Dr.Victor Dostov, PayCash Group www.paycash.ru

Dr.Victor Dostov, PayCash Group

Outline What is PayCash Group of companies? What is PayCash technology? How PayCash was evolving? What are PayCash achievements? How Russian payment landscape looks like? What we are doing now?

Outline

What is PayCash Group of companies?

What is PayCash technology?

How PayCash was evolving?

What are PayCash achievements?

How Russian payment landscape looks like?

What we are doing now?

PayCash is: Payment technology, 4 patents Chaum-like digital cash support Accounts management Merchant support Crypto, digital signing, database and other primitives Payment engine Set of business, regulatory and other know-how

PayCash is:

Payment technology, 4 patents

Chaum-like digital cash support

Accounts management

Merchant support

Crypto, digital signing, database and other primitives

Payment engine

Set of business, regulatory and other know-how

PayCash incarnations: Internet payment system (6) Payment kiosk processing (3) On-line lottery (1) Remittance (1) Mobile payments (3) Miscellaneous (3)

PayCash incarnations:

Internet payment system (6)

Payment kiosk processing (3)

On-line lottery (1)

Remittance (1)

Mobile payments (3)

Miscellaneous (3)

PayCash incarnations : Yandex.Dengi iDealer Dramcash Cyphermint Moneta Express Alter-I Loki Mobile Wallet Internet.Dengi … . Some of them have failed, survivors have about 40 mln. USD capitalization.

PayCash incarnations :

Yandex.Dengi

iDealer

Dramcash

Cyphermint

Moneta Express

Alter-I

Loki

Mobile Wallet

Internet.Dengi

… .

Some of them have failed, survivors have about 40 mln. USD capitalization.

PayCash Group is high-tech privately owned narrow purpose incubator: New idea IT development Pilot (business) implementation Commercial run (and getting new ideas ) Sale Big experience save a lot of time and money on early stages: fast start, ready environment (financing, corporate, IT, legal, etc.)

PayCash Group is high-tech privately owned narrow purpose incubator:

New idea

IT development

Pilot (business) implementation

Commercial run (and getting new ideas )

Sale

Big experience save a lot of time and money on early stages: fast start, ready environment (financing, corporate, IT, legal, etc.)

PayCash Group is not a “classic” incubator, because of: Concentration on payments and around Sale on mature stage, not start-up sale

PayCash Group is not a “classic” incubator, because of:

Concentration on payments and around

Sale on mature stage, not start-up sale

PayCash History 1998

PayCash History

1998

Basis Internet payment system looks like a good idea. 50K USD + 1 year ROI We are not alone: DigiGold CyberCash Digicash Millicent e-Gold …

Basis

Internet payment system looks like a good idea.

50K USD + 1 year ROI

We are not alone:

DigiGold

CyberCash

Digicash

Millicent

e-Gold

…

Question What is exactly the system to build? Answer Digital cash

Question

What is exactly the system to build? Answer

Digital cash

In 1998 life was very different Internet was big already and needed payment tools Internet bubble was coming Credit card on line? Worked, but ugly Internet banking was very unclear Privacy was a huge concern on personal and even state level No 9/11, no Patriot Act, no KYC, no FATF, anonymous accounts in Switzerland, offshore banking

In 1998 life was very different

Internet was big already and needed payment tools

Internet bubble was coming

Credit card on line? Worked, but ugly

Internet banking was very unclear

Privacy was a huge concern on personal and even state level

No 9/11, no Patriot Act, no KYC, no FATF, anonymous accounts in Switzerland, offshore banking

Digicash David Chaum “ Security Without Identification: Transaction Systems to Make Big Brother Obsolete ” Digital cash Absolutely new approach to remote payments with no accounts

Digicash

David Chaum “ Security Without Identification: Transaction Systems to Make Big Brother Obsolete ”

Digital cash

Absolutely new approach to remote payments with no accounts

. Digital bearer certificate valued in a currency, digitally signed, by an Issuer (Bank), like a bill of exchange or a traveler check low infrastructure cost (PC + Internet based) highest security: strong crypto Digital coins DBC #1234678988 Nomination: $123.25 Underwritten: Tavrichesky Bank Date:12.1.98 11:01 Digital Signature: 12345467575643434556563452678999

.

Digital bearer certificate valued in a currency, digitally signed, by an Issuer (Bank), like a bill of exchange or a traveler check

low infrastructure cost (PC + Internet based)

highest security: strong crypto

$1 $1 FILE-sertificate FILE-sertificate $1 FILE-sertificate FILE-sertificate   Internet V-BANK Customer V-SHOP

Details Double-spending: number database Blind signing: Bank does not know which specifically coin it signs, but knows face value. No trace of future spending. Everything is signed, easy check by independent party. No need in array of accounts support Fast, private, save, elegant, new.

