TELENOR:

REVOLUTIONIZED
RETAIL BANKING IN
SERBIA

Submission by:
Inam Bari Laleka
Mustafa Hashim
Muhammed Tallal Maneka
Hassan Safdar
Malik Qaiser
Introduction

In this case study, we are analyzing how one of the biggest international telecommunications
providers, Telenor, has used this weakness of financial institutions and has successfully launched
the first mobile only bank in Serbia - Telenor Banka. The CEO of Telenor Banka is an INSEAD
Alumni and is working with us on this case. The Case is illustrating how companies can create a
successful business by enhancing traditional (marketing) strategy frameworks with innovative
digital approaches and technologies in new, under-developed markets. Telenor has
revolutionized the entire customer experience across the most important touch points by
leveraging digital trends like big data analytics, artificial intelligence, augmented reality or
community building through social media marketing.

Telenor, the overseas technology giant, benefited from the weak state of Serbia's financial sector
to launch the country's first mobile-only bank. Telenor Banka's success story is shared due to the
CEO, an INSEAD alumnus, who contributed in the study. The central issue of the case - devising
a marketing prepare for a new financial service in a new market - allows for debate of themes
like digital marketing, digital disruption, customer experience strategies, customer segmentation,
omni-channel strategies, and brand positioning and architecture.

The case also illustrates how digital practices foster business-model innovation that may not only
change the competitive landscape but represent a 'quantum leap'. Finally, the case discusses key
enablers that organizations have to put in place to make a digital transformation work: the
success of Telenor Bank Serbia was also driven by organizational change, leadership skills, the
right vision and new management approaches like design thinking and lean management.

Objectives:
The case mention key strategic decisions including tips on how to plan marketing new services
in a digital world; understanding the social and digital media trends that are changing the way
banks work; why digital transformation is essential to banks; ways to optimize the customer
experience; brand identity and positioning in a digital world.
Swot Analysis

Strengths

Strengths are the Telenor Digital capabilities and resources that it can leverage to build a
sustainable competitive advantage in the marketplace. Strengths come from positive aspects of
five key resources & capabilities - financial resources, past experiences and successes, physical
resources such as land, building, human resources, and activities & processes.

Strong Balance Sheet and Financial Statement of Telenor Digital can help it to invest in new and
diverse projects that can further diversify the revenue stream and increase Return on Sales (RoS)
& other metrics.

Strong relationship with existing suppliers – As an incumbent in the industry, Telenor Digital has
strong relationship with its suppliers and other members of the supply chain. According to Joerg
Niessing, Hilke Plassmann , the organization can increase products and services by leveraging
the skills of its suppliers and supply chain partners.

Superior product and services quality can help Telenor Digital to further increase its market
share as the current customer are extremely loyal to it. According to Joerg Niessing, Hilke
Plassmann in Telenor: Revolutionizing Retail Banking in Serbia: Digital Transformation of the
Customer Experience study – there are enough evidences that with such a high quality of
products and services, Telenor Digital can compete with other global players in international
market.

Diverse Product Portfolio of Telenor Digital – The products and brand portfolio of Telenor
Digital is enabling it to target various segments in the domestic market at the same time. This has
enabled Telenor Digital to build diverse revenue source and profit mix.

Successful Go To Market Track Record – Telenor Digital has a highly successful track record of
both launching new products in the domestic market but also catering to the various market
based on the insights from local consumers. According to Joerg Niessing, Hilke Plassmann ,
Telenor Digital has tested various concepts in different markets and come up with successful
Sales & Marketing solutions.
Intellectual Property Rights – Telenor Digital has garnered a wide array of patents and
copyrights through innovation and buying those rights from the creators. This can help Telenor
Digital in thwarting the challenges of competitors in various industries Customer service,
Customers, Disruptive innovation, International business.

Robust Domestic Market that Telenor Digital Operates in - The domestic market in which
Telenor Digital is operating is both a source of strength and roadblock to the growth and
innovation of the company. Based on details provided in the Telenor: Revolutionizing Retail
Banking in Serbia: Digital Transformation of the Customer Experience case study – Telenor
Digital can easily grow in its domestic market without much innovation but will require further
investment into research and development to enter international market. The temptation so far
for the managers at Telenor Digital is to focus on the domestic market only.

