In Russia’s Cash Economy, Finance and IT Go Hand in Hand

DLD Moscow was the occasion to hear from experts and key players on IT and finance in Russia. A very helpful endavour when one realizes that there is a “Russian Paradox” as moderator Adrien Henni puts it. In short, Russia is still very much a cash economy, more so than India. Moreover, the Russian online banking penetration is only 6%

Maxim Nogotkov (left) and Cindy Padnos (founder of Illuminate Ventures)

However, thanks to new technologies, Russian entrepreneurs are developping services to cater to the specific needs of their local customers. For instance, Maxim Nogotkov, who made a fortune launching cell phone company Svyaznoy, transformed his 3000 mobile phones shops to promote the banking products of Svyaznoy Bank.

“We have a full banking licence” underlines the man who, according to Forbes, is now a billionaire. This position puts him at the crossing of the growth of smartphones and mobile payment, 2 very promising markets in Russia, as the shift from cash payment is slowly taking place.

Boris Kim

Talking about key player don’t begin to describe Boris Kim’s role in the Russian banking world. It’s simple, last year, more than half of the population of Russia used at some point one of Kim’s QIWI services.

Recognized as an integral part of Russian internet life, Qiwi’s products ranges from the omnious cash collecting kiosks to purchase online to more recent launchs like the QIWI virtual visa card, mobile apps, electronic wallets. Kim offered the audience some lessons for success: growth through cannibalization, using cloud money and getting mobile and social.

New Ways Money and Data Mix Online

Moderated by Matthew Bishop (The Economist, left), Errol Damelin (Wonga, center) and Sebastian Siemiatkowski (Klarna, right) discussed how financial institutions online now use data in new ways to learn about the behavior of their prospective borrowers.

Erol Damelin created Wonga, an online lender that makes a profit when people repay their loans, contrary to traditional financial institution who benefit when people default. “When people have short term cash flow problem, Wonga offers short term cash advance on mobile.” He claims the service is totally transparent, “you know what’s the cost will be” the moment you apply online.

Sebastian Siemiatkowski co-founded Sweden-based Klarna in 2005 to create a frictionless buying experience. It allow buyers to get their products first, and pay later. In 2011, Klarna processed on average approximately 40.000 transactions per day and their database holds 6 million people, while the population of Sweden is 9 million.

Both companies use data to learn more about their customers. Siemiatkowski explains: “Klarna gets a lot of data, including the products you are buying” which eventually helps the users “because we can see who will or will not pay”.

Damelin, critical of a “minority who is nostalgic about human bank tellers” states clearly, “it’s a proven fact, computer processed data are superior to human based interaction in a bank”. This digital method, according to Damelin, reduces risks. Wonga’s defaulting customers number is ” a single digit, lower than credit card number” claims Damelin, ”We never lend more money than necessary and we are really selective”. Thanks to the data Wonga gather, only a third of the loan applications are given the green light, he explains.