Many digital financial institutions have wild total addressable market (TAM) claims. A financial analyst that used to keep a record of the most outlandish such claims made in investment pitches tells Euromoney that in one instance the TAM for a Mexican digital bank exceeded the world’s internet-enabled population.
Then the market changed. Higher US rates meant that investor demands from neobanks and fintechs went beyond the sheer scale of their potential to include at least an element of revenue and occasionally even profits.
Nevertheless, today there are many stellar valuations baked from the heady recipe of TAM, low cost-to-serve, ‘asset-lite’ and operational leverage.
Brazilian neobank XP is different – and has been throughout its now 20-plus year history. The bank’s TAM hasn’t changed since it burst onto the national scene in Brazil in the late 2010s.
“We have a TAM of 30 million individuals,” says Jose Berenguer, chief executive of Banco XP, the banking business of XP Inc, talking to Euromoney alongside Thiago Maffra, the chief executive of XP Inc.
That’s also the TAM XP presented in its IPO. It’s the TAM the company was built upon, and an increase in revenues from R$3.2 billion ($630 million) in 2018 to expected annual profits of around R$14.8
