mbank case study sl2008

mBANK STORY – DISRUPTIVE BUSINESS MODEL IN FULL RANGE RETAIL BANK ING

Maximum benefits and convenience in personal finance

BRE Bank: The best financial institution for demanding customers

Investment

Banking

Corporate

Banking

Retail

Banking

(+ PB)

The roots of BRE Bank

inceptionTo grow and

to generate

significant profits

To keep up profits

and to mitigate

risks

Directions of BRE Bank’s Strategic Growth

Customers

Products

Operating model

Mass customers Affluent customers

Standardised products

Preference for

electronic access channelsMulti-channel architecture

Products tailored to segments

Leader in

Internet Banking

Leader in

Service Quality

mBank and MultiBank

Retail Banking

Personal finances require simple solutions at arm’s length. Products and services should work on straightforward, easy to understand principles.

We don’t promise that you’ll find with us everything that has ever been invented in the world of finance, but you’ll certainly find the things that are the most important for you, at the best quality and price available on the market

Maximum benefits and convenience in personal finance

The vision

The mision statement

MBANK – MISSION AND VISION mB

ank B

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ess Case

42008 SL Consulting

price

quality

simplicity

convenience

innovation

community

Is going to be main market advantage at the launching phase

Despite low price, high quality needs to be addressed as well – it is important to build credibility and trust

Products and processes are as simple and clear as possible

Internet as a main access channel will assure accessibility in the 24/7/365 model. Reliable and user-friendly interface will base on Polish experience

True internet bank. mBank will not be afraid of this term. However it is crucial to underline, that bank operating in internet is able to provide clients with cheap and high-quality banking products

Various mBank activities (internet forum, on-line chats, sporting events), that successfully build community in Poland, will make mBank distinctive on Czech and Slovak market

MBANK – CORE VALUES mB

ank B

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52008 SL Consulting

http://www.theta.pl/pl/item/image/IR/IS293-006

http://www.theta.pl/pl/item/image/CO/cb103658

http://www.theta.pl/pl/item/image/PD/200179895-001

http://www.theta.pl/pl/item/image/SB/EI00269

http://www.theta.pl/pl/item/image/SB/57658172

Self service 24/7/365

Simplicity, Reliability, Honesty

(No hidden fees and costs)

Continuous improvement through

Innovation in:

• Products

• Processes

• Distribution and

Communication

Low cost

Low price

High quality

High tech

PHILOSOPHY OF MBANK mB

ank B

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62008 SL Consulting

Target GroupWide mainstream in 2007: Self-directed, quality and price sensitive, capable of using new technologies, seeking financial benefits, convenience and freedom

Products:Innovative, attractive and transparent banking and non-banking financial products, offered within single, revolutionary open platform -financial portal with one login and password

TechnologyScalable, flexible and efficient central IT system, central back-office, automated processes and innovative distribution channels based on Internet solutions

Distribution and communication channelsExclusively virtual bank with free Internet banking service and Contact Center operating in 24/7 modelTransparent, aggressive communication

Strategic positioning:mBank, the leader of Internet banking, offers those who rationally manage their personal finances, the most essential products and services at the best possible prices and the highest quality on the market.

MBANK 2009 – LEADING RETAIL FINANCIAL INSTITUTION FOR EMERGING NEW GENERATION OF

CUSTOMERS

mB

ank B

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72008 SL Consulting

current account

investment products

savings

credit cards

mortgage loans

consumer finance

insurance products

MBANK BUSINESS MODEL: FULL RANGE PRODUCT OFFER

Current account as a center of the mBank universe

mB

ank B

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Source: 'Delphi' team analysis 82008 SL Consulting

• Transfers and payments• Cash management• Brokerage services• Credit cards, cash

loans, mortgages • Funds: investment and mutual• Insurance• e-commerce

SELF MANAGEMENT

• Access 24/7/365 • Free of charge ATMs and deposit

machines• No minimum regular in-flows

• Maintenance • Transfers • Debit card

• Efficient processes• Transparent and easy to apply

procedures• Full range on-line offer

CONVENIENCE

BEST PRICE WITH NO FEE FOR

INNOVATIVE FULL ON-LINE INTEGRATION OF PERSONAL FINANCE

First choice Current Account satisfies all financial needs through on-line integration and management

