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spk04: Good day, everyone, and welcome to the Kiwi Third Quarter 2020 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to Mrs. Varvara Kisileva, Interim Chief Financial Officer of Kiwi. Please go ahead.
spk08: Thank you, Operator, and good morning, everyone. Welcome to the Kiwi Third Quarter Earnings Call. I'm Varvara Kisileva, Interim Chief Financial Officer And with me today are Boris Kim, our Chief Executive Officer, and Andrei Protopopov, Chief Executive Officer of the Payment Services segment. A replay of this call will be available until Thursday, December 3, 2020. Access information for the replay is listed in today's earnings press release, which is available at our Investor Relations website at investors.kivi.com. For those listening to the replay, This call was held and recorded on November 19, 2020. Before we begin, I would like to remind everyone that this call may contain forward-looking statements if they are defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements about our expectations for future performance are subject to known and unknown risks and uncertainties. Give you caution. that these statements are not guarantees of future performance. All forward-looking statements made to date reflect our current expectations only, and we undertake no obligation to update any statements to reflect the events that occur after this call. Please refer to the company's most recent annual report on Form 20F filed for the Securities and Exchange Commission for factors that could cause our actual results to differ materially from any forward-looking statements. During today's call, management will provide certain information that will constitute non-IFRS financial measures, such as total net revenue, adjusted EBITDA, adjusted net profit, and adjusted net profit per share. Reconciliations to IFRS measures and certain additional information are also included in today's earnings press release. With that, we'll begin by turning the call over to Boris Kim, our Chief Executive Officer. Boris.
spk05: Thank you, Barbara, and good morning, everyone. Thanks for joining us on this call today. I'm glad to share our third quarter 2020 financial results. This quarter, we continued to demonstrate robust performance in our payment services segment, as well as in our other projects. Our payment services segment showed solid results and delivered 11% net revenue and net profit growth. This growth was largely supported by several factors, including abnormally high density of sport events in the third quarter, as well as growth in our strategic self-employed streams. This quarter, we also successfully closed the sale of Solvist and concluded the wind-down of RocketBank. This helped us to refocus on our core payment business, as well as on projects that can be synergetic to our key products, consumer niches and competence. This being said, we also continue to optimize and improve the efficiency of our operations across all projects. Moving further, I would like to share with you our several trends that I believe are currently important for our business. Today, we see increasing uncertainty related to the spread of coronavirus. Moreover, as a result of several other factors, we may expect further deterioration of the consumer patterns, and disposable incomes in Russia. We have not yet seen any substantial effects of the decrease of the purchasing power of the population on our operations. Our diversified portfolio of services and circular growth in our key markets cushioned the negative trends so far. However, we may expect certain negative effects to be visible going forward and into 2021. Secondly, We have noted in the past and are likely to continue to see in the future constant defaults of our governmental bodies to adopt more robust and stringent regulations in respect of our key products and markets. This may include, without limitations, more elaborate wallet KYC requirements, establishing certain limits for the digital wallet transactions, both in respect of their types and maximum amounts, specific rules and regulations in respect of the cross-border transactions and regulation of the sport betting market. As of today, a number of legislative initiatives have been discussed by different legislative bodies, formally or informally, that can eventually become legislative proposals or laws and impose additional pressure on our operations. As of now, we cannot make any reliable assessment of the impact that these trends may have on our 2021 results of operations, but we continue to closely monitor the situation and will provide our 2021 guidance in due course. Despite uncertainty and challenging economic and operating environment, we see diverse opportunities for growth in mid- and long-term, including through general digitalization trends, new niches and services for self-employed, as well as certain B2B products and services. I do believe that we are well positioned to continue developing our business and strengthening our ecosystem to provide our clients with the best in-class digital solutions. Now, on some operating highlights. Third quarter 2020 total net revenue increased 11% to reach 6.6 billion rubles, up from 6 billion rubles in the third quarter of 2019. The increase was mainly driven by payment services segment and corporate and other category net revenue growth, as well as by positive contribution of RocketBank, as opposed to negative effect on total net revenue for the same period of the prior year. Andrei will discuss the performance of our payment services segment in a minute while I walk you through the results of our other projects and segments. Corporate and other category net revenue was 449 million rubles as compared to 268 million rubles in the third quarter of the prior year. Net revenue growth in other category was primarily driven by factoring plus net revenue growth. Factoring plus net revenue grew to 182 million rubles as compared to 55 million rubles in the third quarter of the prior year. Factoring net revenue growth was driven by the scaling of the projects, including the expansion of bank guarantees and factoring portfolios. In the third quarter of 2020, factoring portfolio increased by 15% to reach 3.8 billion rubles. Bank Guarantee portfolio grew by 26% to reach 16.7 billion rubles. Both products performed