Oliver Hughes joined Tinkoff as CEO in 2007, and under his leadership the branchless innovator has grown into the world’s largest independent digital bank by customer base. Hughes discusses Tinkoff’s future growth plans with Douglas Blakey
Russia’s Tinkoff Bank is little more than 10 years old, but has made quite a splash in its short history.
In 2017, Tinkoff cemented its position as the number two credit card player in Russia with a market share of 11.6%, acquiring 1.8 million new credit card customers. The self-styled online financial supermarket in the cloud is now making waves in the current, SME and investment account segments.
At first glance, Tinkoff’s current profit forecasts may appear ambitious – it says it is on track to hit net income of at least RUB24bn ($390m) in FY2018, up from RUB19bn in 2017 – but, if anything, the forecasts appear somewhat modest given Tinkoff’s track record.
Tinkoff Bank CEO Oliver Hughes, tells RBI: “We are opening over 400,000 accounts per month across all products. In consumer current accounts, we are opening 120,000 new accounts per month.”
Tinkoff is successfully disrupting the existing market, while its current account net promoter score of +57 is sector-leading.
Tinkoff’s move into the SME sector in 2016 has kicked off so well that that business line reached break even in June 2017. As at year-end 2017, Tinkoff served about 250,000 SME customers, a fivefold increase in one year. For fiscal 2017, SME business contributed RUB3.2bn in fees and commission income, and over RUB800m in net segment income.
Diversifying Tinkoff into new sources of non-credit revenue is giving it an increasing share of customers’ wallets, and it is proving that it can build and scale in new segments profitably. Tinkoff Black and Tinkoff Mortgage both broke even in 2017, while its into the investment sector is also proving a hit.
Notes Hughes: “Tinkoff Investment, a retail securities trading platform-broker also exceeded expectations with over 70,000 brokerage accounts opened by year-end 2017. We are already a big player in retail securities in Russia.”
In May, Tinkoff rolled out its own platform, offering brokerage accounts directly to customers. As a result, the overall contribution to total gross revenue from all non-credit-related business lines, including Tinkoff Insurance, doubled in 2017.
Hughes continues: “We remain on track to report net income growth per year in the 20- 40% range to the end of fiscal 2019.”
Segmentation strategy is very much the mid-market, but Tinkoff is increasingly moving into the mass affluent and lower end of the high net worth segments, as evidenced by its launch of Tinkoff Black, which offers concierge services.
ATMs, but no to branches
Highlights for 2017 included Tinkoff launching its own ATM network, initially with 200 units, but Hughes already has plans for an additional 400, and says the network will hit 1,000 before long.
Hughes’s position on the branch, however, remains resolute. He insists: “We do not need branches and will not have any branches of any format. Some [digital] banks have experimented with fancy branches or cafe formats or used the branch to promote their brand. We do not need any branches for brand presence.”
Tinkoff’s use of biometrics puts many a established Western bank to shame. Hughes explains: “We have been using biometrics for many years now. Customers to our call centre are identified by voice – so no need for codewords, passwords or questions about your mother’s maiden name.
“Already we have five million voice prints. It not only enhances the customer experience; it increases call centre efficiency and security.”
Tinkoff customers are also photographed as accounts are opened, and the image shared with credit agency Equifax. The Tinkoff image library is approaching five million users.
Hughes concludes: “We are moving biometric security to the next level – with a two-factor biometric database for the state.
“Other banks have started to contribute customer images, so that in time there will be voice and face prints for all consumers. It really will be a great fraud-prevention instrument.