OBERTHUR CARD SYSTEMS WILL TRY TO TAKE RUSSIA ON CHIP (Kommersant, №205, November 2, 2004)

At the end of the week one of the world leaders in the production of chip cards Oberthur Card Systems have announced about « strategic partnership» with the company NovaCard. This agreement gives an opportunity to the French company to enter the Russian market on the eve of the Russian banks’ movement to the cards of new standard.

Oberthur Card Systems is a subsidiary company of Francois-Charles Oberthur Group. Its sales volume in 2003 achieved 430,1 mln euros. OCS is one of the world leaders in the delivery of Visa and MasterCard cards. In the structure of its incomes 54 % are the share of the bank cards.

JSC NovaCard (Nizhny Novgorod) is one the leading Russian manufacturer of plastic cards. It has the certificates to produce chip cards of Visa and MasterCard. It produces more than 15 mln cards per month.

It has been declared about signing of the agreement between OCS and NovaCard at the end of last week. As it has been announced to K in the press center of Oberthur, «the agreement will allow us to use production facilities of NovaCard and Oberthur, in its turn, will provide NovaCard with expert assistant in the field of EMV-cards (chip cards of Europay\MasterCard\Visa standard. - K».

Earlier the sources close to the deal, informed K. that OCS is going to purchase 60% of NovaCard’s shares and to open its representative office in Russia. However, in the press center of OCS declared: «We haven’t bought NovaCard’s block of shares, it is a strategic partnership». «The deal is in the process of negotiations and all the details can be discussed a little later», - the CEO of NovaCard, Vladimit Krupnov, stated.

Anyway, this deal should influence on the balance on the market of plastic cards manufacturers. According to Mr.Krupnov, the partnership with OCS will be aimed, first of all, at the development of new solutions for SIM-cards. However, OCS arrival in Russia can’t have an effect on the market of banking chip cards. Today the majority of Russian banks prefer to purchase Visa and MasterCard cards abroad. The matter is that the foreign manufacturers can offer much more high technology plastics than the Russians. However, OCS technologies are able to change this situation.

«Both parties benefit from this deal, - the CEO of the company ORGA, Peter Bakhtin, considers, this company was also certified by Visa and MasterCard. – Oberthur was poorly presented on the Russian market, and by means of NovaCard it gets such an opportunity. NovaCard, in its turn, which has been always oriented towards the products manufacturing with low price (the cards with magnetic strip and so on), will get all the know-hows from the foreigners and gain the image of very high technology company. It will make us to work on the market more carefully».

Nethertheless, not all the business rivals of NovaCard agree with that. «The banking market is very innovative and conservative, that is why new technologies, which Oberthur can offer, have been already presented on the Russian market, - the Commercial Director of the company Rozan, which was the first certified for EMV in Russia, Timut Radionov considers. Most likely they are not expected on the market. It is not necessary for the banks to migrate from the other manufacturers to them, even if the banks will be suggested the cards a little bit cheaper. It is too difficult. In the nearest future there will be no considerable changes on the market of EMV-cards».

But the banks themselves do not share this position. «New shareholders will strength NovaCard’s power», as the Europeans will able to offer the newest technologies on the market, - the Vice President of Guta Bank, Arcady Komyaginsky considers. Besides, the appearance of a new player on the market can lead to the price reducing». «To my mind, OCS has good perspectives on the Russian market of EMV-cards connected with the movement of the Russian banks to the chip cards in 2006, - the Vice President of Transcreditbank, Andrew Kuptsov supposes. – However, OCS arrival will influence the market a little this year».