FOCUS: Odnoklassniki’s rush to replace banned money services in Ukraine can pay back

By Yekaterina Yezhova

MOSCOW, Nov 21 (PRIME) -- Popular social network Odnoklassniki, owned by Russian Internet giant Mail.Ru Group, has taken advantage of offering users to remit money to Ukraine, whose central bank forbade several Russian payment systems, like Yandex.Money and Qiwi. Analysts approved of the move, saying the network has a strong brand and multiple loyal audiences to succeed and expand further.

“Ukraine with the network’s monthly audience of 9.5 million people is the second largest country after Russia by Odnoklassniki’s popularity. Many Russians use the network to get in touch with their relatives and friends in Ukraine,” Anastasia Zhbanova, head of Odnoklassniki’s press office, told PRIME.

“Development of payment services is important for us in this region, and we’re certain of success of the new service. We hope a great chunk of the audience would use it, as we’ve been witnessing a growing demand among Russians since the launch.”

Investment in the project was not disclosed, but Viktor Markov, senior analyst at Zerich Capital Management, said such things usually cost a lot.

“Odnoklassniki, however, is part of the gigantic Mail.Ru Group with multimillion audiences, and expenses on creation of the payment system will repay quickly,” Markov said.

To remit money via the network, a user should choose a recipient and a card, from which the money will be taken, and enter the amount of a transfer. The recipient indicates the card to accept the money. The sender does not need to enter data of the recipient’s banking card. Transfers are made in Russian rubles and are converted into a foreign currency under the rate set by the recipient’s bank. Users can remit from 100 to 75,000 rubles.

“The network does not charge commissions for transfers. MasterCard and Maestro systems also charge no commissions at present. Visa charges 35 rubles for transfers of 100–1,000 rubles; 50 rubles for 1,001–5,000 rubles and 50 rubles plus 0.5% of the amount for 5,001–75,000 rubles,” Zhbanova said, adding that an average amount of a remittance is at 7,000 rubles.

Finam analyst Leonid Delitsyn said Odnoklassniki is a mature project with a more than 10-year history, and key indicators of its effectiveness are revenue and profit.

“That is why management concentrates its attention on the growth of revenue. Electronic payments are one of the biggest slices of the Internet economy. According to experts, the Russian market of electronic payments amounted to 558 billion rubles in 2015, or 42% of the whole Internet economy. Money remittances from Russia to Ukraine stand at U.S. $1 billion,” Delitsyn said.

Markov at Zerich valued the Russia-to-Ukraine money remittance flow at $800 million. “The volume of transfers depends on the number of Ukrainians working in Russia. The money flow won’t weaken in future because the Ukrainian economy is struggling. The ban of the Russian payment systems by Kiev could allow Odnoklassniki to take a strong position on the local market,” the analyst said.

Delitsyn at Finam agreed, saying that if transfers via social networks prove convenient, their flow could grow. “People will start using the network for the sums they now carry in cash. After strengthening its positions in the money transfer sector, Odnoklassniki could gradually expand in other sectors linked to payments,” he said.

“Odnoklassniki has unique competitive advantages, including a huge audience and the brand, to which users are very loyal. The network is one of the main Web resources for elder generations.”

Russia counts some 2.5 million Ukrainians, and the majority of them can use the network. “We can speak about 1 million potential users,” Delitsyn said. “Russia accommodates over 2 million Uzbeks and about 1 million of Tajiks. The number of citizens of Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan and Moldova in Russia exceeds 500,000 people. These countries will be priority markets for Odnoklassniki’s money transfer service.”

Odnoklassniki’s spokeswoman Zhbanova said the list of countries for the service will be expanded constantly. “Transfers to 17 countries of the CIS and close neighborhood are available now. In the future we plan to add money transfers from Ukraine to Russia and other options,” she said.

(65.1023 rubles – U.S. $1)

End