well and continue to maintain low NPL level. Given the results of the project and the trends we currently see, we aim to further develop these products by scaling our current products as well as by expanding Factoring Plus product propositions. Deutsche Knet revenue for the third quarter 2020 was 126 million rubles compared with 199 million rubles in the third quarter of the prior year. Deutsche Knet revenue decline primarily resulted from a decrease in revenue generated from cash and settlement services due to low number of active clients in KiwiDeck. At the same time, the consolidation of the FluxTree project starting from December 2019 also contributed to the net revenue growth. As I already mentioned, in the third quarter, we successfully completed the sale of service projects and concluded the Rocket Bank wind-down process. Thanks again to the team for an outstanding job done. Further, I'm happy to share that in October 2020, we placed the first-ever TV rubble-denominated bond entering Russia's debt market. Barbara will give you more details shortly, but I would like to mention that the placement enjoys a strong interest from both institutional and retail investors, which we believe is a good sign that general market as well as Kiwi customers value our story and believe in our business. Moving on, I'm glad to announce that following the determination of the third quarter 2020 financial results, 34 cents per share. We remain committed to the target dividend payout ratio of at least 50% of the adjusted net profit for 2020, approved by the Board in March. The Board of Directors reserves the right to distribute the dividends quarterly as it deems necessary so that the total annual payout is in accordance with the target provided. However, The payout ratios for each of the quarters may vary and may be above or below the provided target. Finally, I would like to announce the appointment of Pavel Korsh as the Chief Financial Officer of Kiwi effective December 1, 2020. Pavel has over 20 years of experience in finance. He joined Kiwi in August this year and has served as the CFO of KiwiBank incident. Given Pavel's extensive financial knowledge, impressive background, and strong focus on delivering results, I'm convinced that Pavel will be able to support our further growth, strategy execution, and help us extend our business further. With this, I will turn the call over to Andrey for an update on our payment services business. Andrey.
spk07: Thank you, Boris, and good morning, everyone. Thanks for joining us. Moving on to the results of our payment service segment. For the third quarter 2020, our payment service segment volume increased by 11% to 435 billion rubles, driven primarily by growth in e-commerce and money remittance market verticals, offset by a decline in financial services and telecom market verticals. As we have discussed on numerous occasions, we started to see volume recovery in June as the quarantine restrictions were eased and the majority of sports events were back on track. Different self-employed use cases also started to recover once the lockdown was over. Hence, our e-commerce volume was driven to a large extent by abnormally often sport events, as well as by a growth of different other digital entertainment subcategories. The continued growth in money remittance verticals at the same time was largely driven by the strong performance of the contact money remittance system, primarily resulting from the growth of the Tajikistan corridor, underpinned by the development of the contact mobile application. Significant increase in payouts resulting from the scaling of our strategic self-employed streams also contributed to the performance of money remittance categories. For example, in the third quarter 2020, we connected to our platform over 480 taxi companies, continued to improve our services for taxi parks and other self-employed use cases, in order to support further growth in the stream, and started to develop several new niches. At the same time, some of the categories primarily connected to our physical distribution, such as travel and ticketing or loan repayment, continued to be adversely affected by the restriction related to the COVID-19 and overall economy slowdown. As Boris mentioned so far, we have not seen any significant slowdown in our volumes or revenues resulting from lower purchasing power of population in Russia. thanks to our diversified product mix and resilient niches. At the same time, we believe that further deterioration of the situation can negatively affect some of our categories, including not only our physical distribution, but our core categories like, for example, e-commerce. At the moment, we remain cautious and closely monitor how the situation evolves, doing our best to mitigate key risks and uncertainties. In order to maintain our growth, we continue to look for new use cases and develop new niches and products. For example, we are piloting certain projects in our payment service segments, such as debit card program for our partners and their employees, earlier developed in RocketBank, or payday loans for our key user groups, as well as certain B2B-focused services. We believe that such products will help us expand our B2B2C product proposition and provide more demanded, diversified, and relevant services for our clients, cementing our market position and growth. Going back to the third quarter results. Payment services segment net revenue increased 11% to reach 6.1 billion rubles compared to 5.5 billion rubles the prior year. Payment services payment adjusted net revenue increased 13% to 5.3 billion rubles, up from 4.7 billion rubles in the prior year, primarily due to the volume growth supported by the slight improvement of the payment average adjusted net revenue yield. Our payment average adjusted net revenue yield was up by two basic points year-over-year to 1.22%, driven by increasing share of e-commerce and money remittance volume in total volume. At the same time, e-commerce and money remittance verticals adjusted net revenue yields have declined year-over-year due to changing product mix with higher proportion of low-yielding products, such as, for example, acquiring in this category. Payment services' other adjusted net revenue was 8%. as compared to $808 million in the prior year. Fees for inactive accounts and unclaimed