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Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Founder CEO Guy Founders. Field Guide is a series of conversations with founders, CEOs and operators building great businesses. I believe we are all builders in our own way and this series is dedicated to stories and lessons from builders of all types. You can find more episodes at Investor Field Guide dot com.

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Our guest today is Oliver Hughes, the CEO of Tinka of the leading online commercial bank based in Russia. I found this conversation fascinating, and I think it will be essential for anyone who wants to understand online financial services or the next generation of fintech. Our conversation touches on how Tarkoff used direct mail campaigns to become the largest online banking provider in Russia, their last mile delivery platform that combines couriers with door to door salesmen and how they built profitability into every aspect of their business.

I hope you enjoyed my conversation with Oliver Hughes.

All right, I was thinking about an interesting place to begin this conversation, and because people probably have less context around tick off than they normally would with a business that they recognize here in the US, I'd love you to begin by just telling its origin stories, what it does, how it began.

We started commercial operations back in 2007. There's actually a story to tinker for at least the tinkled brand, which is named after a leading entrepreneur like think of so as a person. If you think Richard Branson in Russia, then that's something akin to think of. He's a serial entrepreneur and he had several companies immediately prior to the the bank. He had a big business and the restaurant business also called Sankoff, which is sold on the proceeds of that. So went and starting what was initially a credit card monoline.

So in 2006, 2007, he put the initial team together. We launched in early 2007. So I've been with the organization ever since the beginning as I've basically just about all of the senior management team, the whole 14, 15 year journey. We started as a credit card monoline, acquiring customers through direct mail with zero branches, always a cloud based digital player. Before the idea of Neil Banks came along, we built up a business, a broker even just before the financial crisis.

The global financial crisis in 2008 2009 weathered the crisis nicely, includes a few things along the way, and then went into rapid growth and actually a little bit of diversification until the Russian crisis, our second crisis in 2014 2015. So we'd already become quite a large player in credit cards, but we'd also started taking deposits online and we'd move all of our business to digital channels and online servicing. The Russian crisis comes along 2014, 2015, and we also weathered that very nicely, remained profitable all the way through.

That was a big banking system, clean up and shake up in Russia. And we embarked on a process of diversification. So we realised that we had a large inflow of customers, of applicants. We could generate acquisition flows anywhere in Russia using our online model and offline distribution through our smart career platform, which will probably come once. A little bit later, we decided to go into the product lines. We started building other financial service products, such as an SMB transactional business, a brokerage business, an online acquiring business, lots of other lending businesses.

And then we went beyond finance and into what we call lifestyle services. So some of these lifestyle services we built ourselves, these are beyond the financial services. So we built a virtual mobile operator, online travel agents, lots of content provision, and then started partnering with other service providers who gave us ecommerce. They like Gable's ticketing and tons of other stuff which we now make available to our existing customers. We have a large customer base of now 12 million customers in Russia.

We make available to them tons of different digital services, including these partner services. In our super up, you can order flowers, book a restaurant table, order a taxi, open a credit card, a debit card, airline ticket, whatever. So across virtually the whole digital spectrum of services. So that's where we are today. We've been highly profitable all the way through. We're actually just beginning of our journey because there's still tons and tons to do.

There's a million questions, such an interesting unfolding of services and products that you've built. Maybe that last point is among the most interesting, that the company has been extremely profitable along the journey. As you mentioned, Keech say a bit about that. Most of the I'll call them neo banks, you're on my side of the world, tend to run enormous losses for a very long time. So given how much you've built and done it profitably, to say a bit about why you've done it that way and what you've learned, there's a couple of things at play here.

We have a very disciplined approach to managing capital and managing the bottom line. Philosophy is embedded throughout the whole organisation and all of our business lines in all of our team members is the lingua franca of the organisation. That's number one. And number two, we've always been very focused on product lines that produce a positive bottom line result as opposed to going into, for example, of liabilities led strategy and then hoping that at some point we'll find out how to monetize the customers that we're bringing in through, for example, debit cards, mobile app or whatever it might be.

We started with products that we knew were going to make us a bottom line, positive return and then went into other services through which we could build up our volumes of customer inflow whilst monetizing at the same time we've always done in a different order. The third thing, which is very important is that we're in Russia is the only market in which we work currently, even when we started back in 2007, which was a different world. So politically, there's never been an abundance of private equity, still less of VC funding that will some capital, but capital has always been scarce and over the years it's actually becoming more scarce.

We're not able to take say something out of school, but we don't want to take in money and hopefully some time will crack the code and be able to monetize. In our case, we've had to live hand-to-mouth existence. We've been through three crises in a market where capital is very scarce. And so we have to treat it as such. And this means that we've had to be extra disciplined about how we manage bottom line managed capital of our organization.

You say a bit about lessons that you learned personally prior to take off, I believe, opening visa in Russia and just sort of the background in the credit card business and why credit cards and debit cards was an interesting wedge into the Russian customer at the beginning of the tank.

Often there's very few similarities, to be honest with you. Between my previous job experience, they were both in initially and cards because obviously Visa was a big payment system. I opened the office, eventually became head of Visa in Russia and basically built a sales force and then some product development. But the outpost that I opened in Russia, which was an outpost at the time, is now a very big office. That was more about the sales and business development site in think of its about product and platform.

