Hello and welcome to our audience in the room and the audience online to the Freedom Holdings Invest Day here at the London Stock Exchange. My name is Aayuna Nicha. I'm head of Europe Primary Markets of the London Stock Exchange and I'm delighted to welcome Timur Turlov, who is the chairman of the board, CEO and founder of Freedom Holding. Thank you so much.
So today we have actually about an hour for the fireside chat. So this is an informal interaction. I have a number of questions for you and then we'll go through those questions and then hopefully we'll have also some time for questions from the audience after our session.
Timur, you spoke so eloquently about Kazakhstan and the opportunity that it represents, especially for the broader technology-enabled industry, and how you sometimes use this as a testing ground or a playground for new technology which you can then roll out elsewhere, including continental Europe. So maybe for the benefit of our online audience, could you tell us a little bit more about this opportunity, but also maybe a few background facts about Freedom Holding and your key products?
We actually started our business in 2008, in the middle of the financial crisis, building a digital broker to provide access to the retail public to global markets, to US markets, to let people trade online on the New York Stock Exchange and so on. And then we participated in people's IPO in Kazakhstan and built a network across our whole country to let people access some privatization opportunities in 2012, 2014.
And finally, after our involvement in people's IPO in Kazakhstan, we not only made money on that program, unfortunately, but I think we were the only broker who invested much of their own money for the creation of infrastructure at that time. And finally, we turned to the top stock broker by trading volume on the Kazakhstan Stock Exchange in 2014 and have been the top one since then.
We participated in the creation of a retail investor base in our country, providing customers access to global markets and also offering them local products from time to time. That helped us solve this chicken-and-egg problem, because usually if you don't have enough products on your market, there are not enough investors, and not enough investors means nobody needs these products.
But we initially started to offer European and US products to our people in Kazakhstan, and that created this demand for local high-yield bonds, for local IPOs. And now we have millions of Kazakhstanis having accounts on the Kazakh Stock Exchange, and we still service some hundreds of thousands of accounts who from time to time trade on local markets.
And definitely, I think Kazakhstan's stock markets — between the Astana International Exchange, the Kazakhstan Stock Exchange, the international trading system and the AIFC — now the largest. Kazakhstan, I think, in Central Asia for sure is a key market, but it's also much bigger than many countries of Eastern Europe, for example.
And then we realized that to be competitive in this world, it's not enough just to be a very good retail online stock broker. We've seen how digital ecosystems successfully started to compete with stock brokers abroad, in Europe, in Asia, and we realized that if we will not follow that way, if we will not build our own digital ecosystem with banking services, with insurance services, now it will be extremely difficult to survive at all.
We have to create this ecosystem or become a part of another ecosystem. So we did not find the chance to become a part of another ecosystem. So we decided to create our own. That's always the best. And now, yeah, I think we're happy that we did, which is quite not usual.
So we're the only company from Central Asia with licenses in Western Europe, in the European Union, with an investment banking and brokerage license in the United States, and we are a direct member of the New York Stock Exchange. We also have direct membership in some European exchanges and markets.
We just recently obtained a license in Tajikistan and are going to launch a bank live very, very soon, and are finishing the final preparations for our IT systems. Now, maybe in some months ahead, we will launch our services. And we believe that in this world of technology, finally, you have to compete globally, otherwise you will lose the local competition.
And we try to roll out our technology, which we created in Kazakhstan, which we created in Cyprus, to provide services on global markets, to get the resources for our further development and to take our place in this digital banks global ecosystem and take some of our market share. Because we're sure that with such talents which we have in Central Asia, in Eastern Europe, we definitely should be very competitive globally.
And there's completely no reason why we can't compete with people here in Europe or in the United States in terms of talents, in terms of all that stuff. That's what we certainly see is the high quality of human talent in Central Asia and Eastern Europe.
So, we are here today at this historic venue at the heart of London's International Financial Center. Why have you decided to come to London to host this Invest Day?
We appreciate London's role as a key financial center for the big region, and historically a lot of companies from Kazakhstan are present on the London Stock Exchange market. And we also know that there are a lot of investors here in London who have the expertise to invest in Central Asia, in Eastern Europe, and who cover a very big world outside of continental Europe and the United States.
