The Secret Fintech Giant
💡JC's Newsletter #70
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In JC’s Newsletter, I share the articles, documentaries and books that I enjoyed the most in the last week, including a must-read.
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💡Must-read
👉 Oliver Hughes (CEO of Tinkoff) - The Secret Fintech Giant (Join Colossus)
And then we went beyond finance and into what we call lifestyle services. So some of these lifestyle services we built ourselves, these are beyond financial services, so we built a virtual mobile operator, an online travel agent, lots of content provision, and then started partnering with other service providers who gave us e-commerce, they gave us ticketing and tons of other stuff, which we now make available to our existing customers.
Tinkoff started as a bank and became a quite large super-app.
Using de-personalised data, we were able to do our first direct mails, build up a database, collect data ourselves from potential prospects as they're called in direct mail, and then send out targeted, personalized mailshots to these people.
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.
It all comes down to how you use data, store data, how you overlay data, do all your intersections, all your data mining, enrich data.
Then we had, for example, after a period of time, you'd start seeing a degradation in response rates, where you'd been sending the same mailshot. So then you'd have 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 it as probably something card-like inside, but we didn't send cards, obviously, we didn't send plastic, you'd indent it to make it a look like there was a card. You'd change the format, we had hundreds of different formats, colors, with official stamps, non-official stamps, all the tricks that any direct mail organization will know about.
In direct mail, there's a longer gestation period, but then you work out what works and then you scale that up.
Direct mailing was super successful for Tinkoff, it is pretty contrarian.
So we'd just started to diversify away from a credit card pure play and what enabled us to do so was the fact that we had direct to consumer credentials, direct to consumer skillset, data acquisition and data management, remote servicing.
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.
I really believe about more ownership on PnLs for teams to distribute even more ownership.
We have the risk team, who are basically all mathematicians and physicists so they're very, obviously, analytical people as you'd expect.
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 NPV model and so we make an investment decision based on the best available information.
out of 20, 25 business lines, we have 2 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 through another product.
We put ourselves within this ideological straitjacket that every incremental customer that comes into our ecosystem has to be NPV positive.
Interesting thinking about having loss leaders (and computing NPVs for the finance & risk team)
Russia still requires, by law, to have a face-to- face meeting every time a bank account is opened, including a card.
We didn't set out to be a large logistics company, as you can imagine, but we've become one, and we're doing today 35,000-40,000 deliveries door-to-door every day, which is quite an amazing number. So we are the largest door-to-door logistics company in Russia.
So when we started taking the positives back in 2009, the customer would apply online, then we would have to send out or have some way of 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.
And obviously these guys started with deposits, but then we found out that they could do a lot more for us, so they do credit cards, they do debit cards, they've started doing insurance policies for us, now they can deliver tickets, SIM cards, whatever it might be.
Well, basically they're getting a signature on a piece of paper and a photograph for the Central Bank, while the rest of it is sales. And it's actually become a huge cross sell channel as well as a fulfilment platform for us.
We developed a mobile app for them called Magent.
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 are going to meet, the prospective customers, tells them which things they 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, a Q&A, and obviously it's just a big information resource for them and tons of other stuff that we do.
That is super interesting, and thinking about building face-to-face door-to-door is powerful.
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.
We get these moves of customers into our ecosystem and monetize them by cross selling.
Again about cross selling and being a loss leader.
So we have a resource called Tinkoff Journal, sounds a bit bizarre, but it's the largest independent media resource in Russia.
And we have eight and a half million MAU on that resource now. So it's an absolutely huge site, and soon to be a mobile app. That's one area.
Super interesting about building a media 🙂. It is something we are trying to do with Alan.
So we were the first financial institution in the world to integrate storyboards into our mobile app.
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. So, relevant content. So it's based on the machine learning algorithm, which drives customized content, personalized to that particular individual profile of the user. We see obviously their transactions, we see their behavior, we see what they look at, and we see where they travel.
Personalisation of content is really important in healthcare too.
The preference to recruit the absolute most talented, smartest people with math or physics backgrounds, and mold them from a young age inside of Tinkoff's culture. We're a very flat organization. Genuinely flat, so we are broken down into the different businesses and service lines that I mentioned earlier, who are autonomous.
Taking very junior people and molding them into the culture is a good strategy. We don’t do it enough at Alan.
We're tech, we don't buy stuff off the shelf, we don't use outsources, we develop our systems in-house, including our core systems these days.
About building vs. outsourcing.
🏯 Building a company
In addition to selected articles, I share one of Alan's leadership principles every week - the same one that I share internally and with our investors every Wednesday.
👉 Alaners delight our members (Healthy Business)
We are always thinking about how to delight our members. Delight is something that brings great emotions: pleasure, satisfaction, or happiness.