EKONTO – MOST CONVENIENT CURRENT ACCOUNT mB

ank B

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ess Case


• Many Accounts create convenience for on purpose savings

CONVENIENT ACCESS 24/7/365

BEST PRICE

SELF MANAGEMENT

• ATM and Deposit Machines

• Debit Card payments

• Interest rate of term deposit• No charge for early withdrawal• Free of charge debit card

• Real instant access Savings Account with interest rate as good as the term deposit

INNOVATION

Basic multipurpose Savings Account creates maximum benefits and convenience

EMAX – SAVINGS ACCOUNT REVOLUTION IN MASS MARKET mB

ank B

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SFI – MUTUAL FUNDS ACCESSIBLE DIRECTLY FROM THE CURRENT ACCOUNT mB

ank B

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• Access to un-limited Investment Funds offering from a single platform

• Open architecture• No buy or sell fees• Investment Account integrated

with Current Account

CONVENIENCE

BEST PRICE

INNOVATION

SELF MANAGEMENT

• Directly connected to the Current Account

• Access 24/7/365 • Only 2 clicks for buy or sell

• No initial charge• No additional charges• Entire invested capital is

working for the client• Management fee is the

only charge

• E-Learning for new & un-experienced investors

• Recommendations for un-experienced investors

• Online Education Center

COMMUNITY

Open architecture with un-limited Investment Funds access fully integrated with the Current Account


EMAKLER – BROKER SERVICES REVOLUTION IN MASS MARKET mB

ank B

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• Broker Account conveniently integrated with Current Account

SELF MANAGEMENT

• No fee for the Broker Account

• Lowest transactional charges on the market

• High interest rate for un-invested funds

• Online Education Center for new & un-experienced investors

• Interactive analytical tools available online

CONVENIENCE

BEST PRICE

INNOVATION• Directly connected to the Current Account

• Access 24/7/365• No extra login needed


COMMUNITY

Broker Account online connected to the Current Account enables an integrated management of the individual financial standing unmatched in the marketplace


SUS – INSURANCE REVOLUTION IN MASS MARKET mB

ank B

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• Broad selection of life and non-life insurance products from 4-5 insurance companies

• Lower risk when selling insurance products to identified bank clients

• Single process for all insurers and all types of insurance

• Insurance fully integrated with the Current Account

• Single process for all insurers and all types of insurance

• Product offering transparent & easy to understand

• Access on-line 24/7/365

• Client shares unmatched price benefits through online self service and elimination of agents, brokers, …

• High profitability thanks to cost savings

• Online Education Center • Automatic best option

recommendations

• Direct channels enable high number of options to choose from via direct channels

• Fully flexible payment options e.g. monthly

SELF MANAGEMENT

CONVENIENCE

BEST PRICE

INNOVATION

COMMUNITY

Disruptive bancassurancemodel fully compatible with the requirements of e-commerce – best price and simple processes transparent to the client


• Client may use direct channels to self-manage the offset mechanism

• The offset mechanism significantly reduces the cost of servicing the mortgage

• Automatic integration of the Current Account with the mortgage account

• The online offset mechanism reduces the prime and enables the best application of the periodic peaks on the Current Account to serve the mortgage

SELF MANAGEMENT

CONVENIENCE

BEST PRICE

INNOVATION


COMMUNITY

Unique functionality based upon online integration of the mortgage loan with the Current Account enables off-setting periodic peaks in account balance against the loan prime

MORTGAGE REVOLUTION IN MASS MARKET mB

ank B

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MBANK BUSINESS MODEL

Comments

The strategy of innovation is in mBank’s business model continuous, ongoing process. The only constant element is a change. On average, once a year mBank implements major new innovation.

mB

ank B

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Car Insurance Supermarket – new type of Bancassurance

On-line brokerage linked to current account

Unit link (life insurance+investment in Mutual funds)

Instant access Saving Account

Free of charge Current Account

2000 2003 2004 2005 2007

Mutual Funds Supermarket:

• Open architecture• No front load fee

Electronic Revolution in Mass Market

152008 SL Consulting

Centralized and digitalized back-office operations

UniFlow and UniWniosekSupportive banking systems: Innovative flow solutions for sales and customer service

