Russia: A New Global Digital Player

Visiting Russia is always a pleasure, more so because its digital landscape so intrigues. I’m on a mission to learn as much as I can about the latest developments here in the digital identity space…

Russia, the Next Digital Superpower?

The Putin government plans to spend $1.8 billion a year through to 2025 to build Russia’s digital economy, in a move to diversify from oil and gas, and catch up with global digital players. The strategy makes sense considering Russia’s scientific excellence, its strengths in cybersecurity, its 100-million-strong internet user base and its thriving FinTech sector. Long on talent and ambition, Russia certainly can position itself as the next digital leader, if it puts its mind to it.

The cards up its sleeve: a highly educated population reared on hard science, no shortage of brilliant tech entrepreneurs, a relatively developed broadband infrastructure and untapped e-commerce potential. Plus, a government wise in the ways of projecting power and influence and seemingly determined to create the conditions for digital transformation.

I’ve talked in previous posts about how government can build the enabling digital identity platform to host business applications, or, when concerted government effort generates private-sector solutions to the identity challenge. Russia’s approach appears to be similar to China’s at this early stage, strengthening the digital infrastructure through a comprehensive policy framework, research and venture-capital funding and state support of private initiatives.

Biometric Identity System for Financial Services

Government is playing a key role in bringing together all stakeholders to create a rich and innovation-led digital ecosystem. For instance, in financial services, the central bank has rolled out a biometric identity system that allows people to access banking facilities across the country.

Users’ voice and face images are collected at a member bank through the government’s United Identification and Authentication System. User data can then be submitted to the Unified Biometric System (UBS), which is shared among service providers through Rostelecom’s cloud infrastructure and the Interagency Electronic Interaction System, the government’s document management platform.

UBS uses a two-factor authentication process, voice and facial biometrics, to increase the accuracy of user recognition. Registered users can carry out bank transactions through their digital devices, including smartphones.

The project is a collaboration among the Bank of Russia, the Ministry of Communications and Mass Media, Rostelecom, the state-controlled telecoms provider, and partner banks, underscoring the country’s multi-stakeholder approach to digital transformation.

Digital Finance on the Frontlines

UBS’ voice recognition algorithm was developed by Tinkoff Bank, the world’s largest independent online bank. Beyond the best-known internet champions such as Yandex (Russia’s Google), VKontakte (Russia’s Facebook) and cybersecurity giant Kaspersky Labs, it is Russia’s financial sector that is leading digital innovation and driving the digital identity debate.

Russia is among the top five countries with digital banking maturity, according to Deloitte Digital. FinTech use in cities with populations of over one million is 42 percent, compared with 33 percent in the US (Ernst & Young FinTech Index 2017). FinTech is heavily concentrated on payments and money transfers.

Implementation of a national ID system would accelerate Fintech penetration as well as the growth of e-commerce, which, while thriving, remains only 3 to 4 percent of the Russian retail market, according to the World Bank. For UBS to become the de facto ID system, digital finance should bring the 22 percent of unbanked adults into the formal banking system. These include those living outside of urban centers, the elderly and low-income citizens.

Projecting Digital Power

However, when it comes to Russia, any talk about digital identity solutions inevitably leads to questions on state surveillance. How will personal data be used in a country notorious for its advanced cyber capabilities, crackdown on dissidents, and heavily monitored internet? Where LinkedIn was banned for refusing to comply with data localization laws, where the security services can access call and message logs, and where bloggers need to register with the state?

At a 2018 conference on digital regulation, an information technology official estimated that 80 percent of the working population will have a ‘digital portrait’ by 2025, as part of a ‘personal development trajectory’ which records ‘every achievement in a person’s life – the misses, mistakes, big projects…’ (Moscow Times/TASS) Observers noted the similarity with China’s controversial social credit system.

Moreover, Russia, sees itself as a champion of a multi-polar world, challenging Western (meaning, US) dominance and uses its digital influence to push back. As the digital economy grows, the digital state likely will use its power to shape global politics and the international order, doubling down on dissent.

Trust: A Complicated Concept

Trust in a digital identity system in such a complex environment will surely be problematic, to put it mildly (Winston Churchill once described Russia as ‘a riddle wrapped in a mystery inside an enigma,’ hard to make sense of and much harder to predict). Depending on who you talk to, the country is either solidly behind the current government or a clamour for change is rising.

How do you negotiate trust, in all its shades and nuances, in this context? Will global opportunities in the digital space change the dynamics of trust, ushering in a new glasnost? Or will it reinforce the existing social contract between Putin and the public - economic stability in exchange for freedoms?

As usual, eager to have a lively conversation about this!