‘Retail’ banking reimag i ned

tbi bank took a new look at retail banking seven years ago and built an entirely new model that leverages the power of alternative payments for the benefit of merchants and consumers, as Petr Baron explains

Petr Baron isn’t a conventional banker, but then tbi is no longer a conventional bank.

Originally registered in 2002 as West-East Bank, it was the first to be founded in Bulgaria using Slovenian capital and its aim was to finance the flow of goods and services between the two countries while also providing banking services to Bulgarian SMEs.

Nine years later it was acquired by Netherlands-based investment group tbi financial services and renamed tbi bank; 2012 saw it establish a presence in Romania, using European passporting rights. In 2016 it was bought by 4Finance Holding SA, one of Europe’s biggest online and mobile consumer lending groups.

By that time, it was well on the way to redefining what a ‘bank’ could be by combining its merchant and consumer businesses to create what Baron, its CEO, describes as an ecosystem for financing and shopping, benefiting tbi bank‘s merchant clients as well as the retail customers it shares with them.

He joined the bank in 2016, having established a track record in creating other mutually rewarding communities – first for a bank in Ukraine, where he deliberately recruited staff with experience in fast-moving consumer goods to build a ‘financial services supermarket’, combining nine companies in banking, risk insurance, reinsurance, life insurance, pension, leasing, asset management, consumer finance and brokerage; and then again by launching the MAXI loyalty programme for large Ukrainian mass merchants in the fuel, shopping, entertainment and food sectors.

At tbi bank, he’s headed up a team that has transformed a legacy institution into one of the most successful challengers in South Eastern Europe, operating principally in Bulgaria and Romania, and, from last year, in Greece. Perhaps what’s most surprising is that its success all turns on one of the most contested areas of financial services – payments, and, increasingly, on POS instalment plans.

“Banking, being in many ways a service that people dislike, or don’t want to deal with, has got to become embedded, has to become contextualised,” believes Baron. And one of the quickest ways for his own bank to do that was by tapping into the alternative payments trend.

“We are the leaders in the payment plan business in our region, and we have very strong embedded, long-term relationships with all types of merchants, from the largest e-commerce players to the mom-and-pop stores,” he says.

“We believe that bringing consumers closer to those merchants, by providing insight into their shopping habits and interests, is the contextualised future of our business.

“We’re bringing finance together, to help, on one side, merchants do better business, and, on the other, to give consumers the ability to spread their payment and get the best offers – to embed our tools into their journeys to save them time and money.”

Clearly not an archetypal banker, Baron says: “With a wave of fintechs pushing the boundaries, and making bankers really come out of their comfort zone, you have an opportunity to change the paradigm – and, actually, to enjoy what you do.”

Right now, he is clearly enjoying tbi bank being at the top of its game and on course to become a leading next-generation digital lender in South Eastern Europe. Full-year unaudited accounts for 2022 show a record net profit of €35.5million, up 29 per cent on 2021, and a big contributor to that was its alternative payment revenue stream, including point of sale loans. Through various digital channels and trusted partnerships with nearly 20,000 merchant locations, tbi bank issued nearly 550,000 loans in 2022 for a total of €726million, up 34 per cent year-on-year. In Romania alone, its general loans were up 26 per cent (September vs December), point of sale loans up 31 per cent and business banking up 30 per cent in the same period.

It is intent on rewriting the narrative of recent years, which says traditional banks are losing the payments race while retail-focussed fintechs like BNPL leader Klarna – which has its own banking ambitions – are rocket-fuelled by consumer demand for alternative ways to pay. It’s doing this by using immense amounts of data, and whatever rails are necessary to support alternative payments, delivering solutions through its own and others’ technology. An example of that is in the partnership it formed earlier this year with Skroutz, to provide a package of personalised benefits and service automation to help e-commerce businesses better serve their customers and secure their sales funnels in difficult economic times.

As Baron says, it’s been helped by being able to leverage existing merchant relationships that the bank has built over more than 15 years of providing in-store payment solutions. By embedding interest-free payment plans for a period of four months or spread over four-to-48 months for a ‘small fee’ with a fully digitised experience, it has increased those SME customers’ conversion rates and average shopping basket value. It gained a degree of first-mover advantage by introducing zero per cent interest solutions in Bulgaria in 2021, but it also supports the merchants involved with 24/7 automated servicing and immediate payment of 100 per cent of sales proceeds, compared to other providers’ terms of seven days or more.

Alternative payments is now baked into tbi bank’s free mobile current account, neon solution, which also offers savingsrelated services.

“When you look at South Eastern Europe, digital adoption is still not as advanced [as in Northern Europe],” says Baron. “We saw a clear opportunity in being the first ones to bring much of that technology in, to show regulators and consumers that it’s safe, intuitive and user friendly – to educate the market.” tbi bank is not alone in eyeing consumer spending as a space in which to diversify and monetise payments, but the players getting all the attention tend to be young fintechs, retailers and big tech. Amazon is dabbling with BNPL, while Apple is rumoured to be a bout to follow suit.

Market-leading Klarna boss Alex March believes banks’ omnipotence will be replaced by ‘smarter paytechs’ like his, already a licensed bank in its Swedish home market and in Germany. which will evolve to become banks by leveraging the close relationships they have developed with consumers through embedded services.

Marsh says Klarna, which chalked up a £1billion loss in 2022 but expects to enter profitability this year, is ‘actively targeting the traditional incumbent banks’, to become ‘one of the five big retail global banks’ in the next five to 10 years.

EY’s 2022 report How Can Banks Find A Winning Position In The Buy Now, Pay Later Market? suggested ‘BNPL is now the fastest-growing payment method in many economies’ and that banks who decided to participate in this increasingly tight market, needed to leverage existing strengths if they are to succeed – tbi bank is among only a handful to have done that at any scale.

In a 2021 interview with The Verdict magazine, Marsh indicated that 2023 could be the year it enters UK banking territory to counter the ‘woeful’ service the traditional players offer consumers. It is

“Kaspi Bank, in Kazakhstan, has managed to combine overall e-commerce with payments. Russia’s Tinkoff Bank has also done a great job of it,” says Baron. “[But] I don’t see yet too many great examples… except I think what Klarna is doing is very smart. It’s done shopping very well. It’s not yet done banking very well and this is exactly what we are looking at: how to really grow both sides of that equation in parallel, because if one outweighs the other, you don’t achieve that synergy effect.

“Things will converge, one way or another,” says Baron. “Banking is a financial vein of the economy, fintech is how you do it, how you innovate, design and communicate a product, recognising that, at the end of the day, it’s still a financial services business.”