Digital Platforms and the Ecosystems of Financial Inclusion. The Russian Experience

The research report explores the issues of digital financial platforms and ecosystems created by them based on the study of four cases of successful Russian financial technology companies. This study outlines the specific business models and corporate strategies and also contributes to the understanding and conceptualization of the global parallel banking practices.The emerging phenomenon of digital financial platforms needs special attention of the regulators. For one, it is important to distinguish between the effects of the platforms and those of their applications, though this may not be always easy from the regulatory perspective. Such an approach is especially important in the formulation of the rules for the emerging phenomenon of the crypto-currencies and blockchain-based transactions. While some of the applications in this area may not meet the standards of financial monitoring transparency, the technology in itself – and the platforms using it – has huge potential of bringing operational costs of financial organizations further down, allowing for broader inclusion of customers across the world.Another important issue is the mitigation of social risks. On certain occasions the needs of inexperienced customers can be exploited by non-ethical market players for profiteering. This is especially dangerous in the sphere of lending, where the line between the supply of productive enabling credit and creating permanent burden of indebtedness may be rather thin. The challenge for modern regulators in emerging markets lies in promoting the financial literacy, which leads to effective choices of financial instruments by the consumers, at the same time avoiding the temptation of playing a Big Brother which arbitrary limits the scope of personal money-management strategies.In many markets the financial regulators successfully adapt themselves to the challenge, finding the ways to work with both traditional banks and emerging parallel banking businesses. There is strong evidence that overall the two types of financial players can coexist effectively. A tactful and insightful regulation can reinforce the coexistence pattern leading to both more stable and more inclusive financial system working for the benefit of the society