Identification of critical success factors in short-term lender

companies in Poland– business model analysis

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Ewa Łosiewicz-Dniestrzańska, Adam NosowskiWrocław University of Economics

Department of Banking

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In the presentation we are analyzing the business model of loans firms and we try to answer the following questions:

• Which elements of business model decide about their success?

• Are loans firms the competitors for retail banks or they rather complement the loan’s market?

defin

ition

„A business model is a conceptual tool that contains a set of elements and relationship and allows expressing the business logic of a specific firm. It is a description of the value a company offers to one or several segments of customers and of the architecture of the firm and its network of partners for creating, marketing, and delivering this value and relationship capital, to generate profitable and sustainable revenue streams”.

Seppänen M., Business Model Concept: Building on Resource Components, Tampere University of Technology, Publication 745, Tampere 2008.

Value proposition

Customer

Relationships

Distribution channels

Revenue streams

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Business modelsof loans firms

analysis

value

PROVIDENT:• Easily available and express cash loan in value up to 7000

PLN (for new clients) or 10 000 PLN (for „good” long standings customers), with weekly repayment (30, 45, 60, 90),

• Easily available means minimum formalities and possibility of borrowing and repayment at home,

• Express is quite relative – between 24 and 48 hours.

WONGA.COM: • Easily available and fast cash loan, offered only via electronic

channel. It is the same kind of product called „chwilówka” (monetary loan for a short period of time),

• Maximum amount: 500 PLN, maximum period of loan’s repayment: 30 days (possible 3 prolongations),

• Fast means 15 minutes. It is possible. This is achieved through a fully automated application process.

customers

PROVIDENT:• In 2012 Provident served 821 300 of consumers, • the total amount of loans this year: 1,63 billion PLN,• In Poland: 81% of consumers have got banking account,• 24% of consumers have got savings account,• 50% of consumers have got no savings,• The average balance of outstanding debt: 690 EUR,• Average consumer debt: 1 570 EUR / 143 EUR repayment.

WONGA.COM (Characteristics of Great Britain and Ireland): • 68.4% of consumers are at the age below 34 (13.9% - customers

at the age 45 +),• 55% of consumers claim to be single,• 66.1% of consumers do not have dependents (children),• 100% of customers have bank accounts, • 100% of consumers have a mobile phone,• 77% of consumers use Facebook.

PROVIDENT:• customer charter – rights and obligations,• competition „Truly customer stories of Provident"

and building an advertising campaign around it,• information campaign „responsible lending",• get the emblem „customer-friendly company”• a reward Top Employers 2013,• campaign „antychwilówkowa".

WONGA.COM (the company's own data for Great Britain and Ireland): • OpenWonga.com dedicated service,• Net Promoter Score for Wonga.com is 74%;• ease of use indicator for Wonga.com is 80.8%, (7.2% of the

banks received this level)• Readability communication index for Wonga.com is 63.8%,

(7.4% of banks achieved this level)• Jargon Buster – „slang slayer” ;-)

relation

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distri

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PROVIDENT:• hotline available 7/24 - the average time to answer is 8-9

seconds, in less than 20 seconds 93% of calls are answered,

• 2 600 employees, 8 600 representatives,• 44% of consumers considered consultant's advice the most

important argument when taking a loan,• only 19% considered advertising as an important element.

WONGA.COM:• Website supports the entire loan application process,

including the signing of the agreement by so called: fast electronical way (paper option is a contract sent by mail),• Respond times (responses and implementation of

transfers) are dependent on the availability of partner systems (banks and institutions providing informationon borrowers/debtors).

PROVIDENT:Weekly repayment schedule!The cost of the loan (2 thousand PLN/30 weeks):• transfer option – the total amount due: 2 563.27 PLN,

APR: 124.90%, weekly repayment: 85,45 PLN;• option of „at home service” – the total amount to be

repaid: 3424.48 PLN, APR: 139.60%, 114.45 PLN weekly repayment.

WONGA.COM:Loan amount (500 PLN for 18 days)• The total amount to be repaid 613.08 PLN, interest 3,08 PLN,

annual interest rate of 15%, commission 110 PLN, APR 459%,• Need to make a transfer from your bank account to the

account of the company in the amount of 10 PLN/100, which is to verify the customer's data. After the verification it is RETURNED to the consumer. income

motivation

PROVIDENT:Vision: Provident is a leading institution offering a simple, fair and transparent financial solutions.Mission: Through continuous compliance with the highest business and professional standards. Provident is building close and based on trust, responsibility and long-term relationships with our customers, business partners and the communities in which it operates.Values: respect, responsibility, transparency.

WONGA.COM:Our mission is to solve consumers’ occasional, urgent and short-term cash flow problems with an equally short-term solution. We base our commitment to responsible lending on transparency, flexibility and extreme selectivity – believing it’s possible to provide credit in a way that suits consumers, not lenders.

* - CAUTION! The image is not reality.

kontra

• modern company "chwilówkowa"

• simple offer,• focus on a young client• electronic channels of

distributions,• automatic verification of

creditworthiness (including BIK, BIG-s, KRD - organizations providing information on borrowers in Poland),

• image-compatible with the idea of „responsible lending”*.

• "lending" company with traditions,

• simple offer,• diversified client base,• electronic channels of

distributions + „advisory” channel,

• verification of creditworthiness,

• improved image-towards CSR*.

assesm

ent

Value proposition

Customer

Relationships

Distribution channels

Revenue streams

conclusions

Based on a preliminary analysis we can conclude that:

• loan companies have different business models, but some key elements are similar ("non-banking’s" customer base, specific pricing - high APR that does not act as disqualifying),

• additionally, the number of supported transactions is significant, but their value relatively low, which in fact (including earlier comments) creates a specific niche.

Thank you for your attention

Ewa Łosiewicz-Dniestrzańska, Adam NosowskiWrocław University of Economics

Department of Banking

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