Non Bank Payments with Webmoney Transfer (part 1)

Around the world there are some brilliant people creating online payment products for tomorrow's consumer. These Internet visionaries analyze the everyday financial issues we all face then create convenient solutions which make our world run smoother. Webmoney Transfer in Moscow, Russia engages a small army of these bright young minds.

Webmoney Transfer is a family of products created by knowledgeable professionals with backgrounds in the daily business practices of Russian consumers. The operation and the regulatory framework for this dynasty started in Russia and are based on the changing Russian economic model. When the company first began operations in 1998, the Internet was brand new, cell phones were very expensive & the "Internet payments" industry was still in diapers. The April ‘98 Time Magazine cover story was asking, “The Future of Money...are banks really necessary?”

Although during the past decade Webmoney has been rapidly expanding around the world, a large segment of their products and services still cater to local Russian consumers and a majority of their customers reside in that part of the world.

If you have never been to Russia it is impossible to comprehend the many non bank local payment solutions offered by Webmoney. The company's software provides a wide variety of solutions that seem permanently integrated into everyday Russian life.

Over the past 5-10 years, detailed information about the Webmoney business, for any English speaking person, has been somewhat limited. It was very enlightening to visit Moscow and see the system from a local point of view. As a non Russian person, if you tour their English language web site http://www.wmtransfer.com the information you learn online is only a small slice of the total company's operation.

For permitting such unrestricted access to their company and employees I would like to send a special thanks to Peter Darakhvelidze and Jane (double thanks to Jane for translating:-)

Computing Forces

Mid 1998, there was a group of Russian software engineers creating a new online banking package. This software would have been marketed to Russian banks, however, in August of 1998, Russian banking business experienced a major financial meltdown (also called “Ruble crisis” or “Default”). This event was essentially a total collapse of their banking industry.

Wikipedia describes the Russian bank situation like this:

The inability of the Russian government to implement a coherent set of economic reforms led to a severe erosion in investor confidence and a chain-reaction that can be likened to a run on the Central Bank. Investors fled the market by selling rubles and Russian assets (such as securities), which also put downward pressure on the ruble. On August 13, 1998, the Russian stock, bond, and currency markets collapsed as a result of investor fears that the government would devalue the ruble, default on domestic debt, or both. On August 17, 1998, the Russian government and the Central Bank of Russia issued a “Joint Statement” announcing, in substance, that: (i) the ruble/dollar trading band would be widened from 5.3-7.1 RUR/USD to 6.0-9.5 RUR/USD; (ii) Russia's ruble-denominated debt would be restructured in a manner to be announced at a later date; and, to prevent mass Russian bank default, (iii) a temporary 90-day moratorium would be imposed on the payment of some bank obligations, including certain debts and forward currency contracts. Russian inflation in 1998 reached 84 percent and welfare costs grew considerably. Many banks, including Inkombank, Oneximbank and Tokobank, were closed down as a result of the crisis....millions of people lost their bank savings.

The Russian crisis also had a negative effect on the surrounding countries including but not limited to Estonia, Latvia, Lithuania, Georgia, Belarus, Kazakhstan, Moldova, Ukraine & Uzbekistan. After August, the engineers' original online banking software was no longer needed by the banks. Additionally, local consumers across Russia and the region quickly stopped using the local banks. Russian banks were not considered safe and as millions of Russian consumers had just lost their savings a new cash driven society was created almost overnight. Non bank payment options were now in big demand.

WebMoney Transfer Is Born

The banking crisis had created a large receptive market for online payment services. In late 1998 the Webmoney Transfer software was created from this original online banking package. The new system permitted consumer payments without the need for a bank account.

At that time there were very large differences between regulated online banking and non bank Internet electronic money.

-Much lower fees
-Less regulation from the state
-Smaller more receptive operators able to quickly adapt their business practices
-Easy entry for new businesses
-Real advantages for local private businesses using these new consumer products and technology.

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