Since its inception in 2006, Tinkoff has gone from strength to strength, with its success reflected in its performance metrics. As of the third-quarter of 2021, the emerging markets challenger bank counted 18.5 million customers across Russia, boosted group revenue by 48% year-on-year and increased net profits by 31% to Rbs16.5bn ($225m). It is one of only a handful of neobanks worldwide generating profits. Recently, Tinkoff’s Russian operations were designated as “systemically important” by the country’s central bank.
Tinkoff’s ambitions are not limited to its home market of Russia — and the recent appointment of Pavel Fedorov as co-CEO, serving alongside longstanding Oliver Hughes, underscores its expansion plans both domestically and abroad. Mr Fedorov joins from energy company Rosneft, where he was first deputy CEO and advisor; previously he held a similar position at Norilsk Nickel. He also had a long career in telecoms, media and technology and banking, including a 13-year stint with Morgan Stanley in London and Moscow.
Mr Fedorov’s remit is to grow the Russian business, drive operations, develop new products and help expand Tinkoff’s business in new geographies, such as south-east Asia. He spoke to The Banker in November, soon after his appointment was made public.
Q: What is driving Tinkoff’s success?
A: Tinkoff is a fintech with a banking licence — fully digital without branches. We have expanded into many areas of the fintech universe; for example, we have large debit and credit card businesses, a buy-now-pay-later product, a digital brokerage business, a sizeable, small and medium-sized enterprise (SME) business, insurance, a lifestyle offering and so on. We are a fully-fledged fintech ecosystem in the rapidly developing global industry.
We are the only systemically important fintech in the world. Last year, we were recognised as one of the 13 systemically important banks in the Russian Federation, which is a tribute to our phenomenal success in the Russian market.
Being a 100% digital bank gives us an advantage as we are uniquely scalable. This applies to our platforms, human talent, technologies and products. Quite a few of the components of our successful delivery are scalable and transferable to other markets.
Q: What are your expansion plans?
A: Russia will remain the core of our business for a long time — we have only scratched the surface of the potential of Russia and there is a lot of room to grow; however, we believe that there is substantial value in markets outside of Russia. And as we move our platforms increasingly to the cloud, we can be successful in many markets as we arguably have many the prerequisites for success already in place.
One of the trends in many emerging markets is that regulators that are focused on enhancing competition, driving financial inclusion and ensuring customers get a much better quality of financial services. Specifically, we are looking at markets which have recently opened up to the social value of financial inclusion and the incumbent banks have not woken up to new technology. Tinkoff can deliver exceptional customer experience in such markets and contribute to the greater good.
Q: Why is south-east Asia a region of interest, as many of the markets are quite crowded with competitors?
A: Sure, there is a lot of competition; however, there is also a substantial number of unbanked people, SMEs without access to credit and many markets have payment and credit market infrastructure in their nascency. These markets are ripe for disruption and we are keen to take advantage of this opportunity.
To be successful, you need to have strong local partners and people on the ground. Retail is detail, and retail is uniquely local. So, local talent is key. It is possible that in some markets we will be working with partners — those companies that have the right approach and track record. On the flip side, what we bring to the table is a major de-risking of fintech execution. If you look at global fintech players, there are only a few companies globally that can execute profitably in a particular geography, and we have a successful track record of consistent and profitable growth with over 40% return on equity.
Q: Will you be looking to obtain banking licences in multiple markets in the region?
A: We applied for a commercial bank licence in the Philippines and are in close talks with other regulators in south-east Asia. Our approach is what we call a ‘licence-first strategy’. We don’t want to be in a grey area between being a regulated or unregulated fintech — that is not structurally viable. We would rather focus on getting the licence through dialogue with the right partners and are putting much effort in ensuring that the regulator is happy with the type of service and offerings that we are bringing to the marketplace.
We are fortunate enough to have the experience of working with one of the more progressive and enlightened regulators in the world, the Bank of Russia. It has fostered competition and opened up digital banking in Russia, empowering many Russians with access to world-class financial services. Today, we are seeing a very similar trend in south-east Asia and are excited about the opportunities opening up in various markets.
Q: What unique offerings do you plan to roll out in the Philippines?
A: There is a bit of a ‘secret sauce’ as to what Tinkoff does, but what we plan to do in the Philippines will gradually mirror our domestic set-up. The backbone of our business in Russia is our debit card offering, Tinkoff Black, which is very hi-tech, very convenient and, essentially, a core part of an ecosystem for our customers. Around this core we also provide other services, such as credit and asset management services, seamlessly integrated with our core debit card offering. It is a very slick, sharp and attractive package.
Q: Is the Philippines a test case for further expansion?
A: A critical characteristic of Tinkoff's DNA is that we are continually testing and learning. Where there is traction, then we will put our full weight behind those markets to make sure that they end up being very successful businesses for us.
We believe in our mission of changing the world. We want to serve people who have been historically underbanked or underinvested. Fundamentally, the potential of the global fintech revolution is that it will change the lives of hundreds of millions of people for the better. That is our vision, and we have the right technology and people to deliver on that mission.
We are starting with south-east Asia in a very disciplined manner, with openness and transparency, and bringing international standards to the table. The beauty of our set-up is that we are a very scalable platform and we have a healthy ambition vis-à-vis our opportunity set.
