“We want to learn how to catch the emotion right at the time of purchase” – Kommersant

Despite the rapid growth of the BNPL market in Russia, there is enough space for all players. At the same time, installment plans do not compete with retail loans, but rather complement them. About why the BNPL market appeared in Russia and what is needed for its further development, the head of the profile business of Tinkoff Bank told Kommersant Dmitry Seregin.

— How do you assess the volume of the Russian BNPL market in the first half of the year and its dynamics?

– First of all, you need to understand that the BNPL market is just being formed, new partners are being attracted, new segments are being tested. Compared to 2022, the market for the first half of the year grew by about 10 times and reached a turnover of 100-125 billion rubles.

– What share does your service “Shares” take?

– Meaningful. I would not like to open it. But basically the market is formed around Split (Yandex) and Shares (Tinkoff).

– Competition is growing, or rather, there are not enough players to meet demand?

– In no case do I exclude Alfa-Bank (Divide), Sberbank (Pay in installments) and Sovcombank (Halva in installments) from competitors. These are very strong players in the retail market, and they are ready to continue playing, offering products, dumping, and competing. And the fact that they have not yet occupied a significant share does not mean that we do not feel they are competitors. Somewhere we are ahead of them, but somewhere we are already holding the defense.

With Yandex, the situation is more interesting: they have their own marketplace, where you don’t have to defend yourself, and this, of course, is a very big advantage.

As for new players, there is definitely an opportunity to enter the market. And even after the boundaries and rules of this market are already clear.

– Whose experience did you rely on when launching Shares?

— It was the Australian Afterpay, which went global. The company is based only on the BNPL service. There are also interesting examples in the Asian markets, in the CIS and the countries of the Middle East.

— BNPL work according to the same scheme everywhere: four payments in two-week increments?

– Mostly. This is the optimal time. The segment of large terms and amounts is a POS loan.

— Which model of building a BNPL business seems more effective to you: with a banking core or with an IT core?

– It is best to create BNPL services based on a business, where a large amount of data is accumulated and all decisions are made based on this information. This approach makes it possible to build one of the scoring models: either when you see the behavior of the client inside the ecosystem and can easily make a decision on it, or when you know how to work with a large amount of external information and integrate it into your processes, making a decision on people who are new for the ecosystem. These are two key and different approaches. We are developing along the second line, but knowledge about the client certainly strengthens our models.

— From what is this external knowledge formed? BKI data in the case of installments is not available to you.

– Yes. BKI is not used in our scoring. Of those partners that we disclose, we work with the Russian Cybertonica. This is a service that helps to improve the quality of customer solvency assessment. How does the client look in the digital space? What trace does he leave? Is it in line with our risk policy? What is the client’s payment load and BNPL behavior of other operators? These are the questions that Cybertonica helps us answer by analyzing a large amount of data. The use of such technologies makes the installment payment market more transparent and sustainable.

— How does your and other BNPL services make money?

— A good analogy is acquiring. The mechanisms are very similar, we receive transaction income from commissions paid by partners connected to the service. The commission includes the risks and cost of acquiring. For partners “Shares” such commission is 4.9%. And there’s not much left for us, since we don’t control all the debit cards from which the payment is made. In essence, BNPL is a transactional business that benefits from scale.

– “Shares” – is it still a startup? How can you evaluate the financial results of the service?

— I would say that Shares ends the startup period. We are already starting to transfer the service to the rails of regular management, this is an independent business that will grow and develop.

— With the help of BNPL services, purchases can be paid both online and offline. Which direction is more in demand?

– Offline has not yet been fully probed, we are still going there. But we really want to learn how to work offline. BNPL is about emotional purchases with low checks. Most often we are talking about goods in the fashion and beauty segments. The audience is predominantly female. At least in the Shares. And we want to learn how to catch this emotion right at the time of purchase in offline stores.

— How do you see the further development of the BNPL market?

“We can and should continue to grow, exponentially. This market can be significantly larger than POS lending, simply because it is transactional. You just need to keep investing in this topic. And already in 2023, the volume of the BNPL market can reach 200 billion rubles. and more.

— Can BNPL cannibalize credit retail products in retail chains and online stores?

– There is no goal to take something from the lending market. Quite the opposite. These are two different entities. A tool like BNPL did not appear for a long time, because we doubted – why, if there is a POS loan? We tried to enter the segments where BNPL has now settled with a POS loan, for example, we worked with clothing stores, but nothing worked. It is unlikely that anyone will want to apply for a loan product to buy sneakers or a dress.

— Does the BNPL market need regulation? What principles should underlie it?

— The market needs clear rules of the game, and they definitely need to be discussed with the regulator. We believe that BNPL should be free for the client. Like acquiring: the cost of transactions is not passed on to individuals. Restrictions on the total amount must be introduced: the client cannot take 100–500 thousand rubles in different BNPL services. This is what worries the regulator. We hear this request and formulate various solutions together with market participants.

One of the main ideas is to create an analogue of BKI for BNPL services: a distributed registry with a quick and convenient way for all market participants, including professional lenders, to obtain information to assess the total debt burden of a client.

Interviewed by Polina Trifonova