And we believe that it's a good place to be and a good chance to present ourselves to very sophisticated investors from the United Kingdom who know about fintech very, very, very well and who can also evaluate our ecosystem and provide some feedback on how we're doing.
Well, that's certainly nice to hear for me, and I would agree that there is a lot of specifically fintech expertise in London across the board. So moving on to the second block of questions, it's around financials. And I know that we can't talk about the quarterly results because they haven't yet been announced, but I think last year was pretty successful. So I just wanted to ask you about some key takeaways from last year's performance. What would you like to highlight?
I think it's extremely important to mention that, and I think most investors usually appreciate the future much better than the past, and we're sure that it's a great time for investments. We don't like to be a cash cow, and we expect that there's still a lot of potential in front of us.
So I would be happy if our investors paid much more attention not just to our current and past performance in terms of financials, but also to a lot of different non-financial metrics — how successful we are in our competition, what happens with our market share.
And I believe that we live in a very uncertain world, a world where a lot of different changes happen all the time. But I'm very happy that we know that, like most financial companies, we are profitable, and we know that it's much better to invest into the future rather than to be focused on current profits.
We still believe that there's a huge room to grow and a huge potential for reinvestment of our income into our future growth. Because in Kazakhstan in general, financial conditions were very good in the last some years because of very high interest rates. The financial sector was very profitable in general, but that's temporary stuff.
So you could make a lot of money because of high interest rates, you can lose money sometime, and then this market conjecture can change if the central bank lowers interest rates. Probably that can also suppress this current high-yield income for the longer term. But I do believe that it's a great chance to reinvest our profits because of the good general market conjuncture for our further growth, for our further development of the ecosystem.
And not to be focused on current financial performance as many of our competitors do. Now we still believe that our ability to grow our market share and develop our ecosystem, test hypotheses, finally makes us maybe not the current leader and definitely not the leader on profitability in our market, but for the market who could be very promising on the long term because of market position and because of our intention to continue to invest to grow our market position.
And growth is certainly the name of the game when it comes to the technology sector. Freedom's market cap recently surpassed 10 billion US dollars. Congratulations. Five and a half years after going public, how significant is this milestone for you?
I'm very happy. I'm happy to know that, and I'm very proud that now we are running one of the, I think, definitely top thousand companies in the world. And that's a huge responsibility, of course, for me in front of investors, in front of my government, in front of our regulators, in front of our customers and shareholders.
And I'm very proud that we finally became a member of the Russell 3000 Investable Index just recently. But once again, I'm much more proud that for us we see opportunity.
We spent, I think, more than eight years to create some conditions, to create our ecosystem. We started to acquire some companies. We started to build them, grow them, develop their technology. And now we're focused on integrating everything into our super app. And when we see successful integrations, when we see how the growth of our market share accelerates after this integration, I'm feeling much happier.
And actually, for me, this launch of the super app is a much more important milestone rather than achieving some market cap, because market cap is not what I can directly target. That's, I think, external estimates done by other kinds of investors.
But I'm very, very happy that our strategy, in which we invested so long and so hard, and definitely not all the market participants shared our vision, not all investors shared our vision in the last period of time. But now, for most of them, it's much more clear why we did some of our venture investments, why we acquired these companies, why we invested so much in some different technologies and sectors.
And now they see how this puzzle is being finalized. And when we see that finally the strategy started to pay off, and we see some growth in the different business lines, and growth of retention, reduction of customer acquisition — that makes me very proud. And that gives the impression that maybe finally our vision, our vision probably was not wrong, at least.
And this takes us neatly to this next topic, which is the products. And you've spoken about the super app quite a lot. And then the other product that you have is the trader.net, right? The brokerage app or technology?
Yeah, we have this Freedom Broker app, trader.net. Okay, that's right. And that's a product which I think we already have a brokerage license in Kazakhstan, and that's the main market. We have a license in Uzbekistan and Kyrgyzstan, in Ukraine, in Europe, in the United States. We now work on some final regulatory approvals in some other markets.
The brokerage business was our core since the formation of the company, and we proved that with the solution which was developed in Kazakhstan and which was developed in Cyprus, we can compete in Europe. And that was a very good test of the quality of our products. We not just can win a competition in Kazakhstan, we can win a competition in Europe.
