Net Element, Inc. (NETE) Bridging the Gap in Burgeoning Asian, European & Russian E-commerce, M-commerce & Payments Markets

Leveraging vast expertise in e-commerce and m-commerce enabling mobile payment technologies, as well as in crafting end-to-end payment and transaction processing solutions that can help supercharge commerce, Net Element (NASDAQ:NETE) continues to hammer out a sizeable presence in emerging markets, with their owned and operated TOT Group subsidiary being the tip of the spear. TOT Group’s family of companies includes TOT Money, a carrier-integrated mobile payment solutions provider, which is continually expanding its already unrivaled 49 country-spanning coverage footprint, through both innovation and growing its network of relationships with mobile providers around the world. Also in the mix is TOTmoney.ru, a mobile payments gateway focused on m-commerce and premium SMS that is specifically geared towards the Russian Federation market.

From both an e-commerce and payments perspective the Russian Federation is growing by leaps and bounds. A report out in April this year from the first international company dedicated to Russian digital industries (and a leading source for intelligence on this market), East-West Digital News, indicates that Russian e-commerce grew 5 percent last year to over $17 billion. With around 31 million consumers (roughly 32 percent of population over the age of 18) going online in 2014, even as over 42 percent of the entire 143 million person population now use the internet daily, the underlying growth metrics for e-commerce in Russia are tantalizing to say the least. While Russia handily outpaces Europe in terms of internet usage per capita, online retail turnover still lags behind more mature European markets, further showcasing the region’s long-term growth potential. Data from McKinsey out late last year shows similar metrics for the payments industry in Russia, with 30 percent growth per year in card issuance and some $50 billion a year in payments as of 2014, Russia is now the sixth largest payments market on earth.

E-commerce still represents only around 2 percent of the consumer space in Russia, with cash-on-delivery still predominating and e-commerce adoption in the outlying regions still having an enormous amount of room to grow compared to the capital. However, this is rapidly changing and with nearly 30 percent of 2014 e-commerce coming from cross-border sales, particularly from China, the need for e-commerce content localization, as well as mobile payment and processing capabilities, is greater than ever. Net Element is already poised to deliver a wealth of assistance in this growing market with some of the most appealing value-added transactional services available today at their fingertips and the recent announcement that the company has executed definitive documentation to acquire PayOnline, which currently processes online payments for 10 million plus active consumers, as well as thousands of merchants across Asia, Europe and the Russian Federation, substantially strengthens the company’s handle on this burgeoning space.

A growing depth of economic ties between Russia and China, including a recent $25 billion deal to increase Chinese lending to Russian firms, a $400 billion gas supply deal whereby Russia will deliver some 38 billion cubic meters of gas annually over 30 years (starting in 2018), as well as the formation of the New Development Bank, or BRICS bank, and the formation of the AIIB (Asian Infrastructure Investment Bank), heralds the start of a new geopolitical era where China and Russia will become increasingly more and more important markets for global e-commerce and payment solution providers. In such an environment, the direct agreements with Eurozone area and Russian Federation banks that are available to NETE via PayOnline’s architecture, which will allow seamless transactions in the U.S. for thousands of merchants located in those regions, as well as the same easy access for U.S. merchants to Asian, European and Russian markets, will be of inestimable value.

According to recent analysis on the Chinese e-commerce market by iResearch, e-commerce grew a whopping 21.3 percent between 2013 and 2014, to nearly $2 trillion, and it is expected to continue growing at a similar pace over the next few years, reaching upwards of $3.9 trillion by 2018. E-commerce retail alone, dominated by Alibaba’s Tmall (57 percent) and JD.com (21 percent), is on track to hit around $1 trillion by 2019 according to Forrester Research, with the online to offline (internet driving consumers to brick and mortar) and online travel markets making up the remainder, driven in large part by the rapid proliferation of mobile devices throughout China. In fact, most people in China use their mobile to get on the net according to Forrester, with 25 percent of respondents indicating they also shop via mobile at least once a week, in a space where Alibaba’s Tmall and Taobao apps currently dominate, holding over 85 percent of the market share.

Sandwiched between China and Russia, Kazakhstan’s e-commerce market is also set to rise handsomely in coming years, projected to increase over 38 percent to around $5 billion between 2015 and 2017, according to the country’s Ministry of Transport and Communications. Net Element has already moved to tie up this significant additional regional market as well, announcing that they have secured a contract with the biggest online ticket seller and second largest online merchant in the country, Kassir.com, as of early June 2015. Paired up with a key agreement between Net Element and KAZKOM, the country’s biggest bank, NETE’s soon-to-be-acquired subsidiary PayOnline will gain access to a huge payment processing market of over 2.4 million cardholders which stretches up north into Russia, as well as south into Kyrgyzstan and Tajikistan.

Keen maneuvering by Net Element here to stitch up a regional strategy that is designed to make the company a service provider of choice. Developing key relationships with big banks and executing the acquisition of an established processor like PayOnline will go a long ways towards helping the company to grow its already formidable emerging market footprint.

Take a closer look by visiting www.netelement.com

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