AltamiraCore Banking system

• Central System

• Central Host

• Customer Centric

• All kind of products parameterized in product

factory, available for customers any time and

at any distribution channel

• Up to 10 mln customers

• Rapid product flow and customer application

development

• Fast and automated processes

• Easy sales partners launch

• One Central Location

• Massive use of scans

• Digital archives

TECHNOLOGY OF MBANK mB

ank B

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Self-service

Financial Centers

mKIOSKs

Subsidiary man-backed

physical channels

Agents

Post/Courier

ATMs

Internet

Telephone

Direct electronic• The most cost-sensitive elements of

clients acquisitions and service are

shifted to remote direct or self

service physical channels

• The most quality-defective factor – a

man – extracted from the sequence

in the most frequent operations

• Permanent availability and constant

high quality of of all services from

any place in the world mBank fetched market opportunity in consumer

credit - cash loans and mortgage loans - with new

efficient model of physical sales network: mBank

mortgage sales per location is 18 times higher than

the market average

DISTRIBUTION AND COMMUNICATION CHANNELS

Multichannel distribution model based on Internet and Internet technology

mB

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MBANK WEBSITE IS A POWERFUL FINANCIAL PORTAL

mBank Business Case

0

200 000

400 000

600 000

800 000

1 000 000

1 200 000

0

50 000

100 000

150 000

200 000

250 000

300 000

350 000

2008.09.08 Mon Tue Wed Thu Fri Sat 2008.09.14 Sun

Returning visitors (cookies) First time visitors (cookies) Page views

Custommers acquisition via internet till end of:

2001 88 ths2004 582 ths2007 1 232 ths2008 1 465 ths

mB

ank B

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Source: GemiusTraffic – 2008.09.08 – 2008.09.14 182008 SL Consulting

CONVENIENCE TO VISIT THE MBANK ANYTIME

Average hour mBank customers visits on www.mbank.pl

Comments

•12 256 visitors in average every hour, 14 213 in working days, 6 632 on weekaeds

•Highest visitors frequency between 12-13 - 20 800 customers, 24 240 n working days, 11 209 on weekends

•Lowest visitors frequency between 4:00 – 5:00 a.m 294 customers

mB

ank B

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Weekend Each day Working day

Nu

mb

er o

f u

sers

(co

oci

es)

Source: GemiusTraffic – 2007.10.01 – 2007.10.31 192008 SL Consulting

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

PONIEDZIAŁEK WTOREK ŚRODA CZWARTEK PIĄTEK SOBOTA NIEDZIELA

02:19

02:33

02:48

03:02

03:17

03:31

03:45

04:00

04:14

Il. tel. odebranych Il.tel. straconych (systemowe) callbacki czat maile Średni czas rozmowy I linia:

Answered calls Lost calls (system) Callbacks Chat Mails Average time of call

Monday Tuesday Wednesday Thursday Friday Saturday Sunday

• 9 550 calls in working days• 405 calls per hour. In hours of the biggest traffic (10 A.M. – 8 P.M.)

it raises to 720 per hour. • 220 000 calls monthly• 4 600 talks per week through chat

MBANK CONTACT CENTER – THE BIGGEST BANKING CC IN POLAND mB

ank B

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Source: mBank internal data 202008 SL Consulting

MBANK CLIENT – NEW GENERATION CUSTOMER IS VISITING BANK FREQUENTLY AND DOING IN SELF

SERVICE MULTIPLE TRANSACTIONS

250 000 customers currently log on daily to the mBank transactional system

mB

ank B

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In the afternoon and evening hours in each second :• 10 clients log on• 5 transfers are being made• 15 card authorizations occur• 420 transactions are made

Source: mBank internal data

0

50 000

100 000

150 000

200 000

250 000

2007-01-01 2007-02-01 2007-03-01 2007-04-01 2007-05-01 2007-06-01 2007-07-01 2007-08-01 2007-09-01 2007-10-01 2007-11-01 2007-12-01

average


Service desk 2

Service desk 1

KIOSK 1Internet

Telephone 1ATMdeposits

ATMwithdrawals

Telephone 2KIOSK 2Internet

Description

• Shopping centres in big cities and urban areas

• Modular architecture –easy-adopting arrangement to different spaces

• Mobility – quick and easy relocation of mKiosk

• Advice on and sale of consumer credits

• Gaining customers and opening of accounts

• Cash deposits and withdrawals

• Self-service financial management points: terminal|telephone

MKIOSKS

Internet bank in the real world

mB

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Functions

• Advice on and sale of credit and investment products

• Cash deposits and withdrawals using self-service equipment

• Self-service points for managing personal finances: terminal and telephone

FINANCIAL CENTERS


mB

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FINANCIAL CENTERS


mB

ank B

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FINANCIAL CENTERS AND MKIOSKS


mB

ank B

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714 15 15 20 22 242240

56 6182 94 106

27

100100

100

2003 2004 2005 2006 2007 2008 2009 2010

Financial Centeres

mKiosk

mKiosk (partnership)

