Private FinTech as a tool for sustainable business development in Russia and Kazakhstan FinTech Market Trends Deloitte CIS Research Center, 2018 FinTech Market Trends 2018 Contents 01 Foreword 02 Key findings Overview of the FinTech 03 market Foreword 03 Overview of Kazakhstan’s FinTech market 81 Overview of Russia’s FinTech 01 05 04 The FinTech market in figures 82 market The current situation in Kazakhstan’s FinTech market 83 Overview of Kazakhstan’s 05 02 Key findings 06 FinTech market stakeholder map 87 FinTech market Supply in the FinTech market 95 Demand in the FinTech market 97 06 Appendix 03 Overview of the FinTech market 20 Barriers for development of Kazakhstan’s FinTech market 101 The FinTech market geography 21 Drivers for development of Kazakhstan’s FinTech market 102 07 Contacts Comparison of regional FinTech markets 22 Kazakhstan’s FinTech market outlook until 2020 103 FinTech’s contribution to sustainable development 27 FinTech’s contribution to achievement of the SDGs globally 29 FinTech market outlook until 2020 30 06 Appendix 107 04 Overview of Russia’s FinTech market 31 07 Contacts 120 The FinTech market in figures 32 The current situation in Russia’s FinTech market 33 FinTech market stakeholder map 42 Supply in the FinTech market 53 Demand in the FinTech market 62 Barriers for development of Russia’s FinTech market 68 Drivers for development of Russia’s FinTech market 71 Russian FinTech market outlook until 2020 74 02 FinTech Market Trends 2018 Foreword 01 Foreword 02 Key findings Overview of the FinTech 03 market Finance technologies (FinTech) are among and e-transfers. However, presently it offers According to international experts, this market Overview of Russia’s FinTech the fastest growing markets. They beat other a number of new services, such as lending, emerged around ten years ago, with payments 04 industries by the pace of the development personal finance management (PFM), loyalty systems (non-bank transfers), mobile payments market both in terms of the financial performance (e.g. programs, insurance, management accounting, (via mobile phones) and online lending (e.g. Overview of Kazakhstan’s 05 investments, M&A activity, etc.) and the number etc. As a result, in a relatively short period P2P) being the first products launched in this FinTech market of end-consumers. of time (in less than five years) we saw dramatic segment. As soon as in two years this list International experts note that the number changes in the infrastructure of the adjacent increased significantly and became unique from 06 Appendix of FinTech users has been increasing by 15- markets, i.e., banking, insurance, broker services a geographic standpoint. 20 percent annually in the past five years. and other segments. 07 Contacts The FinTech products are offered in various Lora Nakoryakova consumer segments. Most FinTech users cannot However, FinTech-related solutions are Deloitte CIS Research Center Leader do without using those technologies on a daily implemented in the major companies much basis. For instance, one in three residents slower than the FinTech industry itself advances in million-plus cities use more than two FinTech and the consumer interest grows. services daily. Experts estimate the FinTech Hence, the fast growing consumer interest penetration in Russia at 50 percent. in the FinTech end products and the lack of sufficient flexibility of the business The key driver behind the FinTech market infrastructure (e.g. Financial institutions) at the development are the Internet and digitalization. point of launching and implementing new At the early stages, the FinTech market FinTech solutions paved way to the birth of the comprised nothing more than e-payments private FinTech market. 03 FinTech Market Trends 2018 Foreword 01 Foreword 02 Key findings Overview of the FinTech 03 market Speaking about the FinTech market and FinTech Using the examples of Russia and Kazakhstan China (69 percent) and India (52 percent) Overview of Russia’s FinTech service proliferation one should not ignore such we are going to review the specific drivers overtake Russia by this scale. The results 04 development driver as trade relations between behind supply in the FinTech market, of Deloitte’s international research support market countries. Russia’s key trade partners are China consumer interest (the demand structure), and this assumption to some extent. According Overview of Kazakhstan’s 05 and Kazakhstan, which undoubtedly impacts examine the influence of the FinTech market to that research, Russia ranks among top FinTech market the Russian domestic, as well as the global on the sustainable development of business 5 digital banking leaders in Europe. In practical FinTech market. Moreover, the representatives in the region. terms, it is exactly this measure which reflects 06 Appendix of Kazakhstan’s FinTech market are unanimous the potential effect of the FinTech market in assessing the performance of this market It is common knowledge that absolute leaders development (on the adjacent industries 07 Contacts post-2014. Thus, in 2016 the market grew in the FinTech industry