![]() ![]() Secondly, transfers to pre-paid cards from corporate accounts are impacted, but presumably here mitigation is easier since the payment could go to a digital wallet rather than a pre-paid card. In addition, the ecommerce business may be impacted too, to the extent foreign merchants form part of that ecosystem, that is a concern because ecommerce has a disproportionate margin contribution. It appears, on industry data, at least two thirds of remittances are international, so this is material and at least 20% of payment services net revenue. those that would involve "foreign merchants". However, we do not know what proportion of these transactions are cross-border i.e. This is because "money remittances" make up 41% of payment volume and 30% of net revenue for Qiwi's cash cow, its payment services business. It appears most significant part of Qiwi's business that has been hit is "The suspension or limitation of most types of payments to foreign merchants and money transfers to pre-paid cards from corporate accounts". For those interested in further reading here, Bill Browder's Red Notice is an excellent book related to this topic. Of course, investors in Russia should not expect the level of transparency and rights that exist in other markets. Yes, various rulings ultimately went against the Russian government requiring $57 billion in damages, but Yukos was still bankrupt.Īll of which is to say it is quite possible that arbitrary demands from the CBR and elsewhere could materially impact Qiwi shareholders. Yukos is one prominent example from 16 years ago, where the energy company was essentially bankrupted by tax demands from the government. Russia also has a history of challenging companies it does not favor. Hence once can see why Qiwi is very much on the Central Bank's radar. Today, banks can print money, which is a tremendous power, however no bank can print Bitcoin directly. Furthermore, digital currencies, though not directly related to this issue also present a challenge to the fiat money of central banks. This action may give the Russian state greater control and insight over transactions. and ongoing internet regulation in China to name a few examples.Īs such, it may well be that the CBR wishes to tamp down on the free flow of payments, especially cross-border payments. We are seeing a general trend of a more regulated internet, with different regions taking different approaches, from the General Data Protection Regulation (GDPR) in Europe to debates over Section 230 and net neutrality in the U.S. However, the issue at stake is material, Qiwi is still challenged even if this is an industry-wide trend. The small size of the fine suggests that Qiwi may be correct that the issue is not so much Qiwi's practices as general electronic payment regulation. In addition, Qiwi now faces potential class action lawsuits, likely due to not disclosing these risks to investors early enough. Qiwi argues that these actions are more a reaction to the Russian bank's attitude towards digital payments in general, "driven by an evaluation of the overall approach of the CBR to the interpretation of the applicable e-payments regulation", rather than Qiwi in particular.Įither way, the actions are material and Qiwi estimates a 33% to 40% impact of the enforcement actions on Qiwi payment service net revenue had these restrictions been in place for the first 9 months of 2020 (source: 12/9/20 6-K).
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