At least, our market share in Europe is still very small, but we see that we are competitive, so we can make money on this. And we can successfully fight for customers with other European firms, and we see that our technology is not worse than many other technologies which exist in Europe. And we're finally much more cost-efficient in the development of this technology.
But in Kazakhstan, we've already seen how the super app can empower growth of this line. And we finally believe that maybe in the future our super app with digital bank, with insurance, should be replicated also in Europe, should be replicated also in other markets. And that can accelerate our growth and reduce customer acquisition, increase retention.
And we believe that in Europe we've seen many good examples, like what Revolut does here, what Robinhood does in the United States. Now I hope we're following more or less the same directions, maybe with some different approach, with some different products. But super apps will definitely win standalones.
And it's happy to see that Revolut, for example, they offered not just payments, they also offered electronic SIM cards, they offered investment products, crypto products — so a lot of different products. And that makes them stronger because each service enriches another one.
And we believe that the only way to survive for trader.net is to become a part of a bigger super app also here in Europe. We understand that that's not going to be easy, and the market is much more strictly regulated. The market is maybe in some way in continental Europe a bit less tech-optimistic, and people are much more concerned about some technology issues, privacy issues, which will slow down this development.
But we still believe that we have to follow this approach because in, I don't know, five years, ten years, in finance could happen the same which happens almost everywhere on the internet, where Google is Google everywhere else in the world. And maybe in fintech — fintech is very heavily nationally regulated everywhere in the world, and it's very difficult now to create some global financial institute.
But who knows how the world will change in the next ten years, and we should be ready for this competition. Otherwise, because if we will not be able to be competitive on a global level, we will lose the competition in our home market.
Yeah, it's a great point. So AI is a big topic and everyone talks about it. How do you utilize AI and what types of AI do you use in your services?
I think we're very focused on predictions AI. And there were a lot of talks about big data, I don't know, 15 years ago, 10 years ago. So a lot of companies started to talk that we need to collect data, we need to process data. But now we see a real opportunity to monetize this data because AI and machine learning approaches helped us to process huge amounts of data and to still find some gold inside these huge amounts of maybe not the best structured data which we have already in our data lakes.
And because we collected and structured a lot of data in different business lines in Kazakhstan, I think we now have one of the deepest data lakes and one of the best structured data lakes, where we can do a lot of machine learning and benefit different services to better understand risk, cost of risk for each banking service, to approve loans instantaneously and to provide real risk-based pricing for each individual.
We do the same in insurance, and that helps us to win the competition because we can precisely try to estimate risk for each driver and not let a good driver pay for a bad driver. That also helps us to fight fraud in banking and insurance with this deep approach for machine learning and to better understand these patterns, also fraud patterns.
And that also helped us to turn our car insurance business in Kazakhstan profitable for our company. So we finally became profitable in a market where a lot of our competitors don't make money, especially in the last couple of years. And car insurance is not the most profitable business in Kazakhstan, at least in mandatory insurance, because the cost of repairs went up and the tariffs went down because of loss-ratio targeting by the regulator.
And that became a huge point for us because of our deep knowledge of our customers. We distinguished a low-risk customer from a high-risk customer in each category, and that helped us to provide even much cheaper rates for good customers and win the competition, especially for good customers.
And now we acquire, I think, more than 30% of new customers in the B2C business in mandatory car insurance, and we're leading this just because of technology, because of AI.
Now, especially at this moment, we invest hard to better understand customer needs in e-commerce — to know better when to offer, what to offer, how to better price. So to better understand what kind of cell phone we may offer to you and at what time. Maybe you want to buy an iPhone at the launch date, and maybe you want to buy an iPhone the year after the launch date, or maybe you prefer to buy a Samsung, and a Samsung of some special category.
And by analyzing this data, we can make a special offer and carefully use customer attention, not to waste this customer attention. And if you're going to our super app, we can offer you the most actual topic — that's an artist which you can love and you can book a ticket. That's a cell phone at the right time because you usually change your cell phone every two years, for example, or every three years. And that's a model which you may like, and that's a special condition for you.
