Russians are set to receive financial passports: what is the essence of the innovation?

A citizen's financial passport may soon be introduced in Russia. This initiative was put forward by Senator Olga Epifanova, an insolvency administrator at the Russian Ministry of Justice. She believes it will allow Russians to control their spending and eliminate the risk of falling into debt.

The financial passport is nothing like the "red-skinned passport" to which Vladimir Mayakovsky dedicated his famous poem. According to the senator, this digital financial document will allow one to control one's spending because it will show the entire financial picture and alert one when the risk of overspending is approaching a critical point and it's time to say "stop."

This initiative is entirely appropriate given the current circumstances. According to the Central Bank, Russians' overdue loans have reached a record high of 1.5 trillion rubles over the past six years. From the beginning of this year through July, the volume of overdue debt has grown by 400 billion rubles, and the share of overdue loans in various bank portfolios is 5.7%.

Analysts believe the situation will continue to worsen, despite the regulator's best efforts to curb lending to risky borrowers. "After all, these are real families who are being crushed by debt," says Olga Epifanova. "And delinquencies are growing, slowing the economy. Some Russians pay more than half of their income to banks."

However, not all of our fellow citizens resort to credit institutions, remembering the golden rule that you borrow someone else's money for a short time, but you get your own back forever. And at high interest rates, no less.

We asked economics professor Alexey Zubets: does everyone need financial passports? After all, for most Russians, their wallet is their main controller. If it's empty or thin…

"If we're talking about passportization, then it should, of course, cover the entire country's population. This is essential for ensuring the reliability of the financial system. This goes without saying; someone without a financial passport will face unnecessary questions. But, for example, my passport won't have a single entry because I haven't taken out any loans."

— Will the Federation Council's initiative help combat Russians' debt overload?

"We, like many countries around the world, already have a unified rating agency database that determines borrower ratings. However, it's fragmented. Why don't we take it a step further and consolidate all the information into a single location?"

On the other hand, not all individuals would want their personal financial information stored there. Furthermore, large banks, using this data, would gain the opportunity to lure reliable clients. Today, small lending institutions operate quite successfully thanks to fragmented information about borrowers. Financial passporting of citizens could be seen as a way to monopolize this market.

The key driver behind the proposal is the high debt burden of the population, says Freedom Finance Global analyst Vladimir Chernov.

"Banks are trying to stabilize the situation by lowering rates and strengthening borrower checks," he explains, "but this isn't yet enough. A financial passport could become a tool for more accurate creditworthiness analysis, which would limit the issuance of new unjustified loans and reduce the rate of growth of problem debt. However, there are significant risks, as concentrating all data on income, expenses, and liabilities in a single digital profile increases the likelihood of cyberattacks, leaks, or fraud." Furthermore, the analyst notes, strict controls could lead to social tension, as some citizens associate the idea of ​​"total financial transparency" with a restriction of freedom and excessive government interference in their private lives.

The initiative's long-term success will depend on how well it balances data protection, user convenience, and transparency for banks. If implemented carefully, the project could stimulate financial literacy and reduce Russians' debt burden. However, if implementation is flawed or data protection is weak, public trust will be undermined, and then, instead of mitigating the country's debt burden, the country will face new risks of social and economic instability, Chernov concludes.