Russian iPhone users can now experiment with social banking – an entirely new concept in the country – with an app launched last month by Instabank, a Moscow-based startup. The iPhone app allows clients to transfer money to Facebook friends who also use Instabank, get notifications of new account activity, and add geotags and photos to their transactions.
At present Instabank is limiting the number of new users through an invitation-based system. Yet the company has to date received far more invitation requests than expected, marketing and communications manager Elisey Zakharov told East-West Digital News.
“We are already working on issuing bank cards for the first users and expanding the functionality,” he said.
There is still a long way to go on the Instabank roadmap. The list of features to implement includes virtual credit/debit cards, individual Instagram-based card design, a personal home banking system and more. Zakharov also emphasized that the still-to-be-introduced function of transferring money to Facebook friends who are not using Instabank is the startup’s know-how and a potential killer feature.
Mobile first
Before creating Instabank, the co-founders — Dmitry Feofanov, Roman Potemkin and Valentin Kravtsov — had been involved in mobile software development for several major banks, including Home Credit, Unicredit, and Tinkoff. The idea of creating Instabank came as a result of frustration with what they saw as the sluggishness of large financial organizations.
“At a certain point the founders realized that over the past few years the whole world had changed,” said Zakharov. “It became obvious to them that behind the nice mobile applications then in use there still stood huge, clumsy banks – a situation not in line with the current evolution of society.”
Zakharov reckons that a “bank in a mobile phone will revolutionize the banking sector the same as Instagram has revolutionized the photography world.”
Yet the team does not stray too far from conventional banking institutions. While Instabank offers users a slick mobile banking interface and customer support, the actual bank infrastructure is provided by a partner, Russian bank VPB. Another partner of Instabank is Masterbank, from whose ATMs the social banking service’s users can withdraw funds without charge.
In October 2012 Instabank received an undisclosed sum in funding from Life.SREDA (the company was valued at $4 million then). Established last year with an initial capital of $10 million, this venture fund is part of the Russian financial group Life, which comprises eight sizable Russian banks.
An untapped market
Even though several similar projects have been launched over the past few years, including Simple and GoBank in the US and Fidor Bank in Germany, mobile and social banking is new in Russia. Rocketbank, a Russian startup that intended to disrupt the banking field, was announced in June of last year but is still working on an invite-only basis.
Instabank presents its focus on mobile and social functions, relating in particular to Facebook, Instagram and Foursquare, as a distinct advantage in Russia’s social banking market – which, according to Zakharov, is “very ample and almost untapped.”
Another source agreed. “Nowadays smartphones are becoming one of the most important channels for financial services and the main interface for social networks. Sooner or later these two segments had to be combined, and it is very promising,” noted Viktor Dostov of the Russian Electronic Money Association in an exchange with EWDN. “On the other hand, customers tend to be very conservative when it comes to bank services; this is why such projects, in my opinion, should be considered marketing instruments rather than core bank services.”
Although Instabank’s Russian service is not fully launched yet, the startup already envisions expansion to the US.
Among other plans are apps for Android and Windows Phone, though focus will be kept on iOS in the short term, Zakharov said.
