2009 Operating Report

Financial Performance

In 2009, the total turnover of the CyberPlat® payment system comprised about 160 billion roubles. The CyberPlat® company collects more than 25% of the entire revenue of the leading cellular communication operators in Russia. It is the largest partner of Beeline, MTS and MegaFon in the volume of accepted subscriber payments.

According to statistics of December, 2009, 91% of turnover of the CyberPlat® company falls within the payments accepted from the subscribers of mobile network operators, 2.2% - from Internet and IP-telephony users, 1.6% - from subscribers of commercial television operators, 1.5% are payments for housing and public utilities and electricity, and 1.5% are payments for fixed-line communication. The remaining 2.2% are payments for security alarm systems, retail loan repayments, refilling of bank accounts and other.

CyberPlat® - the first Russian electronic payment system - was established in 1997. The first online payment was effected to the benefit of Garant-Park company on March 18, 1998, whereas the first payment in favour of a cellular communication operator – Beeline - was effected on August 12, 1998. For more than 12 years of operation at the electronic payment market, the CyberPlat® company has been showing a dynamic and stable growth of the payment acceptance network, the number of providers in which favour the payments are accepted, as well as its key business performance indicators as a whole.

Transactions

The total number of transactions effected through the CyberPlat® payment system in 2009 comprised about 1.5 billion.

In 2009, the CyberPlat® payment system broke through in the processing speed of complex financial transactions. Upgrading the processing platform of the payment system resulted in its productivity exceeding the peak of 1,000 transactions per second which ensures a tenfold larger capacity with regard to the current operating load level of the system.

Therefore, with a uniform load at maximum capacity, the CyberPlat® system is currently capable of processing more than 30 billion transactions per year.

Such productivity is unprecedented taking into account those features of the CyberPlat® system’s operation which ensure maximum security of financial transactions. The assumed by the company high security standards favourably distinguish CyberPlat® from the competitor processing systems. Within the limits of one transaction, the system performs up to 16 operations that are authenticated by means of an electronic digital signature and carried out using secured methods of transferring data over the Internet channels. These methods include checking the availability of phone numbers or personal accounts of customers, identification and authorization of payment acceptance outlets, etc.

This technology secures absolute safety of performed financial transactions and minimizes the number of erroneous payments. There has not been a single case of hacking a transaction in the CyberPlat® system for the entire period of its operation.

The increase of the system’s efficiency was a result of expanding the capacity and optimization of its processing platform architecture. The achieved productivity indicator equals to more than 1,000 transactions per second is an interim one and a larger increase of the financial transactions processing speed is planned in the course of further upgrades of the CyberPlat® computing platform.

Payment acceptance network

In 2009, the CyberPlat® payment system was building up its leadership by the scope of its international global payment acceptance network which comprised 420,000 outlets by the beginning of 2010, having added 20,000 new payment acceptance outlets.

The number of payment acceptance outlets in Russia and the CIS connected to the CyberPlat® payment system exceeded 250,000. The unique density of coverage in Russia and CIS countries makes carrying out of payments convenient and comfortable for users of CyberPlat® and saves them much time.

Thanks to collaboration with the world leader in the field of money transfers - Western Union, the CyberPlat ®payment system also provides payment acceptance at 170,000 locations in the vast majority of countries worldwide.

According to statistics of the Central Bank of the Russian Federation as of January 1, 2009, the number of banking institutions in Russia servicing the population, inclusive of all their branches, departments and even movable pay offices makes 43.3 thousand, i.e. the CyberPlat® payment system’s network is five times larger than the entire banking system of the country. One should also consider that banks’ branches do not operate round-the-clock compared to numerous payment acceptance outlets and self-service terminals. Besides, these branches are not located in places that are convenient for the population but in places where the requirements of the Central Bank to a certain branch or office of a bank can be met.

