The turkish credit_cards_experience_2010

Growing Customer Base Through
Customised Solutions in Credit
Cards Business
askbmm consulting is a boutique management consulting ﬁrm that uses
strategic insight, tailored solutions and a collaborative working style to help
June 2010
clients achieve sustainable results.

:askbmm consulting
Gulbahar Mahallesi Avni Dilligil Sokak No:5 Celik Is Merkezi C Blok
Kat::4 Daire:16 Mecidiyekoy Sisli 34387 ıstanbul Turkey
T: +90 212 347 7260 F: +90 212 347 7275 www.askbmm.com

Disclaimer

  The initial market brieﬁng included in this presentation has been produced by askbmm
  askbmm has prepared this document within a limited timeframe and has relied heavily in its analysis upon previous industry experience,
publicly available data such as press reports, annual reports, websites and market reports
  askbmm cannot be held accountable for any investment, restructuring or another strategic decisions made upon the basis of this limited
data gathering exercise. Any opinions expressed here are preliminary nature, based upon judgement of the data collected to date. This
report is collected from publically available data
  No person may rely on any advice or information contained in this report or provided in any presentation made by askbmm. Any use or
reliance by such other persons on askbmm’s advice or information is entirely at their own risk. askbmm shall have no liability for any loss or
damage arising out of any such use or reliance

© askbmm 2010: Customised Solutions in Credit Cards Business
2

Agenda
A Case Study : Turkish Credit Card Market

Innovative System The Enhanced Loyalty and Proﬁtability

Introduction to askbmm consulting

3

Turkish Credit Cards : Milestones of The Last Decade
Turkish banks were forced to introduce innovative features (independent air miles and lucky draws) as
competition to sustain and increase customer base got tougher

Advantage was a spinoff
New Features
More banks shift credit Travellers are the new
from a department store’s cards features towards target. Banks offering
deferred payment card rewards redemption at additional independent air
launched in early 1999
merchants and deferred miles with reward points
payments. Yapı Kerdi
converts its credit card base
The rival department store, to world system
in association with Garanti Joint air miles
Bank launches a similar programme with
As competition increase
card with reward points Last to join this paradigm Pegasus Airlines
banks began seeking to ad
redemption at the shift, Akbank was the introduced.
new features. Akbank
merchant option
first to directly link rewards Holders can still
introduces new card which
Paradigm Shift
to monetary value
also rewards independent earn reward point
Deferred payment options with air miles on top of previous and miles
credit cards
Joins Bonus rewarding options
system

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

Garanti bank launches first official
Consolidation of Credit
Yapı Kredi bank launches its
credit card of Turkish Airlines. Along Card Systems
air miles featured credit card
with earning air miles, card offers
programme
deferred payment as well
bank was the last to step
Turkey’s oldest bank retaliates to in the air miles competition
market shifts introducing reward
End of an Era
awarding and deferred payment
Now reward points option card. Rewards are equal to As competition to increase credit card
converted to face 1 TL and redeemed at merchants base, akbank launches credit card
value and redeemed at face value
that also offers a monthly lucky draw
at merchants as of high ticket items such as cars,
opposed to previous apartments, boats, TVs etc.
catalogue system

Source : Company web sites, BKM, Trade Press, askbmm research

4

Turkish Credit Cards : Impact of Deferred Payment Options
Today all Turkish banks offer credit cards with differed payment options at competitive interest rates
and shifted towards instant points redemption (at the merchant)

50
$3,500
CAGR
Further consolidation of
credit cards brands (other c. 25%
45
banks to join this wave)
$3,000
Siginiﬁcant increase in
40
number of merchants c. 7%
offering deffered payments Consolidation of various
banks credit cards systems

Yearly Spending per Credit Card
and point redemptions
35
under the leading 4 brands
$2,500
# of Credit Cards (million)

Number of credit cards offering
30
deffered payments increase and $2,000
bank partnerships (using same
brand, IT systems, model etic)
25

Financial crises
$1,500
20

15
$1,000

Introduction of deferred credit
10
cards (enabling installments)
and shift from catalogue points
$500
to points redemption at
5
merchants

0
$0
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

# of Credit Cards
Spendings per credit card (US$)

Source : Central Bank of Turkey, Banking Regulations and Supervision Agency, BKM,
Trade Press, askbmm analysis
5

