Armenian banks do not imagine the volume of incomes from e-commerce

Yerevan /Mediamax/. E-commerce is a prospective direction of business, however no significant progress is being observed in Armenia in this direction. According to the data of Armenian CB, the volume of internet trade in 2010 made only 2.1bln AMD (USD 5.8mln).

Overall Solutions Company elaborated Armhotels.am website, where one can book a hotel room in Armenian hotels online. In an interview to Mediamax, Director of the Company David Kotanyan stated that in order to service customers properly, the company opened a merchant account in a foreign bank.

“Armenian banks have a license for service of internet payments by holders of Mastercard, issued by foreign banks, however the same cannot be said about Visa cards, and companies, which realize internet processing, such as PayPal and Moneybookers, do not consider Armenia an interesting market and do not open merchant accounts for us. And since it is not expedient to work only with foreign holders of Mastercard, we opened a merchant account in a foreign bank, on which the payments for our services are transferred”, David Kotanyan stated. According to him, additional transaction expenses reduce the profits of the company by 2%, which is “absolutely unprofitable”.

Concerning cards, issued by Armenian banks, according to the Director of Overall Solutions, “Armenian Card” (ArCa) payment-account system allows making purchases in internet, but requires modernization.

ArCa realizes the necessity of technical reequipment and takes up the corresponding steps. Director of the Payment-Account system Ishkhan Mkhitaryan stated in an interview to Mediamax that in order to update the software support, a contest was announced, following the results of which the reequipment process will be initiated. “Modernization of our system will significantly insure banks, which work with our processing, from ungrounded chargeback. The reequipment process will take about a year, after which, I believe, the banks will demonstrate greater readiness in the issue of purchasing a licence on accepting internet payments by international Visa cards”, Ishkhan Mkhitaryan stated. 

Explaining why Armenian banks can accept internet payments, made by international Matsercard cards, and cannot accept ones, made by Visa cards, Ishkhan Mkhitaryan stated that the ArCa system is a principle member of Mastercard. ArCa, as the national payment and account system, was assigned this status back in the time of its establishment. According to Ishkhan Mkhitaryan, usually neither Visa nor Mastercard issue licenses on accepting internet payments by non-bank organizations. And concerning reasons, why none of the Armenian banks has purchased the corresponding license of Visa, they are related to economic justification.

Head of “Converse Bank” Project Management Department Suren Voskanyan agrees to this viewpoint. In an interview to Mediamax he stated that for each individual Armenian bank, purchase of a licence on accepting internet payments by international Visa cards will cost about USD 250 000 and banks, considering that the market is not yet ready, do not take up such expenditures.

Nevertheless, if Armenia is the target market of the internet store, then according to Suren Voskanyan, the decisions of local banks are completely satisfactory. “For that, the customer needs to turn to card departments of banks, after which the bank provides the customer with the corresponding software support or a “module”, which is placed at the website of the customer, turning it, per se, into an internet store”, Suren Voskanyan stated, adding that purchase of the “module” is free of charge, and the customer pays only for opening and maintenance of the merchant account in the bank.

According to the Head of “Converse Bank” Project Management Department, purchase of a “module” in order to create an internet trade point should not last longer than a week: after the client’s application, the bank turns to ArCa, which provides him with the necessary software package.

Armenian internet stores can accept payments also with the help of Idram internet payment system. The system owns mechanisms of work with foreign “acquirer banks”, however these mechanisms are not profitable and contain great risks. 

Director of IDram Gayane Stepanyan informed Mediamax that the company would prefer to work with Armenian banks, since this would lead to reduction of transactional expenses and the need for a long procedure of buyer identification would disappear.

Gayane Stepanyan informed that the share of e-commerce in the turnover of the company makes only 20% (about 10mln AMD) monthly, and the remaining part falls on the share of payment for services. This fact evidences that the absolute majority of the system users are residents of Armenia.

Issues of e-commerce development are also on the agenda of the Union of IT Enterprises (UITE) of Armenia. Director of UITE Karen Vardanyan stated in an interview to Mediamax that besides infrastructural problems, there are also numerous unresolved legal issues, in order to solve which, this year UITE will elaborate and present to the consideration of the government a package of draft laws, necessary for development of e-commerce. The draft laws, according to Karen Vardanyan, provide for changes, in particular, in the tax and customs legislation, in the law on “currency regulation and currency control”. The legislative proposals also provide for establishment of a structure to protect interests of payment and account organizations, as well as solution of issues of warranty service of imported goods, facilitation of export procedures for high tech products and customs administration.

“Armenian banks do not yet imagine what incomes they will have from e-commerce. The economy of Russia, for instance, loses USD 3-4bln annually only because the merchant accounts of many internet stores of that country are in foreign banks. And this happens in a situation, when infrastructural and legal issues of e-commerce in Russia are solved it seems”, Karen Vardanyan stated, adding that if we try to compare the scales of the Russian and the Armenian markets, one can assume that annual losses here reach USD 30-40mln, and which is a quite serious figure for Armenia.

UITE realizes that such assumptions are not sufficient to “convince” banks to solve issues, necessary for development of e-commerce in our country. At the Forum of Armenian IT Companies’ Heads, which took place in December, 2010, an agreement was reached that in the course of 2011, UITE and companies, interested in development of e-commerce, will make estimations in order to assess the market’s potential. These estimations will be presented to banks for the latter to be able to assess what benefit they would have from that direction of business.