YouSaid · the spoken record

Oliver Hughes

lines on the record: 57
first: 2021-01-14
most recent: 2021-01-14
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“200 pounds just at the right moment when I needed it, completely unsolicited. I just knew that I was going through a bit of a hard patch. And I remember I was saying, well, you know, I can't pay this back to you, John, for a while. I don't know when. He said, no, one day he'll buy me a new fridge. I remembered this recently. I thought it's about time that I bought John a fridge. So that's one of the kindest things that's been done to me and one that I remember, and I'm going to buy John a fridge.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“You know what? It's something I've been thinking about recently that I really need to return this favor. When I was a student, I came from a background without a huge amount of money, certainly not access to throw around. And I had a bit of a tough period as a student where I was actually finding it difficult to make ends meet and did some new shoes or something. I can't remember. A friend of mine who was a”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“Through us, but unfortunately, economics didn't work. So we probably took a little bit longer to kill it than we should have done, but eventually we came around to the idea that we couldn't make the unit economics stack up. So we discontinued it, unfortunately. I wouldn't call it a mistake. It wasn't a very expensive mistake anyway.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“But the thing that we thought would work didn't work. Imagine quicken loans in the US. We built a fledgling quick and loans in Russia, where we originate customers onto balance sheet of partners for mortgage. The problem was that the structure of the Russian market is such that 70% of mortgages originated are done so onto the balance sheet of state-owned banks. The state-owned banks, as a matter of principle, wouldn't work with us. We had difficult sales funnels, so basically we were attracting a lot of customers, a lot of applicants, but at the bottom of the funnel where the key conversion takes place, they were going and getting a mortgage from Sparebank and V2B or whatever the other state-owned banks. So our economics didn't stack up. We tried making it work for one year, two years, three years, kept trying to make it work because it was a fantastic service. The NPS was through the roof. Our partners liked it. We had 12 privately held partner banks originating in this mortgage.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“Business, there's always lots of failures. I've talked about test and learn many times. Tests more often than not end in failure. That's how you learn. Rather obvious. One thing that would maybe stand out as something that didn't go as we'd hoped. So we had the idea of an online financial supermarket at some point. This was back in 2015, where we thought we would do less balance sheet stuff and do more off balance sheet stuff. So we'd use our origination platform to bring customers in and write them onto a partner's balance sheet. So specifically for mortgage, where we're going to do it for lots of different lending products. So we make our balance sheet more light, less capital intensive and more about commissions-based income. So we've grown our commissions-based income for sure. It's now over 35% of our top line from non-credit business lines. So we made huge inroads in that direction anyway.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“At homeworking regime where other offline organizations obviously found it extremely difficult, we were online anyway. Most of us were in the cloud anyway. So we've actually been able to increase the pace of our innovation and knock out new stuff. It's that ideas generated approach. And the fact that you can see the effect that you're having on the society in which you're living and working.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“fact that we can do things as a team which affect in a positive way the lives of a large number of people. We've shaped the way that the Russian financial sector is developing. I don't want to sound too arrogant or cockshore, but we really have. We just changed the direction of things in Russia. So we've set the pace, we've set the benchmark, and now lots of banks are building ecosystems in Russia. Some will make that journey, some won't. We're constantly finding ways of innovating in our interface and bringing new value to customers. And we can do this in a very quick way. So the rapidity of our business and the innovation and bringing out new products and services is something which really gets us all fired up. COVID has actually been an interesting time for us. Obviously, it's been very tough for Russia as well as all countries of the world. But this enables us to actually speed up as we moved into 100%.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“In house, including our core systems these days. And so the speed of change, the organizational culture, the DNA which is Tinkoff is very specific, peculiar. We're very proud of it. We're fiercely independent and proud. It's a place that you can really make things happen, which is why people like working here.