Marey, head of retail banking at Alfa Bank, Russia’s largest
privately owned banking group. Marey explains how superior customer
service, product innovation and a big investment in multi-channel
distribution will keep Alfa ahead and fend off competition from
international raiders.
In contrast to a number of its Russian banking peers
which have welcomed strategic investment from Western raiders
(see RBI 588), Alfa Bank has jealously guarded its
independence and faces the future with confidence.
Founded in 1990, it is already the
country’s fourth-largest bank by assets behind state-controlled
Sberbank, VTB and Gazprombank. Its most recent annual results,
posted in April, provide evidence of this optimism: total assets up
49 percent to $22.7 billion; net profit after tax up by 33.2
percent to $253.5 million; total gross loans grew 57 percent to
$15.4 billion; and loans to retail clients increased 131 percent to
$1.9 billion.
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“We recognise we are competing with
Western banks with their experience and knowledge,” said Alfa
Bank’s head of consumer banking, Alexey Marey, in an interview with
RBI. “They are a definite threat to us but not a major
threat. Long term they are serious players and some of them may
have an advantage in terms of funding.”
One area in which Alfa has a clear
advantage over international rivals is its expanding branch
network. Alfa currently has around 200 branches in Russia, almost
170 of which were built within the last three years, and Marey says
the bank will open more then 30 branches over the next 12
months.
“We are increasing the network but not
very aggressively,” Marey added. “Numbers are currently being
finalised and we will plan city by city, area by area based on
getting the maximum and fastest return on investment.
“While we see the foreign banks as
competitors and a threat to us today in retail – UniCredit is quite
strong in the auto and mortgage sector, for example – we are ahead
of them in terms of branch network, sales development and
distributional channel development and it will take them some years
to build.”
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By GlobalDataAlfa, he adds, has an advantage over
domestic and international rivals in terms of online distribution.
More than 300,000 of its 2.65 million retail customers are regular
users of its internet offering, a figure that has risen from only
100,000 a few years ago and, with increasing internet penetration
in Russia, will rise further.
“We believe the internet is a key channel
to develop and the number of our customers banking online is a good
sign that we are moving in the right direction… We compete with
international banks with online platforms recognised worldwide,
Citi for example. Our platform was developed by us, especially for
Russia.”
Eighth most powerful
brand
An early awareness of the importance of
branding and marketing has been a key factor in the rise of Alfa,
evidenced by its strong showing in the most recent Russian brand
value survey by US consultancy Interbrand (see RBI 582).
It ranked eighth overall of all Russian brands, only one place
behind state giant Sberbank, the only other bank to feature in the
top 10.
The bank was positioned as a premium brand
in its early days but, in 2000, decided to go after the mass
market. In 2005 and 2006 it underwent a successful rebranding,
keeping the name but changing the logo; since then, its brand
proposition has been centred around a desire to be regarded as the
number one bank for service and customer experience.
“We try to make sure the promise and the
delivery of the brand is consistent, so any promise we make via an
ad campaign has to be delivered through every single channel
including ATMs, call centres, internet and branches,” said
Marey.
A recent study by consultant
Pricewaterhouse
Coopers (PwC) released in June, entitled Who is Winning the
Retail Banking Race in Russia?, placed Alfa in first place for
customer service and customer experience (see RBI 595).
The survey analysed 51 retail banks in the market including
Raiffeisen, Citi and UniCredit.
And while Alfa’s top place ranking in the
PwC survey (it also secured a number one ranking in a similar
survey conducted by rival consultancy KPMG in 2007) is a source of
evident pride to Marey, he cautions against complacency.
“The competition is picking up so we must
move faster,” Marey said.
The bank has also led the way in
co-branding initiatives, scoring two notable successes: with
national airline Aeroflot as well as a deal with the Russian
language edition of the magazine Cosmopolitan.
“The tie-up with Aeroflot started back in
February 2006 and so far we have more than 250,000 customers. It
was recognised by MasterCard as the best co-branded initiative in
2006.”
