The FINTECH conference in 2018 and the role of new financial technologies in Russia

Russia has embarked on a large-scale transition to a digital economy. In the last year all attention is focused on the new financial technology, the blockchain, and cryptocurrency ICO. What digital transformation of traditional economic institutions can expect in the near future? What role in this process assigns a state? What steps the authorities are waiting for the business community to effectively transition to a digital economy? What awaits the Russian banking system in connection with the appearance of new financial technologies: integration or confrontation?

II international conference on the digital transformation of the economy and new financial technology, held with the support of business newspaper «Vedomosti», brought together heads of state bodies regulating financial activities, Bank managers, and departments of new developments, financiers, venture capitalists, heads of large businesses and start-UPS for joint analysis of new industry in Russia, discussing the main trends and the identification of key vectors of development Finance and the digital economy.

Key discussion topics

New financial and digital technologies and their role in global transformations of Russia’s economy.

  • The prospects of integrating the blockchain in various sectors of the economy.

  • The main trends in the cryptocurrency market and ICO.

  • Regulation of the new digital economy.

In the first plenary session devoted to the new financial and digital technologies and their role in the global transformation of the Russian economy, focused on the main trends and tendencies in the development of digital economy model in Russia, the role of the state in associated with transformation risks. The transition to a digital economy in Russia in the near future will be one of the key factors for GDP growth: according to analysts, by 2025, digital technology will lead from 19 to 34% of the total growth of Russia’s GDP. If we talk about the development of new technologies, global trends and challenges of the digital economy, the figures speak for themselves:

  • $25,5 billion global investment in FINTECH companies in 2017;

  • 52% of financial institutions are investing in solutions on the basis of artificial intelligence;

  • 54% of financial institutions consider storage requirements and data protection are the main regulatory barriers to innovation;

  • 77% of financial institutions plan to introduce the technology of distributed registers in business processes by 2020;

  • 78% of financial institutions tend to implement open APU to improve customer experience;

  • 58% of financial institutions are investing in technology to reduce cyberrisks.

The Bank of Russia in the current situation acts as an organization that sees the financial market as a whole: dynamics, global trends and participants. «Main directions of development of financial technology for the period of 2018-2020»
synchronized with the program «Digital economy of the Russian Federation» the basic directions which are: regulation, information infrastructure, information security, personnel and education, the formation of research competences and technological potential. The main purpose of the trends relating to regulation, is the formation of a new regulatory environment, providing a favorable legal regime for the emergence and development of modern technologies, as well as the implementation of economic activities associated with their use.

«The purpose of the state is to support the development of business by creating high competition in the market», — said the Director of the Department of financial technologies the Central Bank of Russia Alisa Melnikova. In this regard, the following key areas:

  • legal regulation;

  • the development of digital technology in the financial markets;

  • the transition to electronic law;

  • the creation of a regulatory site of the Bank of Russia;

  • cooperation in the framework of the EAEU;

  • security and resilience;

  • personnel development in the field of financial technologies.

With the beginning of 2018, the Bank has developed several interesting projects:

  • running the regulatory sandbox the Bank of Russia;

  • applications now open for the piloting of innovative financial services and technologies;

  • prepared and introduced to the State Duma 20.03.2018 the draft Federal law №419059-7 «On financial digital assets»;

  • prepared the concept of the system of quick payments and initiated implementation of the respective prototype;

  • prepared a number of normative (legal) acts in the framework of the implementation mechanism for remote authentication, as well as the technological infrastructure of the unified biometric system;

«The state should not last to introduce new financial technologies, fearing heavy risk, you need to be ahead, asking the right vector of development,» said Alisa Melnikova.

Advisor to the Chairman of Vnesheconombank Vladimir Dyomin told about the main steps needed to solve the problem of introduction of innovative projects at the state level.

  • Pitching which provides for the review of the existing solutions on the market, sync technology, team building, organizational definition of the functional volume of the solution

  • MVP development: preparation of technical specifications, rapid prototyping, development of routine documentation

  • A pilot test is conducted when the system is running in a limited volume and function, we study the reaction of the environment on new methods of data management and develop proposals for changing regulations

  • The duplication, which involved the deployment of the system, training of users, monetization of the project.