And it has been since the beginning. Why did I join single in the first place? When Oleg Sankoff, the founder, asked me to move over, I knew that the market was ripe back in 2006 2007, it was ripe for disruptive player. Credit cards was a very small product category in Russia at the time. There were some around, but it was just starting to take root. The cards infrastructure in Russia was very good, so there were probably over 100 million cards, which would debit cards through Sellery projects, what they call payroll programs, I think in your neck of the woods.

And therefore the rails were that it was just a case of finding the right product with the right distribution channels, the right branding, find that magic and then start knocking them out the door, the virtual door. In our case, which is what we after a bit of experimentation, a bit of testing and learning, which is what we managed to do on the credit card, part of the business really took off. And that was what gave us the fuel to build out all of the other parts of the business on the platform that we created a little bit later.

For those that don't know the credit card business model itself. Can you walk us through it and think of early version? What exactly was the business model? How did it work? I would love to include the acquisition of customers through direct mail, which I think is such a probably underappreciated way to reach new consumers.

Can you talk us through the business model of the dustoff? A few memories there, but basically we were branchless credit card, wholesale funded monologuing, purely focused on credit cards on the major, but not the only acquisition channel was direct mail. So in those days, most of the banking was concentrated in the big cities. It was done mainly through payroll channels. So basically our corporate relationship with a bank who gives the employees of the Enterprise debit cards and then maybe sells a bunch of loans, that was it.

That was retail banking, Russia. So along we came with direct to consumer model where we worked with a number of different partners across Russia, which gave us access within the confines of very strict privacy requirements in Russia. So since 2005, 2006 has been a very strict continental European like privacy laws, as opposed to more liberal as they were more liberal Anglo-Saxon privacy and data protection requirements. Using depersonalised data, we're able to do our first our emails, build a database, collect data ourselves from potential prospects as a call, direct mail, and then send out targeted personalised mail shots to these people.

Unfortunately, all the time, direct mail dried up as an acquisition channel, not because it stopped giving us the response rates which made the economics work so the economics didn't stop working in terms of response rates. They stopped working because the Russian postal system every year kept jacking up the rates for mailing. And so they didn't give corporate rates somewhat bizarrely, that what we paid was the individual consumer rate stopped working quite quickly and that was about to happen the same time as we move to online.

So we moved all of our customer acquisition for for credit cards and for deposits and debit cards, which we started doing back in 2009 till lights were actually the first institution in Russia to do anything online at all. After getting a bit of testing and learning, we found that it worked very well indeed. And so we stopped doing direct mail. I've got this secret hope that one day will go back to our mailbox. It's a brilliant acquisition channel is a little bit unfashionable these days, but from a business perspective, it works very well indeed.

And if the post office introduces a corporate rate, then maybe it will go back into it as an acquisition channel. But right now it's all digital.

Before we leave direct mail, any key learnings, assuming that you got that new corporate rate and could start it up again, what were the most effective things you learned about an effective direct mail campaign with high response rates, good acquisition costs, etc.?

Now we're really going down into the nitty gritty, the nuts and bolts of credit card, direct mail business. Every set of consumers is different. Every country has its own regulatory framework. Every market has its own different partner network. So it's all very different. So whatever I say now is not generic. It's probably more specific to the Russian environment. It all comes down to how you use data store data, how you overlay data, Tulear intersections, all your data mining in rich data.

So it's all about the data management. So that skillset that we evolved in order to overcome the problems that you just asked me about and I tell you about in the second, was what then lay at the heart of the success of think of as a business going forward. And it's actually a very good discipline to have the heart of your organization. So we discovered a law of physics, if you like, which is called the Over Promotion Index. API basically said that if we sent more than X thousand mail pieces to a particular postal index, then the response rate would decline.

So basically what was happening physically on the ground was you were overloading the postal hub and they just started throwing the letters away, throw them in the forest and put them in the river, whatever, fortunately was paper. So it wasn't damaging to the environment. So the opted over promotion index, which took us a while to figure out because we couldn't understand why when we started ramping up mailings, all of a sudden our response rates were. Drastically decline.

I was like, so there's a certain limitation of the infrastructure that we were using an independent by index, as well as those different options according to different indexes than we had. For example, after a period of time, you'd start seeing a degradation and response rates where you'd been sending the same mailshot. So then you had to have different variations in order to provoke a response from the recipient. So you'd, for example, have an indentation in dust or dirt on the front of the envelope, which would basically tease the curiosity because they'd say there's probably something called like inside.

We didn't send cards. I was put in some plastic indented to make it look like there was a card. You change the format. We have hundreds of different formats, colors with official stamps, nonofficial stamps, all the tricks of any direct mail organization will know about. We tested all of these. And so you test in different test cells, making sure you covering different geographies and different segments. It takes a bit of a while for these things to mature.

Unfortunately, in terms of tests and direct mail is not like a line where you can do in a few weeks, even days, sometimes in direct mail, that takes a long gestation period. But then you work out what works and then you skeletal. You carefully follow the response until it stops working as well. And then you move on to the next thing.

A very interesting discipline seems like a fascinating thing to build the team's early experience off a very quantitative, very high feedback loops, really interesting muscle to develop early on once you had that initial base of users. I'm curious how big it was in the first few years, how many people signed on to the service? How did you begin to then branch away from the original core credit card business? So what was the thinking and the strategy around how to move from product to product?

