banking at Raiffeisen International, speaks to
CI about the prospects for payment card
growth in the emerging Central and Eastern European markets, where
opportunities appear bountiful. However, with new opportunities
come new challenges.
Robert Wright has over 20 years of international retail banking
experience and has worked in the UK for HSBC, Bank of Scotland and
Abbey National where he was banking director. Prior to joining
Raiffeisen Bank in 2004, Wright worked for the largest bank in
Saudi Arabia for three years as head of marketing and business
development. His current role is retail banking director for
Raiffeisen Bank Albania.
CI: Raiffeisen is active in many Central and
Eastern European markets. Which markets in particular are you
hoping to grow market share in credit and debit cards?
RW: There are two separate markets – there are those established
markets where we don’t have appropriate market share, and there are
those markets which are new and which have huge potential. In the
first category, we would definitely put the Ukraine and Russia
where obviously credit cards are well established, but our share of
that market is lower than we would like, but we have plans to
expand significantly in those two countries because we’re
relatively new entrants there.
The second category is the whole of the Balkans region,
particularly Albania, Kosovo, Croatia, Serbia and to a lesser
extent Bulgaria, Romania, and Slovenia. The exception is probably
Croatia, which is fairly well established, but the rest still have
a lot of potential.
CI: In markets where share is not growing as
expected, is that down to the lack of POS and ATM
RW: It is, yes. It is a combination of things, such as the
electricity supply and the telecoms infrastructure. Those things
are not always in place or reliable. Then there is the merchant
resistance and education in cash-based societies, and customer
education and usage. That is partly driven by the infrastructure
reliability. Customers who are unfamiliar with card payments may
make a transaction, only to find that the next time they make one
it doesn’t go through because of infrastructure problems. The
merchant does not like it, the customer does not like it, therefore
they do not have a lot of confidence in the system working.
The usage of debit cards in POS networks is starting to happen,
but credit cards are still taking a while. And because a credit
card is in essence a loan, there are also wealth issues, credit
worthiness issues and so on. We would prefer customers to first of
all have an overdraft, then a personal loan, then probably a
mortgage and fourth on the list, for all sorts of reasons including
bottom line value, would be the credit card. It is not top of any
bank or emerging market list as you would probably engage in less
risky lending first anyway.
The reasons that apply to Albania for a lack of card growth also
apply to the other Balkan countries, not to such an extreme extent,
but primarily what applies to Albania applies to the other Balkan
I would say that is particularly the case for credit cards.
Debit cards are more established because current account banking is
usually the first thing you launch when you enter a developing or
emerging market, and current accounts are fairly well established
now. We have 180,000 debit cards versus 1,000 credit cards in
Albania, to put things in perspective.
CI: Could you describe the development of the
Albanian card market to date and the prospects for growth
RW: On debit cards, growth has been dramatic. They are now well
established and it is almost a mature market in terms of debit
cards. It has gone from nowhere to a total market of about 350,000
cards in the space of four years. Usage on ATMs is incredible.
There is a broader issue here of the country wanting to almost
leapfrog from branch banking straight to electronic banking, and we
are seeing that on all sorts of things. It bodes well for the
future of POS usage as well.
However, although debit cards are well established, one sign of
a maturing market is fraud, and we are getting that now on debit
cards. It is something that is concerning regulators, to which I
say: ‘welcome to a mature market!’
As for credit cards, I would have said four years ago that the
market would be further on than it is in 2008. The reasons for the
lack of progress include things such as the priorities of the
banks, and the acceptance and willingness of the merchant network.
Credit cards in Albania are still a VIP or affluent segment product
for those who travel abroad because they need the usual travel and
entertainment benefits, car hire and so on.
In Albania, the average customer does not really need a credit
card yet for day-to-day purposes. A debit card with an overdraft is
the same sort of facility. That goes back to affordability as well,
and Albanian consumers are not buying big-ticket items on credit
cards. Overall though, it is growing, and in the fourth quarter of
this year we have begun to aggressively market it. There are big
opportunities for things like affluent and VIP cards, and also
co-branded cards. That is where I see serious growth for us in
The potential is there – the one word that sums up Albania is
potential, and that applies to the rest of the Balkans as well. It
is realising that potential that is the challenge. For us, four
years on, it was always going to be about 2008 before we got a grip
on credit cards. And I think it has been the same for the other
banks as well.
CI: How are you approaching the issue of
consumer education and encouraging greater card usage at the
RW: For me, the banking associations should be getting hold of
this more, and encouraging greater contributions from their
members. Governments often talk about getting cash out of the
system, or encouraging more electronic banking and less cash usage.
There is a role for the government and the banking associations,
and obviously the individual banks themselves.
There is also a role for Visa and MasterCard. They are not
putting enough money on the table to encourage card usage. They, in
many ways, have more to gain than we do, so they need to do more.
It is about proving to the merchant that cards can bring them
greater turnover and are more secure than other methods, and it is
also about reducing the amount of cash in the banking system.