25

MBANK – NEW GENERATION OF CUSTOMERS mB

ank B

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Target group:Sensitive to price and quality of service, prone to use

new technologies, seeking comfort and valuing independence, well educated, socialy active and

enterprising

Higher education

63% 24%Banking Sector

Internet users

Clients under 35 year old

70%

Credit card owners

50%Banking Sector



Source: SMG KRC, March 2007 262008 SL Consulting

MBANK.PL – CURRENT PERFORMANCE

stateincrease

Clients(ths)

Loans and mortgages(m PLN)

Data for 2009.03.31

1 869 thsm EUR2 510

Assets under management (m PLN)

m EUR2 596

Third biggest retail bank in Poland in terms of number of clients. Continuously outperforming the market in deposit and credit growth. Market leader in brokerage .

mB

ank B

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9191

9466

72

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2 000

20

07

-12

-31

Mar

Jun

e

Sep

t

Dec

20

09

-03

-31

+28%


1 455

1 869

1 399

447578

252

-359

-2 000

0

2 000

4 000

6 000

8 000

10 000

12 000

14 0002

00

7-1

2-3

1

Mar

Jun

e

Sep

t

Dec

20

09

-03

-31

+24%

9 485

11 802

836634

1 347

2 688

1 304

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

20

07

-12

-31

Mar

Jun

e

Sep

t

Dec

20

09

-03

-31

+126%

5 399

12 207

MBANK PERFORMANCE TO DATE

Clients [ths]

Accounts SME [ths]

mB

ank

Bu

siness C

ase11 112 209214

215255

274 339342

2000 2001 2002 2003 2004 2005 2006 2007 2008

stateincrease


299

20 36 35 40 40 6266

2002 2003 2004 2005 2006 2007 2008f 12.2008f


Impressive mBank growth in the prospective segment of microenterprises. To datemBank is ranked second on the market

Accelerated growth in acquisition of individual clients over the period of 8 years shows theunique track record.

MBANK PERFORMANCE TO DATE

Assets under management [m PLN]

Loans [m PLN]

mB

ank B

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stateincrease


19 1 019791 723 500

984 1 293

4 172

2 675

2000 2001 2002 2003 2004 2005 2006 2007 2008

4 158 341637 1 902

2 356

5 504

2000 2001 2002 2003 2004 2005 2006 2007 2008


mBank business develpment was driven by client and deposit acquisition in the first phasefollowed by mortgage and cash loans growth.

MBANK – MARKET POSITION

Number of individual clients

0,10% 1,10%

2,60%

3,90%5,20%

6,80%8,00%

8,50%

9,34%

0

500 000

1 000 000

1 500 000

2 000 000

0

5 000 000

10 000 000

15 000 000

20 000 000

25 000 000

2000 2001 2002 2003 2004 2005 2006

Market (left scale) Market share mBank (right scale)

Current accounts – Polish market [Dec 2007]

mB

ank B

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Source: Parkiet, TNS

Pekao20%

BZ WBK7%

mBank8%

PKO BP33%

ING BŚ7%

Millennium7%

Other18%


2007 2008

mBank big bang growth has changed the landscape in the retail banking in Poland. Rank 3

in terms of number of clients and current accounts is an impressive achievement

2005 2006 2007

34,5

82,9

12,4

II 2007 VI 2007 End 2007

24,4

66,9

1,7

• mBank started selling direct car insurances in early 2007. More than 66 thsd. where sold by the end of 2007

• The value of car direct insurances in 2008 is forecasted to reach 500 m PLN. mBank aims at selling approximately 37 m PLN.

• The product earlier available only to a narrow group of sophisticated customers now offered to mass customers

• mBank is a market leader in terms of number of opened brokerage accounts

MBANK PERFORMANCE IN NEW, OFF-BALANCE, BUSINESS FIELDS: DIRECT INSURANCES AND ONLINE

BROKERAGE

Direct Car Insurances [‘000]

On-line brokerage accounts [‘000]

mB

ank B

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Source: mBank internal data, insurance companies

CAGR 159 %


-168 -1 187 3 838 12 973

54 964

116 213

200 587

353 716

537 627

-7 061-30 339

-45 937 -48 191

-7 04428 417

72 577

165 405

237 673

-100 000

0

100 000

200 000

300 000

400 000

500 000

600 000

2000 2001 2002 2003 2004 2005 2006 2007 2008

Results on banking activity Gross financial results

MBANK FINANCIAL RESULTS

Break Even Point [ths PLN]

mB

ank B

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Break Even Point


MBANK FINANCIAL RESULTS

Payback, Investment vs. gross result [ths PLN]

