It's still Day 1 for Nubank

Hey!

Nubank is objectively one of the most successful Fintech companies out there. In Brazil, they have reached the scale of the incumbents and yet maintain the growth rates of a startup. Innovative, highly profitable, and deeply loved by its customers.

However, on the recent earnings call, David Velez, the company’s co-founder and CEO, said that it is still Day 1 for Nubank. He’s set ambitious goals for the company, so ambitious that, if achieved, Nubank’s accomplishments to date could seem like a footnote.

Nubank wants to become the largest financial institution in Latin America, expand beyond financial services, and…wait for it…become a global player. I believe it was the first time that they had explicitly told investors that they are working on expansion beyond Latin America.

Let’s dive in because this is super exciting!

Jevgenijs
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A lot has been written about the Brazilian Fintech miracle Nubank $NU ( ▲ 0.74% ) . It is a truly fascinating company that has already achieved a lot. So, before we dive into why it is still Day 1 for Nubank, let's quickly recap how far they've come.

Nubank launched in 2014 with a fee-free credit card, a mobile-first experience, and an ambition to create a bank that consumers love. At the end of 2024, 40 million people used Nubank’s credit cards. In Brazil alone.

Three years into the journey, in 2017, Nubank launched a fee-free checking account, NuAccount, aiming to become the primary bank for its customers. At the end of 2024, 79 million people in Brazil were using NuAccount. Nubank has also managed to become the primary bank for 61% of its active customers.

Nubank launched unsecured consumer lending in 2019 and expanded into secured consumer lending in 2023. Secured consumer lending in Brazil means loans backed by salary, pension, or unemployment benefits.

In 2024, interest income from credit cards and consumer loans, as well as NuAccount balances (which Nubank invests primarily into government treasuries), contributed $9.6 billion, or 84% of the company’s total gross revenue.

Fast forward to today (or rather 2024)…Nubank serves 102 million people in Brazil (which represents 58% of the country’s adult population) and has become the third-largest financial institution in terms of the number of customers it serves.

Financial success followed, with revenue reaching $11.5 billion and net income reaching $1.97 billion in 2024. The company’s mobile-first approach translated into unprecedented efficiency levels, delivering 28% ROE.

Nubank has also become the most valuable bank in Latin America by market cap (Itau retook the leadership in March, but I do not expect this to last for long).

Nubank started by focusing on the underserved, less affluent, customers and has successfully become the primary bank for many of them. However, they are now quickly expanding into the affluent segment with their Ultravioleta offering.

Being a primary bank and successfully competing in the affluent segment is something that very few neobanks in other regions have succeeded with.

In short, Nubank is probably what every Fintech company (at least a neobank) wanted to be. Nubank is now big enough to compete with incumbents, it’s highly profitable, and it’s still growing fast. So why is it Day 1, you might ask.

During the Q4 2024 earnings call, David Velez, Nubank’s co-founder and CEO, outlined three priorities for 2025: 1) build the largest banking franchise in LatAm, 2) expand beyond financial services, and 3) “take critical steps to turn the vision" of a global AI-driven digital bank into reality. Nubank is early in all three.

Let’s start with Nubank’s ambition to become the largest retail banking franchise in Latin America. Nubank expanded into Mexico and Colombia between 2019 and 2020, and by the end of 2024, it had already surpassed 10 million customers in Mexico and 2.5 million in Colombia.

However, compared to Brazil, Nubank’s customer base in Mexico and Colombia is still small (12% of the total). Of course, Mexico and Colombia are smaller countries than Brazil. In 2024, Brazil had a population of 212 million, while Mexico and Colombia had populations of 132 million and 53 million, respectively. But still…there is clearly lots of room for Nubank to grow in these markets.

Mexico and Colombia also represent just 20% of Nubank’s total deposits. Deposits are growing at a neck-breaking speed both in Mexico and Colombia, so this proportion will certainly change very quickly (especially given that Nubank is paying premium rates to customers now).

…and Mexico and Colombia contribute less than 10% of Nubank’s revenue. As I illustrated above, Nubank generates most of its revenue from lending (credit cards and personal loans) and interest earned on customer deposits. Loan portfolios in Mexico and Colombia will take time to build.

During its Q1 2024 earnings call, Nubank compared its performance in Mexico and Brazil, highlighting that Mexico is growing faster than Brazil did at a similar stage. If this trend continues, we should see the same exponential growth in Mexico and Colombia, that we saw in Brazil in the 2021-2024 period.

In summary, Nubank is still early when it comes to monetization of its operations outside of Brazil. They have done the groundwork, but we are yet to see that translating into revenue and profit. Now, let’s discuss Nubank’s ambition to expand beyond financial services.

However, let’s start with Nubank’s non-lending services. Nubank has a successful track record of launching and scaling non-lending services. Thus, in 2020, Nubank expanded into investments through the acquisition of Easynvest (which became NuInvest). It also partnered with Chubb to launch life insurance, NuLife.

More recently, in 2022, Nubank launched NuPay - its own branded checkout button with BNPL capabilities. Using NuPay, Nubank customers can pay online using their account balance or convert the payment into interest-free installments. I haven’t seen Nubank disclose any statistics about NuPay. However, they did sign a number of prominent partners, such as Uber.

Now, Nubank uses its customer base and product development muscle to expand beyond financial services. The company launched Nu Shopping (referred to as Nu Marketplace in investor materials), a curated e-commerce platform within its mobile app; Nu Travel, a service for booking flights and hotels; and NuCel, a mobile phone plan offered in partnership with Claro.

Despite many launches and early traction, Nubank still makes most of its non-interest revenue from interchange and late fees. The revenue from non-lending products (credit cards and consumer loans) represents about 10% of non-interest income (and as I mentioned above, total non-interest income represents just 14% of the company’s gross revenue).

In summary, Nubank has a track record of launching and scaling non-lending products, but it is super early in monetizing those. Now, let’s discuss the company’s vision of becoming “a global AI-driven digital bank.”

I believe it was the first time Nubank explicitly said they are planning to expand beyond Latin America. They made a number of strategic investments in neobanks operating in other parts of the world. Thus, they invested in Jupiter, operating in India, and Tyme, operating in South Africa and the Philippines.

However, David Velez’s comments during the Q4 2024 earnings call suggest that they are preparing to expand to other markets directly. Thus, he spoke about building technical capabilities to quickly expand into new geographies. And, apparently, they have already been working on it for the past “18 to 24 months.”

Last year, Nubank also acquired an AI company, Hyperplane, which specialized in enabling financial institutions to train their own machine learning models used across risk management, collections, and marketing departments.

At the time of the acquisition, it felt like Nubank was trying to improve its AI capabilities. However, the ambition of a “global AI-driven digital bank” adds a new perspective to this acquisition.

So where will they expand? While working on the “State of Fintech 2025” report, Simon Taylor and I debated who might become the “Nubank of the U.S.”. Could it be Cash App, Chime, or maybe even PayPal, if it manages to expand Venmo beyond peer-to-peer payments? But what if “the Nubank of the U.S.” will actually be Nubank?

I would think that acquiring Jupiter or Tyme, and trying to replicate its blueprint in India or Africa, would make more sense for Nubank. After all, they made those investments for some reason. However, I cannot exclude the option of Nubank pursuing the opportunity in the United States. After all, if any non-US neobank can succeed in the U.S., this probably would be Nubank.

Needless to say, none of the above is happening overnight. The opportunity in LatAm is probably more concrete. Expanding into non-financial services is still not a given. And going global is just a call option. But, oh my…this sounds super exciting!

Cover image source: Nubank

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