Nov 30, 2022

Nubank: The Business Model behind the World’s Biggest Digital Bank

Business Model Innovation
by Stefan Lemmerer

What is Nubank?

Nubank is a Brazilian neobank. It is the world's largest digital bank in terms of customer base. David Vélez, the current chief executive officer of Nubank, founded the company in 2013. Nubank has conquered Latin America and has immediate expansion plans for the rest of the world. The bank went public recently in December 2021.

Nubank operates solely through digital banking products, such as their NuConta digital banking account, and has no traditional bank branches. Customers can use the bank's no-fee, low-interest international credit card directly on their smartphones. The Nubank app enables users to conduct all types of banking transactions from their mobile devices at the touch of a button. This has helped Nubank increase financial inclusion in Latin America, where the majority of individuals lack access to or knowledge of traditional banking practices.

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Nubank Financing and Development

By 2013, Vélez had already received $1 million in funding from his mentor Leone and his previous partners in investment banking. The Argentine venture capital firm Kaszek proposed an additional $1 million in startup funding. With an investment of $2 million, Vélez and his partners began designing their first product. With the assistance of a banking partner, Nubank was able to store customer funds. This was done in conjunction with Mastercard, which issued them a credit card.

Nubank Customers and Growth

In 2016, barely two years after its formal opening, Nubank reached one million users with recognized credit cards. Almost exclusively by word-of-mouth and referrals. Nubank was granted a Brazilian banking license in 2017 as a result of the success achieved by Neobank. This enabled the platform to provide checking and savings accounts, which boosted their user base immediately.

Approximately 1.5 million Nubank credit card clients joined up for bank accounts and traditional financial services within five months.

Today, the total number of Nubank users is 65 million. This becomes Nubank the world's largest digital bank in terms of customer base.

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What Makes Nubank Special?

Nubank made Latin American banking easy. The characteristic purple credit card of the digital bank was issued to assist reduce Brazil's exorbitant interest rates. The internet banking solutions provided by Nubank made banking far more accessible to Brazilians.

The bank's app-based system with no hidden costs has simplified banking for the ordinary public, which previously had no access to the country's five largest banks. Anyone can open a digital account and begin banking without visiting physical locations.

In recent years, Nubank has provided high-interest savings accounts, debit and ATM withdrawal capabilities, direct transfers for users' paychecks, a personal loan product, and more.

This online Brazilian bank branch provides the most cutting-edge financial services in Latin America due to its easy-access banking. Similar to Nubank, no other digital bank has been able to conquer the market.

Competing with Nubank

As a result of the platform's success, digital banking services have recently exploded in Brazil. Numerous conventional banks are rushing to build their own applications in an effort to enter the fintech business.

The "Big Five" banks of Brazil, comprising Ita Unibanco, Caixa, Banco do Brasil, Bradesco, and Santander, are Nubank's primary competitors.

However, Nubank presently dominates the fintech business in Brazil, offering features that will be difficult for other companies to replicate.

The previous year, Nubank bought a pioneering digital investing platform and launched a life insurance product, selling a total of one hundred thousand contracts in the first two months. Simultaneously, the digital bank has expanded to Argentina, Mexico, and, of course, Vélez's native Colombia in order to harness their untapped markets. No other bank has been able to capture the market as well as Nubank.

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How does Nubank generate revenue?

How precisely does Nubank generate revenue without charging a fee for their credit card? Whenever you make a purchase with their credit card, a Mastercard network interchange fee is assessed. In addition, when you deposit monies into a Nubank account, the bank gets interest on these funds.

In addition to issuing loans, the bank charges overdraft fees, ATM withdrawal fees, and referral fees. Recently, Nubank introduced a premium credit card called Ultravioleta, which provides clients with a variety of privileges for a monthly cost of $49.

Even if their basic credit card plan is free, it is safe to state that the bank has a varied array of revenue streams.

David Vélez - Founder and CEO - Nubank

Is Nubank a Public Bank?

Nubank went public on the New York Stock Exchange on December 9, 2021. The company's stock price increased by 15%, resulting in a valuation of $41.5 billion.

Nubank's shares began trading at $11.25 per share, which was more than its initial public offering price of $9. The company raised $2,600,000,000.

Nubanks Future

Over the past few years of operation, Nubank has significantly expanded its customer base and revenue. Will this expansion continue?

According to official statistics, Nubank is now adding 41,000 new subscribers daily. It appears like Nubank will continue empowering people financially and breaking the stranglehold of traditional banking through technology as it expands its dominion into other unbanked places throughout the world.

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