Russian style: fintech vs bigtech

As a person who is from a Central Asian country which is in close relation with Russia I have always used some kind of Russian made IT product.

This applies to fintech products too, for example, among others Yandex.Money is one of the finance apps I use in my everyday life. Until recently Yandex and Sberbank another Russian company were closely cooperating, however, things have started to change.  

Sberbank Russia’s largest bank decided to drop the ‘bank’ from its name and became Sber in September. The move arrived a few months after its official decoupling with Yandex, one of Russia’s Big Tech firms.

After a lengthy partnership with Yandex via shared e-commerce and joint payment venture which began in 2009, Sber’s CEO, Herman Gref, made a bid for a controlling stake in Yandex in 2018.

Yandex rebuffed Sber’s offer. This saw the bank announce a $2 billion tech ecosystem investment into Yandex’s sectors.

Since the 2018 rebuff, Sber has gone head-to-head with Yandex on streaming, and food delivery services according to Fintech Futures.

This year, the bank acquired a 46.5% stake in online media group Rambler for $170 million. As well as an 84.7% stake in Local Kitchen, bought by Sber’s food delivery joint venture with major Russian internet firm Mail.ru Group.

Fintech Futures writes that Sber further continued its move into the territory of the big tech by doing several acquisitions.

At the end of 2019, Sber announced a joint venture partnership with Mail.ru Group to create a rival food delivery service to take on Yandex’s Eats service. The acquisition of Local Kitchen shortly followed.

Whilst Sber’s Delivery Club service focuses on takeaway food, the bank also launched Sber Market. The latter service rivals Yandex’s 15-minute grocery delivery service, which launched in 2019.

Sber also acquired streaming service ‘Okko’ this year – originally Rambler’s. Ivi.ru is Russia’s largest streaming platform, with Okko coming in at second. Billionaire Len Blavatnik-backed Amediateka, Yandex’s Kinopoisk, and Russian energy firm Gazprom-linked Premier all count as lesser contenders.

Sber claims to serve 100 million customers in Russia, which is home to 145 million people – meaning the bank holds a 71.4% share of its home banking market. However, as the experience shows banking services are boring and limited to a certain level, therefore, banks need to be creative and try to find ways to generate profit and make the products attractive to customers. 

Why did Sber start to move into big tech territory?

Tinkoff Bank a challenger bank already expanding in direction of a lifestyle business. The company offers a marketplace, entertainment, mobile network, travel services. The company has recently launched its own chat focused on financial services and has its own voice assistant Oleg.

Tinkoff began diversifying into the non-financial services segment with an aim to create revenue streams other than credit. 

Yandex one of the biggest tech companies in the market with a variety of services starting with search engines and ending with its own fintech products. After the sales of Yandex.Money to Sber the company was in talks to acquire Tinkoff Bank to create a full rivalry with Sber and other players in the market. However, the deal was canceled because according to the founder of the Tinkoff Bank Oleg Tinkoff Yandex wanted a takeover rather than a collaboration that was totally unacceptable for Tinkoff. 

In this game, I wouldn't forget another tech giant in the market of Russia Mail.ru Group. The company also offers a variety of services biggest of which are social media platforms such as Vkontakte, Odnoklassniki, ICQ, and Moymir. The company making move into fintech using these platforms for example company launched VK Pay to facilitate payments on social media platforms.

All these companies are using eco-system models very effectively by combining big tech and fintech services together. 

By this time it must be obvious why Sber wants to move into the territory of big-tech. It’s one way or another either Sber will expand its presence in big tech or big tech companies will eat up Sber’s share in the banking sector.

Whilst it might seem impossible for a bank to become as agile as a native technology company, Rafalovsky argues that the Russian bank has an advantage.

And Rafalovsky Sber’s CTO thinks many banks “heavily skew” their budgets to usage rather than creation. “Financial companies choose a dominant vendor like Microsoft or AWS. Banks are tech users, not creators.”

Sber started with a mix of technology partners, Rafalovsky says. “It’s still mixed, but our control of the tech is a lot higher than other banks. It takes guts to even say we’re doing it”.

For Sber, the play is to compete with the Big Techs.