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. Last Updated: 07/27/2016

Guta Bank Launches Web Banking Service




Russian banks have offered services like shopping on the World Wide Web for some time, but it has been impossible for Russians to fully manage their accounts via the Internet.


Until now.


Moscow-based Guta Bank is dipping its feet into cyber water, launching what it calls Russia's first Internet banking program, Telebank Online. The service, which opened in mid-June, allows a client to pay bills, such as for telephone service and rent, from his home computer.


Under the program, it is also to exchange money and transfer cash from one account to another, the bank said.


Telebank Online comes at a time when crisis-hit Russian banks as a whole have precious few services to offer disillusioned clients. Many customers lost much if not all of their savings when the banking system collapsed following the ruble devaluation last August.


Russians, however, do still use banks to make transactions - a niche that analysts said Guta Bank could well fill.


"The variety of services one can pay for through the Internet in Russia is limited, but there will be some demand" for the new service, said Georgy Pavlov, an analyst with the Russian-European Center for Economic Policy.


Even so, a major concern about Internet banking in Russia is that the system will be vulnerable to theft.


Guta said it created a multi-tier system of barriers to prevent its clients' money from being stolen while in transit, but an analyst with Rating Information Center was skeptical, saying that "such information is easy to intercept even if there are 20 levels of protection."


The weakest links in the chain are the proxy and cache servers, which many Russians rely on, that are accessible to a third party, he said.


Another problem with Internet banking in Russia is that electronic transactions are loosely regulated in Russia.


A client claiming his money was stolen through an unauthorized transaction has a much better chance of getting it back by proving that the payment order is false than by trying to prove that access systems were tampered with, the analyst said.


However, Guta chairman Alexander Petrov told a news conference last week that Telebank Online was intended for small transactions, not commercial use, and designed to block large transactions.


Internet banking in Russia is bound to remain tiny in the near future, since utility bills do not account for large amounts of cash and there is a very limited number of potential clients who would use the service for other purposes, analysts said.So far, "this is nothing to talk about," said Alexei Vasilyev, an analyst with Skate financial information agency.


Guta boasts it has 1,000 clients using the Internet to pay for its telephone service, Telebank, and even if as many people were to sign up for Telebank Online, the commission the bank could collect would amount to "peanuts," Vasilyev said.


"Talking about a new banking retail service will make sense when there are several million dollars in the business," he added.


But in the end, it all appears to come down to trust.


For Internet banking to develop, "fundamental trust" in the banking system is needed, Pavlov said.