Having said that, we are currently offering incentives to use
cards at the POS in the major supermarkets in Albania with prize
draw promotions and so on. There are active promotions like that
happening, but merchant education is critical.
They do not see the value of the merchant fee ranging between 2
and 3 percent, or even 4 percent in some cases. They see it as a
cost. But merchants need to be more on board. They have got the
terminals but they do not actively encourage usage.
In a practical sense you can imagine a petrol station in the
middle of nowhere, with the attendant not knowing what to do or who
to ring when the terminal does not work, and the customer is there
with no cash and his card does not work. I saw similar things in
Saudi Arabia eight or nine years ago. Just four years ago there was
great reluctance to use the technology, but then a combination of a
number of things leads to a point where it gathers momentum and
critical mass, and it seems to go from nowhere to significant card
numbers in no time at all.
As always within Raiffeisen International, in Albania we can see
the other 14 countries in the region ahead of us where it has
happened, and it will happen here. It will follow the same pattern
– in 2003 or 2004 those countries had low usage levels but by 2007
they had taken off. If we were talking again on credit card usage
in two years’ time, I’m sure it will be dramatically improved.
CI: How is Raiffeisen approaching customer
segmentation in Albania, and how is it influencing your marketing
RW: On credit cards specifically, our VIP customers who have to
have at least €50,000 or assets under management were the first
obvious targets, because they were travelling abroad and that is
why they needed and wanted a card, for travel and entertainment
benefits and so on.
Then we moved into the affluent segment – we’re only just into
that, but it is the niche segment below the VIP segment, and there
are also certain thresholds an affluent customer has to have. There
are about 50,000 of those customers identified in our customer
base, and we are actively selling credit, charge and debit cards to
We are not yet addressing the mass market because of various
reasons, such as the level of usage and merchant network
infrastructure, customer credit worthiness and the ability to take
on more credit.
We have already given most of the mass market an overdraft and a
personal loan, and the credit cards could cannibalise the overdraft
in a way. We do not want to do that for various commercial reasons
and nor do we want long-term lending on credit cards with new
users. We want to encourage good behaviour. So at the moment, our
focus is really on the VIP and affluent segments.
I see the big entry into the mass market through co-branded
cards. There are big supermarkets here which have loyalty cards.
Also, we are talking actively to Vodafone, because they see it as a
good way of funding their postpaid mobile phone customers. With big
brands like ourselves and Vodafone or the Albanian supermarkets, I
see co-branding as a good way into the mass market, as well as
selling cards through our branch network, but really, that is for
next year. We really want to get the VIP and affluent market up and
CI: Is Raiffeisen pursuing a strategy of
organic portfolio growth or acquisitions to increase market
RW: Inevitably when we make an acquisition we get a card base
with it. One of our most recent acquisitions was in the Ukraine
where we immediately inherited 300,000 credit cards.
When we buy a bank we get a whole range of products, but we are
not actively looking for other card bases to acquire. We are
looking for other banks to acquire and if credit cards come with
that, great. Our strategic objective is organic growth in that our
acquisitions are few and far between now anyway.
Our penetration per country in terms of current account
customers owning a credit card varies from as high as 70 percent in
some countries, such as Kosovo where it’s 74 percent, and as low as
1 percent in countries like Albania.
There are different levels of penetration and therefore
different levels of emphasis based on that penetration. Typically
around 20 percent of our customer base have credit cards. That is
against the norm for our operating areas.
CI: How do credit scoring and risk management
processes differ in Central and Eastern Europe compared to the rest
of Europe, where credit bureaus are more developed?
RW: In January 2008, Albania got a credit bureau – it was one of
the last countries in Europe to get one. There is a credit bureau
in every one of our operating countries now, but they are only as
good as the data that goes in, and that is still a big issue across
The software and technology is there but it is only as good as
the data that is contributed, used and extracted, and that is still
a big problem. Compared to Western Europe, credit bureaus are
nowhere near as reliable or as sophisticated. Because of that, the
ability to use score cards and behavioural scoring and so on is
again limited. That then impacts on the upfront credit scoring and
Hence, there are bigger margins and bigger delinquency rates
than in Western Europe – the margins are greater to allow for that.
I think that is the key difference. Like everything else, we are
behind Western Europe but the pace of change is phenomenal. In five
years we will do things in this operating area that took the UK 10
or 15 years to do, because the pace of change is faster and we will
catch up easily.
However, there are still basic infrastructure problems relating
to postal systems and the capabilities to collect bad debt and
delinquency. It is getting better but it’s not there yet.
CI: Are multinational issuers or single
domestic issuers more effective when it comes to segmenting and
launching card products onto the market?
RW: For me, it is localised issuers who are more effective,
because you really need to know your market, and with all the
issues mentioned before, it is difficult to do this from London or
elsewhere outside the target market. A one-size-fits-all approach
will not work.
It is also to do with issues of wealth, demographic profiles,
credit bureau facilities – all these issues are different in
different markets. There are some things that can be cut and pasted
and copied from other markets, but you have to localise it.