mBank: Creating the Digital Bank

Introduction 

In 2000, mBank[foot]This briefing focuses on the retail product line of mBank Group. [/foot] as launched as Poland’s first completely digital bank: customers could access bank services only online or by phone. Today mBank operates in a sector crowded with formidable competitors born as brick-and-mortar businesses that have since developed mobile and web channels. The country’s number one mobile banking provider, mBank outperforms most competitors along key metrics such as market share, gross revenue, and profit before tax. Its return on equity is four times the average return of European banks. As of July 2015, mBank had more than 4.9 million retail customers in Poland and 780,000 in the Czech Republic and Slovakia. In recent years, the bank has diversified its sources of revenue by expanding the type of services it offers to customers and providing core banking services to external parties. Since February 2013, mBank has won twelve global innovation awards, including Efma and Best of Show awards at Finovate in Europe and the US. 

mBank’s digital success rests on five enterprise-wide practices: 

1. Think digital to reinvent banking 
2. Amplify the voice of the customer 
3. Develop reusable components on a single platform 
4. Partner business and IT in every project 
5. Extend services and access more customers through external partners 

1. Think Digital 

mBank exhibits four features that MIT CISR research has identified as key to digital transformation. First, it has a vision for how to reinvent with digital. In 2000, management at BRE Bank SA (mBank Group before consolidation and rebranding) looked around and saw how poor the typical banking experience was worldwide. In Poland, banking customers had no choice but to wait in long lines for services. The management team embraced digital to create both significantly more satisfying customer experience and more efficient operations. Today at mBank, employees share responsibility for using digital to simultaneously improve customer experience and reduce costs. 

Second, mBank invests in cool design for the customer. Senior bank executives, with the strong support of mBank CEO Cezary Stypułkowski, engaged with customers and realized that banking online had become too “text-heavy and clunky” and that customers were “more visual and interactive.” mBank redesigned the customer experience with colors and attractive interfaces, making it cool and fun to use. Third, the bank uses a test-and-learn approach. When mBank redesigned all of its customer-facing processes in 2012, it rapidly iterated design and testing of over 1700 drafts of user interface and user experience models with designers, programmers, and customers. This approach resulted in more than four hundred final UI/UX models and the development of over two hundred new features. And last, the bank recognizes digital as cross functional. The rise of digital means fewer silos: at mBank it is hard to distinguish who is from IT and from other parts of the business. 

2. Amplify the Voice of the Customer 

To validate this vision and keep it fresh, mBank has developed several ways to amplify the customer voice. For example, mBank has built internal teams that reflect its core customer base. Like many firms, mBank surveys and conducts focus groups with actual customers; however, it claims to benefit most from the knowledge of its own people, who also use mBank’s products and services. The company has found that mBank employees are willing to invest more time and effort to contribute deep insights about a product or service than the random customer contacted through market research. 

Additionally, mBank amplifies the customer voice by encouraging everyone across the bank to share responsibility for the customer experience. At every decision point for a new feature, team participants are expected to “put themselves in the customers’ shoes” and estimate what quantifiable value the feature will provide. No single team is responsible for the customer experience; instead, “everyone is responsible.” To coordinate efforts at improving the customer experience, mBank measures employees on key performance indicators such as sentiment scores from direct communications, first contact resolution of complaints, transactional and relational Net Promoter Scores, and pull-through rates of processes to track successful conversions. 

Finally, mBank relies on analytics and predictive models to make changes proactively rather than reactively. While customers can be a tremendous source of information about lifestyle, feelings, and unfulfilled needs, they lack the information and insight to propose solutions. Using the data from distribution channels such as mobile and web, business executives conduct behavioral analyses of customers’ spending habits and combine the findings with forecasts of customer spending. This approach has led to innovations that include one-click credit applications with thirty-second loans and a calculator to show customers how much money they will have remaining after they’ve paid their typical bills. 

3. Develop a Set of Reusable Components 

The customer experience at mBank is made up in part of over two hundred features such as the aforementioned quick credit applications and loan approvals plus display for forecast, mobile payments, peer-to-peer (P2P) transfers, and cardless ATM withdrawals. Teams create these features using only four types of components from mBank’s digitized platform (see figure 1): (1) core data; (2) core services, including both banking and non-banking services;[foot]In 2015, mBank introduced two kinds of physical branches: light acquisition branches and advisory centers. Its light acquisition branches won the bank the Best of Show award at FinovateEurope 2015.[/foot]  (3) distribution channels, such as mobile, web, branches, and call centers; and (4) APIs that enable all distribution channels to access core data and core services. As a result, when a customer performs a transaction or makes a change on her/his mBank mobile app, the information is immediately available to customer representatives and distribution channels. This design enables a consistent customer experience across channels. Creating features from a simple set of reusable components enables mBank to innovate more rapidly, effectively, and efficiently than competitors.