Weaknesses

Weaknesses are the areas, capabilities or skills in which Telenor Digital lacks. It limits the ability
of the firm to build a sustainable competitive advantage. Weaknesses come from lack or absence
of five key resources & capabilities - financial resources, human resources, physical resources
such as land, building, activities & processes, and past experiences and successes .
Inventory Management – Based on the details provided in the Telenor: Revolutionizing Retail
Banking in Serbia: Digital Transformation of the Customer Experience case study, we can
conclude that Telenor Digital is not efficiently managing the inventory and cash cycle.
According to Joerg Niessing, Hilke Plassmann , there is huge scope of improvement in inventory
management.
Customer Dissatisfaction – Even though the demand for products have not gone down but there
is a simmering sense of dissatisfaction among the customers of Telenor Digital . It is reflected on
the reviews on various on-line platforms. Telenor Digital should focus on areas where it can
improve the customer purchase and post purchase experience.

Implementation of Technology in Processes – Even though Telenor Digital has integrated

technology in the backend processes it has still not able to harness the power of technology in the
front end processes.
Telenor Digital business model can be easily replicated even with the number of patents and
copyrights the company possess. The intellectual property rights are very difficult to implement
in the industry that Telenor Digital operates in. According to Joerg Niessing, Hilke Plassmann ,
Intellectual Property Rights are effective in thwarting same size competition but it is difficult to
stop start ups disrupting markets at various other levels.

Low Return on Investment – Even though Telenor Digital is having a stable balance sheet, one
metrics that needs reflection is “Return on Invested Capital”. According to Joerg Niessing, Hilke
Plassmann in areas Customer service, Customers, Disruptive innovation, International business
that Telenor Digital operates in the most reliable measure of profitability is Return on Invested
Capital rather than one favored by financial analysts such as – Return on Equity & Return on
Assets.

Project Management is too focused on internal delivery rather than considering all the interests
of external stakeholders. This approach can lead to poor public relation and customer backlash.

Opportunities

Opportunities are macro environment factors and developments that Telenor Digital can leverage
either to consolidate existing market position or use them for further expansion. Opportunities
can emerge from various factors such as - political developments & policy changes,
technological innovations, economic growth, increase in consumer disposable income, and
changes in consumer preferences .
Lucrative Opportunities in International Markets – Globalization has led to opportunities in the
international market. Telenor Digital is in prime position to tap on those opportunities and grow
the market share. According to Joerg Niessing, Hilke Plassmann , growth in international market
can also help Telenor Digital to diversify the risk as it will be less dependent on the domestic
market for revenue.
Changing Technology Landscape – Machine learning and Artificial Intelligence boom is
transforming the technology landscape that Telenor Digital operates in. According to Joerg
Niessing, Hilke Plassmann , Telenor Digital can use these developments in improving
efficiencies, lowering costs, and transforming processes.
Access to International Talent in Global Market – One of the challenges Telenor Digital facing
right now is limited access to high level talent market because of limited budget. Expansion into
international market can help Telenor Digital to tap into international talent market. According to
Joerg Niessing, Hilke Plassmann , it can also help in bringing the talent into domestic market and
expanding into new areas Customer service, Customers, Disruptive innovation, International
business.

Growing Market Size and Evolving Preferences of Consumers – Over the last decade and half
the market size has grown at brisk pace. The influx of new customers has also led to evolution of
consumer preferences and tastes. This presents Telenor Digital two big challenges – how to
maintain loyal customers and how to cater to the new customers. Telenor Digital has tried to
diversify first using different brands and then by adding various features based on customer
preferences.

E-Commerce and Social Media Oriented Business Models – E-commerce business model can
help Telenor Digital to tie up with local suppliers and logistics provider in international market.
Social media growth can help Telenor Digital to reduce the cost of entering new market and
reaching to customers at a significantly lower marketing budget. It can also lead to crowd
sourcing various services and consumer oriented marketing based on the data and purchase
behavior.

