Brazil’s Nubank plans consolidation in Latin America’s thriving fintech sector

Latin America’s largest digital lender, Nubank, plans to take advantage of the impending shake-up in the region’s booming financial technology sector by grabbing bargains, according to its chief executive.

The Sao Paulo-based group, which has attracted billions of dollars from foreign investors and provided millions of poorer citizens with their first bank account, is looking for opportunities, despite a sharp drop in its own stock prices during a sell-off in the technology sector. . Its shares fell two-thirds this year, reaching a market capitalization of about $ 15 billion.

But as rising interest rates and tighter lending are limiting venture capital flows globally, there are warnings that some regions startups can fightcreating attractive goals.

“There will be a rationalization of some of the fintech companies on the market, there will probably be some consolidation,” Nubank CEO and Founder David Veles told the Financial Times. “This will enable the most capable to survive.”

The Colombian pointed to the proliferation of “around 40 different digital banks” in Brazil, Nubankhomeland of the country and the largest economy in Latin America. “It simply came to our notice then. Users will not have 20 different payment apps on their smartphones. It’s just too complicated. You can have three or four instead of 20.

Veles predicts “a number of acquisitions” in the sector. “Some of the M&A [mergers and acquisitions] the calls we had 12 months ago are back with a 70% discount. . . We will strive to make more mergers and acquisitions. “

Nubank was in the forefront of the fintech explosion in Latin America. An initial public offering in New York last December valued the group at more than $ 40 billion, making it the continent’s most valuable financial institution.

Founded in 2013, the app-based provider of credit cards, current accounts and loans now has nearly 60 million customers.

Unlike some of its digital counterparts, Nubank started with credit, not payments. Since then, it has built a significant set of retail deposits in Brazil, where the market is very profitable and highly concentrated among giants such as Ita├║ Unibanco, Bradesco and Santander.

Veles believes that this broader focus will help Nubank amid market turmoil and resistance from existing banks. VC’s fintech investment in Latin America totaled $ 1.2 billion in the first quarter of 2022, according to the Lavca trade association, 27 percent less than in the fourth quarter of 2021.

“The funding environment will certainly be a little more difficult than what you have seen in the last few years,” Veles said. But he insisted he wasn’t worried.

In the past, he said, American investors have asked him, “You grew up very well in good times, what will happen in bad times?”

“This is the wrong question,” said the entrepreneur. Referring to the country’s frequent battles with inflation and recession, he added: “Brazil has always been a bad time.”

Veles also rejected Brazil’s proposals large established banks that digital new people have benefited from being less regulated. “The regulation is asymmetric – in favor of [established] banks, “he said. “It took us four years to get it [financial institution] Permit. We had to get a presidential decree.

Nubank, which is also present in Mexico and Colombia, has already bought several start-ups over the past few years and expanded to offer insurance, investment and only last month’s cryptocurrency trading.

Veles said Nubank was “very close to profitability in Brazil”. He said the group could be “totally profitable tomorrow”, but put growth first. The group was in a strong financial position after raising about $ 2.8 billion in an IPO and its credit losses were lower than the market average, he added.

In addition, the CEO said his company could win higher interest rates as it does not pay yields on customer deposits of small and medium enterprises and has a large and profitable credit card operation.

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