We try to surprise people by exceeding their expectations. Does our product answer two questions: Will our members like it? and will they be surprised?
We believe that the biggest needles to move will be the things that members don't know how to ask for. We need to invent on their behalf.
👉Evernote’s CEO on the company’s long, tricky journey to fix itself (Protocol)
Internally, Evernote employees called the app's codebase "the monolith," and that monolith had grown so big and complex, it was preventing the company from shipping cross-platform features or doing much of anything in a short time. While other apps were becoming faster, more useful and more powerful, Evernote was slowly becoming a crufty, complex relic of a once-great app.
How do you assess if you have a similar risk?
They would stop building new features and new products for as long as it took to fix the core of Evernote from the ground up in a way that would work better going forward
with an unconventional communication strategy, which was to just go out like in my first few months and say, "Right. Here's the state of the world: The app's kind of broken, we're going to fix it, it's going to take a while." As you go through the process, being transparent brings the users on your side and lets them into the process so they can be excited about what's coming.
:I liked the transparent communication
It's hard enough to rebuild a platform and fix it to the extent that we did. If you try and reinvent it at the same time, you really face a challenge in getting people over to that platform.
It is an important learning about focus and doing one thing at a time :)
He reorganized the company to focus teams on features and functions, rather than platforms, in an attempt to keep everything thinking about Evernote as a whole rather than a single platform
🗞In the news
📱Technology
👉 Facebook hits the brakes on groups (Platformer)
Facebook will no longer recommend political or health-related groups in any country at all.
👉The mess at Medium (Platformer)
Advances paid by Medium appear to be significantly smaller than Substack offered; one source told me Orlean was paid $25,000 to write occasionally on the platform, compared to the $250,000 that Substack gave Matt Yglesias and a small number of other high-profile writers.
It is bold to pay people to have stars on your platform so you start launching the flywheel.
👉Tencent’s Investments Got $120 Billion Boost From 2020 Rally (The Information)
Tencent pumps a portion of the cash it generates into a wide range of equity investments.
Tencent owned stakes in nearly 1,200 companies. Those stakes, which have cost Tencent $80 billion to acquire over the years, were worth more than $280 billion at the end of 2020.
Tencent eschews most outright acquisitions in favor of taking minority stakes in companies.
Tencent, founded in 1998, has become increasingly active as an investor over the past decade.
👉 Zoom is releasing a SDK (Ben-Evans, Techcrunch)
Zoom: in the medium term 'video calls' will be in everything just as 'voice calls' are now. Microsoft, Google and Salesforce/Slack are trying to bundle video as a 'free' add-on to their core products, while Hopin and hundreds (literally) of others are peeling off verticals one by one. The textbook tech strategy in this position is to add APIs and try to turn yourself into a platform, and so here is Zoom's SDK.
👉 The EU is proposing a standardised framework for startup rules, covering immigration visas and (especially) taxation of stock options, which have been prohibitive in some countries, especially Germany. (Ben-Evans, CNBC)
🏥 Healthcare
👉 Mental healthcare startup Koa Health closes €30M Series A funding to expand its international footprint (Siliconcanals.com)
130 countries were spending less than 2 per cent of their national health budgets on mental health.
The company’s lead product is Koa Foundations, a mental wellbeing app that helps organisations support employees with evidence-based activities focused on tackling stress, sleeping better, aiding relaxation and positive thinking, and boosting self-confidence.
Koa Foundations is available to more than 3 million people through contracts with dozens of employers, healthcare providers, and payers. The company has operations in Barcelona, the US, and the UK.
👉 Forward Health raises $225M (TechCrunch)
Forward Health, which aims to attract subscribers and, for lack of a better term, minimize churn, actually is incentivized to make those long-term outcomes positive for everyone who comes through the door.
That’s part of why one focus with this new funding is to debut new doctor-led programs tailored to treating conditions that individual patients might be predisposed to – like heart health, if heart disease runs in your family, or specific types of cancer, if there’s a history of that, for instance.
“We’ve got our [in-clinic] body scanners, our blood tests, our gene sequencing – we basically collect on the order of about 500 biometric data points,” Aoun said. “The idea is you and your doctor then figure out which kind of programs make sense for you based upon those.”
Another program for cancer prevention includes measures designed to help lessen the risk of contracting the top five cancers in terms of prevalence
💚 Alan
👉 🇫🇷 “La technologie aide-t-elle vraiment à mieux soigner ?” (YouTube)
The debate was with Carlo Purassanta, President of Microsoft France and Alexandre Kouchner from Usbek & Rica.
The format of this debate was interesting. I really enjoyed talking with Carlo and Alexandre about such important topics as health and technology.
🙋 Featured in this newsletter
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