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The Moscow subway will spend hundreds of millions of rubles a year on a new loyalty program, and the money is flowing through some very strange business people
The “Moscow Metro,” the Russian capital’s subway system, is one of the busiest public transportation networks in the world, carrying billions of passengers every year. In all that traffic, ticketing is key, and the subway is now rolling out a new loyalty program, designed to lure customers away from single-ride tickets and encourage bigger deposits on their rechargeable “Troika cards.” The company hired to operate the new program, however, has a strangely byzantine ownership structure, and Moscow’s subway system has a nasty history of doling out money to third-party companies with suspicious roots.
Last February, Meduza reported that the Moscow subway system would be introducing a loyalty program. In June, it finally arrived.
This February, Meduza reported that the Moscow subway system was planning to launch a customer loyalty program through the contactless Troika card. In March, the subway began taking bids from potential contractors to run the program, but two months earlier a company called “Narodnaya Karta” (People’s Card) had already started sending offers to large retail chains throughout Moscow, inviting them to participate in the subway’s new program. A month before that, in December 2017, Narodnaya Karta released an app called “Gorod” (City), which uses people’s Troika cards and their subway travel data for registration. When asked about the app, the company’s CEO, Ilya Korolev, said it was just a “publicity stunt,” and the subway system insisted that it had no ties to Narodnaya Karta. The contractor selected to run the new loyalty program, officials said, would be chosen on a competitive basis.
When the procurement process ended on April 2, however, Narodnaya Karta was declared the winner. This was no special feat, however, as the company was the only contractor that submitted a bid. The procedure itself was carried out on the Moscow subway’s own trading floor. A spokesperson for the subway told Meduza that Narodnaya Karta was selected for its “popularity and openness.” (Since the start of the year, the Moscow Metro has conducted three tenders on its own trading floor and 740 on other trading floors, including Russia’s state procurement website.)
City Hall announced the launch of the new loyalty program on June 25, explaining that customers who add 250 rubles ($3.94) or more to their Troika cards will receive three-percent bonuses that can be used when buying future tickets or making purchases at 236 participating partner companies (most of them — small online stores or retail chains). The rewards go both ways, too: for example, purchases on the website “Auchan,” made through the Gorod app or the loyalty program’s site, will result in a 1.7-percent loyalty program bonus. So far, there aren’t many large retailers participating, but the list of partners does include the “36.6” and “Gorzdrav” drugstores, “Coffee Bean,” and the “Medsi” clinics. Loyalty members are also eligible for discounts at “Perekrestok” grocery stores and “Shokoladnitsa” coffee shops.
According to Moscow’s Transportation Department, the average amount of cash deposited to Troika cards is roughly 165 rubles ($2.60). Officials hope the new Gorod program will boost this figure to 230 rubles ($3.62) and cut single-ride ticket sales by as much as 40 percent. Subway administrators say this would reduce lines at ticket windows and slash the production costs of manufacturing single-ride tickets. As an added bonus, multiple-use tickets are more environmentally friendly.
Narodnaya Karta will be getting money from Moscow’s subway system. The loyalty program will pay out more than 1 billion rubles ($15.8 million) in bonuses.
The commercial offer made by Narodnaya Karta says the Moscow subway system will raise 1 billion rubles ($15.8 million) to fund the loyalty program’s initial bonuses, and the subway system will replenish this fund every month with an additional 150 million rubles ($2.4 million). Spokespeople for the subway, however, have denied that they will transfer this money directly to Narodnaya Karta. The final contract states that the subway system will provide the company with “funds equal to the value of bonuses accrued to passengers.” The word “passenger,” however, refers to all people who paid for tickets. Based on this wording, Narodnaya Karta will receive three percent of any Troika Card deposits in excess of 250 rubles, whether or not the customers who bought the rides participate in the subway’s loyalty program.
Based on this information, Meduza estimates that the Moscow subway system will transfer at least 500 million rubles ($7.9 million) a year to Narodnaya Karta, and it’s more likely that this amount will actually be twice as big.
Representatives of the Moscow subway system told Meduza that they will recoup any bonus funds not spent within two years. These terms appear in the guidelines displayed on the Gorod project’s website, but they’re absent in the city’s contract with Narodnaya Karta.