This predictions risk management is huge in our day-to-day business because I think for most financial houses we do two things: we do risk management and we do transactions. So transactions are very highly competitive. It's very hard to make money on transactions this time. And the most money is being made on understanding of risk.
And we became one of the best in consumer lending because of deep understanding based on machine learning. And we're also becoming the biggest in insurance because of our deep understanding of machine learning. And we also try to win competition in e-commerce because of our understanding of consumer needs and recommendation systems. We don't invest hard in generative AI at this moment.
But we also try to make our services much more efficient. For example, our news feed could be translated and rewritten by AI to make news native in many different languages simultaneously with the publication, which also helped us finally to unlock research in many different national languages, to unlock news feeds in many different national languages for our customers.
Even if that's to make information accessible in the Kazakh language, for example, for people in Kazakhstan, at a very, very simultaneous pace, like it happens in English, and still with a high quality, using these AI models.
That's fantastic. The predictive AI is just so scary, right? Because this technology sometimes offers you things that you didn't know you wanted, and then you see, like, oh, I actually do want this. It's very accurate, actually.
So there is one more thing I wanted to ask you about: integrated digital ecosystem. And then you did mention that you wanted to integrate trading into the super app. So in terms of your approach, what sets you apart from the competition? What is the USP of Freedom Holding?
We do believe that we need to better understand consumer needs, and we also should make the process of investments interesting and easy. I'm not sure that we need to integrate all the services into the super app, but at least some of them should be present, and it should be very easy to switch between different applications.
So it should be very easy to open an account. It should be easy to track your account. If you want to trade, you just need to push one button and maybe go to a special professional app which will allow you to use a better scope of technology, which will allow you to use very different functionality.
And we usually see that in many different ecosystems they have a standalone brokerage app and still a lot of integration to their banking solution. So in a banking solution you can maybe buy the most simple products, and then if you want to trade on the markets, you switch to some different application which is deeply integrated, which still allows you to top up your account, to transfer money, and simultaneously very fast, very easy, and efficient in processing of any orders on any transactions.
So in this digital world, you have to be fast, you have to be cheap, and you have to provide interesting content and interesting products to your customers. Usually you don't need to be extremely unique, but you have to do everything a bit faster, a bit more useful, more stable, a bit cheaper than others. That's enough to win a competition globally, usually.
And I'm sure that in the end of the day, this super app integration just helps us to provide better and cheaper services because of much better efficiency. Customer acquisitions and a lot of different cross-monetizations also help you to keep a much lower margin on each product because you can benefit from the full basket of them.
And then thinking about the regions where you operate. You mentioned Kazakhstan, but if we look at the broader Central Asian opportunity and the Caucasus market, could you talk a little bit more about the opportunity in this broader part of the world?
Yeah. Kazakhstan is quite unique because I think we are the only investment-grade country in the region of Central Asia and most of Eastern Europe. We're the only country with free capital accounts, even in a much bigger region. So a very good and stable government position, opportunities of AIFC — the Astana International Financial Center — and common law regulation, an independent court of the AIFC International Financial Center, and a very attractive tax regime which also provides zero taxes for most financial products, which also makes life easier for a lot of investors locally and globally.
I do believe that we are the only pretender to be the new financial center of this region, and we need to rebuild connectivity between these Central Asian countries and Kazakhstan to become a new financial hub for the region, to connect different banks directly one with another, to let people from Tajikistan, Uzbekistan, Kazakhstan, Kyrgyzstan, the Caucasus, Georgia transfer money very fast in national currencies.
Because we still have a lot of labor migration, people still share the same culture, talk the same language, and that's a very big economic space. And this space is not yet well connected, and we should rebuild our financial center and use this chance. And that's why we believe that our technology, which is actually proven as competitive in Kazakhstan, we should go to other Central Asian and Caucasus markets to try to leverage it there.
And based on our banking network, we maybe can create the right links between banks, to create less borders, and to make payments faster, cheaper, and more efficient, and finally to become a trade and investment hub for all this big region, because it's still an empty space.
After what happened in Russia, a lot of Central Asian markets just became disconnected. And also, still, not all of them have good connectivity with European and US markets, US banks, and even facilitation of payments across Central Asia. Now it's not easy stuff. Sometimes it takes a lot of time, it's expensive, and the amount of transactions sometimes is very, very slow.
