Brazil’s Nubank plots consolidation in Latin America’s booming fintech sector


Latin America’s greatest digital lender Nubank is planning to reap the benefits of an impending shakeout within the area’s booming monetary expertise sector by scooping up acquisitions at cut price costs, in accordance with its chief government.

The São Paulo-headquartered group, which has attracted billions of {dollars} from overseas traders and given tens of millions of poorer residents their first checking account, is eyeing alternatives regardless of its personal inventory worth plummeting throughout a sell-off within the tech sector. Its shares have slumped by two-thirds this yr, taking its market capitalisation to about $15bn.

But as rising rates of interest and tighter credit score prohibit flows of enterprise capital globally, there are warnings that a few of the area’s start-ups might battle, creating enticing targets.

“There’s going to be a rationalisation of some of the fintechs that are in the market, there will probably be some consolidation,” Nubank’s chief government and founder David Vélez advised the Financial Times. “This will enable the survival of the fittest.”

The Colombian pointed to the proliferation of “about 40 different digital banks” in Brazil, Nubank’s homeland and Latin America’s largest economic system. “It probably was too much. Consumers will not have 20 different payment apps in their smartphones. It’s just too complex. You might have three or four, not 20.”

Vélez predicted “a number of acquisitions” within the sector. “Some of the M&A [mergers and acquisitions] conversations we had 12 months ago are coming back at a 70 per cent discount . . . We’ll be looking to do more M&A.”

Nubank has been on the forefront of a fintech explosion in Latin America. An preliminary public providing in New York final December valued the group above $40bn, briefly making it probably the most worthwhile monetary establishment on the continent.

Founded in 2013, the app-based supplier of bank cards, present accounts and loans has practically 60mn clients at present.

Unlike a few of its digital friends, Nubank began out in credit score somewhat than funds. It has since constructed a sizeable pool of retail deposits in Brazil, the place the market is very worthwhile and closely concentrated amongst behemoths reminiscent of Itaú Unibanco, Bradesco and Santander.

Vélez believes this broader focus will stand Nubank in good stead amid the market turmoil and a fightback by incumbent banks. VC investments into Latin American fintech totalled $1.2bn within the first quarter of 2022, in accordance with commerce affiliation Lavca, 27 per cent decrease than within the fourth quarter of 2021.

“The funding environment is certainly going to be a bit harder than what you saw the past few years,” stated Vélez. But he insisted he was not fearful.

In the previous, he stated, US traders had requested him: “You’ve grown very well in the good times, what’s going to happen in the bad times?”

“That is the wrong question to ask,” stated the entrepreneur. Referring to the nation’s frequent battles with inflation and recession, he added: “Brazil has always been bad times.”

Vélez additionally rejected ideas by Brazil’s huge incumbent banks that digital upstarts had benefited from being extra frivolously regulated. “Regulation is asymmetric — in favour of the [established] banks,” he stated. “It took us four years to get a [financial institution] licence. We had to get a presidential decree.”

Nubank, which can also be current in Mexico and Colombia, has already purchased a number of start-ups over the previous couple of years, and has expanded into providing insurance coverage, investments and, simply final month, cryptocurrency buying and selling.

Vélez stated Nubank was “very close to break-even in Brazil”. He stated the group could possibly be “fully profitable tomorrow”, however was placing progress first. The group was in a powerful monetary place after elevating about $2.8bn within the IPO and its credit score losses have been decrease than the market common, he added.

In addition, the chief government stated his firm stood to achieve from greater rates of interest because it doesn’t pay a yield on the deposits of small and medium-sized enterprise clients and has a big and worthwhile bank card operation.