Technology Innovation in Russian Banking

My interview with HBR Russia has just been published. Here is the English translation (the interview was conducted in English, translated to Russian and back to English, hence some awkward phrases…)


What features of the Russian market do you see as important from the standpoint of innovation development in the banking sector ?

First of all, people in Russia are not accustomed to perceive payment services as a component part of banking products. The population see banks as a place to keep money while they prefer to use the services of other organizations to perform transactions. However, modern technologies may change this.

Second, people do not invest their money in financial products and instruments.

The situation usually begins to change when the population income increases. My personal forecast is that in the course of the next 5-10 years, the market for financial instruments in Russia will grow apace. New technologies will help customers manage their equity, using complex financial products without the help of external financial consultants.

Third, as before, Russians prefer cash, believing that cash money is the most reliable and accessible means of storing their savings. However, events that have unfolded over the course of the country’s recent history tend to demonstrate the opposite.


What is the source of innovations at Sberbank ? In-house developments, the experience of other financial and non-financial organizations and the assistance of consultants ?

Sberbank is trying to use every opportunity when seeking ideas for innovations.
As part of existing crowdsourcing initiatives, the best propositions from customers and staff are considered and selected.
The banking market is regularly monitored and the operations of other banks around the world and their applicability to Sberbank are analyzed.

Sberbank works with leading consultants from the financial industry who specialize in complex transformations.
We also call upon individual ‘futurist’ experts, such as Brett King (author of Bank 2.0).

Sberbank looks especially closely at start-ups, actively sponsoring international start-up competitions in financial services. Thus, we have gathered information on more than 1000 start-ups that operate on the development of new technologies in the banking industry.

In addition to this, we also collaborate with leading international universities and scientific groups, the work of which has a significant influence on the banking industry.

Together with Skolkovo, Sberbank supports the opening of three research centers for applied developments under the aegis of Russian and international universities.

We are also involved in international initiatives. For example, as part of the SWIFT Innotribe, the main trends in the banking business are being discussed together with representatives from a number of the largest international banks.
However, despite such an extensive programme, we at Sberbank understand well that the results of such innovative programmes may not manifest themselves immediately and, perhaps, only after several years.


What, in your view, constitute the difficulties in introducing innovations in Russia ?

Many people acknowledge today that the development and introduction of fundamentally new technologies in large companies is no easy task. To achieve such goals these companies have to rely on start-ups and on their creative potential. Start-ups, in turn, develop and sell their own technologies to larger companies. This model, which exists the world over, is beginning to find its reflection in Russia as well. Nevertheless, there is always someone who prefers a ‘centralized model’, when there should be a ‘most competent’ employee, who will manage all innovations and decide for himself into what funds should be invested. Thus, the main difficulties in developing innovations, I think, are as follows:

Missing elements for the development of start-ups: The existing legal field that is called upon to regulate the activity of start-ups in Russia to a great extent complicates their very appearance. There is currently no such concept in this country as stock options. For example, in the USA there is an enormous number of people who are able to make a profit from buying out shares during the course of the IPO of many companies, sufficient to open their own business. In Russia only a small proportion of investors enjoy advantages from entering the market of only a few Russian companies. Today’s market for financial instruments in Russia gives no opportunities for the wider masses of the population.

A lack of financial security: People in Russia are not sufficiently protected from a financial point of view to open their own company. They cannot start their own business, supporting its growth with their salary alone, while it remains extremely hard raising funds from the capital market.

A lack of experience among businessmen and a lack of business mentors : When someone actually succeeds in opening their own business they often have not the slightest idea how to manage it. Linked with this, the business incubator industry, which is just emerging, plays a special part, enabling inexperienced businesspeople to gain the management skills they need. Furthermore, there is evidence of a lack of experienced mentors on the Russian market, capable of helping start-ups to manage their business effectively.

Lack of understanding why start-ups are needed: In some companies an opinion still prevails that there is no need for start-ups whatsoever and that everything can be achieved with projects initiated within the company itself. The ‘we can invent everything ourselves’ approach is very popular in Russia (perhaps thanks to the legacy of centralized planning).

And yet it is important to take into account the fact that, despite the ability to do everything by oneself, the market should always be analyzed for the ability to acquire the required technology.

Dominance of the individual over joint creativity: People like to feel that they can achieve great things by their own efforts. Modern technologies, however, are so complex that they often require collective efforts to achieve results of any significance.