Sibos TV: Now Russia’s banking sector and capital markets have been making solid progress adopting application programming interfaces – APIs. It helps synchronize data resulting in better services, reduced costs, decreased transaction times and, of course, increased revenues. A new Law introduced in July this year is set to accelerate the development of APIs in the country. We are joined from Moscow by Alexander Nam, Managing Director and Head of IT Services at Russia’s National Settlement Depository. Alexander, take us through the status of API development in the Russian financial market – where are they at the moment?
Alexander Nam: Well, first of all, there are no legal requirements in Russia that mandate banks or securities participants to open their APIs to third-party developers. However, this new technology is high on the regulator’s agenda, so the Bank of Russia in close cooperation with the major financial institutions set up a Task Force to research and develop open APIs in the Russian financial market. This Task Force is led and coordinated by the Fintech Association, which was founded back in 2016 – by the way, Moscow Exchange and NSD are the members of this Association. In 2018, the members of the Task Force presented a high-level concept paper and the detailed implementation roadmap for API development. Going forward, we expect that the Task Force, together with the regulator, will develop and finalize the API standards, such as specifications, usage rules and security guidelines.
Sibos TV: Alexander, in absence of the regulation, what's the main driving force of API adoption in banking?
Alexander Nam: Well, even though there is no regulation in capital markets and payments, the regulator still plays a very crucial role as a facilitator. I would say that the Bank of Russia is gently pushing the market participants to start using APIs by implementing new market initiatives such as the new Faster Payment System or the Financial Marketplace. Nevertheless, I would say that the banks themselves are the main driving force in the Russian financial market for several reasons. First of all, there are not many Fintech companies in Russia but there are over 400 banks. So the competition among banks is very fierce. Top 20 banks control around 80% of the market share. Big banks invest in API to increase their dominance, while smaller banks are interested in APIs to stay relevant and to level the playing field. Secondly, the Russian banks are very advanced in terms of IT. This is because the banking industry is relatively young, and one of the advantages of being in an emerging market like Russian is that you have the privilege to pick the latest technology so you do not have that much of legacy on your side compared to other regions.
Sibos TV: Can you explain the impact of the recent Law on Financial Marketplace?
Alexander Nam: In July this year, a new Law on Marketplace was introduced. Basically, the Law sets forth legal grounds for retail clients to buy financial products from digital platforms without the need to visit physical bank branches. This Law, on the one hand, will improve financial inclusion, and on the other hand, will also develop the competition among financial institutions and level the playing field. The Law introduces several key elements of the new infrastructure such as the financial aggregators – these are the entities where the financial products will be displayed. When I say financial products, these are banking products, insurance products, and investment products. Financial platforms are where all the financial transactions are processed, and finally the Registrar of the Financial Transactions is where all the data is kept in a safe and reliable manner. Moscow Exchange was the first registered operator of the financial platform, and NSD was selected as the Register of Financial Transactions. So this law will have a huge impact on the API adoption because all the participants and partners will be talking with each other through the standard APIs.
Sibos TV: Do you see the same trends in the securities space?
Alexander Nam: The securities space, in my view, is a little bit different, and I would even say that the securities post trade industry is more complicated. This is because if you look at the value chain of the capital market, you will see that there are many different players at every stage of the chain – pre-trade, trade, post-trade – so you will see buy-side firms, sell-side custodians, market infrastructures. In my opinion, the post trade industry is much more conservative than the banking one. So the adoption of new technology has always been slow here. However, the APIs have been gaining momentum over the past two years. What we can see is that the securities players are more open to implement APIs both internally, to improve their operational efficiency, and externally with their clients – to add value to the existing products.
Sibos TV: How does NSD use APIs as a CSD?
Alexander Nam: There are a number of cases where we use APIs. First of all, we use APIs as an additional connectivity channel to some of our clients – those who want to have direct integration with their back-office systems. We also extensively use this technology in our existing products like data distribution – to deliver our reference data, market data. We also use the APIs in real-time reporting, both in settlement and corporate actions.
Sibos TV: Could you describe your project Transit 2.0?
Alexander Nam: This project is also related to APIs. At some point of time, we decided to take APIs to the next level, and we actually decided to build a product to monetize APIs in the Russian securities market. In a nutshell, Transit is a multibank platform that allows corporate treasurers to communicate with all their banks through a single interface. Large corporations have multiple banking relationships, and they have to deal with different banking portals, different formats and security guidelines. Transit helps them to avoid all this complexity because we orchestrate all the complexity on our side.
Sibos TV: Alexander, thank you so much for joining us.
Close
Search