Nubank, the Brazilian digital bank valued at $10 billion, is launching its Nu credit card in Mexico – a country where the unbanked population counts 36 million people.
The Sao Paulo-based fintech company, known for its fully-mobile digital bank and credit card, has raised $820 million across seven rounds of investment and has amassed nearly 22 million customers in Brazil alone. Now, the Nu credit card is available to all Mexicans over 18 years of age – and has already grown a waiting list of 30,000 Mexican customers. Nubank’s CEO is David Vélez, who before founding Nubank in 2013, was a partner at Sequoia Capital in charge of the firm’s Latin American investments. Nubank was co-founded by Cristina Junqueria and CTO Edward Wible. In the past year, the company has hired three more C level executives and a new CFO.The Mexico opportunity
Nubank believes that Mexicans are ready to take back control of their money with financial services that are transparent, human and simple. A predominately cash-based society and lack of digital savings and lending products makes it harder for people to achieve financial freedom in Mexico. The company hopes its no-annual-fee credit card will help to free Mexicans from the complexity and bureaucracy beleaguering their banking experience.The problem is this big and bad: Personal finance tools in both Brazil and Mexico are so limited that Nubank has not had to spend a dollar on customer acquisition.
Half of Mexico’s population is under 24 years old and is digitally engaged, but due to legacy banking oligopolies, only 10% of Mexican adults have credit cards. With an unbanked population of 36 million, startups and investors have been grappling for a piece of the Mexico fintech opportunity for years. Vélez predicts that Nubank’s biggest customer acquisition channel in Mexico will be word of mouth just as it was in Brazil. 80% of Nubank’s Brazilian customers were sourced from unpaid referrals, and the company has spent $0 on customer acquisition, he says.
Currently, Nubank offers a credit card with no annual fee, fully controlled by a mobile app. The company is testing personal loans with two million customers, who must pre-qualify to get the service. Recently, Nubank has started to develop services for entrepreneurs and small-business owners in Brazil and is currently testing a beta version of its digital account for this user group. As Nubank scaled in Brazil, the company realized that its biggest bottleneck was access to engineering talent. Vélez says that while Brazil trains 50,000 developers per year, the demand for tech developers is double that. While Nubank hires locally and recruits engineers from domestic Brazilian universities, the company opened engineering centers in Berlin, Mexico City and Buenos Aires. This year, Nubank made its first acquihire, a software consultancy called PlataformaTec. Vélez declined to disclose how much Nubank paid for the acqui hire. Vélez doesn’t think that Nubank’s entry will eradicate existing Mexican neobanks. He stresses that banking in Mexico is so defective that numerous startups offering niche services can thrive. European digital banks N26 and Revolut have reportedly had their eye on the Mexican market. Albo, a Mexico-based challenger bank recently raised a $19 million Series A. However, Albo issues a Mastercard debit card and a personal finance app for underbanked people — different from Nubank’s credit card product. While competition is great for customers, an increasingly saturated market may raise customer acquisition costs, and make recruitment and growth-stage fundraising harder for players across the board.