March 2025
Article
6 mins
Nubank: Latin America’s Digital Finance Disrupter
Lawrence Burns
- Nubank has become one of the world’s biggest digital banks since launching its first product 11 years ago
- The firm offers a range of services to meet its customers’ needs as they become more financially sophisticated
- At present it operates in three countries, but it could expand further
A Nubank Customer’s Financial Stepping Stones
As with any investment, your capital is at risk.
Across the globe, ‘fintechs’ have fallen short of their promise. Their apps often excel at only a small number of tasks and few have cracked credit.
Marginal benefits over traditional lenders have not convinced the public to switch en masse to make them their primary bank.
To find digital banking’s true growth champions, you need to look in an unlikely place: Latin America.
Here, Nubank has amassed more than 110 million customers, over half of whom use it as their main account. It is the largest digital bank outside China.
In its home country of Brazil, half the adult population are customers. Brazil’s legacy lenders are notorious for high fees, poor service and neglecting lower-income households. And their costly branch networks and outdated IT limit their ability to improve.
By contrast, branchless Nubank makes it free to transfer money, make deposits and have a credit card.
Its ‘low and grow’ business strategy has helped poorer customers build credit histories, and its ever-expanding range of services meets account holders’ needs at every stage of their financial journey.
This has yielded impressive results: US$11 of monthly revenue per customer against a cost to serve per customer of just 80 cents, a margin that should keep growing as the firm scales.
Nubank’s Customer Growth
Where Next?
Nubank’s six-year-old Mexican business is tracking ahead of Brazil at the same stage on almost every metric. The company debuted in Colombia in 2020 and has ambitions to expand outside Latin America in the years ahead.
Its biggest two competitors are likely to be two other holdings: MercadoLibre, with its financial arm MercadoPago, and recent private investment, Revolut.
Few industries are as large as financial services, giving ample room for all to grow and expand the market. The digitisation of finance has only just begun.
Digital Bank Disruptors
Sources: N26, SoFi Technologies, KakaoBank, Freo Group, Revolut, Nubank, WeBank, Bloomberg
*Q3 2024 v Q3 2023, excluding impact of foreign exchange rate changes
** Based on the last four quarters reported
Co-Founder and CEO of Nubank, David Vélez, on how he and his team have built the world's biggest neo-bank outside of China on our podcast Invest in Progress.
Listen to the podcast here.
About the author - Lawrence Burns
Lawrence Burns was appointed Deputy Manager of Scottish Mortgage in 2021. He joined Baillie Gifford in 2009 and became a Partner of the firm in 2020. During his time at the firm, his investment interest has become focused on transformative growth companies. He has been a member of the International Growth Portfolio Construction Group since October 2012 and, in 2020, became a manager of Vanguard’s International Growth Fund. Lawrence is also co-manager of the International Concentrated Growth and Global Outliers strategies. Prior to this, he also worked in both the Emerging Markets and UK Equity teams. Lawrence graduated BA in Geography from the University of Cambridge in 2009.
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