Deloitte: Fintech sector in Russia continues to grow despite weaknesses in economy

According to a new report from Deloitte and ID Finance, Russia’s private fintech sector continues to grow despite weaknesses in the economy and will be worth $810m by the end of 2018. This represents growth of 12% compared to 2017.

The report by Deloitte, the first of its kind on the private fintech market in Russia, found that the fintech sector now employs over 3,600 people in Russia and fintech companies are surprisingly optimistic about their future. 76% of fintech companies tend to positively assess the state of fintech from the point of view of the financial well-being of their business, while 60% of companies believe the sector has good prospects for growth.

Among the most popular financial technologies in Russia are payments, money transfers, and online lending. Market participants named artificial intelligence, machine learning, predictive analytics, deep learning and big data as the most promising technologies.

However, Deloitte believes a lack of competition in the market, the closed nature of financial institutions and a stagnating economy mean the outlook for fintech in Russia is mixed.

“Fintechs in Russia are optimistic about the future but there are many issues to be solved,” says Alexey Minin, director of the Institute for Applied Data Analysis at Deloitte CIS. “The first is the lack of competition between the major incumbents which reduces demand for innovative new solutions. It is also very difficult for fintechs to expand outside of Russia due to the lack of funding.”

“Over the past ten years Europe and the US has seen the longest bull market since mid-20th century. We totally missed this in Russia and have had a recession since 2010. The private sector contracts while the role of the state increases,” comments Alexander Dunaev, cofounder at ID Finance. “While our business in Russia continues to grow, we are focused on building our business in the Americas where we see huge potential.”

The report, which polled over 60 private fintech companies (i.e. fintech companies that have not taken investment from or have affiliations with large corporations), was commissioned by ID Finance, the emerging markets fintech company. ID Finance was founded in Moscow in 2012 and has since moved its headquarters to Barcelona, launching its service in Europe and Latin America.