Details

Double-spending: number database

Blind signing: Bank does not know which specifically coin it signs, but knows face value. No trace of future spending.

Everything is signed, easy check by independent party.

No need in array of accounts support

Fast, private, save, elegant, new.

Digicash Made up in Netherlands by Dr. Chaum Deutsche Bank pilot EU Technology Innovations Award 1995 Negotiation with Microsoft One country, one Bank Huge license cost

Digicash

Made up in Netherlands by Dr. Chaum

Deutsche Bank pilot

EU Technology Innovations Award 1995

Negotiation with Microsoft

One country, one Bank

Huge license cost

PayCash. Better Digicash. Bypass patent umbrella Multicurrency Multibank Even less trust needed Smaller database … .

PayCash. Better Digicash.

Bypass patent umbrella

Multicurrency

Multibank

Even less trust needed

Smaller database

… .

We have done this… Chaum’s Coin( i , X ) = { i , X , g i -1 ( f ( X ))} , where X is the random serial number of a coin, chosen by a customer, X belongs to a large set M'  M = (Z/ m Z) * , m is a composite number whose factorization is known only to the bank, f : M' —> M is an easy-to-calculate mapping publicly known and hard-to-invert for all parties of the payment system except, possibly, for the bank PayBook ( N , P ) = { N , P , g - N ( f ( P ))} , where P is User’s random public key , f , and g have the same meaning as above, and g - N ( X ) = g -1 ( g -1 (... g -1 ( X )...)) . A nonnegative integer N (the disposition of the book) determines paying capacity of the book.

… and even more New two-stage scratch card protocol Password Verifier Patent: Method for a cardholder to request fulfilment of an obligation associated with the card and for the issuer to acknowledge this obligation

Some IT Thin server Very thick client Very secure environment, but proprietary and not easy-to-learn (for customers and shops)

Some IT

Thin server

Very thick client

Very secure environment, but proprietary and not easy-to-learn (for customers and shops)

“ Russian leader in financial cryptology ” - Computerra National Intel technological award [ 03 /00] , Intel diploma (shared with International Banking Institue) [07/00], Best site [St.Petersburg , 06/00], Business site 2000 diploma [11/00]; Russian Innovation Conquest (Intel/Audi/Expert) Award [05/03] Four patents International expertise ( Chaum, Shneier ) Certificate of Special US Congressional Recognition [ 12 /02]

“ Russian leader in financial cryptology ” - Computerra

National Intel technological award [ 03 /00] , Intel diploma (shared with International Banking Institue) [07/00], Best site [St.Petersburg , 06/00], Business site 2000 diploma [11/00]; Russian Innovation Conquest (Intel/Audi/Expert) Award [05/03]

Four patents

International expertise ( Chaum, Shneier )

Certificate of Special US Congressional Recognition [ 12 /02]

How to ROI? Sale of patents + software licensee + pilot + commercial run (around 00, Russia, US…)

How to ROI?

Sale of patents

+ software licensee

+ pilot

+ commercial run (around 00, Russia, US…)

PayCash. Change of paradigm Group of analytics Development company Operating company

PayCash. Change of paradigm

Group of analytics

Development company

Operating company

Shop 34567899 PayCash Bank External World Internal world Banks Payment systems Scratch cards On-line payment systems 34567899 Plastic cards Kiosks

Running the system Legal & financial model Agreement with shops Money-in/Money-out: agreement with agents Customer supports Security … ..

Running the system

Legal & financial model

Agreement with shops

Money-in/Money-out: agreement with agents

Customer supports

Security

… ..

Running the system Development is slow Cash burns fast IT/Marketing interface is poor … .. Anyway, we are doing a great thing

Running the system

Development is slow

Cash burns fast

IT/Marketing interface is poor

… ..

Anyway, we are doing a great thing

2001. Outside Digicash bankruptcy 9/11. Shift to conservative models No more privacy motivation Internet bubble exploded Not a best time for private internet payment systems

2001. Outside

Digicash bankruptcy

9/11. Shift to conservative models

No more privacy motivation

Internet bubble exploded

Not a best time for private internet payment systems

2001. Inside System became evidently commercial No more privacy, but engine works excellent Can be transformed into account-based model We were getting Central Bank License We became interesting for vendors, partners, licensees, etc. We started join venture Yandex.Money Yandex.ru is a biggest Russian search-centered portal (now in World Top 10).

