Bank of America (BofA) has released a survey on the digital banking market in Brazil and the adoption of digital financial platforms by Brazilians. This is the third consecutive year of this survey, and it shows that neobanks and fintechs have been getting more users and more engagement with services such as marketplace, credit, and insurance, although part of this engagement is supported by incentives such as cashback and outsized returns on deposits.
According to the report, 98% of respondents had a neobank account in 2021, up from 89% in 2019. Exclusive users of neobanks jumped to 8% from 3% in ’19, while exclusive users of traditional banks declined to 2% from 9%.
Despite the growth of neobanks, 82% of users do not intend to close their traditional bank account, and over 73% intend to open another digital account, indicating that they are comfortable using more than one bank account to meet their demands and to search for the best offers and new products.
According to BofA, the most valuable asset of neobanks is the convenience to solve issues digitally. Interestingly, the report points out, the second most valued quality of traditional banks is precisely the access to physical branches, which provide face-to-face assistance.
This indicates user experience is key, either digitally or physically. Security of the banking app and brand awareness remain key for both traditional and neobanks. Neobanks’ users also look for card and checking account low fees, while traditional bank users value access to payroll, the report says.
Brazilians use twice as many banking apps
The survey also showed that the average number of banking apps per user has more than doubled, from 2.1 in 2019 to 4.5 in 2021. More than 80% of respondents use more than one app and nearly 70% use three or more banking or financial services apps. Consumers are attracted by the convenience, lower fees, and popularity of the apps.
Among the most used apps by Brazilians in 2021 are PayPal, Nubank, and PicPay, with penetration rates among the digital population of 67%, 65%, and 54%, respectively.
BofA also measured the overlap between users of each neobank and each traditional bank. The neobanks most used by incumbents’ users are PayPal, Nubank, and PicPay, reflecting the high penetration of these apps.
The report also noted that Bradesco‘s neobanks Bitz, Next, and Digio do not concentrate Bradesco customers in their user base, suggesting that Bradesco “has been able to avoid cannibalization with its own clients.” Similarly, the user base of iti, Itaú‘s neobank, does not concentrate Itaú clients.
From physical branches to apps
On one hand, there is greater use of banking apps; on the other hand, there is a decrease in the number of visits to physical bank branches. The survey shows that 47% of respondents have not been to a bank branch in 2021, compared to 12% just two years ago. “We believe this reflects not only mobility restrictions related to the pandemic, but also better services in traditional banking apps, which gained meaningful traction,” the report says.
Neobanks taking share of wallet
The BofA survey also indicated that Brazilians are using a wider range of services offered by neobanks, including marketplaces, credit cards, insurance products and deposits. Indeed, 65% of respondents concentrate deposits in neobanks, and 62% concentrate credit card expenses in a card issued by a neobank.
In BofA’s analysis, “this suggests greater relevance in day-to-day banking, which is crucial in terms of funding and profitability for disruptive providers.”
However, BofA points out that part of this engagement is supported by incentives such as cashback and outsized returns on deposits, “raising questions on the ability to retain clients without financial incentives.”
BofA surveyed 1,000 respondents for the research, 64% of whom earn less than three minimum wages per month, and 85% of whom earn less than five minimum wages. Age-wise, 53% of respondents are between 18 and 29 years old, and 37% are between 30 and 44 years old.