In the second part of
RBI‘s series of interviews with senior Turkish bankers,
Soner Canko, assistant general manager of the country’s biggest
lender, Ziraat Bank, outlines the bank’s investment strategies and
discusses with Duygu Tavan how the bank will differentiate itself
in Turkey’s cut-throat banking sector.
Go deeper with GlobalData
Following last
month’s article on Akbank, RBI’s series on Turkish banks’
targets and investments in light of narrowing margins continues
with the assistant general manager at Turkey’s largest state-owned
lender Ziraat Bank.
As a public sector bank, Ziraat
tends to get criticised from privately-run lenders accusing the
bank of government favouritism that they do not have. But Ziraat
Bank is just as much affected by the Turkish central bank’s
unorthodox decision to raise reserve capital ratios while keeping
interest rates at a record low as its privately-owned peers.
And just like his peers, Soner
Canko remained fairly unfazed by the macro-prudential
tightening.
“I consider the macro-economic
precautions by the central banks as quite natural and don’t think
that the central bank’s actions will abnormally curb the growth of
the sector – but rather, it will result in slowed-down growth,”
Canko explained.
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By GlobalData
A creative
sector
Although he acknowledged that
banks’ profits would decrease this year when compared with the past
years, Canko maintained his confidence.
“We are a strong and creative
enough sector to find new revenue sources for those we may lose as
a result of the central bank’s actions.”
According to Canko, the most
important segment to target and gain revenues from is the unbanked
market, followed by the semi-banked or those who do not bank
regularly.
Additionally, the bank will, in the
near future, begin analysing more closely its broad customer base
to identify clients offering the highest return potential.
But although the bank already
rolled out a credit card for the youth segment, those aged under 36
and in education earlier in the year, Canko emphasised that Ziraat
works “like a supermarket”. Thus, the target is to make banking
convenient for all segments.
As a state-owned bank, one of
Ziraat’s ‘duties’ is the issuance of student loans to about one
million students, as well as the pensions of five million people
every month.
“If you
take into account that about 40 out of 75m of the Turkish
population are banked, then 30m of them bank with us in one way or
another anyway,” he said.
As margins are narrowing, Ziraat
Bank is tweaking its customer strategy in accordance with
investments in its distribution channels and new products.
At the forefront of those
investments are the implementation of staffless micro-branches and
an upgrade and expansion of the bank’s ATM network.
Ziraat’s upgrade and expansion of
its 2,919-unit strong ATM network is a key strategy to curb
operating costs while enhancing consumer experience. The bank has
invested around $35m for 1,500 recycling-enabled ATM units from
Chinese manufacturer GRG Banking.
“The biggest challenge we face [in
terms of ATMs] is the cost to run them. We found the solution to
this problem in recycling machines from GRG,” Canko explains.
Biometric ATMs, staffless
micro-branches
The GRG ATMs will also be enabled
with biometric capabilities to identify customers by the individual
vascular pattern on their palms.
The bank has already begun to
implement the devices.
Ziraat’s investment in GRG ATMs
will take the bank’s total ATM distribution close to 4,500 units –
and make Ziraat the biggest bank by ATM network.
Ziraat’s implementation of
biometric ATMs follows that of Turkey’s largest privately-run bank
by assets, Isbank, who introduced biometric ATM services in July
2010.
In addition, the bank has rolled
out 50 staffless micro-branches, called Goruntulu Islem Merkez
(GIM) units – which translates loosely as ‘visual processing
centre’ – across Turkey.
Although there is no staff in the
GIM micro-branches, all banking services are offered with
assistance via a live video-link to an Istanbul-based advisor who
talks customers through each step of their banking
requirements.
The bank is planning to open
another 50 such units by the end of the year. And it is targeting a
GIM distribution network of 1,000 units by 2015, Canko
revealed.
The GIM branches are part of Ziraat
Bank’s multi-channel strategy, in which branches in all forms will
continue to play a key position for the bank.
“We want to be closer to the
customer with our branch network and are considering opening 100
branches this year,” Canko says.
He added that branches will operate
in a more sales-orientated manner and be key in Ziraat’s expansion
in Turkey’s East, where many people are still unbanked.
Going East
A branch expansion further into
Turkey’s East would also mean less marketing spend.
Of the unbanked in Eastern Turkey,
Canko explained: “It is enough if you are close to them.”
But of course, some promotions will
be necessary and, although he would not go into detail, Canko
acknowledged that, besides the physical presence of branches,
mobile phone operators with an existing and wider distribution
network would be suitable partners to reach the unbanked.
“Distribution is the most important
factor for us,” Canko says.
He was quick to
point out some impressive statistics: Ziraat Bank has identified
420 locations where it is the only bank with a branch and 366
locations where there only is a Ziraat ATM.
“We want to maintain this position,
want to be where no other bank has a presence and we will do so
using all [physical] channels, whether that is the GIMs, ATMs or
branches.”
Still, there are areas where
Ziraat’s presence is not as dominant as that of other banks, and
Canko said that the bank would analyse and target those areas as
well.
Yet, the emphasis on branches does
not mean that the bank is neglecting the direct channels. Ziraat,
in effect, is upgrading its online portal and expects the online
channel to become the most dominant one in the years to come.
In terms of products, Canko
forecast that debit cards would gain in popularity and contactless
card distribution will also increase. But while his belief in debit
cards was strong, Canko’s stance on the innovation of near-field
communication (NFC) technology-supported mobile payments – already
introduced by private lenders Garanti, Yapi Kredi and, most
recently, by Akbank – was somewhat lukewarm.
Canko remained rather doubtful of
the potential of NFC m-payments market, at least for now.
“We do not target growth in this
segment at the moment. I believe contactless payments via cards
will be more popular [and] I prefer contactless cards to
contactless mobile payments – storing your financial details on top
of all your personal details adds another level of risk,” Canko
argued.
However, he acknowledged that it
was too early to determine how successful NFC mobile payments would
be.
The rise
of contactless cards
“We are involved in experiments
with NFC mobile payments – but these are just that – trials to gain
knowledge and understanding.”
For now, Ziraat is concentrating on
increasing its contactless cards in circulation from around 341,630
to 600,000 this year.
In particular, Ziraat is pushing
its contactless Maximum Card, which it issues in cooperation with
Isbank and which works on Visa’s payWave technology.
“When we issue new cards, we issue
them with contactless capabilities as often as possible. In the
short term, we believe that contactless cards will be more widely
distributed than NFC [m-payments].
“We do believe that in the medium
to long term, NFC m-payments will increase and when they take off,
we will have the experience and knowledge to participate and
compete.”
Another cards and payments related
area the bank is tapping into is prepaid. Canko revealed that the
bank was running a pilot with prepaid cards internally.
But a public launch is, as of yet,
not in sight.
With all the push into innovative
product segments and services, the credit card, which is a very
popular product among Turkish consumers, partly due to relatively
easy obtainment processes, is one ‘traditional’ product the bank
needs to push.
Ziraat’s market share in credit
card numbers lies at 6%, while its market share in credit card
receivables is a mere 2.3%.
But although Canko recognised that
the bank needs to gain more market share in the credit card
segment, he stressed that “unlike the other banks, we are not
trying to double our market share”.
Ziraat’s ambition instead is to
grow parallel to the growing Turkish sector.
In the next issue, RBI will feature an interview with
Garanti Payment System’s CEO Mehmet Sezgin.
