Went to Ubank: why is one of the most famous startups brings losses

Co-founder of a startup Ubank Felix Khachatryan

The February 2014 Mobile World Congress in Spain. In front of the pavilion “Kaspersky Anti-virus” is the stand of a startup from Russia Ubank. It is the star of the domestic financial technologies. Start-up is an advanced mobile wallet joint with the Ukrainian PrivatBank debit card kasbekar. The company has already signed a contract with Samsung about preset of the application into mobile phones, and the Fund Runa Capital has invested in the project a record $8 million

However, it was past the hour of the company. Since then, the revenue of OOO “Mobile payments” (this is the main operating entity of the project in Russia) fell five times, up to 9 million rubles in 2015, and a loss, according to SPARK, amounted to RUB 29 million Controls a legal entity offshore from the British virgin Islands Lafa Ventures Limited, CEO is Felix Khachatryan.

Bring a startup from prolonged peak called the new shareholder. As it became known to RBC, the project Ubank has a new managing partner is a minority shareholder of the company bought a former top Manager of MDM Bank Stanislav Danysz.

<p>a Former top Manager of MDM Bank Stanislav Danysz</p>
Photo: Vladislav Shatilo/RBC


A former top Manager of MDM Bank Stanislav Danysz

Bet on NAV

The founders Ubank brothers Felix and Aram Khachatryan’s not the first time I get into a situation where their technology startup out of a promising market, and he deflates. Aram Khachatryan studied business management at the University of Malta, Felix has studied international relations at the Russian-Armenian University. But most of all the brothers loved gadgets — buy mobile phones and wrote programs for them.

Start-up capital family Khachatryanb earned in 2000-ies in the monitoring systems of mobile objects. For example, Aram Khachaturian’s “Global search engine” supplied equipment in the car of collector service of Alfa-Bank. “Momentum was small — a few million dollars a year,” says Felix Khachatryan. But with the release of the iPhone and then Android operating system all phones started to be equipped with built-in GPS module, and some gadgets with GPS for location tracking of transport ceased to be in demand.

In 2007, the brothers created the 3D voice navigation NaviFon, which was to incorporate into all of their Samsung phones. But in two years, “Yandex” and Google offered a similar free solution. “We realized that to compete, our pay decision becomes quite difficult,” says Felix Khachatryan.

In 2009, the entrepreneurs decided to focus on the creation of a “social” app for smartphones — it was supposed to provide single sign-on with mobile in all social networks: from ICQ to only gaining popularity of “Odnoklassniki”, “Vkontakte” and Facebook. The CEO of the project was Laura Asejeva with which Aram Khachatryan met while studying at the University of Malta.

Laura Aliyeva played in the media as the author of the idea of universal messenger uTalk. “We’re not focused on monetization, and then something like WhatsApp, but it was all done without investment of their money,” says Felix Khachatryan. This project killed. Application demand (5 million active users in 2010, according to Felix), however, it soon became clear that to compete with Viber and WhatsApp, which are rapidly gaining momentum due to the investment of foreign investors, was useless. And to find investors for his project in Russia, the entrepreneurs failed.


In early 2010, the owners decided to radically change the business model to try to capitalize on the incoming in Vogue vintage.

Then popular QIWI terminals, and the founders, their new project Ubank was supposed to be “payment terminal online”. The user gets an electronic account tied to the phone number to which you can add cards of any Bank and is able to make transfers to friends, pay for Internet, utilities, to count the cost. Available today in the app any more-less large Bank functionality was then a major competitive advantage of the service, the creation of which the founders spent $3 million of its own funds. Where is the money? According to Alijevas, the company managed to sell uTalk, however, it does not specify to whom, and part of the proceeds went to the development of Ubank. Today, Google Play app uTalk anymore.

The most expensive part of development was the establishment of banking processing, allowing you to make payments. On its construction took two years: required to sign agreements with banks-acquirers and partners — service providers, as well as to develop the technical part. Alijevas managed to sign a contract with Raiffeisen Bank and Bank of Moscow.

“When you’re a small company, especially in Russia, big business sees you not serious,” says Felix Khachatryan. To negotiate with the banks failed primarily because of existing contracts with manufacturers. “They risked nothing — they had only time for integration,” says Laura. Under the contracts we have in mind primarily the Treaty on the preset apps in the Samsung phones, one of the leaders in the smartphone market.

