We have all at least once encountered so-called ecosystems and used their services. The increasing digitization of the economy has given us a whole network of platforms, such as Mail.ru Group, Yandex, Sberbank, MTS, Ozon, Tinkoff, Wildberries. The share of spending by Russians in this segment is steadily increasing, and as with any large business, with the growth in revenue and profitability of the supplier, the risks of business collapse due to poor quality management. and a bad business model are also increasing. All of this threatens losses for ordinary consumers, there are huge amounts of customer funds in the systems. Therefore, the Ministry of Economic Development of Russia and the Central Bank are preparing a draft law that will lay the foundation for the regulation of this area. The columnist for Realnoe Vremya, an economist with many years of banking experience, offers to take a closer look at the details of the market and the proposals of the relevant departments.
What is happening in the ecosystem market?
Currently, around 10% of total spending by Russians is on ecosystem goods and services, and this indicator continues to grow. They mainly represent taxi aggregators, food delivery, online retail and fintech. For example, in the first quarter of 2021, the share of spending in the presence markets was already over 11.27% (excluding housing, furniture, tobacco products and others). The growth of penetration in the consumer market is facilitated by the consolidation of the assets of major players such as Yandex, Mail.ru Group and others. In 2018, that figure was 5%.
If we compare with the global experience, so far, the share of ecosystems is lower than in developed countries. Nevertheless, the turnover of ecosystems is expected to reach 134 billion dollars by 2025, an increase of 21% each year. Particular competition is expected in the e-commerce segment, where giants like Ozon and Wildberries are already present (the company is not part of any ecosystem and remains an independent player).
According to experts, the barrier to revenue growth is that a person often uses only one service offered by the ecosystem, for example delivery. The size of the marketing budget is in the foreground: anyone who can gain more customer attention will see their income increase. This is the main risk of these sites: in search of customers, companies often work in the red, being “systematically unprofitable” throughout their existence. The promotion of one segment is due to the exsanguination of another or to the attraction of new investments. All of this makes the company systematically unstable.
Need for regulation
Relevant departments represented by the Ministry of Economic Development and the Central Bank of the Russian Federation expressed concern about the explosive growth of this segment and developed criteria for classifying companies in the ecosystem segment.
The first criterion is the close internal integration of ancillary services different from the core business of the parent company. Now we see that all kinds of services are mixed in ecosystems – from fintech to food delivery, when the main activity acts as a service for all other areas, in fact being infrastructural, but not the main one. compared to the system itself.
The second criterion is the implementation of continuous investments in digital innovations in various sectors of the economy. To attract the maximum audience, some services operate in the red, while others operate in the dark. This is exactly the same systemic instability as that mentioned above, and this factor is of great concern to the departments concerned in the person of the Central Bank and the Ministry of Economic Development. The absolute opacity of the activities of the ecosystem makes it impossible to see which of the companies in the system increases the losses and when and how this less is compensated.
According to the criteria developed, the signs of the ecosystem are the network effect (less in one direction to attract an audience and more in the other directions), the multiplicity of types of third-party companies, the number of services for customers, a loyalty system, logistics solution.
The regulation proposed for this segment will be based on the principle of equality for all market players, both banking and non-banking ecosystems. There will be specific requirements for the financial sector: the Central Bank has proposed to increase the capital requirements of banks that develop large ecosystems by introducing the so-called risk sensitivity limit (RSL) by 2023 The limit shows the marginal share of investments in so-called fixed assets in relation to its total capital. To calculate the indicator, banks will have to divide all fixed assets into groups, and then multiply their volume by increasing the immobilization coefficients. The indicator must not exceed 30% of the capital of the credit institution. Banks have a period until 2025-2027 to bring the indicators back to normal in the event of an overrun due to a capital increase in the amount of adjusted assets. Naturally, bankers are not satisfied with such proposals, and now there is an active discussion about this measure. Note that banks must remain more conservative institutions and not play too long with “digitization”.
“When two or three players control the market and set their prices in collusion”
In general, we speak of a sort of higher-level framework law which will establish general principles of regulation. The government is working on the project, in November 2021 there will be a plan to publish regulations, where there will already be a clear definition of what will be regulated and how. At the same time, the Ministry of Economic Development does not rule out that ecosystem regulation is immersed in the Fifth Antimonopoly Package – a bill aimed at extending the provisions of the Law on the Protection of Competition to the digital industry ( marketplaces and aggregators), which is included in the government’s legislative activity plan for 2021.
In conclusion, let us note that the term resulting from biology is already well anchored in our dictionary and that the development of ecosystems is part of the logical continuation of the growing digitalization of companies. The development of technology allows us to meet customer needs in any department almost instantly, in one place and with a click. Moreover, this already concerns not only mundane needs, but also areas such as creativity and science. There is a huge benefit to this, it is not even discussed.
But there are also drawbacks: the risk of market oligopolization (a situation where two or three players control the market and set their prices in collusion – explicit / implicit), a threat to the security of user data (the systems know too much about our preferences, purchases, trips, personal documents). What is the guarantee that it won’t be a good help for all kinds of crooks? In addition, ecosystems have enormous potential to manage public opinion, which also raises questions about the need for proper regulation of the activities of actors who should be engaged only in business and focus on development and the implementation of innovative technologies and thus displace high technologies. technology market, developing a new digital reality.
Artur Safiulin. Photo: Maksim Platonov
The author’s opinion may not coincide with the position of the editorial board of Realnoe Vremya.