Fintech Startups are bringing new banking business models focused on simple and effective customer experience based on mobile and with lower fees. And traditional Banks are struggling to face these neo banking challengers by developing new internal digital capabilities or collaborating with Fintech and even buying them. But in this new Fintech hype scenario, how is the satisfaction and loyalty of banking customers?

1. What Changed in
the Satisfaction
and Loyalty in the
Era of Disruptive
Innovation
Digital Banking Customer 3.0
By Fabio Mittelstaedt
July 2016

2. Point of View - 2
Digital Banking Customer 3.0
38% of Brazilians
consider to use
services from
other Banks or
Fintech Startups
ince the origin of banks
similar to the current format,
which accept deposits and
pay interest, which emerged
from 1300, the consumer has faced the
competition factor.
At this time in Italy traditional banking
families like the Medici, Bardi and Pe-
ruzzi competed for consumers offering
attractive services, customer service and
confidence in saving money.
Hundreds of years later, this scenario has
not changed much. In Brazil about 1 in 4,
or 24% of consumers believe that their
banks have offers commodity products
and services without major differentia-
tions, according to research from Global
Consumer Survey that Accenture held
in 27 countries. Still in Brazil 38% are
considering search and use services
of other banks or Fintech Startups in
search of better services and prices.
And needless to exchange bank for
this, 31% of Brazilians have done what
we call partial abandonment of the
main bank, that is, begin to experience
the services of other banks or Fintech
Startups to decide whether to migrate
or not. In neighboring Argentina the
rate of experiencing other Financial Ser-
vices Providers is almost equal (50%).
This number is also similar to Spain with
30% partial exchange and 14% of total
main bank exchange (total of 44% of
part exchange + total), strongly driven
by the crisis of confidence in Europe
The highest incidences of so-called par-
tial exchange of the Bank are in India
S
“With the lowest
global satisfaction
index, Brazilians shift
torwards new Banks
and Fintech Startups,
looking for simple
and effective servi-
ces based on digital
channels and with
lower fees.”

3. Point of View - 3
“The new Banking
Customer has a
fragmented vision about
services, they want
smart apps, specialized
in one single service,
with a intuitive user
experience that fit to the
context of daily needs in
a natural way:”
with 37% and Mexico with 36%. Japan
has the lowest Global index, with 7%
only of total abandonment of the main
bank and 10% partial abandonment. Chi-
na is the one that has higher incidence of
complete exchange bank with 34%.
In conclusion, it is perceived in Brazil and
the world a strong trend of customers
looking for alternative financial services
provders.
The intention to seek other providers or
change brands, whose overall average in
the financial industry is 27%, is however
not the largest in the market.
Industries such as Mobile with 31% and
Consumer Electronics products with 48%
are the most affected, with the provider
exchange champion who is the travel
and tourism industry with 51%.