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“Across Russia. These young people are in charge of, well, we don't have budgets because we don't have a budget per se, but we have plans. They're in charge of very large business and service lines spending tens of millions sometimes hundreds of millions of dollars and generating these ideas that they can implement so that the distance between one of our employees and the results of the decisions that they're making, testing and learning and then if they find something that works based on the analysis they do that they scale up the distance is very short the time is very short time to market is very collapsed so it's a very stimulating environment in which to work you're delegated to very early you're encouraged to take risks in a controlled way in a measured way very early you're with like-minded people who are just swimming in data and love analysis with tech we don't buy stuff off the shelf we don't use outsourcers we develop our system”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“We're a very flat organization, genuinely flat. So we're broken down into the different businesses and services lines that I mentioned earlier, who are autonomous. So the full stack teams through developers, product people, analysts, people on the business side and sales, marketing, risk if we need be, whatever. So full stack, fully autonomous teams with their own resource. They have goals in terms of annual goals and longer-term goals, and we try and keep this very cohesive at a group level so people don't drift apart and we try and keep a lot of the infrastructure shared, as well as the conceptual framework and the management tool shared. But apart from that, people are very independent. And we're able to basically delegate authority in decision making powers very low in the organization. So you get very young people. The average age of our HQ is 26. We have 3,000 people in HQ, 1,000 people in development hub.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“Is unusual because normally you get financial services appearing around e-commerce platforms, around messengers, around search systems, whatever it may be across the world. But Brussels is the only place where you get digital ecosystems being built around financial platforms. And that's Tinkoff and Bearbank, the largest state-owned financial institution in Russia. So there's all sorts of fascinating things going on. And when people come here and really look under the bonnet, they're actually quite surprised at how vibrant it is.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“Some of the best talent available to them in Russia in the labor market because this is where the best programmers are developers, designers, architects, etc. Obviously, you guys know that in Silicon Valley. A lot of them are Russian origin one way or another. There's just a very different story on the ground with a lot more room for maneuver, room to innovate and the ability to innovate because of the amazing people here. The fintech space is quite incredible here as well because you do have some tech companies, you have specialist companies doing different parts of the financial value chain, but you have less of a startup climate here for reasons that I've explained around availability of capital. However, when you look at what the incumbent banks and some new players have done, new players obviously including Tinkoff, you can see that there are financial platforms and naturally ecosystems”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“Many other companies in Russia, in the tech space, in retail, in finance, without encountering anything remotely like that. People unfortunately tend to see ghouls and goblins all over the place in Russia because this is what's being fed to them through the media. And actually even some people are considered to be smart. They tend to swallow a lot of this stuff about this being a hostile business environment and corruption and bribery all over the place. It's just not like that at all. You have to be savvy like you do in any market. Moreover, The tech space is very vibrant. So when you look at what's happening with some of the leading tech players, some of them are public. So for example, Yandex, MailRux, Tinkoff, a lot of them are not public. So these are names that just won't appear on people's monitors at all. There's tons of really world-leading innovative companies working in the new economy, not just in Russia, but operating internationally.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“Obviously, there's a lot of misconceptions, there's a lot of stereotypes out there on both sides. Russia is an amazing place to do business. It's a tough place to do business, but then I think every single market in the world is tough depending on what you're doing. I don't think there's an easy ride for a business, particularly an early stage anyway. The Russian environment is pretty difficult in terms of availability of capital. So we discussed that a little bit earlier in our conversation. So capital is scarce. There's no huge inflows of inward investment. You have to be a lot tighter about your execution. But there is business to be done. It's not all about stuff you get out of the ground about all the oil and gas. There are peculiarities of the business environment, as there are anywhere. But all of the stories of men in gray suits extorting money or whatever is just not the case because we've managed to build a business like many other people.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“Very far from Tinkoff, go and found a fintech startup in Europe. So this is called Vivid Money. And Vivid Money has a pretty different philosophy, different approach, and it's a liabilities-led fintech, but it's all about managing money, so it's about investments as well as money management solutions, very high tech, very AI, and very lean. We really like it. Like what they're doing. So we've made this investment. And they'll be scaling across Europe and then potentially across the world in the coming years. So that's, if you like, tink off dipping its toe indirectly into geographical expansion. And we'll see how that works. We are there as an investor. I just repeat that as opposed to operationally. And depending on how that goes, maybe depending on how we're thinking evolves, we may look at other markets to expand in, but right now we haven't taken any final decisions on that.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“On all cylinders and has been for a long time, and will continue to do so for a long time because it's management distraction, it takes out some people from the inside of Tinkoff to go and build Tinkov India or Tinkov Brazil or Tinkov Iceland or whatever it might be. And it's a deployment of capital. So if we're making a year in, year out 40, 50, sometimes even higher percent return on equity, why would you deploy that capital in other market where you have all sorts of execution risk? And even if it does come together in three or four years time, maybe you'll get a 25% return on equity. Maybe worse. So these considerations have always held us back from going abroad. That's not to say that we won't. And we're actually currently doing a little bit of an experiment, if I could call it that, in terms of an investment that we've made. So a couple of very, very strong people from Tinkoff left Tinkoff didn't go.