Digital Lab at LETA Bank (McK/BCG Digital)

A good answer might include but is not limited to…

Company

• Capabilities - What are some of the digital capabilities that the bank has?
• Current product offer - What is the overall product offering of the bank at the moment?
• Product-market fit – To what extent is our current product offering in line with the expectations of our customers and those of other potential customers we could be acquiring in the market?

Competitors

• Who are the main competitors of LETA Bank?
• What are their digital capabilities?
• How does their value proposition differ from ours?
• How does their product range differ from ours?

Market

• What is the landscape of personal loans at the moment in the banking market? Growing or shrinking?
• What are some of the main trends among customers? e.g., services provided mostly via banking app, branchless banks, etc.

Product (focus on personal loans)

• Are there any core differences in terms of product specifications between our personal loan and that of our competitors?
• How does our pricing compare to that of our competitors?
• What is the approval period for the loan / How easy is it to get the loan?
• What is the process for obtaining the loan for our bank vs competitors? (e.g., only in branch or also possible via app or phone or mail?)

A very good answer might also take into account

• Potential synergies with the banking group that owns the bank. Is there any potential for learning or experience sharing from the other banks in the group to that of our client in terms of building and providing digital assets to clients?

A good answer might include but is not limited to…

Chart A

• LETA Bank is the only player within top five without a digital personal loan product
• Compared to Bank 4, LETA Bank sells the same number of regular personal loans, with the additional sales of Bank 4 coming only from digital sales. This already suggests the high potential for LETA Bank to consider developing and selling a digital personal loan. A similar pattern can be observed for Bank 3.
• Banks 1 and 2 are digital leaders, with 50% or more of their sales in digital personal loans. This suggests that the market overall has a high preference for digital products, once again highlighting the importance for LETA Bank to consider developing a digital product.

Chart B

• LETA Bank customers have a high appetite for digital products which is not currently satisfied by the client’s product offering
• The digital preference is especially high amongst the younger age groups (18-30 and 30-45). These are also the most important customers to retain and attract since they are likely to have a longer relationship with the bank over their lifetime.
• If LETA Bank would offer digital personal loans, it is likely to surpass Bank 4, judging by the comparatively higher preference for digital products.

A very good answer would provide an integrated story with a strong hypothesis supported by the data available in the two charts. 

Example: Based on the information provided, LETA Bank should consider developing a digital personal loan for at least three reasons. 

• One, it is currently the only player in top five without a digital product, suggesting the need to develop one if it would like to compete further with the industry leaders.
• Two, digital products seem to be a priority in the market, with the two market leaders having over 50% of their sales from digital personal loans.
• Thirdly, LETA Bank customers interviewed in the survey demonstrate a strong appetite for digital products, more so even than Bank 4, once again suggesting the importance of LETA Bank to develop such a product in order to retain its customers and further acquire new ones.

A good answer might include but is not limited to…

Establishing team

• Recruiting external talent (e.g., designers, Agile coaches)
• Re-assigning internal talent (e.g., developers)
• Defining co-working structures, Agile ceremonies and practices within the Digital Lab

Project management

• Developing a project plan
• Communicating to bank and group leadership
• Establishing Steering Committee routine to communicate progress

Securing resources

• Request approval for financial resources to run project
• Securing space within bank
• Expert support (e.g., external consultants)

Product development

• Understanding digital product needs and requirements from customers
• Redefining process end-to-end
• Assessing of new product impact on total portfolio

A good answer could attempt to recycle parts of the structure from Question 4:

Establishing team

• Difficult to find digital talent on the local market
• New Agile practices require internal culture shift that is difficult to bridge by employees

Project management

• Digital transformation may fall short of target, take longer or overall fail, thus carrying also a reputational risk

Product development

• New product is alienating some of the older, more traditional customers of the bank
• Digital product is more exposed to online security risks
• Risk of cannibalization - shifting volumes and lowering cost instead of bringing in incremental volumes

Overall, we would recommend LETA Bank to set up a Digital Lab and begin the digital transformation of the bank with the Digital Personal Loan. 

First of all, developing a digital personal loan product is a must condition for LETA Bank to remain competitive in the current market, seeing that customers have preference for digital products and the market leaders are also digital leaders.

Second, the expected increase in sales will likely enable LETA Bank to move up one or two positionswithin the top banks in the country. 

Third, the costs associated with launching this program will be offset by the third year of the Lab’s operation by the increase in associated profits. 

There are multiple implementation elements to consider, such as establishing a team, setting up the project management of the Lab, securing resources and product development. To minimize risk, the team at LETA Bank should begin at least with identifying the talent needed for this transformation as well as digging deeper into the potential consequences on the overall portfolio from launching this new product.