Solid loyalty offerings are proving essential to driving
card usage in the nascent markets of Central & Eastern Europe.
Sara Perria looks at two of the region’s highest profile issuers
and finds out what they are doing to erode the role of
Central Eastern European Countries (CEE)
markets, from Ukraine to Turkey, are proving that alternative
banking-models are essential to improving the usage of cards in
Although a geographically coherent region, the
countries that comprise the CEE are variegated and often
contradictory in cultural terms, and this in invariably reflected
in the different strategies undertaken by banks across the
The contrast is marked – between countries
like Ukraine, Russia or Kazakhstan, which are still heavily
cash-based economies, and the tech-savvy examples of Croatia and
Turkey, which are already posting impressive, and growing,
card-usage figures. And at the heart of the success of those
markets are consumer-focussed loyalty programmes.
In stark contrast to many more mature Western
markets, Turkish banks, which act as both acquirer and issuer in a
single market are able to take a ‘holistic’ approach: giving
cardholders access to coherent, wide-ranging and genuinely
rewarding loyalty programmes, without having to fill their wallets
with a multitude of different loyalty cards.
Turkey is an ideal environment to understand
the potential of loyalty cards: the immediacy with which is now
considered the epitome of an emerging country means the challenges
of cards’ payments are all there.
This country offers one of the most powerful
European loyalty cards schemes, Garanti Bank’s ‘Bonus’ card. This
MasterCard product has attracted over 2.5 million cardholders and
800 merchants with 35,000 sales points in less than four years,
establishing Garanti as one of the top ten issuers in Europe.
Garanti Payment Systems communications senior
vice president Asli Germent says the fact that Turkey is a
developing country made it easier to introduce a new idea.
“In Turkey the major banks are both acquirers
and issuers and you have to be on both sides to operate such a
scheme successfully. Also, high inflation suffered in Turkey
created a market for a financial tool that would allow payments in
instalments,” Germent says.
One distinctive feature of the Turkish card
market is its holistic view of issuing and acquiring, which has an
impact on the way these scheme develop. Germent stresses that in
Europe, merchants prefer to have more ownership over loyalty
products: “When you look at [UK-based retailer] Tesco and how it
segments data and manages customer communication it is very
impressive. In Turkey major retailers tried to have similar store
card products but they couldn’t really manage it, so having a
loyalty programme that provides them with the results they need to
make decisions was something very valuable”.
What’s more, he says, “the Bonus card is
essentially a credit card with a revolving facility. It has a chip
on it so is EMV compliant, but we have tried to create something
valuable that offers lots of benefits to the customer, the merchant
and to the bank. We are trying to use the technology to make it
very easy and flexible to use so that merchants do not need to make
any additional effort, and consumers do not need to make efforts to
earn and redeem the bonuses,” Germent says.
Bonus card works on the basis of a single cash
back reward pool. When a cardholder makes a transaction at a
partner merchant he or she earns a certain percentage of bonus
(from 1-20%), finances by merchants. Those bonuses are stored on
the chip and they are immediately available to make a free purchase
at any partner shop.
“For example, if I buy gasoline and earn EUR5
worth of bonus, then I can spend it the next day at a restaurant.
And if I buy something for EUR60 and earned EUR10 in bonus I could
pay EUR10 using the bonus and EUR50 on the credit card,“ explains
“It’s extremely flexible, which is why
cardholders like it. If they spend outside of the partner merchants
the bank finances the bonus so they still earn point,” he says.
Upwardly mobile: Croatia
Croatia is another example of a country where
the card market is advancing apace, that’s to innovation in
loyalty. In 2010, Unicredit developed the MultiPlus Card programme,
through a partnership between Unicredit’s Zagrebačka Banka and the
leading national retail chain Konzum: the scheme now counts over 1
million enrolled customers (a quarter of the population). The
program allows customers to collect points when using the card at
Konzum, as well as other retailers including drugstore chain Kosmo,
T-Mobile and others.
