Nubank
Photo: Nelson Almeida/AFP via Getty Images

Nubank thinks its super app is worth $50 billion. Here’s why it might be right.

Protocol | Fintech

Hello and welcome to Protocol | Fintech! This Tuesday: Nubank reveals how fast it's growing, a crypto CEO tries to pull off a hip-hop anthem, and a new regulatory framework for stablecoins shows signs of emerging.

Why Nubank's super app is super successful

Fintech is displacing traditional finance around the world, but nowhere are the changes as striking as in Latin America.

Nubank is seeking a valuation of about $50 billion in its IPO, according to the Brazilian neobank's latest filing — a sum that would make it more valuable than Lloyds Banking Group, Nordea or BBVA.

If Nubank — properly Nu Holdings — hits that mark, it could signal broader lessons for other neobanks as well as conventional banks trying to match their nimble nature.

This is what a super app looks like. While American fintechs are talking up their super-app plans, fintechs abroad are making the vision of a do-it-all financial app a reality. There's Revolut in the U.K., Paytm in India, Alipay and WePay in China, and Nubank in Latin America.

  • One clear tell of a super app is the non-interest income it generates. The Federal Reserve Bank of Cleveland has found that non-interest income has been trending downward in the past decade among American financial institutions.
  • Nubank makes almost half its money — 43% in the first nine months of 2021 — from fees and commissions. Interchange on its customers' card purchases, paid for by merchants, is the single largest source, but its fee and commission income is diversified. It sells subscriptions to loyalty programs, prepaid mobile phone top-ups and insurance. It also offers online brokerage services and remittances.
  • Nubank's overall growth is spiking. It generated $1.06 billion in revenue in the nine months ending in September, almost double the year-ago period. Losses grew, though more slowly, rising to $99.1 million from $64.4 million in the same period. It has 35.3 million monthly active customers.

American super-app hopefuls should take note. Neobanks like SoFi, payments companies like PayPal and "buy now, pay later" companies like Affirm all want to go super. Here's what they should learn from Nubank.

  • Nubank, founded in 2013, started by offering no-fee credit cards, but has since expanded into bank accounts; debit cards; personal loans; small business bank accounts; "buy now, pay later"; and other products across Brazil, Mexico and Colombia.
  • The lesson: Build your brand and expand beyond the basics. That's easier said than done in crowded, mature markets, of course.
  • Speaking of: U.S. neobank Chime is also seeking an IPO, reportedly targeting a valuation of $35 to $45 billion.
  • The IPOs of Nubank and Chime could both occur in the coming months. If they're successful, the offerings will help validate the neobank market. The stock markets' stamp of approval might also tip some consumers over into signing up.

The other lesson: Don't sleep on Latin America. A sizable portion of the population in Latin America is unbanked. That leaves opportunity for Nubank and others. Another fintech, Argentina's Uala, recently was valued at $2.45 billion.

  • Mercado Libre, Latin America's Amazon, has a market capitalization of $74 billion.
  • Last year, $4.1 billion in venture capital went to Latin America, beating Southeast Asia, and also topping Africa, the Middle East and Central and Eastern Europe combined.
  • There are a slew of Latin American unicorns across different sectors, but most have a strong fintech connection, whether through payments, ecommerce or other new financial products. And 40% of Latin America VC funding went to fintechs, The Financial Times reported.

— Tomio Geron

A MESSAGE FROM DIGITAL REALTY

Optimizing financial services data exchange requires a data-centric infrastructure architecture designed to defy data gravity, secure data near the customer, and enforce data compliance while also being engineered for AI. Download the Optimizing Financial Services Data Exchange PDx™️ Solution Toolkit, which includes a Solution Brief, Blueprint and Design Guide.

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From Protocol | Fintech

The Treasury Department called for bank-like regulatory oversight of stablecoins. The much-anticipated report highlights gaps in regulation and calls for Congress to make legislative moves to increase oversight.

Most fintechs ignore renters. That's a missed opportunity. Esusu's co-founders say renters deserve credit.

Overheard

"Some of the criticisms of payment for order flow, frankly, don't make sense to me."Robinhood CEO Vlad Tenev.

"It's like a doctor selling donuts in the office."Mike Stegemoller, banking and finance professor at Baylor University, on the potential conflict in the report that Goldman Sachs could take on dual roles as adviser and financier in SPAC deals.

"Everybody say 'U' … say 'S' … 'DC' … it's the currency for me." MC JA, better known as Circle CEO Jeremy Allaire, in a corporate parody rap video marking USDC surpassing $20 billion in circulation.

3 questions with Arrived CEO Ryan Frazier

What fintech trend are you most excited about?

I am seeing a lot of fascinating developments in financial education. There are a ton of great new companies focused on expanding financial education more broadly for both kids and adults who may have not had much exposure to best practices. These companies are helping their customers understand the importance of saving and investing, the differences between "good" and "bad" debt, and other topics that will help set more people up for financial success over the course of their lives.

What fintech trend is most troubling for you?

The rate of innovation in fintech has created a pace that puts a lot of focus on very short-term investment periods and trendy asset classes. I think at times this can distract from the fact that real wealth is usually created through consistent, compounding growth for long periods of time. I would love to see more people talking about a time horizon in decades instead of days.

What problem would you like to see a fintech company solve?

Crypto for beginners. Investing in crypto can still be very overwhelming. I think there is an opportunity for more companies to solve the analysis paralysis that many people have when thinking about dipping their toes into the crypto asset class.

Need to know

NYDIG acquired Bottlepay. The bitcoin company said it plans to integrate the payments software company into its crypto infrastructure offering.

Paysafe completed its acquisition of Viafintech. The payments technology company said buying the German alternative-payments infrastructure firm would help it expand.

Ekko introduced an environment-friendly debit card. The fintech company said five transactions on its debit card will pay for the diversion of an ocean-bound plastic bottle. Every 50 transactions pays for a tree to be planted and maintained.

Making moves

The CFPB named new leaders. Lorelei Salas is the agency's new assistant director for supervision policy and acting assistant director for supervision examinations. Eric Halperin is the CFPB's assistant director for the Office of Enforcement.

Deal flow

XanPool raised $27 million. The Hong Kong-based payments infrastructure company's series A round was led by Valar Ventures.

A MESSAGE FROM DIGITAL REALTY

Optimizing financial services data exchange requires a data-centric infrastructure architecture designed to defy data gravity, secure data near the customer, and enforce data compliance while also being engineered for AI. Download the Optimizing Financial Services Data Exchange PDx™️ Solution Toolkit, which includes a Solution Brief, Blueprint and Design Guide.

Learn more

Data point

$116 billion: That's the projected amount of direct bank account payments facilitated by open banking in 2026, up from under $4 billion in 2021, according to Juniper Research.

Thanks for reading — see you Friday!

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