Our client was large universal bank that wanted to establish a mobile-only, stand-alone challenger bank that was not only innovative but would provide the universal bank with a platform for future growth. Additionally, the client wanted to further develop their proposition for a challenger bank and create an operational model and a business case. The universal bank stipulated that the new endeavour would operate under the greenfield approach, meaning that it would not be constrained by the bank’s previous operation style. The end result for the client was a viable business model that met both its strategic and financial goals, a business case, and them having the correct information to establish and run the challenger bank.

In assisting our client with creating the challenger bank and its operational model, we built a financial model. This model estimated and forecasted the size of the retail banking market regarding business volumes, profits, and incomes, and was constructed in a bottom-up manner. The model was additionally divided into various key product lines for the new bank. Here, we also conducted market analysis on the size and margins. Based on our calculations of market size, our chosen products, and an estimate of market shares, including churn rates, we made a revenue forecast.

Secondly, we estimated operational and risk costs for the new bank, based on input from actual estimates, and top-down cost and return on investment targets.

In our third step, we calculated one-time investments needed to get the endeavour off the ground. We determined these figures using input from IT service providers and by considering marketing and project costs.

Now that the model was built, we used it to determine which specific products the challenger bank should offer, how it would operate, and its roadmap.

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