Growth Prospects and Key Trends of Russian Fintech Market

Growth Prospects and Key Trends of Russian Fintech Market

According to Deloitte analysts, the Russian fintech market increased by 12% in 2018 in comparison with the previous year. Its total volume reached 54 billion RUB. What are the current prospects of financial technologies in Russia? What affects their development?

Financial technology market in figures

Financial technology market in figures

Switzerland-based IMD School has prepared a rating of digital competitive ability among different countries following the results of 2018. Russia is ranked 40th out of 63 there. The main assessment criterion was the level of digital technology integration into economy. The top 3 countries include the USA, Singapore, and Sweden.

Over the past five years, the level of digital municipal services adoption in Moscow has propelled the capital into the world’s top 5 digital megalopolises, while the share of those applying fintech services in the largest Russian cities has reached 43% (primarily remote banking).

Russian fintech is evolving slowly but steadily. Sberbank’s acquisition of Yandex.Market shares (amounting to 30 billion RUB) is one of the top ten largest European financial technology deals of 2018. According to the study of KPMG, the list of the world’s 100 best fintech innovators of the past year contains Blackmoon, a Russian platform for developing and managing tokenized funds.

The Russian financial technology market in figures (estimated by Deloitte):

  • 48 billion RUB – the total market volume in 2017;

  • 3652 people are engaged in the fintech sector;

  • 3 years – the average age of Russian fintech companies;

  • 102,000 people are В2С clients;

  • 352 В2В customers.

The anticipated market size in 2018 was 54 billion RUB. Besides, 60% of the fintech companies positively treated the development prospects of the Russian financial technology market and expected significant improvements by 2020.

Current condition of Russia’s fintech market

Current condition of Russia’s fintech market

The financial technology market in Russia is evolving not as rapidly as in other regions because of country’s certain economy features and regulation process complexity.

Digital technologies are mainly applied in:

  • the banking sector;

  • insurance;

  • risk management;

  • trading.

Russia’s most demanded areas are online lending, payments, and money transfers. However, the financial market growth depends on several factors, including three key ones.

Increasing demand for fintech services. Remittances, mobile payments, and online lending, which initiated the development of the Russian fintech market, turned into common services. Relevant trends are machine learning technologies in fintech, aggregator platforms, and information security.

Activity of the Central Bank of Russia. The financial establishment is not only a regulator building up the infrastructure but also an initiator of fintech projects. The bank is supporting the following implementations: an express payment system, a single biometric identification system, Marketplace, and Feed-Antifraud.

Offer dynamics. Not only new requests but also new services and offers affect the market establishment. The main consumers of fintech products are banks interested in systems simplifying the problem solution and maximum digital data protection.

The fintech market growth also depends on the wideness of mobile Internet connection and communication quality. It encourages the rapid evolution and application of financial technologies among citizens of million cities.

Development prospects of Russian fintech market

Development prospects of Russian fintech market

In 2019, the HSE Institute for Statistical Studies and Economics of Knowledge (ISSEK) and the Banking Institute of the National Research University “Higher School of Economics” carried out a survey aimed at determining the key prospects and specifying the agenda of the fintech development along with the banking sector. The survey involved financial, education, and IT experts. Respondents assessed the potential of certain fintech services for banks. They distinguished:

  • payments and remittances;

  • bank cards;

  • investments;

  • lending;

  • platform solutions.

Over half of the respondents (52%) believe that it would be efficient to integrate the Unified system of identification and authentication (USIA) for clients and to use a single ATM network. Some experts consider that the establishment of an international customer data exchange system and legal outsourcing would be promising.

They put a special focus on the impact of blockchain technology on the banking activity in Russia: 46% of the respondents state that it will help financial institutes to reduce information process expenditures. People stress the following advantages of blockchain:

  • simplified conventional banking operations;

  • better transaction protection.

Currently, unlike foreign countries, Russia features a poorly developed area of technical solutions for performing regulatory requirements (RegTech). The world’s demand for RegTech solutions is caused by the necessity to fight against fraud and money laundering. It is referred to solutions for statutory reporting, risk management, identity management, as well as transaction compliance and monitoring. In 2018, the global stage has only 300 RegTech solution providers, but the demand for such services would just grow. According to Reuters, the turnover of this market will be $120 billion by 2020.

The Central Bank activity can become one of the drivers of the Russian RegTech market, while the unsteady and tricky regulation can be a crucial challenge for implementing fintech projects in this or any other areas.

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