Being a Tech and FinTech expert during the early days of digital transformation in the Russian banking sector, I led the adoption of the most popular payment solutions in the country. Project Director Kirill Ostrovskii, with his experience, aided multiple Russian banks in embarking on the digital transformation journey and transitioning into IT companies with banking licenses.

Project Director Kirill Ostrovskii, with his experience, aided multiple Russian banks in embarking on the digital transformation journey and transitioning into IT companies with banking licenses. Kirill was responsible for implementing the popular Sberbank Online application, Faster Payment System (SBP), contactless QR code payments, and developing a financial service for self-employed individuals based on a banking application.

Kirill Ostrovskii is a Tech specialist and project manager with 20 years of experience. He began his career in the largest tech ecosystem in Eastern Europe, Mail.Ru. In those times, in the early 2000s, web services were just emerging in Russia. The internet was becoming increasingly accessible to users, and online platforms enticed them with various forms of entertainment. Kirill was at the forefront of Mail.Ru's development when its team consisted of only 65 people. The business faced the challenge of retaining users on the website and monetizing their presence on the internet resource.

Kirill and his colleagues devised services that complemented the company's main internet product – the email inbox and captured customers' attention. One of Kirill's notable projects at Mail.Ru was the mapping service "Maps.Mail.ru," analogous to Google Maps. Additionally, as a Technical Director, he led partnership projects for the Internet company and developed unconventional advertising initiatives. With his team, Kirill managed the technical aspects of special advertising projects for the country's largest companies, such as Coca-Cola, Philips, Danone, Nike, Reebok, and others.

After 11 years in his career, a new stage began for Kirill. The Russian banking sector was transforming from traditional banking services to digital. Banks were developing applications, streamlining money transfers, and offering customers more online transactions. Banks needed the right talent to navigate this new digital landscape – individuals from IT and tech companies and experienced developers. Kirill was intrigued by the opportunity to participate in large-scale banking IT projects, test his skills in a rapidly growing market, and be part of the global transformation in the financial sector.

This marked the beginning of Kirill's journey into FinTech when he joined Russia's leading bank, Sberbank, in 2017. The company was then revamping its approach and transitioning into an ecosystem and a full-fledged technological platform. Kirill played a role in developing one of the bank's most significant products in this process – the Sberbank Online application, which allowed transfers between bank clients using phone numbers. Alongside his team, he worked on expanding a marketplace of partner products and services within the bank's app, enabling users to pay for services from other companies, purchase digital certificates for popular services and stores, and access additional services such as health check certificates (CheckUp). By 2018, the active user base of the "Sberbank Online" app had exceeded 40 million people.

In contrast to Internet companies, banking institutions tend to approach their work conservatively, as they are entrusted with managing their clients' finances. In FinTech, developers need help implementing frequent updates and swiftly roll out new products. Extended approval procedures mark the process. Nonetheless, FinTech deals with financial technologies that significantly simplify individuals' lives and empower banks to gain deeper insights into their customers' behaviors, enabling them to offer products tailored to specific needs.

When Kirill transitioned to work at another prominent bank, Alfa-Bank, he took on two ambitious tasks – launching a service for self-employed individuals and introducing a novel instant payment solution called the Faster Payment System (SBP). Recognizing the challenges posed by the conventional banking infrastructure, Alfa-Bank established a dedicated Tech division known as the "Alfa-Laboratory." This entity operated independently from the bureaucratic barriers often associated with financial institutions, granting developers the freedom to innovate and swiftly release new products to the public.

The SBP project marked a significant stage in the digitalization of the banking sector, enabling Russians to transfer money to one another using phone numbers as long as their banks were connected to the SBP system. This project allowed the Central Bank of Russia to extend Sberbank's successful experience with phone number-based payments to all banks nationwide. Thanks to the bank's team's extensive technological and integration efforts, customers were no longer required to visit bank branches to initiate transfers from their accounts. In collaboration with the Central Bank, several leading banks had the stringent task of launching this project from scratch within a tight timeframe. As the project director, Kirill and his team developed this service for Alfa-Bank, considering all regulatory requirements and security standards for clients. Thanks to the SBP, Alfa-Bank's customers could make secure instant transfers to various banks across the country, eliminating the need for a physical card and expanding the service beyond transactions within a single bank. ( Link )

Kirill's second project at Alfa-Bank, the self-employed service, was developed in collaboration with the Federal Tax Service. Self-employed individuals are a relatively new legal entity under Russian legislation. This category encompasses citizens who essentially work for themselves. In 2019, such freelancers gained a tax status. Its uniqueness lies in the fact that self-employed individuals input data about incoming payments from clients into the application themselves. Subsequently, the Tax Service utilizes this data to generate a tax payment receipt for them within the application.

