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Nicholay Zhmurenko, 38, Yury Vladimirov, 38; activity - acquiring; initial investments $ 300,000 (founders’ investment) $ 2,000,000 – venture capital investments raised in the A round: nVenture Partners, Almaz Capital, ESN Group, business angels.

In Russia 80% of bankcard transactions concern withdrawals. In the U.S. and Europe the trend is reverse. In our country on a payday every second Russian immediately withdraws all cash in the nearest ATM. Empty accounts affect banks not the best way. About a year ago, the Association of Russian Banks almost categorically demanded from the Ministry of Finance to take measures to promote cashless payments. However, according to the president of the non-profit partnership ‘National Payments Council’ Andrey Yemelin, ‘the best card usage incentive for a customer is the feasibility of using it’. But there is no adequate infrastructure in Russia (about 4,000 thousand points per 1 million population in Europe and 22,000-25,000 points in the U.S.). Even in the capital you cannot take a taxi or but food in the market without cash in your pocket. Also in several other segments of small business the card acceptance equipment is not always available. It is not economically viable for banks to provide traditional POS terminals to outlets with a low or irregular turnover.

Small solution for a major problem

Nikolay Zhmurenko identified the acquiring infrastructure shortcomings. At the same time he found a solution. In early 2010 an American entrepreneur Jack Dorsey (creator of Twitter) founded the Square company engaged in the implementation and maintenance of a light system to accept payment cards. The company’s product is a software along with a mini terminal, which is connected to normal smartphone via an audio jack. With such mobile equipment an entrepreneur (it is only a registered entrepreneur who can use the device) can easily handle transactions where it is convenient to the customer, whether in skydiving or waiting in ambush in the hunting field, it is important that there is access to the Internet. Eighteen months later, the project had about 1 million customers (now there are more than 3 million) , and almost immediately the Swedish company iZettle took up the development of the European counterpart. ‘I monitored the Square’s evolvement and the demand despite the fact that the level of card penetration in the U.S. was one of the biggest in the world. I came to the conclusion that I would like to carry out such a project in Russia’, says Nikolay. Inspired by the idea Zhmurenko left his position of CFO in a telecommunications company and in November 2011 began to set up a team for the project. He took another former CFO, Yury Vladimirov as a partner and a co-investor, and they jointly invested about 300,000 dollars in the joint business. Then two more experts joined the team. By combining competences in the development of software products, traditional acquiring, telecom business and the knowledge in the financial sector, by the end of winter 2012 a four-person team under its own brand ‘Smartfin’ began to deploy the technology in the Russian market. ‘Our first money was used to develop a system for smartphones based on Apple iOS and Android as well as software, that is our pre-processing centre’, says Nikolay Zhmurenko. By the autumn of 2012 a finished product was launched, a complete analogue of the U.S. one, the 2can platform.

The card industry is quite complex and specific. Businessmen realised that it was incorrect to perform such a project without the support of payment systems. The success of the American company paved the way for the Russians, an entrepreneur says that it was quite simple to enlist the support of major partners, ‘We have contacted Visa and MasterCard, which are in fact the security regulators, the companies deciding what can be done and what cannot be done. We told them that we would like to repeat the project which is already in place in the U.S. and under development in Sweden. We wanted to know whether they would support such a project in Russia. They replied that they had heard about the project and they were interested. They were willing to help with advice and comments how to do it right’.

Tips from the experienced people

The Russian company was straightaway advised to change the approach to the service security concept ‘We changed our approach to a card reader. We used to think that data would be encrypted only in the smartphone, after receiving to then send them over the network to our servers. Payment systems advised to avoid unencrypted data entering the smartphone because there is a risk of our not knowing whether there are other applications on the smartphone, and whether they would copy the data’.

No doubt it is still difficult to convince a person to swipe his/her card through someone else’s smartphone. That’s weird, in a restaurant, for example, we are not afraid of handing our card to the waiter when paying the bill. We do not even think what they do with it and how much will be written off. ‘The same risks arise as those related to any POS terminal, says Andrey Yemelin, possible intervention in its operation, the use of malware software to interfere with the functioning of the device. Of course, there will be attempts to perform illegal operations with the device’.

In this case size is the only difference between the mini terminal and its ‘big brother’.

The principle of operation is the same. ‘We deal with a very simple menu. In the ‘Payments’ section we see the amount of payment. On the screen we are offered to swipe our card. The card reader decodes the data read from the card and transmits them already encrypted to the smartphone. Open data are not stored on the smartphone’, says Zhmurenko. Promsvyazbank acts as an acquiring bank providing the card reader transactions.

Another advice that the company ‘Smartfin’ received from partners is directly connected with the spread of the product: ‘We thought that we would distribute ourselves, online, offline and through stores. Payment systems were advised us to communicate with the banks that cooperate with small and medium businesses, they are interested in this service and look forward to having it in Russia’. The banks have a base to which they would like to provide acquiring services but since these customers are small, it is unprofitable for them to spend on traditional terminals. They deal directly with a number of customers, we provide customised solutions tailored to business specificity to insurance companies and taxi stations’, says Nikolay Zhmurenko.

In the autumn of 2012, after the company was supported by regulators, ‘Smartfin’ attracted the first round of investment, $ 1.6 million from the InVenture Partners venture capital fund and about $ 400,000 from Almaz Capital and ESN Group. The money was sent to finalise the software and disseminate the service in order to build customer and technical support and configure business processes.


The ‘Smartfin’ company orders their card readers in Asia but the first batch will be made in Russia by May of this year. Now the company gives the attachments to entrepreneurs for free (it is planned to sell them).

Software is not traded. Connecting to the service is free, there is no rental fee, a businessman pays only if he/she uses the service; in other words, the company earns an interest on transactions. The rate is 2.75%. The commission is split between the acquiring bank, payment systems, the bank issuing cards and the ‘Smartfin’ company. The former take the lion’s share, and ‘Smartfin’ gets no more than 0.75% under the most optimistic scenario as we see that.

The service has been launched into the market recently, in late September the permission from Visa and MasterCard was received, in the fourth quarter the service underwent the test operation and completion with a small customer base. Business processes as such only started in January 2013. Thus it is too early to talk about any major financial achievements. But for a few months of work more than 2,000 customers have already registered. Amounts in checks are between 100 roubles and up to 40,000 roubles.

The team consists of about 30 people, developers and vendors. A team of the first four developers holds the shares. Asked about the size of salaries, Nikolay Zhmurenko said that they were ‘market-based’. Well, ‘job fairs’ show that it is about 80,000 roubles including a personal income tax. It turns out that the staff cost about 2.4 million roubles a month. Taking into account the social benefits that is about 35 million roubles a year.

According to statistics, for startups that is usually 60-70% of the total expenditures.

The company is located in the industrial park, startups usually enjoy certain exemptions as far as lease and equipment is concerned. Therefore the remaining 30% of the cost account for promotion, marketing, hosting and outsourcing services. That is about 15 million roubles per year. The total cost of work is about 50 million roubles a year.

It appears that ‘Smartfin’, which earns 0.75% of the volume of completed transactions, should make transactions worth about 6-7 billion roubles a year to break even.


In any new business it is important to be first. Today, the area of mobile acquiring is already quite competitive in Russia; more similar solutions have come out since the launch of the 2can service. Some of them are not getting the support of investors, they even left the market. ‘Smartfin’ expects to reach the break-even point by the end of 2014. However, it is pointless to build any business model in the startup business. Dates may prove quite different.


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