some innovative retail banking products, and one of the more
interesting players is GarantiBank. Personal loans and credit cards
are in high demand, according to Ali Fuat Erbil, Garanti’s head of
retail banking, though deposit growth is proving harder to come by.
William Cain reports.
Transactional m-banking, five-minute loan machines, DIY credit
cards – all cutting-edge retail banking products and all available
in Turkey from one of the region’s more innovative players,
GarantiBank.
Go deeper with GlobalData
So active has Garanti been in driving through innovation that it
has even caught the eye of US’s fourth-largest retail banking
group, Wachovia. At the recent RBI Banking Forum in London
at the start of April, Ilieva Ageenko, Wachovia’s director of
emerging technology, said Turkey’s largest retail lender had made
impressive progress in the interactive market. In a question to Ali
Fuat Erbil, Garanti’s executive vice president and head of retail
banking, at the event, Ageenko said: “You’re doing a great job on
mobile [banking], and as a matter of fact, we have been tracking
what you have been doing.”
In one of the more popular presentations, Erbil revealed some
telling insights into how his bank had navigated regulatory
problems with regards to its mobile banking service in the country.
One of its cleverest moves was how it overcame the need for ‘wet
signatures’ to secure sales for new products. Garanti’s solution
was asking customers who signed up to credit cards to sign multiple
documents giving their consent in principle to almost all products
including overdraft accounts, deposit accounts or online
banking.
The bank used the strategy when it was acquiring customers with a
big credit card push five years ago, and is now enjoying the
benefits. It can send an SMS to a customer asking if they want a
pre-agreed limit for an overdraft account. All the customer needs
to do to approve is to reply with a text saying ’Yes’.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataErbil said: “We did it smart. We collected when the customers were
raining in, in those days, when we were getting millions of
customers. Then we started to market.”
It has helped the bank establish itself as the mobile banking
service of choice for Turkey’s population. Garanti was the first
bank in the world to offer SMS money transfers to non-customers,
and it now offers a range of other transactions including credit
card payments, toll payments, mobile phone top-ups and an SMS
gambling account service.
Wachovia’s Ageenko said that although similar technology was
available in the US, there are strict regulations regarding Know
Your Customer restrictions, which restricted some P2P payments.
Erbil said: “Anti-money laundering is important [but] we know the
source, so there’s no problem with that. [The service is] for
micropayments, so there are some limits. It’s something like $600,
below money laundering minimum levels.”
The five-minute loan
Another of Garanti’s innovative products is its five-minute loan.
Because loan applications still require a ’wet signature’, the bank
cannot use the same method it does with deposit accounts and
overdraft extensions. But it has overcome that problem to a degree
by developing a rapid-response credit bureau that can pre-approve
loans in less than five minutes.
The service is available on the internet, at ATMs, through call
centres and even by SMS. Customers and non-customers of Garanti can
put details into an ATM, and receive an SMS response from the bank
within five minutes complete with the details of the pre-approved
loan. Customers can then visit a branch to sign up for the loan
instantly.
Garanti has approved 850,000 of these loans through its different
channels, granted around 150,000 and lent around $700 million. The
approval rate for the five-minute loan is 35 percent, with
non-performing loans (NPLs) at around 4 to 5 percent. That is lower
than the bank’s credit card NPLs, but higher than personal loans.
Erbil said the bank was comfortable with that because opening fees
and APRs were higher.
A trailblazing approach
That Garanti’s trailblazing approach to retail banking has already
attracted such high profile admirers as Wachovia is made more
impressive because it had barely any retail banking customers ten
years ago. It was considered a corporate bank back then, but now
considers itself first and foremost a retail bank after five years
of aggressive growth in the consumer market.
Garanti, now part-owned by US consumer finance business GE Money,
has a mix of corporate, commercial and retail banking businesses,
with seven million customers, 630 branches and 2,200 ATMs. Some
$1.2 billion of its $2.1 billion net income in 2007 was made from
retail banking. The bank is ranked number one or two in market
share in all of the main retail banking products; and its assets
increased a very healthy 61 percent in 2007.