Turkish Credit Cards : Impact of Deferred Payment Options
While the average number of transactions seems to be stagnated at CAGR c. 2% it is mainly due the
signiﬁcant increase in number of credit cards
50

Increase in # of POSs
$90
CAGR

c. 2%
Financial crises
$80
40

$70
c. 7%

$60
Transactions/Year

Transaction Value
30

$50

$40
20

$30

$20
10

$10

$0
0

1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

# of transactions per credit card
Average Transaction

6

Turkish Credit Cards
The Turkish credit card is still under penetrated compared to other countries and there is a considerable
growth potential

GDP/Capita vs. Number of Credit Cards/Population 2009
60,000

UNITED STATES

50,000

40,000
UNITED KINGDOM
GERMANY
JAPAN
GDP / Capita $

SPAIN
FRANCE
CANADA

SOUTH KOREA
30,000

SAUDI ARABIA

20,000
MEXICO
BRAZIL
TURKEY

10,000
RUSSIA

THAILAND
JORDAN

0
-0.5
0
0.5
1
1.5
2
2.5
3
3.5
Number of Credit Cards / Population
* The size of the spheres corresponds to the population

Source : TUIK, BKM, Central Bank of Turkey, Lafferty Group Research, Trade Press, askbmm analysis

7

Turkish Credit Cards : Consumer Perspective
Turkish consumers prefer lower limit credit cards that are compatible to their monthly income and they
tend to consume only 50% of this limit

CAGR

  The most commonly used credit cards (at 88%) are those with a
Acquiring Volume ( Retail & Cash )
limit cap less than US $3,000. Turkish consumers prefer to use
$160
Siginiﬁcant increase in number c. 30%
lower limit cards parallel to their monthly income
$140
of merchants offering deferred   Only 11% of Credit card holders use more than 85% of the card
payments/points redemption
US $ (billion)

$120
limit whereas 75% of the holders only utilises up to 50%
over credit cards
$100
  Number of cards ownership differs with S.E.S groups as in the
$80
S.E.S A segment consumers on average owns +3 cards whereas
$60
in C segment this number goes slightly below 2
$40
$20
  Deferred payment option became the leading factor for the usage
$0
of credit cards. Instant points redemption at the merchants ranks
second in the top reasons of using and selecting a credit card
1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009E
  Consumers tends to choose deferred payment option with
purchases above US $50
$2,500
2.5
-  “Consumers today are able to make high value purchases beneﬁting
from the deferred payment feature/option allowing us the retailers to
$2,000
2
increase our sales” BMD Chairman
-  “[credit cards] penetration rate increase had a positive effect on
$1,500
1.5
consumer allowing them to change life styles as the range of
products now purchase increase” AMPD, Chairman
$1,000
1
-  “Instant reward points redemetion [at our shops] motivates the
customers to continue shopping despite the economic downturn -
$500
0.5
Mehmet Nane, CEO, Teknosa

$0
0
  With 62% of the consumers owning two or more credit cards, the
ability to offer wider usage of installments is the determining factor
2005
2006
2007
2008
in the choice of credit cards
Average Credit Card Limit
Credit Cards/Consumer

8

Turkish Credit Cards : Merchant Perspective
Merchants, turned towards credit cards offering deferred payment and points redemption as the
solution to offset the limited purchase power and increase sales

CAGR
  Merchants claim that the increase in number of customers, hence
# of POS Machines at Merchants
sales volume is due to two major factors: 1. increase in number of
c. 30%
credit cards; and 2. deferred payment option
  Today an average of 44% of total purchases are made through
2,000
credit cards (electronic and durable goods are at 50% where
grocery is at 40%) increasing from a low 15% in the beginning of
1,800
the century
  78% of merchants believe that they would run out of business if
1,600
they hadn’t introduced credit cards/deferred payment options

1,400
  45% of merchants stated that purchases via credit card increased
during economic crises allowing them access to cash and funds
1,200
  Close to 90% of sports activity tickets are sold through deferred
POS (000)

payment credit cards
1,000
  In 2008 c 2.7 million air travel tickets were sold via points
800

600

400

200

0
2009E
1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

9

Turkish Credit Cards : Incorporated Risk
The eye catching growth and proﬁts comes at a cost. c. 3% of card holders fail to pay their credit card
debts during the legal period creating a none performing loan volume at c. US $2,690 million