You with it offered a wide variety, almost sounds like one of the super apps and someone else in Asia. In terms of the number of things that you do for customers, I'd love to understand the sequencing and how you made those decisions to move from credit cards to the marginal business.

We built super customer base of probably about 300, 500000, so don't quote me on that. But I think that was about the way we were in terms of active customers. And then the global financial crisis happened and our funding model, which was already quite difficult, which is wholesale funding mainly from the international markets, because there was no one to borrow from in Russia, no one that was willing to lend, I should say, in Russia to start a credit card company in 2007, which was an interesting time to be launching a company like that.

As you can imagine, we had to rethink our funding model. So we went into deposits. I said we were a credit card monoline company, but we were a fully licensed bank. So like think of back in 2006 to full banking license. So we were able to take deposits and we obviously didn't have any branches. So how do you take deposits in Russia back in 2009? So we did a couple of tests, nothing that really worked. And we decided to try online, as I said earlier, and we were the first financial institution in Russia to do anything online.

We went into a loan, take deposits and found out that that was something that was scalable. We could do it at a price that worked for us in terms of funding cost. And we started scale it up very cautiously in the beginning because we were obviously very exercised by the idea of liquidity management and also the cost of funding as well, because deposits in those days were very, very costly, gradually scaled up. That took us into debit cards.

We also, around 2013, quite a small online insurer, just an insurance shell license. We created an online insurer ourselves off the back of the license, to be precise, and started building up business. So we just started to diversify away from a credit card, pure play. And what enabled us to do so was the fact that we had direct to consumer credentials, direct to consumer skillset, data acquisition and data management, remote servicing and all the prerequisites were there for us to start moving into all sorts of different directions.

And as I said, we were able to generate this huge customer inflow, this application flow from any geography in Russia. So Russia is quite a large country, obviously. So not from just the big population centers of a million people, which are thirteen, but from any village literally anywhere in Russia. But we would just sell them credit cards in the few deposits. So we realize that we really needed to start utilizing the customer flow a lot better.

And we started playing with different products to see what worked and where the business was, where the conversion was.

What then what can you talk a bit about that process, that capital allocation process, which is probably what I imagine takes a lot of your personal time, is making these bigger strategic decisions both now and think cost history. How do you think about when you mentioned NPV when to make different competing investments? Is it just the highest potential rate of return that your team has determined a product will deliver? What is the exact process by which you make decisions on what to do next?

If you just think of credit cards, because it's an easy example, we. Understand the cost of acquisition, so the cost of generating an application, the conversion metrics of the application through to utilize credit cards, that goes through different stages of underwriting all the way through to the first transaction being made on that credit card. So that's the full conversion. The cost of a utilized credit card is a cost of acquisition for us. Then you have the cost of servicing and that very much depends on which channel the customers come through.

So they come through online as opposed to offline, a partner or Koranda or whatever it might be. They will have different servicing costs because of the different behavioral profiles you have. Your cost of risk is also very different by different subchannel of your cost of funding, which in credit cards is a constant, is consistent across all different channels. But for different lending products, depending on the duration of the product, there's different funding curves. So you plug all of that into your NPV model.

We apply a 30 percent discount rate. That's a very high hurdle, high requirement in terms of return on capital to our shareholders and take a decision. So we rank different channels so we can prioritize what we're going to do and where we put our resource in terms of scaling things up. But in terms of actual decisions and underwriting basis, for example, acquisition targeting, then that would be using this framework to decide where we're deploying our resource. And our capital is being very useful because it helps us, as I say, prioritize.

It gives us a big loss absorption capacity when we go through different cycles, economic situations, stress tests of which we've been through three, as I said earlier, three crises in our relatively short history of 14 years. It also gives us a common framework between business lines so that we can decide which of the business lines to invest in raises.

Two interesting questions about the NPV method. One is how you invest it in an organization like literally whose job it is in each of these groups to be the steward of that process. And what magic is there on the downside? How is this failed you if it has failed you? This process mentioned it's not an exact science. So I'm really curious. And those two concepts kind of who is responsible and how and when it fails, I'll deal with the first question about Stuart.

So every single business line and service line in our organization. So this is basically a product unit or a servicing platform. They all have their own NPB models and so they're developed locally. But the guys to steer them, advise them, have input in developing these temporary models are the risk guys. So the risk of the gatekeepers, they're the custodians who make sure that the consistent methodologically correct. There are lots of different ways of building a model to make sure that will have the same currency in the organization.

We have the risk team who will basically all mathematicians and physicists are obviously analytical people, as you'd expect. We don't have a siloed organization. I'm a very flat organization with very analytical approach steeped in the numbers, and this is one of the insurance policies that we have to make sure we don't make too many mistakes. But obviously we do make mistakes. So there's obviously going to be a stage where, for example, investing in a new channel or even a product line, we don't have enough data to build an NPV model.

And so we make an investment decision based on the best available information and sometimes we make mistakes. So then we have to take a judgment call. Do we continue with this and hope that the economics will stack up all the time then? Peevey, or do we kill it? And we've had to make a few decisions like that along the way. There are also other business lines, for example, where we actually run them. But we only have to like this to be out of twenty, twenty five business lines.

