Moscow Bank for Reconstruction and Development
(MBRD) is in talks with Western partners to help develop its credit
card business in Russia. Sergey Zaytsev, the Russian bank’s
chairman, spoke to William Cain about how the bank’s
retail partnerships give it a headstart in the fledgling
Moscow Bank for Reconstruction and Development
(MBRD) is on the lookout for foreign partners to help develop its
credit card franchise in Russia.
Sergey Zaytsev, the bank’s chairman, told CI
talks are ongoing with a number of prospective partners. The bank,
which is owned by Russian conglomerate Sistema, already has a
strong cards proposition because it has relationships with the
numerous retail businesses of its parent company, which has 68.5
million clients in Russia and the Commonwealth of Independent
States (CIS). It currently has around 200,000 credit cards in
Zaytsev said the card partnership market was
not particularly well developed in Russia, with few links between
other banks and enterprises, which meant MBRD could have a
head-start on its credit card rivals in that area. Sistema’s main
retail business is Detsky Mir, a retailer of children’s goods.
Another is Intourist, which runs package holidays and owns a chain
of hotels. It also has numerous telecoms businesses including
Mobile TeleSystems (MTS), the largest mobile phone operator in
Russia and the CIS, with which it has launched an internet and
mobile banking platform.
Zaytsev told CI: “There are some products where
we feel we could share our experience and some where we could learn
from others, and here I mean credit cards.
“We are very aware of the fact the Russian
market has specific features, so we cannot just cope with the
experience of the Western market. We already achieved quite good
results here as well, and because we know the specifics of the
Russian market, I think we could be quite a good partner. Because
one of our shareholders has very strong retail businesses, we think
there are grounds for optimism where this is concerned.”
The Russian credit card market has recently
started to take off. According to the Bank of Russia, the country’s
central bank, credit card numbers increased by 128.3 percent in
2006, although no figure was given for the actual number of cards
in issue.
However, it said there were 74.8 million bank
cards in issue at the end of 2006, up by 36.8 percent from 2005,
and credit card transactions made up only 2 percent of total
payment card transactions.

Varying estimates of card numbers

There are varying estimates for the number of credit cards in use
in Russia. Figures are clouded because some cards which are
marketed and issued as credit cards are not fully-functioning, and
act more like debit cards with a loan facility. Between 90 and 95
percent of cards issued in Russia are of this type, and are termed
payroll or salary cards.
Russia – credit card market shares (end-2007)Genuine credit
cards are a more recent addition to the product mix in the country
and consumers have taken a while to get used to them, particularly
concepts like the interest-free grace period, which was only
legislated into meaningful use at the end of 2004.

On the supply side, logistical problems have
hindered development of the market. Only recently have credit
bureaus developed to help mitigate risk, and the country is so vast
and remote in some areas that issuing has to be carefully targeted
regionally in order not to make collections too onerous.
There are numerous examples of Western banks
partnering with Russian franchises as a means of accessing the
The early movers were BNP Paribas, which bought
Russian Standard Bank (RSB) in July 2004, and GE Money, which paid
$100 million for Delta Bank two weeks later.
Both have focused on consumer lending in the
country, with RSB emerging as the Russian leader in credit cards.
It claims to have around 70 percent of the credit card market with
21 million credit cards and $25 billion in issued credits, as well
as an exclusive agreement with American Express.
More recently, the Russian market has attracted
interest from a range of big European retail banks. As well as the
potential for consumer loans, they have been attracted by the
opportunity to pick up retail deposits in the country as it becomes
increasingly wealthy.
Barclays, Société Générale, HSBC and Nordea
have all made bold moves to establish retail banking franchises in
the country in 2008.