payments increased 5% to $506 million from $484 million in the prior year. Interest revenue decreased year-over-year mainly due to lower central bank rates. This quarter we continue to see a decline in the number of active Kiwi wallets from $22.3 million as of September 30, 2019 to 19.7 million as of September 30, 2020. We believe that the key factors that resulted in such decline related primarily to the regulatory and operational reasons rather than any substantial changes in the consumer preferences or economic slowdown. Such decline did not substantially impact our financial operating performance due to increasing diversification of our product proposition and operating model. At the same time, we believe that certain regulatory initiatives that are being discussed from time to time, as well as continued economic slowdown, have a potential to negatively affect our operating performance in the future. Our growth this quarter was supported by the robust performance of our key products and co-captains. Although at the moment we see many challenges ahead and remain cautious, we believe that we are well positioned to continue to grow our business, enrich our suite of services, develop new niches, and create new use cases for our users, merchants, and partners. Simultaneously, we are looking to improve and optimize our operations in order to lay a groundwork for sustainable long-term growth. With this, I will pass over to Varvara for more details on the financial performance of the group. Varvara?
spk08: Thank you, Andrey. Moving on to expenses. This quarter, our payment services segment continued to demonstrate robust operating performance, and generated strong cash flows supported by good performance of our other projects. In the third quarter, we have significantly increased overall efficiency of our operations as well as our margins through successful divestiture of the key investment intensive projects as well as other cost control and optimization measures that we have started to implement in the beginning of this year. Before we move on, I would like to highlight that going forward, I will refer to the segment numbers that include the effects of both continued and discontinued operations under IFRS. For the avoidance of doubt, as of September 30, 2020, service and RocketBank projects are presented as discontinued operations in our IFRS financials. That being said, adjusted EBITDA increased 60% to 4 billion rubles. Adjusted EBITDA margin was 61% compared with 42% in the prior year. Adjusted EBITDA margin growth primarily resulted from total net revenue growth, underpinned by a decrease of selling, general, and administrative expenses, resulting from a decrease in marketing, advertising, and client acquisition expenses, driven mainly by the termination of source and RocketBank marketing activities. This was partially offset by an increase in personal expenses, primarily related to payment services segment personal expenses growth, as well as consolidation of flock to it. Group adjusted net profit increased 73% to 3.3 billion rubles from 1.9 billion in the third quarter of the prior year. The growth of adjusted net profit was primarily driven by the same factors impacting adjusted EBITDA as well as by an increase in foreign exchange gain that was offset by an increase in income tax. Payment services segment net profit increased 11% to 3.6 billion rubles driven primarily by payment services segment net revenue growth, upset by an increase of payroll and related taxes, excluding effects of share-based payments, predominantly driven by higher bonus accruals and expenses related to the cash-based LTI compensation program. Consumer financial services segment net worth was 137 million rubles in the third quarter 2020, as compared to 424 million rubles in the same period of the prior year, resulting primarily from a decrease in personal expenses, including effective share-based payments, and selling general administrative expenses due to the project's sale, as well as credit loss recovery compared to the credit loss expense for the same period in the prior year. RocketBank's segment net loss was 165 million rubles compared to 632 million rubles in the prior year, resulting primarily from better net revenue performance, as well as decrease in personal expenses and selling general and administrative expenses resulting from the project wind-down. As Boris has already mentioned, in October 2020, TV has placed a 5 billion ruble unsecured points view in 2023. The final coupon was 8.4%, significantly below the initial range, and the placement enjoyed strong interest and was oversubscribed. At the moment, the main purpose for raising debt is funding the development of a number of current projects, primarily funding the growth of factoring portfolio of a current class project. At the same time, we do strongly believe that it was a good opportunity to optimize our capital structure. Now on to our guidance. Firstly, I would like to remind everyone that at the moment we have limited visibility regarding the potential impacts of the outbreak of COVID-19 strain of coronavirus, as well as certain other factors on our business. In addition, it is currently unclear how much consumer demand will be negatively affected from the outbreak of COVID-19 and what effects such outbreak will have on the macroeconomic environment as a whole. The full impact remains uncertain and will depend on the length and severity of the effect of the coronavirus on economic activity in our market. Our outlook reflects our current views and expectations only, and is based on the trends we see as of the day of this earnings call. If such trends were to deteriorate further, the impact on our business and operations could be more severe than currently expected. We continue to monitor the situation closely. Having said that, we reiterate our guidance in respect of 2020 outlook. We expect group total net revenue to increase by 7% to 15% over 2019. Payment services segment net revenue to increase by 3% to 10% over 2019, while adjusted net profit is expected to increase by 35% to 50% over 2019. Although we see our nine-month results as a solid foundation for our 2020 performance, certain other factors remain beyond our control to revise their guidance in the course of the year. With that, operator, please open up the call for questions.