But we have to well we run them with negative NPV because we know that through those business lines we bring customers in and we will then cross-sell them a monetize those customers to another product. So this is why I S&P the biblical and it's not a science that's a tool that helps us do things in the organization a consistent way. And this might be the one of thing which is this is a big kind of ideological debate, if you like. So you look at a lot of the neo players across the world today and they've gone out with basically mobile up and a debit card, bringing in lots of customers very, very quickly.

Some of them have purportedly already tens of millions of customers. And that's great. They don't have necessarily a revenue model that works or a way of monetizing those customers. The jury's still out, but they grow very quickly. So they don't have incentive based approach because they have a very different revenue model and different outlook on this. In our case, maybe we could have grown a lot quicker, but we don't because we put ourselves within these constraints that we put ourselves within this ideological straitjacket, that every incremental customer that comes into our ecosystem has to be NPV positive.

Otherwise we won't bring them in or we bring them in with a slight negative NPV position, as I mentioned earlier, in a very exceptional cases and cross-sell them. We have to make them positive that way. If they don't come up with a positive NPV, then we don't bring them in, so. That puts a cap on our growth, maybe in some cases, but it means that we're always going to be producing a bottom line return, which grows every year.

I think it's so fascinating to contrast a company like yours, which, frankly, is doing a lot of the same things that I think these other big digital first companies want to do in terms of the suite of services that they offer but are willing to. That's the history of Western tech businesses, has been get the eyeballs first, figure out how to monetize later. So fascinating to have seen you done it. Like you said, perhaps your customer count would be bigger.

I'd done it the other way. But surely a unique and interesting way to scale the business. One of the most interesting little factoids I found in doing research on Take Off was that you're also the largest door to door delivery service in Russia, which was not expected, given that you're a digital first branchless bank. Can you talk to why that is the case?

We didn't set out to be a large logistics company, as you can imagine. What we've become and we're doing today, 35, 40000 deliveries door to door every day, which is quite an amazing number. So we are the largest door to door logistics company in Russia, while Russia is actually a very progressive country, not just in terms of fintech, in terms of the services offered to the consumer in the financial space. But in terms of regulation, so we've got a very progressive central bank who do all sorts of interesting stuff, and they're actually a big disruptor themselves.

However, Russia still requires by law to have a face to face meeting every time a bank account is opened, including a card. So we can do what, for example, new banking do or do all the stuff and take names out there and acquire someone purely through mobile up and then send out Cardiff. That person wants a piece of plastic or just give them mobile payments if that's how they want to play, because according to KYC requirements, we have to have a physical meeting and thus remains true to this day.

So when we started taking deposits back in 2009, the customer would apply online. Then we would have send out of some way of physically identifying them. The way we did this was to send out a small courier. So we developed our own smart career platform, which was proprietary because nobody else could do it, a DHL Pony Express, whatever. They just couldn't do the last mile for us did the article routes and we don't do it all in-house as far as I can remember.

But the last mile nobody could do so. We did ourselves as one of the many innovations that we've come up with over the years in order to scale our business. And obviously these guys started with deposits, but then we found out that they could do a lot more for us. Credit cards. They do debit cards. They started doing insurance policies for us. Now they can deliver ticket SIM cards, whatever it might be. We actually started experimenting with third party products and services that we can deliver through our smartphones as well.

These guys are very well trained, very well appointed, very young, dynamic, interesting, educated people. They're not courteous in any sense of the word, apart from the fact that they do a delivery of something. Well, basically, they're getting a signature on a piece of paper on the photograph of the central bank. But the rest of it is sales. It's actually become a huge cross-sell channel as well as fulfillment platform for us. And it's become a huge differentiating factor in terms of service fulfillment capability to increase the velocity of our business.

So you apply today and you actually get a card today in many places of worship. If you don't get a card today or product today, then you get it next day anywhere in Russia. And it's also a very important risk management tool because we do physical verification, but it's also a fantastic service. So it's become a fundamentally important part of our business on a fascinating, interesting, unique aspect of the business.

Are those people armed with data going in, especially thinking about cross-sell opportunities or sales opportunities? They're given sort of a stack ranking of what to prioritize with each customer.

Absolutely. So we developed a mobile app for them called IMG Agents. All of our development is done in-house these days. So most of our stuff tech professionals. So we're basically a tech company with a banking license. There's a logistics platform in the background. But each of our smart couriers has a mobile app which tracks them, manages the logistics, the scheduling, enables them to communicate with the people they're are going to meet the prospective customers, tells them which things are supposed to be cross-selling to those customers, gives them all sorts of advice and scripts, whatever, in terms of routine for selling a Q and A, obviously it's just a big information resource for the mountains with the stuff that we do.

So we use that data to continually optimize our whole service delivery platform.

It's a fascinating barrier to entry, I imagine that makes takeoff extremely hard to compete with. Would you say that's one of the largest barriers, one of them.

So if you want to set up a banking type operation in Russia today, you need a lot of capital because we have the highest risk weightings from the central bank in the world. You have this KYC requirement I've just been describing. If you don't have branches and you don't have. Access to a decent courier network, which gives you that coverage, then how are you going to do it? There's not many options. Basically, the only ones, unless you're working through a retail partner and that's a bit clunky, then that means that's a significant barrier.

Loads of others as well. I've seen busting in technology. So it means that there's not that many successful start ups in the financial space in Russia.

