Half of Mexico’s population is under 24 years old and is digitally engaged, but due to the country’s banking oligopolies, only 10% of Mexican adults have credit cards.
“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.”
Nubank’s CEO David Vélez
predicts that Nubank’s biggest customer acquisition channel in Mexico will be word of mouth, as was the case in Brazil. 80% of Nubank’s Brazilian customers were sourced from unpaid referrals, and the company has spent $0 on customer acquisition, Vélez
says (Tech Crunch
Vélez doesn’t think that Nubank’s entry will eradicate the existing Mexican neobanks, but instead believes that banking in Mexico is so defective that startups offering niche services can thrive in this environment.
European digital banks N26 and Revolut have also reportedly been eyeing the Mexican market. Albo
, a Mexico-based neobank recently raised a $19 million Series A
. While competition is great for customers, a saturated market could potentially raise customer acquisition costs
, and make recruitment and growth-stage fundraising harder for fintech players.
Pattern Matching with China
When asked what Nubank was hoping to gain from taking strategic cash from Tencent
, Vélez responded “I went to China and I saw the future” (Tech Crunch
Investors say that due to pattern matching, in Latin America, Asian capital is smarter capital
. Globally, Southeast Asia and Latin America have similar population sizes (roughly 640 million), and 18 of the 25 biggest cities in the world are located in either Southeast Asia or Latin America. These congruent geographic patterns and similar population volumes mean that technology solutions- such as digital banking- achieved by startups in China could also function in Latin America.
“It’s been very helpful to be able to go to China and see what our market might look like five years from now,” said Vélez.
Both Mexico and Brazil are on the brink of entering the QR-code payments world, Vélez noted. While governments are pushing regulations on this technology, Nubank said working with Tencent has helped them understand customer satisfaction better, and how to more strategically position their company as the payments leader in its home market.
Nubank says that although its credit card product has been profitable since 2017, the company itself is not. According to Tech Crunch
, Nubank is leveraging its $820 million in venture capital to invest in scaling its operations and strengthening its technology.
In response to when Nubank will IPO, Vélez says he wants to keep the company private for as long as possible.
Vélez told Tech Crunch
that Nubank is lucky to have investors who are long-term oriented, and that going public hasn’t been brought up at a board meeting. He did note that a direct listing is a “real option.” Vélez imagines that when the time is right for an IPO, Nubank would likely go public on an American exchange, a local exchange, or potentially both.
Nubank has more than 2,500 employees from over 30 different nationalities. The company says it is the sixth-largest bank in Brazil and today, Nubank is the largest independent digital bank in the world.