A NEW FACE IN THE FINANCIAL MARKET

For many years, Azerbaijan’s financial market has been a pioneer in adopting cutting-edge technologies and instruments, demonstrating how digital transformation can enhance efficiency, transparency, and accessibility of services for a broad audience.

Among the wide array of recent innovations, fintech and the operations of credit bureaus stand out, significantly simplifying life not only for users but also for banks themselves.

In late June, Baku hosted the International Credit Reporting Conference and Fintex Summit 2025. Beyond sharing a common target audience, these events drew attention due to the high number of foreign expert attendees. As such, they served not only as platforms for exchanging best practices but also as crucial steps in integrating Azerbaijan into the global financial technology ecosystem.

As a result, a Memorandum of Understanding was signed during the Fintex Summit to establish a credit bureau platform for Turkic states.

Ensuring financial stability

In an increasingly digitalised and integrated financial sector, the strategic role of credit reporting systems has expanded far beyond traditional scoring formats. In this regard, credit bureaus in Azerbaijan have become one of the key pillars of financial stability.

Over the past seven years, the credit portfolio of Azerbaijani banks has grown by 125%, or 2.3 times, reaching ₼29.3 billion. Meanwhile, non-performing loans decreased by 72%, amounting to ₼449 million. "The growth in lending levels confirms the timeliness and correctness of the decision to establish and develop a private credit bureau," said Zakir Naghiyev, President of the Azerbaijan Banks Association.

Toghrul Aliyev, Deputy Chairman of the Central Bank of Azerbaijan (CBA), noted: "Credit bureaus promote responsible lending by reducing information asymmetry and the likelihood of defaults in credit markets. They also play a vital role in macroprudential analysis, stress testing, and risk modelling under Basel III."

Elchin Habibov, CEO of the Azerbaijan Credit Bureau, added that modern credit bureaus have evolved beyond mere databases into specialised institutions supporting digital transformation. They now assist financial institutions in accurate risk assessment, fostering business growth and strengthening trust.

"Credit reporting is a cornerstone of financial stability. It ensures responsible lending, a culture of borrowing, and security for both banks and society at large. For central banks, these systems are tools for macroeconomic resilience. Collaboration between regulators and credit bureaus helps create a more transparent and efficient market," Habibov stated.

Ruslan Omarov, Chairman of the Board of the Eurasian Credit Information Suppliers Association and head of Kazakhstan’s First Credit Bureau, emphasised that credit bureaus play a foundational role in building trust between financial institutions, with data protection and restricted market access being top priorities.

At the same time, advancements in digital technology are expanding the capabilities of credit bureaus. Many now utilise alternative data sources—such as mobile operators, utility services, and e-commerce platforms—to include individuals outside the traditional financial system in credit histories. "Significant progress has already been made in Azerbaijan in this direction, and work continues," Habibov remarked.

Fintech Innovations

Another major transformation in the financial system in recent years is the growing role of fintech. In an increasingly digital world, users expect fast, secure, and personalised financial services. Fintech has rightfully become the driving force turning these expectations into reality.

The global fintech market is projected to reach $700 billion by 2030. In this context, Azerbaijan has set ambitious goals for the same period. According to Vusal Khalilov, Deputy Chairman of the CBA, as of April 2025, the monthly volume of cashless payments via payment cards approached ₼10 billion. "Over four months, the value of cashless transactions made with domestic payment cards increased by more than 67%, while the number of transactions rose by over 91%. This means that 9 out of 10 domestic transactions are now cashless," he said.

In this regard, the CBA’s key objectives include establishing a balanced and flexible regulatory framework for fintech, introducing new technological solutions, ensuring universal access to digital financial services, and fostering efficient information exchange with market participants. "We believe that Open Banking, Distributed KYC, and especially the Instant Payment System we are developing will play a crucial role in advancing fintech," Khalilov added.

Analysts suggest that Azerbaijan’s banking platform model should integrate decentralised finance, embedded finance, regulatory technology, artificial intelligence, and green technologies.

Vusal Gasimli, Director of the Centre for Analysis of Economic Reforms and Communication in Azerbaijan, elaborated on these innovations.

Decentralised finance, based on blockchain, is growing rapidly—whether we are ready or not. Unlike centralised systems, it shows higher growth rates. The next trend, embedded finance, involves integrating financial services into non-financial platforms, from ride-hailing apps to e-commerce systems. Regulatory technology, meanwhile, enhances oversight efficiency, including anti-money laundering efforts, transaction monitoring, and adaptation to new payment mechanisms. The fourth trend is AI-driven personalised solutions.

Regarding green technologies, Gasimli noted that sustainable and environmentally responsible solutions must be considered in transforming the banking sector.

The focus should also remain on establishing digital banks, necessitating legislative reforms. A centralised open banking infrastructure, to be launched by the CBA, will enable deeper and more effective implementation of open finance principles.

Zakir Naghiyev stressed the need for innovative central labs to foster an open ecosystem that supports groundbreaking solutions in the future. "We believe that innovation hubs, as seen in Singapore, Italy, and other leading countries, will facilitate more successful projects for ecosystem participants," he said.

Meanwhile, Yelena Bakhmutova, Chair of the Kazakhstan Finance Association Council, expressed confidence that joint initiatives—such as cross-border innovation hubs and open dialogue between the central banks of Azerbaijan and Kazakhstan and the private sector—could turn the Caspian region and Central Asia into a dynamic digital finance hub. "We stand at the crossroads of East and West, tradition and technology. Today, fintech is one of the most powerful drivers transforming our economies," she said.

As evident, Azerbaijan is among the countries steadily progressing toward building a resilient, innovative, and inclusive financial ecosystem—one capable of not only integrating into the global landscape but also leading regional digital transformations.