4. Point of View - 4
Digital Banking Customer 3.0
The New Patterns of
Banking Customer
Behavior
But what leads consumers to take on
this new pattern of behavior? One of
the key factors is the search for higher
quality care services. This demonstrates
the need to take a closer look at the full
consumer experience, either through an
easy digital self-service channel to use,
is in interaction with a branch mana-
ger or a call center operator, where he
most wait is that these professionals
have good skills and knowledge and,
especially, understand their needs and
quickly resolve their requests, with
transparent tariff schedules and costs.
All this reflects a greater confidence.
Sure, in the new days of smart technolo-
gy, it does not matter if it is a video call
with your Bank Manager or an Artificial
Intelligence solution with cognitive
learning.
In Brazil this perception of trust is the
most valued factor by 31% of consumers.
As the expectation of quality service,
the most demanding in the world are
Canada (57%), USA (51%) and Mexico
(52%). In Brazil only 23% consider cus-
tomer care the most important factor,
but here there is a counterpoint to 55%
of the poor quality of service is the main
Brazilian total abandonment factor of the
main Bank. Already prices and banking
fees are not what bothers the Brazilians.
Only 19% say that they will keep the
account in a bank due to competitive
prices.
Digital & Mobile Banking
adoption accellerate
The Brazilian is in an expansion stage of
banking and has surpassed 160 million
accounts (considering full accounts and
the new digital accounts offered by tra-
dional Banks and Fintech Startups), with
average banked population oscilating
from 80% to 90% of Banked population,
depending on the survey methodology.
Each CPF (Brazilian Personal
ID Number) has between 2
to 3 accounts on average,
but in the class C checking
account ownership rate still
fluctuates between 70%
and 80% and in classes
D / E is close to 55%. But
despite of having or not a
checking account, com-
monly all social clas-
ses in Brazil consume
new products and
services by paying
with credit and debit
cards (linked to the
bank account or not)
that have surpassed
225 million cards in
Brazil, plus around 75
million of pre-paid
German Mobile App S-Banking: MultiBank, allow
the customer to manage multiple accounts, in-
vestments, insurance and credit cards and makes
graphical analysis by type of expenditure, one
hand on the wheel to control personal finances. It
has similarities with the Brazilian GuiaBolso App.
cards that grew a lot in Brazil, increasing
the financial inclusion. But having or not
a card, the main point here is the trend of
increase of the channel of payment as to-
day in Brazil almost 60% of all payments
are done on digital channels like mobile
and web.
Another point that is pushing level of
banked people in Brazil is the higher
offer o f new products for low income
population. Before the current economic
crisis we had at least 3 or 4 years, begin-
ning in 2010, when credit, personal loan
and financing of home and auto was faci-
litated, creating a boom of consumption
of the C, D, E. So a point that Brazilian
consumers highly values ​​is the range of
products and services, in the opinion of
26% . And it is estimated that the volume
of consumers using Fintech services in
Brazil is higher than 30%, and most part
of them are banked, what shows the high
potential of Fintech in Brazil, when the
unbanked population start using more
these innovative services that commonly
do not demand to open a checking ac-
count and do notover-analyze customers
with thousands of information to start
using a mobile service. The only missing
point here is that Fintech Services for
people with bad credit, especially in the
lower social classes, still is a important
gap, and also a huge business poten-
tial, since great part of this people have

5. Point of View - 5
money to expend. And I am not sayng
just the opportunity of pre-paid cards
potential, but new business models that
go over the standard risk analytics model
and use other factors more based on
social behavior and future lifetime value.
“The changes in the behavior of the Banking Customer
are not only linked with digital, we need to understand
the root causes. The brutal truth is that nothing bother
so much the Brazilians as unfulfilled promises and not
understand banking fees.”
1%
3%
6%
10%
10%
10%
13%
16%
16%
16%
26%
35%
35%
55%
0 0.1 0.2 0.3 0.4 0.5 0.6
BANK DO NOT HAVE SUSTAINABILITY ACTIONS
TRUST IN THE BANK FALLING
LACK OF COMMUNICATION ABOUT PRICES & FEES
INNOVATION ACTIONS DO NOT ATTEND MY NEEDS
QUESTIONABLE QUALITY OF PRODUCTS AND SERVICES
GAPS ON PORTFOLIO OF PRODUCTS & SERVICES
LOW TRAINING OF CUSTORMER SERVICE PROFESSIONALS
NO BANK INITIATIVES FOR CUSTOMERS'ENGAGEMENT
LOW COST X BENEFIT
WRONGLY CHARGED SERVICE I HAVEN'T ASKED FOR
HIGH PRICES OR NO TRANSPARENT SERVICE FEES
LACK OF PERSONALIZATION ON SERVICES & INTERACTIONS
DIFFICULT & BUREAUCRACY TO DO BUSINESS WITH BANKS
BAD CUSTOMER SERVICE EXPERIENCE
Major Offenders of Brazilian Banking Customers' Satisfaction

