Single payment and service system "Universal Electronic Card" (EPSS UEK)

Role of Sberbank

On September 8, 2010 the senior vice president of Sberbank of Russia Oryol Victor Mikhaylovich held a briefing "About the project progress of the IT block of Sberbank". During the action the top manager of Sberbank of the Russian Federation told about a status and perspectives of project implementation of the Universal Electronic Card (UEC), provided data on investments which Sberbank in this project intends to make.

So, the bank already directed 20 mln. dollars to project implementation. In the next five years the bank will direct to these purposes, in total, from 100 million to 150 million dollars. In particular, 50 — 70 million dollars will go for development of technologies, from 25 million to 50 million the bank is ready to enclose in development of JSC Universalnaya elektronnaya karta as the shareholder.

By calculations of shareholders, investments into the UEK project should pay off by 2016. Sources of income in this project for Sberbank, by words B. Oryol, licensing of applications, issue of cards, providing state services and information services will be. Until the end of 2010 technical and functional requirements to the map and its applications should be created and fixed by the law, the design of the card and an order of the entry of banks into the UEK system is developed.

The project will be based on the EMV cards of the standard. However V. Orlovsky did not exclude also a possibility of card issue of UEC together with international payment systems. "At departure of the citizen – the card holder abroad she can be used as the payment instrument, and within Russia as the universal card. Technically it is possible". At the same time, were the percent of the Russians who are going abroad, 7% is called in view of what this perspective of this project deserves separate discussion.

Important distinctive feature of the Russian UEK project the speaker called that for acceptance and service of cards the infrastructure network which is already existing in Russia actively created by banks within the last 20 years will be used: ATM network, POS terminals and other devices.

• On February 28, 2011 on the commission on upgrade at the President of Russia the main sensation did not take place: the estimate on implementation in Russia of the universal electronic cards (UEC) is not approved. Dmitry Medvedev charged to provide it justification of project cost on implementation of the universal electronic card till May 1, 2011.

In several hours prior to commission session on upgrade, the head of Sberbank German Gref criticized uncertainty with costs for electronic cards.

It is supposed that in the long term costs for creation of infrastructure and implementation of UEC will bear banks investors, federal and regional budgets. However, according to Gref, in the absence of the estimate expenses are incurred entirely by participants of JSC Universalnaya elektronnaya karta which financed implementation of UEC in pilot regions.

Estimates of the total costs of implementation of universal electronic cards in Russia reached 500 billion rubles for the next 5 years. The Assistant to the President Arkady Dvorkovich called on February 28, 2011 the expected amount of the total costs of 150-200 billion rubles. Assessment of the Minister of Economic Development Elvira Nabiullina makes 150-170 billion rubles.

According to Gref, "so far any of investors could not pay back costs for UEC infrastructure", and the first hopes for payback belong at the right time in 2-3 years when the mass release of universal cards begins.

Among the banks which in due time were wishing, but which did not enter into consortium of investors of the Russian UECs, Gref called Bank of Moscow, "which is busy now with another matters", and VTB, "expressing about it contradictory desires".

Banks — have potential investors no incentive to participate in the project at an investment stage, Gref notices: "They speak, same there will be an open system, means us all the same will allow to it, will not get to anywhere".

On a question of CNews whether considers the guide of Sberbank as means of monetization of UEC the payments commission, Gref explained that using UEC it will be possible to make payments for three big categories of services: actually state services and payments for benefit of budget organizations will take place without banking fee while for "commercial payments" the fee is charged by a normal order.

At a present situation to predict payback of infrastructure of UEC for banks of investors not easy, the head of Sberbank believes. However, according to him, the budget of the Astrakhan region which is one of pilot regions on implementation of universal cards "felt savings from implementation of UEC in a year after the beginning of implementation which was paid by Sberbank".

According to Gref, in Russia there is "a boom of electronic cards" which are issued now by "almost each department": "when department does it, it means that it wants to earn money, and to earn so many that will be enough not only itself, but also for all relatives".

TransTeleCom - EPSS UEK provider

In December, 2011 Transtelecom Company (TransTeleCom) announced that it became provider of a single payment and service system of JSC UEK - the authorized operator of universal electronic cards in Russia. A TTK will connect to UEK network on special rates of all project participants, including banks and state structures, suppliers of commercial services and also authorized organizations of the subjects of the Russian Federation.

According to the results of the open tender organized by JSC UEK, TransTeleCom became provider of the single payment and service system "Universal Electronic Card" (EPSS UEK). Within the agreement TransTeleCom organized a corporate multiservice data network (IP VPN) UEC which integrated head office and data processing centers of the company in Moscow. The corporate network of data processing centers UEC is EPSS UEK core.

