Proceedings of the Second American Academic Research Conference on Global Business, Economics,

Finance and Social Sciences (AAR17New York Conference) ISBN: 978-1-943579-13-6

New York-USA. 28-30, April 2017. Paper ID: N733

Factors Attracting Banking Investment into Fintech Start-Ups:

Russian Context

Ekaterina Semerikova,
Finance, payments and e-commerce chair,
Moscow school of management SKOLKOVO, Russia.
E-mail: Ekaterina_Semerikova@skolkovo.ru
___________________________________________________________________________
Abstract
Nowadays, financial technologies bring growth not only to the financial system of a country
but also to its economy as a whole. In Russia the main demand for fintech innovation comes
from banks that strive to optimize internal processes, increase financial inclusion, as well as
widen the products that they offer. The aim of this paper is to determine which qualities and
characteristics should a fintech start-up have in order to attract a bank as an investor.
Qualitative interviews with experts of Russian financial industry, including representatives
from banks, a regulatory institute, IT corporations (n=32) as well as quantitative survey of
fintech start-ups (n=37) provide data for this research. One of the main preliminary findings
is that most of the fintech in Russia concentrates in banks. Besides, Russian start-ups consider
banks as one of the most promising future investors from which they hope to get financing.
When it comes to investing in start-ups banks usually consider start-ups that are 5 or more
years old and those that can offer working prototypes. This research contributes to the
emerging literature on financial innovations/technologies and develops knowledge on fintech
start-ups in particular.
___________________________________________________________________________
Key Words: fintech, start-up, finance, banking, financial services
JEL Classification: C 21, O33, O52

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 Proceedings of the Second American Academic Research Conference on Global Business, Economics,
Finance and Social Sciences (AAR17New York Conference) ISBN: 978-1-943579-13-6
New York-USA. 28-30, April 2017. Paper ID: N733

1. Introduction
Spreading Internet connection, increasing speed of innovation development as well as
active usage of mobile devices in everyday life leads to the era of financial technologies, the
new period for financial industries in most of the countries around the world (Birch and
Young, 1997; Mori, 2016; Mackenzie, 2015). Fintech innovations play a role of a catalyst for
financial systems development especially in the emerging markets, which improves overall
country’s economic growth. In Russia the main demand for fintech innovations is formed by
banks that strive to optimize internal processes, increase financial inclusion, as well as widen
the products that they offer. In general financial innovation might help banks increase their
profits and remain leaders in the market (DeYoung et al., 2007; Beck et al. 2016)
2. Literature Review
The existing literature on fintech (Shim and Shin, 2015; Mori, 2016) and especially
fintech start-ups (de Vauplane, 2015) only starts to appear and currently does not provide an
in-depth analysis of these factors. However, from a practical point of view it is an important
problem for many innovative companies starting their business. This is the first paper that
approaches the question in the context of Russian market.
3. Methodology
3.1 Research Questions
The main research question of this paper is to determine which qualities and
characteristics a fintech start-up should have in order to attract a bank as an investor.
3.2 Method and Data
Qualitative interviews with experts of Russian financial industry, including
representatives from banks, a regulatory institute, IT corporations (n=32) as well as
quantitative survey of fintech start-ups (n=37) provide data for this research. Methodology
consists of two stages. First - qualitative analysis of interviews; second – fsQCA method to
find the relationship between attracting bank as an investor and certain characteristics of the
start up (e.g. stage of life, number of people in a team, specialization, etc.).
4. Results and Discussion
One of the main preliminary findings is that most of the fintech activity in Russia is
concentrated in banks. Besides, Russian start-ups consider banks as one of the most promising
future investors from which they hope to get financing. However, sometimes there is a gap
between what a start up offers and what banks need. When it comes to investing in start-ups
banks usually consider companies that are 5 or more years old and those that can offer
working prototypes. Thus, start-ups that offer just an idea are usually unable to attract banks
as investors and need to pay more attention to presenting the already functioning product.

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 Proceedings of the Second American Academic Research Conference on Global Business, Economics,
Finance and Social Sciences (AAR17New York Conference) ISBN: 978-1-943579-13-6
New York-USA. 28-30, April 2017. Paper ID: N733

5. Conclusions and Recommendations

The practical implication of this work lies in helping Russian start-ups to understand
which characteristics increase their chances to get banks as investors. Start-ups can, then, pay
closer attention to these characteristics and attract additional funds. From the social
perspective, additional innovation that these start-ups generate can lead to the economic
growth of industries as well as the economy as a whole. This research contributes to the
emerging literature on financial technologies and develops knowledge on fintech start-ups in
particular (e.g. Shim and Shin, 2015).
References
Beck, T., Chen, T., Lin, C. and Song, F.M., 2016. Financial innovation: The bright and the dark sides.
Journal of Banking and Finance, 72, 28-51.
Birch, D. and Young, M.A., 1997. Financial services and the Internet-what does cyberspace mean for
the financial services industry? Internet Research, 7(2), 120-128.
de Vauplane, H., 2015. Les nouveaux acteurs de la finance. Revue d'économie financière, (2), 27-35.
DeYoung, R., Lang, W.W. and Nolle, D.L., 2007. How the Internet affects output and performance at
community banks. Journal of Banking and Finance, 31(4), 1033-1060.
Mackenzie, A., 2015. The Fintech Revolution. London Business School Review, 26(3), 50-53.
Mori, T., 2016. Financial technology: Blockchain and securities settlement. Journal of Securities
Operations and Custody, 8(3), 208-227.
Shim, Y. and Shin, D.H., 2016. Analyzing China’s Fintech Industry from the Perspective of Actor–
Network Theory. Telecommunications Policy, 40(2), 168-181.
http://www.u.arizona.edu/~cragin/fsQCA/

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