UniCredit is also involved in a new loyalty
programme in Hungary, designed by the Oil Company Tigaz, and its
main partners, Agip and Vodafone. The bank offers a current account
package with special conditions reserved to Tigaz loyalty
cardholders. A similar partnership was set with Lukoil in Bulgaria,
where a debit card entitles cardholders to a 2% discount at gas
The ‘underdogs’: Ukraine to
Ukraine is a CEE country with a significant
card penetration, but where card usage is still weak. Almost
everybody has a card and in the Kiev region there are 1.3 debit
cards per banked customer. However, the issue lies in the low use
of these cards. Cards are seen instead more as a pay-roll
disbursement tool. Bank customers tend to use them to withdraw
their salaries in cash. And while everybody has a debit card,
credit cards penetration is quite low – 0.06 cards per person.
To try and improve this position, Unicredit
has announced plans to launch a loyalty programme for Ukraine in
September 2012. And in this case it’s the bank that is directly
promoting the scheme, without joining an existing one.
“In the case of Ukraine, UniCredit is the
centre of the loyalty programme and has a network of retailers from
different industries and sectors, offering customers to accumulate
points that can be dispensed to all participants in the network,”
says Unicredit Head of Retail Mauro Maschio.
The loyalty programme is tied to debit cards,
but a credit option can be also activated. The scheme involves some
of the biggest retailers of the country and aims to issue some
hundred thousands cards in the first year.
If this attempt proves successful, it could
replicate the results achieved in other low-card-circulation
countries such as the Czech Republic and Romania, where Unicredit
launched Miles & More in partnership with airline network Star
Following success in its home market, Garanti
Bank launched retail banking services in Romania in 2006, having
had a trade finance business in the country since 1998.
Four years ago Garanti started offering the
Bonus loyalty programme to customers in Romania which, together
with Bulgaria, is one of the CEE countries furthest behind in the
card business, especially credit.
“When we entered the market, the biggest
problem was card’s acceptance: Merchants that had POS devices were
rare. Thanks to our Bonus programme, the POS distribution grew and
consumers started using credit cards for shopping. The network and
loyalty aspect were the main drivers,” explains former head of
Garanti’s cards business in Romania and current marketing director
“Clients had credit cards in their pocket but
were not using them, because they had cash. With the crisis, they
started to use credit card as a credit facility because they needed
the increased flexibility,” Kaya says.
To prevent cards from being used mainly as a
mean to withdraw cash, the bank has kept a cash withdrawal limit on
its Bonus cards.
“We have kept the cash limit on our Bonus
cards to half the amount of a consumer’s total credit limit. That
encourages them to use the card for point of sale transactions
instead of cash withdrawals,” Kaya explains.
The decision appears to have paid off. The
increased usage of cards has led the number of card accepatance
points to more than double in the past four years in Romania,
jumping from 52,000 in 2008 up to 110,000 thousands in 2012.
“Loyalty programmes in Eastern Europe have
started to become a core service,” says Kaya. “If you simply
position the loyalty aspect of a card as a value-added service, it
will be difficult to acquire customers. But if you position the
product itself as a loyalty card, or instalment card, then customer
acquisitions and card usage start to pick up. In Turkey we market
our card not as a credit card but as the Bonus card,” he said. “And
we use the same marketing techniques in Romania as in Turkey.”
Garanti’s partners include retailers such as
Vodafone Romania, Domo, Altex, Flanko and other electronic and
goods retailers, as well as Romania’s biggest online retailer e-mag
and RomPetrol, one of the big petrol retailers a total of 5,000
retailer contracts and 7,500 POS terminals.
These programmes in CEE offer examples of how
loyalty can become the engine for growth in card payments as a
whole, rather than simply an added incentive. The CEE markets that
have grasped this now sit in contrast to other countries in
Southern, and even Western, Europe where card usage remains
One considerably overlooked factor in the
development of a successful reward programme could be the
integration of acquirers and issuer in a given market. A single
bank following a single strategy will inevitably design a more
flexible tool with a far wider scope than the single
store-branded-cards so used in Western Europe.
In this way the advantage of using plastic
payments becomes intuitive: why pay with cash if I can pay with one
single card that enables me to get some extra value out of it
without any extra-effort?