Rusland Paycash


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Presentation by Victor Dostov of Paycash for the Dutch delkegation. June 16, 2009

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Rusland Paycash

  1. 1. <ul><li> Dr.Victor Dostov, PayCash Group </li></ul>
  2. 2. <ul><ul><ul><li>Outline </li></ul></ul></ul><ul><ul><ul><li>What is PayCash Group of companies? </li></ul></ul></ul><ul><ul><ul><li>What is PayCash technology? </li></ul></ul></ul><ul><ul><ul><li>How PayCash was evolving? </li></ul></ul></ul><ul><ul><ul><li>What are PayCash achievements? </li></ul></ul></ul><ul><ul><ul><li>How Russian payment landscape looks like? </li></ul></ul></ul><ul><ul><ul><li>What we are doing now? </li></ul></ul></ul>
  3. 3. <ul><li>PayCash is: </li></ul><ul><li>Payment technology, 4 patents </li></ul><ul><ul><li>Chaum-like digital cash support </li></ul></ul><ul><ul><li>Accounts management </li></ul></ul><ul><ul><li>Merchant support </li></ul></ul><ul><ul><li>Crypto, digital signing, database and other primitives </li></ul></ul><ul><li>Payment engine </li></ul><ul><li>Set of business, regulatory and other know-how </li></ul>
  4. 4. <ul><li>PayCash incarnations: </li></ul><ul><li>Internet payment system (6) </li></ul><ul><li>Payment kiosk processing (3) </li></ul><ul><li>On-line lottery (1) </li></ul><ul><li>Remittance (1) </li></ul><ul><li>Mobile payments (3) </li></ul><ul><li>Miscellaneous (3) </li></ul>
  5. 5. <ul><li>PayCash incarnations : </li></ul><ul><li>Yandex.Dengi </li></ul><ul><li>iDealer </li></ul><ul><li>Dramcash </li></ul><ul><li>Cyphermint </li></ul><ul><li>Moneta Express </li></ul><ul><li>Alter-I </li></ul><ul><li>Loki </li></ul><ul><li>Mobile Wallet </li></ul><ul><li>Internet.Dengi </li></ul><ul><li>… . </li></ul><ul><li>Some of them have failed, survivors have about 40 mln. USD capitalization. </li></ul>
  6. 6. <ul><li>PayCash Group is high-tech privately owned narrow purpose incubator: </li></ul><ul><li>New idea </li></ul><ul><li>IT development </li></ul><ul><li>Pilot (business) implementation </li></ul><ul><li>Commercial run (and getting new ideas ) </li></ul><ul><li>Sale </li></ul><ul><li>Big experience save a lot of time and money on early stages: fast start, ready environment (financing, corporate, IT, legal, etc.) </li></ul>
  7. 7. <ul><li>PayCash Group is not a “classic” incubator, because of: </li></ul><ul><li>Concentration on payments and around </li></ul><ul><li>Sale on mature stage, not start-up sale </li></ul>
  8. 8. <ul><ul><ul><li>PayCash History </li></ul></ul></ul><ul><ul><ul><li>1998 </li></ul></ul></ul>
  9. 9. <ul><li>Basis </li></ul><ul><li>Internet payment system looks like a good idea. </li></ul><ul><li>50K USD + 1 year ROI </li></ul><ul><li>We are not alone: </li></ul><ul><li>DigiGold </li></ul><ul><li>CyberCash </li></ul><ul><li>Digicash </li></ul><ul><li>Millicent </li></ul><ul><li>e-Gold </li></ul><ul><li>… </li></ul>
  10. 10. <ul><li>Question </li></ul><ul><li>What is exactly the system to build? Answer </li></ul><ul><li>Digital cash </li></ul>
  11. 11. <ul><li>In 1998 life was very different </li></ul><ul><li>Internet was big already and needed payment tools </li></ul><ul><li>Internet bubble was coming </li></ul><ul><li>Credit card on line? Worked, but ugly </li></ul><ul><li>Internet banking was very unclear </li></ul><ul><li>Privacy was a huge concern on personal and even state level </li></ul><ul><li>No 9/11, no Patriot Act, no KYC, no FATF, anonymous accounts in Switzerland, offshore banking </li></ul>
  12. 12. <ul><li>Digicash </li></ul><ul><li>David Chaum “ Security Without Identification: Transaction Systems to Make Big Brother Obsolete ” </li></ul><ul><li>Digital cash </li></ul><ul><li>Absolutely new approach to remote payments with no accounts </li></ul>
