In this podcast, Miguel Armaza sits down with Oliver Hughes, CEO of Tinkoff Bank- the leading Neobank in Russia and one of the largest fintechs in the world. The Tinkoff ecosystem offers a full range of financial services for individuals and businesses and has evolved into one of the largest super-apps in the region. Listed on the London Stock Exchange as well as the Moscow Stock Exchange, Tinkoff has a Market Cap of nearly $5 Billion with an ROE of 59%.
Growing up in Lancaster, England, Oliver Hughes probably didn’t imagine he would one day be leading the largest fintech in Russia and one of the leading Neobanks in the world. His passion for Russian history led him to pursue a degree in International Politics, learn the Russian language, and travel to the Soviet Union to conduct some of his research as a college student. A few years later, Oliver found himself working at Visa in the UK, where his Russian skills came in handy as the company decided to open an office in Russia.
Oliver moved to Moscow in 2000 as part of the Visa launching team and a few years later was asked to take the rein as CEO of Visa Russia. His unique experience, coupled with an excellent reputation, convinced Oleg Tinkov, a well-known Russian entrepreneur, to recruit Oliver in 2007 as part of the leadership team of then newly-launched Tinkoff Credit Systems.
From Credit Card Company to Digital Super-App
Although they have not always been digital, Tinkoff has always been a branchless institution. Initially started as a direct-to-mail credit card business, it took three crises, three rapid growth phases, and many years for the company to become the giant financial lifestyle ecosystem it is today. During the first seven years of Tinkoff, the company specialized in issuing credit and taking some deposits. They became really good at this and went public on the London Stock Exchange in 2013. Just around this time, Oliver and team also realized their platform was being underutilized and decided to expand.
Over the last seven years, Tinkoff has evolved into a 15,000 person institution that is one of the largest digital platforms in Russia, offering a wide range of lifestyle services like brokerage, travel, entertainment, and much more. Tinkoff is also a highly profitable and resilient business with an average ROE of 58% (average ROE for US banks is in the low single digits). Mr. Hughes is convinced that being hit by the global financial crisis of 2008 early in their existence, forced them to learn some hard lessons that eventually became competitive advantages they still carry through today.
Innovating in Russia
Russia is the kind of country where most of the innovation comes from within. The largest tech companies in virtually all sectors are homegrown, but unlike other emerging markets, Venture Capital funding is negligible, and Private Equity funds are few and far between. This means the barriers to entry for new entrepreneurs are very high and loss-making models with no sound unit economics don’t work. As Oliver puts in, “If you want to launch a startup, you have to be able to stand on your own feet. Otherwise, you’ll die”. This kind of mentality is engrained in Tinkoff’s DNA and they don’t approve new projects unless they meet a projected ROE hurdle above 30%.
In a country where the corporate culture can be very hierarchical and questioning supervisors is frowned upon, Tinkoff has built an environment where team members are encouraged to challenge the organization and help improve the company by voicing their opinions. Which is why they hire people mostly straight out of university, before they are exposed to the typical Russian corporate culture. Moreover, the average age of their workforce is 27 and they even run an internal FinTech school for new trainees coming in every summer.
As for the future of Tinkoff, Oliver has ambitious plans to continue innovating in Russia and doubling down on the market. They aim to triple their local customer base to 30 million clients within the next few years and to continue driving local, home-grown innovation.
Oliver Hughes, Tinkoff CEO
At Tinkoff, Oliver Hughes is heading the team that is building Russia’s leading financial ecosystem. He joined Tinkoff as CEO in 2007 right at the start of the project and has been at the helm every step of the way, helping Tinkoff grow into the world’s largest independent digital bank with 11 m customers. Before joining Tinkoff, Oliver worked for Visa International for a decade, including as Head of Visa in Russia from 2005 until 2007. Prior to Visa, he held various positions including at Reebok, Shell UK and the British Library. Oliver holds a Master of Arts degree in International Politics from Leeds University and a Master of Science degree in Information Management and Technology from City University in London. He also has a Bachelor of Arts (First Class) degree in Russian and French from the University of Sussex.
Tinkoff is an online financial ecosystem centred around the needs of its customers.
The Tinkoff ecosystem offers a full range of financial services for individuals and businesses.
With a focus on lifestyle banking, the Tinkoff ecosystem enables customers to assess and plan personal spending, invest their savings, earn loyalty programme bonuses, book trips, buy movie tickets, make restaurant reservations and much more.
All Tinkoff services are accessible via our mobile applications and on the Tinkoff.ru website.
The Tinkoff ecosystem is branchless: its proprietary network of smart couriers can deliver the Company’s products anywhere in Russia in the shortest time span possible, and customer service is handled online and by call centres (both office and cloud-based). Tinkoff makes active use of AI and machine learning technologies to streamline communications: over 30% of customers’ chat queries are resolved with no employee involvement.
All Tinkoff products and most of its IT systems have been developed in-house. Some 70% of the bank’s HQ staff are IT specialists.
At the core of the ecosystem is Tinkoff Bank, which was founded in 2006 and has since become one of the world’s biggest independent direct banks with over 10 million customers. In 2018, Global Finance named Tinkoff Bank the world’s Best Consumer Digital Bank, in 2019, 2018, 2016 and 2015, the Best Consumer Digital Bank in Russia, and in 2019, the Best Consumer Digital Bank in Central and Eastern Europe. In 2017 and 2013, the Banker recognised Tinkoff Bank as the Bank of the Year in Russia.
The bank’s parent company — TCS Group Holding PLC — has been listed on the London Stock Exchange and on the Moscow Exchange. The 9M 2019 IFRS net income of TCS Group Holding PLC amounted to RUB 25.1 bn. The ROE was 59%.
Leading Russia’s Fintech Innovation with Oliver Hughes, CEO of Tinkoff was originally published in Wharton FinTech on Medium, where people are continuing the conversation by highlighting and responding to this story.