In the spring of 2011 the open competition on right to contract on execution of works, rendering services in creation of virtual channels of communication between the federal authorized organization (FAO), the authorized organizations of subjects (AOS) and banks was held. Transtelecom company managed to offer the best terms: TransTeleCom has an extensive extensive network across the Russian Federation that was one of the main requirements of tender, and offers profitable rates on connection for participants of EPSS UEK. UEC and a TTK agreed about long-term cooperation, information on the amount of the agreement belongs to internal information of the companies which disclosure is not supposed yet", - representatives of UEC noted. According to them, EPSS UEK only forms, and in connection with the arisen requirements the federal authorized organization signed the agreement with a TTK on execution of works and rendering services in creation of virtual channels of communication.

"According to technical features of the scheme of the organization of virtual channels of communication FUO recommends to all participants of EPSS to sign agreements on providing the main channel for connection to a system with Transtelecom Company. However any participant of EPSS UEK can sign the agreement with any other telecom operator which can provide connection to provider of the virtual EPSS UEK private network which a TTK is", - the press service of UEC concluded.

Requirements to EPSS UEK

Forms the basis for introduction of UEC accepted 7/26/2010. Law No. 210-FZ "About the organization of providing the public and municipal services" according to which requirements a Single payment and service system 'Universal electronic card" should provide (EPSS UEK) providing the following types of service:

• state and municipal, including social;
• transport and medical;
• financial;
• commercial.

Proceeding from it, infrastructure of UEC should interact with state agencies, banks and suppliers of commercial services. With respect thereto to EPSS UEK there are following main requirements:

• ensuring the protected storage of identification data of the citizen on the card and in the system;
• ensuring payment transactions in network of the banks which are logging in;
• compliance to requirements of the current legislation means the legal importance of information exchange of participants and also personal data protection of citizens;
• possibility of use on UEC of departmental data units (for example, the Pension fund, Ministry of Health and Social Development, etc.);
• existence on UEC of means of formation of the electronic digital signature (EDS) of the citizen;
• for the purpose of unity of card management authorization of changes of data on the card from the Federal Authorized Organization (FAO) should be performed;
• use of open standards for ensuring interaction of participants of this project.

Requirements to participating banks of the UEK project

Federal requirements to banks

On August 1, 2011 the order of the Ministry of Economic Development, Ministry of Finance and Bank of Russia approving the list of requirements to banks for participation in the draft of the universal electronic map (UEC) was signed.

Is established by the order that till January 1, 2014 the minimum value of own funds of bank for the last reporting date should be not less than 1 billion rubles. Requirements assume participation in deposit insurance system, release of cards by bank within three years before filing of application about participation in the project, absence within half a year before signing of the contract and also during its action of violations of capital adequacy ratios, instant and current liquidity.

Besides, the bank should own ATMs, payment terminals or the signed agreements with other banks on their use. Also the bank needs the "worthy" score of long-term solvency assigned by one of three international rating agencies (Fitch Ratings and Standard & Poor's – not below B-, Moody's – not below B3) or national rating agencies (RusRating – not below BB; RAEX, National rating agency and AK&M – not below A).

According to member banks of Russia Association that these requirements create unreasonable competitive advantages for large credit institutions and significantly limit the rights of regional banks to participation in the UEK project. The lack of the international rating is not an obstacle for active work of banks with accounts of citizens (including release and service of payment cards).

Ideally on UEC about 400 appendices among which bank is some kind of additional service should be contained. For August, 2011 statements from 89 credit institutions came to JSC UEK. At the same time, according to the head of department of ratings of credit institutes "RAEX" Stanislav Volkov, 140 banks conformed to necessary requirements for the beginning of August, 2011.

Requirements to participating banks of the UEK project in Moscow

In August, 2011. The Government of Moscow announced conditions on which banks will be able to take part in the Universal Electronic Card (UEC) project. First, the bank should sign the agreement with federal management company of JSC Universal Electronic Card (JSC UEK). For this purpose, under the law, the size of own means should be not less than 3 billion rubles. Also the bank should have the long-term credit rating assigned by one of the rating agencies accredited in the Ministry of Finance. Secondly, the credit institution should have at least 30 departments in the territory of the city. To the selected banks will permit to activate the payment application which will be installed on the card of each citizen.

Who is connected to a system

• "UEC" calculated that until the end of 2011 the number of project participants will increase to 20 banks which will undergo all formal procedures, will append the signature on all necessary documents. "Process of joining of each participant long because legal procedures very serious and deep", - Petkevich explained.