# Of People Who Did Not Pay Credit % Of Card Holders Who Did Not Pay
Cards Debt
Credit Cards Debt
700
CAGR
10.00%
CAGR
600
500
c. 76%
7.50%
c. 70%
(000)

400
5.00%
300
200
2.50%
100
0
0.00%
2005
2006
2007
2008
2009
2005
2006
2007
2008
2009

Non Performing Loan (Credit Cards)
  Only 20% of credit card holders do not pay the full
amount/debt on time of which c. 48% pay the
$3,000
minimum amount only
CAGR
$2,500
  While c. 40% of card holders did not pay the debt
$2,000
c. 29%
amount on time in 2001 this number fell to c.20% in
(million)

2009 clearing the clouds of the pessimist outlook
$1,500

$1,000

$500

$0
2005
2006
2007
2008
2009

10

Agenda



11

How Does The System Works
Today, the cost and burden of offering additional reward points and deferred payment options is shared
by the merchants whom in return have notably increased their revenues and profits

Merchant Accepts:
Bank offers:
  Deferred payment option   Additional deferred
at their own cost
payment option based on
Common
Merchant
agreement with partner Bank
Pool
merchants

Merchant offers:
Bank offers:
  1%-5% reward points at   X% reward point from
their own cost
purchase or transactions
  Additional reward points made at non partner
during special promotions merchants
in relation with bank
Merchants at the POS can:
Reward Points
  Offer a wide range of reward
points redemption
  Different terms of deferred
payments (with or without
interest)

Shopping with:
Payment:
  Reward point
  Consumers benefit from
  Benefiting from deferred deferred payment option
payment option

12

Win-Win-Win : For Banks
System allow the bank to increase customer loyalty and engagement, hence profitability by leveraging
merchants participation and utilising approved credit lines

Boost Customer Base
Utilise Approved Credits

  Retail client number will increase due   System enables banks to utilise their
to the facilities that the system offers
approved retail customer credit lines
  Merchants/corporate cline base will through deferred instalments
also increase as the system enables   Facilitate ground to raise debt-
higher revenues/cash generation
capital through securitization of
future credit-card receipts

Profit and Revenue Enhancement

  Interest charges to customers along
with higher spending volumes
  Interest charges to merchant:
depending on the arrangement
  Lower costs as merchants share the
burden
  Retail customers' floats

13

Win-Win-Win : For Merchants
At a very low cost merchants will benefit from offering a loyalty programme and credit facilities instantly
and hassle-free to their customers

Higher Turnover
Higher Volumes

  Big ticket items are financed at long   Merchants will have loyalty
term loans instantly and with no programme at low cost allowing
hassle
customers to purchase any item
  Customers will be able to purchase instantly with reward points
higher volumes faster

Profit and Revenue Enhancement

  Faster inventory turnover hence
lower operational costs
  Loyal customers (they wish to
redeem points at the pos)
  Increase in sales margins blended
with interest rate

14

Win-Win-Win : For Customers
While c 25% of purchase items are made through deferred payments, small items are purchase via
reward points allowing the customers to choose payment terms and methods based on their cash ﬂow
schedules

SMART Loyalty Programmes
Loan Facility
Access to Needs
  Deferred payment option allowing   One reward pool
  Hassle free access to funds when   One card for all programmes and
customers to choose payment terms
needed
partners
and schedule their cash ﬂow
  Access to items via multi payment   Faster rewards collections and
  Extended line for big ticket items
options
redemption
instantly

15

Key Success Factors
While credit risk policy and Vendor buy in are key denominators, market dynamics and socioeconomic
factors are major catalysts in ever changing trade and finance flow

  Devising a reasonable credit policy is of utmost importance as today’s consumer credit
decisions are given in 1 hour. Credit card approvals should not take days
Policy and Procedures
  Limit assignment process has to be very fast and straight forward with a scoring system
  Availability of credit history data base

  Purchasing power is a key political and social issue
Socioeconomic, hence   Growing urbanisation results in an emerging middle-class whom willing to improve current life
change in spending habits
standards
  Tendency of people to mortgage their future income in return of better life standards

  Shift from an industrial to a service economy
Market dynamics
  Need for productivity gains (better employee health)

  Merchants’ financial robustness and willingness to entre such business
  Size of the affiliate network and participant companies (there is a balance of critical size for
Merchants buy-in
merchants to entre the system and number of credit cards offering these attributes)
  Sales force to develop large affiliates networks

