Learning from mBank’s branch channel investment

Learning from mBank’s branch channel investment.
Written by Bob Meara

Bob Meara looks at the news of mBank and its investment in a branch network.

The recent article in Finextra,mBank to spend EUR17 million on new network of ‘Light’ branches‘, prompted this post. At first read, I thought this was a story about a celebrated direct bank building a branch network. Well, not exactly.

About mBank

mBank is no stranger to Celent, having received two Celent Model Bank awards. In 2014, Celent recognized mBank’s digital platform redesign, and in 2015 Celent recognized mBank’s Bancassurance initiative. mBank is a Polish direct bank brand established by BRE Bank in 2000 as one of the first of its kind in the country.

Thanks to the mBank’s business achievements and potential of the brand as the first (and biggest) internet bank in Poland, BRE Bank Group decided in 2013 to change the company name to mBank. Thus, mBank became a mature brand with an offer addressed to mass customers, affluent personal and private banking clients, as well as businesses, from micro-enterprises to the biggest corporations.

Through 2014, mBank grew to more than 4.7 million customers, 6,318 FTEs, and deposits totaling $20.6bn. It’s currently the fourth largest bank in the country.

Before its time

Long before the Simples, GoBanks, Movens or Hello Banks of the world sought to capitalize on the shift in consumer behavior, there was mBank: serving customers where they want, when they want and through an innovative direct approach that, in its day, was one of the first of its kind. Rather than copying other financial institutions, mBank sought to deliver a best-in-class digital experience inspired by the world’s best retailers. For example:

  • Its virtual store, inspired by Zappos
  • Advanced search functionality, inspired by Google
  • Merchant-funded rewards, inspired by Cardlytics
  • Research and advice, inspired by Amazon and Mint
  • Video banking, inspired by Skype and Google Hangouts
  • Gamification and social media integration, inspired by Foursquare, Like and Love.

In 2014, seeking further growth, mBank leveraged its new digital platform to introduce a complete digital transformation of insurance delivery to retail and SMEs, under its Bancassurance model. The platform is offered under an omni-channel environment, accessible through online, mobile, phone, video, or branch, all supported by a real-time, event-driven CRM engine. mBank enables the entire process to be handled electronically, while decision-making and purchasing can be started and completed through different channels at a customer’s convenience. As a result of its efforts, the bank built the fifth largest insurance business in Poland aimed solely at existing checking account holders. Considering this represents only 7% of the market, the result is compelling.

Starting from the overhaul of its digital delivery in 2013, and then extending into insurance services, mBank is a model for how digital can transform an institution, enabling innovative applications that can substantially grow the business.

A branch network – really?

An undeniable digital success story, this celebrated ‘direct bank’ wants a branch network? It already had one … sort of. Part of the BRE bank family of brands, mBank had always been a direct bank, but in 2012 BRE bank announced it would simplify its branding and brand all its banks as mBank. This initiative effectively made mBank a universal bank franchise. In my opinion, this is itself significant: a universal bank operating in three countries adopting a direct bank’s brand for the enterprise? Imagine BBVA adopting Simple as its global brand. You get the picture, except mBank grew to many times the size of Simple.

So this isn’t really a story about a direct bank building branches. Yet, it is a story about a fabulously successful universal bank investing heavily in its branch network. To some, this still may seem nonsensical. mBank knows that point of sale is important and needs to be done right. Its new ‘light’ branches will no doubt be right for its brand and its markets.

Retailers across (most) all segments get this, too. The latest published statistics from the US Census Bureau (November 2015) tells the story with great clarity. Despite two decades of steady growth, industrywide ecommerce comprises less than 10% of total retail sales.

Estimated quarterly US retail ecommerce sales as a percent of total quarterly retail sales: Q1-Q3 2015.

As important as the digital channels are, the branch will remain central to retail delivery for some time. Celent’s Branch Transformation Research Panel gets this, too. In its first survey (June 2015), we asked panelists how important branch channel transportation is. After all, the topic was virtually all talk and little action for years. Yet, 81% of the panel confirmed that branch channel transformation is not simply important. It’s imperative.

The importance of branch transformation.

– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. You can read the original article here.

About the author

Bob Meara

Bob Meara is a senior analyst with Celent's banking practice. His research focuses on branch and ATM delivery channels, customer analytics, and check and cash payment processing technologies.

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