The Universal Electronic Card (UEC) is intended eventually to replace all local, regional, and national forms of ID.

Russian President Dmitry Medvedev and other top officials discussed a universal ID-payments card that will be issued from January 1, 2012 at an estimated cost of 135 billion – 165 billion roubles and will enable their users to pay for goods and services in Russia and abroad and possibly even vote.

Medvedev said he doubted the state’s ability to handle a process that extended beyond providing public services on its own and that this might be done in a public-private-partnership, with banks’ (notably Sberbans) playing a pivotal role in introducing the cards.

Payments

The planned universal electronic card for Russian citizens will be an accepted payment instrument in Russia and abroad, President Dmitry Medvedev said at a meeting of the Commission on Modernization and Technological Development.

“Everything must be done so that the card, which we have approved, is universal in nature, is a universal financial instrument, which can be used in Russia and abroad, and not some kind of homemade product that is not recognized in other countries,” Medvedev said.

The card will elevate the interactions between the citizen and the state, to a new level and provide new possibilities to Russian citizens, he said.

The e-cards represent “a radical elevation of the digital culture” and the ordinary citizen will feel “better protected in dealings with the state,” Medvedev said.

“The universal card may be used as an instrument for cash-free payments and also as a full-fledged payment instrument, in Russia and abroad,” he said.

Medvedev directed the government to present the cost projections for introducing the e-card before May 1.

“The economics of the project must be tallied. The interest of banking and financial structures in its implementation is clear. Of course they support it, but the volume of state financing must also be determined. Therefore I am giving the pertinent order to the government to prepare and present the spending justification by May 1, 2011, in order that the required funds are allocated in next year’s budget,” Medvedev said.

“We are ready to begin the implementation of this massive, socially important project. Its results will have a pivotal effect on people’s lives, on the interaction between the citizen and the state. I am certain that as soon as we introduce this system, it will simplify the life for tens of millions of people,” he said.

Medvedev also directed that the legislation needed to introduce the card be drafted by the summer of 2011.

“All these documents must be approved by the summer. That is my direction to the government, he said.

The drafts include a law on digital signatures, a host of government resolutions concerning the technical requirements, including the data storage material, the technical requirement for electronic applications, and the regulations concerning procedures for issuing the e-cards.

Medvedev also warned the banks against using the e-cards to generate outsized profits.

“We must first figure out how to regulate the rates [on transactions for commercial and state services]. Clearly, not by squeezing the organizations that engage in the transactions, but at the same time preventing these transactions from becoming a source of unjustified profits, because in that case we would be discrediting the very idea of the card,” he said.

“If operations with the cards cost the citizen a lot, that’s going to look very bad. Therefore, everyone that services the cards, all the major banking institutions, must understand that this is in fact a social mission and not a source for big earnings,” Medvedev said.

Medvedev also said personal information in Russia is not protected enough and is actively circulating on the Internet.

“We need to make efforts to protect personal information from possible dissemination and abuse. Although I have to admit that this information is now circulating on the Internet in large quantities,” Medvedev told the meeting of the Commission on  Modernization addressing the introduction of universal electronic cards in Russia.

“The state has not found effective ways to protect this information,” Medvedev said.

The President reiterated that “the protection of this information in itself should not be an obstacle to the decision to introduce these cards.”

Cost

The introduction of Universal Electronic Cards for Russian citizens will cost 135 billion – 165 billion roubles, according to preliminary estimates.

The figure, which will be spent over a five-year period, is contained in materials prepared for Economic Development Minister Elvira Nabiullina’s report to the presidential Commission on Modernization.

Banks will spend 40 billion roubles for issuing the e-cards over five years, and 12 billion roubles will go to regional processing. A new company OJSC Universal Electronic Card will spend 3 billion roubles on federal processing.

Infrastructure creation for accepting the e-cards – at banks and elsewhere – will cost 70 billion – 100 billion roubles.

Payments for government services using the e-cards will require 10 billion roubles over five years. That amount will be paid out of savings from switching to the cards.

The materials do not indicate the amount required to use the card to pay for commercial services.

Sberbank President and CEO German Gref said previously that the participants in the universal e-card project would spend 150 billion – 200 billion roubles over five years.

The e-cards will be used to provide government services and for banking operations. It will also double as personal identification.

The visual information on the e-card will include the bearer’s first name, patronymic and surname, his or her photo and signature, the individual pension insurance number, the e-card number, and expiration date.

