MTS Bank updates strategy to 2027, aims to diversify business model

MOSCOW. Nov 19 (Interfax) - MTS Bank has updated its development strategy for the period to 2027 and plans to diversify its business model by accelerating the development of daily banking, with a focus on card products and payment services, as well as the expansion of a new client acquisition channel, BNPL services, the Russian lender reported.

The bank aims to increase its net profit by 100%-150% by 2027 compared to this year, more than triple the number of active customers to 6.5 million-8.5 million and earn a return on equity of 20%-25%, with potential for further growth to 30% or more.

"MTS Bank continues to develop as a successful fintech company focusing on digital services for retail customers. However, we see opportunities to develop our business model and adapt it to changing market conditions by promoting transaction services, increasing the frequency of contacts with customers and steadily growing the share of noncredit revenue in our revenue base," bank CEO Ilya Filatov was quoted as saying in the press release.

The bank will commit to a dividend policy that calls for paying out 25% to 50% of net profit, MTS Bank vice president for strategy Roman Zilberman said in a conference call with reporters.

"In general, we are more pessimistic than the Central Bank [of Russia]. We believe that if the key rate is reduced in 2025-2026, the decrease will be much more gradual than what the Central Bank is forecasting. At least 20% in 2025 and around 15% in 2026. Combined with the tightening of macroprudential lending requirements, the tightening of matrices and the current regulatory changes, this will certainly lead to a significant cooling of the credit market, particularly unsecured lending to individuals," Zilberman said.

The bank plans to significantly diversify its business model by adding debit cards and BNPL services to its flagship product, POS loans.

"We expect substantial growth in customer acquisition for products like BNPL over the next three years. We have launched the corresponding service. We are now looking at the initial results and are very optimistic about significant growth from this product," Zilberman said.

Given the increased capital burden on banks and the tightening of macroprudential regulation, the bank is shifting to a daily lending model with a focus on high-frequency loans with shorter terms, smaller amounts, less capital load, and a higher ROE of at least 30%.

"We are currently a leader in POS, with a market share of 20% by the end of 2024. By 2027, we aim to reach about 25%. This is an important product for us, and it will remain one of the key ones in our strategy in the future. We are implementing technologies, which we call smart POS, meaning that we score customers not only based on risk profiles but also on the likelihood of future cross-selling and the LTV we can obtain from them," he said.

In the BNPL segment, the bank is launching a service that allows customers to pay by QR code, not only for MTS Bank customers but also for non-customers based on a pre-screening process. "Our task is to convert BNPL clients into banking customers for more 'heavy' products. Currently, we have around 42 million pre-approved offers. This means that about half of the Russians using financial products have pre-approved offers from us," he said.

The bank expects the number of trade partners, such as marketplaces, using its installment and payment services to grow from more than 100 in 2024 to nearly 800 by the end of 2027.

The bank also plans to enter the micro-lending segment and launch a digital lending division.

In passive and transactional products, the bank is focusing on self-sufficiency with low-cost funding, meaning from current accounts of individuals, and aims to increase this figure to over 20% by 2027. "Our main focus will be on increasing customer funds, expanding our investment product lineup, and creating targeted offer segments. This includes youth and children, as well as working with the gaming segment, where we are already very successful, and working with the migrant segment," said Zilberman.

The bank plans to continue growing its market position in the cross-border payments and foreign trade products segments. Its share in the cross-border payments market for individuals currently stands at around 12-13%.