VLADIMIR KRUPNOV: «WE ARE THE PARTNERS» (the interview to the magazine Cards’ World, №12, 2004)

The agreement between a Russian company NovaCard and a French one – Oberthur Card Systems (OCS) – became one of the most sensational events of the cards market for the recent months. As any sensation it sparked a huge amount of hearsay and half-words. The Head of the company NovaCard told about the actual situation. Vladimir Krupnov: «We are the partners» Cards’ World: Your cooperation with Oberthur Card Systems is overgrown with rumours. In the summer the press people and business rivals did projections about possible purchase of the company NovaCard by the Oberthur Group, and after it had been announced officially about the agreement, the rumours and even publications about the concluded deal appeared. What is going on indeed? Vladimir Krupnov: The hearsay that the company Oberthur Card Systems bought NovaCard, really, appeared right after our official press-release, however, projections about the conclusion of such a deal were disproved at once by the press centers of both companies. I also take this opportunity to declare that we have never had an intention to sale the company. We concluded the partnership agreement, the name of which, to my mind, reflects the essence rather exhaustively. The rumours, I think, appeared due to numerous confluences and devourments obtaining in the cards industry in recent years: they simply used to that somebody always buys somebody. Indeed, the Oberthur Group successfully purchases companies all over the world. However, now the strategy of Oberthur is not limited by the devourment of enterprises. At the annual meeting of the governing body and the OCS partners held on November 3 in Paris, the Head of Oberthur Card Systems, Pierre Barberis, called creation of the alliance with NovaCard as an important new step in the company’s strategy. It was officially announced at the last exhibition Cartes & IT Security 2004 in Paris about the conclusion of partnership agreement, our logo could be seen at the display of Oberthur Card Systems. I would like to mention that our agreement is not needed to be constant and invariable. Further it is possibly to discuss forms of cooperation, but at the present moment we are the partners. C.W.: What is the essence of a new strategy of Oberthur? V.K.: I can answer your question in terms of our market: for the promotion of own products in Russia Oberthur Card Systems is based on the Russian partner – the company NovaCard, which can see needs of the market and is able to act operatively on their changes. The conclusion of the partnership agreement for both companies is a result of seeking some beneficial solution satisfying both parties. We and OCS are interested in effective work on the Russian market. The company Oberthur Card Systems offers real advanced solutions for all segments of the smart-cards market. It is a world leader in its industry not accidental. Our aim is to provoke interest of the Russian consumers suggesting them the localized version of solutions. At the present moment the banks and operators of mobile GSM-standard are the main target audience of OCS products, the project for medical and insurance cards launching is also discussed. Speaking about localization we bear in mind not only the adaptation of products for the usage in Russia. In this case we act as value Added Resellers that is we create our own products on the basis of the Oberthur Card Systems platforms. Herewith these products are often developed under the requirements of concrete clients. Besides of it, within the reached agreement Oberthur Card Systems gets an access to our production facilities. Performing a chain of production operations in our plant in Nizhny Novgorod we can offer our clients to implement and pay for an order within the shortest possible time. Herewith our services become cheaper, and our clients, certainly, and, as a result, end-purchasers benefit from it. At the same time both company-partners certainly win: NovaCard – thanks to increasing of the production volume of high intellectual, comparatively expensive products, OCS – thanks to mass promotion of their technologies on the Russian market. C.W.: Does the OCS-NovaCard agreement imply an opportunity to use your production for the placement of orders? V.K.: Yes, it does. Our production is built according to the world standards, that gives an opportunity to join in the international system «division of labor» to the company NovaCard. If workload our production allows we will be ready to place orders in the interests of our partners. As well as our orders can be placed on productions of the company Oberthur Card Systems. Besides of it, this is not out of the question that the developments of our center R&D (developments department) will be a demand for other clients of Oberthur Card Systems. Generally, developments department of NovaCard is busy with creation of local applications for their usage on the Russian market. Further in case of success of one or another development, it can be suggested to our partners on the world market as well. C.W.: Does conclusion of the agreement mean that you have placed your bets on the Oberthur platforms in your work on GSM market and on the banking market? Will Oberthur Card Systems be the only your partner in this industry in the foreseeable future? V.K.: Yes, out bets have been placed on the partnership with the company Oberthur Card Systems. However, the agreement doesn’t forbid us to cooperate with other companies within earlier signed contracts up to their implementation. Besides, we can use the specified program products, successfully developed by the third companies. It is absolutely the common practice. Though, I would like to point out that we will work just with Oberthur Card Sustems in the spheres where this company offers its solutions. C.W.: Do conditions of the agreement imply that for Oberthur Card Systems you become an exclusive partner and the only source in the question of its promotion on the Russian market? V.K.: Yes, certainly. It is going without saying that those agreements which were concluded between OCS and the Russian companies remain in force and keep on until their validity expires. However, further we will become the only partner of Oberthur Card Systems. C.W.: Does it mean that in the nearest future your efforts as a company-developer will be aimed exceptionally at creation of localized Russian version of the offers Oberthur Card Systems? V.K.: We take the platform offering by Oberthur Card Systems and develop applications for the order of our Russian clients. Just the specified applications for SIM-cards are the main driving force of the mobile market in Russia in 2004-2005ss. Reducing of rates is not the only way of client solicitation for a long time already, the competitive activity develops just on the market of additional services for the phone-subscribers, that is of applications. We work either with operators of the first triad – MTS, Megafon and Beeline, or with small regional operators. Almost everybody has a need in the specified applications. As for the banking market, the main niche we see in the work with payment systems which are going to move from their developments to EMV-standard. There out agreement with Oberthur Card Systems again is a big competitive advantage. OCS leadership on the world market of banking cards, including micro-process ones, is indisputably. Taking into account a rather high level of fraud at transactions by payment cards in Russia in the nearest 3-4 years EMV-migration will become one of the basic question before the bank-issuers of cards.