Thu.
Feb 6
2025

‘Russia’s Google’ Might Have Just Leapfrogged Google in Financial Services

Editorial Staff
Sep 28, 2020

Ask any person in the West what Yandex is, and you’ll get one of two responses: a blank stare, or the words “Russia’s Google.”

The fact is, Yandex Group, whose search engine is ubiquitous in the Russian speaking parts of the world, has been much more than Google for some time.

If you’re stranded in Moscow with not a bus in sight, you’ll use the Yandex.Taxi app, one of the mobility services provided by the joint venture between Yandex and Uber. If conversation with the driver is a little awkward, you may opt to put in your headphones and listen to some Russian tunes on Yandex.Music, the service’s answer to Spotify. And if you arrive home to realise you forgot to grab a bite to eat – don’t despair. You can order your favorite meal from Yandex.Eats or get groceries delivered in 15 minutes by Yandex.Lavka.

Yandex’s sprawling ecosystem includes e-commerce, car-sharing, video streaming and more, while its self-driving technology business was recently spinned off to create the stand-alone Yandex Self-Driving Group. All in all, Yandex is more like Google, Amazon, Uber and Spotify all wrapped into one.

On Tuesday, Yandex made a surprise announcement, confirming plans to extend its reach into financial services.  The tech giant said that it has reached a preliminary agreement to acquire Tinkoff, the country’s first and largest digital bank, for nearly $5.5 bn. Yandex seems to be diving head first into banking, while Alphabet, Google’s parent company, is just starting to test the waters.

Though the US tech  behemoth may have Google Pay and a new debit card and bank account in the pipeline, Yandex is set to acquire a highly profitable, full-fledged bank with a variety of developed financial and lifestyle services that are already operating successfully across all of Russia.

And it looks like the market approves the move. Yandex shares rose 4.5% since the announcement, while TCS Group, Tinkoff’s parent company, gained 7%.

Yandex’s planned acquisition of Tinkoff comes on the heels of its split with Russian state-owned brick-and-mortar bank, Sberbank. Earlier this summer, the two called it quits on their joint ventures in e-commerce and online payments, freeing Yandex to compete with its former partner in those areas.

“The return of Yandex.Market and the potential deal with TCS Group are to fill the ecommerce and fintech gaps in Yandex’s ecosystem,’’ VTB Capital said in a note to investors on September 25, rating Yandex’s stock a ‘buy’.

By merging with Tinkoff, Yandex will “fast track” its acquisition of fintech solutions, developed by a “digital consumer-centric bank with an entrepreneurial management team,’’ Goldman Sachs wrote in a research report. “Further, Tinkoff ‘s fintech business could benefit from access to Yandex’s vast user network and data, which could improve its credit scoring framework and enlarge financial product cross-sell opportunities.’’

State-run Sberbank, Russia’s largest lender, is keen to remain relevant and has announced it too is betting on tech to create its own ecosystem of financial, e-commerce and lifestyle products.

On Thursday, Sberbank unveiled its new strategy with a flashy Apple-like presentation, during which CEO Herman Gref introduced a suite of new tech products along with a “family” of virtual assistants and its own digital payment system. Sberbank also dropped “bank” from its name to underscore its move away from traditional banking.

“In an apparent attempt to sound more like a Big Tech group, $67 billion state-owned Sberbank is ditching “bank” from its name,’’ Dasha Afanasieva, a columnist at Reuters Breakingviews, wrote on September 24. “To convince, the transformation needs more substance.”

The jury is still out on Sberbank’s transformation. However, analysts seem to agree that Yandex’s acquisition plans are beneficial to both companies and have the potential to completely reshape Russia’s tech and banking.

“We believe the proposed acquisition of Tinkoff by Yandex is a win-win for both companies,’’ said Mikhail Terentiev, Head of Research at Sova Capital. “Overall, the inclusion of financial services in Yandex’s ecosystem should help improve user loyalty and make the united company’s competitive positions more defensible.’’

With Sberbank expanding into the technology space currently dominated by Yandex – and Yandex now wading into Sberbank’s financial services field – analysts believe the battle between the two Russian giants is about to heat up. Mikhail Terentiev of Sova Capital has  on the pressure Sberbank is now under: “By buying Tinkoff, Yandex becomes a larger and more attractive company.”

What’s more, consolidating Tinkoff’s cash-generative business should give Yandex additional firepower to spend on long-term initiatives with heavily back-loaded paybacks, such as driverless cars, according to Terentiev.

There are, of course, potential challenges ahead, as there are no guarantees the acquisition will happen smoothly. In addition to the complexities of integrating two large companies, there might be some more long-term issues to consider.

It’s possible that when Yandex begins to provide banking services, its fortunes will become more closely tied to Russia’s economic cycle, according to Sova Capital analysts. For the first time, too, Yandex – which had previously positioned itself as the friendly everyday assistant – might have to perform some not-so-friendly tasks, like debt collection.

These issues notwithstanding, the ramifications of the Yandex-Tinkoff union could potentially cause a seismic shift in the market and provide an important case study for big tech companies worldwide.

While neither company is prepared to comment until the deal is completed, industry watchers have stepped in to voice what the newly merged company might look like.

“The vision is to create an expansive technology platform that offers a variety of online services, such as search, ride-hailing, and payments – not unlike Tencent’s WeChat in China,’’ Evan Niu, senior technology specialist at The Motley Fool, explained.

Whatever the strategy for the big tech company going forward, the planned Tinkoff acquisition is one more reason to stop calling it  “Russia’s Google” and instead to ask: “where is Yandex headed next?”

This website uses cookies to improve and customize the user experience. To learn more, please see our cookie policy.
Cookie Policy