Nubank: A Brazilian FinTech Worth $10 Billion

SECTION 1: Nubank: A Brazilian FinTech Worth $10 Billion

If we gather a group of FinTech enthusiasts and ask them about neobanks, the discussion is likely to be focused on case studies mostly from Europe. However, the phenomenon of the increasing number of challenger/neobanks is not limited to Europe. There are over 80 challenger banks spread across the world, including Europe, South America, and Asia. Brazil’s Nubank and Banco Original, Germany’s solarisBank and N26, China’s MyBank (by Ant Financial) and WeBank, and Starling and Revolut from the UK are some wonderful neobank success stories.

Among these neobanks, we consider Nubank as one of the true disruptors for its value addition to the Brazilian banking customers who have been squeezed too hard by the oligopolistic banking industry in Brazil. In July 2019, Nubank was estimated to be valued at $10 billion, making it the most valued private technology company in the Latin American region. To put this in perspective, Nubank’s valuation is now almost three times of Europe’s most valued neobank N26. The July edition of Monthly Analysis for MEDICI Inner Circle members zooms into Nubank to find out what is so special about this six-year-old decacorn FinTech.

Nubank’s Growth Story

Founded in 2013, Nubank is a Brazilian FinTech startup that has emerged as one of the largest challenger banks in the region. It took just six years for Nubank to hit $10 billion in valuation, raising $820 million in six funding rounds and acquire approximately 12 million customers in Brazil. Nubank’s product and service offerings include credit cards, digital savings accounts, and the recently launched consumer loan service. Nubank has also planned digital account offerings for small-business owners.

Nubank was founded by David Velez, Cristina Junqueira, and Edward Wible. The face of the startup, David Velez, is a former partner of Sequoia Capital, and he was focused on the firm’s Latin American investments. Prior to that, David worked in investment banking and growth equity at Goldman Sachs, Morgan Stanley, and General Atlantic.

Nubank has achieved exponential growth in the number of customers – from 1.3 million in 2016 to reported 12 million as of July 2019. While initial growth can be attributed to it its credit card offering, the recent growth spurt can be witnessed in its customer-focused digital accounts.

Timeline of Product Portfolio Expansion

Credit Cards

The bank started its operations by offering a zero-fee, low-interest Mastercard Platinum credit card which customers can manage using their mobile phones. The mobile app provides real-time spending notifications, personalized categories for tracking payments, and the ability to lock and unlock the credit card directly from the app. It currently has over 5 million customers for its no-fee credit card. Now Nubank is recognized among the top five credit card issuers in Brazil. As of May 2019, Nubank had received 30 million applications for its credit cards.

It can be shocking to learn about the interest rates being charged by the Brazilian banking industry on credit cards. In Brazil, traditional banks’ credit card APRs stand between 200% to 500%, with some being even higher.

Looking at Nubank’s 140% APR, one could say that it is still very high, but relatively, it makes a lot more sense for a customer to get a Nubank card in Brazil.

The full Analysis here