Bank of Russia measures financial inclusion in third annual study
The 2016 results suggest that the trend towards reduction in the number of financial institution branches persists, which is evidenced by the data of a financial inclusion measurement study undertaken by the Bank of Russia in 2017. In defiance of this trend, the study found growth in the availability of remote financial services to be sustainable.
The data show that there was a 8.7% decline in the number of lenders’ operating offices in 2016 (vers. 11.2% in 2015 and 4.1% in 2014). The year saw a reduction in the number of both ATMs with card cash advance/acceptance options (2.6%) and those operating with card-free cash acceptance (5.7%). This is in fact a global trend: as manual cash disbursement is gradually replaced by remote service, demand for bank branches is dropping.
This chimes with the survey's measurements, suggesting that remote financial services are becoming increasingly widespread. In this way, the share of adult customers using remote bank account access for cash transfers (internet and mobile banking) jumped from 23.7% in 2016 to 31.5% in 2017. In particular, there was a rise in the proportion of adult customers who use mobile devices for cash transfers, from 20.7% in 2016 to 29.6% in 2017 (in 2015, this number stood at 16.8%).
There was a 18.9% rise in the number of e-commerce terminals; growth was also seen in the number of individuals’ and corporate / self-employed individuals’ accounts with payment transaction functions (5.3% and 4.1% respectively).
With lenders scaling back their point-of-sale lending operations, non-bank institutions including credit cooperatives and MFOs emerge as institutions complementing the financial landscape of small towns and rural areas where remote finance has yet to gain traction. A 2017 measurement found this segment of the population to be a more regular customer of non-bank institutions (including MFOs) compared to the overall population (6.9% and 5.7% respectively). Moreover, the share of such residents holding bank deposits (14.8%) is lower than the national average (19.6%). In a similar vein, they tend to keep their cash in non-bank institutions; the percentage is 2.4% for 2017 and 1.4% for 2016 (Russia's average is 1.9% for 2017 and 0.9% for 2016). In this context, central to the successful delivery of the financial inclusion agenda are the Bank of Russia's efforts to promote proportional supervision.
In remote and inaccessible areas, proportional supervision of credit institutions can help the expansion of financial services. Banks holding basic licences are envisaged to meet their profit targets more easily in their small town operations, considering softened regulatory requirements for such lenders. In turn, Post Bank, in line with its corporate strategy, seeks to create the largest chain of branches across Russia, in a move to cover the public currently residing in underserved areas where banking is either totally unavailable or concentrated in remote locations.
Beyond financial inclusion, the study covered customer satisfaction with financial services. According to the study, between March 2016 and May 2017, growth was seen in the share of adult population satisfied with credit facilities (up from 36.1 to 38.8%) and voluntary life insurance (from 13.9% to 16.7%). These are among the key indicators seen as a gauge of the general public attitude to financial institutions, products and services. In recognition of their importance, the Bank of Russia intends to conduct these surveys every six months in lieu of the current annual mode (with the next survey due in autumn 2017).
Importantly, the measurements signal consistently declining public mistrust towards financial institutions. Specifically, the proportion of customers who trust no financial institutions fell from 4% in 2016 to 2.9% in 2017 (in 2015, this number was 11.9%). The Bank of Russia firmly believes the level of confidence between players of the financial market to be a qualitative indicator of market stability.
There are plans to issue the BoR’s second regular publication, titled ‘Survey of Financial Inclusion in Russia’ based on a 2017 measurement effort, in the second half of 2017.