The founders of Ubank and the South Korean Corporation Samsung have a long and strange relationship. In 2010, the entrepreneurs managed to negotiate with the Koreans, the contract of presets uTalk apps for a smartphone vendor. “The boys had a good experience with Samsung for installing navigation applications in 2005-2006 when they were new. This was a good base for the development of relations”, — says ex-employee Ubank Vitaly Belikov.

In 2013 Ubank is now again failed to agree on the presets with the Russian representative office of Samsung. As a rule, the price preset $1-2 per device — Ubank, according to Felix Khachatryan, agreed to free installation, promising to pay part of the fee from the transaction that will make users. The source of RBC said that usually large manufacturers of smartphones such conditions do not go, “it was a very strange deal”. Felix Khachatryan explains that the vendor needed a universal solution, not an app of any Bank.

Relationship with Samsung soon spoiled. In the same 2013 Samsung broke the contract with uTalk unilaterally, explaining the developer begins to install on their gadgets its own messenger ChatOn. In the end the American company Top Space Enterprises (TSE) has filed a claim for bankruptcy LLC “Samsung electronics Rus company”.

According to RBC, the claim by Top Space Enterprises initiated Laura Ashizawa, Felix Khachatryan says that the shareholders of Ubank to the American company, claimant had no relationship. The court decided that Samsung should pay TSE because of a violation of the agreement between the companies debt in the amount of €5200 and a fine of €7.89 million As told RBC in the company’s “Legitimate business”, whose lawyer defended the interests of the TSE, “sued the software vendor, which had two contracts with Samsung, in Russian and English jurisdictions; in both courts had concluded a settlement agreement with the decision to pay the fines by the Koreans”.

The representatives of Samsung, as application developers and UBank uTalk, to remember the unpleasant incident. Samsung in those years was shaken by corruption scandals.

Despite the courts with the Koreans, a contract with Samsung has been a main asset of Alijevas and Khachatryanb, which helped to attract investors. In the same 2013, Runa Capital announced the investment in the project in the amount of $8 million, although at the time the application was not 300 thousand users. This transaction became the largest in the history of the Fund.

After it became known about the deal with Runa Capital, became interested in the service Oleg Tinkov. The media reports mentioned the sum of $10 million, which allegedly was willing to pay Tinkov, however, the co-founder of Ubank Laura Asejeva claims that it was even on larger amounts. The deal never happened, and a year later, Tinkoff was told that his Bank was able to develop a similar product on their own for tens of thousands of dollars.

Own mobile apps and banks have become killers of e-wallets, and in early 2010-ies of the purses were quite popular. “We had tough competition with QIWI, — says one of the former employees of Ubank. — At some point, after another glitch in their application to us a stream of their users.” According to him, there was no library interfaces, and the team had to create everything from scratch — as a result spent much more money than it would have taken a couple of years later. In Ubank say that 70% of investments spent on developing the technology and 30% to the lawyers accompanying the agreements with the partners. Today, the application of the agreement on the preset is from the Fly, Huawei, Samsung and 4good.

The company could afford the expenses. 2013 was the best in its history. Revenue, according to SPARK, exceeded 46 million rubles, and profit — 5.7 million rubles. But the whole business transaction user has rolled downhill. Leaders — recipients of payments, such as Beeline, MTS and MegaFon, have ceased to pay the Agency fee in order to concentrate the flow of payments on their sites. “Transactional model would bring an average of a maximum of 1% of the profits from the transaction amount in 2012, then in 2013-2014, the figure has dropped significantly, and even began to make losses, as in connection with the increased competition we could not raise the Commission for users,” says Felix Khachatryan.

“This application purses appear as a reaction to the slowness and low level of customer focus of banks, — said Vyacheslav Akulov, head of project management product development electronic Commerce of Alfa-Bank. — Increasing quality of banking services the demand for them is not there.”

Policy instead of the economy

Brothers of Khachatryan decided to shift to a more lucrative and conventional banking products such as credit cards. “In Russia, these companies are constructed so that they should stand in a traditional Bank,” says Igor Pesin, managing partner at Life.SREDA VC Asia. Entrepreneurs needed a reliable partner Bank, but everything went as they planned.