2001. Inside

System became evidently commercial

No more privacy, but engine works excellent

Can be transformed into account-based model

We were getting Central Bank License

We became interesting for vendors, partners, licensees, etc.

We started join venture Yandex.Money

Yandex.ru is a biggest Russian search-centered portal (now in World Top 10).

Instant acquirement of a huge auditorium.

Sold in 2007 to Yandex Now 3+ mln accounts, $800 mln per year

What more? To clone PayCash internet payments in another countries Internet.Dengi, Ukraine, sold Remittance Moneta Express, in process of sale eLottery Loki Intellectual property protection, crypto, etc.

What more?

To clone PayCash internet payments in another countries

Internet.Dengi, Ukraine, sold

Remittance

Moneta Express, in process of sale

eLottery

Loki

Intellectual property protection, crypto, etc.

What more ? Advanced technologies of financial values storing and/or management (internet, mobiles, stand-alone chips…) Non-banking financial operators Advanced market segments (internet and mobile merchants, etc.) Is this an endemic situation to extinct or the can get some universal lessons from it?

What more ?

Advanced technologies of financial values storing and/or management (internet, mobiles, stand-alone chips…)

Non-banking financial operators

Advanced market segments (internet and mobile merchants, etc.)

Is this an endemic situation to extinct or the can get some universal lessons from it?

Russia: typical features 142,7 mln. population more than 50% lives in small towns/countryside, with only Federal Post or Sberbank offices providing very basic financial services Average monthly income in countryside is few hundreds USD Average income in Moscow is comparable to NY Two worlds in one Both worlds use more than 150 mln cellular phones, 99% are prepaid

Russia: typical features

142,7 mln. population

more than 50% lives in small towns/countryside, with only Federal Post or Sberbank offices providing very basic financial services

Average monthly income in countryside is few hundreds USD

Average income in Moscow is comparable to NY

Two worlds in one

Both worlds use more than 150 mln cellular phones, 99% are prepaid

Russia: typical features Banks target B2B, weakness of retail banking: can’t build retail in 20 years from scratch Banks targets credits with 20%+ p.a. rate Banks are not very interested in retail payments Historical weakness of “distant” payments (no checks…) Low effective card and accounts penetration (percents) Formal penetration is more than 100% High-tech culture development of sophisticated payment instruments

Russia: typical features

Banks target B2B, weakness of retail banking: can’t build retail in 20 years from scratch

Banks targets credits with 20%+ p.a. rate Banks are not very interested in retail payments

Historical weakness of “distant” payments (no checks…)

Low effective card and accounts penetration (percents) Formal penetration is more than 100%

High-tech culture

development of sophisticated payment instruments

How do people pay for, say, prepaid mobiles or telcos?

Kiosks Cash-in Touch screen

Kiosks

Kiosks What pay for? Prepaid mobiles Return of bank credits Prepaid telcos Utilities Tickets, MMORG, everything

Kiosks

What pay for?

Prepaid mobiles

Return of bank credits

Prepaid telcos

Utilities

Tickets, MMORG, everything

Kiosks Cyberplat, ePort, OSMP How market looks like: Kiosks: more than 100,000 Merchants: 2000 (large) + small Monthly turnover: 1 bln USD Average transaction: $20 Yearly growth: +30%

Kiosks

Cyberplat, ePort, OSMP

How market looks like:

Kiosks: more than 100,000

Merchants: 2000 (large) + small

Monthly turnover: 1 bln USD

Average transaction: $20

Yearly growth: +30%

What more? m-Payments Mobile Wallet, joint venture with Vimpelcom and other MNOs The same account for Air-Time and purchases, like Premium SMS Bank as an intermediate between MNO and merchant 1 mln USD per monts, 400 000 accounts Paying for internet, VoIP, flowers, tickets, e-books, internet services etc.

What more?

m-Payments

Mobile Wallet, joint venture with Vimpelcom and other MNOs

The same account for Air-Time and purchases, like Premium SMS

Bank as an intermediate between MNO and merchant

1 mln USD per monts, 400 000 accounts

Paying for internet, VoIP, flowers, tickets, e-books, internet services etc.

Other m-payments Different m-banking schemes Credit-card based m-payment NFC pilots

Other m-payments

Different m-banking schemes

Credit-card based m-payment

NFC pilots

A men needs half of a day to think out the thing, which will keep thousands of other man busy for a few years. Joseph Strauss, inventor of Golden Gate Bridge in San Francisco

A men needs half of a day to think out the thing, which will keep thousands of other man busy for a few years.

Joseph Strauss, inventor of Golden Gate Bridge in San Francisco

Victor Dostov [email_address]