12 33225 018

79 95897 302

117 998142 819

162 151

201 727

-6 997 -34 479

-71 551

-98 852-82 964

-40 499

53 538

243 898

-150 000

-100 000

-50 000

0

50 000

100 000

150 000

200 000

250 000

300 000

2000 2001 2002 2003 2004 2005 2006 2007

Investment

Cumulated gross result + depreciation

Comments

•In August 2007 investment in mBank paid back, after over 6 years of operations.

•Total investment till payback time amounted to 168M PLN, of which 60% are intangible assets

mB

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August 2007, Payback date


COSTS STRUCTURE

•mBank keeps low share of employee benefits in total costs, what is the result of specific mBanks business model

•In mBank, marketing and administrative costs are two key positions in ‘non-personnel costs’ that have 16% and 17%

•Quite high level of other internal costs can be explained i.e. by considerable costs of contact center

Cost structure comparison [2007] Comments

mB

ank B

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mBank

Source: mBank, PKO bp, Delphi team analysis

PKO BP

21%

55%

9%

16%

161

56%

33%

2%

4 082

9%

TOTAL in m PLN =

Depreciation

Other costs

Non-personnel costs

Employee benefits


2006Czech Republic

Slovakia Poland

Population [M] 10.2 5.4 38.1

GDP per capita [EUR] 11 010 8 150 7 120

Real GDP growth [%] 6.1 8.3 6.1

Inflation [%] 2.5 4.3 1.0

Unemployment [%] 7.7 12.0 14.9

Average salary [EUR] 1 657(2005)

536(2006)

643(2006)

Household loans CAGR (2000-2006)

27.7 30.4 1 17.3

Household deposits CAGR (2000-2006)

6.0 1.1 2 2.9

1 – 2000-2005 CAGRSource: CEEmea Banks – The Big Picture, Citigroup Global Markets, Equity Research, April 2007; Directional Economics, ING Wholesale Banking, April 2007Czech Statistical Office; Statistical Office of the Slovak Republic;

MBANK IN THE CZECH REP. AND SLOVAKIA

Economic background

mB

ank B

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0

3 733

163116 185

271139

2 858

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

Mar

Ap

r

May Jun

Jul

18

Au

g

06

.05

.20

09

18

232

1413

1812

1413

158

107

0

50

100

150

200

250

31

.12

.20

07

Jan

Feb

Mar

Ap

r

May Jun

Jul

18

Au

g

06

-05

-20

09

MBANK.CZ IS CHANGING THE LANDSCAPE OF CZECH BANKING SECTOR

Clients(ths)

Loans and mortgages(m CZK)

Data actual for 2009.05.06

232 ths m EUR670

Deposits(m CZK)

m EUR140

mB

ank B

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+1223%128

17 893

1 030

1 829

1 606

1 7401 401

1 396

1 626993

6 144

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

20 0003

1.1

2.2

00

7

Jan

Feb

Mar

Ap

r

May Jun

Jul

18

Au

g

06

.05

.20

09

+13912%


stateincrease

+2185%


8

73

54

63

34

42

35

0

10

20

30

40

50

60

70

80

31

.12

.20

07

Jan

Feb

Mar

Ap

r

May Jun

Jul

18

Au

g

06

.05

.20

09

MBANK.SK IS CHANGING THE LANDSCAPE OF SLOVAK BANKING SECTOR

Clients(ths)

Loans and mortgages(m SKK)

Data actual for 2009.05.06

73 ths m EUR214

Deposits(m SKK)

m EUR84

mBank.sk is doing well in client acquisition and deposit gathering. Credits will accelerate soon.

mB

ank B

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ess Case

+787%150

6 448

382

637

628

641528

515

709201

2085

0

1 000

2 000

3 000

4 000

5 000

6 000

7 0003

1.1

2.2

00

7

Jan

Feb

Mar

Ap

r

May Jun

Jul

18

Au

g

06

.05

.20

09

2 533

0 111141

26191

1 722

0

500

1 000

1 500

2 000

2 500

3 000

Mar

Ap

r

May Jun

Jul

18

Au

g

06

.05

.20

09

+4205%


stateincrease


+1131%

mbank case study sl2008

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