So we believe that it's a good space to grow and leverage technology, because the technology itself is very competitive. But if we also can gain a synergy of these cross-border payments for private people, for small amounts of money, that can also help and create a very huge opportunity for Kazakhstan to make a new financial network for the region, which will be, in my opinion, very much demanded by small businesses and by individuals.
Yeah, sounds like a massive opportunity. You know, people will go work in a neighboring country, they want to send money back to their family. Small businesses want to do business in different countries in the region, and their expense is very huge now.
So it's being processed where it's very, very slow. It's still expensive and still relies sometimes on some foreign payment systems, which is not efficient. And they still rely on many things on Russia, which is also not very easy for many. We should take this opportunity. We should also offer some competitive product for the region.
Sounds fantastic. So I know you have invested in digital infrastructure projects in Kazakhstan, and recently you've invested in a large data center in Almaty. So what difference does this make? How can Kazakhstan distinguish itself as the key chain in the network of global connectivity? Just building on your previous...
In my opinion, Kazakhstan is not just the only open-capital-accounts country. We also have, I think, quite liberal regulation of the internet, and we definitely could be a great partner for many global hyperscalers — for Amazon, Google, Meta — for many Western and Eastern companies who need a presence in the middle of big continents.
Because for many of them, if we look on a map, I'm not sure that Amazon has anything between Eastern Europe and Korea. So it's a very, very huge space. It's thousands of kilometers without any hyperscaler services and any public clouds. And actually, Freedom is one of the largest consumers of these clouds in the region already.
So if we're aiming to be one of the largest digital ecosystems, we're aiming to be the largest consumer of cloud services in the region. And we also believe that there's still strong demand from many other companies who can provide cloud services to all of Eurasia, to the middle of Eurasia, to a big amount of Central Asian countries.
And Kazakhstan, with our liberal regulation of data, I think is a good space for a country with very good relationships with East and West, with good governance, with stable regulations, with cheap energy — in the end of the day, still cheap — is a good space and a very attractive place to actually develop this data center infrastructure, cloud infrastructure.
And that's why we believe that we have to invest here also, and that can leverage the country, that can leverage our needs. And if we will not build these data centers, we could meet problems for our own business development.
We see that even Freedom can't predict our data processing needs. So sometimes we make a wrong estimation of our needs, like many other competitors do. Sometimes our data needs are growing much, much faster than our expectations.
And if we will invest into this public cloud infrastructure, that will mean that even Freedom can benefit and take more computing power if we will need it. If we will not need it, we will be happy to share with the rest of the markets. But Freedom itself could be a big consumer of that, and we need a reliable digital infrastructure. We need a reliable data infrastructure in our country to support our growth and our stability in the market, and we're not sure that we can rely on anyone else here.
And that certainly plays a massive role in risk management overall, and obviously ensuring data safety and data security.
Because unfortunately we can't use, I don't know, Amazon Web Services located outside of Kazakhstan because of national data regulation. We should keep it in our country. And if we will not build these data centers, we can be in a position when we will have demand and have no supply at all. And this supply will not appear instantly. Even if you're ready to spend a billion dollars, you will still need some years to build it.
And I believe that it's a good business actually to invest here, because probably most of our competitors, most of our players on the market, our government, all of us underestimate demand, and probably we will need much more than we expect. And it will be very smart to build now some computing power, some data centers. And our president also says the same.
And I'm fully sharing his approach to these data centers. We will try to use this — that our government is favorable, they try to support these projects, and we will use this opportunity to build infrastructure.
Well, certainly it will be great to see that happen, and it's great to see that you are ahead of the curve and anticipating massive growth in demand and managing the risk at the same time.
Yeah, and it's funny because we don't have much infrastructure in Central Asia at this moment at all. If you will compare it to, I don't know, the UK, even per capita, we still have such massive opportunity to grow. And it's just because at this moment we have a very, very, very small data center supply. So our market is very tiny, so it could be much, much bigger based just on our GDP per capita.
We have about eight minutes left. So please start thinking about questions if you would like to ask any. We have two questions left. I have two questions left for you. So one is around market stability. We have seen the first half of the year — us at the London Stock Exchange, well, we at the London Stock Exchange, we really, you know, we're a big part and parcel of the process where we're trying to handle market volatility, etc., etc. So from your perspective, how have you approached and handled market volatility and instability from a business perspective?