This isn’t the first time a third-party company has managed to earn money every time somebody buys a public transit ticket in Moscow. Until recently, the Transport Ministry was paying out three percent of every bus and trolley ticket to businesses that own a patent on an “automated fare collection system.” The patent’s owners, it so happens, had ties to Sergey Makarenko, a transportation city official from the days of Mayor Yuri Luzhkov. Dmitry Gayev, a former official in the Moscow subway system, was also earning three percent on every subway ticket sale until 2011 with a similar patent.
The company hired to manage the subway’s new loyalty program is a convoluted beast, but they attribute it all to coincidences and “technical errors.”
As Meduza previously reported, the story surrounding the subway's loyalty program has involved, to varying degrees, three companies with the same name: “Narodnaya Karta” (People’s Card). One of these companies managed negotiations with the program’s future commercial partners; another subsequently won the procurement contract; and the third enterprise is the registered owner of the “Gorod” website. The current head of the third Narodnaya Karta is the former director of the first Narodnaya Karta. All three of these enterprises are linked to a group of businessmen with Armenian roots, particularly the family of Kamo Avagumyan, who owns the company “Avilon” (a long-time contractor for the Moscow Transportation Department and various federal law enforcement agencies). One of the Narodnaya Kartas opened its bank account at “ForaBank,” which is owned by billionaire Samvel Karapetyan’s “Tashir” holding company — one of the biggest beneficiaries of Moscow’s urban development projects in recent years.
Moscow Transportation officials credit a man named Vladimir Gorbunov with launching the Gorod program. Until March 2017, Gorbunov and his father managed the Narodnaya Karta that later won the contract from the subway system. Today, he prefers to call himself “the founder of Crypterium” — an Estonian cryptocurrency bank. Gorbunov told Meduza that he poured 80 million rubles ($1.3 million) into launching Gorod, and says the program currently has no other investors.
Gorbunov hadn’t previously partnered with the Moscow city government, but he has overseen other startups besides Crypterium. He owns these other projects (some of which are residents at the Skolkovo Innovation Center) through the Cyprus-registered company “Paygr International Ltd.,” whose shareholders include another Cyprus offshore called “Elseno Investments Limited.” This company’s other assets link him to the developer Veronika Dvorkina, whose relative, Alexander Dvorkin, has been tied to several little-known companies that won major contracts for trash removal in two districts outside the capital, as well as big landscaping deals with Moscow’s “My Street” urban renewal program.
Vladimir Gorbunov
Gorbunov told Meduza that Elseno Investments Limited doesn’t have anything to do with the Gorod program. He previously explained in an interview with the magazine RBC that he used his name to conceal other investors in Paygr International Ltd., and until 2016 he was listed in Cyprus as the company’s sole owner.
Gorbunov says it was merely a “technical error” that the Gorod program’s owner was initially listed as the second Narodnaya Karta, and not the one that won the subway system’s procurement deal. He also claims that his decision to hire the third Narodnaya Karta’s former director, Ilya Korolev, was “purely professional,” saying that Korolev had managed other successful loyalty programs and even came up with the name “Narodnaya Karta” while working on a similar project for a Moscow taxi company. There were “certain complications” when realizing a loyalty program on such a massive scale, and Gorbunov says that’s why he turned to Korolev. He says that’s also when they decided to call the company Narodnaya Karta, arguing that this brand “was already known to some market players.”
Meduza asked Gorbunov why he has no formal ties to Narodnaya Karta, even though Moscow’s Transportation Department considers him the one operating the subway’s loyalty program. He said his busy workload doesn’t allow him to devote the “necessary attention” to every project, and “for the sake of operational convenience” he transferred the company to his “close confidant and employee Rostam Khumoyan. As of June 2018, however, Khumoyan also has nothing to do with the company. Shortly after Meduza’s first report on Narodnaya Karta, it was transferred to a 40-year-old woman named Natalia Startseva — the former head of “Ice Food,” a frozen fish vendor. Gorbunov says she is another of his “close confidants.”
Story by Ivan Golunov, translation by Ivan Kh and Kevin Rothrock
The math here
In 2017, the Moscow subway system provided slightly more than 3.1 billion rides. Based on an average ticket price of 36 rubles ($0.57), this traffic brought in a total revenue of about 112 billion rubles ($1.8 billion). A research study by Rocketbank found that at least 38 percent of Moscow subway passengers add less than 200 rubles to their Troika cards, and 15 percent add somewhere between 1,700 and 2,000 rubles.