VC investments in Latin America doubled in 2017 to over $1 billion and over $600 million were invested in the first quarter of 2018. A beneficiary of this trend is Brazilian FinTech startup Nubank, which recently entered the Billion Dollar Unicorn Club.
São Paulo-based Nubank was founded in 2013 by David Vélez to offer a fair and transparent banking service. Brazil has one of the highest interest rates and fees while the services rendered are not transparent and efficient, so Nubank was started to empower people and fight complexity with the help of design and technology.
In September 2014, Nubank launched its credit card Nubank Mastercard, for which it does not change any annual fees. Since then, over 16 million people have requested for its card and the company had over 4 million active customers in 2017. What sets it apart is that its credit card service can be controlled in real-time for free by a mobile app available for Android, Windows Phone, and iOS. Using the app, users can block their respective credit card, apply for a limit raise, contact customer support, and track transactions in real-time. Initially, Nubank charged a revolving rate of 7.75%. Now, it charges revolving rates ranging from 2.75% to 14% a month, depending on the client. According to Brazil’s card-industry association Abecs, the industry average was 9.6% in June 2017.
In August 2017, Nubank launched its Nubank Rewards program. It awards points that never expire and can be redeemed for a product catalogue or discounts on services, travel & entertainment. Customers can try the program for free for 30 days, after which they will be charged a fee of R$ 19,00 per month or R$190,00 per year.
In October 2017, Nubank launched its digital bank service NuConta. NuConta is a no-fee digital savings account that offeres up to 100% of CDI, the Brazilian risk-free rate, on any amount of money deposited in the account, with immediate liquidity. NuConta also offers the option to send unlimited peer-to-peer transactions as well as transfers to any bank account in Brazil for no charge. So far, NuConta has transacted around R$4 billion in its digital accounts and over 1.5 million customers. Nubank recently announced that it would be making the NuConta product available for any Brazilian resident with a smartphone.
In April 2018, Nubank launched a new facial biometrics feature called AccessoBio that will be used to help prevent identity fraud in credit card transactions.
Nubank competes with two of Brazil’s largest banks Banco Bradesco SA and Banco do Brasil SA, which started a zero-fee credit card last September. They each have over 20 million clients. According to Conexão Fintech, there are over 300 FinTechs in Brazil that are disrupting the financial sector that is expected to be worth $75 billion in ten years. According to central bank data, Brazilians spent around R$1.1 trillion ($0.3 trillion) on purchases using credit and debit cards in 2016, which accounts for over 30% of private consumption.
Early this year, Nubank reported that its revenues tripled in 2017 to R$567 million ($170.5 million) driven by increased credit card usage. Its clients more than doubled from 1.3 million in 2016 to 3 million at the end of 2017. However, it continues to record losses. Net loss declined 4% in 2017 to R$117 million ($32.1 million).
Nubank maintains that its current focus is on expanding its client base rather than making profits.
Nubank is venture funded. It has raised $527 million from investors including Red Point, Sequoia Capital, Founders Fund, Kaszek Ventures, Tiger Global Management, Goldman Sachs, QED Investors, Fortress Investment Group, Dragoneer Investment Group, and DST Global. In March this year, Nubank raised $150 million at an estimated valuation of $1-$2 billion. In earlier round in January 2016, it had raised $52 million at a post-money valuation of $500 million.
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns.
This segment is a part in the series : Billion Dollar Unicorns