Unfortunately, I've seen you mentioned elsewhere that specifically payments can be a very hard business to make money. And can you talk a bit about your experience with the payments line of business, specifically the margins there and the challenges and what you think about maybe Western companies like Square or people that have seemed to have succeeded in that area?

I don't believe that you can't make money in payments. You obviously come the some companies that do it extremely successfully and to scale. Well, I mean, when I say that there are probably challenges around setting up, for example, a digital bank and trying to build a payments business, which provides you with bottom line return, I think that's a bit more difficult because you have to have absolutely huge scale because you have have the right business model, see, because that if you don't have these kind of entrenched position, then you're already thin margin in payments, if you have a positive margin at all, is getting eroded away by regulators, by competition, by consumer behavior as well.

If you're setting up the kind of freemium model where you're offering banking services or financial services and hoping to make money on interchange and all payment services, then you're not going to be able to make ends meet. Basically, that's what I mean when I say that the payments business we really like, we have a enormous payments business. We have the lending businesses, largest of which is credit cards, but we have others, including secured lending, which are coming up very nicely.

We have an SME transactional business. They're going to make a very strong return this year. It's also been growing all the way through covid and we're starting to see a bit of a SME lending as well off the back of the data and the existing customer relationships we have and and our, let's say, current account business. It's a mobile app with the debit card. The debit card can be virtual or it can be physical, where one of the largest players in Russia, we have one of the largest P2P businesses, P2P transfer business of the of.

But if we come back to debit cards, which is where we started you on a transactional basis, we lose money on our debit card book. And we have, I think the numbers currently around about nine million debit cards issued. And all of these are customers of self acquired customers. They come to us not through a payroll program. They made a conscious decision to become our customers. They want our product. They still loss making because we give a very rich product to our customers.

We get these millions of customers into our ecosystem and monetize them by cross-selling. So we sell them loans, we sell them insurance, we sell them brokerage, we sell them services. We sell them lots of other stuff. And that's how we monetize them. So for us to just have a debit card business will be really quite deeply lost making and there's no way it would be able to switch on monetization without just losing our customer base overnight in a very competitive market.

That's what I meant when I made those comments fascinating.

You mentioned earlier a couple other verticals that I'd love to explore. The first is content. What has been the use of content across the the ecosystem? Why do you invest in it?

And content is very, very important part of our business. So we have several different, let's say, content generation sources within our ecosystem. So we have a resource called Tinkled Journal. Sounds a bit bizarre, but it's the largest independent media resource in Russia is completely non-commercial. So we don't advertise, we don't monetize, we don't do anything through it apart from provide useful content in the financial space. So it's financial literacy. It's educational investing is how to protect themselves going forward, how to pay your VAT, how to pay a traffic.

Fine. So anything in financial equation, financial space, lots of tips. And we have eight and a half million mouth on that resource now. So it's such a huge, huge sight unseen to be mobile up as one area. The next area is what we call stories. So we were the first financial institution in the world to integrate storyboards into our mobile app. So if you think Instagram, Facebook, obviously they'll have these stories. We did something similar.

And the idea here was to drive engagement in our mobile app to make sure that people went into the mobile app as often as possible and spent more time there, saw relevant content. So it's based on a machine learning algorithm which drives customized content personalized to that particular individual profile of the user. We see obviously the transactions, we see the behavior. We see what they look up. We actually have quite a bit and we see where the trouble. We are shocked.

Quite a lot of knowledge about that particular person, that customer, so we can drive the right targeted content to them in order to increase their endorphin levels, as we like to say, through shopping offers, through travel tips, restaurants, things to do at the weekend with kids, whatever it might be, local events, but also a bit of cross-sell. So we'll try and cross-sell, monetize our customers to buy some of the products or services from Sankoff.

We give them cash back on the theater tickets, concert tickets. It's really quite rich, rich offering in terms of content, other stuff that we do around the ecosystem. So, for example, we have lots of different recommendation engines. We have a robot advisor. So a lot of the content is kind of where portfolio management or transaction management or whatever it might be ends and where content, useful lifestyle tips begins is difficult to say because we're able to do it until those things.

And this drives us forward to our concept of an allied bank. So we want to take into the background the boring stuff, the hygiene type transactions, utility payments, mobile top, all the stuff they don't want to think about Will to make it the background, the stuff that gives you these endorphins, that gives you enjoyment. So it's shopping is travel, it's entertainment. It's sports is whatever it might be. All of this kind of stuff we bring to the foreground, give you offers through cashback, try relevant content to you.

Lots of recommendations in terms of people like you bought. What kind of stuff? It's fascinating.

And it seems like to me maybe the answer of my next question is one of them is content. I'm curious how you think about the two or three, what I'll call competitive frontiers for take off the places where you winning in those areas. Content could be one, maybe mobile is another, or something would be the most effective for your overall strategy and for the success of the business.

How do you think about what those competitive frontiers are and how often do they shift or do we spend a lot of time thinking about so a lot of time thinking about loyalty, merchant funded loyalty. So we have a platform called Single Target, which we want to do a lot more with because we have a big network effect. We have lots of users on the consumer side. We have lots of partners on the merchant side, on the retail side and more.

We can put those together. The more it adds value to our merchant partners, the more it drives value to our consumers, our customers, and the more it improves our economics. So there's an obvious area we need to be just a part of. That is the father in Russia. We can see to SKU level what's happening in the transaction, not just the transaction, i.e. location, a merchant ID, the amount of transaction and that kind of stuff, the kind of generic payment system stuff.