The cost of processing a payment in a retail chain is considerably lower than in the banking system: the payment is accepted at a regular cash-register and the cashier, apart from accepting payments, maintains the main operations of the trading company. This allows acceptance and processing of even very small payments, effecting of which by banks is loss-making due to higher costs of the banking transactions. The CyberPlat® company complements the banking payment system in Russia and saves it from a great number of economically unprofitable operations.

Client base

Steady and dynamic growth of business became possible due to connection to CyberPlat® of new networks of payment terminals, trading and dealer companies, as well as branches, offices and ATM networks of numerous credit institutions.

In particular, in 2009, the largest Russian banks - Russian Standard Bank, National Bank TRUST, Sobinbank, as well as many other banks became members of the payment system. In 2009, the number of credit institutions – members of the CyberPlat® system increased by one third and comprised more than 170 banks.

In the accounting period, the CyberPlat® payment system was strengthening business with its partners - the largest retail banks in the country: Bank of Moscow, Rosselhozbank, TransCreditBank, Promsvyazbank, RussBank, Credit Bank of Moscow, SKB-Bank, SMP Bank (Bank Northern Sea Route) and many others.

In 2009, Mobile TeleSystems OJSC - the largest mobile network operator in Russia and CIS countries – following the results of the tender, chose the CyberPlat® payment system to be the uniform platform for providing payment acceptance at the cash desks of the MTS retail network.

The integrated versatile multibanking payment system CyberPlat® was implemented for the purpose of cash settlements in all brand stores of the MTS retail network. The system ensures instantaneous transfer of funds received from subscribers at the cash desks of MTS brand stores to their mobile phone accounts, as well as transfer of payments for fixed-line telephony, public utility services, Internet, hosting, IP-telephony and other services.

The leading position of the CyberPlat® payment system is associated with the permanent improvement of quality of its services provided to its clients. In the accounting period, the CyberPlat® payment system continued its fruitful co-operation with the largest Russian retail networks – Russian Post, Euroset, Svyasnoy, the retail network of MTS, chains of electronics stores Eldorado, Mir, and Bely Veter, terminal networks Elecsnet, Strela, Platforma, UNACT, Novoplat and many others.

It ought to specially note the promotion of a joint global project of the federal state unitary enterprise Russian Post and CyberPlat® in cash payment acceptance from the population within the large network of post offices in Russia. Cooperation with the Kazpochta JSC (Kazakhstan Post) has been rapidly developing.

Partners to the CyberPlat® payment system primarily are the large companies with steadily growing turnover and a high level of technological and corporative culture – whether they are retail and terminal networks or companies, specializing in providing such services as mobile telephony, commercial television, telecommunication services, as well as housing and utility and power supply companies, and many others.

Providers

In 2009, the CyberPlat® payment system introduced new opportunities in the payment acceptance market and increased the number of payment gateways to the billing systems of various service providers by more than 50% - from 440 to 700 gateways.

In the accounting period, all branches of companies Comstar and TransTeleCom, regional enterprises of Rostelecom and many other companies became members of the CyberPlat® payment system.

Citizens of Russia and those CIS countries, where the CyberPlat® payment system operates, have already got used to paying practically at any place for the services provided by operators of mobile and fixed-line communication, commercial television, Internet-providers, banks and satellite security systems. Today, it is also possible to pay for utility services and refill banking accounts using the CyberPlat® system. Such payments are fast, comfortable and are made without standing in lines.

Money transfers

2009 is the year of a large-scale use of Money Transfer System Integrator (MTSI) - a unique product developed by the CyberPlat® specialists - at the money transfer market.

The use of MTSI greatly, i.e. tenfold, increases the effectiveness of banks’ activity in the filed of money transfers due to sharp cost reduction along with expanding their customer base. For example, the costs of a bank operating three money transfer systems and changing over to the Integrator will be reduced three times and, thus, the customer coverage will be increased more than three times. Introduction of MTSI is a unique opportunity for banks and other credit institutions to cover the maximum of the money transfer market at minimal costs.