Cardholders earn miles every time they use
the Aeroflot-MasterCard-Alfa-Bank card and can redeem their miles
to obtain two types of travel rewards: upgrades when travelling on
business, and free tickets to make leisure trips.
The launch of the Alfa Bank Cosmopolitan
Visa card in February 2007 has also exceeded expectations, with
more than 45,000 customers already signed up.
Marey said: “It is the first women’s bank
card in Russia and was designed specially to meet the personal
needs and lifestyle of young women.”
The card offers consumers substantial
discounts at top brand stores and studios, including some which do
not conduct sales campaigns. Cardholders also have exclusive access
to closed pre-sales campaigns in partner stores and the chance to
attend special occasions such as fashion shows, concerts and new
collections parades.
Marey added: “As part of the deal we have
a page promotion in each issue of Cosmopolitan but we have
also found the card has attracted the attention of men, who want to
apply for the card to give as a gift to the lady in their life… so
that has become a second target audience.”
The success of this card has also led to
Alfa being asked when they will release a card specially designed
for men. “You can expect the launch of a new product later this
year, the details of which I cannot yet divulge,” Marey told
RBI.
Russia lags behind more mature
markets
Alfa has also successfully
targeted the mass affluent and high net worth segments of the
Russian market with it’s a-Club service, offering a dedicated
personal banker and a range of benefits normally associated with a
private bank.
But in terms of segmentation generally,
Russia continues to lag behind more mature markets.
Marey said: “The market is not that
segmented, with the level of banking penetration still far from
Western levels. For many customers, for example, the use of debit
cards is ATM only. The market allows us to acquire customers
without detailed segmentation. But necessity of much more detailed
segmentation is rising.”
One product launch Marey can reveal is a
card personalisation offering. “We are set for a big launch in
mid-September,” he said. “We have observed the trend towards
personalisation, creating an emotional link between the customer
and the banking product.”
While card personalisation has been one of
the most regular features of card marketing among banks in Western
Europe in recent years, Marey believes the Alfa product will confer
a competitive advantage.
“We will be the first bank in Russia to
launch such a card service,” Marey added. “No other bank offers
card personalisation here based solely on an online service which
is fully automated. It will also support our positioning as a new
and innovative bank which presents its customers with interesting
and fun ideas.”
Marey draws marketing inspiration from a
number of Western companies he admires.
“I like Nike and Disney,” he said. “Apple
also, as they show how deep you need to understand your customers
and how much loyalty you can generate. I admire Virgin in terms of
creating a brand and one bank, Commerce Bank in the US. I am
fascinated about what they achieved and we will try to do a certain
piece of it in Russia.”
Mergers and acquisitions
‘Easy to say, hard to
execute’
While his bank has to date focused on
organic growth, Marey does not rule out the possibility of Alfa
making an acquisition – but does not consider it essential.
“When we discuss further regional
development [an acquisition] is one of the possible ways of
advancing our development. However, when we look at a number of
mergers, especially in the regions, we have not observed many
successes,” he said.
In particular, Marey argues
banks who have undertaken M&A activity in Russia have been
distracted by the time taken trying to integrate IT platforms and
reconcile possible conflicting cultures of the merging banks.
He adds: “That is a very important area
and one not always taken into consideration. Acquisition is easy to
say but may be difficult to execute in order to get the return on
investment.”
Earlier this year, Alfa’s president, Petr
Aven, mooted the possibility of a stock market listing as part of
the bank’s development plans, though he said it was unlikely to
happen either this year or next.
And in July, the well-connected Aven –
prior to joining Alfa Bank he was minister for foreign economic
relations and served as Russia’s representative to the G7 – told
journalists the bank was looking to “seriously expand” its business
in Kazakhstan. Aven also talked of the possible investment in other
countries in the Commonwealth of Independent States such as
Azerbaijan.
