A major element of the PZU Group’s business model is the banking business. The tightening of cooperation with the banks within the PZU Group (with Alior Bank and Bank Pekao acquired by the Group in 2015 and 2017, respectively) has opened up tremendous growth opportunities, especially in terms of integrating and focusing services on clients at every stage of their personal and professional development. Cooperation with the banking segment forms an additional plane for PZU to build lasting client relations. Its ambitious targets entail the sales of insurance to the clients of Bank Pekao and Alior Bank as well as PZU bringing insurance clients as new clients to these banks.
A comprehensive offering of financial services will help reach the client through all channels. This should considerably ramp up the number of products per client while making a material contribution to grow new sales. The PZU Group assumes that in 2020 it will collect PLN 1 billion of additional written premium from cooperation with the banks and that the banks themselves will acquire 1 million of the Group’s insurance clients. Significant savings will also be generated owing to synergies in the areas of procurement, IT and real estate within the Group. It is expected that costs will be cut by PLN 100 million by 2020. SECTION 4. STRATEGY
In 2018 an important decision was made concerning the model of cooperation between Bank Pekao and Alior Bank within the PZU Group. On 23 October 2017, at their own initiative, Bank Pekao and Alior Bank signed a letter of intent to commence preliminary talks on potential cooperation strategies that might be developed to increase their value for shareholders and clients. Following the analyses performed by both banks, the option of a merger between Alior Bank and Bank Pekao (under which Alior Bank’s shareholders would obtain shares of the merged bank) was considered to be an opportunity for generating potentially the greatest added value to shareholders. Accordingly, negotiations were commenced to select of the optimal form for the merger between Alior Bank and Bank Pekao. Finally, on 7 August 2018, the banks decided to wrap up their analyses and negotiations on a possible merger. According to the banks’ final decision, it will be more beneficial from the shareholders’ point of view for the banks to keep operating as separate entities and cooperate with each other as members of the PZU Group in order to fully tap into the potential of the largest financial group in Central and Eastern Europe.
The first results of this cooperation are as follows:
As a leader of the Polish financial market, with immense potential to create innovative solutions for business, the PZU Group actively promotes Polish economy abroad. PZU and Bank Pekao cooperate regularly at such events as #PolandCanDoNation as well as promotion of Poland during the World’s Economic Forum in Davos.
On 4 October 2018 in New York, under the PZU initiative #PolandCanDoNation, one of the biggest meetings took place, bringing together the leaders of Polish economy and representatives of American business. Several dozens of CEOs from the most important Polish companies took part in the events. Polish Prime Minister was the guest of honor.
The September promotion into the prestigious group of developed markets, as well as the centenary of regaining independence created a context for conversations about Poland’s prospects, as well as the intellectual and economic potential of Polish people and companies. Those conversations culminated in the debate “From Developing to Developed – A Macroeconomic Perspective”, organized with the Reuters press agency and Boston Consulting Group.
The #PolandCanDoNation campaign, designed to promote Poland and initiated by PZU with a meeting of Polish and American business in New York, was continued in the form of a Polish Home at the World’s Economic Forum in Davos. It was a result of joint actions of PZU and Bank Pekao. Throughout the duration of the Forum - which is one of the most important meetings of the world’s business, the Polish Home was a venue of debates, presentations and conferences devoted to global issues and Polish economy. Our guests discussed global trends, such as the industrial revolution 4.0, biotechnology or artificial intelligence. It was also a place of meetings with clients and mutual funds interested in increasing their exposure to Poland. The Polish Home was created for the first time in the history of the World’s Economic Forum in Davos and was open to visitors from 21 to 25 January 2019.
The World’s Economic Forum is attended by the majority of presidents and prime ministers representing G7 and G20, i.e. the groups of the most developed countries and the biggest economies in the world. The 2019 World’s Economic Forum in Davos hosted representatives of over 100 governments, representatives of over 3,000 companies, leaders of international organizations, representatives of non-governmental organizations and of science and research from all over the world.