Increase in Consumer Disposable Income – Telenor Digital can use the increasing disposable
income to build a new business model where customers start paying progressively for using its
products. According to Joerg Niessing, Hilke Plassmann of Telenor: Revolutionizing Retail
Banking in Serbia: Digital Transformation of the Customer Experience case study, Telenor
Digital can use this trend to expand in adjacent areas Customer service, Customers, Disruptive
innovation, International business.

Threats

Threats are macro environment factors and developments that can derail business model of
Telenor Digital. Threats can emerge from various factors such as - increase in consumer
disposable income, political developments & policy changes, technological innovations, changes
in consumer preferences, and economic growth.
Credit Binge post 2008 Recession – Easy access to credit can be over any time, so Telenor
Digital should focus on reducing its dependence on debt to expand. The party has lasted for more
than a decade and rollback from Fed can result in huge interest costs for Telenor Digital.
Culture of sticky prices in the industry – Telenor Digital operates in an industry where there is a
culture of sticky prices. According to Joerg Niessing, Hilke Plassmann of Telenor:
Revolutionizing Retail Banking in Serbia: Digital Transformation of the Customer Experience
case study, this can lead to inability on part of the organization to increase prices that its
premium prices deserve.

US China Trade Relations – Telenor Digital has focused on China for its next phase of growth.
But there is growing tension between US China trade relations and it can lead to protectionism,
more friction into international trade, rising costs both in terms of labor cost and cost of doing
business.

Increasing bargaining power of buyers – Over the years the bargaining power of customers of
Telenor Digital has increased significantly that is putting downward pressure on prices. The
company can pursue horizontal integration to consolidate and bring efficiencies but I believe it
will be a short term relief. According to Joerg, Hilke, Telenor Digital needs fundamental changes
to business model rather than cosmetic changes.

International Geo-Political Factors – Since the Trump election, geo-political factors have taken a
turn for growing protectionism. Developments such as Brexit, Russian sanctions, foreign
exchange crisis & inflation in Venezuela, lower oil prices etc are impacting international
business environment. Telenor Digital should closely focus on these events and make them
integral to strategy making.

Increasing costs component for working in developed market because of environmental

regulations – Telenor Digital has to deal with these costs as governments are trying to levy
higher environmental taxes to promote cleaner options. For Telenor Digital it may result into
higher logistics costs and higher packaging costs.

Problem & solutions

Solution 1
 Serbia has seen major political issues through the times. After a strong decade of economic

growth, the market was hit by a recession. Service industry, including banking, provided

substandard service to the consumers. Consumer dissatisfaction is high and established banks

operate in an old school way with non customer centric methods. Considering the above factors

Telenor should invest in Online Retail and Mobile banking to penetrate into the Serbian market.

Opportunities: The study conducted for Serbian banking market suggests the following

opportunities for Telenor.

 A large size of population uses basic banking solutions at the least.

Telenor can take advantage of this fact by introducing their retail

banking solutions.

 As only 9% of the banked population uses online banking, the

opportunity to scale is extremely large.

 There has been a 30% growth year over year for mobile users

presenting a huge opportunity for mobile banking for Telenor.

Risks:
 Majority of Serbian banking market is crowded with established banks with

48% market is held by top 5 banks of the country.

 High inflation and fluctuating exchange rate is causing further issues in

banking business

 Due to non customer centric banking methods the consumers have very

little trust in the governance of the banking sector.

Solution 2

Consumer Targeting for Telenor. By studying the various segments provided in the case, Telenor
must target a combination of Segment 1 and Segment 5. My rationale is given below:

Segment 1 – The employment rate for this segment is 78% and has high income with mobile internet
usage of 61%. It will be easier to target this segment as they seek risk and adventure and are open to
new things to manage their money.
Segment 5 – This segment forms 32% of the total customer size. This group is 78% employed
 with moderately high income. This group however are not early adopters, they will follow suit

once Telenor successfully captures the Segment 1.

