How Digital Banking Products Empower People
Lessons from Nubank and Chime On Building Customer-Centric Products
We rely on banking services to access, oversee, and manage our finances. While banking is an essential service, our experience can be wildly different depending on our financial situation, where we live, and, most importantly, who we choose to bank with.
However, as digitization increases, the banking experience has had to evolve. Banks have had to learn how to build software products to deliver their services. They have to reimagine how they operate because customers have different expectations online.
While traditional banks have been slow to embrace innovation, digital banks have emerged as a popular alternative. These are online-only banks that promise to make banking fast, simple, and easy for us.
I decided to explore how Nubank and Chime, two of the most valued digital banks, are solving problems differently and why people are drawn to them.
What Is A Digital Bank
Digital banks (also called neobanks) operate completely online without any physical branches. They offer the same services as any traditional bank but through mobile and web apps.
The Fully Digital Advantage
Cost-Savings
Digital banks can serve customers at a significantly lower cost than traditional banks. They transfer these cost-savings to customers by offering them financial services at more competitive rates.
They lower their costs to deliver services by eliminating physical branches.
They make their services affordable by eliminating fees.
Note: Many digital banks make most of their revenue through interchange fees (the transaction processing fees between banks), instead of the standard fees charged by traditional banks.
Personalization
Digital banks have become a popular choice, especially in emerging economies, as people are seeking affordable, convenient, and personalized banking solutions.
NuBank
Nubank’s platform gives customers affordable and convenient access to banking services.
NuBank is a Brazil-based digital bank founded in 2013 by David Vélez, Edward Wible, and Cristina Junqueira. It is one of the world’s largest digital banking platforms, serving over 100 million customers across Brazil, Mexico, and Colombia.
Addressing Problems With Traditional Banking: High fees and poor service
Traditional banks were the most profitable industry in Brazil (controlling over 80% of the market). However, banking was challenging for customers because of long wait times, complex processes, poor quality service, and high fees.
Targeting A Meaningful Pain Point: Fees and customer experience
Nubank focused on a specific problem for Brazilian millennials, who were frustrated with fees and the struggle of getting a credit card. Nubank charged no annual fee and managed all services through its app, which made them an affordable and convenient choice for customers.
Nubank customers could receive real-time notifications, request credit line increases, pay bills, and much more, quickly and easily through the app at no additional cost. Meanwhile, traditional banks neglected to offer many of these services, and they charged monthly fees for the ones they did.
Chime
Chime’s platform gives customers banking solutions tailored to their financial context.
Chime is a US-based digital banking provider founded in 2013 by Chris Britt and Ryan King. It is one of the largest US digital banking platforms, serving over 22 Million customers.
Note: While Chime is technically not a bank since it partners with Bancorp Bank and Stride Bank to offer banking products (like checking and savings accounts, it’s still a banking service provider.
Addressing Problems With Traditional Banking: Lack of focus on lower-income customers
Traditional American banks primarily focus on serving higher-income customers because they can make more revenue from them. Meanwhile, lower-income customers are often neglected, and unfairly held to the same standards as the higher-income customers (with higher balances, stronger credit, etc.), despite the significant difference in their financial conditions.
Targeting A Meaningful Pain Point: Eliminating Fees That Impact Lower-Income Customers
Chime focused on the needs of young lower-income Americans, who were majorly concerned about financial uncertainty, trying to make ends meet, and often living paycheck to paycheck. They provided customers with access to financial solutions based on their direct deposit income.
They catered solutions catered to their customers’ financial context, such as faster access to deposits, free overdraft, free ATM withdrawal, etc, which allowed customers to access financial services without financially straining themselves.
Keys To Successful Digital Banking Products
Addressing meaningful problems with customer-centric solutions.
While big banks can access the technology needed for digital banking, their focus and strategy are fundamentally different. They have well-established systems designed for the traditional banking process. However, these are primarily designed to accommodate a limited range of financial scenarios. People have to adapt to the solutions, instead of the solutions adapting to them.
Nubank and Chime have been successful because of their focus on people. They can create personalized and flexible banking solutions because they think about their customers differently from traditional banks. Therefore, they use technology to deliver a different banking experience.
Prioritizing Meaningful Problems
Nubank and Chime listen carefully to customers and identify the root cause of their issues. They uncover “what” their customers want and “why” to ensure they build meaningful solutions.
Example
Fees are a problem for both Nubank and Chime customers but for different reasons.
Nubank customers are frustrated because paying fees does not guarantee access to services.
Chime customers are frustrated because fees put further strain on their finances.
Both organizations solved the problem based on their customer’s specific context.
Delivering Customer-Centric Solutions
Nubank and Chime understand that customer satisfaction is the best indicator of success. They recognize subtle differences in the customer’s needs, motivations, and requirements.
Nubank Example
Jag Duggal (Nubank’s Chief Product Officer) credits Nubank’s success to their customer-centric culture. Nubank closely tracks Net Promoter Scores (NPS) to ensure customer satisfaction. NPS measures how likely a customer is to recommend their product (from -100 to 100). Nubank’s NPS was 86, compared with traditional banks that scored around the 50s and 40s.
Chime Example
Menlo Ventures (Chime’s Investor) credits Chime’s incredible impact on millions of Americans to their focus on real customer needs. Chime product teams listen to customers directly on an ongoing basis (through phone calls, interviews, surveys, etc.). They solidify their customer understanding by answering their customers’ questions themselves.
Nubank and Chime have succeeded in building a truly customer-centric product, which has generated incredible word-of-mouth and loyalty among their customers.
Note: For more on a people-centric approach to product development, check out my post on Designing For People.
Takeaways For Product Teams
Recognize where existing solutions fail to meet customer needs and expectations.
Understand your target customers’ unique circumstances and context.
Validate your solutions by frequently getting customer feedback.
Targeting a deeply meaningful pain point for your customer.
Prioritize customer satisfaction as a success metric.
Conclusion
Great products reflect a great understanding of people and their problems.
Creating a great banking product requires strong empathy for the people who use it. Both Nubank and Chime are driven by a mission to empower people and make banking accessible. Their focus on people is helping them steadily win over customers. They present a refreshing alternative for customers who are frustrated by the traditional banking experience: a banking product designed for people’s unique financial context.
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