Bank Pekao - clients and products
Bank Pekao is one of the largest financial institutions in Central and Eastern Europe. It is a universal commercial bank, the biggest corporate bank and the leader of the private banking segment in Poland. Pekao has over 5 million customers, every second Polish company is a customer of the Bank. The Bank offers all financial services available in Poland to individual and institutional clients. The group comprises over a dozen companies which are national leaders in the area of brokerage services, leasing, factoring, financial investment and transaction advisory services. SECTION 3 OPERATION OF THE PZU GROUP
A broad product offering, innovative solutions and individual approach provide customers with comprehensive financial service. An integrated service model guarantees the highest quality of products and services, as well as their optimum alignment with the changing needs.
The bank’s business model is based on a segmentation of clients into the following areas:
Pekao’s customers can use a developed network of branches and ATMs, which provides convenient access throughout Poland, as well as a professional call center and a competitive Internet banking and mobile banking platform for individual and corporate clients, and for small and micro businesses.
As at the end of December 2018, the bank had 825 own branches and 1,708 own ATMs. With a competitive offer of products and services in the Polish market and a high standard of customer service, the Bank administered 5,949.4 thousand current accounts, 378.0 thousand mortgage loan accounts and 678.1 thousand Express Loan accounts (data as at 31.12.2018).
As from the beginning of 2018, the Bank has consistently pursued a growth strategy in the Small and Medium Enterprise segment. Customer service is provided in specially created dedicated SME Business Centers across Poland, where clients can receive support of qualified Advisors, supported by Product Specialists (in respect of foreign currency transaction services, leasing, factoring or EU funds).
Pekao is one of the leaders in electronic banking in Poland. In its electronic banking operations, the bank offers its customers a full range of solutions such as: web and mobile sites, a mobile app for phones and tablets and PeoPay mobile payments. Since mid-2017, the bank’s customers have been able to use Pekao24, a new mobile service for mobile phone browsers, which apart from the design change, friendly navigation and intuitive operation, offers the functions familiar to customers from the mobile app for tablets and the Internet service.
Along with the development of remote channels, the bank also implements a project to increase the efficiency of its traditional retail sales network. In corporate banking, one of the key initiatives is a project geared towards proficient management of relationship value, based on a better understanding of the client’s potential and needs, raising the efficiency of the sales network by the way of digitization and automation, as well as optimization of the key processes and activities of the network employees.
In 2018, improvement in the quality of customer service was achieved. According to a Newsweek survey, over the past year the bank rose to become the leader in the “Mortgage Banking” category, and ranked second in the Forbes ranking for the most friendly bank for companies, up from 11. place taken in the previous survey.
Innovativeness is one of Pekao’s strategic priorities. To this end, the Bank established the Innovation Laboratory, with the objective to create innovative concepts in interdisciplinary teams of the bank’s employees, and in cooperation with start-ups and fintech companies. The bank’s developments in the area of digital transformation have been noted internationally and rewarded by the EFMA association (The European Financial Management & Marketing Association), which named the PeoPay app the best innovation in the world in the category Phygital Distribution & Experience. The Bank’s flagship product was highly praised by international experts, for, inter alia, its multi-functional character - support of multiple currencies, use of biometric data for log-in and transaction authorization, as well as the option to make transactions with one’s phone, without the requirement of having a physical card.
PeoPay is state-of-the-art mobile banking, which integrates the services of banking and payments within one app. PeoPay offers innovative solutions, such as the use of touch-id or face-id to authorize transfers and payments, payment for Internet shopping directly in the phone, without the need to log into Internet banking, scanning of account numbers from invoices, without any prior need of inputting the account numbers into the app. The PeoPay app is available for devices with an Android and iOS operating system. The app can be used to pay at over 700 thousand contactless terminals in Poland (NBP data for the end of Q2 2018), which represents nearly 99% of all POSs, and about 6 million terminals worldwide, as well as in most online stores in Poland and in online stores abroad marked with the Apple Pay or Masterpass logo. In 2018, the mobile service and the PeoPay app provided information on the investment account and offered transfers to the client’s savings and checking account. Clients also received the function of viewing debit cards issued for the account and managing their settings. The new function allows them to set or change the PIN for the card, activate the card, change transaction limits and temporarily block or suspend the card. In the payment schedule, the bank’s clients can easily check the impending payments, such as regular transfers or card repayments, and may use e-mail to contact the bank’s relationship managers directly.
