On the Road: New York, N.Y.

Over the past seven days, I made two quick trips from Alexandria, Va., to New York City. Here's a look into Nubank ringing the bell at the New York Stock Exchange, QED's final meetup of 2021 and my message to the biggest banking executives in the country.

A #NuDay in the Big Apple

Yesterday, I stood shoulder-to-shoulder with my dear friend David Velez as Nubank cemented its reputation as arguably the finest challenger of its generation. Let me tell you about the time I turned David down.

I have known David since 2007, dating back to when he was at General Atlantic in financial services in New York. We had looked at a microfinance business together in Mexico City, and we spent some time in Brazil thinking about the thesis of building a Capital One of Brazil.??

We met with a number of management teams and, not surprisingly, there was not a single management team that you could back to build the type of business that I had helped to build Capital One in the U S.

David was very enamored with the idea because he saw banking in Brazil and Latin America as one of the most inefficiency industries and one that was not customer-oriented. David was insatiably curious as of why nobody was able to crack the code of those five big banks and their oligopoly. His ability to absorb information and nuance like a sponge and to ask the right questions was, and still is, extraordinary.

David told me the Brazilian market was so big -- the banks enjoy more than 20 percent of the equity and don't have customers in mind. He said there's a young population that's increasingly technologically mobile native and that we don't have to start with a legacy infrastructure.

He offered QED some warrants to help him understand the Capital One approach better and how the credit card business works. He wanted me to invest in Nubank’s seed round. I told him I had too much on my plate in the U.S. and U.K. What a mistake that was.

A year later, I'm going, ‘You know what? He's actually got some of the infrastructure up and he's going to get the regulatory approvals. Maybe this actually can work.’ We joined the Series A shortly after, and David and his team have since reached a scale that was incomprehensible in 2014.?

Of the 170-plus companies that QED has invested in, I think maybe only two have hit their numbers that they showed us when they came to pitch. Nubank was one of those. It’s a remarkable story of a fintech that has proven the exception to the rule. What they have done is unmatched in financial services. A special mention, too, to QED Partners Frank Rotman and Bill Cilluffo for all their valuable insights and support on this incredible journey.

David and Nubank was QED’s gateway into Latin America. In the seven years since that first investment, QED has backed almost 40 companies across Brazil, Mexico, Colombia, Argentina and Chile. Seven of the 22 unicorns from the QED portfolio are from Latin America – a sign of the importance of this ever-growing region in the fintech ecosystem.

There are few things I enjoy more as an investor than seeing our portfolio companies succeed. When it also happens to a good friend, I couldn’t be happier. Congratulations to David and his co-founders Cristina Junqueira and Edward Wible and the entire Nubank team.

Growing the ecosystem

On Thursday evening, QED hosted almost 185 founders, entrepreneurs and guests at a networking event and happy hour at the Sandbar Rooftop in the Flatiron district.

I am always energized by meeting founders in person and I was thrilled to see a dozen or so portfolio companies in addition to LPs, friends and acquaintances.

The talent in fintech today is incredible. That’s not to say founders were not talented 10 or even five years ago, but I am truly blown away by the intellect, curiosity and savvy of today’s entrepreneurs.

There has never been a more exciting time for be part of this wonderful fintech ecosystem. To the entrepreneurs I spoke with, I want to reiterate that you have the winds firmly at your back. Valuations are booming, and the speed at which truly disruptive companies can make an impact is almost unimaginable compared with even just a few years ago.?

It’s more and more essential to continue to feed the fintech ecosystem and we are glad to be doing that with you all. We’re really just at the beginning of this fintech wave and we think there are huge opportunities ahead.

Addressing the bankers

I had the honour of speaking on a panel with Matt Harris of Bain Capital Ventures at JP Morgan’s CEO Conference hosted by Jamie Dimon for the top U.S. Bank CEOs, including national banks regionals, mid-level banks community banks.

There was a palpable difference in how interested they were versus what I imagined it was 12 months ago.

The notion of it is not now, ‘who’s going to win -- fintech or banks?’ It’s how do they work together to create a better outcome for consumers, shareholders and the overall ecosystem.

The value-added chain is busting up and banks are increasingly wanting to work with fintechs, no doubt about it. They can’t do it themselves and they appreciate that digital is alien to them in an analogue world. They want to partner, but they are struggling with how to partner and they’re unsure what their action steps should be. I’ve had this conversation with several banks over the past few months.

The move to digital has clearly accelerated during COVID, but adoption of fintech services is no longer confined to young consumers.?Paypal’s 200 million US customer base surpasses even the largest banks’; more than 20 percent of their users are over age 55 and this segment is growing fastest. Chime has roughly 12 million customers, more than the largest regional banks, but almost one-third of their customers are over age 40.

So the question for banks is how to address the challenges they face as digital adoption continues and consumer apps gain traction.

Firstly, they have to know their raison d’etre.?More than half of bank consumers still define their primary financial institution as the one where their pay is deposited, but many now define it as the institution where they conduct most of their day-to-day transactions. This opens the door for payment processors to displace banks’ primacy.

And secondly, they must be proactive about new opportunities, instill a culture of innovation and hire the right talent. As we’ve seen, there’s a war for talent and recruiting has never been more important. I would argue that it’ the No. 1 pain point for the majority of QED’s portfolio companies.