  13. 13. <ul><ul><ul><li>. </li></ul></ul></ul><ul><ul><ul><li>Digital bearer certificate valued in a currency, digitally signed, by an Issuer (Bank), like a bill of exchange or a traveler check </li></ul></ul></ul><ul><ul><ul><li>low infrastructure cost (PC + Internet based) </li></ul></ul></ul><ul><ul><ul><li>highest security: strong crypto </li></ul></ul></ul><ul><ul><ul><li> </li></ul></ul></ul>Digital coins DBC #1234678988 Nomination: $123.25 Underwritten: Tavrichesky Bank Date:12.1.98 11:01 Digital Signature: 12345467575643434556563452678999
  14. 14. $1 $1 FILE-sertificate FILE-sertificate $1 FILE-sertificate FILE-sertificate   Internet V-BANK Customer V-SHOP
  15. 15. <ul><li>Details </li></ul><ul><li>Double-spending: number database </li></ul><ul><li>Blind signing: Bank does not know which specifically coin it signs, but knows face value. No trace of future spending. </li></ul><ul><li>Everything is signed, easy check by independent party. </li></ul><ul><li>No need in array of accounts support </li></ul><ul><li>Fast, private, save, elegant, new. </li></ul>
  16. 16. <ul><li>Digicash </li></ul><ul><li>Made up in Netherlands by Dr. Chaum </li></ul><ul><li>Deutsche Bank pilot </li></ul><ul><li>EU Technology Innovations Award 1995 </li></ul><ul><li>Negotiation with Microsoft </li></ul><ul><li>One country, one Bank </li></ul><ul><li>Huge license cost </li></ul>
  17. 17. <ul><li>PayCash. Better Digicash. </li></ul><ul><li>Bypass patent umbrella </li></ul><ul><li>Multicurrency </li></ul><ul><li>Multibank </li></ul><ul><li>Even less trust needed </li></ul><ul><li>Smaller database </li></ul><ul><li>… . </li></ul>
  18. 18. 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.
  19. 19. … 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
  20. 20. <ul><li>Some IT </li></ul><ul><li>Thin server </li></ul><ul><li>Very thick client </li></ul><ul><li>Very secure environment, but proprietary and not easy-to-learn (for customers and shops) </li></ul>
  21. 21. <ul><li>“ Russian leader in financial cryptology ” - Computerra </li></ul><ul><li>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] </li></ul><ul><li>Four patents </li></ul><ul><li>International expertise ( Chaum, Shneier ) </li></ul><ul><li>Certificate of Special US Congressional Recognition [ 12 /02] </li></ul>
  22. 22. <ul><li>How to ROI? </li></ul><ul><li>Sale of patents </li></ul><ul><li>+ software licensee </li></ul><ul><li>+ pilot </li></ul><ul><li>+ commercial run (around 00, Russia, US…) </li></ul>
  23. 23. <ul><li>PayCash. Change of paradigm </li></ul><ul><li>Group of analytics </li></ul><ul><li>Development company </li></ul><ul><li>Operating company </li></ul>
  24. 24. Shop 34567899 PayCash Bank External World Internal world Banks Payment systems Scratch cards On-line payment systems 34567899 Plastic cards Kiosks
  25. 25. <ul><li>Running the system </li></ul><ul><li>Legal & financial model </li></ul><ul><li>Agreement with shops </li></ul><ul><li>Money-in/Money-out: agreement with agents </li></ul><ul><li>Customer supports </li></ul><ul><li>Security </li></ul><ul><li>… .. </li></ul>
  26. 26. <ul><li>Running the system </li></ul><ul><li>Development is slow </li></ul><ul><li>Cash burns fast </li></ul><ul><li>IT/Marketing interface is poor </li></ul><ul><li>… .. </li></ul><ul><li>Anyway, we are doing a great thing </li></ul>
  27. 27. <ul><li>2001. Outside </li></ul><ul><li>Digicash bankruptcy </li></ul><ul><li>9/11. Shift to conservative models </li></ul><ul><li>No more privacy motivation </li></ul><ul><li>Internet bubble exploded </li></ul><ul><li>Not a best time for private internet payment systems </li></ul>
  28. 28. <ul><li>2001. Inside </li></ul><ul><li>System became evidently commercial </li></ul><ul><li>No more privacy, but engine works excellent </li></ul><ul><li>Can be transformed into account-based model </li></ul><ul><li>We were getting Central Bank License </li></ul><ul><li>We became interesting for vendors, partners, licensees, etc. </li></ul><ul><li>We started join venture Yandex.Money </li></ul><ul><li> is a biggest Russian search-centered portal (now in World Top 10). </li></ul>
  29. 29. Instant acquirement of a huge auditorium.
