Visa to Advise Russia on Plastic

Will Help Andersen Study No-Check Payment System

LONDON -- The Soviet Union's biggest republic has commissioned Visa International, Andersen Consulting, and two Norwegian bank-technology companies to lay the groundwork for a Western-style, card-based payment system.

The Russian Federation, the Soviet republic headed by the newly elected Boris Yeltsin, asked the consulting affiliate of Arthur Andersen & Co. this week to do a four-month feasibility study of a system that would institute plastic money immediately and bypass a check-based payment system.

The first payment mechanism to be implemented in the republic will probably resemble the debit card Western consumers now use to get cash from automated teller machines or make retail purchases, officials said.

Andersen is bringing in Visa and the two systems companies, AS/Solution and GBS, to help evaluate available technologies and consider system-design alternatives.

Opportunities Expected

Andersen officials signed the accord in London with the federation's Finance Ministry but did not disclose the project's cost. The officials said the effort is likely to create business opportunities for Western banks and technology companies that the Soviets might consider as models for their own consumer payments system.

"Our study represents the first stage in the development of a card-based electronic payments service to replace the existing cash system used throughout the Soviet Union," said Mark Aston, an Andersen Consulting partner.

The republic's effort to modernize its banking system is not the only such project going on in the Soviet Union.

Victor Gerashchenko, the chairman of Gosbank, the Soviet Union's central bank, said at a meeting of the Bank for International Settlements in Basle, Switzerland last week that Kremlin authorities were talking with International Business Machines Corp., Hewlett-Packard Corp., and other U.S. computer makers about revamping the entire Soviet banking and payment systems. It's not clear whether the two efforts are linked.

Response to Consumers

Russian Finance Minister Igor Lazarev, speaking after signing the accord, said a move to cards "should satisfy demands by consumers for greater efficiency and a broader choice of products," as Russia develops a market-driven economy under Mr. Yeltsin's reformist policies.

The Moscow City Council and Russian Republic Bank also signed the pact.

The Russian Federation is the biggest republic in the Soviet Union, with a population of 150 million.

As the Soviets pursue their economic restructuring, the old Communist state banking system, which mostly did not even offer basic checking account facilities, is being dismantled. In its place, a range of commercial banking organizations are being established similar to counterparts in the West.

In recent years, the international card associations, including Visa, MasterCard/Eurocard, and American Express, have made initial inroads in the Soviet Union and other Eastern European economies.

Long-Term Potential

Russia could potentially become the largest single national card market after the United States, which has about 300 million bank cards outstanding, Andersen's Mr. Aston said.

"But you're talking about a very long time frame before seeing card usage on the scale of the West," he said an an interview.

"There won't be suddenly an investment of billions of dollars with all 150 million people offered cards," he said. Most individuals currently make payments by cash and any change will have to be gradual.

The feasibility study will look at the phased introduction of automated teller machines and payment terminals in stores and restaurants across Russia, as well as the task of educating Russian citizens about plastic money. The investment costs will also be investigated.

The actual card mechanism will probably be a version of Western debit cards, with deductions made directly from users' accounts, specialists in the feasibility group said.

"I don't think that it's any secret that the Soviet banking system is ancient and slow, and this will have to be taken into account in designing systems," the Andersen partner said.

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