Wednesday, May 29, 2024

Brazilian Nubank introduces savings accounts, debit cards to Mexican market

Brazil’s Nubank, the largest financial technology firm in Latin America, is now offering savings accounts and debit cards in Mexico through the digital bank’s arm, Nu México.

In a Wednesday press conference, Ivan Canales, who will replace Emilio González as the director of Nu México, said the firm would open a waiting list for the opening of the savings accounts, with first access being granted to clients and members of the company’s digital forum, known as Comunidad Nu.

The firm said it will also launch a Mexican debit card for customers to withdraw cash from ATMs.

Nubank was founded in Brazil in 2013 with the goal of offering consumers a no-fee credit card, backed by investors that included Warren Buffett’s Berkshire Hathaway firm. In Mexico, Nu started operations in 2019.

Nu México’s new products have been launched as a Popular Financial Society (Sofipo), a kind of financial institution which operates with the approval of Mexico’s national bank commission, CNBV. This was possible thanks to its purchase of AKALA, a Sofipo that Nu México acquired in September 2021 as part of its expansion plans, which followed an investment of US$ 135 million to boost Nu’s growth in the country.

Before turning into a Sofipo, Nu México launched its first product in 2020 — an international credit card with no yearly fee. By September 2021, the company was the second largest issuer of credit cards in the country.

In a country where only 47% of the population have bank accounts, Nu México has 3 million clients already — an increase of 4% compared to the third quarter of 2021.

Nu executives hope that the savings accounts, which will not require a minimum balance and will be completely digital, will lure Mexicans with no bank accounts, particularly those in rural areas far from physical branches of traditional banks.

Nu México's headquarters in Mexico City.
The Nu headquarters in Mexico City. Nu México

To date, Nu has users in nine out of every 10 municipalities and covers 80% of the government’s priority rural areas. Canales said that technology was essential to reach those rural communities.

“There are many problems to be solved,” he said. “The financial system in Mexico is very complex, and we believe there are simpler products we can offer to transform the financial life of users.

He added that Mexico, which represents 20% of the population of Latin America, is Nu’s second largest market and a key piece of the firm’s global expansion.

“For folks that have never had a savings product before, this type of digital solution with Nu’s formula of great customer support will also be a compelling value proposition,” Canales told Reuters in an interview.

As of February 2022, Nu reached 53.9 million customers in Brazil, Mexico and Colombia as part of a growing trend. The company estimates that 55% of its monthly active users have chosen it as their main account.

Financial services have dominated Latin America’s startup scene in recent years. According to the Latin American private capital association LAVCA, about 40% of the private funding in 2021 went to financial technology, often referred to as fintech. As of Q1 of 2022, the association also found that fin-tech startups raised US $1.2 billion, marking the fourth largest quarter on record for investment in the region.

With reports from El Economista and Reuters

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