The e-cards are slated to be issued in the period from January 1, 2012 to December 31, 2013.

Sberbank, Uralsib (RTS: USBN), and Ak Bars (RTS: AKBR) set up OJSC Universal Electronic Card in June 2010 with 100 million roubles of charter capital.

The pilot project for the production of universal electronic cards is being realized in four regions of Russia: the Astrakhan region, Bashkortostan, Moscow, and Tatarstan.

In December 2010, Moscow Mayor Sergei Sobyanin said Universal Electronic Cards will begin functioning in Moscow in 2011.

The Moscow mayor said universal electronic cards will retain all the functions of the current Muscovites’ cards and will also function as an insurance policy, a social card, a transport pass, and will have a bank application.

Negotiations are currently in progress with the Visa and Master Card to join Universal Electronic Cards to the international payment systems.

Processing

Medvedev said banks were better prepared to process the universal cards than the state. “This is obvious,” he said.

He said he thought the cards ought to be introduced under the auspices of a public-private partnership.

“I won’t hide the fact that I have doubts about the state’s ability to put in place one universal system that will digest everything, but maybe I’m wrong,” he said regarding processing and storing the cards.

He said Sberbank seemed to be more motivated, going by the information presented at the commission’s meeting. “When government agencies start dealing with this, a lot of internal discrepancies arise, which need to be resolved, and unfortunately our ministers do not always have the skill to do this,” he said.

Sberbank’s Gref said a public-private partnership was the only effective means of taking the project forward. “Any attempt right now to create public infrastructure as an alternative to private infrastructure would bring the project down,” he said.

Gref said it would be better to use existing infrastructure than spend money on new infrastructure. Russia already has a network of 800 000 terminals and ATMs, he said.

Communications Minister Igor Schyogolev said he thought the state alone should handle the card project.

“We’ve long been discussing the mechanism for interaction between the state and the authorized federal agency (OJSC Universal Electronic Card), and from our point of view, the system’s central function should be to provide public services in electronic form, including with the use of the cards, and there ought to be a universal system of liaisons between the departments.”

“But is the state capable of setting a system like this up? Won’t we get bogged down in it?” Medvedev asked Schyogolev. Banks might not be perfect, but they already have a working system, Medvedev said, to which Schyogolev replied that work on the inter-departmental system was underway.

But the question whether the state would manage to launch its own system for processing the cards by 2012, when the cards will start to be issued, remained unanswered.

Medvedev also gave instructions to launch the card using a foreign chip.

“We are not going to wait until they create our own chip, otherwise it will never happen. Introduce it with a foreign chip,” Medvedev said.

Once a domestic chip is created, cards will be re-issued with a Russian chip, he said.

“This will not create any problems; as far as the database is concerned, consider it my instruction to the government to act in this way,” Medvedev said.

Less cash

The introduction of Universal Electronic Cards for Russian citizens will help bring non-cash transaction to over 50 percent of total payment operations, said presidential advisor Arkady Dvorkovich.

“Over 50 percent [of transactions] will be non-cash,” he told journalists.

When asked whether this card was absolutely necessary or not, Dvorkovich said that the universal e-card would be necessary for certain types of transaction including “all pension transactions and medical insurance.”

Less corruption

The introduction of a Universal Electronic Card in Russia will help reduce the level of corruption and the number of officials, Sberbank’s Gref said.

“The most important thing in the introduction of the Universal Electronic Card is that it is a totally new instrument of interaction between citizens and the authorities. What is most important to us today that is that it will dramatically reduce the level of petty obstacles and corruption levels,” Gref said at a briefing.

The introduction of this card in Russia will save citizens the trouble of standing in lines and will make the process of interacting between citizens and the authorities more transparent. “I hope it will also reduce the state apparatus and a lot of offices will become redundant,” he said.

Voting

President Dmitry Medvedev said the cards might be used to vote in elections.

Many Internet users are currently watching the discussion on the introduction of Universal Electronic Cards online and are sending their proposals, Medvedev said.

“I see that we have received a number of ideas, including the idea to use UEC to vote in elections so that everyone can understand what has happened to their votes,” Medvedev said.

“It is potentially possible in the future, it would be beautiful,” Medvedev said.

“Clearly, it’s not a prospect for today or even tomorrow, but it’s an interesting thing,” Medvedev said.