Neobanks and the next step: Tinkoff 22 July 2021

Stanislav Bliznyuk, Chairman of the Management Board at Tinkoff Bank, discusses the many impressive accomplishments of his institution and how much more there remains to achieve in Russia. 
The demographics of neobank users are often surprising; it is not only young people who are signing up, but also older age brackets. What is the standard profile of your target customer? What has been key to your customer acquisition success?
It is a common misconception that neobanks are attractive to only the younger generations, who are the ones driving industry growth. While it might be intuitive to think this, and there is a grain of truth to younger people being the early digital adopters, this is not the full picture. 
The young, digital natives might have been the first to start using digital financial services, but the strength and the breadth of our offering have enabled us to enjoy explosive growth well beyond this demographic. At least 60% of customers who sign up for Tinkoff Black – our current account product -- come to us via referrals from existing customers. This helps broaden our base from the digitally-savvy and highly educated to the general population.
Generally, such referrals provide a steady stream of new customers across business lines, thanks to our commitment to customer service and the seamless, intuitive user experience that is at the core of what we do at Tinkoff.
Having something for everyone also helps us to achieve a broad customer base and to continue growing it across the demographic and social strata. Today, Tinkoff is a financial and lifestyle ecosystem, serving more than 13 million customers across Russia. 
We offer a variety of lifestyle services within our super app, ranging from cinema and theater bookings to travel reservations and flower delivery, which we offer alongside traditional banking, payments, and insurance products. These appeal to a broad slice of the population.
We also have Tinkoff Junior, a popular product with teenagers, who learn about banking, spending, and financial planning from an early age by using Tinkoff – with all the requisite parental controls in place.
We cater to what we can broadly refer to as the ‘mass affluent’ demographic, but also have high-net-worth individuals among our customers. We are currently building out a more comprehensive offering for this customer segment, so stay tuned for some news on this.
Generally, we have a diverse customer base that includes active, engaged users from across the spectrum. Undoubtedly, the pandemic has also played a role in accelerating digital adoption in Russia as it has elsewhere around the world. 
Many were forced to try digital services for the first time last year and having discovered their convenience, they are unlikely to go back to their old habits.
There is sometimes a perception that neobanks are convenient for travel purposes, but people maintain a different primary bank account for most of their banking needs. How do you convince people to use neobanks as their primary bank, where they keep a majority of their money and turn to for all of their financial needs?
Unlike many other neobanks, Tinkoff has been around since 2006. Branchless from the start, we have built up a reputation over the past 15 years for being truly dependable – a fully licensed bank (and now much more than a bank) that you can trust.
Besides being around for a relatively long time and thriving, our very model encourages customers to switch over to Tinkoff from other banks to bring all of their spending into our ecosystem. Customer engagement is an important focus for us and a key part of our strategy. We make spending and other routine financial transactions more enjoyable. The Tinkoff customer experience is not only convenient, but it is also fun and rewarding. 
Our customers get personalized offers and cashback bonuses for using the products and services within the Tinkoff ecosystem. They are rewarded for keeping their transactions within the Tinkoff ecosystem, being incentivized to use Tinkoff as their primary bank (as well as their travel agent, their ticketmaster, their brokerage platform and much more).
Our customer engagement figures show the strategy is working. We were able to increase the number of our monthly active users (MAU) across our main interfaces from 6.0 million to 9.3 million by the end of 2020.
While neobanks have shown impressive numbers in terms of customer acquisition, the transition to becoming profitable is proving more challenging. How do you make the necessary leap to becoming profitable while still maintaining the pace of your user acquisition?
Focusing on profitability early on was a strategic priority for us – one born out of necessity. In 2006, Russia was not a market awash in startup capital. Tinkoff began its history as a branchless credit card monoliner, but soon began offering current accounts and other banking products, becoming a tech company with a banking license. 
Building out a robust tech core and keeping customers engaged was and is key to our ability to maintain and grow a loyal customer base. We also diversified into different non-credit business lines, ensuring Tinkoff can thrive no matter the economic cycle.
Non-credit business lines such as Tinkoff Investments, Tinkoff Business and Tinkoff Acquiring accounted for a record 37% to total revenue by the end of 2020. Our return on equity remains above 40%, making Tinkoff one of the most profitable independent digital banks globally.
Taking a more granular look at how we were able to achieve this – it comes down to the fact that we only deploy capital where we think we can earn a satisfactory return on investment. 
Generally, we think about our products as belonging to one of three broad categories. The first category, like Tinkoff Black, is aimed at getting an additional stream of new customers into the Tinkoff ecosystem. The second category consists of highly monetized products such as Tinkoff Investments brokerage platform, Tinkoff Business serving businesses of all sizes, and Tinkoff Acquiring - Russia’s second-largest provider of acquiring services. The third one is meant to keep customers engaged and provides additional opportunities to cross-sell products to them. This last category includes cinema tickets and restaurant bookings and similar products and services.
Striking the right balance among these categories, while continuing to provide the best-in-class customer experience is our secret sauce. 

Being a bank without branches, customers only interact with you digitally. How do you ensure an excellent customer service experience with interactions being 100% digital? Are there certain advantages or challenges compared to banks that need to manage physical spaces?
Our super app is a modern-day branch equivalent. It is a branch that is always open and available to our customers at their fingertips. We have a very responsive in-app customer-service chat, where chatbots can hand over more complex requests to live customer support personnel, so any questions can get resolved quickly via real-time chats. 

We also have a cloud-based call center, which continued to operate as usual during lockdown and beyond, providing the prompt and convenient service Tinkoff customers have grown to expect. We also have sophisticated chatbots, which fully address 50% of customer requests without having to switch to a live operator for help.
In addition to having robust customer-service provisions, our interface is deliberately highly intuitive and predictive. The Tinkoff super app provides a seamless user experience, making it easy for our customers to find just what they need among the hundreds of products and services in our ecosystem. 
In terms of not having to manage physical branches, being fully digital is certainly an advantage when it comes to efficiency. It helps keep costs low and continue business as usual, unaffected by any restrictions that have recently become a reality of the physical world. Being branchless and fully cloud-based also helps us to remain flexible and scale up or down quickly, as market conditions and the macroeconomic environment dictate.
What are your international expansion plans? Could you describe the regulatory or technical challenges to becoming a truly global neobank?
We became Russia’s third-largest bank overall last year by customer base, just behind two other players, which are both state-run. Nevertheless, Tinkoff still accounts for just 2% of the total retail lending market, so there are lots of opportunities for growth in this and other areas.
For now, we are focusing on Russia. It is the most populous market in Europe, one with a highly competitive fintech landscape and a deep pool of first-rate tech talent. We’ve been successful in finding the right formula for profitable growth in this market, which spans 11 time zones, and aim to continue expanding profitably in Russia going forward. This is an exciting, under-penetrated place with a lot of growth to be had. 
That said, we are constantly looking at other markets for new opportunities -- the ones where we would be able to compete and expand successfully. We will continue to do so in order to not miss the right opportunity if it arises.

How do you see your bank evolving in the next five to ten years? And more generally how do you see neobanks competing in the future banking landscape?
In five years, Tinkoff is set to become even more dominant than it is now. I see the battle for customer engagement intensifying over the next few years. This is a battle for keeping the customer relationship within your ecosystem – one that is waged in a field that transcends banking and involves large players in the social media, education, and lifestyle space.

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