#13 - JRL 7204
Russians still prefer cash despite growing bank card market
June 1, 2003
Bank card use in Russia has skyrocketed in the past year, but analysts here say that is not necessarily a sign that Russians have been able to wean themselves from the security offered by hard cash.
State-owned Sberbank, Russia's largest bank in which two-thirds of the country's population keep private accounts, issued 57 percent more bank cards over the past 12 months, reaching some five million people.
There are some 15 million cards currently circlating in Russia and half of them are international Visa or Mastercards, according to Andrew Keeley, an analyst with the Renaissance Capital investment bank.
"Visa cards with a frantic speed" over the past year, said Brian Huckett, deputy head of Visa International's development department.
The number of Visa cards issued in Russia in 2002 doubled on the year before, reaching 5.1 million cards.
But for a country with a population of 145 million "this is still just a drop in the ocean," noted Maxim Buylov, a specialist on the issue for respected business daily Kommersant.
While credit card use shot up to 6.8 billion dollars (5.8 billion euros) last year, that is still nothing compared to Poland, where twice the number of people hold Visa cards and used them to spend 989 billon dollars (839 billion euros) last year, Visa's Huckett said.
And while international groups Mastercard and Visa hold half of the Russian market, the other half belongs firmly to domestic Russian cards, mainly used for cash withdrawls.
But even that was a rarity in Russia just a couple of years ago, with Russians still reeling from the 1998 financial meltdown and accustomed to keeping their savings tucked away at home in cash.
Russians are thought to stash an estimated 75 billion dollars and most continue to pay for property and large purchases in cash, while banks hold just 30 billion dollars in private accounts.
Russian businesses, such as mining giant Norilsk Nickel, often gave their employees ATM cards to retrieve their salaries, aiming to simplify accounting practices and save money by making redundant workers who manned cash registeres handing out pay.
Baltisky bank official Alexander Kazansky says that this system is the main reason why card use in Russia has increased.
The government is also pushing citizens towards using cards, paying state workers directly and handing over student grants through bank accounts.
Yet the number of bank accounts remains low, represententing just 10 percent of Gross Domestic Product (GDP), while in Western Europe it represents 78 percent, Renassaince Capital's Keeley said.
The low number of ATM machines accounts in part for the failure of bank accounts to catch on in Russia, where 40 machines exist for every one million people.
In Western Europe, an average of 550 ATM machines exist for every million, while in the United States 1,200 exist for every million, Renaissance Capital estimates.
Furthermore, most Russian cards are bank-specific and can be used only in the issuer's ATM machines.