Gold is an integral part
of Turkish culture and it is estimated that there is $220m worth of
gold
kept at home. Duygu Tavan speaks to Irfan Yilmaz, assistant general
manager in charge of retail banking, about Kuveyt Turk’s initiative
to integrate gold into the banking system via gold-dispensing
ATMs.
Go deeper with GlobalData
In Turkey’s
secular economy, Islamic banking offerings, in particular for
consumers, have always lagged behind the traditional banks.
Turkey’s four Islamic banks accounted for a mere 6% of all deposits
in the market at the end of 2010, a position they reached only
after 25 years in business.
But now the third-largest
Islamic lender by assets, Kuveyt Turk, is ramping up its retail
banking offering with added ATM functionalities that will enable
even non-customers to buy or save gold.
In particular, it is looking
to benefit from the huge amounts of gold saved “under pillows” in
rural Eastern Turkey – estimated to be worth between
$160million-$220m – where the commodity is not so much used as
jewellery or status, but as an investment.
With gold prices reaching
all-time highs, the bank expects a substantial return on
investment. Already, it has exceeded its target for gold this year,
accumulating 11.2 tons of gold from gold deposit accounts: its
target for 2011 was 10 tons.
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By GlobalDataIn January, Kuveyt Turk,
majority-owned by Kuwait Finance House, began a major ATM
investment programme. It also commissioned the Germany-based
self-service vendor Wincor Nixdorf to add a gold dispensing module
to the bank’s 159-strong- ATM-network.
The service has been
available at Kuveyt Turk ATMs in Istanbul, which account for about
half the bank’s ATM network, since early in the second
quarter.
Wincor Nixdorf is currently
in the process of fitting all of Kuveyt Turk ATMs with a gold coin
output module. The ATMs currently dispense gold bullion weighing 1
gramme and are packed inside a transparent plastic coin.
Later in the year, Kuveyt
Turk will commence offering gold bullions weighing 2.5 grammes. The
bank’s gold dispensing service is operating in partnership with the
Istanbul Gold Refinery.
Irfan Yilmaz,
assistant general manager in charge of retail banking, tells
RBI that by the end of the year, all its devices will
offer the service in addition to traditional ATM
services.
“Many banks offer gold
investment products via funds, but we are trying to integrate the
gold that Turkish consumers keep at home into the economy,” he
says.
“This is a first in Turkey
and even in the world. It is an innovative service. There are gold
dispensing devices, but they do not have the traditional ATM
functionalities such as bill payment, cash withdrawal.”
The bank’s proposition is
that gold kept at home does not accumulate any income, so it
enables consumers to deposit their gold with the bank, giving them
the going rate for gold as a dividend on the customer’s
account.
The consumer can then return
at any time, either to buy back the gold or receive the cash
equivalent of the value of the gold, an approach fitting in well
with the rules of Islamic banking.
Non-customers can use a
credit card or cash to purchase the gold. There are no restrictions
to the amount of gold one person is allowed to buy and the service
will be available 24 hours a day, just like any other ATM
function.
As an Islamic bank, the bank
does not charge interest, but will earn a commission of between 1
and 2% from this service. Since May, the bank has registered 210
kilogrammes of gold.
Security risks are minimised
as the bank’s branch and ATM numbers are almost the same, 162 and
159 respectively, so almost all of the ATMs are located on-site and
under camera surveillance.
Although almost half the
bank’s ATM network is located in Istanbul, it is really the rural
East of the country which the bank has in its sights.
Turkish people in the east of
the country tend to be more conservative – and modern banking
products and services like cards or online banking, are not as
widespread as in the big cities.
Yet, there is what one
leading analyst describes as “a lot of gold under the pillows” –
jewellery accumulated from birthdays, weddings or other traditional
events.
The further East you go,
people do not use gold so much as jewellery, but consider it an
investment. Kuveyt Turk is targeting those areas.
But Yilmaz is anxious to
emphasise that the bank is marketing the service just the way it
would with any other service.
“We consider this a general
savings product and service. Our campaigns do not depend on the
trends in the gold commodity market,” he adds.
“There certainly is appetite for such as service in
Turkey.”