Retail clients may also use an innovative mobile app made especially for tablets: “Pekao24 for tablets”. In addition to the key transaction functions available in the regular Pekao24 system, the app has been equipped with a financial analysis tool, which makes it easier for clients to review receipts to and expenditures from their accounts. A new, simplified transfer form and an advanced operation history search engine make daily use of a bank account easier. The “Pekao24 for tablets” app is available for devices with an Android and iOS operating system.
The Bank continues to improve its digital solutions dedicated to corporate clients. In 2018, the Open Financing Platform was launched, a unique supplier financing solution that can be used by companies that are the bank’s clients, as well as the companies that do not have accounts in Bank Pekao. The bank is also working on further development of the Internet banking platform, PekaoBiznes24.
Alior Bank - clients and products
Alior Bank is a universal deposit and credit bank, providing services to natural persons, legal persons and other domestic and foreign entities. The bank’s core business comprises maintaining bank accounts, granting cash loans, issuing bank securities and purchase and sale of foreign currencies. The bank also conducts brokerage activity, provides financial advisory and intermediation services, arranges corporate bond issues and provides other financial services. In its operations, Alior Bank combines the principles of traditional banking with innovative solutions and consequently it sets new trends in financial services and consistently strengthens its market position.
The bank’s operations are conducted by various divisions that offer specific products and services earmarked for specific market segments. Currently, the bank has presence in three industry segments: individual clients (retail segment), business clients (business segment), treasury operations.
At the end of 2018, Alior Bank catered to 4.0 million retail clients. The higher client number in 2018 resulted from the bank’s organic growth. Alior Bank provides services predominantly to clients from Poland. The percentage of international clients in the overall number of the bank’s clients is negligible.
Alior Bank has a comprehensive and contemporary offer for business clients in all the segments: micro, small and medium and corporates. As at 31 December 2018, the bank serviced more than 192.8 thousand business clients.
Since 2017, the bank has been implementing a project of behavioral segmentation of retail clients, which allows it to target products and services to the appropriate recipients. Behavioral segmentation is applied to the development of the product offering and also to the support given to the sales network. In 2018, the bank continued to implement the strategic segmentation of its clients. It implemented an innovative solution, i.e. customer surveys carried out using Dronna, a speech synthesizer combined with Data Mining models, which enabled telephone contact with 3.5 million clients. The knowledge of customer needs and the focus on segments of strategic importance allowed the bank to implement the new Savings Account quickly and efficiently. In one of the regions, the bank tested the implementation of the Strategic Segmentation in the sales network; after 6 months it contributed to an increase in the sales of checking and saving accounts by 71%.
In addition to behavioral segmentation, the bank divides its retail clients in the following operating segments:
This segmentation is reflected in the structure of the sales network, as the sales units are specialized into, respectively: universal branches, premium and mini-premium and Private Banking branches.
At the end of 2018, Alior Bank had 861 outlets (202 traditional branches, including 8 Private Banking branches, 8 Regional Business Centers and 643 partner outlets). The bank’s products were also offered in the chain of 10 Mortgage Centers, 10 cash centers and a network of roughly 5 thousand intermediaries.
Alior Bank also used distribution channels based on a modern IT platform incorporating: online banking, mobile banking and call centers and the DRONN technology. The Bank uses the Internet, including Internet banking, to enter into agreements for: savings and checking accounts, currency accounts, savings accounts, deposits, debit cards and brokerage accounts. These channels are also used to accept applications for credit products: cash loans, credit cards, overdraft limits and mortgage loans. Using the Internet, the bank offers installment loans in an on-line process and offers services of a currency exchange office.
