A leading provider of cash and online payment services in Russia and Kazakhstan, Qiwi also operates in 20 other countries in Europe, Asia, Africa and the Americas. The company was established in late 2007 following the merger of OSMP, established three years earlier, and E-port Payment Systems. A majority stake is owned by Qiwi’s management, while the Mail.ru Group and Japan’s Mitsui have minority stakes.

Qiwi enables more than 40,000 merchants to accept over 39 billion rubles (approximately $1.3 billion) cash and electronic payments monthly from over 65 million consumers using its network at least once a month.

The operator dominates the Russian cash payment terminals market with more than 120,000 payment processing machines across the country. Russians use these nearly ubiquitous kiosks to pay for virtually everything from mobile phone bills to utilities, taxes, and fines.

Over the last few years, the company has gone online, providing 11 million users with electronic wallets and offering new products in partnership with VISA.

Qiwi’s financial results, 2010-2012 (in million USD)

 Source: IPO prospectus

According to its IPO prospectus, Qiwi now plans to “transition to a multi-bank open model in Russia and internationally.” This “global online and mobile payment processing and money transfer system” will enable any Visa member bank to offer a Visa Qiwi Wallet account to its customers.

The Russian company also plans to strengthen its existing network by adding new services and enrolling new merchants; to introduce “new, value added, high-margin products and services to address evolving customer demands;” and to enter into new geographies by “investing directly, franchising [its] operations, or licensing [its] technology.”

A long list of “risk factors”

Among the “risk factors” listed in the SEC prospectus are fierce competition – from such players as Russia’s national savings bank Sberbank and payment giant PayPal, which is entering the Russian market – and the fact that Qiwi derives “a substantial portion of its revenues from a few large merchants,” in particular Russia’s three biggest mobile network operators.

Unsurprisingly, Qiwi also warns that “emerging markets, such as Russia and Kazakhstan, are subject to greater risks than more developed markets, including significant legal, economic and political risks.”

“Legal and bureaucratic obstacles and corruption exist to varying degrees in each of the regions in which we operate, and these factors are likely to hinder our further development,” Qiwi states.

“Press reports have described instances in which government officials have engaged in selective investigations and prosecutions to further the interest of the government and individual officials or business groups. Although we adhere to a business ethics policy and internal compliance procedures to counteract the effects of crime and corruption, instances of illegal activities, demands of corrupt officials, allegations that we or our management have been involved in corruption or illegal activities or biased articles and negative publicity could materially and adversely affect our business, financial condition and results of operations,” Qiwi adds, referring to Russia’s sometimes unhealthy business climate.

With its holding company incorporated in Cyprus, Qiwi acknowledges its exposure to “adverse financial measures [which] may be adopted in [this country] in connection with its bailout.” Any negative developments “could have a significantly adverse effect on our financial condition,” the Russian company says.

Qiwi’s IPO could be a success, but not a triumph, predicted some Russian market experts interviewed by the news agency RIA Novosti, due to these business risks as well as to the specificities of the Russian market.

First published in East-West Digital News, a leading English-language resource dedicated to Russian digital industries.