OREANDA-NEWS. April 9, 2008. The retail strategy of Bank Electronika focuses on specific clientele with average and lower earnings.

Bank Electronika is developing retail and corporate business lines. In an interview with radio station Business FM, Deputy Chairman of the Management Board of Bank Electronika Dmitry Samoilov discussed the distinctive features of the bank’s new strategy. 

BFM: Why did the bank decide to develop a retail strategy at this particular moment?

Dmitry Samoilov: That is precisely the question we asked ourselves: We matured into that decision – the bank is 17 years old. We concluded that it was essential to enter the retail market. It is a conscious and serious step. We prepared for it long enough – all of last year. Our niche is clients with average and lower earnings (12,000 to 15,000 rubles per month per family member) who live in regional cities and who haven’t been showered with banking services.

BFM: Is your strategy one that you designed or have your taken it from a successful model already in practice?

D.S.: We did not construct the model independently. It is working quite successfully in Eastern European markets. We conducted analyses of Western and Eastern European markets. Today Russia, in our view, lags behind Western Europe by roughly 12 to 15 years and behind Eastern Europe by some five years. The model we are introducing now has successfully passed testing in the Ukrainian market. Therefore, we believe in the accomplishment of what we are undertaking.

BFM: Which regions are planning to enter?

D.S.: We are beginning work across all of Russia, with the possible exception of the Far East district during the first phase. The cities we will enter have populations of more than 200,000. We will also establish office networks in Moscow and St. Petersburg; however, they are not central in our model.

BFM: The banking market right now might be termed supersaturated. The profits that banks earned five years ago are difficult to imagine today. What do you take into the retail banking market?

Д.S.: Entering the market for services to individuals, it is difficult to distinguish oneself. Banking products are pretty standard everywhere – credit, term deposits, plastic cards, current accounts – and we enter the retail market with that selection of products. We distinguish ourselves by tailoring proposals to a concrete target group. The services have very low thresholds. Take, for example, cash credit for whatever purpose: the minimum sum of credit is 5,000 rubles. We accept deposits beginning at ten rubles, in essence beginning at zero. Banking services on those terms are accessible to everyone.

BFM: In what detail did you study your potential client?

D.S.: Micromarketing presupposes thorough knowledge of what the client wants and how he lives. We are studying this right now. We conducted sufficiently detailed investigation of the lifestyle of our target client group and found quite a bit of new information. We know, for instance, what time our clients prefer to visit the office. In response, we moved closing time of the personal services offices to 8 p.m. on weekdays and organized office hours on Saturdays.

Who is our client? Imagine a city with 200,000 residents, a large regional center. There are families, mostly with working parents, and one or two children. One child attends school, and the other is in day care. These people may be hired employees, work in the public sector, or in locally spawned businesses. Each month they receive their salaries and plan the family budget from those resources. Our typical client is a working family person who lives in a medium-sized Russian city.

BFM: The bank’s shift toward retail is a rather cardinal change in course.

D.S.: I would like to step back a moment and recall what the bank was like at the beginning of 2007. Bank Electronika was a lending organization with five branches whose primary business was concentrated in Moscow. In addition to the business community, we serviced individuals, although most of these people were connected with corporate clients of the bank or were our VIP clients. We understood clearly that in that form the bank did not have the opportunity to develop further; the model had been played out. We found new directions. There are two: along with retail, there is a second line – work with small and medium-sized businesses. We spent no small amount of time and eventually found a quality model that permits us to develop a retail line and a line for small and medium-sized businesses, to form an office network throughout Russia, and to win a respectable share of the market. We enter the market with services that differ somewhat from those offered now. Today the bank has 24 service points across the country: 11 branches in the regions, offices in Moscow, offices specialized in servicing small and medium-sized businesses, and eight offices working exclusively with individuals within the framework of our new strategy.

BFM: Your niche in retail – average and lower-income families – is traditionally Sberbank’s clientele. How do you plan to compete and win people’s trust?

D.S.: The answer is simple: This is a matter of raising the culture of banking. Bank Electronika is a participant in the deposit insurance system, which means that the government insures deposits to 100,000 rubles and 90% of deposits to 400,0000 rubles. In addition to the reliability of the bank, which guarantees the integrity of monetary resources, the government protects funds. The Central Bank has a sufficiently strict supervisory system and rigid requirements of banks.

Financial institutions that satisfy the government’s demands receive its guarantee, but the addressee of that guarantee is not the bank – it is his client. That fact resolves questions of trust. Furthermore, our clients, overall, are not going to place deposits of more than 400,000 rubles. We anticipate average deposits of 70,000 to 100,000 rubles. Bank Electronika is one of very few banks with 17-year histories of work during which there has been neither default nor refusal to return money placed on deposit, including the crisis of 1998.

BFM: What is the amount of your investment to develop the retail network?

D.S.: The retail network will cost the bank about \\$52 million; the corporate network – somewhat less.

BFM: Do you think that is enough?

D.S.: Yes. We have adopted the principle of focusing efforts on narrow specialization. The format of retail offices envisions a staff of about nine employees working in a space of about 150 square meters. All functions that require additional expertise will be centralized in Moscow. With that plan, the main expenses for the network go to office renovations and IT. They are not very expensive.

BFM: Have you also found a particular approach to the small and medium-sized business segment?

D.S.: That area of work is not entirely new to us. We made a provisional division of the client base and found that more than half of our current clients are small and medium-sized businesses. We found working models and began to form the network. As a result, two sub-brands emerged – for work with retail and corporate lines. We have reserved still another sub-brand for development of relations with large clients. Our primary focus with small and medium-sized businesses is clients who work directly with the public, participate in the turnover of consumer goods, or are engaged in constructing housing that will eventually be purchased by consumers. That is the B2C (Business-to-Сonsumers) sector. We have a powerful proprietary network of encashment. We can service the circulation of cash resources of clients inexpensively and at high quality. Here we have competitive advantages; the capabilities of the bank are maximally close to the needs of its target clientele. We improve the quality of service to our clients every day.