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“We made 36.5 billion dollars of net income last year. This year we're telling the market that we're going to do $30 to $35 billion in this COVID year, but we've already hinted to the market that we're going to have a very strong results and our results are coming out fairly soon. And so they'll be able to see that for themselves. The reason why I start my answer in that way is because we know how to grow our business. We know how to grow our customer base. We've currently got 12 million customers. We know how to grow to 20 million customers in the next three years. We know how to grow our bottom line. And we've been growing our bottom line over the last few years. So 30 to 40 percent every year. And we're going to continue to do so. So we know how to grow to a billion dollars or so. That's our ambition. So when you have that kind of growth profile in Russia, anything that you do outside of Russia, and it's a conversation we have regularly, introduces a certain amount of opportunity cost or execution risk to the business that we have in Russia, which is firing.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“Higher net worth frequent traders in terms of execution in the background and using sophisticated algorithms to help our investors make better investment decisions. We're just starting there and it's an absolutely fantastic journey and basically Blue Ocean Territory. And the third area is actually building our lending businesses. Here we have lots of data that we can obviously bring to bear to improve the underwriting decisions that we're making. And content has a role in all of these in terms of tribing engagement, which drives cross-sell, which drives lifetime value, which means we can improve pricing for customers over time. It also improves the lives of our customers because we can provide more relevant offers at the right time as opposed to generic kind of cross-sell offers that aren't particularly interesting to people because we don't get them at the right time or don't get them at the right proposition. So we're in this positive virtuous feedback loop.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“Integrated all that into a mobile app as well, and I as a customer can see what I bought down to SKU level. So the data there is just incredible, as you can imagine, which enables us to all sorts of stuff in terms of targeted offers from brands, not just from retail partners. That's one area. The other area is around the brokerage business. So if you think Robin Hood but only better, we are the largest now brokerage operation in Russia with a by number of active customers. We have over two and a half million brokerage accounts opened in just a little more than two years. I think we're going to grow five or six times in terms of assets this year, balances and transaction have just skyrocketed. So trades, and it's a very profitable business for us. What we've got to do in terms of building out the product range, segmenting for different types of customers from buying, hold retail investors to premium type customers.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“We spend a lot of time thinking about, so a lot of time thinking about loyalty, merchant funded loyalty. So we have a platform called Tinkov Target, which we want to do a lot more with because we have a big network effect. We have lots of users on the consumer side, we have lots of partners on the merchant side and the retail side, and more we can plug those together, the more it drives value to our merchant partners, the more it drives value to our consumers, who are our customers, and the more it improves our economics. So there's an obvious area we need to be just part of that is the fact that in Russia we can see to SKU level what's happening in the transaction, not just the transaction location, merchant ID, amount of transaction and that kind of stuff, the kind of generic payment system stuff, but we actually could go down and see what actually the customer bought because of the way the Russian tax online reporting system works.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“To the foreground, give you offers through cashback, try relevant content to you, lots of recommendations in terms of people that you bought, that kind of stuff”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“Customers to buy selling them other products and services from Tinkoff. We give them cash back on their theatre tickets, concert tickets. It's really quite a rich, rich offering in terms of content. Other stuff that we do around the ecosystem. So for example, we have lots of different recommendation engines, we have a railboard advisor. So a lot of the content is kind of where portfolio management or transaction management or whatever it might be ends and where content, useful lifestyle tips begins and is difficult to say because we're able to do it, interweave those things. And this drives us forward to our concept of an AI bank. So we want to take into the background the boring stuff, the hygiene type transactions, utility payments, mobile top, all the stuff you don't want to think about will automate it in the background. But the stuff that gives you these endorphins, that gives you enjoyment. So it's shopping, it's travel, it's entertainment, it's sports, it's whatever it might be. All of this kind of stuff.