Alior Bank’s traditional branches are located throughout Poland, in particular in cities with more than 50 thousand residents, offering the full range of the bank’s products and services. Partner outlets on the other hand are located in smaller towns and in selected locations in Poland’s major cities, offering a broad range of services and deposit and credit products for retail and business customers.
Cooperation between the bank and its partner outlets is based on an outsourcing agency agreement. Under these agreements, agents provide exclusive agency services to the bank in respect to the distribution of products. These services are provided in locations owned or leased by agents approved by the bank.
The bank’s products are also offered in financial intermediary chains, such as Expander, Open Finance, Sales Group, Dom Kredytowy Notus, Fines, DFQS, GTF and others. The range of the bank’s products available from financial intermediaries varies depending on the intermediary, however financial intermediaries offer mainly cash loans, consolidation and mortgage loans as well as installment loans.
Sales support in all distribution channels is ensured by operational and analytical Customer Relationship Management (CRM) systems.
Higher culture. Novelty bank.
As one of the first financial start-ups, Alior Bank has an innovation culture in its DNA. The Bank uses cutting-edge technologies to implement processes from various areas in the most effective way possible. Robotization and automation are two of the key assumptions of the “Digital Disruptor” strategy adopted by the bank for 2017-2020. The slogan “Higher culture. The Bank of innovation.” emphasizes being open to clients of the era of mobility, and the bank’s focus on digital channels and daily banking.
The Alior Bank’s new Innovation Management Model supports the use of modern technologies to bridge customer needs with the bank’s strategy. This will make life easier for customers while ensuring high profitability for the bank. The model is based on two ecosystems: internal and external. They enable ideas to be retrieved from employees, customers and the fintech sector around the world and turned into innovative solutions for clients. The Bank is introducing a new career path for innovators and crowdsourcing tools to stimulate innovation among employees and open the way towards the use of their ideas in business.
The Bank is an example of an efficient collaboration between a corporation and fintech companies. Together with VoicePin it successfully introduced artificial intelligence which, under the name of DRONN, supports the bank in monitoring its key clients, increased risks, account closing processes or sending of reminders in enforcement seizures. This technology also powers Virtual Advisors supporting remote contact with clients. The system is based on artificial intelligence, biometrics and speech analysis, one of the most advanced generations of robots. It has been designed to carry a casual, logical conversation with clients: respond to answers and ask questions that match them. The Virtual Advisor is used in soft recovery and in marketing research.
In 2018, Alior Bank launched the RBL_START acceleration program. As the program is launched, Alior Bank’s new RBL_ brand is introduced. Its purpose is to bring together everything that is innovative, digital and cutting edge. At present, there are two entities operating under the RBL_ brand (which is short for REBEL): RBL_START, an acceleration program for start-ups and RBL_LAB, a laboratory conducting work on technology solutions. RBL_START is an original program of Alior Bank addressed to startups from all over the world, aimed at identification of innovative projects, their development in accordance with business needs and commercialization (both within the bank’s own systems and among business partners). The major theme of the first edition of the program, which was held in 2018, was trends in new technologies, with a particular focus on open banking, blockchain and roboadvisory. From among nearly 100 applications, 8 startups were selected for a 15-week acceleration program. For that period, the participants received a solid support from bank mentors and program partners in the area of preparing the cooperation model and potential implementation of the idea at the bank and PZU, which was the major partner of the first edition of RBL_START. In addition, the bank provided the participants with API Sandbox, or a testing environment in which services were exhibited in connection with PSD2 Directive, i.e. Payment Services Directive 2 (Directive of the European Parliament and of the Council (EU) on payment services in the internal market). In the RBL_LAB research lab, prototypes of the solutions developed by the startups were tested with clients to better adjust the target products to users’ needs. For the entire period of the program, the startups could also take advantage of the modern RBL space located in the Warsaw Spire building in the center of Warsaw. The effect of the accelerator has taken the form of pilot projects with selected startups in Alior Bank and PZU. One of the successes accompanying the program was Alior Bank’s investment in PayPo, a company participating in the accelerator.
