In Russia, a Billionaire Scoffs at Oligarchs

In Russia, a Billionaire Scoffs at Oligarchs

Tinkov Considers Himself a Rarity in Country Known for Close Ties Between Business and Government

GREGORY L. WHITE

Dec. 13, 2013 4:52 p.m. ET

MOSCOW— Oleg Tinkov may have joined the ranks of Russia’s billionaires when his online bank went public in October, but don’t call him an oligarch. “Categorically not,” he says in his Russian-styled office on the outskirts of Moscow. Oligarch “means a person who works close to the government—there are lots of those,” he says, listing some of the country’s richest men. “But ones like me who built from nothing? Very few.”Mr. Tinkov, 45 years old, is indeed a rarity on the Russian business scene. While most tycoons took advantage of close ties with the government to win control over huge oil, metals and other companies originally built by the Soviet government (“losers,” says Mr. Tinkov), he founded a string of successful startups whose businesses range from selling electronics to making frozen Siberian ravioli. And in a country where prominent businesspeople keep their political views to themselves, Mr. Tinkov is a frenetic tweeter—outspoken and often critical of the Kremlin.

While he used to be able to stay under the radar, his latest venture, an online bank called Tinkoff Credit Systems (he uses the “Tinkoff” spelling for businesses), now finds itself a leader in an industry that has landed squarely in the cross hairs of regulators and legislators.

Mr. Tinkov and his colleagues learned that the hard way last month. A local newspaper reported that a draft of changes to the consumer-finance law in parliament would have essentially banned TCS’s branchless distribution model. Stunned investors drove TCS’s newly listed shares down over 40%. Within hours, legislators explained that the confusion was the result of a word that had been inadvertently left out of the draft. The stock bounced bank, but the shock remained.

“I didn’t think we were that big, but it turned out we are,” says Mr. Tinkov. He added that the bank, the third-largest issuer of credit cards in Russia, is now looking for its first full-time government-relations executive.

It is a long way from where he got his start, in the Siberian coal town of Leninsk-Kuznetsky, where his father worked in the mines. Mr. Tinkov says he began his business career as a teenager in the Soviet era, bringing highly prized jeans back from his training trips with his bicycling team to sell at home. At the time, such trading was illegal, but Mr. Tinkov says he dodged arrest and expanded his business when he went to university in Leningrad.

As the Soviet Union collapsed, he dropped out of school and went into retail, later founding a chain of electronics stores. A friend who married an American invited him to visit California, where he discovered what he calls “the entrepreneur’s Mecca” of Silicon Valley.

But there was less competition back home, so he returned and started a line of frozen Siberian ravioli, naming it for his daughter, Daria. He sold the company, which had grown to become one of Russia’s largest, for $21 million in 2001 to tycoon Roman Abramovich. From there, he went into premium beer, building the Tinkoff line until he sold it to InBev SA for €167 million ($229.7 million) in 2005.

Mr. Tinkov says the idea for the bank came during a visit to the U.S., when he grew fascinated with the model of Capital One. He took the direct-mail idea back to Russia and set up TCS in 2007. His drive and track record of success helped him win the backing of Goldman Sachs, his first investor. After struggling with the rest of the Russian economy through the global financial crisis, TCS then took off, doubling its assets annually for the next three years.

TCS is branching out into insurance and mobile payments, seeking to build on its customer base. The bank has also started taking deposits—including the roughly $200 million he got from the IPO, Mr. Tinkov says. (He still owns 51% of the bank’s stock.)

But the stock is still trading about 16% below the IPO price. “It is going to take a while for investor confidence to recover” after the drop last month, says TCS President Oliver Hughes.

Mr. Hughes admits the consumer-credit market is “underregulated.” Tightened standards will slow growth and squeeze profits, but ultimately will create greater opportunities for Tinkoff by driving out weaker competitors even as the economy slows, he says.

TCS targets customers deep in the heartland, where rivals don’t have branches. It takes applications online, verifying by phone and using credit-history and other databases. The final step is a visit from a courier, who uses a smartphone app developed in-house at TCS to do final checks before determining the credit limit and handing over the card. TCS keeps limits low: They average about 45,000 rubles ($1,371). But interest rates and fees can be quite substantial, with consumers paying an average of just under 50% a year.

Though it hasn’t mentioned any banks by name publicly, Russia’s central bank is planning to crack down on what it calls “usurious rates.” Consumer advocates also are calling for greater protection for Russian borrowers, who with little financial experience can sometimes get in over their heads fast.

True to its high-tech approach, TCS has automated the process of filing lawsuits against late payers, speeding collections.

Like much of its marketing, some of TCS’s tactics have been edgy. A client in the city of Yekaterinburg complained to regulators this fall after he got a TCS postcard with a cartoonish figure blowing its brains out and the legend: “Don’t see a way out? The bank is ready to offer a solution to the problem.”

Mr. Hughes says that card was part of a small-scale test that was later discontinued.

Mr. Tinkov says his bank fills an important niche, providing credit to people who otherwise couldn’t get it.

In a country where private business was illegal for most of the last century and is still viewed skeptically by many, he preaches the gospel of western-style entrepreneurship in books, lectures and TV shows. In his popular Twitter feed, he opines on everything from politicians to competitors to his own sex life.

“I get ‘fun’ from life, from business, from social media—I’m provocative there,” he says, slipping from his native language into English for a word that doesn’t really exist in Russian. His bank’s glass-walled offices are decorated with garish cartoon-style murals of Russian folk heroes.

He says he has no plans to tone down his public persona. Last week, as Russia and theEuropean Union bickered over rival trade deals for Ukraine, he weighed in with a tweet that went against the Kremlin line: “Ukraine is part of europe! and i hope Russia too… but lets start with Ukraine first ).”

Asked whether his higher profile could get him in trouble with the government, he is dismissive. “I don’t get involved in politics and I hope it doesn’t get involved in me,” he says.