But we actually could go down, see what actually the customer bought because of the way the merchant takes online reporting system works. So we've integrated all that into a mobile app as well as the customer can see what I bought down to ask you level. So the data, though, is just incredible, as you can imagine, which enables us to do all sorts of stuff in terms of types it offers from brands, not just from retail partners as one area.

The other area is around the brokerage business. So. If you think Robin Hood, but only better, we are the largest now brokerage operation in Russia with a big number of active customers. We have over two and a Half Men in brokerage accounts opened in just a little more than two years. I think we're going to grow five or six times in terms of losses this year. Valences transaction have just skyrocketed. So trades and it's a very profitable business for us.

So what we've got to do in terms of building out the product range, segmenting for different types of customers from buying to hold retail investors to premium type customers, higher networth frequent traders in terms of execution in the background and using sophisticated algorithms to help our investors make better investment decisions. We're just starting, though, and it's absolutely fantastic journey and basically blue ocean territory. And the third area is actually building our lending businesses here. We have lots of data that we can also bring to bear to improve the underwriting decisions that we're making on content has a role in all of these in terms of tribal engagement, which tribes cross-sell with tribes lifetime value, which means we can improve pricing for customers over time.

It also improves the lives of our customers because we can provide more relevant offers at the right time as opposed to generic kind of cross-sell offers. That's particularly interesting to people because we don't get them at the right time or don't go with the right proposition. So we're in this positive, virtuous feedback loop in terms of the data that we got on more and more customers that were using a much better way over time, as you think about Takeoff's future.

Now, what do you think the most effective next chapter might look like for your business? You've talked about the competitive frontiers. So obviously those are key focuses for where you go next. But are there other plans beyond Russia? Maybe say a little bit about we haven't talked at all about just the Russian and business environment or doing business there versus elsewhere in the world. How much of it do you think is portable outside of Russia?

We made 36 and a half billion dollars of net income last year. This year, we're telling the market that we're going to do 30 to 35 billion in this covid year. But we've already hinted to the market that we can have a very strong results and our results come out fairly soon. And so they'll be able to see for themselves. The reason why I stopped my answer in that way is because we know how to grow a business. We know how to grow our customer base.

We've currently got 12 million customers. We know how to grow to 20 million customers in the next three years. We know to grow bottom line. And we've been growing our bottom line over the last few years. So 30 to 40 percent every year. And we're going to continue to do so. So we know how to grow to a billion dollars or so. That's our ambition. So when you have that kind of growth profile in Russia, anything you do outside of Russia, and it's a conversation we have regularly introduces a certain amount of opportunity cost or execution risk to the business that we have in Russia, which is firing on all cylinders and has been for a long time and will continue to do so for a long time because it is management distraction.

It takes out some people from the inside of think of to go and build think of India or tinkled Brazil or think of Iceland or whatever it might be. And it's a deployment of capital. So if we're making a year in, year out 40, 50, sometimes even a higher percent return on equity, why would you deploy that capital in another market where you have all sorts of actually execution risk? And even if it does come together in three or four years time, maybe you'll get a 25 percent return on equity, maybe worse.

So these considerations have always held us back from going abroad. That's not to say that we won't. And we're actually currently doing a little bit of an experiment, if I could call it, in terms of an investment that we've made. So a couple of very, very strong people from sinc of left think off, didn't go very far from Sankoff, go and found a fintech startup in Europe. So this is called vivid money. Vivid money has a pretty different philosophy, a different approach, and it's a liabilities let fintech, but it's all about managing money.

So it's about investments as well as money management solutions. Very high tech, very high and very lean. We really like it. Like what they're doing this we've made this investment and they'll be scaling across Europe and then potentially across the world in the coming years. So that's, if you like, think of dipping its toe indirectly into geographical expansion and we'll see how that works. We are there as an investor, I just repeat that as opposed to operationally and depending on how that goes, maybe depending on how our thinking goes, we may look at other markets to expand in.

But right now we haven't taken any final decisions or not.

Can you describe the state of things, the state of the market, the state of business in Russia today for those that don't follow that market as closely, used to be extremely interested in the entire history and just haven't caught up in the last couple of. Four years, how would you describe Russia, just generally speaking, only with sort of open ended like that to a listener base, which is more North American?

Obviously, there's a lot of misconceptions. There's a lot of stereotypes out there on both sides. Russia is an amazing place to do business. It's a tough place to do business. But then I think every single market in the world is tough, depending on what you're doing. I don't think there's an easy ride for business, particularly early stage anyway. The Russian environment is pretty difficult in terms of availability of capital. So we discussed that a little bit earlier in our conversation.

So capital is scarce. There's no huge inflows of inward investment and you have to be a lot tighter about your execution. But there is business to be done. It's not all about stuff. You get out of the ground about holding oil and gas. There are peculiarities of the business environment as there are anyway. But all of the stories of men in grey suits, extorting money or whatever is just not the case because we've managed to build a business like many other people, many of the companies in Russia, in the tech space and retail in finance, without encountering anything remotely like that.

People unfortunately tend to see dos and goblins all over the place in Russia because this is what's being fed to them through the media. And actually even some people are considered to be smart. They tend to swallow a lot of this stuff about this being a hostile business environment and corruption and bribery all over the place. It's just not like that. So you have to be savvy like you do in any market. Moreover, the tax base is very vibrant.

