Russia’s large fintechs and digital ecosystems – in the face of war and sanctions

Russia’s financial landscape has changed rapidly in recent years, with the lines between banks and tech firms ever more blurring and giving rise to large fintech firms. We are going to look at these changes from a perspective before and after Russia’s invasion of Ukraine in February 2022. Pre-war, tech firms such as Yandex or VK and financial firms such as Sberbank started diversifying into each other’s business by broadening service offers to consumers via so-called digital ecosystems. From an international perspective, two things stand out: first, with Sberbank, Russia’s largest bank is attempting to fully rebrand itself as a technology company. Second, the Russian government facilitates these developments both directly and indirectly, e.g. by pushing the country’s digital transformation while simultaneously exercising more control over foreign tech firms. From a post-invasion perspective, international sanctions pose several challenges to large fintech firms; and so do economic and geopolitical developments. Going forward, the firms will face major issues in advancing their digital ecosystems. As to technology-related sanctions, we show that Russia continues to substantially depend on technologies from abroad, despite pre-war efforts to reduce this dependence. Russia’s economy in general and its tech and fintech firms in particular are thus vulnerable to international technology sanctions. As to sanctions evasion, particularly through crypto assets, we currently see limited potential for circumvention. Clearly, sanctioning countries need to perceive sanctions as a dynamic tool that they must adjust regularly to address potential loopholes and circumvention tactics.