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“To integrate storyboards into our mobile app. So, if you think Instagram, Facebook, obviously they all have these stories. We did something similar and the idea here was to drive engagement in our mobile app to make sure that people went into the mobile app as often as possible and spent more time there. Saw relevant content. So it's based on a machine learning algorithm which drives customized content personalized to that particular individual profile of the user. We see obviously there are transactions, we see their behavior, we see what they look at. We actually have quite a big and we see where they travel. We actually have quite a lot of knowledge about that particular person, that customer, so we can drive the right targeted content to them in order to increase their endorphin levels, as we like to say, through shopping offers, through travel tips, restaurants, things to do at the weekend with kids, whatever it might be, local events, but also a bit of cross-sell. So we'll try and cross-sell monetize.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“content that's very important part of our business so we have several different let's say content generation sources within our ecosystem so we have a resource called tink of journal sounds a bit bizarre but it's the largest independent media resource in russia it's completely non-commercial so we don't advertise we don't monetize we don't do anything through it apart from providing useful content in the financial space so it's financial literacy it's education on investing it's how to protect yourself against fraud how to pay your vow how to pay traffic fine so anything in financial or quasar financial space lots of tips and we have eight and a half million mao on that resource now so it's an absolute huge huge sight and soon to be mobile app that's one area the next area is what we call stories so we were the first financial institution in the world”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“That made a conscious decision to become our customer. So they want our product. That's still loss making because we give a very rich product to our customers. We get these millions of customers into our ecosystem and monetize them by cross-selling. So we sell them loans, we sell them insurance, we sell them brokerage, we sell them SME services, we sell them lots of other stuff. And that's how we monetize them. So for us to just have a debit card business would be really quite deeply loss making and there's no way we would be able to switch on monetization there without just losing our customer base overnight in a very competitive market. That's what I meant when I made those comments.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“Enormous payments business. We have the lending businesses, largest of which is credit cards, but we have others, including secure lending, which are coming up very nicely. We have an SME transactional business that are going to make a very strong return this year. It's actually been growing all the way through COVID and we're starting to a bit of SME lending as well off the back of the data and the existing customer relationships we have. And our let's say current account business, it's a mobile app with a debit card. The debit card can be virtual or it can be physical. We're one of the largest players in Russia. We have one of the largest P2P businesses, P2P transfer businesses of the back of that. But if we come back to debit cards, which is where we started, on a transactional basis, we lose money on our debit card book and we have, I think the numbers currently around about 9 million debit cards issued and all of these are customers who self-acquired customers, they'll come to us not through a payroll program.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't believe that you can't make And there's some companies that do it extremely successfully and to scale. What I mean when I say that there are probably challenges around setting up, for example, a digital bank and trying to build a payments business which provides you with bottom line return. I think that's a bit more difficult. A, because you have to have absolutely huge scale. B, because you have to have the right business model. C, because that if you don't have these kind of entrenched position, then your already thin margin in payments if you have a positive margin at all is getting eroded away by regulators, by competition, by consumer behavior as well. If you're setting up the kind of freemium model where you're offering banking services or financial services and hoping to make money on interchange and all payment services, then you're not going to be able to make ends meet, basically. That's what I mean when I say that. The payments business we really like.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“One of them. So if you want to set up a banking type operation in Russia today, you need a lot of capital because we have the highest risk weights from the central bank in the world. You have this KYC requirement that I've just been described. If you don't have branches and you don't have access to a decent courier network, which gives you that coverage, then how are you going to do it? There's not many options. Basically, the only ones, unless you're working through a retail partner and that's a bit clunky, then that means that's a significant barrier. There are loads of others as well, obviously investing in technology. So it means that there's not that many successful startups in the financial space in Russia, unfortunately.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely. So, we developed a mobile app for them called Magent. All of our development is done in house these days. So most of our staff tech professionals. So we're basically a tech company with a banking license. There's a logistics platform in the background, but each of our smart couriers has a mobile app which tracks them, manages their logistics, their scheduling, enables them to communicate with the people they're going to meet, the prospective customers, tells them which things are supposed to be cross-selling to those customers, gives them all sorts of advice, hints, scripts, whatever in terms of that routine for selling. Q&A, and obviously it's just a big information resource for them and tons of other stuff that we do. So we use that data to continually optimize our whole service and delivery platform.