As a sub-segment the mobile enthusiasts from Segment 6 is also a viable option for Telenor’s

customer segmentation. As this segment has high smartphone users they have access to the

platform and their attitude shows willingness to adopt new technologies which will make them

stand out.

Solution 3

The Serbian banking sector is traditional and rudimentary in functionality. Major banks have

regulations that are not customer friendly. The customers are not happy with the substandard

service they receive from these banks. Therefore, Telenor should position itself as a ‘smart and

savvy brand’ that offers easy of banking straight in the hands of the user through mobile phones.

As mobile banking is available 24/7 and avoid physical paperwork, it is the perfect alternative to

the traditional banking solutions that are in market right now.

As per the above rationale, the pillars of focus should be simplicity of the platform, easy of

banking anywhere anytime and finally being digitally advanced. This will enable the brand to be

recognised as leader in mobile banking and pioneer in digital and online banking.

Solution 4

Telenor has a strong brand presence in Serbia. The logo and brand are familiar to the population

and is Telenor is well known as a telecommunications company. With a brand that has been in the

market for over 150 years, it is recommended they launch their online banking solution under the

same brand name and logo. There are several examples all around the world where companies have

diversified into other businesses and have retained their parent brand and logo. Rogers Telecom in
Canada also has Rogers Bank under the same brand name and logo. Another example is Virgin

Group in UK. Virgin has diversified into airlines, aerospace, telecom, banking and much more and

has retained the original branding and logo.

The risk of brand dilution is low as the brand recall in very high for a brand like Telenor which has

been in market for over a century.

Solution 5

I. Product – Product look and feel must be simple and easy to navigate. It should

solve all the issues that the customers faced with traditional banks. The online

solution should be a fully functional and act as a smart replacement to the

traditional banks.

II. Promotion – The promotional strategy should be a mix of both organic and paid
media.

Initial market entry should be done using social ads, display ads and app

downloads. Once the brand captures a comfortable number of users, the brand

should rely on word of mouth of satisfied and happy customers.

The messaging should differentiate Telenor from its traditional counter parts and

present itself as modern and cutting edge. It should place itself as the banking

solution of the future.

III. Price – The price of using Telenor services should be based on the services the

customer signup for. Different range of fees would mean customers can pay only

for those services that they use specifically and don’t get charges a hefty fee

which will defeat the purpose of having an easy to use online service. In any

case the fees must be lower than traditional banks.

IV. Place – As the solution is an online and digital solution presence must be online
only.
 However, they should have a strong customer support network so users can get

their queries resolved if they face any challenges or have questions.

Conclusion & Recommendations

Focusing on earned media rather than paid media as the main driver of brand loyalty, and targeting
exactly the right customer segment to make that happen, made Telenor Banka a disruptive innovator.
Telenor should offer mobile and expanded online financial services in addition to or even in replace
of retail banking in Serbia. Consumers were already dissatisfied with the banks in Serbia with the
antiquated and substandard banking operations already in place due to the opening times and
procedures, lack of retail outlets, and relatively onerous administrative requirements.
By implementing mobile banking, mobile payment, and updated online banking services, it would
lower the cost of banking which would appeal to the 31% of customers who would be encouraged to
use mobile banking if the fees were lower than those of normal banks.
Additionally, customers would not have to wait hours in line only to be turned away for minor
mistakes in paperwork, the ability to access one’s funds and be in control of their finances would not
be restricted to intermediaries or bank hours and can be accessed anytime, everywhere; even if
internet connection is not available, mobile connection would be.
Mobile banking is growing, gaining popularity, and projected to be growing at a rate of 30% for the
next 4 years. There is lots of growth potential for mobile banking seeing as 73% of the population of
Serbia has access to a bank. However, only 9% of customers have used online banking, and only 6%
used mobile banking services.
Some risks that come with mobile banking and online banking as opposed to retail banking is that
there are major security concerns that relate to data and privacy regulations as well as the challenge
of creating a seamless customer experience even with the integration of all these services. 34% of
Serbians expressed interest in using mobile banking as long as there were safeguards for security and
personal data. What Telenor needs to do is to anticipate what customers need then provide services
and a product that provides value and meets those customer needs.