The research conducted by SBS Consulting provides a comprehensive analysis of current trends and prospects for the development of the financial services sector in Russia. Particular attention is paid to the impact of international sanctions, digital transformation, fintech development and changes in the structure of the banking sector. This research aims to identify the key challenges and opportunities facing the Russian financial system in the coming years..

Structure and number of credit institutions

Number of credit institutions:

• In 2022, there will be 370 credit institutions operating in Russia, a 9% decrease compared to 2020 (442 institutions).
• The main reasons for the reduction in the number of banks are: loss of liquidity, lack of necessary resources to fulfil obligations, suspicious transactions, high-risk credit policy and takeover by larger competitors..

Structure of the banking sector:

• Banks with a universal licence (capital of more than RUB 1 bln) account for 60% of the total number of banks, while banks with a basic licence (capital of RUB 300 mln and above) account for 28%.
• In 2022, corporate loans accounted for 42% of total banking sector assets, retail loans for 20%, and securities for 14%.

Impact of sanctions on the financial sector

Types of sanctions:

• SDN (blocking sanctions): complete ban on any transactions and financial operations, freezing of banks' assets.
• SSI (sectoral sanctions): restrictions affect a certain sector of the economy and certain activities of a bank abroad. Assets are not frozen, but restrictions are imposed on transactions with new debt and shares.

Impact on Russian banks:

• More than 60% of total assets of the Russian banking sector are under blocking sanctions.
• The sanctions have resulted in disconnection from SWIFT, isolation from international payment systems, increased exchange rate volatility and reduced foreign currency liquidity.
• Foreign investors sold off Russian assets, which led to a decline in stock indices and an increase in margin calls.

Global and Russian trends in the financial sector

Global trends:

• Emergence of FinTech companies: banks are reducing branch costs and investing in digital self-service channels.
• Increased focus on digital transformation: digitisation of banks' internal and external processes to improve operational efficiency.
• Building the cognitive side of the business: utilising artificial intelligence and robotics to meet regulatory compliance.
• Rethinking the concept of money: implementing blockchain, peer-to-peer lending and smart contracts.
• Trust in digital money: growing popularity of digital money and the emergence of new financial products.

Russian trends:

• Cooperation between banks and the fintech sector: banks offer products that use fintech companies' technologies.
• Development of digital self-service channels: investing in mobile and online banking.
• New regulations: using AI and robotics to tackle regulatory challenges.
• Creating super apps: customers expect a mobile-centric service.
• Zero trust: verifying every request for system access.
• Digital money: increasing trust in digital money and the emergence of new financial products.

Fintech and investment

Fintech investments:

• More than 80% of all transactions in the global financial technology market are carried out by venture capitalists.
• In 2021, venture capital investment in Russia's fintech sector totalled $395 mln, accounting for 17% of all venture capital investment in the country.
• The volume of cryptocurrency trading in Russia totalled $115 mln, which makes the Russian market one of the most promising for the development of cryptoindustry.

Main segments of fintech:

• Payments and transfers: online payment and currency exchange services.
• Regtech: technologies to comply with regulatory requirements.
• Blockchain & cryptocurrency: using blockchain and cryptocurrencies for financial services.
• Cybersecurity: DDoS attack protection and attack vector detection.

Examples of successful projects:

• Chipper Cash (Africa): international money transfers, bill payments, cryptocurrency trading.
• Currency Cloud (England): cross-border money transfers for corporate clients..
• Torus (Russia): cost analysis and optimisation in the financial sector.
• Tred (England): an app for estimating emissions from user purchases.

Conclusion

In the face of international sanctions and rapid technological development, the Russian financial sector must adapt to new conditions. Investments in fintech, digitalisation and innovative projects will allow Russian banks and financial institutions to remain competitive and ensure sustainable growth in the future. Key success factors will be cooperation between banks and fintech companies, the development of new financial products and services, and the creation of a favourable regulatory environment for innovation.