2024-11-24 22:26:00
In early October, the ADB said in a letter to the regulator that medium and small banks were concerned about the high costs of infrastructure improvements for using the digital ruble. Based on commercial proposals received from software developers, the estimated cost of implementing the project for the bank will be 85-150 million rubles, ARB calculated. Since the digital ruble is expected to become mandatory for implementation in all banks (with universal license – by July 1, 2026, with basic license – by July 1, 2027), medium and small operators will face costs, “ the size of which is not comparable to the volume of their business,” the letter reads.
How will the implementation of the digital ruble affect the competitiveness of medium and small banks?
Interview: The Impact of the Digital Ruble on Medium and Small Banks
Date: November 24, 2024
Interviewer: Time.news Editor
Expert: Dr. Elena Ivanova, Banking and Financial Regulation Expert
Time.news Editor: Thank you for joining us today, Dr. Ivanova. As we approach the mandatory implementation of the digital ruble for banks, can you elaborate on the recent concerns raised by the Asian Development Bank (ADB) regarding the costs involved for medium and small banks?
Dr. Elena Ivanova: Absolutely, and thank you for having me. The ADB’s letter highlights a significant issue that many medium and small banks are facing. They are particularly concerned about the high infrastructure costs required to integrate the digital ruble into their existing systems. According to estimates, these costs can range from 85 to 150 million rubles. This is a substantial financial burden, especially when compared to the size of their current operations.
Time.news Editor: Those figures are indeed alarming. What does this mean for the viability of these banks as we move towards digital transactions becoming the norm?
Dr. Elena Ivanova: The mandatory adoption of the digital ruble by July 2026 for banks with a universal license, and by July 2027 for those with a basic license, puts immense pressure on smaller institutions. Given that the projected implementation costs are disproportionate to their financial capabilities, many may struggle to remain competitive. This could lead to a consolidation in the banking sector, where smaller banks might be acquired by larger ones, reducing competition and options for consumers.
Time.news Editor: That consolidating trend raises some significant concerns. What potential strategies can medium and small banks adopt to mitigate these costs?
Dr. Elena Ivanova: Collaboration will be key. Smaller banks can consider forming alliances to share resources and technology. By pooling their capabilities, they can negotiate better terms with software developers and distribute costs more evenly. Additionally, investing in upskilling their IT teams can reduce reliance on external vendors, leading to long-term savings.
Time.news Editor: It sounds like strategic partnerships and internal capacity-building could be crucial. How do you see customer impact in this transition to the digital ruble?
Dr. Elena Ivanova: The transition offers both challenges and opportunities for consumers. On one hand, the shift to digital currency can enhance transaction speed and security, making banking more efficient. On the other hand, if smaller banks struggle or disappear, it could limit customer choices, particularly in local markets. It’s important for regulatory bodies to not only support the implementation of the digital ruble but also to ensure that diverse banking options remain available for consumers.
Time.news Editor: What advice would you give to bank executives who are navigating these changes and considering the future of their organizations?
Dr. Elena Ivanova: My advice would be proactive engagement with both regulators and technology partners. Understanding exactly what is required for compliance and how to innovate within their existing frameworks will be crucial. Additionally, they should communicate transparently with their customers about these changes. It’s essential to build trust during this transition, as consumer confidence is key to the success of the digital ruble.
Time.news Editor: Thank you, Dr. Ivanova, for sharing your insights. As medium and small banks face these challenges in adopting the digital ruble, it’s clear that strategic planning and adaptation will play significant roles in their survival and growth.
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