July 09, 2009

Webmoney's start in the 1998 crisis

In comments, Igor Drokov asked for data points on my claim that Webmoney single-handedly saved the Russian people from their crisis. The problem with Webmoney has always been that the documentation is in Russian, so the story spread slowly and was wildly exaggerated in the telling. I asked Dani Nagy, who is fluent in Russian, for the truth, and here's what he said:

Here is a summary of the official history of WebMoney, as told in 2005 (in Russian) and an interview:

The first financial transaction in WebMoney happened on November 20, 1998, when the shock of the financial meltdown was still raw in Russia. They started their operations with a "Marshall-plan", spending a few tens of thousands of dollars as follows: the first 1000 registered users got 30 WMZ (WM denominated in USD) on their accounts, the first few vendors that signed up for accepting WM got 100 WMZ and invitations were rewarded by 3 WMZ each, if successful.

For about a month, they announced each signed-up vendor as a separate news item on their main page. By December 1998 they switched to batch announcements, as the service was growing in popularity, albeit mostly confined to Moscow due to the (almost negligibly) low residential internet penetration elsewhere in Russia.

The growth was quite rapid. By the end of 1999, businesses operating mostly online, such as ISPs, banner exchanges, hosting providers and web design studios, adopted Webmoney almost universally. It was in 1999 when exchange agents started popping up in major Russian cities. They also got into the remittance business, mostly for Russians working in America's dot com boom.

By 2000, WebMoney was already very popular across Russia. That same year, Oleg Bunas started a branch in Minsk, Belarus. See this (also in Russian).

Of course, in those years, WebMoney was severely constrained by the low Internet penetration in Russia. But among internet users it was a runaway success from the very beginning, as there was no comparable fast and cheap means of payment. The banking sector certainly failed to meet the demand for such.

My (Dany's) comment:

Giving cash to conductors on railroads has been and still remains a popular means of money transfer, but when it's -20C outside (with a raging blizzard to complete the picture), the benefits of being able to wire money from the comfort of one's home or office are difficult to overstate. :-)

The effect of the present financial crisis on WebMoney is thankfully measured by Google.

Posted by iang at July 9, 2009 07:55 AM | TrackBack
Post a comment

Remember personal info?

Hit preview to see your comment as it would be displayed.