So when you look at what's happening with some of the leading tech players, some of them are public. So, for example, Yandex, Mail.ru, think of a lot of them are not public. So these are names that just won't appear on people's monitors at all. There's tons of really world leading innovative companies working in the new economy, not just in Russia, but operating internationally, have obviously some of the best talent available to them in Russia, in the labor market, because this is where the best programmers are developers, designers, architects, etc.

. Obviously, you guys know that in Silicon Valley, a lot of them a version origin one way or another. There's just a very different story on the ground with a lot more room for maneuver, room to innovate and the ability to innovate because of the amazing people here. The fintech space is quite incredible here as well, because you do have some tech companies, you have specialist companies doing different parts of the financial value chain, but you have less of a startup climate here for reasons that I've explained the availability of capital.

However, when you look at what the incumbent banks and some new players have done, new plays, obviously, including think of you can see that there are financial platforms and actually ecosystems being built around financial platforms, which is unusual because normally get financial services appearing around e-commerce platforms, around messengers, around search systems, whatever it may be across the world. But this is the only place where you got digital ecosystems being built around financial platforms. And that's Pinkerton's Burbank, the largest state owned financial institution in Russia.

So there's all sorts of fascinating things going on. And when people come here and really look under the bonnet, they're are actually quite surprised at how vibrant it is.

One of the things that you've talked about is the preference to recruit the absolute most talented, smartest people with math or physics backgrounds and sort of mold them from a young age inside of Takeoff's culture. What have you learned about that process?

How have you deliberately built a unique and specific culture over the last 14 years where a very flat organization, genuinely flats, were broken down into the different businesses and services loans that I mentioned earlier who are autonomous? So the full strike teams through developers product, people on the lists, people on the business side and sales marketing risk if need be, whatever. So full stack fully autonomous teams with their own resource goals in terms of annual goals, longer term goals.

And we try and keep this very cohesive at a group level so people don't drift apart. And we try and keep a lot of the infrastructure shared, as well as the conceptual framework and management tool shed. But apart from that, people are very independent and we're able to basically delegate authority in decision making. Powers are very low in the organization. So you get very young people. The average age of our HQ is twenty six well, three thousand people in HQ, one thousand people in development hubs across Russia.

These young people are in charge of well, we don't have logistics. We don't have a budget per site, but we have plans. They're in charge of very large business and service lines, spending tens of millions, sometimes hundreds of millions of dollars and generating these ideas that they can implement. So the distance between one of our employees and the results of the decisions that they're making, testing and learning, and then if they find something that works based on the analysis.

They do that, they scaleup, the distance is very short, the time is very short, time to market is very collapsed. So it's very stimulating environment in which to work. You'll delegated to very early. You're encouraged to take risks in a controlled way, in a measured way, very early. You're with like minded people who are just swimming in data and Hlophe analysis we take we don't buy stuff off the shelf. We don't use our sources.

We develop our systems in-house, including our core systems these days. And so the speed of change, the organizational culture, the DNA, which is think of is very specific, peculiar. We're very proud of it. We're fiercely independent and proud.

It's a place that you can really make things happen, which is why people like looking at what do you personally enjoy most about your job, the fact that we can do things as a team which affect in a positive way the lives of a large number of people. We've shaped the way that the Russian financial sector is developing. They want to sound too arrogant or cocksure, but we really have we just change the direction of things in Russia. So we've set the pace, we've set the benchmark.

And now lots of banks are building ecosystems in Russia. Some will make that journey, some won't. We're constantly finding ways of innovating in our interface and bringing new value to customers. And we can do this in a very quick way. So, you know, the rapidity of our business and innovation and bring out new products and services is something which really gets us all fired up. Kolby, there's actually been an interesting time for us. Obviously, it's been very tough for Russia as well as all the world.

But this has enabled us to actually speed up as we moved into a 100 percent homeworking regime where all the offline organizations obviously found it extremely difficult. We were online anyway. Most of us were in the cloud anyway. So we've actually been able to increase the pace of our innovation and knock out new stuff. It's that ideas generated approach and the fact that you can see the effect that you're having on the society in which you're living and working.

What's been the largest failure, in your opinion, during your time? I think often. What major lessons did you learn from that failure in business?

There's always lots of failures. I've talked about test and learned many times tests more often than not, and then failure. That's how you look rather obvious. One thing that would maybe stand out as something that didn't go as we'd hoped. So we had the idea of an online financial supermarket at some point. This was back in 2015 where we thought we would do less balance sheet stuff and do more of balance sheet stuff. So we'd use our origination platform to bring customers in and write them on to apartness balance sheets.

So specifically for mortgage, what we're going to do it look for lots of different lending products. So we make our balance sheet more lights, less capital intensive and more about commissions based income. So we've grown our commissions based income for sure, is now over 35 percent of our top line from non-credit business loans. So we made huge inroads in that direction anyway. But the thing that we thought would work didn't work. Imagine Quicken Loans in US. We built a fledgling Quicken Loans in Russia, where we originate customers onto balance sheet apartments for mortgage.

