Industry News & Papers

mPOS in Russia in the eyes of a Polish traveller

added: 03-12-2015 Author: Cezary Kosiński

In 2009 American company Square presented a concept of card payment acceptance on smartphones. The idea was to transform the smartphone into card reader by adding a small square dongle mounted in audio jack port, to authorise transactions with a signature captured on the smartphone’s touchscreen and simply start accepting cards after having bought a Square device in a supermarket and having registered via WWW portal. The idea was revolutionary in terms of bypassing incumbents of infrastructure delivery like POS terminal manufacturers, MSP/PSPs and Acquirers. However ...

Square’s copycats

The idea has immediately attracted many copycats, establishing new start-ups in the belief that a revolution was coming and it was worth to participate in it. The wave of enthusiasm fell on fertile ground in countries like Russia, South Africa, India or South-eastern Asia. The intention of this article is to show the transformation of mPOS market in Russia in the subjective eyes of a Polish traveller who visits Russia from time to time and naturally compares it to his own country. And sometimes he can’t help wondering at the various singularities.

As a curiosity one of the mPOS companies told the story about mPOS installations in villages of mining companies in Siberia cut off from civilisation. Once in a while a helicopter would fly to the village from the distant town and then workers would give their cards with written PINs to the helicopter crew. The crew would withdraw cash from an ATM in the town, each card separately, and carry the cash back in the next flight. The breakthrough came with the availability of Internet over the satellite. The company installing the Internet infrastructure started offering modern Chip & PIN mPOS in addition, which solved the real problem of consumers and merchants. It allowed secure paying with cards without the need of using cash, traveling by helicopter, and disclosing one’s account balance and PIN to anybody. And the supplier of mPOS solution could count on higher than average MSC and transaction volume and value.


Let us start with some stats

At the end of 2014 there were about 220 million cards issued in Russia against the population of 142 million citizens, that is, each person had statistically 1.55 card. At the same time there were about 1.2 million POS terminals accepting cards against about 6 million businesses registered in Russia, that is in average  about 8.4 thousands devices per million citizens and close to 20 per cent saturation of merchants. The number of terminals has increased rapidly in the recent years, even more than 60 per cent per year, and a comparable rate of increase is expected for the next two years although economic crisis can slow down this growth rate.





142 m

38.3 m


220 m

36 m

Card saturation (card/person)



Registered businesses

6 m

1.1 m

POS terminals

1.2 m

0.4 m

POS saturation



POS network growth

60 %/year

22 %/year

Consumer payments performed with cards



Annual growth rate of consumer payments performed with cards



Table: Comparison of basic card payment stats for Russia and Poland

According to the estimates of Russian experts the potential market for mPOS is created by about 700,000 micro- and small-sized enterprises. By mid-2014 companies offering mPOS sent to merchants around 50-60 thousand devices, of which only about 20-25 thousand (~ 40%) processed any transaction. Merchants have never activated the rest. The number of installations and activations of mPOS has been continuously growing since mid-2014, mainly due to the involvement of banks. Currently it exceeds 50 thousands working units.

In mid-2014 the monthly value of all transactions on mPOS totalled  about 6 million USD, at the end of 2014 this value amounted to about 7.5 million USD, and at the end of 2015 it is expected to exceed 17 million USD.



Potential of mPOS market

~  700,000 devices

Number of mPOS terminals

  ~ 25 000 in operation (mid-2014)

Monthly value of card payments processed on all mPOS in Russia

~ 6 million USD in Jun 2014
   (~0.5% of all card payments in Russia)

~ 7.5 million USD in Dec 2014

> 17 million USD expected in Dec 2015

Year-to-year growth of the monthly value of card payments processed on all mPOS in Russia

< 60 %/year in 2014  

> 100 %/year in 2015  

> 100 %/year (expected) in 2016  

Table: Stats of mPOS market in Russia

Figures related to the number of mPOS are estimates, as mPOS companies often give only the mixed numbers of devices installed in Russia and other countries, or add Swipe&Sign devices to their Chip&Sign and Chip&PIN replacements. mPOS companies seemed not to pay attention to understanding the reasons why, in the past, so many devices had not been activated. Interviewees pointed rather to the fact that 40 per cent of activated mPOS units was a better result than Square reached in the US. The mPOS companies also seemed to pay not too much attention to the systematic analysis of their own competitive positions, e.g. in the first half of 2014 the sum of the market shares declared by top5 mPOS companies in Russia exceeded 200 per cent.

For an outside observer, it quickly became evident that the United States were the reference point for Russian mPOS start-ups, not any of the European Union countries. It has become clear as well that mPOS should be considered in the perspective of the whole card acceptance market in Russia, which is in the phase of dynamic growth and ecosystem changes. It seems that the most important factor for this growth is the regulation introduced by the Russian authorities in 2014 mandating the acceptance of card payments by companies making annual turnover above 60 million RUB, i.e. approximately 1 million USD. In the case of mPOS also additional factors were pointed out, such as e.g. the involvement of banks in installing mPOS instead of traditional POS even in large customer outlets. Another factor is the noticeable increase in mPOS popularity and number of transactions among couriers, taxi drivers and individual professionals. The observations show that the average value of a single mPOS transaction is almost twice higher than the average for traditional POS. One of the mPOS operators has even declared processing the transaction of a value of 18 thousand USD (it was a fee for organizing a birthday party for children). So in addition to changes caused by regulations of Russian government there are visible changes in payment habits beneficial to the development of the entire market, and especially mPOS.


mPOS enthusiasts in Russia

Most mPOS start-ups in Russia started their operation in 2011-12, but even in 2014 dreamers popped up ready to invest in the setup of such companies.

