Mobile banking: a growth strategy - what does it include?
21 / 05 / 21
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If you decide to create a mobile bank, then you need to immediately decide on a medium-term business development strategy.
At the top level, I would single out two main areas: market share and financial results. Let's talk about this in more detail.
1. Hype to mobile banks.
Such projects are gaining popularity, but there are only a few living banks that attract clients, build up credit and savings portfolios, develop their product and conduct active marketing. Most often these are just announcements, intentions and statements.
I would like to note that there is a large infrastructure around mobile banks:
companies offering software development, white label solutions, integrations;
operating companies - logistics, call centers, etc.
companies providing risk management services - decision making, analytics, collection;
PSP providers - payments, transfers and so on.
But the activities of each such individual company cannot be called a mobile bank business. I want to talk about the complex retail banking business in the form of a mobile bank.
It is important to understand that in the implementation of such projects, expertise in retail banking is important. Therefore, I do not believe in the implementation of a successful project by IT specialists, telecoms or other retailers. I don’t believe in the design when a classic bank unsuccessful in retail buys a white label solution and makes a cool mobile bank.
Therefore, the implementation of successful mobile banks should be expected primarily from specialists from the above projects. But not everyone managed to keep their teams after the bankruptcy: therefore, the list of applicants is even smaller.
For a successful launch of a mobile bank, the stars must converge on a number of other aspects - investors, partner bank, software development, etc. This raises the threshold for entering this market.
2. Mobile banking is not a classic bank.
The second important aspect is that you make plans for the development of a mobile bank business based on your knowledge, experience and accumulated statistics in a classic bank. And here many will be disappointed, because the business model of a mobile bank is different from the classic one.
The absence of expenses for a regional physical network does not make opening a mobile bank easier or cheaper. You will have other costs equal to the cost of maintaining the departments. First of all, this is the need for qualified personnel, a strong development team, as well as a large staff of customer support and logistics. Also, do not forget about payroll, marketing budget, the need for additional bonuses for clients (cashback, special offers, etc.).
Now a few words about the costs associated with customer operations:
high transactional activity, which generates high operational costs;
another structure of transactions that reduces the expected fee and commission income;
different ratios of debit / credit cards in the portfolio, since the client receives a credit decision when registering a card at a later stage of onboarding. Meanwhile, in a classic bank, having received a loan refusal, being next to a bank manager, a client, as a rule, does not continue to issue a card "with zero".
By the way, almost all types of operations in the mobile bank are provided for the client free of charge.
All these factors strongly influence the P&L of the project, and you will learn about them from your mistakes, which cost time and money. Yes, they don't write about this in books yet, so you have to stuff the bumps yourself.
3. Growth strategy - market share or financial result.
Customer acquisition (marketing) costs money. Depending on whether it is a credit or debit client, the amount varies from $ 10 to $ 30 or more for an issued card. And this is an assessment of performance tools only, without media allocation, coverage tools, brand awareness costs.
Operational support for onboarding and issuing cards also costs money. This is the verification of documents and information, communication with the client at all stages of the funnel, making a loan decision, printing documents and delivering a card. Finally, the card itself is plastic with packaging. Here, the price tag starts at $ 10 per customer.
Next, work begins with the client on engagement, activation, reactivation, etc., as well as the work of the support service. Each active client generates costs on a monthly basis: processing, MPS, commission for acquiring and P2P, card replenishment in terminals (PTC), cash withdrawals from ATMs (ATMs), usually strangers, etc. However, not every active client brings income - interest on loans, interchange for purchases, other types of bank income.
Or we set the main goal to break even and payback. Then growth should be rational, every step should be verified, taking into account the economic feasibility of any action, emphasis on performance tools in marketing, increasing profitability (reducing costs) for each operation, reducing the share of debit clients in the portfolio, and so on.
This strategy will lead to the fact that in the medium term you will run to the money faster, but you will get less market share and, most likely, a weaker position in the long term. Although it all depends on the margin of safety and expectations. As a result, you can get a mobile bank with 1 million active high-quality clients and good P&L indicators.
As a result of the emergence of new players on the market, the consumer will win anyway. After all, the more offers, the higher the competition, the more technologically advanced and modern the products, the better and more affordable the services our clients receive.
