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5 Apr, 2010 05:34

E-money use on the rise in Russia

The use of E-money is becoming more popular in Russia, but as the government begins to call for more regulation, that growth could be stalled.

Using web money is not the same as making an electronic payment from a bank account. The service it provides is primarily intended for people who don't have a bank account or wish to keep a transaction entirely secret.

The customer essentially buys credits in the form of Web Money by wiring or depositing cash to any participating vendor. These credits can then be spent over the internet or given to another individual.

The amount of money in Russian e-wallets reached more than a billion dollars last year and the government thinks it needs regulation according to Finance Minister, Aleksey Kudrin.

“I met with the companies which are issuing electronic money, providing web-payments and the so-called e-purses. So far, these web services have not been recognized as using electronic money. According to the draft bill, the central bank will take over regulating the system.”

The Central Bank proposes to classify electronic money operators as non banking credit organizations. This would imply strict regulation which Boris Kim, Head of the Association of Electronic Trade, believes will harm the development of the sector.

“Payment systems are not credit organizations. They don’t take long-term deposits and don’t issue loans. So their risks are much lower then those of banks and they don’t need to be so strictly regulated."

But some control would be welcome, especially if it inspires greater confidence in the services on offer.

Clear legislation would help attract new customers and, therefore, more investment. It will also bring the whole system into the light, making it harder to use web money as a convenient means to finance crime or launder money.