National payment system in Kazakhstan unfeasible: experts

Is there a need for a national payment system in Kazakhstan? If so, will it be feasible?

The questions have been raised after the U.S.-sanctioned Russian banks were denied access to Visa and MasterCard in March this year, which clearly showed that the financial industry was dominated by the West.

The former head of the National Bank of Kazakhstan Grigory Marchenko was speaking to a Russian news agency Lenta.ru when he said that Kazakhstan needed a payment system of its own because relying on foreign services provided by large financial corporations was imprudent and constituted a threat to Kazakhstan's national security.

Marchenko said that the Customs Union countries were excessively dependent on foreign payment systems. In addition, the introduction of e-currencies by major Western corporations exacerbated the threat to the national security.

“If central banks of emerging countries fail to introduce e-money within the following 3 years, it will be too late to do it in five years’ time. The situation in many countries will look as follows: half of their cash transactions will effected in US Dollars, with the e-money realm dominated by Apple, Google and Facebook. How can one manage a system that is run from abroad?” he was quoted as saying.

Some experts, however, do not view this developments as a danger to Kazakhstan or believe it is possible to build a completely independent system in Kazakhstan, Tengrinews reports.

Konstantin Gorozhankin, president of the Association of Kazakhstan Internet Business and Mobile Commerce (AKIB) commented on Marchenko’s statement.

According to Gorozhankin, transactions made in Kazakhstan via Visa and MasterCard payment systems journey to Europe and then return back to Kazakhstan. If there was a national processing center, then transactions involving Kazakhstani banking cards, local ATMs and terminals would be processed inside the country without the detour abroad, lifting thereby the question of national security.

However, he said that “running one’s own system is not profitable” and “only big countries can afford that”. Kazakhstan, although being the 9th largest country in the world in terms of land area, has a population of only 17 million people, with makes it not nearly large enough to make a national payment system feasible.

He added that Kazakhstan used to have two local payment systems, but none of them were popular with the population.

As for the spreading of PayPal, Google Pay, Apple Pay or Facebook Pay, the expert does not see any problem. According to him, these services will work with Kazakhstani cards in any case.

"If necessary, we can always turn them [the cards] off Google or Facebook services and prohibit the Kazakhs from using these services, if such a need arises. No need to ban anything at this point, it is necessary to simultaneously develop our own systems and services, but always retain control of a "switch" so as to be able to protect ourselves if someone encroaches on our security," the expert said.

Gorozhankin said that Marchenko “suggested taking away the banks' ATMs and terminals”, to which the banks were understandably reluctant to agree.

“The current National Bank Governor Kairat Kelimbetov has raised this issue, I believe, in the right way - ATMs and terminals should remain with the banks but the transaction shouldn’t go through Visa or MasterCard but stay within the country instead," Gorozhankin said.

President of the Internet Association of Kazakhstan (IAK) Shavkat Sabirov also doubts that Kazakhstan can do without the Western payment services. He said that Kazakhstani payment systems had to develop not as an equipoise to their foreign counterparts but as something that can be used inside the country, in particular to avoid additional fees that local banks have to pay for using the international services.

"The international system will still be used, it is just that the current worsening of the economic situation has left everyone thinking that there is a need for a country to possess its own systems and capabilities to be able to ensure its independence,” Sabirov said.

He brought the example of China with its UnionPay but said that their market was much larger and doubted a similar scenario was possible in Kazakhstan.

“We need to create our own system that would work inside Kazakhstan and cater to our own users without external fees. The payment systems like PayPal, Google Pay, Facebook Pay and Apple Pay win by having a large customer base. We are not going to compete with them or replace them. Our system can be a supplement,” Sabirov explained.

“For example, if you buy something from Google, then of course using their service is much easier. But if you buy something in Kazakhstan, then Kazakhstani operator should be a more suitable one," he added.

Reporting by Dmitry Khegai, writing by Dinara Urazova, editing by Tatyana Kuzmina