FINANCE, Interviews

Mikhail Mamuta: Gamification to eliminate financial illiteracy

The dark side of the financial market digitalization is the increasing number of threats to consumers. Many risks could have been avoided if the public had a good level of financial literacy. At this point it is insufficient. Russia is ranked ninth from the bottom among the G20 countries and is below Turkey and Indonesia. As a result, non-qualified investors face additional restrictions when it comes to investing into crowdfunding projects and complex financial products (the State Duma recently received a bill that divides investors into several categories with restrictions on the amount of investment and available investment instruments).

Invest Foresight interviewed Mikhail Mamuta, Head of the Service for Protection of Consumer Rights and Availability of Financial Services at the Central Bank of Russia, about the regulator’s measures to protect non-professionals in the developing financial market and ways to overcome the financial illiteracy. The interview was taken on the sidelines of the Digital Transformation of the Financial Industry conference at the Higher School of Economics.

Credit: Sergey Kuznecov | RIAN

Mr. Mamuta, what are the reasons for the current level of financial literacy in Russia?

This is a very comprehensive issue. First, our basic financial literacy is not very high. Historically, Russia has a very high rate of literacy; it is one of the most literate countries, but the elderly generation encountered financial products in their middle age, when many things are already hard to grasp. Elderly people today are highly vulnerable – and this is our specific target audience we are working with. Another problem is that the financial market is changing very rapidly, with things appearing within a year that were previously simply non-existent. General knowledge is not always a universal tool to promptly understand these specific challenges. We ourselves are constantly facing something new, which takes, for instance, a week to grasp before we can make comments. But we are taking efforts to speak about all innovations.

What measures does the regulator use to increase the financial literacy?

We are taking efforts to use all available information distribution channels, including mass media and email lists. We also have the website and are using gaming as well. We are trying to keep up with the times; we like the gamification format and have created the Castle Quiz game, a Russian replica of the Battle of Minds game, a sort of a battle for financial literacy. This has produced solid results; one can have a try and test their financial skills and knowledge. Last year, we conducted online financial literacy tests, a pilot project that involved 300,000 people during one week. This year, we will conduct a financial test as well.

How do you implement the initiative of involving volunteers to detect Ponzi schemes in the regions?

 It’s more accurate to say that volunteers engaged in seeking Ponzi schemes; they are active people and are driven by their deep desire to take efforts to improve the financial market. We have just trained volunteers to recognize Ponzi scheme characteristics and poor financial services. We are training all those interested. We have implemented several regional projects, particularly, in Ryazan and a similar one in Kursk and Russia’s southern territories.

Since January 1, 2019, Russia’s Central Bank has been authorized to conduct test purchases. Have they already taken place?

Such purchases, in the form they are envisaged by the law, require certain regulatory acts. The regulator obtained this right starting January 1 – yet, adopting a regulatory act is a certain procedure. As soon as it is finalized, we will begin to utilize this opportunity.

– Will new platform solutions on the financial market, including the express payment system and the future financial product marketplace, increase the risks and threats for the consumer?

– Any new possibilities can increase risks, there is nothing we can do about that. By we cannot say that we have to stop developing new solutions. Nobody will benefit from it, and it cannot be stopped because technology is developing regardless of our efforts.

– Can the participation of a regulator in the financial marketplace project guarantee that the products are protected?

– We are not promoting this platform but working on a relevant draft law. We believe we need a law that would regulate the activity of platforms, including the consumer’s rights protection mechanisms, and there will be many such platforms.

– Will the Central Bank implement additional scoring for platform participants?

– It is not even a scoring: a quality and reliable product is required to access the platform.

– As for the crowdfunding draft law: will there still be investment restrictions for non-accredited investors? What is the regulators position?

– We are currently discussing this issue. We believe that there should be certain restrictions in terms of risks, a certain sum which a non-accredited investor can put at stake at their own discretion. But if they want to invest all their money or use any complex financial instrument they need to pass a test. Crowdfunding is a complex instrument; it is not like Gazprom bonds or federal loan bonds. Investors should understand the risks of putting their money in it. It is not a right restriction, but a financial knowledge test.

– As for restrictions for non-professional investors, should their activity be limited? The market suggests expanding their powers.

– We suggest a RUR 400K ($6K) limit for non-accredited investors (specially protected non-accredited investors can only use this much money, -ed.). We plan to discuss this again by the second reading of the draft law.

By Olga Blinova

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