mbanx – Pioneering the Virtual Bank

mbanx is a division of the Bank of Montreal, Canada’s oldest bank and one of the largest on the continent. Essentially a bank within a bank, mbanx is the first North America-wide virtual, full-service bank. Opened in October, 1996, it offers customers anytime, anywhere, anyhow banking through a wide choice of electronic channels, including telephone, fax, computer, bank machine, courier and mail.

Several years ago, Bank of Montreal executives realized that the banking world was changing. Four powerful social and economic forces – globalization, technology convergence, restructuring, and rising consumer expectations – were rapidly changing the shape of the financial services industry. Furthermore, market research had identified a growing group of customers who were hard-pressed to find time to visit a bank, but were financially active and comfortable using technology. Bank executives wanted to find a way to develop banking services to address the evolving needs of their industry and their customer base.

The Bank of Montreal had been involved with electronic banking for some years, but only with other businesses. But business executives were convinced that the time was right to bring electronic banking directly to consumers. At the same time, the bank’s IS organization, Emfisys, had been doing research on PC and Internet banking. Together, business and IS leaders developed a proposal for a pilot project that would marry high technology with ‘high touch’ relationship banking. IT would be used in this way to differentiate mbanx from its competitors.

This proposal was presented to Bank of Montreal’s Chairman, Matthew Barrett. He loved the idea. In fact, he loved it so much that he told them to dispense with the pilot and proceed with developing a full scale operation – within ten weeks!


The IS challenge was obvious. In a mere ten weeks the systems had to be created for a full-service direct bank. IS had to work cross-functionally with a variety of users who were reengineering 250 of the bank’s staid, siloed business processes to develop a form of banking that didn’t exist as yet. Clearly, traditional approaches to systems development were not going to be effective. Building a new kind of team was fundamental to getting the job done.

About 500 employees – both business and IS – participated in mbanx’s development. In addition, many external groups, especially vendors, were also involved. The key to the exceptional collaboration on this project, according David Revell, Senior Vice President of Emfisys, was aligning everyone towards a single goal.

The main theme of the development period was “make it work”. Both business and IS groups realized that with technology and business requirements so closely intertwined, and the time frames so short, they had to work together. Management fostered this attitude by supporting new values and not adhering to traditional ground rules. The feeling that they were participating in something new and different, where they could make a real difference, was a morale booster for everyone on the team. Marnie Kinsley, mbanx’s Chief Operating Officer, explained: “One of the worst things you could say was ‘This is the way we’ve always done it’.” In fact, collaboration was so effective that IS people and users were indistinguishable from one another. They became simply ‘mbanx people’.


Clearly, IS staff would not be able to develop systems from scratch. Instead, their strategy was to reuse as much as possible. Fortunately, much of the analysis of the different kinds of transactions the bank would be performing had already been done. Technologies were also available within the bank, such as telephone banking, branch automation, and call centre technology, which could do back-end processing. Adding a user-friendly front end would tie them together. As well, Emfisys’ research on the web was already done, although its in-house skills were not yet adequate for the job and external consultants had to be brought in for this part of the development.

A major hurdle to be overcome was security. No one thought the standard Internet 40-bit encryption was adequate for financial transactions. Emfisys had to research newer encryption methods and eventually adopted a 128-bit encryption standard which is 309 septillion times more secure. It also acquired Customer Telephone Interface (CTI) technology which enables an mbanx manager to greet each customer personally as soon as he/she calls. In this way, IS ‘kludged’ together a variety of technologies using rapid prototyping techniques to create a common desktop for mbanx managers to use.

mbanx was launched in October, 1996 offering seven day a week, twenty-four hour service, 365 days a year. Today, the company serves 153,000 customers through a variety of channels, about half of them over the Internet. Unlike telephone banking, which averages three minutes per call, mbanx calls average fifteen minutes each. Customers need only one mbanx account to cover all their banking needs and one low, flat fee covers all transactions.


Since its start-up, IS has concentrated on improving the system to make it more production-quality and enable it to handle increasing numbers of clients. In its first year of operation, people were more tolerant of mistakes; today, the system is expected to operate without glitches. mbanx is becoming more organized and less ad hoc about its work. It has established an infrastructure, proper planning, and more formal processes for such things as communication and prioritization. Major new software includes: automation of outbound calls, workflow software, document imaging, and an improved manager’s desktop. mbanx is now also fully Y2K compliant.

It has, however, maintained the values and culture that make it distinct from the rest of the bank. This includes a mutual trust between IS and business, valuing change, and maintaining a customer focus. These foster a clarity of alignment that is unique in the bank. As a result, mbanx is considered a great place to work, and turnover is the lowest in the company.

mbanx has quickly emerged as a profitable division. It now has over $50 million in revenue and 20 percent of its clients have been attracted from other banks. More importantly, customer loyalty is extremely high. 96 percent of clients report satisfaction with mbanx service. In addition, 51 percent of customers report that they would also recommend the bank to family and friends. This is 150 percent higher than similar ratings for competitor banks.


mbanx is aiming at marketing to a segment of one, i.e. the individual client. It wants to be a person-to-person bank through the use of IT. By 2005, mbanx expects to be the largest segment of the Bank of Montreal’s business and is rapidly working to expand its services to provide even more personalization and benefits than it already offers at present.

The concept of tailoring the market to the individual using virtual technology has made new levels of service possible in the bank. Making banking available to customers worldwide and all day, every day, has been a massive change that has extended all aspects of what has been traditionally perceived as the banking business. In the process of developing mbanx, virtually all areas of the business have been touched and redesigned for the future. By marrying technology and the real needs of people, mbanx has created a new approach to banking which sets a high standard for financial services in the new millennium.

The three ITX Award winners for 1998 are the vanguard of things to come. They are setting new standards for quality, excellence, and innovation in systems. More importantly, they demonstrate the great value for the organization that can be achieved through true collaboration between business and IS. It is clear that when an effective partnership is formed, technology can be used to create new products and services which could not even have been imagined a few short years ago. These winners demonstrate that IT can be a potent and creative force in our organizations, but only when it is married with business to ensure that it is truly meeting the needs of real people.

Heather A. Smith is a Senior Research Associate at the School of Business, Queen’s University. She is a co-founder of the Queen’s IT Management Forum and The CIO Brief, which explore IT management issues, and the author of Management Challenges in IS. She can be reached at