6. Point of View - 6
Digital Banking Customer 3.0
In mature countries like Japan, the
banking portfolio is relevant only for 4%
of the population. The Japanese value
the speed and ease of doing business
(17%) and many give little importance
to issues such as cost-benefit ratio (7%)
and price (5%). Part of it is explained by
the fact that the Japanese are one of the
people with the highest rate of use of
self-service channels.
According to data from Goo Research
and the Global Mobile Statistics, 65% of
Japanese often use the Internet Banking
as the preferred channel and 45% of
the population has experienced Mo-
bile Banking applications. In Japan
we have about 121 million mobile
phone users for a population of 128
million (95% of the population).
Speed, productivity and reliability
are the key words for the Japanese.
This gives an idea of ​​the potential
that Mobile Banking has to increase
banking services in Brazil. In Brazil
we have 257 million mobile plans for
200 million people, 128% or 1.3 cell
per capita.
And among these cell phones, 168
million are smartphones connected
to the internet. In Brazil we have
more than 55 million consumers
who use Internet Banking and Mo-
bile Banking users already exceeded
33 million.
The sale of tablets in Brazil will also
have an important role. More than 4
million consumers are expected to
buy a tablet/iPad by 2016, and many
should start coming with embedded
banking applications due to agree-
ments with telecom operators.“But
tablets sales are still struggling due
to the“appreciation of the dollar and
competition with larger screens of
smartphones”, said Peter Hagge, IDC.
“In Global average there are signs of Banks’recovery in the
requirements of satisfaction and trust, where USA & Europe
(even after BREXIT) have the most weight, but emerging
markets like Brazil also have a
light in the end of the tunel”

7. Point of View - 7
Loyalty and
Satisfaction, the
weak link in the
Banking Value
chain
Among the 27 countries sur-
veyed, Brazil has the highest
rate of consumers dissatis-
fied with their banks, with
19%, the global average is
11%. And why is that?
What generates this dissa-
tisfaction of the Brazilian
with their banks? 4 factors
summarize this: bad service
experience (55%), hard to
do business with banks
(35%), low personalization
of service experience (35%),
high prices and low trans-
parency on banking fees
(26%).
“Argentineans, Brazilians and Turks are the consumers
who give more weight to a negative experience in any
channel, when deciding to leave the main bank.”

8. Point of View - 8
Digital Banking Customer 3.0
Only 30% are satisfied with their banks
in Brazil.
Assessing the world situation show the
following Countries where there is grea-
ter or lesser satisfaction of consumers
with their banks, but assessing the avera-
ge Global news is positive. The global of
dissatisfied consumers with their banks
is 13%. And the average global overall
satisfaction with banks is 37%. Among
the most dissatisfied globally, the vast
majority are in the European continent,
Spain and Ireland with 18%, England
(15%), Turkey (14%) and Italy (13%). In
Asia the highlight of dissatisfaction is
Japan (16%). And we can also mention
Australia, where 14% are totally dissatis-
fied with their banks.
The most satisfied with their banks are
consumers in Canada (56%), Mexico
(52%), USA (48%), Germany (47%) and
Argentina (46%).
The bad experience in customer care has
the greatest overall weight in the opinion
of the Argentinean Banking Customer:
60% impact on the decision to leave the
main bank. In Germany, one explanation
is that the Germans are globally consu-
mers who perceive more clearly the di-
fference in goods and services between
the banks (47%), typical German Banking
Customers are highly critical to choose
and maintain their account in a bank.
Another major current paradigm of the
financial industry is the not always linear
correlation between satisfaction and
loyalty. After all, the satisfied customer is
more loyal to a specific bank? Not always.
In Brazil, while 30% say they are fully
satisfied with their banks, only 27% claim
to be loyal and 19% have no loyalty.
But there are major gaps between satis-
faction and loyalty. In Germany this gap
reaches 15%, meaning that while 47%
are satisfied, only 32% say they are loyal
to their banks. In England this gap is 10%,
with 32% of consumers satisfied with
their banks and 22% loyal.
“Loyalty is not a comfortable situation in the
financial services industry, and even customers
who say that are satisfied, can migrate at any time
to the competition, this can come from any Indus-
try. Fintech players are not the only challengers.”

