The Digital Ruble: A New Era for Russian Payments
Digital currency introduction by Zulfiya Kahrumanova: what's the purpose of a digital ruble? Is it compulsory?
Photo: Shutterstock
The Bank of Russia is leading a digital revolution in the financial world. Despite the have-beens, Russia is forging ahead in the race for innovation among world leaders. The financial sector is a technological powerhouse, and large banks are paving the way for change and simplicity in our everyday lives.
In an exclusive interview with KP.RU, Zulfiya Kakhumanova, Deputy Chairman of the Bank of Russia, takes us on a journey into the future of the digital ruble.
EMBRACING THE FUTURE WITH THE DIGITAL RUBLE
With all the conspiracy theories surrounding digitalization, let's cut to the chase. What’s the digital ruble in two sentences?
- The digital ruble is merely another form of the Russian currency, coexisting with cash and non-cash rubles. All forms maintain equivalence: 1 digital ruble equals 1 cash and non-cash ruble. The choice of what to use remains with the user.
So, why do we need a digital ruble?
- It's all about convenience for citizens and cost savings for businesses. It allows for free transfers, reducing the costs associated with accepting payments for businesses, particularly when compared to card transactions.
Let me correct you - transfers are practically free now. We can transfer up to 30 million rubles between accounts within different banks each month without charges...
- That's correct, but transfers with digital rubles will come without commissions not only between accounts but also beyond banks, provided you have digital rubles in your digital wallet. Additionally, it offers a smart contract feature, allowing you to set up automated payments according to specific conditions, simplifying financial transactions for all.
Hmm, so it's reminiscent of the crypto world, with smart contracts gaining attention on Ethereum, the second-largest cryptocurrency...
UNDERSTANDING SMART CONTRACTS
A smart contract is essentially the capacity to execute specific actions, including payments, based on a predetermined algorithm and specific conditions. For instance, if you wish for your parents' account to be automatically topped up whenever your account balance drops below a certain threshold, or if a company wants payment to be processed only upon delivery of goods, not before or after, that's a smart contract.
READY WHEN YOU ARE
With all the talk, is there any way digital rubles can be stolen?
- The high levels of information and data security measures implemented on the digital ruble platform ensure that hackers can't pilfer them easily. However, if a person accidentally transfers digital rubles to a scammer, both wallets can be quickly identified. This is because the scheme of bouncing money between different banks to obscure the trail won't work, as both wallets are on the same platform, enabling swift action to address the issue.
So, when can we expect the digital ruble to be rolled out?
- It's already been introduced, and we're continuing to test it with real digital rubles. Although we've postponed the mass launch, note that it won't be mandatory for banks to provide digital ruble payment services. Users have the option to choose whether or not to adopt the service voluntarily. At present, around 2,500 citizens are involved in our pilot project, and we aim to invite more.
Are there any plans for the digital ruble to be used for payouts like pensions or government benefits? Like the Mir card?
- No, no such plans exist. The digital ruble is an alternative option, offering users a choice. If someone prefers traditional methods, they can continue using them.
LET'S SIMPLIFY THINGS
It seems like digital payments are already commonplace for many Russians. Transactions are now nearly instantaneous. And even under sanctions, we've adapted quickly. Yes, payment services like Apple Pay and Samsung Pay don't work, but we've managed to cope with alternatives like QR codes.
- We're committed to simplifying life for both citizens and businesses. A diverse range of remote payment channels is available, including cards, the System of Quick Payments, and QR codes. By leaving your card at home or even choosing not to carry one at all, you can still make transactions.
So, are we following the Chinese example, which heavily relies on QR codes for almost every purchase?
- It's not accurate to say we're blindly replicating the Chinese model. Rather, we're part of a global trend to simplify daily transactions across various sectors. Our goal is to adapt to these conveniences already familiar to us. Soon, we may even control our phones with our eyes thanks to artificial intelligence.
Yet, I've encountered instances where things aren't smooth. You go to a café with just your phone, and the QR code can't be scanned. Why does that happen?
- This happens because the specific merchant may not support the payment service you're using. In such situations, you need to use cash, a card, or arrange a different transfer.
The choice of what to use is still with the individual
Photo: Shutterstock
From the outset, you have several options at different stores. Sometimes, there are even five different choices. Each bank can issue its own QR code, create its own rules, and establish its own standards. As a result, if you're using a payment service from a different bank than the one providing service at the payment terminal, you might be denied the ability to pay with a QR code.
So, what's the solution? It's a complicated mess akin to the plug and socket problem...
- Yes, it's similar to the plug and socket issue. To resolve this, we're working on creating a universal QR code that adheres to a single standard, enabling seamless scanning regardless of the payment service used on your phone.
But what about cashback? Will it remain? Banks only offer cashback on card transactions, not QR codes...
- If you're accustomed to earning cashback with a specific bank's payment service, there's no change. For example, if you use your card to save on fuel costs, continue to do so. The universal QR code isn't meant to replace services you're already comfortable with; rather, it serves as a point of entry, and you can choose your preferred method there.
Will there be a single entry point then, and I can decide how to pay afterwards?
- Yes, a single QR code will be presented at the checkout. Scanning it with your phone's camera brings up a payment page with various options: pay with a system of quick payments, digital rubles, or bank payment services. You select the method most convenient or beneficial for you. After making your selection, the last three services you've used will appear at the top of the list, personalizing the page to your preferences.
Zulfiya Kakhumanova spoke to KP.RU about the digital ruble and the universal QR code.
UNIFIED RAILS FOR MONEY TRANSFERS
Some large banks have resisted the introduction of a unified QR code. Why?
- As we prioritize convenience and affordability for consumers and businesses, while minimizing their lack of choice, we may occasionally face resistance from banks that can dictate their terms, rules, and fees. However, our mission is clear: we strive to make everything as straightforward and cost-effective as possible for all.
So, does that mean small businesses will save money in terms of equiring (the service that enables accepting payments from clients) when paying via QR codes, compared to the fees charged by banks for credit card transactions currently?
- Yes, it's especially important for small businesses because the universal QR offers uniform tariffs, eliminating the need to pay various fees for different banks.
WHERE WILL THE UNIVERSAL QR CODE BE USED?
Beyond payments at stores, the universal QR can be used for various services. Electric parking slots, tips, and e-commerce transactions are all potential options.
When can we expect the universal QR code to be introduced?
- Discussions are ongoing, and we expect to establish a date imminently.
How do these ideas originate at the Central Bank? They frequently seem advanced, and many people reject them. We've done fine without digital rubles and QR codes thus far...
- We study technological trends and international experiences. We analyze how the market is developing here in Russia. We anticipate what will be relevant in the coming years, consider the requirements of market participants, explore the experiences of other industries, react proactively to market changes, assess their impact, and create competitive conditions to accommodate them.
- The digital ruble, as explained by Zulfiya Kakhumanova, is a new form of the Russian currency coexisting with cash and non-cash rubles, offering convenience for citizens and cost savings for businesses through free transfers and the smart contract feature.
- In the world of business and technology, the universal QR code is being proposed as a solution to simplify various payments, including transactions at stores, electric parking slots, tips, and e-commerce transactions, potentially benefiting small businesses with uniform tariffs that eliminate the need to pay various fees for different banks.
- By adopting the digital ruble and the universal QR code, Russia is aiming to accommodate technological trends and future-proof its financial sector, following an innovative approach and adapting to convenience already familiar to citizens, while maintaining the choice of what to use for individual users.
