Fintech in Russia

At what stage of development fintech in Russia is?

The Research Department of IMD School published its Digital Competitiveness Rating for 2018. The Russian Federation ranked 40th out of 63 States. Notably, these positions have been kept at the same level for several years: in 2016 the country took the same place, and in 2017 it fell by 2 lines. Experts have studied how digital services have penetrated the daily lives of citizens from 63 countries. It was no surprise that America, several Scandinavian countries, Switzerland and Singapore were the leaders. The place of states in the list was determined by 50 indicators divided into 3 groups. Most of all, we scored points for the opportunities offered by state science in terms of development and launch of innovative technologies – on this point the Russian Federation took 24th place, leaving behind even Luxembourg and Belgium. The biggest problem of our country is connected with the possibility of real use of digital products. In this indicator Russia is already on the 51st place, losing to South Africa, Greece and Jordan.

EY conducted another survey, which revealed that the number of users of fintech in Russia is 43% in the cities of over one million. This is more than the average values in the 20 most economically sustainable nations of the world. Services penetrate deeper only in China and India. Russia was approximately on equal footing with Brazil and the Great Britain. But it is worth noting that in these countries the indicators were calculated not only for the largest settlements, but as a whole for the country.

Problems of Fintech in Russia

The leading problem of underdeveloped fintech in Russia is the weak economy and the absence of serious transactions. In the first and second quarters of 2018, only one major deal entered the top 10 in Europe is the acquisition by Sberbank of securities “Yandex.Market”, which cost the bank RUB 30 billion. As a result of the acquisition there was a service “Beru”, which is already called domestic Amazon by some people. According to KPMG, only one Russian company is among the top 100 fintech innovators in 2018. This is a platform for the release and management of Blackmoon tokenized funds, launched in 2015. However, it is registered in Cyprus. Otherwise, Russia is still far from the most interesting country for fintech investors. Only 1% of top managers of large companies declared readiness to invest in companies from this industry in Russia, according to a survey by Reed Smith.

Of course, the banks are the main engines of fintech progress in Russia. These are not only traditional financial institutions that invest in technological innovation, but also so-called Neobanks.
In 2017, the FinTech Association in Russia, which includes VTB, Sberbank, Raiffeisenbank and Alfa-Bank allocated about RUB 133 billion for technological innovations. Sberbank did its best investing in its development about RUB 108 billion, which amounted to 16% of operating expenses of the enterprise. Thanks to such investments, Sberbank increased the share of clients of remote channels to 64%. Neobanks are coming to classical financial institutions on the heels, selecting part of customers at the expense of new fintech solutions: chatbots, smart assistants and innovative applications. Neobank earned such popularity due to the fact that the population of Russia is increasingly switching to smartphones, and Internet coverage in the regions is improving. Tinkoff is the undisputed leader of the Neobanks with RUB 228 billion of estimated value.