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Net Element, Inc. (NASDAQ: NETE) to Launch Third Party Bank Processing Service in Russia

  • A partnership with Sputnik Bank in Russia will enable the provision of third party bank processing services to local banks
  • Regulatory approval and completion of the agreement are expected in the final quarter of 2018
  • Net Element is the only Nasdaq-listed U.S. company that stands to benefit from the Russian electronic payment expansion

Global technology and value-added solutions group Net Element, Inc. (NASDAQ: NETE) recently announced a partnership with Sputnik Bank in Russia that’s aimed at offering third party bank processing to other banks in the country. As the October 2 announcement states, Net Element will get 25 percent of Sputnik’s outstanding stock, and a per-transaction fee has also been discussed, Zacks reported in a note published the day after the announcement (http://ibn.fm/3UHj0).

The partnership will be executed via Net Element’s PayOnline subsidiary. The agreement has to pass regulatory approval in Russia before it gets finalized. Such an approval is expected during the final quarter of 2018.

Founded in 1990, Sputnik is a commercial bank that holds $35 million in assets. It offers a full range of banking services to both private and corporate customers. Through its partnership with Net Element, Sputnik will become the first entity to start offering third party bank processing in Russia.

The partnership and the subsequent service will fill a rather significant market gap. Currently, Russian banks use in-house processing systems. These systems are expensive, and many of them have become outdated.

Net Element and Sputnik are expected to start selling a processing service to small banks, Russian third-party vendors, credit organizations, value-added resellers and sales organizations. The cost of processing will be brought down, and the service will also give smaller Russian banks a chance to utilize much more current software than the products on which they’re currently relying for in-house processing.

Sputnik will provide the capacity for the data center needed for the execution of the program. Financial instruments for settlement of transactions will also be provided. The partnership will enable PayOnline to process transactions as a payment facilitator. This way, PayOnline’s offering will be expanded beyond the current electronic commerce.

The total transaction value of digital payments in Russia is expected to reach $39.5 billion by the end of 2018 – a massive increase from $27.9 billion in 2016. The CAGR in the period from 2018 to 2022 is expected to be 11.9 percent, which means that the value of digital payments could amount to $61.8 billion in 2022 (http://ibn.fm/oAIPS).

Net Element CTO Andrey Krotov said in a news release that the innovative turnkey solution will enable frictionless onboarding for merchants with integrated, value-added services.

Net Element is a payments-as-service transactional and value-added services company that provides solutions to small and medium-sized businesses. The company operates both in the U.S. and in selected emerging markets. Its primary goal is to innovate SPE productivity services using blockchain technology solutions for the purpose of growing transactional revenue.

Deloitte’s 2017 Technology Fast 500 ranks Net Element as one of the fastest growing companies in North America. It is the only U.S. company listed with Nasdaq that stands to benefit from the Russian electronic payment expansion.

For more information, visit the company’s website at www.NetElement.com

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