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. Last Updated: 07/27/2016

Visa Sees Opportunities to Expand Its Business

Local banks have issued about 1 million Visa cards with limited capabilities. They've issued less than 200,000 universal cards. Vedomosti's Yelena Berezanskaya talks to Visa International president Malcolm Williamson in Budapest, Hungary, about the credit-card company's expansion plans.


Q: What are Visa International's plans for Russia?

A: Russia is a huge country with a huge population, and so we have great potential here. The problems that Russia is encountering in the credit-card business are unique. But this is the case with any country. If you look at the countries where Visa is established, you'll see both countries with developed economies and countries that have experienced economic depression for several years now. Nearly every country has gone through a situation in its history similar to what Russia has been experiencing since the crisis. It's natural at such moments to wonder: Who needs all these cards? But it's OK. Our experience shows that economies recover and everything works out. You in Russia have survived a crisis and the cards are still here. In emerging market countries, we consider credit cards as a means for attracting people to banks who have never worked with banks. This helps the national economy to reduce the amount of money in circulation. Circulation of cash creates additional problems: This money has to be handled, and it's more difficult to control its movement. The use of bank cards substantially simplifies the situation, because even in a society experiencing an economic turndown, cards can be applied to a very wide range of uses. The number of cards in Russia fell off dramatically after the crisis, but they've begun to increase again. According to the Russian Statistics Agency, your gross domestic product is up by 8 percent for the first months of this year, and we are hoping that our business in Russia will still continue to develop.

Q: I don't quite understand your marketing policies in Russia. In the United States, for example, Visa has commercials on television. Here in Budapest, you can see your billboards on the road to the airport. But you don't have anything of the sort in Moscow.

A: Those issues are decided locally, not in the central office. It would be strange if we negotiated with the Moscow authorities about advertising from our San Francisco offices. These issues are left to our regional representative offices, in this case to Visa CEMEA. They allocate advertising funds from their marketing budgets. Right now in Russia there are a lot of problems in the banking sector, and Visa CEMEA is being very cautious in how it spends it funds. Nevertheless, we're spending money on advertising in Russia. There are different kinds of advertising. Sometimes we decide to conduct an advertising campaign along with a certain bank. For example, with Alfa Bank in its Alfamobile program. We advertised in Moscow newspapers with the Bank of Austria. We've already been well represented on this market, so it's no longer expedient for us to focus on mass advertising campaigns.

Q: When do you plan to open a representative office in Russia?

A: Very soon. I can't tell you the exact month, but I can say that our representative office will open this year.

Q: What problems has Visa had in its work with local banks?

A: I don't think it's been harder for us to work in Russia than in other countries. Everywhere they have their own language, their own culture, their own ways of doing things. Our business is to figure out the situation on each market.

Q: According to Visa's plans, all of the banks in your payment system are required to cease issuing cards with magnetic strips by 2005, and begin issuing cards with built-in microprocessors. This will be a major expense for the banks. How do you plan to force Russian banks to issue these smart cards?

A: We're planning to make our business in Russia meet global standards. This has given rise to some rather serious difficulties. This goal is being achieved in three special ways. First, is the fight against fraud. In this plan, there is a huge difference between cards with magnetic strips and those with chips. Our experience in France has shown that there is much less fraud with smart cards. Second, banks have to understand that they are taking a risk if they refuse to invest in smart cards. Smart cards are used almost universally today. ... If a bank doesn't want to change over to microchips, then other companies will ultimately take over some of its functions with time. ... Third, of course we can offer some help. The more cards in circulation, the less the cost of issuing each one. This is basic math. We can help banks by consolidating their orders. We can even negotiate for the banks with the parties involved.

Q: How much initial investment do you think Russian banks will have to make to change over to the smart cards?

A: Let's talk about concrete conditions. The cost is derived from a number of factors: which program you're talking about, whether the bank is going to use chips with limited or universal functions, who's going to offer software support and so forth. The size of the investment can vary enormously.

Q: What can you say about the formation of a transaction-processing company in Russia? There is an impression that your banks aren't very excited to turn over all their hard-won agreements with mercantile and service businesses to a general pool.

A: We've already encountered similar problems. As a rule, the banks react negatively at first. However, in practice, the banks that join forces are more successful than lone institutions. There are many historical examples to illustrate my words. In Brazil, for example, in every situation banks that consolidated were able to turn unprofitable processing businesses into profitable ones. If you join forces, and share your expenses, you can use your profits. Right now, Russian banks have to lower prices in order to close service contracts, which makes the processing business unprofitable. Creation of a joint processing company is a voluntary affair. We aren't forcing anyone, and we don't have the right to do so. The only thing we can do is convince the bankers of the wisdom, focusing on the realities and our experience.

Q: A new board of directors of Visa CEMEA was recently voted in, and it had only one Russian representative. Before, there were two. Why is this?

A: I wouldn't attach too much meaning to this. As I've already said, we look at Russia as a market with great potential. So we naturally would like to have Russian representatives not only on Visa CEMEA's board of directors, but on the board of directors for Visa International as well. However, this is probably not so expedient right now. For a number of reasons, we cannot increase the number of members of the board. But this does not mean that the door is closed to Russia. ... Even if you don't have someone on the board, what difference does it make? We've been able to satisfy the needs of 25,000 banks throughout the world, even in countries that do not have representatives on our board of directors.

Q: From Jan. 1 to 7, Russian banks couldn't use voice authorization. Why was this?

A: Russia was not the only country affected. We didn't want to offend Russians. The shutdown of our voice authorization was connected to Y2K problems. We were afraid of massive fraud. With voice activation, a sales clerk dictates a card number over the phone. It's the most insecure form of transferring information. In reality, it only involved about 5 percent of our operations. This was by no means an action aimed against Russia.