The rise of the digital disruptors is amongst the biggest challenges facing the financial sector, according to Russia's Sberbank, and larger institutions need to take on the challengers head on if they are to thrive in the coming years.
The bank is becoming, or is already, a fintech to a large extent, two of the bank's senior corporate and investment banking (CIB) directors told SRP, and Russia's retail structured products investors are next in line to tap the growing tech capabilities of Sberbank.
The retail investor community in Russia is quite small at present, according to Damian Bunce, head of electronic markets and managing director at Sberbank's CIB business, who noted that currently there are only about "one million active brokerage accounts in the whole of Russia".
"However, within this small community there is significant demand for products that can outperform retail deposit rates which have started to come down in recent months," Bunce said.
Erwin Parviz (pictured), head of structured products and managing director at Sberbank CIB, added that for some time a few brokers and banks have been targeting the affluent retail segment in Russia with some success.
"The retail space is an area where Sberbank has acquired broad capabilities in terms of product development, platform infrastructure, marketing, client reach and more," Parviz said.
However, the biggest move by the bank in the retail space in recent years comes in 2017, when Sberbank plans to launch a structured products platform that will target a growing base of so-called individual investment accounts (IIAs).
"The legal framework for these IIAs allow retail investors to enjoy tax benefits on certain investments that are linked to these accounts," Bunce said. "They function a bit like ISAs in the UK."
Russia's investors have welcomed vehicles like ETFs and structured notes that enable them to easily stash assets in overseas markets and avoid volatility in the rouble. The IIAs allow for tax-free investment in notes, and Sberbank's upcoming platform could serve as a catalyst to growing the structured products retail sector in Russia.
Sberbank was an early adopter of IIAs and launched them to clients the day they were made available in Russia, said Bunce. "Sberbank has number one market share in these products, and next year we have development plans that will allow clients to invest in IIAs using more sophisticated investment products through mobile devices," he said. The bank is adapting its product range as client demand and sophistication grows, according to Bunce. "Sberbank's aim is to have a working prototype of this new service in the early part of next year."
Conceding that Western sanctions on the bank have restricted its ability to do business, Bunce and Parviz noted that Sberbank has launched a number of initiatives nevertheless, that will have a strong impact on the market.
The two noted that Sberbank's Markets platform, which is the bank's forex trading tool for wholesale clients, would also be expanded to incorporate products like money market, dual currency deposits and other fixed income related products, while the forex functionality could also be extended to the retail segment.
Parviz argued that Sberbank's infrastructure is "getting there" in just the right time, as the market evolves and fresh initiatives are being launched to encourage retail investment in the capital markets, while at the same time retail deposit rates may further decline.
"We believe a further decrease in rates will complement an increasing level of sophistication in the market and boost demand for structured products," he said. "We should see very interesting things in the foreseeable future."
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