien to Zhmurenko, and he began aiming for the idea of a ‘payment smart phone’ whether it is possible to apply it to the Russian reality.
In those times, in Russia there were more bank cards than residents: as for the number of plastic, we caught up with European countries. And there was money on the cards too: in 2011, the turnover amounted impressive 16 trillion roubles. But almost nine-tenths of people just drew money from ATMs. Not only because they were used to it, but also because there was simply nowhere to pay.
‘If we had the same number of terminals as in the US for a million inhabitants, the country would have three and a half million points where you could pay by card rather than six hundred thousand’, says Zhmurenko . This statistics was simply drawing a fantastic prospect for the ‘Russian Square’. Dorsey`s company was able to find two million customers within two years, and it was on the ‘overheated’ US market where there were seven million traditional terminals. What can be achieved in the Russian situation, where there were many cards, there was much enough money on them, but nowhere to pay?
Mr. Zhmurenko recalls his youth
However, when Nikolay Zhmurenko began to select people for the team, he surprisingly found out that it is not easy to find appropriate people who are ready to believe in the idea. Success of the Square in Russia then was not obvious.
Eventually, the people who joined the project were Maksim Morozov who formerly led acquiring business VTB24, Konstantin Ian, former technical director of PayOnline, and Yuri Vladimirov, who previously managed the Department of budgeting and financial analysis of ‘Synterra’. The latter became a co-investor in the project, together with the author of the idea they invested 300 thousand dollars of personal savings in the case. This quartet started "Smartfinom" under the direction of Nikolay Zhmurenko, although not all of his friends believed that he was able to create his own company.
However, Nikolay Sergeyevich surprisingly quite easily withstood the regeneration. He says that even not without pleasure he ‘has recalled his youth’, when he moved into a modest office on the outskirts of the industrial zone where the walls in the corridor were decorated with variegated sceneries, and among his neighbours there were the ‘Sun’ cafe and the companies offering "water well drilling, rabbet and piles'.
‘Well, yes, I had, for example, to choose the office furniture myself’, says Zhmurenko. ‘I can`t say that it was a lot of stress because of the loss of the status. Maybe it was because in my previous life I treated the Status without any special respect. "
Well, to understand what the difference between a start-up and a big company is and how it should really work Zhmurenko even finished a two-month ‘Start-up Academy’ at Skolkovo Business School. There a former financial director was taught that a startuper had to permanently move, to experiment and quickly change the approach if something was not working.
It seems Zhmurenko has learned the lessons well enough. ‘One Friday’, says startuper Nikolay Sergeyevich, ‘we planned out all the work and went home quite satisfied. But at the weekend we thought everything over and on Monday morning got together and decided that it was necessary to do right now what we had planned to do in two months. And we started our work. I think this explains why large companies do not do startups. I think they cannot afford to draw a plan on Friday night and then on Monday morning to throw it in the waste bin ‘.
Copycat? It’s no bother!
In startuper hangouts clones of successful western projects are contemptuously called ‘copycat’. Literally, it refers to somebody that apes and does not create something original, something of their own. It is believed that copying is not a great thing. Smart people have invented something, but you just have copied. It’s no bother!
But, of course, this is a great simplification. In fact, there are no two similar businesses or even two identical markets. To repeat someone's business model in a different culture and in other conditions even just a year later means to invent it anew, having found new answers to key questions the solution of which affects the future of your brainchild.
The creators of 2can faced such questions almost immediately. Where can I find a supplier of the equipment? What devices should it work with? How to enlist the support of Visa or Mastercard? Should we attract customers ourselves or should we offer the technology to banks asking them to promote it under their own brands?
And every question brought temptations. To make it easier and faster or to take pains? The choice was not that obvious: time for a start-up is the most important factor for survival (and competitors are not sleeping, and financial resources are limited). And it often happens that at the beginning you do something in a slipshod way and at once start to earn, and a little later you change everything properly, and all the same you can succeed.
He went to the Visa company to understand how to do everything properly to get the blessing of the company. There he was told that to have everything done up to the mark you need to encipher the data on the reading device and transfer them to the smart phone already protected.
This requirement made everything very complicated. A reading device without ciphering is a magnetic head with two wires, but with ciphering it is a complex machine to which you need to learn how to add a unique key. And then ‘to make this thing friends with’ numerous models of smart phones (one of the startups that appeared on the horizon soon after ‘Smartfin’ tried to make service oriented only on iOS, but Zhmurenko considered this way a dead end: how many taxi drivers have iPhones?). And Square started with devices without ciphering either and only then moved on to more advanced ones (after the company had been presented valid claims regarding vulnerabilities of software security).
Zhmurenko finally decided to stake on ciphering. To find the right supplier proved to be difficult, and the rapid development of the US market did not help here, since other models of smart phones based on Android were popular in the USA. ‘We toured the whole of Asia’, says Nikolay. ‘There are many producers there, but some of them only claim that they produce something. And then it turns out that they just ‘test the market’. And it can be revealed, just turning up at the production place and finding out that it does not exist. You will find only a table piled with parts where something is soldered. It may work, but there is just one copy.’
I am the only one who is so smart
‘Smartfin’ presented its 2can service in late September with the support of Promsvyazbank and Visa having become the first such project. 2can service focuses on entrepreneurs whose monthly card turnover does not exceed 100 thousand roubles. Its share of the revenue is typically 10-20%, i.e. 2can is for those who have no more than 1 million roubles of turnover per month (although it should be noted that in large shopping centres the share of card payments can be up to 50%).
Formerly to organize a reception card payments with such turnovers was almost unreal: a traditional terminal is from 600 to 900 dollars, these costs are borne by the bank , but it wants to quickly cover the expenses, which is a little complicated with small revenues - banks are simply not interested in such clients. For the unique opportunity to receive payments with modest revenues banks will have to pay 2.75% to ‘Smartfin’, which is a bit more than what banks traditionally offer to companies by acquiring (for large companies the percentage may be even lower than 1.5, and it is rarely when it reaches 2.5).
In the perspectives of the ‘Russian Square’ also investors believed (‘Smartfin’ raised $2 million from the InVenture Partners and Almaz Capital Partners funds, as well as business angels. And they are not alone who appreciated the future of the new market: 2can acquired numerous competitors who are willing to challenge the leadership of the pioneer. The most serious in the current situation is PayMe which also managed to enlist the support of Visa, implementing ciphering at the reader level, and ran second. The service has quite respectable partners - payments are conducted by Alfa-Bank and the devices are distributed through a network of Beeline points (2can gives them away for free, and PayMe sells for 1600 roubles). LifePay has obviously serious intentions, and it received $2.6 million from Layf.Sreda venture capital fund (the service has not started yet). You probably should not disregard already working RBC.Card project, which plans to take a commission of 2.9 % , but still gives 90 days with the commission of 0.01% to those who have connected (though their service does not support ciphering at the level of the reader) . And these are not all contenders, even Yandex is testing the service for receiving payments.
Who of the participants in these races will make the most user-friendly software? Which service will work stably with the widest range of smart phones? Whose tariffs will be the most attractive and marketing the most effective? The answers to these questions will show who ultimately will snatch a large sum in such a ‘simple’ case, as ‘copycat’.
Mr. Zhmurenko is not afraid of the presence of competitors. On the contrary, he finds it inspiring. ‘Without competitors it could be much worse,’ he says. ‘In this case I should think seriously enough, if I have taken up the right thing if no one else is interested in it, and does it seem only to me alone that you can make something reasonable of this business? Or am I really the only one in Russia who reads the American press? It cannot be so.’
Press about us