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“Deliver tickets, SIM cards, whatever it might be. We actually started experimenting with a third party products and services that we can deliver through our smart couriers as well. These guys are very well trained, very well appointed, very young, dynamic, interesting, educated people. They're not couriers in any sense the word. Apart from the fact that they do delivery of something. But basically they're getting a signature on a piece of paper and a photograph of the central bank, but the rest of it is sales. And it's actually become a huge cross-sell channel as well as filament platform for us. And it's become a huge differentiating factor in terms of service, fulfillment capability to increase the velocity of our business. So you apply today and you actually get a card today in many places of Russia. If you don't get a card today or product today, then you get it next day, anywhere in Russia. And it's also a very important risk management tool because we do physical verification, but it's also a fantastic service.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“Card if that person wants a piece of plastic or just give them mobile payments if that's how they want to pay. Because according to KYC requirements, we have to have a physical meeting. And that remains true to this day. So when we started taking deposits back in 2009, the customer would apply online. Then we would have to send out, have somewhere physically identifying them. And the way we did this was to send out a smart courier. So we developed our own smart courier platform, which was proprietary because nobody else could do it. DHL, Pony Express, whatever. They just couldn't do the last mile for us. Did the arterial routes, now we don't do it all in-house as far as I can remember, but the last mile nobody could do. So we did it ourselves. It's one of the many innovations that we've come up with over the years in order to scale our business. And obviously these guys started with deposits, but then we found out that they could do a lot more for us. So the credit cards, they do debit cards, they started doing insurance policies for us. Now they can detect...”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“Didn't set out to be a large logistics company, as you can imagine, but we become them, and we're doing today 35,000, 40,000 deliveries door-to-door every day, which is quite an amazing number, so we aren't the largest door-to-door logistics company in Russia. Why? Russia is actually a very progressive country, not just in terms of fintech and in terms of the services offered to the consumer in the financial space, but in terms of regulation. So we've got a very progressive central bank who do all sorts of interesting stuff and they're actually a big disruptor themselves. However, Russia still requires, by law, to have a face-to-face meeting every time a bank account is opened, including a card. So we can't do what, for example, new bank do or revolute do or all the staff intake names out there and acquire someone purely through a mobile app and then send out a”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“Cross sell them, we have to make them positive that way. If they don't come up within a positive NPV, then we don't bring them in. So that puts a cap on our growth, maybe in some cases, but it means that we're always going to be producing a bottom line return, which grows every year.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“And there's maybe one of the thing which is this is a big kind of ideological debate, if you like. So you look at a lot of the neo players across the world today and they've gone out with basically a mobile app and a debit card, bringing lots of customers, scaling up very quickly. Some of them have purportedly already tens of millions of customers and that's great. They don't have necessarily a revenue model at work or a way of monetizing those customers. The jury is still out. But they grow up very quickly. So they don't have this NPV-based approach because they have a very different revenue model and a different outlook on this. In our case, maybe we could have grown a lot quicker, but we don't because we put ourselves within these constraints here. We put ourselves within this ideological straitjacket that every incremental customer that comes into our ecosystem has to be NPV positive. Otherwise, we won't bring them in. Or we bring them in with a slight negative NPV position, as I mentioned earlier, in very exceptional cases.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“Do make mistakes. So there's obviously going to be a stage where, for example, investing in a new channel or even a product line, we don't have enough data to build an MPV model, and so we make any investment decision based on the best available information. And sometimes we make mistakes. So then we have to take a judgment call. Do we continue with this and hope that the unit economics will stack up over time? Or do we kill it? And we've had to make a few decisions like that along the way. There are also other business lines, for example, where we actually run them. Well, we only have two like this to be out of 20, 25 business lines, but we have two where we run them with negative NPV because we know that through those business lines, we bring customers in and we will then cross-sell them and monetize those customers to another product. So this is why I say NPV is not biblical and it's not a science. It's a tool that helps us do things in the organization and consistent way.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“The first question about stewards. So every single business line and service line in our organization. So this is basically a product unit or a servicing platform. They all have their own NPV models. And so they're developed locally, but the guys who steer them, advise them, have input in developing these NPV models are the risk guys. So the risk guys are the gatekeepers. They're the custodians who make sure that they're consistent, methodologically correct because obviously there's lots of different ways of building an MPV model, but to make sure that we all have the same currency in the organization, we have the risk team who are basically all mathematicians and physicists that are very obviously analytical people, as you'd expect. We don't have a siloed organization with a very flat organization with a very analytical approach steeped in the numbers. And this is one of the insurance policies that we have to make sure we don't make too many mistakes.