As a result for the end of 2011 7 banks joined the project:

• Sberbank,
• Uralsib,
• "Ak Bars",
• CB Center-Invest,
• "St. Petersburg bank",
• AvtoVAZbank and
• Moscow Industrial Bank.

For December, 2011 are also connected to UEK network:

• JSC Zolotaya Korona (national interbank payment system, Novosibirsk),
• JSC Bashkirsky registr sotsialnykh kart (Ufa),
• regional budgetary institution "Information and Technical Downtown of Lipetsk".

December 29, 2011: "During 2012 all 83 subjects of the Russian Federation should be connected to the single UEK payment and service system, - reported in the press service of UEC. - Besides, now 5 banks are in the final stage of agreement signature, and all until the end of 2012 accession to a system about 60 credit institutions"^[1] is expected^[1] system.

• In March, 2012 the Surgutneftegazbank signed the agreement on accession to Rules of federal authorized organization "UEK" EPSS UEK.

• On December 27, 2012 the state unitary enterprise of the city of Moscow "Moscow social register" signed the agreement on accession to Rules of the Single payment and service system "Universal Electronic Card" (Rule EPSS UEK). Thus, Moscow became the last of 83 territorial subjects of the Russian Federation which joined EPSS UEK.

Krayinvestbank

In November, 2011 it became known that Krayinvestbank will take part in project implementation "The universal electronic card". Signing with JSC UEK of the first document from a packet of the Agreement on cooperation became the first step of regional bank to the embodiment of the national project in Krasnodar Krai.

The trust put in Krayinvestbank in the choice of regional partner bank of the national project "Universal Electronic Card" naturally also has under itself all objective reasons: the authority of one of significant banks of Krasnodar Krai, the status of the bank card issuer of different payment systems, largest in the region, the created and effectively functioning infrastructure of their service.

As one more powerful argument for benefit of Krayinvestbank as partner bank of the project its active participation in work of the first national project of similar scale - the multifunction centers for providing the public and municipal services which still refer to as as "The federal system "of the electronic government served".

St. Petersburg bank

In January, 2012 it became known that the St. Petersburg bank signed the agreement on accession to rules of federal authorized organization UEK. Bank acts in this project as the partner, the bank issuing and supporting^[1].

Center-Invest (Rostov-on-Don)

At the end of November, 2011 the Center-Invest bank (Rostov-on-Don) reported that it from regional banks signed with the first in Russia the agreement on accession to Rules of JSC UEK. The Center-Invest bank joins the project as the issuer and an ekvayer of universal electronic cards.

The solutions corresponding to rules EPSS UEK

• I-Teco became the first IT company which solution is recognized to the corresponding rules EPSS UEK and is implemented from approval of the coordinator of the national project – federal authorized organization "Universal Electronic Card". For December, 2011 it is known of the beginning of works of the company in Dagestan, Krasnodar Krai and in the Republic of Mari El.

• On May 10, 2012 it became known that the first standard software solutions for authorized organizations of the subjects of the Russian Federation are approved by JSC UEK. Standard software solutions are developed, first of all, for expense reduction of authorized organizations of the subjects of the Russian Federation and reduction of terms of release and the beginning of service of universal electronic cards. The authorized organization of the subject of the Russian Federation can develop the software solution for information systems, or select standard. Use of the ready-made standard solution allows in short terms and with smaller risks to implement information system UOS. In addition the procedure of check of UOS on compliance to requirements of Rules EPSS UEK by federal authorized organization as standard solutions are already in advance checked becomes simpler and it is necessary to carry out configuring, and then final testing.

The federal authorized organization specially developed standard architecture of authorized organization and detailed formats of its information exchange with other participants of EPSS UEK in the automatic mode. Since January 1, 2012 the systems of federal authorized organization are ready to connection of UOS and carrying out final tests.

For May 10, 2012 4 developer organizations received the positive decision about compliance of the standard solutions presented by them to requirements of the current version of Rules of a Single payment and service system (EPSS UEK). Upgraded version Governed EPSS UEC 1.6 of 2/16/2012 JSC UEK was prepared and beforehand underwent approval in the Ministry of Economic Development of the Russian Federation.

Check on compliance to Rules of EPSS UEC 1.6. as the issuer of universal electronic cards passed:

• "Automated information system of UOS" of production of Extreme about LLC.
• "Information system UOS" of production of Pik Sistemz LLC.
• "Information system UOS" of production of I-Teco Ltd.
• "Module RUEC (Register of Universal Electronic Cards) of the IC UOS" of production of Zolotaya Korona Ltd.

