Fintech in Russia continues to grow, but outlook is mixed

In recent years, the fintech sector has rapidly grown all over the world showing good results in Russia as well. In 2018, the local market grew by 12% compared to the previous year. Nonetheless, experts consider that overall economic turmoil will hinder the sector's development.

Russia's private fintech sector continues to grow despite weaknesses in the economy, says Finextra. A new report from Deloitte and ID Finance published in December forecasted that the sector would be worth $810 million by the end of 2018, showing the annual growth of 12% compared to 2017.

According to the report, which polled over 60 private fintech companies (enterprises that have not taken investment from large corporations or have no affiliations with them), industry players in Russia are optimistic about their future. Three-quarters of the fintech companies tend to positively assess the state of fintech from the point of view of the financial well-being of their business, and 60% of companies believe the sector has good prospects for growth, reads the report.

Currently, the Russian fintech sector employs over 3,600 people. Payments, money transfers and online lending are the most popular financial technologies used in Russia. Besides, artificial intelligence, machine learning, predictive analytics, deep learning and Big Data were named as the most promising technologies.

Payments, money transfers and online lending are the most popular financial technologies used in Russia. Photo: Decha Huayyai from Pexels

However, Deloitte highlights a number of obstacles clouding the outlook for fintech in Russia. ''Fintechs in Russia are optimistic about the future, but there are many issues to be solved,'' commented Alexey Minin, the director of the Institute for Applied Data Analysis at Deloitte CIS. The lack of competition between the major incumbents is reducing demand for innovative new solutions, while the lack of funding makes it difficult for local players to expand outside of Russia. The closed nature of financial institutions and a stagnating economy also hinder the development.

''While our business in Russia continues to grow, we are focused on building our business in the Americas where we see huge potential,'' said Aleksandr Dunayev, the co-founder at ID Finance emerging markets fintech company. According to Dunaev, the sector has had a recession since 2010. ''The private sector contracts while the role of the state increases,'' he added.

By Anna Litvina