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“Stress tests of which we've been through three, as I said earlier, three crises in our relatively short history of 14 years. It also gives us a common framework between business lines so that we can decide which of the business lines to invest in.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“you have your cost of risk, which is also very different by different subchannel. And you have your cost of funding, which in credit cards is a constant, is consistent across all different channels, but for different lending products, obviously, depending on the duration of the product, there's different funding curves. So you plug all of that into your NPV model. We apply a 30% discount rate, so that's a very high hurdle, high requirement in terms of return on capital to our shareholders, and take a decision. So we rank different channels so we can prioritize what we're going to do and where we put our resource in terms of scaling things up. But in terms of actual decisions and underwriting basis, for example, or acquisition targeting, then we'll be using this framework to decide where we're deploying our resource and our capital. It's been very useful because it helps us, as I say, prioritize. It gives us a big loss absorption capacity when we go through different cycles, economic situations.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“If you just think of credit cards because it's an easy example, we understand the cost of acquisition, so the cost of generating an application, the conversion metrics of that application through to a utilized credit card, so that goes through different stages of underwriting all the way through to the first transaction being made on that credit card. So that's the full conversion. The cost of a utilized credit card is a cost of acquisition for us. Then you have the cost of servicing. And that very much depends on which channel the customer has come through. because if they come through online as opposed to offline or partner or co-brand or whatever it might be, they will have different servicing costs because of their different behavioral profiles.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“And what enabled us to do so was the fact that we had direct consumer credentials, direct consumer skill set, data acquisition and data management, remote servicing. And so all the prerequisites were there for us to start moving into all sorts of different directions. And as I said, we were able to generate this huge customer inflow, this application flow from any geography in Russia. So Russia's quite a large country, obviously, so not from just a big population centers of a million people, of which there are 13, but from any village, literally, anywhere in Russia. But we were just selling the credit cards and a few deposits. So we realized that we really needed to start utilizing that customer flow a lot better. And we started playing with different products to see what worked and where the business was, where the conversion was, and where the NPV was.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“Said earlier, and we were the first financial institution in Russia to do anything online. We went into online, take deposits and found out that that was something that was scalable. We could do it at a price that worked for us in terms of funding cost. And we started to scale that up very cautiously in the beginning because we were obviously very exercised by the idea of liquidity management and obviously the cost of funding as well because deposits in those days were very, very costly. Gradually scaled it up. That took us into debit cards. We also around 2013 acquired a small online insurer. It was just an insurance shell license when we created an online insurer ourselves off the back of that license to be precise and started building that business. So we just started to diversify away from a credit card pure play.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“We built up a customer base of probably about 300, 500,000. So don't quote me on that, but I think that was about the way we were in terms of active customers. And then the global financial crisis happened. And our funding model, which was already quite difficult, which was wholesale funding, mainly from the international markets because there was no one to borrow from in Russia or no one that was willing to lend, I should say, in Russia, to a startup credit card company in 2007, which was an interesting time to be launching a company like that, as you can imagine. We had to rethink our funding model. So we went into deposits. I said we were a credit card monoline company, but we were a fully licensed bank. So Oleg Tinkoff back in 2006 bought a full banking license. So we were able to take deposits. And we obviously didn't have any branches. So how on earth do you take deposits in Russia back in 2009? So we did a couple of tests, nothing that really worked and we decided try online.