“Brazil, Mexico, and Colombia have 60% of the Latin American population and GDP, so continuing to grow in these three countries is definitely our focus now”, answered Catalina Bretón, country manager of Nu Colombia, in a conference with Latin American journalists this Thursday afternoon, right after the debut of the largest fintech and neobank of the region in the New York Stock Exchange (NYSE). Emilio Gonzalez, in charge of Nu Mexico operations, and David Vélez, co-founder and global CEO at Nubank, also participated in the conference.
As the fintech, valued at more than $50 billion at the beginning of its first day as a publicly-traded company (read more about the IPO below), is still in the silent period, many of the questions all journalists were dying to ask have not been answered, such as which countries are on Nu’s roadmap or what will be the next products to be launched in its newest markets in Latin America.
Even so, it is possible to read between the lines of the statements. “In Mexico, it was said that the people did not want to try or use financial services, that they were not interested in doing that, but we always believed that it was not the people who did not want them, but that these services did not exist. So it was more a problem of supply than of demand”, said Gonzalez.
That’s why, he said, Nu México has dedicated itself to the task of hiring a large team, “which knows the needs of Mexican consumers”. There are already more than 400 employees on Nu Mexico‘s payroll. In addition to the credit card, which is already in the hands of more than 760,000 Mexicans, the plan is to expand Nu Mexicos’s credit portfolio. “In only a year and a half of operations, we have become the largest credit card issuer in the country, surpassing the major national banks, and for 2022 we have an aggressive plan. In September, we were given the final license to acquire Akala (a SOFIPO or Sociedad Financiera Popular, a kind of financial institution), and we are working to increase our product offerings,” said Gonzalez.
At the beginning of 2021, Nu México announced an investment of US$ 135 million to boost Nu’s growth in México, primarily by scaling its local presence at a faster pace. This market is strategic for the company since it represents 20% of the population of Latin America, and according to INEGI figures, only 47% of its population is banked.
In Colombia, Nu still operates in beta mode, but with a totally local approach too. “We realized that the Colombians were not happy with what was being offered. Furthermore, we saw that it was a country with high penetration of digital services. We realized that we could provide a differentiated, more human service. This is clear from the list of people registered to receive a Nu card,” said Bretón.
According to her, about 30,000 people, among the first people registered in Nu’s waiting list in Colombia (the total number was not revealed), participate in the app’s beta phase there. Helping to build an experience that Colombians like.
Nu Colombia is also working on constructing and improving an algorithm, dubbed Betty, for the population’s credit analysis. The idea is that Nu will be able to offer a card to people who have not had this type of offer until now. Betty, says Nu Colombia, has a model of prediction and it is fed with the information it receives so it will be more robust every day. Thus, you will be able to give a different score than that reported by the credit bureaus for the same person and predict the probability of whether or not he will pay a bill on time. In November, when the Nubank subsidiary announced that it was working on the algorithm, it did not detail what kind of information it collects and from what sources.
Nubank’s IPO main numbers and fact
Nubank‘s shares opened 25% above the offer price, around $11.25, in their stock market debut on Thursday, giving the company a market capitalization of nearly $52 billion, making it the third most valuable listed firm in Brazil. Nubank closed the day with a $48 billion valuation, which makes the neobank backed by Warren Buffett‘s Berkshire Hathaway the third most valuable company in Brazil, only behind commodities players Petrobras and Vale.
On the conference with Latin American journalists, Vélez emphasized that Nubank “is a company that works hard to charge less, not a company that works hard to charge more”. And that, according to him, makes all the difference for the company’s business model, which seeks not to charge fees to its users, generating revenue from the backroom, with interchange fees and interest on credit card transactions, among other sources.
On Wednesday, Nubank priced its initial public offering at the top end of a range it had lowered earlier due to concerns over a global rout in technology stocks, to raise nearly $2.6 billion. The offer was eight times oversubscribed, one source with knowledge of the matter said. The flotation comes as a record year for U.S. listings, which saw heavyweights like Coinbase and Robinhood go public, draws to a close.
The neobank has over 48.1 million customers (almost ten times it had three years ago), most of them in Brazil. The company also reported that it has 35.1 million monthly active users (73% of its clientele), which gives Nubank several other possibilities of business diversification.
Throughout this year, Nubank launched a marketplace within its app and added a string of new financial products, such as investments, personal loans, and insurance. It also announced partnerships to offer services that it does not provide itself yet.
“Nubank is one of those companies whose shares we might want to hold for the very long term,” said Douglas Leone, global managing partner at Sequoia, in an interview with Reuters. Sequoia started investing in Nubank in the seed round in 2013. “Right now the focus is to make sure we (Nubank) do the very best job for customers in Latin America,” added Leone, who is also a member of the fintech‘s board of directors.
Despite its growth, Nubank is not profitable – because it doesn’t want to be. In 2020, Nubank posted a total annual revenue of over BRL 4 billion ($737 million), a 20% Y-o-Y increase, and a net loss of BRL 230 million. This year, until September, the neobank recorded a net loss of BRL 528 million ($94 million). Nubank is constantly focusing its resources towards growing its market share in a booming industry that is still far from being consolidated. Can the IPO – and a less patient market with money-burning startups – change that? It’s too early to know.