Features of Nubank’s operations that made it successful
Nubank is a Brazilian neobank that has been operating successfully in the Latin American market for ten years. It has managed to become the second financial company in the region in terms of value, after Itaú Bank, which has 78 years of experience. In the first quarter of 2023, Nubank recorded an 87% increase in revenues and net profit compared to the same months of the previous period. This is thanks to the bank’s sound growth strategy and ability to react quickly to changing market conditions.
The founder of the Brazilian digital bank is David Velez, who worked for many years in the venture capital sector. In 2013, he decided to change his field and create Nubank. Velez’s goal was to build a financial organisation with the following characteristics:
– low-cost processes;
– a completely digital structure;
– the ability to analyse large amounts of data.
According to David, these characteristics would enable the bank to generate high returns once it became a mature and stable business. And that is exactly what happened: following the publication of the results, Nubank’s shares rose by 30 per cent on the New York Stock Exchange, taking its market value to USD 37 billion.
Nubank’s strategy for success
When Velez founded his fintech company, 80% of the Brazilian market was in the hands of 5 banks. Their main source of income was loans at high-interest rates and commissions. The businessman decided to start here because there was already serious competition among digital banks in the US. And in Brazil, there was no alternative to traditional financial organisations. The first thing Velez did was to offer customers credit cards with no fees. This was necessary for the company because it didn’t need a banking licence to issue loans.
To cut costs, Nubank avoided expensive advertising, instead inviting users and, through them, their friends. This strategy paid off, and within two years, the bank had about 2 million customers. In addition to providing loans on favourable terms, the company offered users a convenient mobile application that allowed them to carry out many transactions independently without visiting a physical office.
In 2023, about 45% of Nubank’s revenue came from interest on loans, with the rest coming from accounts, fees for investment and insurance services, and terminal usage. Meanwhile, to mitigate lending risks, the digital bank is gradually increasing the limit for users. If there is a high probability of non-payment, the customer is offered a special secure card. To use it, the customer must first deposit some of their own funds. This approach allows Nubank to minimise the number of problem loans.
