Metrocards come into vogue as Banks look to push credit
With the economic downturn underlining the traditional fears of the Russian public about taking on credit, but with banks and the government looking to encourage consumer spending in order to help push the Russian economy further away from recession.
Alfa-Bank is this week renewing its push on credit cards, joining Sberbank, Bank of Moscow, and Russky Standard, amongst others, in offering metro tickets which are credit cards. Alfa-Bank Head of Retail, Aleksey Marey, says the cards will offer value on the metro as well as credit, and that the bank is planning on tens of thousands being issued in the first year.
“This card combines the functions of a metro ticket and a credit card with a grace period of 60 days. The holder of the card pays only for completed trips, while retaining all the discounts inherent multi-trip tickets.”
Bank of Moscow was the first to start issuing such cards in 2006 and remains the leader with the annual volume of 50 thousand cards. They were joined at the end of 2008 with a similar Citibank product, with the bank estimating the volume at a few thousand. In the second half of 2009 Bank Avangard, Master bank, and Rosbank also started to issue credit cards with the metro function, with Sberbank also announcing its intention to join. Andrey Lapko, vice president at the Bank of Moscow, says that at the end of January it will begin offering debit cards with the metro function for all its clients, not just for salary card holders, as was done earlier.
Pyotr Karpov, Head of credit card development department at Citibank, says the push stems from both a desire to extend credit and usefulness of the cards, and also the desire of the Moscow Metro to encourage the idea.
“As I see it, there are 2 main reasons for that, with the increased competition in the market of credit cards being the most important. Today, when combination of easy usage and innovation becomes especially important, banks start to find new ways to distinguish themselves. And another reason is that the Moscow underground itself is interested in it, hoping to attract more people to use metro. Those who before hesitated to stand in a queue to buy a ticket for an occasional trip will now go down to the metro with such a card in his pocket.”
According to the research agency StatBanker.ru, the main reason for the banks pushing credit cards is a desire to broaden their base and exposure. Unlike western societies Russians remain credit wary, and enjoy paying in cash where they can. Credit cards as metro tickets will broaden the usage of cards in a society where they are used little.
“Best case scenario, half of all clients with a credit card made at least one transaction on goods and services, or withdrew money from an ATM. And the percentage of people, who use their card regularly is even less. The motivation for using credit cards in the broadest spectrum is the main concern for banks.”
Alfa – Bank’s Marey says that the activation of the metrocards will be nearly 100%, unlike most other credit cards. He believes that as clients get used to making payments with the card, and then with the bank, a larger number of transactions will result, boosting commission earnings and also boosting the profile of credit.
Citibank’s Karpov, also notes that with the issue of cards likely to be pitched at the upper end of the spectrum, the cards could help build credit profiles.
“In fact, there is a separate social segment of people using these cards, the upper middle class. If a bank gave you a credit card, this means you are a reliable borrower with a stable income.”