By Roberto Veronese, Creative Director, frog San Francisco
The use of digital banking and electronic payments is expanding in many countries, as consumers embrace technology that facilitates financial services. Yet in Russia, people still cling to cash for most of their financial needs. In fact, more than 90 percent of all commodity purchases are in cash, according to the Bank of Russia, and the country loses over one percent of its annual GDP due to the huge amount of cash circulating and its maintenance costs. This poses a challenge to financial institutions, like Russia’s largest bank, Sberbank, which is eager to transition customers to digital services. Sberbank asked frog to envision product and service concepts that could effectively support that transition.
We began our work with extensive qualitative research in the field, investigating the deeply personal reasons why cash remains so popular among customers in Moscow. “I cannot go around without cash,” a young, wealthy and tech savvy Muscovite told us, while shopping at GUM, the city’s main department store. This was a typical response, even for younger Russians who are regularly online. More than half the population uses the Internet at least once a week, and appreciates the convenience of new digital tools to browse for information and media content. Yet in some cases these technologically sophisticated consumers refuse to open a bank account, preferring instead to pay their bills with cash at ubiquitous payments kiosks, despite the high commission applied to these transactions.
We found a number of reasons for this reluctance to adopt digital banking and electronic-payment services. Foremost is the fact that only a small number of merchants accept credit card payments, due to charges of up to 4 percent on the seller’s side and widespread tax evasion. Meanwhile, salaries are still largely paid with cash, despite the introduction of “salary cards” issued by a bank chosen by the employer. This is the main type of card issued in Russia, which on payday contributes to an extremely high volume of cash withdrawals that are usually not transferred to bank accounts.