1. The Emergence of Electronic Banking in Russia... Rachel Doern Stockholm School of Economics in Saint Petersburg

2. eBanking in Russia * What do we mean by eBanking? * Research Purpose * Research Sample - 10 credit institutions (banks) * Research Methodology - interviews and mini case studies * Interview Protocol (sample questions) * General Findings: industry-level and firm level * Banking Clusters: Traditional, semi-traditional, and non-traditional * Summary of the non-traditional cluster (less than 1% fall into this category) Research Methodology and Findings:

3. eBanking in Russia * Direct deposits * Wire transfers * Plastic card issue and acquiring services * Inter-bank payment systems * Bank-client payment systems * Internet exchanges * Electronic trade range * Foreign exchange operations/trading system * Broker-client systems Examples of Electronic Systems and Applications Implemented in Russia:

4. Clusters and Strategies A. Traditional Banking Cluster * State-owned (>50%) or prior state owned, corporate banking, basic services, many branches, conservative, centralized, and closed. Sample example(s): Vneshtorgbank, and Promstroybank B. Semi-traditional Banking Cluster * State-owned (<50%) or prior state-owned, corporate banking, universal services and some value-added services, conservative, centralized, and closed Sample examples(s): Baltisky Bank, International Bank of Saint Petersburg, and Baltonexim Bank C. Non-traditional Banking Cluster * Commercially owned, retail banking, provide universal products/services and value-added services, substantial investments in technology - Internet-focused Sample example(s): Menatep Bank, Avtobank, Guta Bank, Alfa Bank, and Sudostroytelniybank. eBanking in Russia

5. Vneshtorbank: Traditional Cluster Strong and conservative. - Vladimir I. Vilenchik, Deputy Director * Owned by the Central Bank of Russia (99.9%) * 32 branches in Russia and 6 daughter banks outside of Russia * Second largest bank in terms of assets and first in terms of capital * Works with corporate clients mainly * Developed international operations * Provides basic banking products and services - no credit cards … The bank cannot always give clients what they want. * Goals: Reported to be unknown. Attitude towards eBanking: Not yet favorable...

6. eBanking in Russia Menatep Bank: Non-Traditional Cluster The strong bank for the strong country … there is no bank is better, more reliable, easier or faster. - Kirill Igorevich, Manager * Spun off Bank Menatep Moscow 5 years ago * 49 affiliates across Russia and customers in Germany * Provider of universal services and value-added services - Internet exchange, home bank, bank-client, electronic trade range * Focused on research and development * Looks at western transaction protection systems * Members of the Federation of Internet Education and the Association of Commercial banks in Saint Petersburg * Goals: 1. To be the leading Internet bank in the country by 2003; 2. to replace all activities conducted in the physical bank Attitude towards eBanking - Very favorable...

7. eBanking in Russia The Non-traditional Banking Cluster Strengths of the non-traditional banking cluster: - flexible networks - more decentralized resources - focused on retail banking - provide value-added services Weaknesses of the non-traditional banking cluster: - still too conservative - not transparent enough to the client - limited account management services

8. eBanking in Russia The Non-traditional Banking Cluster Challenges facing development: - lack of capital, personal income and savings deposits - poor communications infrastructure - limited Internet access and penetration (ISPs and hardware) - lack of competition - lack of consumer trust and demand Opportunities facing development: - growth in the private sector - stabilizing economy - improvements in the standard of living - need to improve efficiency, mobility, and trust

9. eBanking in Russia * Market drivers: competition, positive investment climate, demand... * Government support: incentives and education... * eBanking in other parts of the world Innovation so far in Russia is slow because in society there is no knowledge or feeling of need because the government and society are more concentrated on big problems and so innovation is forced to be by itself … and without the support of the government we cannot go fast. - Vladimir I. Vilenchik, Vneshtorgbank What will fuel development in Russia?

10. eBanking in Russia Discussion: * 4 factors for successful development and results: technical security, transparency, financial integrity, independence from criminal activity * The significance of its development: 1. Improve the efficiency and deliverability of services 2. Improve the clients position in the bank-client equation 3. Encourage competition 4. Improve the mobility of the Russian people/companies 5. Limit the gap between regional centres and major commercial centres

11. eBanking in Russia Thank you!