16

Agenda



17

Our Services
Despite our short history, we have been trusted advisors on key challenges and CEO-agenda
issues to leading corporations and many conglomerates across a vast range of industries

Marketing and Organisations and Transaction
Strategy
Sales
Operations
Support Services

Organisation
Product and Service Commercial Due
Corporate Strategy
Effectiveness and
Development
Diligence
Restructuring

Business Forecasting Operational Due Mergers and
Loyalty Programmes
and Strategy
Diligence
Acquisitions

CRM, Customer
Innovation Support
Screening, Evaluation
Services, Contact Service Effectiveness
(Mavericks)
and Selection
Centres Management
Sales and Distribution
Sales Force Strategic Market Due
Channels’
Enhancement
Diligence
Management

Pricing and Pricing Financial Post Merger
Strategies
Restructuring
Integration

© askbmm consulting 2011 - Introduction to askbmm consulting
18

Why askbmm consulting?
we go beyond the pretty reports, fancy frameworks and “analysis-paralysis” and deliver actual results
with measurable impacts

Team with Real World
Urgency and Skill
We Reinvent The Job
Experience
  Time is short, skill is absent while   askbmm team of partners and   We do not only promise to do the
the organisation needs the work managers have real world job, but we also help in
to be delivered immediately. business experience and are reinventing the job"
askbmm steps in to fulfil the need
industry experts with consulting   We support in building the
capabilities
confidence and provide the tools
necessary to find faster, better
and cheaper solutions that caters
to your opportunity needs

World-class Analytical
Facts and Evidence Not
Tailored Service
and Execution
Opinion
Capabilities
  We tailor our service to the need   The correct solution is dynamic,   Our team is made of analytically
and not entirely rely on a tried hence we go beyond the pretty strong graduates from the world’s
and true off the shelve expertise
reports, fancy frameworks and best universities and business
  We stay at client site to ensure “analysis-paralysis” and deliver schools all with real life execution
recommendations are being actual results with measurable experience
implemented properly and are impacts
achieving expected results

19

We Reinvent The Process
We are a team with strong discipline, who demonstrates spectacular leadership, problem solving ability
and outside-the-box thinking which is more than enough to make us successful in areas even where we
have little industry experience

Discipline and
Industry Experience
Methodology

  Is it necessary to only hire We succeed by being a team:
people who worked for your   Who knew how to manage
direct competitors? Would this crisis,
“industry experience” make   how to define the problem,
you successful?
  how to find the solution,
  It is clear that industry   how to inspire people,
experience is preferred, but   and how to lead and never
never been a must
flinch under pressure.

20

Ahmet Rauf Saatçi - Managing Partner

Major Industries Served! Major Practices Delivered !

  Telecom (ﬁxed and Mobile)"   Commercial Due Diligence"
  Real Estate"   Investment Opportunity Screening and M&A Support"
  Retail and F&B (Franchising, Distribution Networks) "   Sales and Marketing Enhancement"
  Aviation (Non Aeronautical Revenues) "   Loyalty Programmes"
  Financial Services (Private Equity, Venture Capital,   Financial Modelling (Financial Impact Analysis)"
Leasing)"   Franchising Development "

Languages! Professional Experience! Educational Background !
  askbmm Consulting- Managing Partner/Founder!   Haas School of Business, UC Berkeley!
-  Degree in Venture Capital!
  Argentum Ventures NV - Investment Director"
  Bilkent University!
  Century 21 Germany, Turkey & Greater Balkans – -  MBA!
Managing Director"   School of Engineering and Technical
  Skytelekom - Managing Partner/Founder" Management, UCLA!
-  Degree in Engineering Management !
  Sabancı Telekom – Director, Consumer Sales"
  Baghdad University !
  Aria/Avea – Manager, Sales Management" -  B.Sc. Civil Engineering!

