How to win 22 mil customers with no marketing spend

How would a company give really great customer experience whilst balancing profitability and regulatory concerns? 

We debated this question in the Momentum Works community when we heard of Nubank’s latest raise – US$400mil and a valuation of US$25bil. What caught our attention was this statement that David Velez told the media “ We’ve gone from 12 million customers to 34 million customers solely based on word of mouth”… and prided itself on having a $0 customer acquisition cost.

How could this be? 

Our Latin American community spoke up. One said “ Try messaging Nubank when something goes wrong. You’re gonna get a response from a well-educated customer support guy and he will solve your issue in minutes. It just works. So it’s not bots and technology. It’s customer experience.” Another said “Good model + timing + customer experience obsession + scalable tech +credit card /Brazilian debt rates = unicorn”.

We were intrigued and dug deeper –  some public, some through private chats – and we managed to pin-point it to 3 points: product, technology + data and customer service.

1. Product

Focus on creating transparent, simple products that customers want and the rest will follow. Nubank first launched a credit card for customers with no long contracts and no hidden fees, with no deposits. Best of all, it could be approved in minutes when traditional banks took about 2 months.

They were building a brand telling people that they trust them when they use Nubank’s product. And because they did not have a huge legacy baggage of people, infrastructure and systems, they could keep the cost low and be profitable. 

And once they had a product that was “good enough”, they would launch it – they believed that even with the best data and intuition, there is no substitute for real usage and feedback. Today – they have a range of products – from savings accounts to insurance to business accounts.

2. Technology + data

How does Nubank issue a card in minutes when traditional banks take months? One reason – technology, and how Nubank used it intelligently. For example, when it first launched, customers could only apply for a Nubank credit card on an app – this helped simplify the approval and KYC process, whilst keeping the customers details secured (app security is much tighter than a website security). This is an example of using technology intelligently. 

Another way that Nubank uses technology is  knowing which emails and chats to automate. We hear that at least 30% – 50% of chats and emails are automated – e.g. where you need to fill in forms, where you can write, how to recover passwords etc. And Nubank then invested a lot on human beings to do the best service you can, when a customer actually needs help. 

On the flip side, when technology is not used intelligently, can be a barrier and create friction for the customer. The way IVR (Interactive voice response) has been abused – sometimes you have to pass 10 levels of IVR just to solve your problem/ talk to a human/ give up – is an example of financial institutions holding customers hostage. 

In this regard, Nubank set the direction right at the beginning: “We are a technology company, it’s in our DNA, not a bank. ” 

3. Customer Service 

Go on social media and you’ll see posts like “I wished my girlfriend treated me as well as Nubank does. ”

So what did Nubank do right? There are 3 interesting insights: 

(i) Similar to Netflix, Nubank focused a lot on talent density. It invested in hiring good people, liked to serve people, who learned fast and could do the job. Although this meant looking outside the financial industry, Nubank took them in, trained them and paid them a lot more than what the industry was paying at the time. This largely improved the productivity of the customer service team, making it a crucial cornerstone to fixing problems for customers, giving constructive feedback to engineers, and preventing problems from scaling. 

(ii) Nubank gave its customer service team high autonomy and included them in squads. One interesting insight was that the Nubank customer service team sat with engineers and they prioritise together what to work on. These close cross-functional collaborations let the engineers know about the things that customers are feeling. This also incentivises the engineers to build better products, which then benefits the consumers.

(iii) How could a “customer support guy solve your problems in minutes? By getting the fundamentals right – Nubank uses technology to understand their customer. By the time a customer opens the app and opens a chat, Nubank can predict why the customer is reaching out – and can channel the customer to the right specialised team. Secondly, products and processes are simple – and customer service agents are given the autonomy to make decisions. And finally, customer service teams have a really robust back office system (built in-house by Nubank) for them.

How about in Asia ? Will it be the same as LATAM?

Asia is different compared to LATAM. Credit rates are much lower and competition amongst financial institutions is much fiercer. Nevertheless, there are some similarities in product, tech and customer service initiatives that we are seeing here that are similar to what Nubank has done. 

A few stand out- DBS (largest bank in Singapore),  FWD (Richard Li’s insure-tech eyeing an IPO), and Revolut (Neo-bank kid on the block). Moreover, as we have set out in our MW Rise of Digital Banks in Indonesia report, with 3 million more digital bank users added in 2020, we will see Jenius, the regional banks (DBS, TMRW, OCBC), as well as tech giants (SEA, Gojek) –  accelerating their digital banking ambitions there. 

Each player uses a different array of tools to give customers a “great experience” – including customer science, optimising the digital experience to having simple UI, and of course, having great customer service people. 

Of course, it takes more than just product, tech and customer services to make a company great. Culture and company structure plays a very big part. 

Please stay tuned – we will dive deep into these topics one by one in the upcoming articles in this little series. Xoxo, brought to you by yours truly, Momentum Works team.