What Nubank’s funding means for Brazilian FinTech
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Image Source: Screenshot, Nubank's website

Besides the fundraising, the company also announced the launching of a MasterCard Platinum credit card that can be controlled from a mobile app

Image Source: Screenshot, Nubank's website

Image Source: Screenshot, Nubank’s website

Nubank, a Brazilian startup for financial services, announced the raising of a $14.3M funding round led by Sequoia Capital, Kaszek Ventures and private investor, Nicolas Berggruen.

Among the biggest and fastest growing emerging markets, Brazil’s startup investment has lagged behind China and India, which are home to numerous dedicated venture funds of U.S. origins. This round of investment for the FinTech startup might be a sign for a change, as investments in Brazil have mainly focused on companies that mimic successful U.S. e-commerce and social-networking sites.

After Sequoia’s first venture in the German market  with its investment in Berlin-based 6Wunderkinder, the American private equity firm has returned to Brazil, after earlier pulling out of the South American region. The current investment suggests that Sequoia remains open to investing in Brazil. Still, there does not appear to be any plans to reopen an office. The firm’s priorities outside of Silicon Valley continue to be focused on Israel, India and China, where they have made numerous investments and have raised multiple successful funds.

The connection between Sequoia and Nubank didn’t come about by coincidence, as David Vélez, founder and CEO of Nubank, used to work for Sequoia as a scout for investment opportunities in South America. It was this work that brought him to thinking about starting his own company in Brazil. Vélez told TechCrunch: “After spending more than two years looking at technology opportunities with Sequoia in Latin America, we got convinced that there were a ton of high quality opportunities for starting tech companies in Brazil, but not in the sectors that most tech companies/entrepreneurs were pursuing,” he says. “I decided to strike on my own because I had always wanted to be an entrepreneur, and as a venture investor I saw more interesting opportunities on the entrepreneur’s side of the table, than in the investor’s side of the table.”

Doug Leone, a key part in Sequoia’s expansion into the BRIC market – specifically in India and China, said earlier: “In Brazil, we see a youthful country, with lots of people who want to innovate and a mass market to receive that. We have seen other businesses in Brazil, and we have seen a lot of look alike models to the U.S., perhaps more than in other geographies. Some of those were interesting but nowhere near as interesting as Nubank.”

Brazil’s Payment Market

Brazil, the economic juggernaut of Latin America, has long been considered for its potential in the financial services industry. Today, getting a credit card in Brazil can take weeks, lots of paperwork, and many visits to the bank, and Nubank wants to swipe all of that away.

According to Vélez: “Financial services is Brazil’s single largest market, but five of the top ten public companies are big banks. At the same time, when you talk to any Brazilian, you realize that there is a significant amount of customer pain and frustration in this industry, particularly among the 100 million Brazilians that are under the age of 29 and want a differentiated banking experience that is friendly, simple, and transparent, and skips the significant layers of bureaucracy.”

Brazil’s credit card market continued to grow in 2014. It accounted for 291 billion Reais ( $121 billion) in transactions in the first half of 2014, a 13.5 percent increase from the same period in 2013, according to the Brazilian Association of Credit Card and Services Companies. In October of 2013, Brazil’s payment industry reached a major milestone with the passage of Law 12.865/2013. The legislation lays out a number of regulations for the sector, minimizing financial market risk, promoting operation stability and formalizing payment institutions.

Besides Nubank, a number of electronic and mobile payment solutions continue to pave the way, including Zoop and PagPop, and other prepaid account payments were initiated. Furthermore, a handful of Brazilian startups are already working on democratizing access to financial services across the country. One of the largest of these players is PagSeguro, which started out as BRpay, and changed its name soon after its acquisition by Brazilian portal UOL in 2007. PagSeguro accepts many method of payments, including ‘boletos’ – bills that users can pay at physical locations – as well as all major credit cards.
Other competitors include the online payment solutions offered by Buscapé Company, which it recently re-branded under the name Bcash to target online commerce in Brazil. The company also owns a separate entity called Pagosonline, which targets the Colombian market.

GuiaBolso, a Mint-style financial management app that has seen some viral popularity in the country, was co-founded by a former exec from Groupon Brazil and a McKinsey alum who had been working with the Brazilian banking industry.

Rocket Internet has also been making a lot of inroads into the country, including launching its Square-style payments platform, Payleven.

According to Vélez, “Nubank is not trying to be the “first” here, just the best. Our story is not about under-penetration of banking. It is about offering credit products to already banked customers that are currently completely overpaying in terms of fees and expenses, and getting a very poor experience in return. Since we don’t have to pay for expensive physical branches or other costly infrastructure, we can pass those savings to our customers in terms of no fees products, lower interest rates, and excellent customer service. Our customers also don’t want to pay for that expensive infrastructure by the way.”

New iPhone and Android app

Besides the strong need in the financial industry, there’s another advantages in Brazil for Nubank. The country’s broadband penetration is huge, and headed largely through smartphone growth. As of today, there are 90 million smartphones in use among Brazil’s population of 200 million, and the numbers are still growing in a fast pace. Furthermore, Brazilians have one of the highest engagement percentages with technology and social media of any country in the world.

In order to take advantage of this growth, Nubank offers a MasterCard Platinum credit card that users can manage through the company’s Android or iOS app.
Nubank’s new app allows you to:

  • Request a credit card
  • Enable the credit card
  • Manage your accounts in real time
  • Filter transactions by location, business name and category
  • Lock and unlock your credit card
  • Change your account settings
  • Easy access your invoices

You can download Nubank’s new financial app for your iPhone or Android from the links below:

Apple-App-Storegoogle-play-store

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