  30. 30. Sold in 2007 to Yandex Now 3+ mln accounts, $800 mln per year
  31. 31. <ul><li>What more? </li></ul><ul><li>To clone PayCash internet payments in another countries </li></ul><ul><ul><ul><li>Internet.Dengi, Ukraine, sold </li></ul></ul></ul><ul><li>Remittance </li></ul><ul><ul><ul><li>Moneta Express, in process of sale </li></ul></ul></ul><ul><li>eLottery </li></ul><ul><ul><ul><li>Loki </li></ul></ul></ul><ul><li>Intellectual property protection, crypto, etc. </li></ul>
  32. 32. <ul><li>What more ? </li></ul><ul><li>Advanced technologies of financial values storing and/or management (internet, mobiles, stand-alone chips…) </li></ul><ul><li>Non-banking financial operators </li></ul><ul><li>Advanced market segments (internet and mobile merchants, etc.) </li></ul><ul><li>Is this an endemic situation to extinct or the can get some universal lessons from it? </li></ul>
  33. 33. <ul><li>Russia: typical features </li></ul><ul><li>142,7 mln. population </li></ul><ul><li>more than 50% lives in small towns/countryside, with only Federal Post or Sberbank offices providing very basic financial services </li></ul><ul><li>Average monthly income in countryside is few hundreds USD </li></ul><ul><li>Average income in Moscow is comparable to NY </li></ul><ul><li>Two worlds in one </li></ul><ul><li>Both worlds use more than 150 mln cellular phones, 99% are prepaid </li></ul>
  34. 34. <ul><li>Russia: typical features </li></ul><ul><li>Banks target B2B, weakness of retail banking: can’t build retail in 20 years from scratch </li></ul><ul><li>Banks targets credits with 20%+ p.a. rate Banks are not very interested in retail payments </li></ul><ul><li>Historical weakness of “distant” payments (no checks…) </li></ul><ul><li>Low effective card and accounts penetration (percents) Formal penetration is more than 100% </li></ul><ul><li>High-tech culture </li></ul><ul><li>development of sophisticated payment instruments </li></ul>
  35. 35. How do people pay for, say, prepaid mobiles or telcos?
  36. 36. <ul><li>Kiosks </li></ul>Cash-in Touch screen
  37. 37. <ul><li>Kiosks </li></ul><ul><li>What pay for? </li></ul><ul><li>Prepaid mobiles </li></ul><ul><li>Return of bank credits </li></ul><ul><li>Prepaid telcos </li></ul><ul><li>Utilities </li></ul><ul><li>Tickets, MMORG, everything </li></ul>
  38. 38. <ul><li>Kiosks </li></ul><ul><li>Cyberplat, ePort, OSMP </li></ul><ul><li>How market looks like: </li></ul><ul><li>Kiosks: more than 100,000 </li></ul><ul><li>Merchants: 2000 (large) + small </li></ul><ul><li>Monthly turnover: 1 bln USD </li></ul><ul><li>Average transaction: $20 </li></ul><ul><li>Yearly growth: +30% </li></ul>
  39. 39. <ul><li>What more? </li></ul><ul><li>m-Payments </li></ul><ul><ul><ul><li>Mobile Wallet, joint venture with Vimpelcom and other MNOs </li></ul></ul></ul><ul><ul><ul><li>The same account for Air-Time and purchases, like Premium SMS </li></ul></ul></ul><ul><ul><ul><li>Bank as an intermediate between MNO and merchant </li></ul></ul></ul><ul><ul><ul><li>1 mln USD per monts, 400 000 accounts </li></ul></ul></ul><ul><ul><ul><li>Paying for internet, VoIP, flowers, tickets, e-books, internet services etc. </li></ul></ul></ul>
  40. 40. <ul><li>Other m-payments </li></ul><ul><li>Different m-banking schemes </li></ul><ul><li>Credit-card based m-payment </li></ul><ul><li>NFC pilots </li></ul>
  41. 41. <ul><li>A men needs half of a day to think out the thing, which will keep thousands of other man busy for a few years. </li></ul><ul><li>Joseph Strauss, inventor of Golden Gate Bridge in San Francisco </li></ul>
  42. 42. Victor Dostov [email_address]