Opravy

Not every business that has unique offers such as products or services can sustain itself and produce profit for its stakeholders and founders.

There are many reasons that may result in bankruptcy in the end.

For example, easily replicated business model, small and slow-growing market, mismanagement and disagreement between stakeholders, lack of funding, market entry are too early or too late, strong competitors with a wide market share and inability to compete with their prices, etc. My example of a business that has failed is a Russian start-up online banking product called Rocket bank.

I had the privilege to observe its life cycle from almost the very begging as a client and as a good friend of one of the company’s employees.

When Rocket bank enter the market it was a real revolution in the banking and finance sector.

During their first two years of existence, they were quickly attracting new users through creative marketing, favorable terms of service for their clients, a revolutionary mobile app that gave a unique user experience.

The cashback could be converted to real money, not just a discount at a partner’s stores as other banks offered.

They had a referral program with terms that every existent client might give a unique link to his friend or colleague and if this person issue a debit card the referral would get 500 rubles which equaled around 8 American dollars.

And since the main market, they were focused on consisted of young people age 18 to 30.

For the auditory with medium, low, or even no income, simply because of their age and working experience, it was attracting and catchy marketing strategy which helped to expand Rocket bank’s customer base.

Also, their mobile app was not just cutting-edge, it was a sensation on a market.

A user was able to customize it and get funny voice notifications from Rick and Morty cartoon or Transformers movie when he made a purchase or withdraw money from an ATM.

In a mobile app, you might convert currencies, set financial goals, and get immediate help from support about any concern.

They were getting market share and brand recognition very fast.

The problem emerged when the second commercial bank they recently become a part of fell under the reorganization of the central bank of Russia.

This made customers of Rocket bank think of the safety of their funds.

After the default in Russia in the 90s, the citizens of my country are trying to be careful about their savings and are very suspicious of financial institutions without state participation.

In addition, 5 years ago, several commercial banks had their licenses revoked at once, and people had problems with withdrawing money from their accounts.

Thus, it is not difficult to guess, there was an outflow of clients from the Rocket bank.

Within a year the project was bought by a fast payments system called Qiwi.

Qiwi has been spending a huge amount of money to keep the project afloat.

Rocket bank was not a private bank itself.

They always were a part of another bank with a license, their financial product line had no opportunity for expansion while average commercial banks could offer loans, credit lines, individual investment, and brokerage accounts.

After a year of investment in marketing, development, and other stuff Qiwi decided to sell unprofitable Rocket bank, but eventually, no one wanted to buy it.

After all, Qiwi decided to restructure and close the project and agreed with one of its main competitors, Tinkoff Bank, on the comfortable transition conditions for Rocket Bank clients.

To be honest, I have never understood how Rocket bank was going to gain profit.

Based on the materials that I found on the Internet, it seems Rocket bank has never been a profitable business, they only spent the money of their investors, including the banks of which they were a part.