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While this strategy left bank fairly confident in its cardholders, it led to only limited market expansion. And
very soon, Russian banks realized, just like Bank of America did 35 years earlier, that slow and careful
recruitment of cardholders was like swimming against a strong current. It was not bringing them closer to
their destination – a market where the numbers of cardholders and merchants are increasing in a
complementary manner, and where growth is generated by demand externalities. They needed an
equivalent of a steam ship. And a ship they did build. In the subsequent decade‐and‐a‐half, Russian banks
pursued two strategies of mass‐issuing cards to millions of Russians. However their success in tackling
complementarity and unce
rtainty problems simultaneously remained limited.
At first, Russian banks turned towards employing organizations peddling cards to whole working
collectives through salary projects. A typical salary project involved an agreement between a bank and an
enterprise to issue cards to all of the employees, from the top manager to the janitor, while their salaries
were directly deposited to the bank. 6 Banks’ possible losses from unauthorized overdraft or misconduct in
the use of the card would be paid by the next month’s salary, and the enterprise would be obliged to notify
the bank as soon as the employee was fired or quit. Popularity of salary projects Russia in the 1990s has
been mirrored in other postcommunist countries as well.
Salary projects were attractive to enterprises because they allowed them to save on transporting, securing,
and dispensing cash. But from the bank’s perspective, salary projects were an ingenious strategy of quickly
mass‐issuing cards without any investment into developing an elaborate network of branches and with
little investment in advertising. Prospective cardholders did not have to be enticed. If the management of
their company decided on a salary project with a particular bank, workers had no choice but to carry a card
of that particular bank. Each salary agreement allowed banks to sign up hundreds or thousands of new
cardholders. Banks hoped this growth in the number of issued cards would also make cards popular among
retailers. Thus, in a way similar to American unsolicited mailings, Russian banks also engaged in creating
cardholders rather than recruiting them. But they went even further. Not only did employing organizations
enable banks’ access to prospective cardholders, but they also helped them avoid large initial losses that
plagued the American credit card market. To the extent that companies exercised control over their
employees, they ensured Russian banks’ ability to monitor cardholders, and helped them to control
uncertainty. The dual role played by cardholders – as customers of the bank and employees of the
enterprise – limited their flexibility, reduced their ability to exit the bank‐client relationship (which would
mean also quitting their job), and made them available for negotiation and sanctioning by the bank. In such
6 Before the introduction of salary cards, salaries were paid in cash. Initially, salary cards were debit cards, but
eventually, banks started to offer overdrafts for up to 75% of one’s monthly salary.
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