Fintech in Russia is rapidly growing into one of the most promising segments of the country’s financial system. Researchers from Plekhanov Economic University have explored how it all began and what stage we are in today.
What is Fintech, in the first place?
On the one hand, the term Fintech refers to innovative financial market products, and on the other hand, it emphasizes the use of new technology to enable the use of such innovations. This combination of finance and technology expands the range and diversity of financial services provided in this segment and accelerates the delivery and use of financial services overall. According to the Central Bank’s official website, providing such services requires specialists to possess end-to-end digital competencies, such as familiarity with big data, artificial intelligence and others.
Country-specific Fintech landscape in Russia
The Fintech services segments differ from country to country depending on the national regulators’ policies and on how advanced the local financial market is.
The Plekhanov research team identified the following trends in the Russian and Moscow Fintech segments: the use of biometrics, online financial marketplaces, development of AI-enabled scoring models for assessing borrower creditworthiness for the self-employed, Fintech solutions for banking, financial and financial-industrial ecosystems, and the use of Fintech tools in “green finance.”
The Russian Fintech segment: A history
The development of most Fintech projects began in 2018-2022, except payment services and personal finance services, spurred on by the development of international relations and the state policy to promote the financial and digital literacy of the population. At the same time, although Fintech services require a digital delivery channel, which means anyone can take advantage of these tools, Moscow’s Fintech segment has played a priority role in shaping the modern Russian financial market as a whole, because the legal addresses of the corresponding companies are predominantly in Moscow (84.6%).
Russian Fintech is a fast-growing market led by digital payments providers. In 2021 alone, over 15 major Russian players appeared on this market, including Osnova, Torus and PlatiGolosom, which are recognized among the most promising ones.
The researchers identified the specifics of the Fintech segment development in Russia, primarily citing the niche-based distribution of financial market startups, and customized financial and non-financial services to clients located in the Russian Federation.
The researchers note that while Moscow is a priority location for start-up projects like this, almost all segments are represented in St. Petersburg by a few players.
Russian Fintech segment structure – who does what?
The researchers described the Fintech segment in Russia as consisting of several building blocks based on players’ functionality, which reflects the widest possible scope of operations performed by banking and non-banking market players.
The Transfers and Accounts block includes eight companies that offer registration of electronic wallets and tools for making transfers. All these companies are registered in the Russian Federation – five in Moscow, two in St. Petersburg and one in Novosibirsk. Curiously, companies in this block are present in different market niches, practically not competing with each other. The researchers note that most of these companies were created in the period from 1993-2012, because that time interval saw the booming growth of payment services and international relations at the same time.
The Installment Plans and Credit-Related Products block includes seven companies offering services to pay for goods in installments, as well as tools for managing loans and mortgages. Six such service providers were registered in Russia in 2013-2021, and one in Belarus. Four of these companies are registered in Moscow, the other two in St. Petersburg and Ufa. The companies of this bloc are not simply present in different niches of the market but also offer fully customized services without competing with each other.
Loyalty Programs and Cards are offered by five companies providing discount card management services and acting as loyalty program aggregators. The companies were founded between 2006 and 2020 but the majority were registered in 2019–2020. As with others, the majority (three) are based in Moscow, the rest in St. Petersburg and Dzerzhinsk.
The Cashback block is represented by ten companies incorporated in Russia for claiming cashback for purchases made between 2015 and 2021. Cashback is one of the newest niches, with companies primarily located in Moscow (five) and one in Krasnodar.
Investment Management and Analysis includes 15 companies incorporated between 2002 and 2022, with more than 50% created in the past five years. The majority of these startups are located in Moscow (eight companies) and St. Petersburg (three companies), the Moscow Region (ten companies) and the Leningrad Region (one company).
Crypto Currency Services are represented by nine companies offering crypto currency investment, crypto wallet and exchange services.
Crypto currency being a new Fintech niche, most Russian companies were registered in 2018 and later. They include three companies based in Moscow, one in Odintsovo, Moscow Region, and one in St. Petersburg. This block is characterized by a limited scope of available operations.
Personal Finance Management is represented by 16 companies created between 1997 and 2021. Eight companies are located in Moscow and the geography of the others is more diversified. Only two companies are based in St. Petersburg and the other six in Krasnodar, Rostov-on-Don, Yaroslavl, Nizhny Novgorod, Barnaul and Astrakhan.
The future of Fintech: Room for growth
Fintech in Russia still has more technology to explore, including biometric technology, blockchain, the Internet of Things, quantum computing and augmented reality.
The researchers stress that it is extremely important to seamlessly ease in various financial technologies into the businesses of corporations in other industries (the financial technology as a service model). Opportunities for building commercial high-tech B2B solutions by financial market participants, including secure public cloud services for financial organizations, also remain to be explored.