PayPal Ups Ante in Russian Payments Ring

PayPal, the online payments arm that helped give eBay (EBAY) a second life, launched its services in rubles — Russia’s currency — on Tuesday, and also now allows users to transfer funds to Russian banks.

PayPal has been available in the country since 2006, but transactions were limited to U.S. accounts because a special license — just granted this May — is required for payments between Russian merchants and Russian banks, according to The Moscow Times.

Despite that hurdle, the volume of PayPal transactions by Russians amounted to $1 billion in 2012 — a small slice of eBay’s $145 billion in total payment volume for the year, but a slice with much more growth potential in the wake of this new development.

The move also underscores eBay’s focus on expanding its PayPal service — already the world’s biggest electronic payment system — across the globe. Electronic payments not only made up nearly 42% of eBay’s revenue in the most recent quarter, but posted double the growth of the more established marketplace segment.

It’s questionable just how fast growth will come in Russia, though, as the electronic payments space is highly competitive.

Search giant Yandex (YNDX) has a leading money service that boasts 17% of the market share. (For investors, though, be aware that the Internet giant recently finalized a joint venture for its Yandex.Money with Sberbank (SBRCY), which takes a 75% stake) And players Qiwi (QIWI) — a sizzling stock that has nearly doubled so far this year, dodging dismal returns for most companies in the region — and WebMoney each have double-digit slices of the pie.

Meanwhile, PayPal only has 9% of the market — so far.

Still, The Wall Street Journal noted two bullish signs for PayPal’s move: 1) Revenue at Russian Internet stores is slated to grow by 35% per through 2015, bringing it to a whopping $36 billion, and 2) any Russian shoppers hesitate to hand over credit card details, making PayPal’s secured system an appealing alternative.

Plus, PayPal has joined forces with at least 12 of Russia’s leading online retailers, including — often referred to as Russia’s Amazon (AMZN).

So while PayPal’s Russian road could be an uphill one, the payments service should get more traction going forward.

As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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