For banks, this governmental solution meant that they could now gather information about clients who previously operated discreetly and predominantly relied on cash transactions. Consequently, some banks opted to create their own application for this customer segment, offering tailored products. Kirill's team, consisting of software developers, designers, testers, and in coordination with accountants and legal professionals, created a product that positioned Alfa-Bank as one of the pioneering Russian banks to extend such a service to self-employed clients.

The digital transformation of banking was ongoing. Other banks also sought to offer their customers a fresh online payment experience. In 2019, Kirill was invited to join "UralSib" bank as the head of the Remote Service Channels Development Department, tasked with launching the company's Fast Payment System (SBP). He also oversaw the implementation of all system updates and supervised the service's development process within the bank.

By then, the Fast Payment System (SBP) had learned to facilitate transfers for individuals and businesses. Corporate clients like shops and cafes could securely pay for their goods and services using smartphones. In this process, businesses generate a QR code, display it on the screen, the customer scans it with their smartphone, and the money is instantly credited to the service provider's account through SBP.

Currently, Kirill continues working on digital payment solutions and integrating all SBP updates with the bank's services at "UralSib." Thanks to his team, the bank can conduct C2C, Me2Me, C2B/B2C, and SBP Pay transactions. As the popularity of SBP grows in Russia, its users are also increasing – on average by 13-15% from quarter to quarter last year. In the fourth quarter of 2022, there were over 65 million users. More than 3 billion transactions amounting to 14.4 trillion rubles were conducted through SBP in 2022.

Kirill is a member of the "FinTech Start" association and strongly emphasizes innovation within financial services in his endeavors. In Kirill's view, the digital transformation of the banking sector is ongoing, and banks are actively exploring new roles. As ecosystem products, banks provide services for product delivery, develop e-commerce, offer logistics solutions, and even create entertainment content. Digitalization enables banks to gather new customer information as they begin to spend money within the bank's ecosystem.

Banks strive to offer customers a variety of convenient online payment methods and allow them to pay for all necessary services within their own applications. According to Kirill's observations, the average bank customer maintains accounts with multiple banks and utilizes their respective applications for various tasks. "The customer uses one bank for receiving their salary, another for transferring money for a mortgage, a third for a car loan, while yet another serves as their daily bank for card payments at stores and cafes. And for the user, this is a normal practice. In turn, banks are interested in enticing the customer to perform all necessary operations within their own application," says Kirill Ostrovskii.

In the world of finance and FinTech, he observes several significant trends. The idea of central bank digital currencies (CBDCs) is gaining more and more interest, but experts in the field hold different positions on this matter. "For some, it's an intriguing and advanced tool that could make payments more transparent. For example, it could eliminate corrupt practices when transferring funds from the federal budget to regional budgets for financing social infrastructure. On the other hand, others view digital currency as a potential threat to the state's total control over citizens. They are concerned that authorities might seize their digital money from their accounts or deactivate their digital wallets as a form of sanctions," Kirill explains.

Another interesting trend in the world of digital transformation of financial services is the rise of neobanks, which are becoming increasingly popular among users. "These are virtual or digital banks that operate without physical branches. Instead of traditional products favored by conservative banks, they emphasize services, user-friendly interfaces, and customization. In Russia, major banks often follow the path of acquiring such neobank entities and fintech projects to leverage their cutting-edge expertise and innovative approach in their operations," says Kirill Ostrovskii.

Typically, neobanks and traditional banking organizations approach their app development differently. A bank that interacts with its clients through physical branches tends to create applications with minimal functionality. On the other hand, neobanks without branches usually opt for developing super apps. These feature-rich applications even include entertainment and educational content, and they offer customers the ability to pay for services from external partners. Thanks to the distinctive attributes of super apps, neobanks can engage users for longer periods and enhance customer loyalty.