Gülbahar Mah. Avni
Dilligil Sokak No:5 C Main Clients Served!
Blok, Kat:4 Daire:16
Esentepe, Sisli 34394   Telecom: Vodafone (Turkey); Umniah (Jordan)"
Istanbul, Türkiye"   Real Estate: The Land Holdings (Jordan) , Century 21 (Jordan, Serbia, Turkey) ; Uzel Makina (Turkey)"
M:+90 532 3555444"   Financial Services: Nuqul Group (Jordan); Lehman Brothers (UK); İş Girişim (Turkey); QVT Financial (UK)"
M:+90 549 3555444"   Aviation: TAV Airport Holdings (Turkey)"
T:+90 212 347 72 60-61"   Logistics: Evyap port"
ahmet@askbmm.com"
Skype:ahmetraufsaatci"

21

Kerem Barut - Managing Partner


  Telecom (Fix & Mobile)"   Commercial Due Diligence"
  Financial Services (Private Equity, Insurance)"   P&P"
  Retail and F&B (Franchising, Distribution Channels) "   Distribution Channels"
  Health Care and Pharmaceuticals (CDD, SOP)"   CRM and loyalty programmes "
  Financial Modelling "

  askbmm Consulting- Managing Partner/Founder!   Istanbul Üniversitesi!
-  MBA!
  Avs Technologies – CEO"
  Istanbul Teknil Üniversitesi!
  Sabancı Telekom – CS&MO" -  B.Sc. İnşaat Müh.!
  Aria/Avea –Sales Director"
  Turkcell – Prepaid (Hazır Kart) Unit head"

Gülbahar Mah. Avni
Esentepe, Sisli 34394   Telecom: Vodafone (TR), Turkcell (TR), Ucell (Uz)"
Istanbul, Türkiye"   Financial Services : Lehman Brothers (UK); Acıbadem Sigorta (TR), Ray Sigorta (TR), Turk Nippon Sigorta (TR)"
M:+90 533 492 0707"   Healthcare & Pharma: Medek (TR), Sanovis (TR)"
T:+90 212 347 72 60-61"   Construction: Schneider Electric (TR)"
kerem@askbmm.com"
Skype:keremone!

22

Alper Uyar - Partner


  Financial Services (Leasing, Factoring, Banking,   PE Advisory Services (Opportunity Screening,
Private Equity, Venture Capital)" Investment Decision, M&A Support)
  Financial Restructuring, Debt Advisory, Financial
Turnarounds
  Start-ups (Operational Systems Design, Pricing
Methodologies, Pre And Post-license Business /
Operational Plans)

  Askbmm Consulting- Partner/Industry Expert"   Middle East Technical University!
-  Associate in Political Science!
  Fleetcorp – CEO and BOD Member"
  School of Management and Economy, Boğaziçi
  Turkish Factoring & Leasing - CEO" University!
  Dogus Otomotive – Board Member" -  B.Sc. Economics!
  Garanti Factoring – CEO"
  Aktif Leasing – CEO"

Gülbahar Mah. Avni
Esentepe, Sisli 34394   Financial Services/Private Equity: Garanti Leasing, Garanti Factoring, NBFS, The International Investor (do-car),
Istanbul, Türkiye" Garanti Bank Moscow
M:+90 532 313 8986"   Automotive : Dogus Oto
T:+90 212 347 72 60-61"
alper@askbmm.com"
Skype:alper.uyar!

23

Dr. Melike Mermercioğlu- Partner


  Construction
  Strategic Management, Management By Projects
  Textile, Apparels And Fabrics
  Redesign Of Operational Systems And Processes,
  ICT
Total Quality And Quality Assurance Systems,
  Automotive"   MIS
  Organizational Restructuring, Human Resources
Costing"

  askbmm Consulting- Managing Partner/Founder!   Istanbul Technical University !
-  PhD Management Sciences !
  Kavrakoğlu Consulting- Principal"
  Imperial College, University of London!
  Aksa Chemicals– Executive Consultant/Advisor to -  MSc. Management Sciences !
the Board of Directors"   School of Management and Economy, Boğaziçi
  Co-author of 3 books
University!
-  B.Sc. Business and Economics!

Gülbahar Mah. Avni
Esentepe, Sisli 34394   Telecom: Vodafone (Turkey), Turkcell, Superonline, Empa"
Istanbul, Türkiye"   Retail: Darty (Turkey)"
M:+90 532 611 6340"   Automotive: Nissan (Turkey), Renault Mais!
T:+90 212 347 72 60-61"   Pharmaceuticals: Istanbul Pharmacies Cooperation (Turkey)"
melike@askbmm.com"   Manufacturing: Cevher Makina Sanayii, Ege Seramik,
Skype:melikemermerci!   Aviation: TAV Airports Holding (Turkey); TAV Operation Services (Turkey)"

24

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