Breaking the Chains: Nubank’s Journey to Challenge the Banking Giants

Hey everyone!

Sorry for not posting last week, I was enjoying an excursion in Mexico with my family.

During that period, I noticed a common theme popping up everywhere. Many locals used a purple card to pay for their goods and services which upon further discovery leads to the story I am going to tell you today.

Picture this: You are a Stanford graduate, worked in Morgan Stanley, Sequoia Ventures and returned back to South America. You noticed there is an oligopoly of banks charging extraordinarily high fees controlling seventy-five percent of the market, and the population was majorly unbanked.

That person was David Vélez, the founder of Nubank one of the biggest fintechs in world and the largest fintech in Latin America. It offers digital credit cards, transfers and payments for the Latin American population.

When Nubank first started, they had to go against the oligopolies in Brazil, which at that time nobody dared to compete with them because they are often controlled by the biggest or best-connected wealthy families. The banking industry was heavily regulated. Companies required licenses, a central bank and capital.

David Velez dubs Nubank as the ‘anti-bank’ in which he says “Big banks thrive on the complexity of the financial system because it’s a way to create a relationship where consumers are hostages. They charge you two reais for an SMS notice, five reais for this, 100 reais for that. “

To the Nubank user, it has no maintenance fees, offers free and unlimited transfers and a higher interest rate than a regular savings account and offers a purple credit card.

The growth of its success is attributed to many factors like emphasizing word of mouth advertising and by not spending much on marketing; that money went to other developments of the business.

Also, another of Nubank biggest strengths is the amount of data it collects from it users, an amount of ten-thousand data points which it uses for good; to build profiles and predict how much of credit they can loan to a consumer.

But It is my belief, Nubanks customer centric focus is why it has rapidly grown. It does not discourage any user regardless of their income level, to have access to banking. In fact, customers start with a $10 credit which many of them pay off in time and they see that credit increase over time.

Nubank’s singular focus on Latin America banking system is its comparative advantage is they know exactly how the average Latin American thinks and they dared to go against what was deemed to be impossible.

Originally published at https://aatish.substack.com.