Nubank’s rumoured Nasdaq listing is less about it expanding into the States and more about fighting off digital banking rivals at home in Latin America, market analysts believe.
The Brazilian fintech is arguably the world’s biggest challenger bank, boasting 35 million clients on its books compared to US competitor Chime’s 12 million and UK-headquartered Revolut’s 15 million. South Korean KakaoBank is said to have over 13 million customers. Nubank has more customers outside China than any other bank in the world.
The flotation rumours come hot on the heels of Nubank raising a $400m Series G round in January that pushed its valuation past the $25bn mark. Investors GIC, Whale Rock, Invesco, Sequoia, Tencent, Dragoneer and Ribbit all participated in the raise, which came after a year in which the fintech had more than doubled its customer numbers and acquired three different startups to strengthen its market position.
The rumoured initial public offering (IPO) in the US, first reported by Reuters speaking with anonymous sources familiar with the plans, is, however, being viewed as a bid by Nubank to shore up Latin American market share rather than an indication of coming North American expansion.
“Nubank is trying to push out its competitors before it is too late,” Katherine Long, banking analyst at GlobalData and author of the GlobalData Beyond the Hype: Insight into Digital Challenger Banks thematic research report, tells Verdict.
In the report, she explains that Nubank was launched in 2013 and that it can attribute its success to it providing a better digital service than Brazilian incumbent banks who had an almost “cartel-like” market dominance. “The incumbents are rubbish,” Long elucidates.
It also achieved its success by not doing what neobanks like Chime tend to do: target millennial customers.
“Nubank is not like other challengers,” Long says. “Other challengers mostly cater to young, fairly low-income people whereas Nubank is mostly for the affluent.”
This explains why Nubank has been able to drum up custom from Brazilian professionals by offering monthly interest rates on loans between 2.75% and 14%. While that may sound high compared to Chime’s annual 0.5% interest rate, it is well bellow what traditional lenders charge in Brazil.
However, rivals are now threatening Nubank’s position in Brazil, Argentina, Colombia and Mexico. Incumbent banks are increasingly offering digital services – especially since Brazil introduced open banking in 2020 – and international neobanks such as Revolut and N26 have announced plans to break into the Latin American market. There is also a smattering of domestic startups positioning themselves for a piece of the pie.
It is against this backdrop that Nubank’s IPO should be seen, Long argues. Capital from a public debut would provide the digital lender with the financial strength to go toe-to-toe with global and domestic rivals.
“I think this is a way for new bank to try and outgrow that small competition by bringing in new funds,” she says.
Rumour as it might be for now, and whatever the motives behind it really are, Nubank’s IPO as and when it happens would be one of the biggest by a South American fintech company.