PZU has declared that it will continue to cooperate with startups AI Busters and Aazzur. With the first of these, within ‘proof of concept’, PZU investigates the role of email correspondence in the client service process. In a pilot project, they pay special attention to topic aggregation, message analysis and preparation of suggested answers. In a pilot project with Aazzur, possibilities are studied in the area of generating and presenting a personalized offer of PZU for clients based on their purchasing and financial decisions.
In the course of executing its innovation strategy, in 2018 Alior Bank launched Bancovo, an innovative online loan and credit platform. This is the first such solution in Poland, due to which clients have gained online access to actual offers of numerous banks and loan providers. Bancovo aggregates and presents to a client the most appropriate offers, the most profitable for them, which may be accepted in a fast, simple and secure manner, directly via the Internet. The innovative solutions applied in BANCOVO (big data + self-learning machine learning systems) allow for getting credit and loans online in a simple and friendly manner. Based on UX best practices, provision of data was limited to minimum. Within one minute, the client receives actual offers of banks and loan providers to choose from and due to transparent presentation, the client may select the solution most appropriate for them. An agreement is executed via the Internet, in compliance with the highest security standards. The platform guarantees its Partners a client profile of proper quality due to applied tools, such as prescoring or anti-fraud shield.
Bancovo won in the second edition of the Polish contest entitled ‘The Heart Corporate Innovation Awards 2018’1 in the category of “New Digital Venture”, where the jury reviewed applications for new brands or businesses developed by corporations. Alior Bank also found itself among the best in the category “Deal of the Year” for the investment in PayPo, the startup specializing in deferred payments for online purchases.
Alior Bank also won golden prize in the category “Offering Innovation” for Konto Jakże Osobiste [Very Personal Account] in the sixth edition of the EFMA Distribution & Marketing Innovation Awards competition,2 where innovations were assessed that may constitute added value to traditional banking products. The Very Personal Account is the bank’s flagship product in which the clients, choosing from among 10 benefits – services and functionalities, may put up an account as they wish, managing on their own additional benefits to accounts and individually adjusting them to their needs.
Cooperation under a banking model, its strong market position, brand recognition and its strategic objective of creating an ecosystem in which the overriding objective is to manage client relations skillfully by offering clients solutions in all venues accessible to clients will contribute to intensifying activities in strategic partnerships with companies operating on the Polish market.
Since 14 November 2018, passengers of LOT Polish airlines may purchase a PZU tourist insurance policy at the moment of booking an air ticket. The solution is possible because of the cooperation of PZU with LOT and Chubb European Group. Within the travel insurance “PZU Pomoc w Podróży LOT”, three variants can be chosen, adjusted to the needs of customers of the Polish carrier. Depending on the selected option, the policy will guarantee, among others, refunding the cost of the air ticket, payment for medical expenses, refunding the transport charges in emergency or protection of luggage and personal belongings.
In 2018, PZU also entered into a strategic partnership with Allegro - the internet sales leader in Poland. The cooperation concerns the sales and distribution of innovative, fully digital insurance products customized to the specific nature of the needs of users on the allegro.pl service. PZU offers three insurance products: “Alleopona” [Alle-tire] assistance, (new or used) bicycle insurance and insurance of brown goods.
Furthermore, within strategic partnerships, PZU offers a number of insurance products for business clients (persons conducting business activity, companies and institutions), including:
1 The Heart is a corporate innovation center, which together with the partners, Mastercard and Ghelamco, once again, in 2019, awarded prizes to the biggest companies which open themselves to innovations most effectively, building partnerships and implementing new technologies.
2 European Financial Management Association (EFMA) is an organization of banking and insurance professionals, specializing in marketing and distribution of financial services. The institution, associating over 3,300 companies from over 130 countries, conducts studies, publishes industry reports and publications, organizes international conferences as well as – in cooperation with Accenture, a company providing consulting services, modern technologies and outsourcing –holds the annual prestigious Distribution & Marketing Innovation Awards competition, in which every year the most innovative financial services in the world are selected.