Value loop : What banks can learn from fintechs about capturing value
Value loop approaches have helped fintechs around the world convert initial growth into sustainable long-term value by lowering costs, diversifying revenues, and promoting customer engagement and loyalty. Starling and Revolut in the UK, N26 in Germany, Chime in the U.S., and South Korea’s KakaoBank all initially limited their product sets. After scaling up, they turned their attention to winning customer trust and, eventually, increasing wallet shares.
Value loop approaches have helped fintechs around the world convert initial growth into sustainable long-term value by lowering costs, diversifying revenues, and promoting customer engagement and loyalty. Starling and Revolut in the UK, N26 in Germany, Chime in the U.S., and South Korea’s KakaoBank all initially limited their product sets. After scaling up, they turned their attention to winning customer trust and, eventually, increasing wallet shares.
An effective value loop is self-reinforcing, driven by data, and prioritizes engagement and long-term relationships to create, realize, and capture lasting value. Fintech players often launch with a free or low-priced single product to entice new customers to give them a try. According to Capgemini’s Voice of the Customer survey, 75% of respondents said fast, low cost services that are accessible and easy to use motivate them to consider switching to a fintech provider. From there they activate and grow those relationships, leveraging data, cloud infrastructures, modern core banking systems, and webs of APIs to create personalized experiences and, increasingly, accompany customers on their ecosystem journeys.
To promote engagement, many fintechs curate targeted content built on their data-driven understanding of the customer’s lifestyle and lifetime value – for example, blog links on retirement planning for those thinking about life after work. They also constantly upgrade the experience with agile process improvements to keep the experience fresh and relevant to the individual customer. For example, San Francisco-based Chime employs a predictive personalization system that delivers content to customers tailored to their individual financial interests.
At Nubank, a Sao Paulo-based fintech firm founded in 2013, executives set out from the start to attract, convert, and activate customers through compelling value propositions and an easy to manage, no-fee credit card with unlimited free transfers and payments – caught on quickly. Personalized educational content on financial and other topics, accessible though several digital channels, created the sense of Nubank as a partner.
Delivering on its value promises earned Nubank a loyal following that provided word-of-mouth referrals, deeper wallet shares, and more customer financial and transactional data, which it uses to continuously improve the customer experience. It’s a virtuous circle, driven by data, accelerating its push outward in pursuit of growth. Between 2017 and 2021, Nubank recorded a 12-fold increase in average revenue per-customer; executives say it was the primary bank for more than half its active customers in 2021. When it IPO’d last December, the firm boasted 48 million customers and a valuation of $41.5 billion. Nubank is one of many fintechs that have successfully used a value loop to grow and prosper.
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