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Digital Transformation in 2021: Reshaping the Russian Banking Sector

by internationalbanker

By Vadim Kulik, Deputy President and Chairman, VTB Bank Management Board





2020 was a year that challenged every industry, and it’s difficult to predict what faces us in the future. We are now operating in environments that change daily, and it is a matter of being ahead of the curve or being left behind. Banks that do not harness technology quickly will lose their competitive edge. Whilst this has always been true, in 2021, it is absolute. We see banks all over the world, including in Russia, moving away from traditional definitions to position themselves as tech companies. Whilst this isn’t the strategy of all banks, it demonstrates how far the industry has come and where it is heading in the future.

Technological innovation has become a key battleground within the Russian banking sector—a competition that the COVID-19 pandemic has intensified. We have seen significant development over the past 20 years with global best practices and the swift adoption of emerging technologies. This has ultimately been driven by customers and their increased usage of mobile and the internet; our IT (information technology) systems have had to adapt to this increasingly digital world.

Many banks may be looking towards a post-COVID strategy; however, its impossible to say when we will truly be post-COVID and what that world will look like. However, the pace of technological development has increased, and this will continue apace throughout 2021. Several strong technological trends developing in the financial market will shape the digital-transformation strategies of banks in Russia and across the world.

Open banking is changing the game

Open banking has the potential to transform the rules of finance and transactions. In 2021, we anticipate that the focus will gradually shift from meeting regulatory requirements to sharpening the ability to utilise existing tools for commercial gains, finding new partners and optimising these tools to meet needs. At VTB, for instance, we have recognised the importance of developing API (application programming interface) technology that accelerates the introduction of new products and services within the bank—as well as simplifying and automating the connections of partners from various sectors, including insurance and retail, to VTB services. In 2020, we were able to launch the first comprehensive savings-management service for users of Yandex, Russias leading technology company, with customers then able to access a range of premium-quality investment and savings products. This is an example of how banks can harness the power of open banking to form innovative partnerships aimed at improving the experience for consumers across varying services.

Going beyond banking

Embedded finance will be key in 2021 as banks look to provide financial services on the customer’s terms at any time and any place. By using embedded-finance tools, customers can integrate payments, debit cards, loans, insurance and even investment tools into almost any user experience. The creation of a seamless experience will be paramount to ensuring customer retention, and in an increasingly virtual world, this will play a vital role in a bank’s relationship with its customers. After all, the easier it is for a customer to carry out a transaction, the more likely he or she is to complete it.

Time is money in 2021

We’ve all heard the saying that “time is money”—that is true now more than ever, which is why banks must create a new normal in which they gift both time and money back to customers. We see this new normal manifest in many ways: offices without workers, biometrics at automated teller machines (ATMs), voice robots optimizing the work of contact centres and more. Robotisation is key for banks looking to save time for both employees and customers. We have our own robot factory at VTB with plans to introduce 250 digital employees by the end of 2022, reducing the share of routine operations, including document processing and data entry, and trimming the processing costs by three to four times.  

Maximum personalization

Personalization is crucial to banking success, whether you are working with consumers or businesses. Machine learning (ML) and artificial intelligence (AI) technologies are already in use throughout the Russian banking sector, and we see the benefits across multiple business segments. In the coming year, we will see multiple projects change the game. Partnerships will be key to delivering personalised services. We are working in partnership with Rostelecom on our Big Data Platform, which focuses on developing and monetising products based on big-data processing. By leveraging banking expertise and combining it with the technological innovation of large partners, we can deliver AI-driven products that offer guidance for any type of business—whether developers locating a new building or beauty salons or large federal retail chains. This highlights just one exciting way banks are using personalization.

Artificial-intelligence solutions are also transforming the investment space. And whilst there is debate over whether it will become the predominant tool for developing financial strategies, there is no doubt that it will play a key role in the future of investments. We will begin to see a world in which traders and fund managers work in harmony with AI and, in some cases, compete with the machines. AI can maximise profit for clients, and as we look towards post-pandemic growth and prosperity, this will be a key driver for technological innovation.


According to data from the Deloitte Center for Financial Services, 64 percent of executives at financial firms expect to increase their spend on cybersecurity in the future, and 60 percent anticipate increasing investments in cloud storage and computing. This is unsurprising, as banks pursue increased integrations with third-party partners that present potentially higher security risks; therefore, ensuring cutting-edge cybersecurity solutions is vital. Current trends point to the possibility of a single cybersecurity centre for the entire market and the introduction of mandatory response procedures and reporting standards for all players. With a focus on cybersecurity practically guaranteed throughout this year, it remains to be seen what path will be taken, but we look forward to exploring how the industry can change and adapt.

Digital currencies

Digital currencies and central bank digital currencies (CBDCs) have dominated news headlines for some time. Digital currencies can deliver transparency in tracking the movement of funds, suitable for targeted allocations of funds. Currently, a complex system of monitoring by fiscal and regulatory authorities is used for this purpose, and digital currencies will provide us with the opportunity to reduce or even remove this burden.

Already, we have heard 2021 being referred to as the year of digital currencies, and so far, this seems to be holding true. However, with so many competitors in the field, the “winner” of the CBDC race will be the one who can bring its stablecoin as close as possible to the role of a universal currency. So far, the players are primarily hindered by the lack of uniform security standards for cross-border transfers.

Payments without intermediaries

Our final trend is the development of integrated-payment channels, where payments are not served by traditional financial providers. This is a long-term trend that we expect to continue through 2021 and beyond. We will see the development of solutions that allow customers to operate without Visa, Mastercard or other acquiring banks. They will be implemented by both fintechs (financial-technology firms) and bank consortia. For example, VTB is actively involved in forming a single-payment space with the countries of the Eurasian Economic Union (EAEU). 

Running through all of these trends is a clear thread, the importance of a customer-centric approach to products and services. Customers are at the core of all financial products. In 2021, this must be prioritised even further, and technology can deliver this. By introducing technology to their business processes, products and services, financial institutions can promptly respond to shifting market needs. Cutting-edge technology has become a key differentiator for competition within the Russian banking sector, and keeping up is now a matter of survival for financial-services providers. A commitment to investing in innovative technology will be the key to success in the banking market. COVID-19 has shown us the importance of being agile and flexible, providing vital digital solutions for our customers. Now, in 2021, we must move another step forward, take this agility and combine it with digital transformation and innovation. By doing this, we will truly change what banking looks like for years to come.  


Vadim Kulik is Deputy President and Chairman of the VTB Bank Management Board. He joined VTB in 2019 and was hired to drive the bank’s digital-transformation strategy. He brings a wealth of experience and has worked at the forefront of Russian banking innovation for many years.


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