spk04: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your questions. Our first questions come from the line of Elber Dablichin of Board & Co. Please proceed with your questions. Good afternoon.
spk06: Thank you for the opportunity to talk to you. Congratulations with good, strong results. I just wanted to ask one question on your core payment business, and particularly the e-commerce segment. We noticed this decline in net revenue yield, which is partially understandable. The question is, do you see this as a sustainable new level going forward, or is there still downside risk to this around 2.2% yield. And then separately, on the self-employed, it seems like you're also making good progress. At the same time, other competitors like Snarebank and Yandex have also plans in that segment. Do you see any direct competition or if you could talk a little bit maybe more about the niche that you operate if it's kind of safer for your operation and maybe just on other revenues like seems like it's also making very good progress could you maybe speak a little bit more about the prospects that you see there like in terms of maybe contribution overall to your revenue in the next I don't know couple of years in terms of the potential thank you um
spk07: Hello, thank you for your question. I will cover first two ones regarding the e-commerce yield and self-employed. So for e-commerce, the reasons are, as we described, that we now sell a more broader range of the products, including online acquiring, and the share of online acquiring is bigger versus our traditional, is growing versus our traditional Kiwi wallets. So I would say that we may see certain continue of this trend, though we believe that those yields will be generally on quite high levels because e-commerce is digital entertainment where yields are normally high versus traditional e-commerce. Talking about the self-employed, we are targeting specific, I would say, markets. We are not targeting all self-employed that we have. And on those markets where we are playing, including, for example, the taxi companies and taxi drivers, metal pickers, webmasters, and some others, we have some we have certain competitive advantages because we build kind of uh tailor-made ecosystem for those markets and uh with the tailor-made solutions that fit exactly our partners on those markets at the same time i would say that uh overall uh uh focus of the industry, including our competitors on those markets, is a reflection that this market is interesting and is growing. And at the same time, in those markets we are playing in and some others, we are not yet, I would say, a lot competing with each other. We are more competing with the cash payment. Because even in the scrap metal pickers market, the majority of the market is cash-based. On the taxi market, big portion of the market of how taxi companies are paying to the drivers is cash-based. So there is still a huge opportunity to grow, to move from those cash-based payments to the online payments. And the more players are there, the faster this move will go. So in a way, on those markets, it's good to have a competition. Well, our, I would say, competitive edge would be to not to try to have the broad market products, but to have this, I would say, a larger focus on the specific niches where we can provide the strongest proposition.
spk06: Maybe just could I double-check on your first comment? Do you expect this third quarter trading yield in the e-commerce to be sustainable, or I didn't get the answer because the line wasn't quite clear?
spk07: Could you please repeat? I have something with the voice.
spk06: Yeah, I was trying to ask about the answer. to the first question on the net revenue yield. So the level we saw in the third quarter, do you think this is sustainable or is it can still go down from this level?
spk07: Yeah, as I said, it still can go down a bit, though I think it will stay on some quite high level. quite high levels overall. So it may go down a bit in the next quarters as well. Thank you. Thank you.
spk04: Thank you. Our next question has come from the line of Chris Kennedy with William Blair. Please proceed with your question.
