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Nikolay Zhmurenko, CEO of Smartfin JSC

Prerequisites for mobile acquiring distribution

Both in Russia and in other countries, traditional acquiring is primarily focused on medium-sized and large trading business. It is connected with the necessity of bank and / or acquiring company investments in costly traditional pos-terminal equipment. Naturally, banks and acquiring companies are interested in renting this expensive equipment to business which shows a large turnover, in order to cover the expenses with the help of the commission. Thus, entrepreneurs with little or irregular turnover are left in the basket.

Also, do not forget about mobility: even portable pos-terminals are quite bulky devices. You cannot put such a device in your pocket and forget about it until the buyer with the card appears. Accordingly, couriers, agents (e.g. insurance agents) or freelancers working out of a permanent office do not have convenient service.

At the same time, the mobile device already contains almost all the ingredients necessary for processing a credit card. A monitor, a processor, a 3G/gprs module etc., anything that is provided to entrepreneurs in addition to the card reader as part of the traditional pos-terminal is not necessary any more, all that is in the smart phone. You just need to add the missing piece, a card reader that reads and transfers the card data to processing, and it does not occupy much space in your pocket.

For these two reasons, the idea of Jack Dorsey who created the Square, became widespread in the US and was taken up all around the world, including in Russia . If we talk about figures, in Russia there are about 3 million points accepting cash using cash register equipment, the uncountable number of points working with registered forms, and distance trade couriers using a cash register and drawing the check before traveling to the buyer, and only 600,000 traditional pos-terminals. Acquiring is not widespread. At the same time, in the countries with much greater using of acquiring than we have there is a huge demand for mobile acquiring. Before the Square start in the US there were about 7 million points with traditional pos-terminals; Square has added more than 2 million of its mPos.

Barriers to distribution

One of the difficulties which this market players face is the absence of pre-prescribed rules and standards. It is natural because Visa, MasterCard payment systems, PSI DSS committee could not make in advance, a few years ago, any rules for the non-existent service. Rules are being written now, with the development of the service, with revealing some nuances associated with its use. Accordingly, market players should be able to quickly adapt to changing conditions.

Just one example. Square began with the use of a simple reader without encryption. In fact it is only a magnetic head for reading a strip soldered to the plug. At some moment, the market experts looked at it as a threat to the security of card data that get in the smart phone not being protected. Some discussions were held, there was a Visa recommendation and Square was fast enough reorganised.

These changes took place during the start of our 2can project. We also expected to use a simple reader, but quickly responded to the new demands. Although it was not easy - completion of the reader leads to the need to ‘teach’ such a reader to interact with a lot of different models of smart phones presented in the market. We managed to solve both problems and, as a result, last year the 2can mobile terminal became the first service of mobile acquiring in the Russian market certified by Visa and MasterCard.

Not all work so quickly, we know as yet only about only one project which received permission from Visa similar to ours. At the same time we know projects in Russia which are still trying to bring ‘the old solution’ to the market which is considered to be dangerous and not in agreement with Visa and MasterCard. And someone has changed their mind too late and cannot come up with a solution that could be suitable only for two or three smart phone models out of those dozens which are presented on the market.

Willingness of the population

Once (in Russia it was quite recently) the population was not ready to use the cards and refuse from a bundle of paper money in your pocket in favour of plastic. Now still many cardholders believe that the card is a key to the ATM with cash rather than a payment instrument. But gradually the culture of using cards is growing, and it can be proved by the statistics of card transactions.

At the same time security is an important issue. Some cardholders think it is risky to pay with the card but to withdraw money from an ATM isn’t, probably not knowing that there is a significant amount of fraud is through ATMs in which different criminal tabs have been installed. Therefore, to use the card at a sales outlet is even safer than to withdraw money from an ATM. But you will need to follow some rules in this process.

For example, it can be seen in Moscow that visitors in the restaurant allow the waiter to carry their card away from the table. And these same, people seeing our mobile terminal for the first time speak about their fear to give the card for rolling through a card reader in somebody else’s smart phone, not realizing that the risk of their ‘restaurant operation’ is several times greater.

We believe that the attitude to mobile acquiring, initially cautious like to any new service, will gradually change as its spread will be becoming wider and together with explanatory work. Actually, this situation is not significantly different from the process of changing attitudes to the credit card itself – from an item which was treated cautiously to the means of payment which is being used more and more actively now.


It would be true to speak not about the limitations but the natural distribution of the market: traditional pos-terminal solutions for large and medium-sized businesses, mPos based on smart phone for small, micro and those who need mobility.


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