Few banks can say they
have seen a seven-fold increase in assets under management year on
year, but for Alfa Bank, Russia’s fourth-largest retail bank with
more than fivem customers and a history that is just over two
decades old, this is the case. MaryRose Fison speaks to head of
retail Alexei Marey.


Photo of Alexei Marey, director of retail banking, AlfaPrivate sector
Alfa Bank, Russia’s fourth-largest bank by assets after state-owned
giants Sberbank, VTB and Gazprom, had a stellar year in 2010 and
hopes the momentum it has built along with a raft of initiatives,
now in their infancy, will result in similarly striking results at
the end of this year.

Alexei Marey, the high-flying
33-year-old director of retail banking at Alfa, is under no
illusions as to the challenges Russian banks face.

The country has one of the
lowest bank penetration rates of developing markets, with just over
half of its 145m-strong population having a bank account and 93% of
all transactions still undertaken using cash. But he is optimistic
that a change in attitude towards retail banking is already

“People are starting to
realise that if they lose their wallet and they have cash in it
then this cash is lost forever, while if there is a card in there,
you could still call the bank and block it,” he said.

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The increase in budget
airline flights has provided a boon to banking indirectly. With
more Russian’s possessing a foreign passport, the convenience of a
credit or debit card is beginning to surpass loose rubles and
travellers’ cheques.

“If you compare now to five
years [ago] there are more people travelling outside the country.
Although it’s still quite a small proportion as only about 10m
Russian customers (less than a tenth of the country’s population)
have a foreign passport.

“Banks are increasing their
focus on promoting card-spending and introducing certain discounts
for loyalty. For example, if you pay by card nowadays you can
expect to get additional bonuses such as ‘air miles’ and additional
discounts. Some of the banks have also introduced cashbacks and
therefore people are also starting to see the benefits of paying by
card instead of cash.”

Over the past year, Alfa not
only boosted its market capitalisation – but it also formulated a
masterplan geared to ramp up profits in each of its 220 branches.
Last month the bank launched an innovative pilot joint venture with
Vympelcom, one of Russia’s largest telecommunications operators,
giving consumers the chance to combine banking with mobile phone
usage. It was a shrewd move given the blanket penetration of mobile
phones in Russia – where every adult resident owns one – and an
indicator of the bank’s modern approach to new consumer

“For us, this is about the
synergies between retail banking and mobile operators. We have to
take these synergies and try to develop a product which will help
those who don’t have a banking account have access to cards as a
means of payments. For those who are interested, we are issuing a
card which will be linked to their mobile [phone] account, which
would look exactly like a payment card and could be used and paid
at any point of sale internationally.”

Marey’s team is rolling out
the pilot to approximately twom people and aims for take-up of 5%.
On the face of it, this figure might appear low, but Marey said the
fragmented nature of Russian banking, combined with cultural
attitudes, mean large-scale uptake will only happen over

“One of the reasons for this
– and it is probably the most difficult one to overcome – is habit.
People are just used to paying by cash. They saw their parents pay
by cash, they saw their friends paying by cash and they also pay by
cash. Secondly, there is an acceptance gap. If you take retail
stores like open markets or kiosks, for example, in many cards are
not accepted and some retailers prefer cash rather than cards
because cash is cash and a card is a wire transfer to their bank
account, which is different.

“Even when we start with a TV
campaign and have our advertising, we believe it will take a
certain amount of time to educate people about the

Another goal for the year is
to successfully execute a joint debit and credit card arrangement
with Russia’s largest food retailer X5. With a net profit of $165m
in 2009, the supermarket chain’s large customer base will open up a
whole new client base for the bank, which holds a 47% stake in the

The first cards were issued
on 15 December and Marey’s intention is to see between 200,000 and
250,000 issued within the next three years, generating a profit of
between $5m and $10m over four years.

Although he is reluctant to
disclose how much Alfa has invested in the venture, for reasons of
commercial sensitivity, Marey says it has poured more than $1m into
advertising alone in the first year – an amount he expects will be
more than recouped if sales go according to plan.

“For us, the initiative
represents access toms of new potential customers who are already
using X5 for their daily shopping and for X5 to give their
customers new benefits by developing their existing loyalty

He expects the bank’s average
revenue per month per customer – currently $150 – to grow as a
result. But what will undoubtedly play an increasing role in the
bank’s ability to attract new customers is its customer service.
Already, Marey believes this is what has set it apart from its
competitors and accounted for the 25% increase in customer growth
reported last year.

“The biggest differentiators
in a bank are the staff and we put a lot of effort into hiring and
training people whom we want and according to our standards, and we
try to create a culture inside where these people can

Alfa’s staff base increased
by over 15% last year bringing employee numbers to 7,000 across the
bank’s 220 branches.