spk05: Sorry, I think we have one more question regarding our new businesses. So I could comment if it's possible. So the question was about contribution of new businesses on mid-term and long-term perspective. You know that after closing selling service project and winding down of Rocket, we have two business verticals left, Flocktory and Factoring Plus. As we discussed during our previous call, they perform very well and they perform even better than we expected at the beginning of the year, especially during this COVID pandemic we have. We are still working on our strategy and mid-term business plan, but I could say that in long-term perspective, say on the horizon on 2023, we could expect these new businesses could bring us like 20 to 25 percent of our net trading view on a group level.
spk06: Male Speaker Thank you. Thank you very much.
spk04: Okay. Apologies. Our next question has come from the line of Chris Kennedy with William Blair. Please proceed with your questions.
spk00: Chris Kennedy Great. Thank you for taking the questions. Boris, one follow-up on those B2B initiatives. Can you talk about the long-term profitability of those?
spk05: Yeah, I believe that the question is about Factoring Plus and their business model, how sustainable it is. So, at the moment, we... see very good profitability in this segment. And talking about long-term and mid-term perspective, we think that although we could expect some decrease in profitability and in margin, in general, we expect that the margin will be rather high. because of two reasons. We work in a very special segment of small and medium-sized enterprises which have contracts with big, reliable companies. And for them, it's not a question of margin. For them, it's a question of time. So we could enjoy rather high margin. On the other hand, the MPL, the cost of risk in such operations, is rather low compared to the loans for small and medium-sized enterprises in which we have practically the same MPL as for retail loans, around 10% to 15%. In fact, in operation with these companies, we have a cost of risk less than 1% even during this crisis.
spk00: Okay, that's very helpful. Thank you. And then just can you give a little bit more color on the potential regulatory changes in Russia and how that would impact Kiwi's business and how you would navigate that?
spk05: As I mentioned earlier, we have a few initiatives from the government and legislative bodies regarding two key markets. The first one is betting. the speed at which they change the legislation is astonishing even for Russia because they just adopted two new laws in July changing the legislation for bookmakers in terms of taxation and offshore offshore beneficiary ownership and now they prepare two new laws which now are being discussed at the level of the government. This law is about further increase in quality and taxation of bookmakers The second law is about changing the whole regulation of bookmakers' companies, including creating a unified two-piece. Now, I remind you that we have two two-pieces. One of these two-pieces is key. It's very early to predict any material effect on Kiwi business, but for sure, that's a very important change in the regulation. The second law is about foreign e-money wallets. At the moment, they try to introduce a special form of reporting of owners of these wallets for the Federal Taxation Office and for the Central Bank about the operations. It wouldn't directly impact our operation. But of course, that's a sign of the level of attention of the regulator to the e-money and to the electronic wallets, especially in trans-border payments. It's a sign of this attention and potentially they could limit such operations and that that could have an impact on our business in this case. Very helpful.
spk00: Thank you, guys. Thank you.
spk04: Our next questions come from the line of Maria Sufanova of BCS. Please proceed with your questions.
spk01: Yes, good afternoon. I just wanted to ask you to elaborate a little bit more on this regulation part. specifically about sex initiatives you mentioned, about creating single soupies. Could you please tell us, have there been more developments in this room so far? I'm just wondering, like with this press release, you seem to have stressed specifically regulatory risk. And we know that regulatory risk is general background risk for the business in general. So I wonder the fact that you have stressed it now, Is it because you are really concerned about what's going on regulatory front, or it just reflects that there have been so many initiatives so far, which together might be, if approved, negative? So just to understand if you're feeling that regulatory environment is indeed more, could be potentially more harmful at this point. Thank you.
spk04: I'm sorry, unfortunately, one of the lines may be muted. We can't hear your response.
spk05: Sorry, I was on mute. Thank you for the question. So talking about single-to-piece, the situation has changed since September or since August when we had the last earning call. because in August that was just a proposal from the Balkan Federation which was discussed at the level of government and now it's a draft law which is now in parliament and so they started to consider this draft law that's a huge progress in this that's why we put this sentence now in our press release even, because the situation is changing. At the moment, it's difficult to predict whether this draft law will be adopted eventually and what will be the final test and who will be the single two-piece. We also have chance to be the single two-piece and that's going to be much better for us even because we would serve the whole market instead of half of it. But the truth is here. The situation is changing and is becoming more uncertain.
spk01: Thank you. And just a quick follow-up on factoring. Do you still confirm your plan to double a portfolio of like half and half to 8 billion rubles by the end of the year or the reasons for down in this respect?
