So it happened: Sberbank has formally announced it is entering a strategic partnership with Yandex Money, meaning it is acquiring a majority share of a leading epayments / emoney company, sprung to life by Yandex, world’s leading cyrillic search engine.
Now, one “big data” search company hands over a payment service to another company that strives to become a “big data” one. With Yandex Money, Sberbank’s overall ecommerce goals become clearer – and interesting to talk about.
To narrate the landscape – 2011 volumes for emoney wallets came close to RUB 125 billion (USD 4 billion)  and became legitimate (and a sound target too) for banks, after the industry got a formal regulatory framework – a National Payments Bill enacted by Russian Parliament the previous year. The volumes are expected by Emoney Association experts to be near RUB 140-150 billion in 2012, where banks started this year to mull plans for their own wallets. Most initiatives got bogged down by banks own risk and control rules (essentially putting a desire “on hold” and demonstrating why banks are still called banks and not financial service companies), where a number of aspiring online champions searched for a chance to win the hearts of e-users.
For its own sake, Yandex has been exploring chances to offload Money, that contributed to a dearth of regulatory requirements (created by the same Bill) and entered talks with several banks as of middle of 2012, Sberbank included. The rest is now history. While ruminating on how would other banks working with Yandex Money behave after and what would happen with 12 million of Yandex Money’ existing accounts is early at best, it would be interesting to offer several strategic bets on what might happen after:
What is the logic for Sberbank to buy the company: there are several main reasons for Sberbank to do it. First is conserving cash: for many years Sberbank has been (and is still) loosing trillions of roubles from ATM cash withdrawals. Most would name distrust for banks overall and requirement to transfer money to another bank (as Sberbank is Russia’s largest payroll card issuer with more that 43 million cards out of 200m+ of all cards for end of first half of 2012). Yet many of these happen to be topped up to a number of electronic wallets via cash kiosks – to be used for utility bills payments and mobile top-ups.
These could be also used to pay for goods bought over the Internet (a specialization for Yandex). So, the acquisition potentially add to the Sberbank initiative to conserve cash and make it more comfortable to buy goods online (Second motive). This is another segment closely watched by banks, as ecommerce volumes are growing rapidly.
Third is battling cash-based payment systems (i.e., QIWI) – seen as scavenging on cash withdrawals, unnecessary to the value chain from Sberbank’s point of view. The Bank has already severed connection to QIWI Wallet earlier this year and the acquisition underlines for the potential of Sberbank to cut into QIWI’s fold: the Bank operates a substantial number of kiosks at its branches (close to 80 thousand), despite less the number than that of QIWI (120 thousand), so it aspires to cut the money flow to the now formal adversary.
What would it to with existing service portfolio: hardly that would change: majority of money to Yandex wallets came through associated linked cards – and that loop other banks would not be able to close, unless Sberbank attach some dubious requirements, it is important for Sberbank to keep what driven that many million active Web users in order to build on that.
What would users do: wait and see. So far it is hard to dissuade oneself from using Yandex and move to other interfaces.
What would Yandex Money be able to do: many things it would not dare, with the investment comes a hungry innovative financial agent (Sberbank despite being a slow juggernaut, has a small team of truly visionary people), whose ideas on combining Yandex and Sberbank services can create a new wave of financial innovation on the Russian market. This blog believes that this is truly the case: complement Yandex Money with Sberbank financial might and learn what small and simple products might be integrated with the help of Yandex engineering. Broadly speaking, Yandex, as it keeps a minority blocking share, can now propose and test new “big data” approaches related to financial services alongside a company that dreamed of doing a “big data” project and reinvent the core of financial services in the era of “mobile Web”.
This post was originally published on Daniel Gusev blog: Sberbank buys Yandex Money as part of its ecommerce / payments and “big data” push.