Digital economies: the view from Russia

Mark Zavadskiy, Sberbank vice-president, Sberbank Digital Business, tells Club@Sibos that in progressing towards digital economies, it will be difficult for other sectors to transform if the banking sector doesn’t transform

By Jon Watkins


Club@Sibos: Governments around the world are launching or investigating digital economy strategies. What do you believe are the main benefits of a digital economy?

 The process of digitalising society, the economy and the state moved from a philosophical plane to an economic one a long time ago. Today, digitalisation of processes is a guarantee of our global competitiveness.

Now a country’s economic might and potential is measured by the number of goods and services you can receive from businesses and the state when using your smartphone in a café, and not by oil and gas reserves or steel production figures.

Offline processes, from having to visit several government agencies to get a passport to making management decisions by constantly holding face-to-face meetings, are part of a model that cannot compete. Companies and nations that possess highly-developed solutions which let them instantly reach out to dozens of people via a secure channel, analyse social processes, and access any document will always have the upper hand because they are faster.

 

What role do you think banks can, or should, play in the development of digital economies?

Banks are at the forefront of the digital transformation – they are meeting clients’ demands for fast and high-quality services while simultaneously carrying out a number of vital economic functions on a national scale. It will be difficult for other sectors to transform if the banking sector doesn’t transform. In the next few years banks will focus on building their own ecosystems and creating marketplaces, on their own and with partners. This is how they will evolve into digital companies, if they want to stay competitive.

 

What barriers exist in creating digital economies? How do you think these can be overcome?

The main barrier to achieving a digital economy is the extent to which society and the state are willing to change and embrace a transformation of basic relations in society. We can see a lot of grey areas in the laws of many countries because governments and regulators take a cautious approach to new technology and can’t keep up in adapting laws to encompass constant change. The concern that many central banks feel about banks’ introduction of new complex products and technology is understandable as their task is to guarantee national financial stability. This is why expertise and establishing positions with regard to a new fintech instrument and introducing new financial technology takes time. A good example of this is the cardinally different approaches to legalisation of cryptocurrencies.

But the state is made up of people. And the question arises – is society ready for the forthcoming digital future? The way I see it, digital transformation of the economy is only possible if there is a transformation of people’s minds. As soon as society adapts to and accepts these changes there will no longer be any obstacles in the way of achieving a digital economy. I believe that those who have a leading role in this transformation must educate society, explain the processes that are taking place and the benefits for each and every person. 

 

What steps should banks take to prepare for a digital economy?

First of all banks, their management and employees must be ready to change and adapt to the new economic reality. Among other things, this means that banks need to go beyond the classic approach of lending organisations with product lines that haven’t changed for years.

Secondly, banks need a transformation strategy. These strategies must be meticulously put together and take all the risks into account. The biggest winner from such transformations should be the client, who will be able to satisfy any of his or her life needs thanks to the bank and in the shortest possible time.

Third, as I said previously, banks need to build a digital ecosystem around their core business. By introducing new services and product lines to sales channels, in essence banks are diversifying their business and hedging against risks of reduced demand for their primary product. The best example of this happening in the IT world is IBM – one of the oldest hardware manufacturers acquired PwC’s consultancy business and now it provides consultancy services to corporations throughout the world using its computing power.

 

Which technologies do you think are the most promising for the future role of banks in a digital economy? What is Sberbank’s experience of such technologies?

As part of the bank’s transformation which we set out in our 2020 strategy, we are focusing on building the Sberbank Group ecosystem, which will include services that fulfil the majority of our clients’ needs. In addition to classic banking services, clients will be able to receive products and services in retail, medicine, business, telecommunications and other areas.

We currently have the following priority areas. In many of them we are already among the leading tech companies:

  • Health (DocDoc)
  • Lifestyle (Foodplex)
  • Fintech (Yandex.Money)
  • E-commerce (Yandex.Market)
  • MarkTech (Segmento)
  • Telecoms (Sberbank Telecom – SberMobile)
  • ID and biometrics 
  • Cybersecurity (BiZone)
  • Instant messaging (dialog)
  • Cloud tech (SberCloud) 

The bank is working to integrate these companies into the ecosystem and building uniform sales channels to provide clients with the widest possible range of services. Something has to link the members of the ecosystem together. For us, this link is a set of common services, such as a uniform authentication service, ecosystem member profile, API, data exchange service, and so on.

 

What qualities do you think bank CEOs will need in a digital economy? How do you think digitisation will transform the way bank employees will work?

For our transformation it is important that Sberbank Group employees understand that they too need to change. It is vital to develop new competencies among employees that meet current market challenges. To achieve this objective we regularly hold internal training programmes and have launched an in-house accelerator that lets employees receive support to develop their own start-ups.

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