TCS Group - Tinkoff Lifestyle Banking Strategy Day

Tinkoff Bank yesterday hosted a strategy session, the fourth in its series of deep dives into key verticals within TCS's digital ecosystem.> What is Tinkoff Lifestyle Banking? This primarily covers TCS's flagship product, the Tinkoff Black debit card, and the complementary lifestyle services available within the Tinkoff app. Tinkoff Black is the core of the ecosystem, the primary customer acquisition tool and the key enabler of cross-sell (52% of its customers are signed up for two or more products). Lifestyle services include the B2C marketplace, as well as products such as Tinkoff Target, Tinkoff Journal and Tinkoff Travel.> What are Tinkoff Black's economics like? The aim is not to monetize the product directly. Net revenues per active customer are up 28% y-o-y in 1H21. The drop in this metric over the past couple of quarters is largely down to seasonality, the impact of promos and strong customer inflows, as well as a drop in travel-related FX revenues. Interestingly, CAC per utilized customer has been very stable for the past couple of years at around R1,500, as has cashback per active customer at around R900 per quarter. > How big is Tinkoff Black? Tinkoff Black's active customer base continues to show phenomenal growth and is on track to almost double this year from 4.8 mln to more than 9 mln. The team that was presenting yesterday put the popularity of the product down to a variety of factors, including generous real-money cash-back (not bonus points; with R15 bln paid YTD), a great interface and successful promo campaigns, as well as viral marketing, which drives 80% of web and mobile acquisition. The average holder is 33 years old, with an average balance of R140k (half of which is related to brokerage though). Tinkoff Black active customers are 12% of the populations of Moscow and St Petersburg, and about 6% of Russia as a whole. > Customer segmentation: Pro, Premium and Private. Tinkoff has launched various subscriptions around Tinkoff Black and lifestyle services. Tinkoff Pro (launched in late 2020, costing R199 per month) now has 1 mln users, with 2.1 products per customer on average. Tinkoff Premium, a similar service targeted at higher net-worth customers, has more than 100k customers, with an average balance of R2.1 mln. Tinkoff Private was launched in September 2021 and is a further step up in target audience wealth. > Lifestyle banking. Core lifestyle services in the Tinkoff app include entertainment, e-commerce, travel, fuel, restaurants and wellness. The app has generated some R37 bln in GMV and R2 bln cash-back YTD. Tinkoff Target is a loyalty program that provides Tinkoff's merchant partners (as of now 2k partners, including leading names in Russian retail) an opportunity to target ads to Tinkoff customers to promote their products, and offers instant payment for goods and services within the app. Cash-back is added onto customer cards automatically (up to 30% from merchants). Tinkoff Target is being integrated into TCS's recent acquisition, Koshelek, a leading loyalty card management app in Russia, which currently has 12 mln MAU. This crossover will be further complemented by BNPL solutions (Dolyami), which were recently launched.> Market growth and the company's targets. Currently, Tinkoff is number five in retail current account volumes, with R0.3 trln and 3.2% market share, while in terms of active retail customers, it is comfortably in third place (11.5 mln customers), behind Sberbank (101.5 mln) and VTB (14.5 mln) and followed by Alfa Bank (7.5 mln). More interesting is that in 2Q21, Tinkoff accounted for 8% of total Russian card purchases. Given the current Tinkoff Black active customer base of 8 mln, growth potential remains high, since Russia has roughly 120 mln economically active individuals. The management expects customer acquisition to remain very strong through 2022, targeting more than 14 mln Tinkoff Black customers by year-end, which will remain a key driver of further cross-sell and monetization elsewhere on the platform.