By the end of this year, Brazil may reach 200 million digital accounts, according to idwall, a digital authentication startup. The number draws attention as it corresponds to almost 95% of the country’s population and takes into account the exponential growth of neobanks such as Nubank (more than 35 million customers only in Brazil), Inter (11.4 million customers) and C6 Bank (7 million). Next comes digital banks such as Iti, from Itaú, with 6 million, and Next, from Bradesco, and Original, both with 5 million.
According to a report by Bank of America that monitors data from the Apple Store and Google Play, in May, 21 million Brazilian bank apps and digital wallets were downloaded. It is the fourth consecutive month that these players surpass the 20 million download mark. Traditional banking apps registered 7.4 million downloads, 8.7% less than in April.
However, the retention of these new customers may not be progressing as well as the acquisition. A survey commissioned by C6 Bank to IPEC and released in June showed that Brazilians with internet access have, on average, 3.6 accounts in banks and other financial institutions at the same time. Another survey attested that 57% already have accounts in digital banks. However, the majority – 65% – still use traditional banks for transactions such as deposits, withdrawals and payments, while digital banks only account for 31% of these transactions. Both surveys were carried out with a sample of 2,000 Brazilians with internet access.
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“We are only at the beginning. People [in Brazil] will have many accounts, many cards. The competition will be for relevance with the customer. Because it’s no use having a card and never using it” observes Thiago Alvarez, who says that Brazilians are not trading much in the new digital accounts they are opening. Alvarez is co-founder and CEO of Guiabolso, a financial management platform and marketplace that also offers open banking solutions for other institutions.
For Alvarez, who is also an advisor to the Brazilian Central Bank in the process of implementing open banking, the use of data is what will guide the evolution of this market. “Through open banking, we will have more user data available. Those who use this data well will be able to activate and retain this customer. There will be a dispute for the intelligent use of data to offer the right product, to the right person, at the right time.”
Priscila Salles, CMO at Inter, considers the digital accounts increase natural, as a result of a user’s maturing process that, over the years and especially after the pandemic, has overcome the fear of testing new products. “Some people will choose to invest in one platform, open an account in another, take credit in another. So, what will be the great value of the proposal that we [at Inter] want to deliver? A single and robust platform so that the customer feels better served and does not need to use other apps,” explains the executive.
“Do our customers only have Inter [among bank apps] downloaded on their cell phone? No. But if they want to, they can use only our app, both for banking and for shopping and insurance. We have diversified our portfolio precisely to be able to serve the customer on several other fronts,” says Salles. In addition to banking, credit, investments, insurance and e-commerce operations, Inter offers travel, education and food delivery services through its app.
We say that after downloading the Inter app, the customer stops downloading other apps. Because there are many services in our app. We’ve seen this change in the user profile since 2015 and a growing adherence by digital banks. So, it’s natural that people have more than one bank. Who will win customer recurrence is the institution that offers the most complete platform.
Priscila Salles, CMO at Inter
Of Inter’s 11.4 million customers, 5.9 million are active, according to data from the first quarter. The activity rate of customers for more than 3 months is 65%. On the investment front, Inter reached 1.5 million active clients, representing around 15% of its client base. In the e-commerce unit, Inter Shop reached 1.7 million active customers and 67% of recurrence, which means that more than half of the customers who purchased on Inter’s e-commerce platform during the first quarter of 2021, had already used the service before.
For Salles, the gap between the number of open accounts and the number of accounts actually used has to do with banking inertia. “It’s natural for customers to want to try the huge variety of offerings. But if they’ve had a bank account since before digital banks existed, it takes a little longer for them to understand what new platforms can offer and what are the advantages.”
The same logic holds for digital accounts. “There will continue to be a time gap for customers to completely migrate platforms, and I don’t know if everyone will officially end their accounts. People will simply abandon a lot of digital accounts due to inactivity. We think this will be a market of two, at most three winners [among digital banks] in Brazil“.
“When we look at our metrics, we see that Inter has one of the biggest engagements in the market. It’s us and another player, way ahead of everyone else,” she says. With 40 million customers in Brazil, besides Mexico and Colombia, Nubank grew at a pace of more than 45,000 new customers a day in the first five months of the year. According to data from the company, its digital account is used by about 36 million Brazilians, while 23.5 million users have a Nubank credit card. Asked by LABS about recurrence and engagement rates, Nubank said it did not reveal these numbers.
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“Customers log into our account every working day of the month,” reveals the Inter executive. “Today, there are about twenty monthly accesses per customer. But it could be that he accesses on Saturday or Sunday to make a purchase at the Inter Shop, or to order through iFood within our app, for example. That, at the end of the day , is value generated for the customer.”
Prioritizing the customer is also the bet of Bradesco’s digital bank, Next, founded in 2017. “Competition has increased a lot in the last three years and it is still in its infancy,” says Jeferson Honorato, director of Next.
Open banking and open finance are just around the corner. Whoever listens and serves the customer the best will stay and grow – always investing in the best talent and in data and business intelligence. Experience will be a decisive factor for customers to choose a platform.
jeferson Honorato, director of Next
With more than 5 million customers, Honorato reveals that Next’s base grew 100% in 2020 and should double in size by the end of the year. “The official goal is to reach 7 million users by December, but we must surpass that number.” Regarding the services that bring more recurrence, the executive reveals that cards are the flagship, although the bank has observed a significant increase in the use of the Brazilian instant payment system (PIX).
Also in the wing of traditional banks, Itaú registered a 2.5-fold increase in the number of new customers acquired digitally, reaching 3.7 million customers in the 2021’s first quarter. The result accounts for the operations of Itaú, Iti and Credicard. Regarding the channel, Itaú also revealed that 54% of the hiring of individuals in the first quarter were made through digital channels, 70% more than in March 2020. In Iti, the bank’s e-wallet, there were more than 6 million registered customers in April 2021 and more than 3 million new customers in the year. Of these, 84% do not have an active account with Itaú. Iti’s goal is to reach 15 million customers by the end of 2021.
Another major player among Brazilian digital banks is C6 Bank, with 7 million customers. The neobank reached a valuation of BRL 11.3 billion in December, when it raised a BRL 1.3 billion round. In June, 40% of its operation was purchased by JPMorgan. The bank told LABS that it does not disclose data referring to active accounts.
The Original bank, with almost 5 million customers, revealed to LABS that the growth from 2019 to 2020 was 50%. The bank’s estimate is to reach 6 million customers by the end of 2021, while the monthly average growth has been 160,000 new customers. Regarding the recurrence of these users or how many active accounts there are, said it does not disclose the data.
There is a smoke screen in the market. Banks should be reporting what is the amount of active users per period, what is the recurrence. Also, what is the concept applied? A customer active once a year is not really an active customer. An active customer should be considered as one who performed some banking activity in the last month.
THIAGO ALVAREZ, CO-FOUNDER AND CEO AT GUIABOLSO
Although the recurrence of the use of digital banks is still less than the acquisition of new customers, the one up their sleeves for these players may be the flexibility to adapt to the users’ demands. “Are the large banks able to serve these clients who are starting to think about cryptocurrencies, about investment funds, or are they still focusing on savings, direct treasury, fixed income? These are profiles that have been changing”, asks Inter’s CMO.
Digital banks have greater flexibility and perhaps greater impetus to keep up with changing user profiles. Maybe that’s why they will be the winners. And for that, the engagement part is the big key to the business. Those who offer good products on their shelf will win, products that make sense for the customer’s routine.