9. Point of View - 9
The lower ratio between satisfaction and
loyalty in the world appears in Japan,
while only 14% are satisfied, an even
smaller population is loyal (10%) and the
Bank’s recommendation rate is also the
lowest in the world with 7%. The concept
of loyalty was put in check in the finan-
cial industry. The loyalty programs still
have a strong membership adoption rate,
on average 31%. But this means a greater
loyalty to the Bank? Industries such as
Mobile (34%) and retailers (53%) have
greater adherence to these programs
and, at the same time, are sectors where
the change of provider and portability
are extremely frequent.
channels. That is, here is the opportunity
to alert marketers to stimulate these
feedback channels and relationship with
the customer.
Stay with my bank or not,
that is the question
Until a few years ago it was considered a
complex movement to close the account
in a bank and open an account at a
new bank. Today, globally, opinions are
divided. 30% do not consider that hard
to change the main bank, some even
open a new account at Bank and do not
close the previous account. And 28% still
believe that gives a tremendous job close
an account in a bank. In Brazil 27% find it
easy to close the account with the Bank
and 35% difficult.
But the question is if it is not useless to
change from one bank to another. Not
always, but it is a right to be exercised. In
open economy markets, the most power-
ful tool of the consumer and that also im-
proves competitiveness, level of service
and prices, is still their free will to come
and go, leaving to work with a bank and
knowing the services of another bank, or
Fintech, that is the new actor in the value
chain.
Being a contract where the relationship is
often long-term, the customer experien-
ce has a strong weight and importance.
Experiment new products and services
and realizing greater customization and
personalization in the interaction can
make the difference between a short or
long stay with your bank, and the level of
investments and daily payments that you
will concentrate with the provider.
The operational channel that you will use
is not the most important: on smartpho-
nes, tablets, web, IVR, at the agency or
even in social networks. The key point is
if the experience model is truly relevant
and adds value with information and
solutions according to the customer pro-
file and family composition. Digital and
In the case of Brazilians, 70% prefer sim-
ple and direct channels of communica-
tion established with companies, rather
than simply offering prizes or financial
rewards for loyalty or relationship time.
Brazilians yearn for opportunities to
contribute suggestions for improvement
of products and services (56%). But today
only 24% of Brazilians give suggestions
for improvement in offline channels
such as retail stores and 31% in online

10. Digital Banking Customer 3.0
Point of View - 10
analytics are simple words, and alone
they mean nothing for customers. The
point is if your bank has a clear and sim-
ple strategy to use these enablers in such
a simple way that banking becomes an
everyday easy task as it is to write a post
in the social network or visit a dealership
to know the latest vehicle model that has
been just launched.
As we have seen, satisfaction and dissa-
tisfaction with the banks often have com-
mon grounds and is not hard to explain,
so even the Brazilian customers need to
increasingly compare services, prices and
quality of service in the Banks channels,
providing feedback and changes su-
ggestions because the called“customer
view”, sometimes considered complex
when analyzed by experts in marketing
and product development, usually brings
simple and incredibly valuable lessons.
These lessons can be decisive for this
cycle of relationship between the consu-
mer and their bank turn into a lasting vir-
tuous circle, which increases satisfaction,
the share of wallet and new services are
experienced. Proof of this is that in Brazil
33% are willing to consume more goods
and services from their banks, above the
global average of 24%.
Surely a greater focus on the customer
and their needs, heavily exploiting the
full digital experience end to end will
have a key role in the Brazilian and Glo-
bal Banking market transformation.
The next chapter of this innovation
history is being written right now or the
next fastantisc banking application too,
and not necessarily by bankers. Just wait
and see.
Fabio Mittelstaedt
Digital Banking Innovation
July 2016