The story of monobank: how did Fintech Band create the first “bank without branches” in Ukraine
The end of 2016 turned out to be nervous for the PrivatBank clients. There were rumors that the bank would be nationalized, the incomprehensible word forced many to stand in line at ATMs. The bank’s top managers categorically denied “rumors from competitors,” however, on the night of December 19 it turned out that this was true.
After nationalization, all the top managers left the bank. Some of them launched their own company called Fintech Band and started to compete with what they themselves worked on a couple of days ago – banking from PrivatBank. The users were promised a mobile bank “like “Privat24,” only better.”
After a couple of years, the joint Fintech Band project with Universal Bank called monobank became one of the most recognizable fintech-brands in Ukraine. The first users of the monobank application vigorously showed off on Facebook with stylish black cards and sets of stickers with branded cats. Over the year, already 600,000 users have acquired these cards, and the team believes that the first million of customers is not far off.
A day after the official announcement of the nationalization of “PrivatBank”, the already ex-IT director of the bank, Dmytro Dubilet, announced that he was officially unemployed. Other top managers left the bank along with him: the change of leadership was one of the conditions for nationalization. It did not work out without difficulties:
“It was hell, just a hell day. During this day, I, Oleg Gorokhovsky and our team experienced so much stress and humiliation, which is beyond words. Everything is done so that in the end all payments for individuals and corporate clients start working in standard mode,” he said back then.
It was then that they came up with the idea to create the Fintech Band company, which would develop Fintech solutions. The founders and co-owners of the company were: Dmytro Dubilet with his father Oleksandr Dubilet, Oleg Gorokhovsky, former first deputy head of PrivatBank, Mykhaylo Rogalsky, responsible for the business of payments and transfers, Vadym Kovalev, who was involved in risk assessment, Volodymyr Yatsenko, deputy head of the bank, and Lyudmyla Shmalchenko, ex-director of the bank’s treasury.
Mobile bank became the debut project of the new company: the idea of making such a decision seemed obvious to the co-founders. “We understood that we were a strong team, we liked the experience of Tinkov and after nationalization and we realized that we ourselves wanted to try to do something like that. We wanted to create a product like PrivatBank, only better in all respects,” recalls the co-founder of the project, Oleg Gorokhovsky, who headed the card business at PrivatBank.
Universal Bank became the partner of the project. Monobank is not a separate bank, with its license or infrastructure. In fact, Fintech Band created and developed a banking application under a separate brand for Universal Bank. The co-founders say that they started working with Universal for a number of reasons: they appreciated the concept of a mobile bank, the team found a common language with management, the bank was ready to give resources for lending. The owner of the bank is a well-known businessman and politician, Sergiy Tigipko. “We perceive him primarily as a businessman,” says Dmytro Dubilet.
Investments in the creation of a single monobank application are estimated at $2 million, and the total investment in the project is about UAH 150 million, partly from the founders’ own funds, partly from payments from partner banks Universal Bank and iBox Bank.
If you outline the main milestones of the development of the service, you get the following timeline:
On the graphs, the growth dynamics is clearly visible:
monobank: application development
The charts at the top show fairly rapid growth, although the founders themselves do not think so. “It seemed to us that we had given birth to a product for ages,” says Dubilet. All seven co-founders took part in the management, and this did not speed up the process. All key meetings in the company were held with the participation of all managers and co-founders. The five people who are the most actively involved in management are the Dubilet Junior and Senior, Vadym Kovalev, Oleg Gorokhovsky and Mykhaylo Rogalsky. They make all the key decisions together. If someone disagrees with something, they discuss it until they come to common opinion.
“We participate in all discussions on the project together. There is no man whose word is the final. For a team of five people we have at least seven opinions. It turns out that we have verified decisions, however, this reduces the speed of their adoption. Although, it seems to me that it is better to move slowly along the right path than to run quickly along the wrong one,” says Gorokhovsky.
On the one hand, the team wanted to release the MVP as quickly as possible, on the other, it was afraid that the MVP would not fit everything that was needed. The goal is to create a credit card and an application for it, and according to commissions and other conditions it should be better than other products on the market. It had to have a credit limit, the ability to make payments, loyalty programs. Later they planned to add referral programs and deposits.
The founders immediately decided to focus on the design, for which they attracted the agency Alty.
“We wanted to make the best application on the market. We could argue ourselves hoarse about the fonts or the color of the gradient on the start screen, Rogalsky recalls. – We constantly returned to the quote that the application becomes good not from what you add in it, but from what you refuse in it. When we talk about great products, everyone has an iPhone example with that feeling when you take a product in your hand and immediately understand how it works.”
The team did not immediately realize the complexity of this task. First, the application was going to run in May 2017. Already in April, the deadline was shifted to the summer, then – to September 1. Fintech Band at that time has grown to 100 people.
The team wanted to add informality to the product, appeal to the user’s emotions. “We understood that at least the first few hundred thousand customers would be predominantly young people. We allowed ourselves to go to a wittier tone. In “PrivatBank” it was impossible. For example, when setting a credit limit above 1 million hryvnia, the text of the error looks like this: “Whoa-whoa, slow your horses, boy!”, said Dubilet, speaking at last year’s iForum.
Such references are constantly added to products. A recent bonus service – Iron Bank metal VIP cards hint users to the “Iron Bank of Braavos” from the book “A Song of Ice and Fire” and the “The Game of Thrones” series.
Recognizable stickers with cats added emotional coloring to the product. The idea of such a symbol for a product was born by chance, Oleg Gorokhovsky recalls:
“When there was work on the application, PrivatBank massively advertised the payment by the QR code. I said, let’s make a QR cat. People will talk about the QR code and remember our QR cat. So, the QR cat appeared, then the QR part disappeared and just the cat remained.”
