By Antonio Torres del Cerro
Sao Paulo, Aug 10 (efe-epa).- Frustrated with the red tape involved in opening a bank account in Brazil, Colombian entrepreneur David Velez decided to found his own fintech start-up, Nubank, in 2013.
Seven years later, it has grown to become one of the world’s largest digital-only banks with 26 million customers and is valued at more than $1 billion.
Velez, who was born in Medellin on Oct. 2, 1981, and currently lives in Sao Paulo, has challenged Brazil’s highly concentrated banking industry and now intends to do the same in Mexico, a market he says has many similarities.
In a video interview with Efe, the Nubank chief executive officer said he has no intention of selling the company nor of launching an initial public offering and that his strategy centers on achieving further growth in the credit card and personal loans segment.
Part of Nubank’s appeal relative to Brazil’s traditional banks is its credit card with no annual fee.
But the CEO said the fintech he co-founded with Cristina Junqueira and Edward Wible is looking to expand its clientele beyond the demographic group of hyper-connected “millennials” (those born between 1981 and 1996).
One of Latin America’s first unicorn companies (a start-up valued at $1 billion), Nubank now has 2,700 employees in 30 countries and offices in Sao Paulo, Mexico City, Buenos Aires and Berlin.
Question: Where did the idea for Nubank come from?
Answer: I come from a family of entrepreneurs in Colombia and I grew up hearing at home that that was the path to follow. I went to work in Sao Paulo (with the risk-capital company Sequoia) and I had quite a frustrating and painful experience trying to open (a bank) account. You have to go through an armored door with armed security guards walking alongside you as if you were a criminal. It took three or four months to open an account that cost me several hundred reais a year.
I opened it at HSBC (a subsidiary of Banco Bradesco) … and in my case I was a privileged person, working on (Brigadeiro) Faria Lima (Avenue) in Brazil’s financial district. Imagine how it would be for 90 percent of the population. I came to the conclusion that there was a great opportunity to create a digital bank given the Internet and smartphone penetration that was happening in 2012 and 2013.
Q: You have 26 million customers, 25 million of them in Brazil. Have any of Brazil’s five-biggest banks (the state-run Caixa Economica Federal and Banco do Brasil and the privately owned Itau Unibanco Holding, Banco Bradesco and Banco Santander Brasil) wanted to acquire you?
A. Let’s say that we’ve talked. We have good relationships with all the big banks, but we’ve been clear from the beginning that our intention is to create a company for the very long term, not one to be sold in five or six years, not at all. We have a market dominated by five big banks that own 90 percent of loans, deposits, financing, university loans, and we want to transform that market and offer the customer a better experience.
Q: What is your customer portfolio like?
A: The average age of our customers today is 32, but we’re now reaching other types of customers. We have (ones) in the 40s, 50s, 60s and 70s age brackets. During the pandemic, we’ve especially seen an acceleration in the over-60 age brackets.
Q: What banking products does Nubank plan to focus on?
A: We’ve grown a lot. We’re fourth among Brazil’s financial institutions in number of customers, but we see percentage-wise (in terms of) number of digital accounts, credit cards, personal loans we’re very small. For example, we have 9 percent of the credit-card market and in personal loans it’s less than 1 percent. On the other hand, we launched a product for small business accounts last year that has grown a lot. We have nearly 250,000 business customers. Internationalization also is a priority. We’re growing well in Mexico and we intend to keep accelerating.
Q: Why Mexico?
A: It has a lot in common with Brazil. It’s also dominated by a banking oligopoly. There’s a lack of competition, alternatives. Prices are higher than they should be, and that leads to a bad customer experience. In Mexico, credit-card penetration is 10 percent. In Brazil, it’s 60 percent. The unbanked level (proportion of people without a bank account) is 40 percent in Mexico and 30 percent in Brazil. It also has a very young population. Half of the population in Brazil is less than 31; in Mexico, half are under 24. They’re very connected populations. Brazil and Mexico are among the world’s top five in number of WhatsApp, Twitter, Uber and Netflix users.
Q: Are you planning to go public?