Russia's war in Ukraine affected all the CIS countries and somewhat all the world. As well the war influenced fintech companies, whose rapid development was observed after the pandemic.
Let's take a look what fintech companies have been targeted by the russian invasion and how they can expand their business further. For ease of use I will divide companies by geography.
What is going on with fintech in the CIS?
Fintech companies in Russia.
Modern technologies cannot normally be developed without international business networking. Because of the shaft of sanctions and the culture of "cancellation" of Russian business all over the world, the most talented fintech entrepreneurs leave the country. Let me name some of them.
One of the most innovative banks in Russia, Tinkoff Bank, has lost its founder, Oleg Tinkov. Now the question remains how long the bank will be able to develop further activity without its creator and inspirer.
In another major Russian bank, which has created an entire ecosystem around itself, Sber, three serious losses in the top management at once:
- Lev Khasis, who since 2013 had been responsible for technological transformation, cybersecurity and marketing, as well as for development in foreign markets, left the board early;
- David Rafalovsky, head of the Technology Block, left at the same time as Khasis. He is known for supervising the creation of the most powerful Russian supercomputer in 2019, Kristofari. Before joining the bank, Rafalovsky lived in the U.S. and worked for about 20 years at the U.S. Citigroup;
- Andrei Shemetov - senior vice president and head of Sber CIB's corporate investment business - left in May.
Such losses will clearly affect Sber's ratings and functionality.
And I guess this is only the beginning of finishing.
It will be not a surprise if lots of new financial companies appear in Russia soon: to show the world how they are strong and digital in finance sphere. This process has already been started. In the last few months, the Central Bank of Russia has issued more financial licenses than during the last 5 years. But we realize these companies can operate only on the territory of Russia. I would say that’s not a great deal to be limited to work only in one country.
Of course there are creative talented guys in the country left. But I think huge part of them would like to develop globally, so they will apparently change their place of residence.
International companies with beneficiaries from Russia.
Such companies have a lot of difficulties nowadays. After all, the whole world now does not want to work with companies that have russian roots. Moreover, many regulators refuse to issue licenses to residents of the Russian Federation.
The only way out for such companies is to change beneficiaries urgently in order to continue working and not to attract attention. What they all actually doing now. Naturally, these companies stop providing services to Russian residents and are forced to look for other markets in order to restore the level of income.
Ukrainian fintech companies.
Doubtless local Ukrainian businesses suffered the greatest losses after the outbreak of
hostilities. But this is a temporary setback before the big rise.
Not only big players of Ukrainian fintech market (Privatbank and Monobank), but also smaller companies (Neobank, Ibox Bank and others) continue to operate. In the first months of the war all of them were solving the problems of relocation the staff for safe territories. Privat even moved all of its cloud data to foreign servers so as not to lose it due to rocket attacks on Ukrainian infrastructure.
Despite the losses associated with the war, fintech showed its advantages in these
- Money on the card do not burn up unlike cash;
- A destroyed bank card can easily be restored at a working bank branch in any region of the country, or by order at the nearest post office
- It is easier to pay abroad with a card than to exchange cash hryvnya for local currency.
The forecast of Ukrainian fintech trends at the beginning of the year: cross-border payments, BNPL, open banking, remote identification, blockchain, although slowed their development, but will definitely be implemented in the future. I keep watching some Ukrainian fintechs also try their efforts to entry the alternative markets.
International companies with Ukrainian beneficiaries.
Here everything is relatively calm. Most of these entrepreneurs have only faced problems with business relocation, relocation of the family, and other life issues.
International companies that worked with the residents of Ukraine and Russian Federation (for example, with beneficiaries from the Baltic States, the UK). Their main problem is the loss of market share. That is why they are looking for new countries and clients to provide their services. This includes developing in such prosperous regions like Asia, India and Africa.
Companies that did not work with residents of Ukraine and Russia.
Fintech which do not have connections with Ukraine and Russia did not face strong changes. Probably these companies made the customer compliance more strict.
On the contrary the most prompt international fintechs may benefit and increase the customer share thanks to the Ukrainians. For example, Wirex, Revolut and some other international banks already issue cards for residents of Ukraine.
Let’s see how the investments into fintech develop in general. According to the KPMG Pulse of Fintech report, in the first half of 2021 the global investment in the industry amounted to $98 billion (for comparison - for the entire 2020 was $121.5 billion of investment). And for the entire year of 2021, investors invested $210 billion in financial technology developers.
According to a report by ABN AMRO Ventures and Dealroom.co fintech startups raised $32.4 billion worldwide in the first quarter of 2022 That's down 10% from the all-time high in the third quarter of last year, but there was nevertheless a 27% year-over-year increase.
My tips for Fintech who face difficulties
Despite the terrible war on the European continent the fintech industry continues to grow. To minimize losses and continue to develop fintech companies:
- Identify your benefits and focus compared to competitors in the same market
- Develop a fantastic marketing strategy and introduce it to your clients in the best
- Develop b2b products and expand your product line
- Enter new markets without waiting for the end of the war. Africa, India, Asia,
Latam - there are still a lot of undiscovered directions to go to the top.