Chinese firm Huawei to launch mobile payment system in Russia

(bne intellinews) – Chinese Huawei has announced that it will launch its Huawei Pay in Russia, the first country outside China to see the system’s launch, reports FPRI Bear Market Brief.

The launch is the latest in Chinese companies opening up their pay systems in Russia, which is emerging as one of their most important markets outside of their own country. Chinese mega-retailer Alibaba also launched its Alipay service in Russia in 2017 to tap into the growing number of Chinese tourists going to Moscow to shop.

Huwaei Pay is a joint effort with China’s Union Pay system, and will be a stepping stone into the Eastern European market. The system’s launch date has not been announced, though one source says it’s autumn of this year.

Huawei’s smartphones currently have a 12.6% share of Russia’s market, behind Samsung (25.4%) and Apple (16.3%). Meanwhile, smartphone use by Russians continues to grow.

According to Per Mobile Research Group, in 2017 Russians had some 18mn smartphones with near field communication (NFC) necessary for mobile payments. That figure was only 10mn in 2016.

Mobile phone sales accelerated in 2017, jumping by an estimated 5-8% depending on the model, to a record high of 29mn devices, earning retailers RUB375bn-RUB384bn ($6.6bn-$6.8bn) in the process, reports Prime. The major producers are expecting the trend to continue in 2018, although competition is becoming fierce.

“The smartphone market is developing at a breakneck speed. Technologies make several steps forward within a year. Tough competition between manufacturers reflects on customers, who increase demand for new devices. As of the end of 2017, M.Video sold 18% more smartphones than a year earlier, which is almost four times higher than the market average,” Sergei Sukhorukov, head of the electronics retailer’s mobile appliances department, said in a research note cited by Prime.

“The main growth drivers were, first, appearance of bezel-free displays, and, second, widening of assortment with interesting new devices from Chinese brands. We can certainly say that we’ll see many interesting solutions in 2018, while competition will tighten even more.”

Estimates of the growth in the market vary amongst the different players. M.Video calculated that smartphone sales grew 15% in 2017 to RUB375bn and 5% to 28mn devices. Retailer Euroset saw an 18% increase to RUB 383.7bn and a 7% rise to 28.6mn units, which is a record high since 2014, PR Director Alexandra Pertseva told Prime.

One of the factors driving sales is Russians have swapped from paying cash for phones to using credit cards. Consumer credit has been rising fast and the average household debt has gone from one or two months worth of average wages to five months in 2017.

Ease access to credit has also driven up the average prices customers are willing to pay for a phone, with the average price gaining 9–10% in 2017 to RUB13,400–RUB13,415, the retailers said. Sales of smartphones with a price tag of more than 40,000 rubles grew by more than 25% in units, and devices for 10,000–20,000 rubles rose 30% in units, M.Video said, Prime reports.

“Beyond oil and gas deals, China has a huge presence in Russia’s e-commerce sector. This investment represents a push beyond that, a logical step given Russia’s growing tech market. Competition will be fierce though, with Russian banks getting in on the action as well,” Bear Markets Brief said in its report.