When David Vélez, co-founder and chief executive of Nubank, Latin America’s best bank, spoke to Euromoney in January 2021 he acknowledged just how powerful an engine the pandemic had been for the growth in digital banking. The Covid-19 lockdown led to such accelerated growth in new customer segments that the bank is seeing numbers that would have taken months or years to achieve in normal times.
For example, online credit card payments have soared, with the bank hitting a level in April 2020 that it had projected to reach in 2023. Its total loan portfolio grew 49% to $95 billion in 2020, where elsewhere banks saw customers paying down card debt. In total, Nubank grew its customer base from 20 million in 2019 to 36 million by the end of 2020. Deposits increased 2.6 times to $29 billion. Nubank is also a leader in the new digital payment system PIX launched by the Brazilian central bank.
The bank now has a market valuation of $30 billion, up from $25 billion in five months, after a Berkshire Hathaway-led investment round of $750 million. It has already launched credit card operations in Colombia and Brazil, entering those markets with the same strategy so successfully adopted in Brazil.
Another important change during the pandemic has been the increase in the number of clients using the bank as their primary account. “That was one of the big surprises,” says Vélez. “When the pandemic came in March, one of the serious questions we had was what was going to happen to deposits – were people going to withdraw their money and go to the established banks that were seen as safer?”
He says this potential flight to quality was a new test for Nubank, but one it more than just passed. Nubank saw “an avalanche of deposits, worth tens of billions of reais during 2020 that came from the big banks”.
Vélez says these flows came mainly from the private-sector banks, with the publicly controlled banks (Caixa and Banco do Brasil) responsible for “around just R$400 million” ($79.7 million).
Nubank’s emergence poses an existential challenge to the large public and private-sector banks alike; those traditional large retail banks in Brazil and elsewhere in the region that have, until 2021, dominated the list of best banks in Latin America.