Figure 1: Reinventing the Core of Banking: mBank’s Customer Experience Relies on a Single Digitized Platform

In 2008, mBank opened up its digitized platform to business channels. mBank creates a business channel to extend its customer experience to a new set of customers, whether to set up a bank in a new market such as the Czech Republic or to partner with a company such as Orange or Allegro (an e-commerce marketplace) in order to offer its customers mBank services. A business channel can draw on all four components of the mBank’s platform. This enables mBank to deliver tailored services without creating separate systems to reach a new set of customers, and thereby supporting multiple tenants on a single platform.[foot]In mBank’s multitenant system, each customer has a Customer ID and a Business Channel ID. Customers are identified not only by who they are but also by the bank to which they belong. Multitenant architecture permits mBank to maintain a single system that it partitions logically to support multiple business channels. [/foot]

New features are developed by teams led by one each IT and non-IT managers; the two are jointly responsible to develop a feature that both enhances the customer experience and complements mBank’s digitized platform. If a new feature needs a component that is not already part of the platform, mBank will decide whether to develop the component internally or to partner with external service providers to deliver the functionality. All enhancements to the digitized platform are developed in response to a new business opportunity and then become available to all, enabling maximum reuse. 

4. Partner the Business and IT 

Improving customer experience results from early and tight collaboration between IT and the rest of the business. Together, they manage a variety of trade-offs inherent in developing new features for customers, creating solutions that both fulfill customer demands and safeguard the digitized platform. Jacek Iljin, managing director of Sales and Processes at mBank, explained, “If we do not include IT early on, then we risk producing something completely inadequate and overly complex from a functional perspective.” IT contributes a strong understanding of how the business operates, whereas the business co-leader brings a strong sales perspective and understanding of customers. Top management leaders primarily play the role of arbiters. 

All feature developments are assessed along a variety of metrics. Two key dimensions are complexity and value to the end customer. Complexity is measured by ascertaining whether the feature consists of existing platform components or is already available on the market. Customer value is assessed by looking at the importance of the problem being solved by the new feature and how many customers are expected to use it. 

If a proposed feature is completely new for mBank, it is rated very high along the complexity dimension (no existing components nor internal expertise with the feature). However, because mBank has for several years been regularly assessing its platform components to ensure that they are relevant, there are now few new features that are typically rated high in complexity on the current platform. “The IT architecture affects the business decisions you are going to make in the future. This is a key reason why IT needs to work hand-in-hand with the rest of the business,” explained Krzysztof Dąbrowski, managing director of mBank IT. 

mBank relies on external partners to provision some new, complex services. According to mBank COO/CIO Jarosław Mastalerz, “The bank is unable to master all kinds of services complementary to banking, and as a result [it] must learn how to govern the relations with third parties.” 

5. Extend Services and Access More Customers via External Partners 

Partnerships have enabled mBank to provide new services to existing customers as well as to access new pools of customers. Before partnering with the insurance provider AXA, mBank bought insurance products and services and sold them to customers. The new partnership gives AXA exclusive access to mBank customers, as well as access to its platform services (e.g., a payment scheme to collect premiums). AXA develops and provisions the insurance services—but because AXA’s sales takes place by means of the mBank platform, mBank retains control of the customer experience and the platform services. The collaboration with AXA has allowed mBank to transition from a seller of a few insurance products to a host of best-of-breed insurance options for customers. 

In another kind of partnership that gives the bank access to potential customers, mBank serves as a white label banking service. mBank’s first significant partnership of this type was with telecommunications provider Orange Polska. Orange Finance—the result of the partnership—debuted in October 2014, just six months after the agreement was signed. The launch of Orange Finance was quick because the development team essentially took mBank’s distribution channel, applied a new skin with Orange’s branding, and enabled a subset of available functionality (i.e., core services and data). As a result of the partnership, by the end of July 2015 mBank had acquired close to 150,000 new customers, and Orange Finance customers got access to banking services with enhanced customer experience. This was enabled by: 

• mBank’s banking license, modern platform for mobile and online banking, and know-how and expertise in the banking industry 
• Orange Polska’s attractive client base, broad distribution network, and significant marketing and branding 

A Digital Bank Pays Off 

mBank is reinventing banking for a digital economy. Using the five practices described above, mBank has developed a strong internal capability that combines the best of both worlds: the fast track tech-enabled innovation typically found in a FinTech company; and the mature management, funding, and relationships of a bank.