are the US, some and the society as a whole). The emergence by 365 percent versus 2915 and twelvefold EU countries and Singapore. However, of new FinTech technology and their direct versus 2014, to 8.9 billion tenge. there is a another measure of the market application leads to changes in the structure development, i.e. service penetration index of consumption, lowers costs of some In this report we want to provide both on which the experts differ: some of them functionalities (loyalty programs, client base a snapshot of the global FinTech market, believe that this measure is higher in developing processing), higher business process efficiency outlining its development outlook, and focus markets, while the others think it is fully in line and quality (scoring, key audience targeting, on developing FinTech markets that are with FinTech development levels. The former loyalty programs, etc.), as well as significant essentially interrelated (for economic and social believe that Russia ranks third by this measure impact on the business sustainability in the reasons). among 20 major international markets. Only region, etc. 04 FinTech Market Trends 2018 Foreword 01 Foreword 02 Key findings Overview of the FinTech 03 market Sustainable development is the concept based In order to prevent negative consequences, ensures secure and unbiased perception Overview of Russia’s FinTech on the economic, social and environmental 195 UN member countries approved the of conditions in which goods are produced, 04 efficiency and aimed at meeting current needs Sustainable Development Goals (SDGs) and as well as encourages producers to disclose market of the human society without a damage to the stated their adherence to collective effort of the information on the entire supply chain to its Overview of Kazakhstan’s 05 future of the mankind. It is one of the key topics governments, businesses and society aimed customers. Innovative products and services FinTech market of the modern time. The risks arising from at finding solutions to global problems. of FinTech companies may have a positive the lack of the sustainability practices lead impact on availability of natural resources and 06 Appendix to serious consequences for the business and Big strides in the financial technology (FinTech) their rational use. For example, this includes society and are as serious as the traditional make it an important tool of sustainable services enabling real-time transactions and 07 Contacts microeconomic and macroeconomic risks. development which can both increase the other online solutions which are currently Ivan Kukhnin efficiency of the finance industry, contribute replacing the use of paper documents in the Director Currently, the link between sustainability risks to achievement of the SDGs, and create value financial transactions. Risk Advisory and the financial sustainability becomes more for society. FinTech products enable full-scale Sustainability Group Leader obvious for businesses. In our previous report integration of various population groups in the Importantly, some initiatives aimed at attaining Deloitte CIS (How CFOs can manage sustainability risks and financial system by increasing the availability the SDGs through implementing FinTech attain log-term advantages for their companies) of financial services. This is in line with the solutions exist only in the form of ideas, we corroborated this assumption by showing goals of the initiative aimed at increasing the so far. However, our analysis shows that the how the corporate social responsibility (CSR) financial integration in developing countries application of FinTech solutions for social and maturity level contributes to the financial which is directly linked to poverty reduction environmental purposes will only grow. stability of companies. campaigns led by the World Bank and other international institutions. FinTech is a powerful tool for achieving the SDGs Nowadays, the CSR is less often considered and improving the quality of life. as a purely social activity. Instead, it is viewed Although FinTech products appear more of a strategic investment in solution to be focused solely on higher efficiency of social, economic and environmental of financial systems, the financial systems problems which, if aggravated, may undermine are considered to be a tool for increasing the the business and economic sustainability. operating and environmental efficiency. FinTech 05 FinTech Market Trends 2018 01 Foreword 02 Key findings Overview of the FinTech 03 Key findings market Overview of Russia’s FinTech 04 market Overview of Kazakhstan’s 05 FinTech market 06 Appendix 07 Contacts 06 FinTech Market Trends 2018 | Key findings 01 Foreword 02 Key findings Overview of the FinTech 03 market The FinTech market Driver 1. Driver 2. Driver 3. Overview of Russia’s FinTech has three fundamental evolution drivers: Growth in demand Proactive regulation Market agility 04 Top 3 reasons: Top 3 reasons: Top 3 reasons: market • Growth in demand for online or mobile 01. A financial technology boost results 01. Financial technology is one of the key tools 01.