Monday, May 20, 2024

Nubank to invest US $100M in Mexico, its ‘priority’ market in 2024

Nubank, the largest fintech bank in Latin America, announced on Tuesday that it would inject another US $100 million into its operations in Mexico.

Iván Canales, director of Nu México, the digital bank’s Mexican arm, told El País newspaper that the new investment makes Nu México the largest financial services company of its kind in the country. 

Iván Canales has served as director of Nu México since 2022. (Iván Canales/LinkedIn)

“This [investment] reflects our long-term commitment to Mexico and dovetails with our strategy to make Mexico a fundamental priority for 2024,” Canales said in a press release.

The new funds boost Nubank’s total investments in the country to more than US $1.4 billion.

“With this investment, Nu México reaffirms its position as the best capitalized financial institution in Mexico,” Nubank co-founder Cristina Junqueira said in the same press release.

How long has Nubank operated in Mexico?

Nubank savings accounts were first made available in Mexico nearly a year ago and within the first month more than 1 million accounts had been opened. Total deposits at that time reached 1 billion pesos (US $58.8 million).

Another savings account that offered 15% annual interest was launched late last year, adding another 1 million people to the Nu México client list.

The company’s success in Mexico dates back further. Nu México launched an international credit card with no yearly fee in 2020. By September 2021, the company was the second largest issuer of credit cards in Mexico.

However, Nubank’s default rates in Mexico through February were higher than average, attributed to the large number of first-time card customers. 

“We’ve realized that in Mexico there’s a great need for our clients to learn how to use credit cards and fix their credit history,” Canales told El País, indicating that future Nu México products will focus on this area.

How will it continue to grow in the Mexican market?

The news of the latest investment comes a day before Mexico’s National Banking Convention begins in Acapulco. Ahead of the convention, Nu Holdings CEO David Vélez told El País that the company will continue to target Mexico’s sizable unbanked population.

Nubank, headquartered in Sao Paulo, Brazil, is enjoying a remarkable turnaround, swinging from a net loss in 2022 to a US $1 billion net profit in 2023, according to the trade magazine Finance Feeds. The digital bank’s revenues have soared past US $8 billion, marking a major milestone in its financial performance.

This growth is fueled by an aggressive customer acquisition strategy, with nearly 20 million customers added in 2023 alone. Nu México is constituted as a Financial Cooperative Association (Sofipo) in Mexico, and its total equity as of March comprised more than 51% of the entire sector.

Sofipos are similar to banks but have certain limitations, and Nu México recently filed a petition with the National Banking and Securities Commission (CNBV) for a banking license.

“If we get the banking license, we will not change the way we operate,” Canales told El País. “Our essence, our DNA, is a company that’s 100% devoted to its customers and that uses digital tools to simplify complex products.” 

With reports from El País and Axis Negocios

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