Moscow Exchange - Marketplace Law Passes, but Without Biometry For Now

The CBR has published a statement saying that the "Law on Financial Marketplaces" has been approved by the Duma. The marketplace project is being undertaken by Moscow Exchange (MOEX) and represents an important element in its strategy through 2024 in terms of contributing to delivering around 10% annual fee income growth. The initial focus will be online retail deposits. While at first glance this looks like a much-awaited development, we note that the law does not incorporate single biometric log-in, which we think is a central tenet to the long-term success of the marketplace. It is expected to be addressed in a separate legislative package. > What is MOEX's marketplace concept? MOEX plans to launch an online financial supermarket to enable customers not only to compare various financial services products, but to buy (or open an account) online, done through API links to banks' online platforms. While the initial focus will be deposits, the longer-term plan is to roll out other financial services products such as bonds, mutual funds and insurance. MOEX sees 3-4% of its annual long-term 10% fee income growth target as coming from "more than exchange" initiatives, such as marketplaces. > First stop: retail deposit market. MOEX will begin with the big beast that is the retail deposit market, with media reporting that it will launch in October in 23 regions. Households have more than R31 trln in deposits, of which 70% are R700,000 or more, according to MOEX. MOEX aims for 5% of this pool to be opened through its marketplace, hence putting the potential market size for its new retail marketplace at R1 trln. MOEX plans to monetize this project through charging banks a small fee for deposits opened, with the service free to consumers, and it sees the long-term revenue potential in the billions of rubles. For example, if we assume about R34 trln retail deposits in 2022, and MOEX's marketplace having 3% market share (R1 trln), each 10 bp fee increment would imply about R1 bln fees, or around 3% of MOEX's 2022 fee income. MOEX has commented that previously a number of banks expressed interest in connecting to the marketplace, including top-10 names. > Interesting long-term project, but lack of biometry is a drawback. We think MOEX's retail marketplace has attractive features for both customers and participating banks, but in a very competitive market like retail deposits, and with online retail banking already well-established and participating banks possibly having to bear higher funding costs (though potentially saving on client acquisition costs), it is not going to be easy to grow revenues. We also think that having a single biometric sign-in that enables seamless management of accounts between banks is a core element of this service, and it is still not clear when this will feature. In the meantime, media reports suggest a work-around using couriers or representatives of banks (such as in branches) for one-time physical identification of clients, which could potentially add costs and friction to the process.