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“Change the format. We have hundreds of different formats, colors with official stamps, non-official stamps. All the tricks that any direct mail organization will know about, we tested all of these. And so you test in different test cells, making sure you're covering different geographies and different segments. It takes a bit of a while for these things to mature, unfortunately, in terms of tests and direct mail. It's not like online where you can do it in a few weeks, even days sometimes in direct mail it takes while the longer gestation period but then you work out what works and then you scale that up you carefully follow the response until it stops working as well and then you move on to the next thing a very interesting discipline”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“Throw them in the forest, or I don't know, put them in the river, whatever. Fortunately, it was paper, so it wasn't damaging to the environment. So there's the OPI, the overpromotion index, which took us a while to figure out because we couldn't understand why when we started ramping up mailings, all of a sudden our response rates were drastically declined. And that was why. So there's a certain limitation of the infrastructure that we were using. And they depended on by index as well. So it was different OPIs according to different indexes. Then we had, for example, after a period of time you'd start seeing a degradation and response rates where you'd been sending the same mail shot. So then you had to have different variations in order to provoke a response from the recipient. So you'd, for example, have an indentation in dust or dirt on the front of the envelope, which would basically tease their curiosity because they'd see there's probably something card-like inside. And we didn't send cards obviously. We didn't send plastic.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“Than X thousand male pieces to a particular postal index, then the response rate would decline. So basically what was happening physically on the ground was you were overloading a postal hub and they just started throwing the letters away.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“We're really going down into the nitty gritty, the nuts and bolts of credit card direct mail business. Every set of consumers is different. Every country has its own regulatory framework. Every market has its own different partner network. So it's all very different. So whatever I say now is not generic. It's probably more specific to the Russian environment. It all comes down to how you use data, store data, how you overlay data, do all your intersections, all your data mining, enriched data. So it's all about the data management. So that skill set that we evolved in order to overcome the problems that you've just asked me about, which I'll tell you about in a second, was what then lay at the heart of the success of Tinkoff as a business going forward. And it's actually a very good discipline to have at the heart of your organization. So we discovered a law of physics, if you like, which is called the Overpromotion Index OPI. Basically said that if we sent more”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“Mailing, and so they didn't give corporate rates somewhat bizarrely. What we paid was the individual consumer rate that stopped working quite quickly. And that was about that happened the same time as we moved to online. So we moved all of our customer acquisition for credit cards and for deposits and debit cards, which we started doing back in 2009 to online lights. We're actually the first institution in Russia to do anything online at all. After again, a bit of testing and learning, we found that it worked very well indeed. And so we stopped doing direct mail. I've got this secret. hope that one day we'll go back to direct mail because it's a brilliant acquisition channel it's a little bit unfashionable these days but from a business perspective it works very well indeed and if the post office introduces a corporate rate then maybe we'll go back into it as an acquisition channel but right now it's all digital”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“And data protection requirements. Using depersonalized data, we're able to do our first direct mails, build up a database, collect data ourselves from potential prospectors are called indirect mail, and then send out targeted personalized mail shots to these people. Unfortunately, over time, direct mail dried up as a acquisition channel, not because it stopped giving us the response rates which made the economics work, so unit economics didn't stop working in terms of response rates. They stopped working because the Russian postal system every year kept jacking up the rates.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“But basically, we were a branchless credit card wholesale funded monoline, purely focused on credit cards, and the major but not the only acquisition channel was Direct Mail. So in those days, most of the banking was concentrated in the big cities. It was done mainly through payroll channels, so basically you have a corporate relationship with a bank who gives the employees of the enterprise debit cards and then maybe sells a bit of loans. That was it. That was retail banking in Russia. So along we came with a director consumer model where we worked with a number of different partners across Russia, which gave us access within the confines of very strict privacy requirements in Russia. So since 2005, 2006, there's been a very strict continental European-like privacy laws as opposed to more liberal, as they were, more liberal Anglo-Saxon privacy.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source
“Credit cards was a very small product category in Russia at the time. There were some around, but it was just starting to take root. The card's infrastructure in Russia was very good, so there were probably over 100 million cards, which were debit cards through salary projects, what they called payroll programs. I think in your neck of the woods. And therefore, the rails were there. It was just a case of finding the right product with the right distribution channels, the right branding, find that magic and then start knocking them out the door. the virtual door in our case, which is what we, after a bit of experimentation, a bit of testing and learning, which is what we managed to do. And the credit card part of the business really took off. And that was what gave us the fuel to build out all of the other parts of the business on the platform that we'd created a little bit later.”
2021-01-14 · Invest Like the Best · Oliver Hughes – The Secret FinTech Giant – [Founder’s Field Guide, EP.16] · IDENTIFIED FROM THE TRANSCRIPT · source