I think in general, for at least retail brokerage ecosystems, market volatility means higher turnover and finally higher revenue, higher commission revenue. I never seen much market stability last time. So something strange happens almost every year. So we're now more resilient to these unexpected events than ever before.
And we see more technology challenges rather than some special financial challenges because of that, because high volatility usually creates a huge demand, and customers may want to trade simultaneously and do transactions simultaneously. And that creates a huge demand for IT infrastructure, and IT infrastructure should be resilient enough to afford our customers to trade.
Because if you have online some, I don't know, thousands of customers, in some moments of volatility some hundreds of thousands can come. And that requires a much different approach to full infrastructure building, to all architecture, to plan your architecture of IT systems which should be scalable, which should also rely on some clouds to afford this overusage in some short period of time, and then again a much slower consumption in a much slower market.
But in the end of the day, I always love to talk about what doesn't kill us makes us stronger. And every next crisis also creates huge opportunities and sometimes accelerates trends. And if we will just look back to many crises which we've gone through in the last 15 years, all of them finally turned into huge opportunities for our company.
Okay, and my last question, and it's actually going to be a summary of all the questions. So what is your ultimate vision for Freedom, and where do you want to take it, both conceptually and geographically, and what role would you like it to play in people's lives? So it's going to probably include all of what you've said before, but maybe if you can sort of summarize it, that would be great.
I believe that we still can grow in Kazakhstan and still have a huge potential which could be realized quite fast. And Kazakhstan for us is still a laboratory for testing a lot of hypotheses which we can scale outside of our country, maybe even outside of Central Asia, because we still see a huge potential in Europe and in the United States.
We already have experience dealing with these markets, and we already have licenses to support our growth. And we still keep our quite opportunistic approach because I think in the end of the day everyone will face global competition, and we need to be quite opportunistic in terms of finding a way to approach any market with our digital technology, with our digital banking, with our digital brokerage, if the regulation will allow us to roll out our technology.
So we need to build our technology as scalable as possible to be able to roll out this technology on many different markets, and to create a team who will be able to do that. Because in the end of the day, I'm sure that the competition in finance will become quite similar to what happens in global search on the internet and in social media, when most of the people globally can use the service of one company or something like that, and the market will have a very unfair distribution.
I believe that digital ecosystems finally win the competition with standalones, and we also believe that we have a lot of experience building and developing this ecosystem. And maybe we should aim to be one of these global competitors in terms of building digital ecosystems in the next couple of decades.
And I believe that we can prove that our approach is competitive, and finally we can become a part of one of the leading ecosystems in the end of the day, or create one.
Well, we're certainly all looking forward to seeing this happen. And on that note, I'd like to invite everyone to say thank you to Timur. Thank you.
Thank you very much. And welcome back to the heart of the City of London, still one of the world's great financial centers. We're here at the London Stock Exchange for this conference. My name is Chris Bishop. I'm a journalist. I've been working for something like 44 years now, and I spent 30 of those years working in Africa. But I was very much a business journalist, which is why I'm very happy to be here today having this discussion.
I'd just like to introduce my panel here. Starting on my left, Mr. Timur Turlov, the founder and CEO of Freedom Holding Corporation. Then we have Philippe Buglier, director of Freedom Holding Corp., now based here in London. Then we have Dr. Kairat Kairbekov, the director of Freedom Holding Corporation, but also the founder of the Astana Financial Center, which we'll be talking a little bit about early in this discussion. And last but not least, Mr. Andrew Gamble, the director of Freedom Holding Corporation. So thank you very much for joining me here.
In terms of just giving us an idea of the roots of this company, because obviously I'm going to talk about your listing first on the NASDAQ, but what were the humble beginnings of this operation?
Oh, I think we started in the middle of the financial crisis, when the bank where I worked decided to close out its investment subsidiary because of the financial crisis. And we actually launched a very small boutique firm to provide access for retail people to global markets, to provide internet trading, online trading, to access US markets for people in Eastern Europe and Central Asia. And that is how it started. We started out of six people, very small infrastructure, very small office.