According to Dubilet, very many things, similar to stickers with cats, were not part of any strategy, they were made rather on a whim: “There was no calculation, like okay, we’ll make stickers, and there will be such and such return on investments. It was more like this: stickers are cool, let’s do it.”
The difficulty was not only in the development of the banking application itself. One of the key tasks is the creation of software that can adequately determine credit risks. Many machine learning models at monobank work precisely to determine credit risks, accompanying the entire credit decision making process. Mathematician Vadym Kovalev oversees this area. Models analyze how quickly a client fills out a questionnaire, which phone or IP he/she has, etc. In total, more than 2,000 parameters are estimated, and about 20 different models work on it. According to the founders of the company, they have learned to consider risks so well that now the Fintech Band sells risk analysis tools similar to monobank ones within the framework of a separate project, Artificial Intelligence Solutions.
“We use neural networks for image recognition, for analyzing dialogues; there are also many advanced methods, such as gradient boosting (with the help of it we predict credit risks), the “random forest” algorithm, Bayesian optimization. We use quantile regression to determine the client’s solvency, graph analytics works well to determine the connections between clients,” Kovalev said.
Even at the beta test stage, the application received a good advertisement thanks to word of mouth. But the product was also promoted by professionals, this was done by Kharkiv-based Promodo company, which carried out campaigns on Facebook, Instagram, YouTube video campaigns, AdWords promotion, etc. (we published a detailed analysis of this case study). Promodo also emphasizes that feedback from real people attracted new customers and increased interest in monobank.
Example of video advertising service:
The founders themselves actively participated in the promotion. Dmytro Dubilet has more than 112,000 subscribers on Facebook, which is comparable to the coverage of pages of famous Ukrainian media.
“I don’t know how many millions we would have to invest in advertising to get as many customers as we received thanks to my blog and Oleg Gorokhovsky’s blog,” he says.
Facebook has proven to be a useful feedback tool. The team does not monitor social networks specifically for the keyword, but most of the reviews about the product one way or another sees. “Unlike “Privat”, most reviews of monobank are superpositive. In this case, I like the post, put a heart and read on. But if we screwed up somewhere, I’m sure to check if this is not a system error affecting other customers. At the end of the day, I look through all the posts where I’ve been tagged,” says Dubilet.
Speaking about their offspring, the creators often oppose it to the services of PrivatBank. “Frankly speaking, at one time we just took all the positions on PrivatBank and did better. We can afford it, because our business model implies the absence of bank branches, which means that we have no expenses for electricity, gas, cash collection, employees, and so on… Continuing the topic of the price war with PrivatBank: we even wrote a special bot that pulls out their rate and makes ours a few kopecks more profitable,” said Dubilet, introducing monobank on iForum.
Even the branded black monobank card is a consequence of this competition. As Gorokhovsky remembers, in PrivatBank the black card for VIP clients caused a sensation, it was sold for $2,000: “Customers called at night to order this card. Black for some reason is perceived as a sign of elitism. So we made a decision: while the main player sells such cards, and we will distribute them for free.”
Now there are more than 150 people in the Fintech Band team and the team plans to expand. Most of the employees are IT specialists. In monobank there is agile and flat structure, without hierarchy. “There are no departments, there are project managers who communicate directly with us. If you need to involve a large number of people in some direction, an ad hoc decision is made, and some employees are transferred to new projects. We have the most agile in this regard, it seems to me that we have the spirit of a startup and I hope it will remain for a long time,” says Dubilet.
The main part of the team works at the headquarters in Dnipro, but there are also remote employees. The co-founders travel a lot, so most of the meetings take place in video conferences at Zoom. “If you look at Screen Time in iOS, Zoom is far away in the first place, Telegram comes the second, we use it as a corporate manager,” says Rogalsky.
For about a year, the monobank project was working at a loss, and in the last couple of months it began to make a profit. This is a logical development for the project with a young loan portfolio, notes Gorokhovsky. According to him, growing portfolio accumulates starting backups, which keep the project down, but they are comparable to investment costs. As the portfolio matures, new reserves already have little effect on revenue traffic and the project gradually comes to a profit.
“Earning is not very successful, however, we credit well. The time has come to take care of attracting liabilities, because we have already successfully spent the funding that Universal collected to start the project,” he says.
In Ukraine, the service grows by approximately about 60,000 customers per month, and so far this dynamic continues.
The portrait of the monobank user is the following: this is a young man with a higher education. There are 68.78% male users against 31.22% female users. More than 50% of bank users have higher education degree, about 17.6% have incomplete secondary education degree and 15.4% of users have a secondary education degree. More than half of clients are people aged 16-30 years old, 38.5% of them are 30-45 years old, 8.2% are 45-60 years old and only 1.2% are over 60 years old. Interestingly, for the year monobank came in second place in popularity among Ukrainian freelancers, although it is still far behind “PrivatBank” (data by Freelancehunt).
In the spring of this year, monobank even received a peculiar recognition of popularity from fraudsters: fake “mono-banks” began to appear on the Internet, luring money and data from users.
The team is working on new services, one of the priorities is an application for entrepreneurs. “Among our clients there are many IT specialists, for them this is relevant. We are also working to make it easy to transfer money from abroad to our card, this is important for freelancers. And if we dream up a couple of years ahead, we will try to do for individuals in general everything they need from the bank,” says Rogalsky.
Fintech Band develops new markets. Earlier this year, the team announced that it is entering the UK market with a product similar to monobank, in partnership with local fintech company Prepay Solutions. In general, the team plans to expand to the whole Europe. “If everything goes well in Britain, we will scale to other markets. Our plans are global,” concludes Dubilet.
For him and for the rest of the Fintech Band founders, December 2016 is long past.