Russians spending more and more money in ecosystems: is it time to regulate the field?

All of us have at least once encountered the so-called ecosystems and used their services. The growing digitalisation of the economy has given us a whole network of platforms, such as Group, Yandex, Sberbank, MTS, Ozon, Tinkoff, Wildberries. The share of Russians' spending in this segment is steadily growing, and, as in any big business, with the growth of revenue and profitability of the vendor, the risks of business collapse due to poor quality management and wrong business model are also growing. All this threatens losses for ordinary consumers, there are huge amounts of customer funds in the systems. Therefore, the Ministry of Economic Development of Russia and the Central Bank are preparing a bill that will lay the foundation for regulating this area. The columnist of Realnoe Vremya, economist with many years of banking experience offers to take a closer look at the details of the market and the proposals of relevant departments.

What is happening in the market of ecosystems?

At the moment, about 10% of the total spending of Russians falls on ecosystem goods and services, and this indicator continues to grow. They mainly account for taxi aggregators, food delivery, online retail and fintech. For example, in the first quarter of 2021, the share of expenses in the presence markets already amounted to more than 11,27% (excluding housing, furniture, tobacco products and others). The growth of penetration into the consumer market is facilitated by the consolidation of assets by major players such as Yandex, Group and others. In 2018, this figure was 5%.

If we compare with world experience, so far the share of ecosystems is lower than in developed countries. Nevertheless, the turnover of ecosystems is forecasted to grow to $134 billion by 2025, growing by 21% every year. Special competition is expected in the e-commerce segment, where giants like Ozon and Wildberries are already present (the company is not part of any ecosystem and remains an independent player).

According to experts, the barrier to revenue growth is that a person often uses only one service offered by the ecosystem, for example, delivery. The size of marketing budget comes to the fore: whoever can attract more customer attention will receive revenue growth. This is the main risk of these sites: in pursuit of customers, companies often work in the red, being “routinely unprofitable” all the time of their existence. The promotion of one segment is due to the exsanguination of another or by attracting new investments. All this makes the business systemically unstable.

Need for regulation

The relevant departments represented by the Ministry of Economic Development and the Central Bank of the Russian Federation concerned over the explosive growth of this segment and developed criteria for classifying businesses to the ecosystem segment.

The first criterion is the close internal integration of related services that differ from the parent company's core business. Now we see that all kinds of services are mixed in ecosystems — from fintech to food delivery, when the main business acts as a service for all other areas, in fact, being infrastructural, but not the main one in relation to the system itself.

The second criterion is the implementation of continuous investments in digital innovations in various sectors of the economy. To attract the maximum audience, some services work in the red, so that others work in the black. This is exactly the same systemic instability that is mentioned above, and this factor is of the greatest concern to the relevant departments in the person of the Central Bank and the Ministry of Economic Development. The absolute opacity of ecosystem activities makes it impossible to see which of the companies in the system is increasing losses and when and how this minus is compensated.

According to the developed criteria, the signs of the ecosystem are the network effect (minus in one direction to attract an audience and plus in other directions), the multiplicity of third-party business types, the number of services for customers, a loyalty system, logistics solution.

The proposed regulation of this segment will be based on the principle of equality for all market participants — both banking and non-banking ecosystems. There will be specific requirements for the financial sector: the Central Bank has proposed to increase the capital requirements of banks that develop large ecosystems through the introduction of the so-called risk-sensitive limit (RSL) by 2023. The limit shows the marginal share of investments in so-called immobilised assets relative to its total capital. To calculate the indicator, banks will have to divide all immobilised assets into groups, then multiply their volume by increasing immobilisation coefficients. The indicator should not exceed 30% of the capital of the credit institution. Banks are given time until 2025-2027 to bring the indicators back to normal in case of excess due to an increase in capital by the amount of adjusted assets. Naturally, bankers are not happy with such proposals, and now there is an active discussion of this measure. It should be noted that banks should still remain more conservative institutions and not play loo long with “digitalisation”.

“When two or three players control the market and fix their tariffs in collusion”

In general, we are talking about a kind of upper-level framework law that will establish general principles of regulation. The government is working on the project, in November 2021 there will be a plan to issue regulations, where there will already be a clear definition of what will be regulated and how. At the same time, the Ministry of Economic Development does not rule out that ecosystem regulations will be immersed in the fifth antimonopoly package — a bill designed to extend the provisions of the law on protection of competition to digital industry (marketplaces and aggregators), which is included in the government's legislative activity plan for 2021.

In conclusion, we would like to note that the term from biology is already firmly entrenched in our dictionary and the development of ecosystems is a logical continuation of the increasing digitalisation of business. The development of technology allows us to meet the needs of the client in any service almost instantly, in one place and with the click of a button. Moreover, this already concerns not only banal needs, but also the areas such as creativity and science. There is a huge plus in this, it is not even discussed.

But there are also disadvantages: the risk of oligopolisation of the market (a situation where two or three players control the market and fix their tariffs in collusion — explicit/implicit), a threat to the security of user data (systems know too much about our preferences, purchases, movements, personal documents). What's the guarantee that this will not be a good help for all kinds of scammers? In addition, ecosystems have enormous opportunities to manage public opinion, which also raises questions about the need for proper regulation of the activities of players who should be engaged purely in business and concentrate on the development and implementation of innovative technologies and thus move the high-tech market, developing a new digital reality.

Artur Safiulin. Photo: Maksim Platonov

The author's opinion may not coincide with the position of the editorial board of Realnoe Vremya.