Nubank: David vs Goliaths - [Business Breakdowns, EP.123]

This is Zack Fuss, an investor at Irenic Capital, and today we’re breaking down Nubank. The Brazilian-based neobank has gone from nothing to extraordinary scale in a short period of time. 10 years after its founding, the company counts 46% of Brazil’s adult population as customers, is the largest Fintech in Latin America, and has a market capitalization of $37 billion. The fact that it’s achieved this in an environment that heavily favored the large incumbent banks makes its story all the more impressive.

To break down the business, I am joined by Daniel Bakalarz, Managing Partner at Unison Asset Management. Dan has a long history with this business and it shows in our discussion. We discuss the confluence of factors that made this business possible, the economics of a typical Nubank customer, and the competitive dynamics of banking in South America. Please enjoy this business breakdown of Nubank.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

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Show Notes

(00:02:44) - (First question) - A background on neobanks and how Nubank is unique

(00:04:17) - The company’s origin story and how it moved up the value chain over time

(00:09:43) - Nubank’s rise to a becoming a market leader in just a decade since its formation in 2013

(00:17:04) - The backdrop in Brazil that led to the opportunity for Nubank to enter the market

(00:23:34) - A breakdown of Nubank’s revenue

(00:29:06) - The makeup of a mature Nubank customer and the company’s average revenue from that customer

(00:33:33) - Reasons for the business pricing its annual percentage rates so aggressively 

(00:34:18) - The comparison between the business and traditional bank holding companies in the US and South America

(00:43:40) - Potential opportunities for Nubank in the future

(00:52:12) - The biggest risks to the company moving forward

(00:57:30) - Brazilian regulator's opinion on Nubank’s rise in the market in context of its large established peers

(00:59:54) - Lessons learned from studying the business

(01:05:06) - Dan’s parting wisdom on Nubank and what he wants people to take away from this breakdown