Nubank: Democratizing Financial Services
"Nubank, a wholly-digital solution created to disrupt Brazilian banking, with 6 million clients and a $4 billion valuation after five years, must decide whether to expand to Mexico. The company was founded in S o Paulo in 2013 by Colombian-born David V lez to seize what he saw as the opportunity latent in a banking system long dominated by five large incumbents with what he considered low value products and deficient customer service. The answer for V lez was through technology. Backed by foreign venture capitalists and recruiting a top team, V lez launched a credit card available solely through a smartphone app, with quick approval and no annual fee, with credit and payments totally online and transparent, friendly customer service, completely up-ending the traditional terms of the market. Nubank's credit card became viral among the Brazilian urban middle-class and by the end of 2018, the company was the fifth credit card issuer in Brazil with over 6 million cardholders. A second product, a digital banking account, also changed market terms by offering services at no fees and yielding higher interest rates. By 2018, Nubank had $628.8 million in deposits. With success, a multitude of opportunities were now open and Nubank and its board must define strategic priorities. Within Brazil, Nubank's market share was still minor compared to the incumbents, and there were many other financial products that could be launched. In addition, 30% of Brazilians remained unbanked. Yet V lez and his team were convinced that the whole of Latin America had the same banking pain points as Brazil and was ripe for Nubank products. For V lez, the gateway to unlocking that potential was through Mexico. The case also examines the challenges in an emerging market of financing and developing a new business concept based on cutting-edge technology, the nature and sustainability of the difference between a fintech startup and leading incumbents, and the role of regulators in the development of fintech.