Kuda is at the forefront of challenger banks looking to change the status quo of banking in Nigeria. However, the startup has had challenges with the same age-old issue that have defined their traditional companions.

In 2020, the KPMG Nigeria Banking Industry Customer Experience Survey revealed that 48% of customers maintained their current banking relationship mainly because of the quality-of-service experience and digital service. This statistic highlights the importance of good customer experience in customer retention.

The report also revealed a slight increase in retail clients' overall customer experience points (CX) from 72.1 in 2019 to 72.5. On the surface, this looks like a decent step in the right direction. However, a look at the 2018 CX point of 73.9 indicates that the banking industry has not made any considerable progress and is yet to recover from the slump of 2019.

Coincidentally, that was the same year digital-only bank, Kuda was launched.

When Kuda bank emerged in 2019, the arrival of a digital bank with its banking license was received with mixed feelings.

Curiosity and excitement, on one hand, as young adults were anticipating the innovation that the neo-bank, who dubs itself as the "bank of the free," would introduce into the saturated Nigerian banking sector.

On the other hand, skepticism. Before the emergence of Kuda, digital banking services were limited to traditional banks and start-ups who were piggybacking on the infrastructure of legacy financial institutions.

As a result, Kuda being the first digital-only standalone bank to chart that unfamiliar terrain raised concerns around whether the new entrant could offer a better customer experience than the incumbent players.

Also, reports of inconsistent service delivery by Alat - a digital banking vertical of Wema bank added to the cloud of doubt that hovered over Kuda.

Tales of Kuda's service gaps

With over 1.4million customers, consistent application improvements, and a first in the industry overdraft offering, Kuda's commitment to delivering superb digital products and experiences is evident.

However, outside the sleek edges of the new bank's mobile app, there have been concerns about the quality of the bank's offline service experience.

Recently, users have taken to social media platforms to complain about poor service delivery offered by the neo-bank, with most of these complaints revolving around the bank's unresponsive customer care and unreliable Kuda debit card.

Oluafolabi, an early customer of the start-up, who had been enjoying a seamless experience with the bank, got his first taste of service failure when he experienced a failed transaction and unsuccessfully tried to reach the bank's customer care via numerous channels.

"So, I have been using Kuda since 2019. I like to think I am one of the early birds. The experience has mostly been fair. There have been upsides and downsides. Upsides include the free debit cards that will be delivered to you, but it took a very long time to get delivered, and I kept sending them reminders.

But the in-app transaction experience has been so so lovely. And I rarely get failed transactions, so I tend to use Kuda to do my important transfers since I'm fairly certain that the transaction won't fail (until yesterday). And that was when I realized that their customer service is really awful. They don't reply to Emails or DMs on Instagram. The customer care number they provided did not go through this weekend when I needed help. So, what if it was an emergency (e.g., fraud)? Is that how I would have been left hanging?"

Oluafolabi is not the only customer to be at the receiving end of Kuda's not-so-great customer service.

"Traditional banks suck" says Chidera, in a conversation that took place over Twitter. Asides from his disdain for traditional banks, Kuda's zero-fee offering was a key motivation in Chidera opening an account with the bank. Unfortunately, an issue with resetting his password has prevented him from experiencing the promise of free banking.

"My issue with the bank was a logging-in issue. I forgot my password and had problems resetting a new one. Called their customer care, and they were not of much help. Sent them two emails, and they have not replied any"

For Wana, a growth and marketing professional, his only issue with the bank is the unreliability of the debit card. Outside that, he does not see any material difference in the standard of service delivery of Kuda, compared with other traditional banks "It is just the ATM that is unreliable. Never had any other issues using any of their services".

Making sense of Kuda's service debacle

As an early-stage disruptor in the banking industry, these sorts of challenges are expected.

Aside from the digital bank still being at the infancy stage of its life cycle, the banking sector is prone to service failures.

A back-of-the-envelope theory suggests that because banking infrastructure is developed on layers of SAAS products, service failure experienced by any of these providers inadvertently impacts the bank's service delivery.

Dolapo, a United Kingdom-based IT professional shares these same sentiments. "Banks cannot build all infrastructure from scratch, and they depend on vendors to render lots of services. So, these breakdowns are inevitable. An easy example is when NIBSS is down; all banks are automatically down by default."

Nonetheless, Kuda needs to find a way to effectively manage these service breakdowns and the barrage of customer complaints that come with it. An effective way of doing so is communicating instances of service failures to customers. Also, introducing a standard service level agreement to deal with different forms of complaints would help reduce the pressure on customer care channels.

Oluafolabi believes that once Kuda solves their customer care challenges and the issues with their debit card, they will be on par with traditional banks in service delivery.

"For a lot of people, if they have banking problems that are not getting resolved online, they can eventually walk into a branch and get their problems solved. Also, ATMs of traditional banks have a lower failure rate compared to Kuda's. But Kuda trumps them with easy accessibility, provision of credit, and the willingness to offer newer features to customers."

Amidst the numerous issues and complaints, Kuda has raised $91 million in funding to help scale its expansion into other African countries. This indicates that investors are bullish on the growth of the neo-bank and are optimistic about Kuda being the bank of choice for every African on the planet.

Who will win the customer service war?

As stated earlier, delivering a good customer service experience is vital in driving customer retention and reducing churn. The low switching cost nature of the banking industry provides customers with the opportunity to change banking service providers easily. This is buttressed by the KPMG Nigeria Banking Industry Customer Experience Survey, which revealed that 8% (compared to 4% in 2019) of customers are willing to change their banks or plan to in the next three months.

The availability of alternatives such as Kuda Bank and Brass and the increased digital penetration in Nigeria has prompted traditional banks to sit up and pay attention to the increasing need for insights-driven customer experience.

Despite the perceived advantage that incumbent players have, research by Accenture on the digital-only banks in the United Kingdom revealed that challenger banks have an average Net Promoter Score of 62 compared to just 19 for traditional banks.

In the absence of such data that compare the quality of service offered by traditional and digital banks operating in the Nigerian scene, only time would tell who would come out tops in the battle of customer service supremacy.