MTSI has been successfully operated and maintained in Russia since April, 2008 and, by the end of 2009, allowed sending transfers through nine systems: UNIStream, Anelik, Bystraya Pochta (Fast Post), Leader, InterExpress, AsiaExpress, Allure, and the two major international money transfer systems. Several other money transfer systems are being connected.

For an effective entry into the extremely profitable market of money transfers, it is necessary to cover all potential customers wherever possible. Since none of the money transfer systems has a market share equal to more than 20% in any of the CIS countries, then, for the full coverage of clients, it is necessary to cooperate with all large money transfer systems – according to calculations made by CyberPlat® experts, not less than with nine systems.

In order to work with nine money transfer systems without using the MTSI, any bank would have to do the following:

• conclude and maintain 9 contracts with money transfer systems;
• maintain the necessary level of balances of 9 correspondent accounts with the clearing banks of these systems or allocate 9 deposits to operate them;
• purchase 9 servers;
• install 9 payment interfaces (gateways) – by the number of systems;
• install 9 different and quite complex software packages – by the number of systems;
• and, most importantly, teach the tellers to operate 9 interfaces simultaneously, which is simply impossible – in practice, even an experienced specialist will make a great number of mistakes while operating more than three systems.

Having implemented the MTSI solutions of CyberPlat®, any bank obtains an opportunity to do the following:

• operate all money transfer systems under a single agreement;
• maintain only one correspondent account for operating all money transfer systems;
• use only one server;
• install only one software package;
• create only one easy-to-develop technological gateway;
• obtain a new high-yielding and marketable service;
• expand the customer base due to the new service.

By the end of 2009, 37 agreements on implementation of MTSI, including agreements with Russian Standard Bank and Kazpost JSC were signed, while another 39 agreements with banks were being negotiated.

MTSI enables banks that have implemented this tool to operate an unlimited number of money transfer systems using a single interface. MTSI can be installed in branches, operating cash desks, Internet-Bank-Client system, ATMs and payment terminals.

A MTSI version for payment terminals and ATMs allows customers to use these devices for transferring funds any time at their convenience after a single registration at a bank branch. This way the bank branches are relieved from the queues.

MTSI is easily integrated with the “Client-Bank” systems and provides bank customers with an opportunity to send money transfers using their home, office or portable computer. Implementation of MTSI instantly enhances the geography of money transfers and results in a sharp and significant growth of the bank’s customer base.

Terminal business

A great number of payment terminal networks, as they develop and enlarge, prefer to operate a payment system which does not have a terminal network of its own and hence cannot be a competitor to their business a priori. For this particular reason, in 2009, many payment terminal networks, operating through other payment systems, changed over to taking the service from the CyberPlat® company.

The customers using the CyberPlat® software have an opportunity to choose the service providers in whose favour they can accept payments. In this case, the CyberPlat® payment system, unlike its competitors, does not impose upon its customers any servicing or services which they do not need.

One of the key advantages of the Cyberplat® payment system’s software for terminals, which the company updated and improved in 2009, is its versatility, and simplicity of installation and running of the said software. Availability of public codes to the developed programs is the CyberPlat® software’s distinctive feature which attracts major customers.

In 2009, the project for development of software in public (open) codes for the payment terminals of the CyberPlat® company changed over to the classical Open Source technology. This software development mode corresponds to the software development technologies in such projects as Linux, MySQL and other global operating systems.

The CyberPlat® software is widely used by the operators of terminal networks, because unlike the software of competing systems, they allow any modifications with due respect to the specificity of their use and their location, and offer the operators an opportunity of promoting their own and not an outside brand, thus, without imposing any unnecessary financial products upon them.

The withdrawal from the concept of software development within the company which created the product, and transition to the classical mode of public (open) initial code (Open Source) have been stipulated by growth of popularity and the scale of using the terminals software developed by the CyberPlat® experts. The important advantage of the new product over internal projects is its faster development due to constant cooperation of different groups of developers among themselves and with the community of Open Source products’ users.

