Russia becomes world’s third most developed fintech market

Penetration of fintech services in Russia is among the world’s highest: over 80% of the population use such services with money transfers and payments being the most popular of them. However, Russians are distrustful of independent service providers and reluctant to share their bank details.

Eight out of ten (82%) Russians use some sort of fintech service making the country the third most developed market in the world after China and India, says bneIntelliNews citing a study by Ernst & Young. According to the study, money transfers and payments are the most popular financial service among Russians, as 90% of the country’s residents have used the service at least once. The awareness of other fintech services is also pretty high (between 81% and 86%).

Nonetheless, there are services that Russians hardly use at all such as investment in securities. Savings, investment, budgeting and financial planning are the areas of the highest development potential, consider the study’s authors. They also point out that fintech development patterns normally follow those of the traditional finance market.

Overall, Russia’s financial system is relatively young and thus easier for customers to embrace innovations. The Russian financial system is not as conservative as in Europe, according to Roman Prokhorov, the head of Financial Innovations association. “Basically, we switched from [Soviet-era-style] savings books to payments over a mobile phone almost overnight,” he says adding that Russian consumers are more receptive to fintech innovations, which explains the popularity of the services.

Money transfers and payments are the most popular financial service among Russians. Photo:

According to Prokhorov, Russia’s financial system is concentrated around banks, and banking institutions are key investors in fintech projects. “As a result, it is easier for a fintech start-up to develop [...] as part of a large financial institution’s ecosystem,” he explains. Customers prefer traditional banks or insurance companies’ offerings to services offered by companies outside the finance sector. Almost half of Russians are ready to trust companies from outside the sector that have a partnership with a traditional financial institution, but in case there is no partnership, this figure drops to just 13%, the study reads.

Russians are not only distrustful of independent providers of fintech services but also reluctant to share their bank details. According to the study, only 18% of Russian users of fintech services are willing to do so, compared to the average global figure of 46%.

However, experts consider that the new law On Attracting Funding with the Use of Investment Platforms coming into force on 1 January 2020 is likely to become a driver of the fintech segment and encourage the arrival of new services from non-financial companies such as crowdfunding. The law introduces the definition of “investment platform” and provides stipulations for investment on such platforms, says bneIntelliNews.

By Anna Litvina