FOCUS: Android Pay seen able to boost NFC smartphone sales in Russia

By Yekaterina Yezhova

MOSCOW, May 29 (PRIME) -- Every fifth smartphone sold in Russia in January–March was equipped with the near-field communication (NFC) option, and their number will rise with a deeper penetration of contactless payment systems, especially the newly unrolled Android Pay. Demand will go higher in case of lower prices and a wider choice of models, as retailers said.

“Android Pay will favorably influence sales of NFC-enabled smartphones thanks to several reasons. The Android operating system has been the most popular in Russia over the recent several years, and appearance of a new function in a smartphone will become one of the factors to decide on the purchase of a gadget,” Sergei Tikhonov, a spokesman for multi-channel retailer Svyaznoy, told PRIME.

Google launched Android Pay in Russia on May 23, and the system – unlike its rivals Apple Pay and Samsung Pay, working in the country since October 2016 – is not tied to a brand and works on any phone on the market-dominating Android. 

The NFC is a set of protocols enabling two devices, one of which is usually a portable one, such as a smartphone, to establish communication by bringing them within a close proximity to each other. The option is used in contactless systems that allow users to pay via their smartphones with certain applications and equipment installed.

“Now more and more smartphone manufacturers add the NFC option, and soon all smartphones will have it. The contactless payment system will certainly propel sales of NFC smartphones. We’re witnessing a rising demand among users for the contactless payment technology,” Alexei Shirokov, director of the purchasing department at retailer Euroset, said.

Tikhonov at Svyaznoy agreed that the share of NFC-equipped smartphones is growing: 9% of all smartphones purchased in 2013 backed up the option, and the share spiked to 16.5% in 2014; 18.5% in 2015; 19% in 2016; and 21% in January–March.

In general, sales of smartphones in the country rose 7% in units to 6.1 million devices in January–March and by 8% to more than 76 billion rubles, as Svyaznoy said earlier.

Shirokov at Euroset said the share of NFC devices in total smartphone sales jumped to 52% in January–March in monetary terms from 49% in the same period of 2016. The share of smartphones without NFC declined 3% in money.

Android had 88% of the smartphone market as of the end of March, while iOS had 11% and Windows 1% in natural terms. In money, Android controlled 66%, and iOS had 34%, according to Euroset.

Meanwhile, the NFC option is not the factor to influence the buyer yet. “The rising number of such devices results from popularity of certain smartphone models in the high-price category,” Tikhonov at Svyaznoy said.

Among NFC phones, various modifications of Samsung phones, like Galaxy A and Galaxy J, as well as Apple’s iPhone 6, 6s, and 7 enjoyed the highest demand in January–March, he said.

An average price of an NFC smartphone grew 5% on the year to 30,000 rubles in January–March, while an average price of a smartphone, in general, stood flat on the year at 12,400 rubles, according to Svyaznoy’s figures.

“Negative factors impeding growth in sales of NFC smartphones include popularity of cash payments in Russia, which is currently higher than a liking for contactless means. One more reason is insufficient development of infrastructure for contactless payments. Daily services, where the availability of contactless payments could be popular, like public transport, are equipped with the option in several big cities only and do not have many fans now,” Tikhonov said.

“The launch of Android Pay and informing clients of its options by banks and big retail chains along with the development of contactless payment infrastructure could push up sales of NFC smartphones. A decrease in prices of NFC phones and a wider range of their models could also play an important role.”

Svyaznoy had over 200 models of NFC phones for the price starting from 9,000 rubles, the seller’s spokesman said.

Sberbank, which is among the country’s top banks working with Android Pay, said about 14 million of its local clients with Android smartphones could join the new system. In total, the bank has over 110 million clients in the country, as it says on its Web site.

“Sberbank’s global task is to go away from cash as much as possible, because it provides clients with a convenient, quick, modern, and safe service. Now, to solve the task, we primarily focus on the development of the contactless technology by securing infrastructure and improving the product offer on banking cards,” Svetlana Kirsanova, senior managing director for retail business at the bank, said in a statement.

More than 1 million of Sberbank clients have already tied their cards to Apple Pay and Samsung Pay and have carried out 13 million transactions, including 5.8 million in big cities, like Moscow and St. Petersburg, Sberbank said.

Spencer Spinnell, director of business development at Google said the U.S. company teamed up with Delivery Club, Russia’s biggest food delivery service, to make Android Pay available for all Android users of the service.

Delivery Club’s Managing Director Andrei Lukashevich said 72% of the service’s clients order food via mobile applications. “Users will be able to choose the means of payment they like most: cards, cash or Android Pay,” he said.

(56.7560 rubles – U.S. $1)

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