If necessary, the open codes allow adjusting software applications to the requirements of large networks, as well as adjusting CyberPlat® applications for their integration into billing systems, business management systems and client accounting systems. The access to initial codes of programs makes CyberPlat® solutions more flexible and allows them to be entirely integrated with business processes of partners.

Technilogical and financial innovations

Online payment technologies using bar-code

Development of infrastructure for the online payments using bar-code technology is a strategic priority for the CyberPlat® payment system. The possibility of making payments in retail trading enterprises using barcode not only for traditional products, but also for such services as mobile and fixed-line telephony, cable television, Internet, public utilities, including payments for the consumed electricity, security systems services, and other services, creates an entirely new segment in the market of online payments. The wide introduction of online payment technologies, on the one hand, will provide additional convenience for customers, on the other hand, it will significantly increase the income of trading enterprises.

The potential from the use of bar-codes significantly increases due to application of new technological solutions. In 2009, the CyberPlat® company, jointly with the company IT SERVICE Retail & Banking, developed and tested, in a pilot mode of operation, the software and hardware system that allows customers to print their own bar-codes to pay for a wide range of services - from mobile telephony to loan repayment. Installation of wall-mount printing terminals (for printing the bar-codes) on trading floors will greatly accelerate the acceptance of payments at the cashiers and will lead to a sharp increase in payments for various services in the retail networks.

Significant benefits will be received primarily by those retail businesses which will be the first to organize payment acceptance using bar-code at the cashiers in their trading enterprises and sales premises. The CyberPlat® payment system offers multiple methods of accepting such payments.

This can be done directly at the cashiers, after prior printing out of bar-codes using the wall-mount printing terminals, located on the same trading floor. Another option is to organize separate payment acceptance outlets which will also be equipped with printing terminals.

Additionally, these specialized cashiers can be used to organize acceptance of bank payments (loan repayment, refilling of deposit and card accounts – with any bank), payments to insurance companies, and for sending money transfers. Such payment acceptance outlets can seriously increase the profitability of trading enterprises, as well as increase the flow of customers and ensure revenue growth on basic goods due to accompanying purchases.

In 2009, the CyberPlat® payment system continued active promotion of online payment technologies in the retail networks. For example, a new service - “Change to the phone” - was started in the retail network of MTS (Russian Telephone Company) counting about 2,000 mobile shops. This service allows using the bar-code to credit the change from purchases to subscribers’ personal accounts, which considerably accelerates the payment procedure at the cashiers and leads to revenue growth of the outlets due to additional commissions. The description of this business process can be found on the payment system’s website: http://www.cyberplat.com/services/retailers/change/

Improvement of the payment technology using bar-code resulted in the increased interest of retail networks in introduction of this service - several major projects with leading retail companies are currently being prepared to be launched.

Payment Book service

In 2009, CyberPlat® experts introduced a new service - Payment Book CyberPlat. The business scheme of the project involves most favourable terms for the partners of the CyberPlat® payment system with regard to forming and distribution of commission fees.

Dealers that are connected to the use of the new service will benefit twice:

• Firstly, they earn on operations of refilling the Payment Book and have an opportunity to freely determine their own (external) commission for these payments.
• Secondly, by registering a new user of this service, the dealer gets 30% of operating income generated by the customer’s payments from their personal Payment Book. This income consists of commission fees of providers in which favour the payments are made (internal commission). Thus, having once registered a customer, the dealer has a part in the income from their payments through the personal Payment Book during 10 after registration.

Anyone who has registered their personal “Payment Book” at www.cyberplat.ru, or using terminals or cashiers at sales outlets of the partners to the CyberPlat® payment system can become a customer of this convenient service.

Having topped up their “Payment Book” account, the users get an opportunity of using the web-interface to make payments in favour of a wide range of service providers - cellular and fixed-line communications, cable and satellite television, Internet providers, public utility companies (altogether more than 700). In this case, all payments due to debit from the “Payment Book” account are performed without an additional commission fee.