The number of standard solutions will grow that means competition development in the field and formation of the fair price.

"We with great satisfaction perceive entry into the market of four standard solutions for authorized organizations of subjects at once. Till the last moment a certain distortion towards the federal center which was ready to card issue since December, 2011 was noted, but could not start at full capacity owing to unavailability of information systems on side of regions. The prepared standard solutions will allow authorized organizations to start for read weeks and to be integrated quickly into the national system of universal electronic cards", - the Vice president of federal authorized organization "Universal Electronic Card" Andrey Igorevich Petkevich emphasized.

Protection mechanisms

In EPSS UEK use of the following mechanisms of protection is supposed:

• mutual authentication of UEC and the terminal on the basis of certificates of public keys;

• two-factor authentication of the citizen - the card holder in attempt data acquisition with UEC (the card + the PIN code);

• authentication of the cryptogram with a service request in the information system (IS) of FUO (symmetric keys are used);

• in order that the supplier of service could trust a request, authorization of a request for service from FUO (EDS) is made;

• protection of departmental data units is performed according to departmental requirements, i.e. departments can set the modes of protection;

• in all system, between all participants and all components it is going to perform data encryption by transfer them in communication channels – between the card and the terminal, between the terminal and the operator of transmission channel and to service provider.

For system maintenance of protection of UEC it is going to construct a management system for keys and certificates, including a public key infrastructure (PKI). It should meet the following requirements:

• support of international standards regarding public keys;

• support of international standards regarding electronic cards (group of standards 7816, Global Platform, DES, RSA);

• support Russian standards on cryptography (GOST 28147-89, GOST P 34.11-94, GOST P 34.10-2001).

For release of safety certificates creation of Head certification center is planned.

Because there is an uncertainty whether the domestic universal card by January 1, 2012 will manage to undergo certification of MasterCard and Visa (without it they cannot be applied to banking activities), he noted two possible extreme scenarios:

1. Release of UEC with import cryptography on import chips (without EDS according to the Russian standards, but with infrastructure of RSA);

2. Release of full UEC with domestic cryptography on the Russian chips in process of readiness of production. Between these options partial decisions are possible. However, as the representative of FSB noted, by consideration of the first scenario it is necessary to consider that for bank solutions the model of threats is much weaker, than for the Electronic Government program therefore for it such model should be approved at the highest level.

History of development of a system

2010

In 2010 the WikiLeaks website published the message of the employee of the U.S. Embassy in Moscow Matthias Mitman who claimed that the bill in the form in which it existed at that time, handicapped Visa and MasterCard. The diplomat recommended to the high-ranking government employees of the USA to put pressure upon the Russian colleagues. According to Mitman, the Russian banks which will be operators of new payment system will annually bring together the transactions commission of about $4 billion.

2011: Americans lobby MasterCard as UEC basis instead of the Russian Pro100

• On June 17, 2011 the management of "UEC" signed the agreement with MasterCard which received the status of the partner in project implementation.

• On September 1, 2011 it became known that the Sberbank of Russia and Uralsib signed agreements on accession to Rules of the Single payment and service system "Universal Electronic Card" (EPSS UEK).

Joining of the leading players of retail market of Russia - Sberbank of Russia and Uralsib, the terminal devices having the largest networks, will promote successful formation of infrastructure of acceptance of the universal electronic card in the territory of the whole country. Agreement signature about accession to EPSS UEK by the largest players of the market shows demand of this system and attractiveness of the business idea put at its formation.

"Accession to rules of the Single UEK payment and service system will allow to pass to a certification stage in a system - the vice chairman of the board of Uralsib bank Ilya Filatov explained. - After its end the bank is going to act soemitenty the banking application in all territorial subjects of the Russian Federation".

• On October 20, 2011 despite the decision of the Ministry of Economic Development on use at release of the Universal Electronic Cards (UEC) of Pro100 technology, in the government there took place the meeting about expediency of use of practices of international payment systems^[2] again^[2].

At the deputy chief of staff of the government Anna Popova there took place the meeting at which the issue of use of Pro100 and MasterCard payment systems within the project on implementation of the Universal electronic card was discussed. In spite of the fact that at the beginning of October of the Ministry of Economic Development approved rules of release of universal electronic cards for two years based on technologies of Pro100 system, without MasterCard, at a meeting in the government different versions of release of UEC, including co-brand option were discussed with an international payment system and use only by Ministry of Railways again.

"Pluses and minuses of each option are considered now", – the director of the department of the innovative development and corporate management of the MEDT Ivan Oskolkov reported media.

