Chief executive Andy Mielczarek on how the UK challenger bank is seeking to offer a personalised service –  that is 99% digital.

Andy Mielczarek

Over the course of a distinguished career, Andy Mielczarek has earned a reputation as a free thinker and a problem solver. Early accountancy experience with Deloitte saw him conducting audits across Siberia, in the wilderness years of Boris Yeltsin’s Russian presidency. By the age of 26, he was head of brokerage operations at the tech-oriented Charles Schwab, before a stint at credit card and loan specialist MBNA. Senior leadership and retail banking positions at M&S Bank, then HSBC, soon followed, rounding out a professional trajectory that has consistently married evolving technology with finance.

This experience has shaped much of Mr Mielczarek’s thinking in his current position, as chief executive and co-founder of UK digital challenger bank, Chetwood Financial. “A core belief in traditional banking is that banking is a distribution business where you ‘acquire’ customers through loss-leading ‘teaser’ rates, then make money later from customer inertia as they revert to worse rates later on, or through ‘cross sales’. But one of the guiding thoughts at Chetwood Financial is: what if we don’t do that? Why don’t we actually just try and build a product that’s profitable on its own, and is the best rate we can do at the time for that customer?” says Mr Mielczarek. 

This philosophy has seen Chetwood Financial create dynamic products that respond to customer behaviour, which are mostly distributed through digital partnerships. Its LiveLend loan, for instance, offers a rate that reduces as a customer’s credit score improves. “What we aim to do at Chetwood is run hundreds of price points by term, by loan size, by credit score and by a range of other data points for the customer, so that when we work with a digital distributor we give them the best rate for that combination. We price in a far more granular way. It’s micro-segmentation and micro-personalisation,” he says.

We price in a far more granular way. It’s micro-segmentation and micro-personalisation

Andy Mielczarek, Chetwood Financial

Data analytics

Chetwood Financial secured a full banking license from the UK Prudential Regulation Authority in 2018, and has since carved out a niche in the UK market through its use of technology and by catering to customer segments in the consumer market that are underserved by established banks. Chetwood’s approach to, and investment in, data analytics has played a big role in its journey to date. The use of an in-house decisioning engine to determine customer viability and pricing on a specific product is a case in point.

“When we first started, we used the decisioning engine from Equifax. We’ve since replaced that with an engine that we built ourselves. It gives us ultimate flexibility over decisioning. That’s a huge dimension of competition that we’re really getting excited about. Over the past 12 months we have built our own data science team, in addition to all of our digital partners who have a range of different capabilities and different data. We can now take variable-size data packets from each of them and run them through different strategies in parallel,” says Mr Mielczarek. 

The end result of this approach offers clear benefits for both the customer and the bank. “For 95% of our customers, our rate is the best they see in the market. By being targeted we can achieve this while still making a strong net interest margin, which is currently around 20%,” he says. 

Moreover, the high degree of end-to-end digitalisation marks Chetwood Financial out in an evolving UK banking landscape. “We started the business with six customer service operatives. We have about nine or 10 today. We were processing 700,000 loan quotes a month, with that many people, before the onset of the pandemic. So probably 99% of our new business is pure digital end to end, meaning we are probably the most digitally leveraged bank you will find in the market,” says Mr Mielczarek. 

Backed by experienced leadership and a unique market offering, Chetwood Financial in many ways stands apart from other digital challengers both domestically and across the wider region. Yet, as Mr Mielczarek concedes, establishing a bank is a difficult and expensive endeavour. And the Covid-19 pandemic, in particular, has pushed back some of Chetwood’s development objectives. 

“We’re not profitable today, as we’re still investing, but we do make a strong risk-adjusted margin. We slowed down lending because of Covid, so the balance sheet is smaller than it would have been and, as a result, the breakeven point is further out. A loss-making bank is not a stable bank, so reaching profitability is a key focus of mine,” says Mr Mielczarek. 

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