  • Moreover, the Bank does not itself develop projects. «Now we are engaged in the distillation and maintaining new market», — said Vladimir Dyomin.

    According to General Director of Association «FINTECH» and the company Qiwi Sergey Solonin, among the most important and promising areas at the moment, it is worth noting the following: verification and management of digital identities, the development of a distributed registry, the development of retail payment space, developing open API. The Association «Finance» was created as an experimental platform for the financial market, where companies with the regulator could come up with platform services and solutions.

    «Our goal is not just to unite the market, but also to increase the speed of creating a new market infrastructure and financial technology. We are involved in the development of legislative initiatives, offer their ideas, participate in all groups in which the issues of regulation of cryptocurrency. Although, of course, for us more interesting are the practical projects, such as Mastercam and System of quick payments», – commented Sergey Solonin.

    Masterchain, which is a modified fork of Ethereum is essentially a blockchain-based platform for the financial sector. It was created taking into account requirements of the Russian legislation and the use of Russian cryptography. Developed by the Association for the advancement of financial technologies in 2016. According to Sergey Solonin: «We are now at the final stage of coordination with the FSB.» The platform supports CBR, Sberbank, VTB, Alfa, Tinkoff, Gazprom and other major Russian banks. The launch of the project is planned in 2019.

    «The blockchain is a strategy, not the technology»

    The second strategic theme of the session:

    • ICO as a new tool of project financing breakthrough.

    • Prospects for the use of cryptocurrency in Russia as a legitimate means of payment.

    • As new financial instruments will change the budget and financial system of Russia.

    Despite the amount spent in the last year conferences, the growing interest of the financial community and the media hype around the cryptocurrency and the blockchain, according to the adviser of the Chairman of Vnesheconombank Vladimir Demin only 1% of the population of Russia has crypto, and for us this is a bad trend. Just recently, venture investors have begun to pay attention to the cryptocurrency.

    «The greatest interest among the investors came in the first quarter of last year. Now we see great prospects for the inclusion of cryptocurrencies in investment portfolios as part of among alternative investments. The lack of regulation of the market creates problems of cheating the market, so you need consistency, warranties, and ways to reduce risk, to enhance the confidence of major investors to new financial instruments, and they began to actively include them in investment portfolios,» commented Managing partner TargetAM Sergei Kosulnikov.

    According to the reporter, if you select a cryptocurrency that attracts the greatest interest among investors, it is still BTC and ETH, though, because their blackany best are supported by technologically. «We also suggest investors to pay attention to the Stellar (XLM), which attracted the interest of the crypto community in 2017 and showed a stable growth and development. The market success of the digital currency are a number of advantages such as decentralized open source platform, equal rights between participants in the system, processing transactions within seconds, the security of the system. Also, it is worth noting StableCoin, which have great potential and are so-called stable cryptocurrency».

    If to speak about business development in the field of new technologies in Russia, many speakers drew attention to the difficulties in connection with lack of proper infrastructure. «The main problem that in our country there is a large number of successful startups is lack of open and well-developed infrastructure. Banks was created a closed ecosystem that does not allow a small team to create a garage project and get it to market,» — said the Chairman of the Board of Directors Qiwi Boris Kim.

    As shown by the trend of the market in General, the large number of projects are born in Russia, and further developed abroad, and it is also worth noting that the main part of the crypto community in Europe — Russian-speaking.

    Director Bankex Lab, founder of iD EAST Vitaly Dubinin said that in the absence of infrastructure in the cryptocurrency market have faced many serious challenges and create the infrastructure themselves. And, from a dialogue with Vitaly Dubinin became clear that many market players do not want to develop on the territory of our state:

    «Business in Russia and prospects of market development of digital technology, we, unfortunately, do not yet see. Moreover, spot bills it will not solve all related problems and you need to change the situation globally at a basic level. In our country the best staff and developers, but to engage in the development and implementation of any new technology in Russia at the moment is not promising and difficult. There is absolutely no desire to fall under close supervision of law enforcement services, and to contact that is not necessary, since we have alternatives and opportunities to work in other jurisdictions, where the attitude to new technologies and regulation is completely different».

    Unfortunately, today this view is predominant among representatives of the crypto community from Russia, which leads to an outflow of capital, but also innovative ideas and professional personnel from our country.

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