Adhere to a similar position also in UEK company. There consider that national payment system Pro100 on the Universal electronic card technically is based on international standards and can work everywhere, but, unlike the international payment systems (IPS), it has more available rates, it is regulated not by the international, but the Russian rules and also closes all financial flows within the country.

As the board member of Sberbank Victor Orlovsky explained, UEC in the next two-three years will work based on Pro100: "Use so-called to - a badge, i.e. simultaneous placement of two applications, Pro100 and Ministry of Railways, on one card is not supposed". According to him, UEC will continue cooperation with Ministry of Railways, but at the technology level. Concern of the Russian officials and UEC concerning possible complete substitution of Pro100 with MasterCard technology is quite explainable. Ministries of Railways practically do not fall under the Russian legislation, their many rates are closed.

The head of the Russian office MasterCard Ilya Ryaby reported in media that neither he, nor his representatives were present at this meeting, though could: "To us was about what to tell. MasterCard has experience of the technological solution of a perspective of social cards, we suggest to use the technologies since 2007".

2012: At first PRO100, after MsterCard

June 13, 2012: Initially universal electronic card will work only with the Russian payment system PRO100, Andrey Petkevich, the vice president of the federal authorized organization "UEK" which is responsible for project implementation of the universal electronic card told CNews. But further, according to him, it is going to provide a possibility of installation on the card of one of the international payment applications.

"Earlier the option about use of one of international payment systems as the main payment system UEK was considered, - Petkevich says. - However the state made the decision on use on the card of national payment system"^[3].

Since 2010 Sberbank is engaged in development of PRO100 payment system. It succeeded the Sberkart system which Sberbank created in 1993. Because a system was based on the closed standards, it functioned only in network of Sberbank and was not widely adopted enough. So, according to MForum Analytics, in 2010 over 85% of bank card transactions in Russia serviced Visa and MasterCard. From the Russian payment systems in 4% Zolotaya Korona had a share, and at Sberbank was also that less.

Cards based on PRO100 abroad are not accepted therefore the order of implementation of UEC approved by the Ministry of Economic Development allows placement of the additional banking application, with the clause - for use of the card outside Russia. However Andrey Petkevich says that the additional application will be attached besides the account, as PRO100, and will allow to pay off with the card as abroad, and in Russia. The choice of the application of the card at making payment will perform the terminal structure of bank.

In the latest revision of the rules UECs which are also approved by the Ministry of Economic Development it is said that participants should place on the card only PRO100 application. However, already at a boundary of 2012-2013 of "UEC" is going to prepare new edition of rules. It is possible that there also the possibility of adding on UEC of the international payment application will enter.

With high probability as the additional banking application on UEC MasterCard will be used, Petkevich says. He connects it with the fact that PRO100 technically is based on the product MasterCard. In particular, the Russian payment system uses its M/Chip application working based on open bank standards that allows for card transactions based on PRO100 to use already existing infrastructure.

The main difference between systems consists in the amount of rates on transactions and also that payments through PRO100 are processed in processing centers in the territory of Russia and information on them is not taken out abroad. "UEC" have an agreement granting the right to use M/Chip in the universal electronic card also.

Lower rates will help to compete with a foreign analog of PRO100, consider in Sberbank. "Regarding rates and conditions of participation, it is national payment system, more available to participants, which fair rates will allow to accept these cards not only in those shops where the international cards are now accepted, but also in those which are not able to afford to work with cards now and so far accept only cash", - note in Sberbank.

Now it is possible to pay off with the card based on PRO100 in any trade and service companies and shops which are serviced by UEK participating banks, speak in Sberbank. If to judge by official statements, like those is only nine so far. And here it is still possible to draw money from the PRO100 card only in network of Sberbank.

"By the time of the beginning of issue of UEC to citizens in the industrial mode, such opportunity will appear in network of other UEK participating banks. The number of banks of participants will be several tens of banks, and these are several tens of thousands of ATMs through the whole country", - assure of Sberbank.

Creation of national payment system – – it is possible to call the competitor of Visa and MasterCard by an old dream of both the Russian government, and a number of credit institutions. The law on it with variable success rose and studied, however its acceptance encountered resistance.

It is remarkable that cooperation in the "adjoining" placement of payment applications on one card at MasterCard was already outlined also with other Russian payment system - Zolotaya Korona. So, in April, 2012 the company announced plans to create the card, joint with MasterCard, which will be supported in the territory of Russia in infrastructures of both payment systems and also in MasterCard infrastructure abroad.

Notes