spk08: I wanted to outline that, of course, factoring business is quite seasonal, and we always see significant increase in the portfolio numbers in Q4. However, of course, given the current levels, the portfolio would probably be slightly less than $8 billion, though more or less in this, I would say, proximity. Understood. Thank you.
spk04: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our next questions come from the line of Vladimir Vesparlov of VTB Capital. Please proceed with your questions.
spk05: Hello. Congratulations on good numbers, and thank you for taking my question. I would also like to follow up on the regulator issue. Probably you do some stress case scenarios, and if we assume that the situation develops according to worst case scenario, you are not the founder of this new single 2%, things like this. Could you give a very rough estimate what kind of heat your adjusted net revenue for whatever metric could take in this event? And I have also a question on what Andrei mentioned given the remark on Tajikistan. Maybe you could elaborate a little bit on this project and what is the contribution of this approach to your performance.
spk06: Thank you.
spk07: Let me probably start from Tajikistan part of your question. So, Tajikistan story is the following. So, starting from the end of the last year, there was a new regulation from the Tajikistan Central Bank for companies, for money-limit companies to operate there. and not all of the players, key players in Russia were able to do so. So we get a kind of competitive advantage there, and our volumes grew significantly in this corridor. Moreover, in the second quarter of this year, we launched a contact mobile application that enriched our product proposition from being able for clients to send money from our partners, retail and banks, to be able to do it directly from mobile app. And it's growing quite successfully as well. So all of those help us to grow the volumes and revenues of the contact money this year quite significantly. So it's, I would say, now close to doubling versus last year. So that impacted our money remittance vertical quite strong specifically in terms of the volumes.
spk05: Yeah, so I will answer to your question regarding betting. At this stage, it's very early to make such a stress scenario just because the legislation itself is not even on the first reading. Statistics of Russian laws show that only 80% of the laws which are put into parliament, enter the parliament, only 20% goes further from the first reading. And there are two competitive laws at the moment, one from the government, but it's still not in the parliament because it's being still discussed at the level of the government. And the second one about single troopers is already in the parliament, but not on the first reading even. So I would say that at the moment it's a very theoretical discussion what will be the real hit on our net revenue if and when this legislation will be adopted. So at the moment we couldn't just give you any numbers. But we have to warn you and we have to discuss that that could be probably an impact on our net revenue in the future.
spk03: Okay, thank you very much. Thank you.
spk04: Our next question comes from the line of Anna Kervotova with Alpha Bank. Please proceed with your question.
spk02: Good afternoon. Thank you for taking my questions. Two minor questions about operations. First of all, on RocketBank and Forest, could you give some guidance or provide us some expectations? Could we expect further scaling back in the losses until the end of the year or the processes that you are Making now with these assets, I'd like to produce more or less the same result on the net profit basis in the third quarter. And the second question, I note that Telecom, part of the U.S. payment volume business, has significantly reduced transaction volumes in the third quarter. So could you make some color on the trends there? Thank you.
spk08: Hello, Anna. Thanks for your question. So on the first question regarding RocketBank and service expectations, as Boris mentioned, we already sold and closed service transactions. And we have substantially winding down RocketBank operations. We don't expect any costs associated with, any material costs associated with two of the projects in Q4 2020 and all costs associated with the pilots that are being run in payment services. These are part of the payment services business costs and as well do not represent any material amounts. So in this respect, the total losses that we have earlier guided for Reutig Bank and Soris, and that have been already booked in Q1-Q3, this is everything we expect to record on our books for this year.
spk07: Regarding the telecom question, this is in line with our performance on the physical distribution that we already mentioned. So, meaning our self-service kiosk network and retail network that those channels were still, I would say, under pressure during the third quarter. So, the telecom volume there as well. There are the same reasons as before. for loan repayment or some other categories that are majorly represented in the physical distribution.
spk02: Thank you very much for this comment. And do you see any, on the other side, gain in the digital online payments? So, I mean... some of the physically-based transactions, do you protect part of them as far as maybe e-commerce? Thank you.
spk07: Yeah, we obviously see the growth in e-commerce and specifically in the digital entertainment, and that's reflected in our numbers because the majority of our Gross is coming from those categories. At the same time, we have some volumes of the telecom as well with our bank partners and with the wallet where there is more, I would say, positive trends in those categories. However, proportionally, those channels for the telecom is smaller versus physical distribution. That's why on the overall numbers, we see the decline.
spk04: There are no further questions at this time. On behalf of the Kiwi team, thank you for your participation. This does conclude today's conference. You may disconnect your lines at this time.
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