The most interesting initiatives were undertaken by Russian individual entrepreneurs previously associated with banking, e-commerce or mobile services, with the support of various Russian investment funds. The overview of mPOS companies those days shows the characteristic mix of start-ups trying to implement a new business philosophy with conservative projects introduced by banks and with international companies that offer mPOS. At the end of 2013, it was possible to count about 15 local new mPOS stat-ups.

Russian start-ups initially started with Swipe&Sign readers except for one capturing card photos in conjunction with OCR. Companies wanted to base on the Payment Facilitator licenses and reach merchants directly. At the same time they tried to offer their services through branches of banks, mobile operators and providers of smartphones. Initial price model assumed free-of-charge distribution of mPOS dongles and "mythical" MSC=2.75% proposed by Square (with fluctuations ranging from 2.50 to 2.90 per cent).

At the end of 2013 mPOS companies seemed to have managed to find the right operating and business models, inclusive participation of partners like banks, mobile operators and smartphone resellers. It seemed also that the concept of mPOS was accepted by micro- and-small merchants. Hence, mPOS companies could focus on expanding merchant base.
And then …


EMV mandate in Russia

Effective January 2015 all cards in Russia must support EMV. This requirement applies to cards and POS terminals, and in particular also mPOS.

Decisions of Visa and MasterCard caused the year 2014 to be a huge challenge for mPOS companies. They were confronted with the need of building the new rules of business profitability. The cost of mPOS Chip&PIN device was about 30-40 times greater than the Swipe&Sign dongle, and what is more mPOS operators had to adapt infrastructure to process transactions secured by PIN. Finally, only 6 companies decided to migrate to Chip&PIN. They started to charge merchants for the EMV mPOS devices (e.g. in the third quarter of 2015 the official price  was about 45-62 USD for a Chip&Sign dongle and about 80-125 USD for the Chip&PIN unit). Now companies do not offer Swipe & Sign dongles. Companies also seek alternative opportunities for further development, for example by expansion to Southeast Asia, or by adding new services on mPOS. Some of the companies have started to see the future in the integration of their own mPOS solutions with the systems of ECRs on tablets.

Simultaneously to struggling with technological and business adaptation to new requirements of payment organizations, local Russian mPOS companies experienced strong competition from international providers of such services already supporting EMV in Chip&PIN version. Then it became clear that instead of competing, it was necessary to join forces against larger and better prepared international competitors. The visible effect of this trend was the acquisition of iBOX by 2Can in June of 2015. Further consolidation activity seems to be only a matter of time.


Lessons to be learned from Russia

The development of mPOS start-ups in Russia has coincided with a period of significant changes of the whole ecosystem of card payments. The newly established companies, before they had got ready with their solutions and before they had tested their business model assumptions, had to deal with changed requirements of the payment organizations and strong competition from international mPOS companies. The initial enthusiasm of start-up founders had been verified surprisingly quickly. Ultimately, however, mPOS projects in Russia found their own way and now they less and less take inspiration from the American archetype Square.

In Russia it has undoubtedly been confirmed that mPOS is an attractive solution for micro and small-merchants. Also the usefulness of mPOS as an alternative to traditional POS terminals has been confirmed at some of the larger merchants.

In Russia the banks now play a dominant role in the distribution of mPOS. They sign more agreements with merchants than mPOS service providers, mobile operators and smartphone retailers together. This is particularly true for Chip & PIN devices where bank’s experience with traditional terminals turns out to be decisive. Initially the start-up makers assumed building their own relationships with merchants. It was only later they began to position themself as a provider of "mPOS white label" SaaS services for banks, or even as providers of mPOS solution installed in banks.

Similarly, the important role of banks (acquirers) in the distribution of mPOS is also visible outside Russia and most likely it has to do with EMV Chip & PIN technology significantly boosting entry barriers to payment industry against new non-banking players. The change observed in Russia is therefore more universal. The verification in other markets could help in final confirmation of the rule, particularly in the US, where EMV acceptance is mandated and is yet to be implemented.


What's next?

It seems the payments ecosystem in Russia will be subject of further changes, which will modify mPOS market as well. In the next 1-2 years the introduction of contactless card mandate is expected. The national payment system MIR is expected to become more disseminated. It is also likely that the interchange fee regulation will be introduced following the example of the US and EU, or wider regulations similar to PSD2. Economic crisis and global political tensions could also contribute to the slowing down or accelerating of changes.

The experience with mPOS accumulated in Russia in a very short period of 3-4 years seem to have a universal value exceeding the borders of Russia. So let us continue to monitor this market, measure its dynamics, trends and responses to the expected new regulations. And what still seems most interesting, is the question whether the phenomena observed in Russia will also occur in other markets, e.g. those currently migrating to Chip&PIN.


The paper has been published in Polish Cards Almanac ( ) in Dec 2015.


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