The “Payment Book” account can be replenished through the terminals and cash registers at sales outlets of those partners to CyberPlat®, who are connected to the new service. The “Payment Book” keeps the details of regularly made payments, which allows performing operations on personal accounts replenishment and repayment of the accumulated arrears in a matter of seconds. Saving history of performed operations not only will allow users to control the operational expenditure, but also to plan their family budget.

The important advantage of the new service is that it is possible to register in the system new payment recipients such as local cellular communication operators, cable television providers or housing and utility companies.

Administrative and financial management

In 2009, CyberPlat OJSC obtained the certificate of quality management compliance with the international standard ISO 9001:2008.

Having successfully passed the independent integrated audit in the field of quality management, the company obtained the certificate of compliance with the international standard ISO 9001:2008. ISO 9000 is a series of international standards which were adopted as national standards in more than 140 countries worldwide.

CyberPlat OJSC has been certified in the following spheres:

• providing services for information and technology interaction between the financial settlement participants;
• providing processing services for calculation for the trade and service enterprises, banks, financial companies and other enterprises and entities;
• carrying out activities in ensuring the safety of transmission, processing, and storing of information and data, including prevention of unauthorized access to such information and data in the course of their transmission, processing, and storage.

Obtaining of the certificate proved the high level of quality management of the services rendered and reliability of the payment system as business partner.

Business activity of the CyberPlat® payment system is licensed by such governmental bodies as Federal Security Service of Russia (FSB) and Roscomnadzor (Russian Ministry of Communications).

The certificate of the leading auditing company “KPMG Limited”, which performed the operational audit of CyberPlat OJSC, proves the compliance of CyberPlat’s internal control system with the international standard SAS 70, Type I, developed by the American Institute of Certified Public Accountants (AICPA).

Over the period of several years, the financial performance of the company has been audited in accordance with the International Accounting Standards by the leading Russian auditing company BDO UNICON. This proves the status of the CyberPlat® system as of a reliable financial partner and ensures transparency of the CyberPlat® payment system’s activity, which favorably distinguishes it from among its competitors.

Regional development

In 2009, the CyberPlat® company successfully developed and expanded its business in the territory of Kazakhstan, the Ukraine and Moldova within the scope of the full scale international expansion program.

Historically, CyberPlat® is the first payment system in Kazakhstan. The subsidiary company in Kazakhstan – TOO CyberPlat-Kazakhstan – was established as early as September 15, 2005. The first payments were effected through the system in April, 2006.

By the end of 2009 the payment acceptance network already consisted of more than 10,000 payment acceptance outlets connected to the CyberPlat® system, and regional representatives of the company work in all major cities of Kazakhstan: Astana, Aqtobe (Aktyubinsk), Shymkent (Chimkent), Ust Kamenogorsk, Karaganda, Pavlodar, Qostanay and Oral (Uralsk). At present, the largest banks, mobile network operators, service providers, terminal networks and trading companies of the Republic of Kazakhstan are the partners to the CyberPlat’s subsidiary in Kazakhstan.

The CyberPlat® payment system’s business in the territory of the Ukraine has been rapidly developing within the constraints of the global international expansion program. As of the end of 2009, the CyberPlat’s payment acceptance network in the Ukraine consisted of more than 3,000 outlets and their number is constantly increasing. Mobile shop networks Mobilochka, Allo, Euroset, Evant, chains of stores Eldorado, Stells and others are among the largest partners of the CyberPlat® payment system in the Ukraine.

Our payment system is not only the creator of the Russian market of online payments but also its irreplaceable innovative leader. Entry to the new segments of the market, development of revolutionary payment technologies – that is the real contribution of CyberPlat® to the development of national high technologies. It is worth noticing that, being at the forefront of technological progress and continuously offering the market modern products and services, our payment system always considers the requirements of the current legislation and exposes all innovations for a thorough legal review,” — stated Andrey Gribov, President&CEO of CyberPlat OJSC.