Nubank, Latin America’s best digital bank, is still very much in growth mode. Over the past year it has further built out from its credit card origins; current accounts have been added and the bank has acquired online investment platform Easynvest.
The value of the Easynvest acquisition wasn’t disclosed, but it was a significant deal for Nubank. It immediately added a retail investment platform with over 400 funds and 1.5 million clients (now 1.6 million) and R$20 billion of assets under custody.
“We saw that our customer base was increasingly wanting to invest in fixed income and equities and we didn’t have that optionality,” David Vélez, chief executive and co-founder of Nubank told Euromoney earlier this year. “We have also developed a highly differentiated [proposition] in the mass retail segment and we are able to serve customers at a very, very efficient cost. Easynvest was a way to offer these customers over 400 different funds from day one – and own a position in the market with the leading digital investment platform for retail investors in Brazil.”
There is also the potential for similar growth in the bank’s core business. Brazil’s central bank is intent on introducing open banking regulations. And while some of Nubank’s competitors are lukewarm on the proposal, Vélez is definitely bullish.
“We think it’s going to be great – and the extent of how great is still to be discussed and depends how the regulation ends up,” he says, claiming that the five largest banks are trying to make the regulations “less effective because once you have a [combined] market share of 90% there is only downside.”
As a digital bank, Nubank’s growth is posing existential questions for the established large banks in Brazil and throughout the region. These legacy players have adopted different strategies to counter the competitive threat of the new wave of digital banks and fintechs, but ultimately they face the fact that Nubank has been able to become a bank with customers in all of Brazil’s municipalities without having any branches, while traditional banks have coverage in about 60%.
Nubank also has only 2,700 employees. The incumbents can’t pivot to compete with Nubank on costs and the mixed model that is being adopted is leading to the cannibalization of revenues from old fee-based businesses. Some banks have developed standalone competitors – some are developing parallel digital versions of their previous infrastructure. All are struggling to get a mix that can blunt the potent low-or-no cost full digital services that banks such as Nubank are providing. They’re fully focused on challenging this new threat, but as Nubank’s breakthrough year shows, time is becoming a very limited resource.
