Daniel Gusev has over 10 years of successful experience in building and growing bank labs, banks, and contributed to three startups in various cofounder or executive positions before venturing into the fintech investment space. Finding success with investments in Revolut, Tandem and a number of other rapidly growing global fintech enterprises, he is now active with a growth-stage, EU-US based fintech fund, Gauss Ventures.
We had the pleasure to talk with Daniel about the booming Russian fintech landscape, which although interesting, is not very well known to the West.
Could you elaborate on the global fintech trends that we see and on how are you and your organization trying to capitalise on these with Gauss Ventures being a new EU-US construct?
The fintech industry is changing gears as it goes from attraction and onboarding (hence a plethora of B2C solutions) to integration, where these solutions partner with liquidity pools – banks, investment conglomerates, seeking scale without losing focus. The incumbents themselves are interested to collaborate rather than compete with fintechs – as they have unprecedented customer onboarding costs, embedded engagement tools that allow for viral effects and agility to innovate. Connectivity and mobile tech impacts the way people perceive and interact with services and the pace of change for a regulated industry like banking is not adequate. One major obstacle is the cost of change due to regulation – so for incumbents, the challenge is around integrating new players on the front-end and verify them with various compliance requirements.
Hence our passion at Gauss – a team of VC, private equity and industry professionals – to enable that. Our team has had a number of successes (one of the recent ones – Revolut, in which we invested at a very early stage with our previous fund) and we focuses relentlessly at how to operate global financial flows at scale: be that payment, remittance or IoT in trade finance. Gauss invests in early and growth stage companies while providing deep level expertise in fintech and access to our tier 1 advisory network to achieve one goal: enable healthy cooperation.
You will soon be speaking at the Future of Finance Summit – what topics and discussions are you most looking forward to and what is that you hope to achieve by speaking at the event?
I will be speaking about integration scenarios of technology in day to day life and how this impacts not only the way modern services should be designed, but what impact it has on the user. I will also go through the new challenges modern fintech startups face regarding attention span, decision control and willpower – and what we should do to improve financial literacy, services routines design and such. I will also point to a number of grassroot fintech innovations from Russia, (as I was born in Moscow) and show how their effect is capitalized by major players trying to embedd them into the construct of the country’s digital economy.
Could you tell us more about the Russian FinTech Association, its members and some of the promising technologies the association is focusing on?
Russian Fintech Association is a market association of 23 members, all of them either major banks or payment systems. The main reason for launching it was to improve system transaction flows and capitalize on the personal user data, and area where banks are still the most efficient operators. Called by the Central Bank of Russia, these major institutions agreed to cooperate on core foundational services: identity and privacy (Digital ID), interoperability through data exchange (Masterchain, which is an Etherium-based protocol for data interexchange), payments provisioning (real-time retail payments platform) and account access (open banking).
The Central Bank is also pushing forward a special regulatory environment, which would be an industry sandbox to allow vetted 3rd parties to tap into the growing library of services borne through the indicated initiatives. This initiative has several aims: to improve efficiency, to maintain stability and transparency and to promote competition based on common standards.
How does the Russian fintech market - unseen but interesting – looks like? Who are Russia`s fintech market players and how is Russia’s central bank supporting fintech initiatives?
I’ve recently published a short story about the market (apart from many stories you can still find in my now archived blog) – in which I explain that fintech in Russia, line in other places, started with mobile phones and the web and grew thanks to the opportunities that the two technologies provided. The internet and mobile technology stimulated and enabled people to buy online via prepaid mobile payment options. From this, it didn’t take long for mobile wallets and ecommerce players to appear and flourish. Apart from the massive growth, we also see integration scenarios where banks collaborate with fintechs to build innovative products and third party services, or even completely new external platforms with a different culture and market dynamics.
We have Sberbank, the Savings Bank of Russia, still dominating the scene with massive presence and what is now a lean model, on par with Silicon Valley physical distribution networks, but we also have Qiwi in mobile payments and prepaid, Tinkoff with his healthy and profitable 3 million customer mobile first platform. Tochka, for SME banking, is also going strong. Each one of these fintechs deserve a dedicated story.
What are the main fintech areas and segments that forecast growth and how can the potential of these segments be unlocked?
Retail is still growing thanks to a gain in efficiency, as people move from physical touchpoints to online, which they use, at least for basic services, as frequently as they use offline touchpoints. Ecommerce, thanks to cross-border purchases from China, continues to experiment a double digit growth, while new consumption models for home delivery / online delivery push people to adopt app-based payments. Russia is the global case for mobile payments – a major market for Apple Pay (with Sberbank being the top implementer), where untapped opportunities await investment. Lack of culture and distrust, may slow funding, but innovation is now needed more than ever, especially since the State sponsored pension system is experiencing chronic deficit.
How will consumers benefit from the fintech boom? How will fintech help them manage their financial lives?
If we follow the current global and local trends, it is clear that users will gain freedom of choice but will often feel vulnerable due to lack of security (hence the drastic need to formulate standards around data sharing and 3rd party account access). They will feel stressed because of multiple apps and platforms vying for their attention and would seek protection from stress by relying on personal bots. As algorithmic trading and dynamic pricing first tried to win customers minds, personal AI would be taking this area. It’s somewhat inevitable that people would further distance themselves from the vagaries of financial technology, yet they should also be mindful about how their personal data is stored and shared.
About Gauss Ventures
The Gauss Ventures fund team comes from major hubs: Berlin, London and New York. have an over 20 year experience in VC, PE and banking senior executive management experience. It adds to the Funds mission of identifying and executing integration opporunities between fintechs and incumbents around savvy use of data to improve efficiency, compiance and cost of distribution.
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