The problem was that the structure of the Russian market is such that 70 percent of mortgages originated are done. So on to balance sheets of State-Owned Banks, the state owned banks, as a matter of principle, wouldn't work with us. We had a difficult sales funnel, so basically we were attracting a lot of customers, a lot of applicants. But the bottom of the funnel were the key conversion takes place that were going and getting a mortgage from Sberbank and VTB or whatever the other state owned banks.

So our economics didn't stack up. We tried making it work for one year, two years, three years, kept trying to make it work. It was a fantastic service. The NPS was through the roof our partners liked. We had 12 privately held partner banks originated in those mortgages through us. But unfortunately, economics didn't work. So we probably took a little bit longer to kill it than we should have done. But eventually we came around to the idea that we could make the economics stack up.

So we discontinued it. Unfortunately, I wouldn't call it a mistake. It wasn't a very expensive mistake.

Anyway, I'll remember this conversation for this mindset of an NPV approach, a customer focus and a product focus and just incredible rigor around how decisions are made with the North Star of creating more valuable products and services for customers. I think it's such a neat and unique story. I love that the circumstances of the country and the lack of capital availability have sort of, if not forced, encouraged this different model than what we see in the West and find it completely fascinating.

So thank you for taking all the time to teach us about take off today. I have one final question, which is a question I ask everybody, which is for the kindest thing that anyone has ever done for you. You know what?

I've been thinking about recently that I really need to return this favor when I was a student, I came from a background without huge amounts of money, certainly not exist to throw around. I'm not a bit of a tough period as a student. Well, it was actually funny, difficult to make ends meet. And I need some new shoes or something. I can remember a friend of mine who was a nurse, a male nurse. He gave me 200 pounds just at the right moment when I needed it completely unsolicited.

I just knew that I was going through a bit of a hodgepodge. And I remember saying, like, you know, I can't pay this back to John for a while, that I when I said one day of blaming you for this recently, the first time that I bought a fridge. So that's one of the kind of things that has been done to me. I remember I'm going to buy the fridge.

What a funny specific episode I love when it's just in retrospect, small, but at the time was large. Such a fine example. Oliver, thanks again so much for your time. It's a pleasure to meet you. Loved learning about a very different business from what I'm used to talking about. Thank you for your time.

Thank you for great questions. This episode was brought to you by Clivia in this four part mini series. I sit down with Clavier customer Nomad and discuss their origin story, why they chose Clearville for their business and how your brand can grow online sales with Clavius. E-commerce Marketing Platform. In this week's episode, Nomad co-founder Brian Hohn and I discussed the expansion of Nomad and the decision to partner with Clavel for ecommerce growth.

So talk me through the progression from the first product and all the way through to today. So how did you start to add products? What are those things look like? And what would be a snapshot of the business today in terms of how it's grown and what it offers consumers?

Yeah, so we started with a credit card size cable that went in your wallet and the whole idea was you'd have something on you that in an emergency you could find a TV in a bar or a keyboard or whatever, a printer, and you could find a USB port and you can get some juice in your phone so you're not stranded. And then we realized that keys, phone, wallet. OK, let's make a cable that goes on your keys.

Let's make a wallet with a battery built in. And we just started making products that kind of revolved around this kind of keys, phone, wallet. You leave the house, you've got tools completely on you that you don't have to think about that integrate into your life. And that's where the brand nomad and the ethos of Nomad really came from. But through changing technologies of what Apple's doing and requirements for lightening plugs, things started to just get a little bit too big to really kind of meet those demands.

So we kind of changed the brand a little bit to really more focus on extremely well-made products that help you travel with this sense of reliability. It's like my cable will not break on me. And so we've come out with a whole suite of products and cables in cases and wireless chargers and leather goods. And we're really proud of the lineup that we've built over the years.

I'm fascinated by the marketing challenge of a business like this and especially on the e-commerce side. And this is a great bridge into how you first found Clivia. So just say a bit about what the problem was or what your solution was, I guess for things like people that put something in a basket on your website and went away or what were the holes in the leaky funnel that you had early on and maybe tell the origin story of how you found Clivia?

I think at the time, the very beginning, we had a bit of an easier hand than I think that people have right now. And the reason is, is back then that was when Facebook first started doing advertising. So advertising was extremely cheap. So we were cranking on Facebook ads and we had a ton of traffic and a ton of people coming to the site. We were just experiencing like the surge of traffic and we were using a similar email provider at the time and it wasn't able to do anything interesting.

And we were really into trying to do these creative kind of like marketing campaigns where we would like to send people these like post follow up emails where they could get a free product if they did something silly, like change the wi fi of their house to Hello Nomad Dotcom or like yell on a bus that this is the favorite product they've ever had or just kind of we had these list of, like, outlandish things that people could do to get free product.

And it was great. And one of the only ways we could find that did that well, that allowed us to have that logic. And control was through Clavier. We were like, wait, this is one of the coolest products in the e-commerce space. We should we should really look into this at the time in e-commerce, in a kind of art space, there was only these really basic providers. So the whole pitch that we got was that we're bringing enterprise grade features down to kind of like.

Masses, we were hooked immediately, we totally saw all the potential of the flows and the different logic gates we could use and the integrations with Shopify and we are hooked. And we just started building out funny flows and different marketing stunts and really helped us kind of take our traffic that we had and turn them into kind of fans, you know, these real nomadic fans that engage with the brand. To find more episodes or sign up for our weekly summary, visit, Investor Field Guide dot com.

Thanks for listening to Founders Felgate.