Its early retail banking success was built, Erbil said, on
tailoring products to customer needs, distribution innovation and
sales model renovation. The bank focused its business from the
start on expanding its credit card market share through a
loyalty-based credit card called the Bonus Card. It set up a
separate cards business with independent management responsibile
for product innovation, marketing schemes and technology.
When it started the Bonus Card programme, it had a market share of
6 percent with fewer than 300,000 cards in issue. Now it has a
market share of 20 percent and nearly seven million. The programme
works across numerous stores and merchants, and points are given in
cash on the credit card, meaning they can be spent anywhere at
participating retailers. Erbil said: “There is great technology
behind it, but there’s also a great value proposition there
too.”
Mortgages were another area that helped Garanti establish itself as
a leader in the Turkish lending market. Mortgages have only started
to become popular in Turkey in the last three years, as disposable
income reaches the level where taking on debt for housing becomes
realistic. Again, Garanti decided to set up a separate mortgage
entity to focus on the particularities of the market. It now has a
14 percent market share of the market.
To help sell its mortgages, Garanti signed a deal with the Turkish
Yellow Pages, an online telephone directory. The bank had adverts
on the website through which customers could sign up to a
pre-approved mortgage after entering a few details. The process
concludes by arranging a time with the consumer to visit a branch
and meet with a mortgage representative.
The bank is also developing its auto-lending business through
relationships with 800 dealers across the country. Salespeople in
the dealerships can access the bank’s system through the internet,
meaning they can complete all of the paperwork relating to the sale
of the car and the finance. The loan can then be granted by Garanti
in “a couple of minutes”, according to Erbil – a process standard
in developed countries, and now growing in Turkey.
Despite its clever approach to products and distribution, Erbil
admitted the problem of pulling in deposits was much more
difficult, however. With access to funding becoming more expensive,
banks are looking for ways of attracting robust savings. And
although Garanti has increased its market share of deposits to 10
percent from around 1 or 2 percent five years ago, Erbil said the
market for savings in Turkey was limited, particularly with time
deposits.
“We do not have particularly sophisticated deposit accounts because
there is nothing in the market in Turkey. Between 50 percent or 60
percent of the total time deposits are one month or two months in
duration. If you include three-month deposits, it’s 90
percent.”
A huge amount of foreign interest
The Turkish market has attracted a huge amount of interest from
foreign banks – and for good reason. The country has a population
of 70 million and is expected to become the 12th-largest economy in
the world over the next decade. GDP growth in 2007 was 4.5 percent
while total assets in the country’s banking sector have increased
at a CAGR of 30 percent since 2002, from $133 billion to an
estimated $501 billion at the end of 2007.
The potential for growth is clear, with figures from Garanti itself
showing that in 2007, total assets in Turkey were 84 percent of GDP
in 2007, compared to an EU average of 322 percent; total deposits
were 54 percent of GDP, around half the EU average, and total loans
as a percentage of GDP were again significantly below the EU
average of 132 percent, at 38 percent.
And while Garanti is using innovation to rapidly grow market share
and push Turkey forwards, its competitors are proving to be equally
good at rolling out smart retail banking services. TEB, for
instance, part owned by BNP Paribas, has developed a clever ’mobile
signature’ with local telco Turkcell, and also offers a heavyweight
m-bank product and a sophisticated Web 2.0 upgraded online
service.
National Bank of Greece-controlled Finansbank offers 15-minute
credit card applications, with cards actually printed in branches;
it says 60,000 people signed up in the fourth quarter of 2007 alone
and is estimating demand for the service will double in 2008.
Finansbank states it is currently getting 250,000 credit card
applications a month overall and 45 percent of those are
approved.
The bank also offers 12-month interest-free consumer loans to its
credit card customers, tied into a card account and depending on
the card spending limit. In the fourth quarter of 2007 alone, the
bank received 100,000 applications and dished out $170 million in
loans.