<p>co-Founder of a startup Ubank Felix Khachatryan</p>


Photo: Vladislav Shatilo/RBC


Co-founder of a startup Ubank Felix Khachatryan

In 2013, they agreed to issue co-branded cards with moskomprivatbanka within the Ukrainian group “Privat”. For each released map they had to get about 6 thousand rubles., says Felix Khachatryan, and a credit institution included in the top 10 most popular credit card banks in the Russian market.

Partners were to be integrated IT solutions Bank and online startups — the team was concentrated in Dnepropetrovsk. Felix remembers that the integration has gone up to 90% of the company’s resources. Ubank in test mode gave about 2 thousand Bank cards to its users — more than 80% of the people have started to use them, says Khachatryan, but soon the project was frozen.

In the spring of 2014 the basic owner of group “Privat” Igor Kolomoisky called Putin a “schizophrenic”, in response, the Russian President said that the Ukrainian oligarch “unique crook”.

The partnership broke up just a few days. The Russian company has lost more than $1 million a year. However, it became clear that the idea is viable, you need to look for another Bank to start the project. “Any start-up sooner or later is facing a crisis, otherwise our business would be called venture capital. The story moskomprivatbanka affected the business, but all difficulties were overcome,” says the managing partner of Runa Capital Dmitry Chikhachev.

Helped investor Runa Capital. “I was called by one of the stakeholders Runa Capital, who was also a shareholder of MDM Bank and its shareholders to refuse as it is not accepted”, — says Stanislav Danysz, since 2012, oversaw the development of e-business MDM Bank (summer 2015 BIN group acquired controlling stake in MDM Bank). The parties agreed to issue co-branded cards. This time on the organization of production took about six months — useful technologies developed for Moskomprivatbank. The card appeared on the market in March 2015. Promoted new service mainly among users of mobile wallet.

At MDM Bank does not have the infrastructure to deliver cards so that in a simple jar built with Ubank. First, the level of “incomplete” (mistakes when filling out documents, in particular due to the negligence of the courier and the customer) amounted to 60% in nine months dropped to 3%. A total of Ubank in October 2016 issued 51 million cards active of which 25 thousand For comparison, Tinkoff Bank in an average month produces 200 thousand cards.

How much it can earn? According to Igor Hops, a former employee of Sberbank, the founder of the service BankEx, the average cost per customer for a credit card is 1800 RUB According to Khachatryan, is now issuing cards brings about 50% of revenue Ubank, to operate at a profit, his company expects in six months.

Financial mini-supermarket

“I was interested in the idea of the financial marketplace. The downside of online life is that the consumer there is an effect of “information fatigue” and he was not ready to buy the goods from different suppliers. It is well known aggregation model, Amazon, Yandex, addressing reasonable orderings”, — says Stanislav Danysz. He engaged in international project development.

In the new reincarnation of Ubank already not a mobile wallet and the financial marketplace. Financial supermarkets — one of the trendiest topics right now in the domestic vintage. On the prospects of the marketplace likes to say Herman Gref and Oleg Tinkov has launched the portal of your Bank financial supermarket in February 2016.

“Marketplace made by the Bank, is a utopia, — said Philipp Ilyin-Adaev, founder banki.ru. — It is impossible to imagine that “Tinkoff” was selling to its customers, for example, the products of the Bank”. In his opinion, the financial supermarkets are rather a lot of Internet media. For example, the portal banki.ru works on the model of the marketplace: the site has a loyal audience (6 million visitors per month), and monetized project through the sale of different financial products from different banks and insurance companies (more than 30 sentences). Co-owner and managing Director Modelbank Yakov Novikov believes that the normal operation of the marketplace need at least several million regular customers. “The practice of large banks shows that conversion in the ultimate sale of such additional services at the level of 0.7% is a good indicator. And only economies of scale client base will allow you to earn the marketplace,” said Novikov.

What is the scale of Ubank? Monthly audience of the app today is 1.3 million users a day — about 100 thousand According to mobile app Analytics, App Annie, Ubank is on the 74th place in Google Play in the category “Finance” (the first — “Sberbank Online”, the second — QIWI-purse, “Tinkoff” — on the 11th).

Now in stock — jointly with MDM Bank card short-term loans from MFIs “Loan Online”, and a travel insurance policy from “BIN Insurance”, etc. Felix Khachatryan says that signed contracts with three banks from top-30 on the distribution of their cards, but the name does not reveal yet the projects running. He once again tries to capture a new niche of fashion till they settled the big players.