One million people in Mexico opened a Nubank savings account by June, just about a month after the digital bank rolled out its second product in the Mexican market. The threshold points to a growing demand for digital services in the country, drawing interest from local and international players alike.
For Nubank, initially co-founded in 2013 by Colombian CEO David Velez in Brazil, this could mark a breakthrough in its international strategy. The neobank has yet to replicate its massive success in its home country, where it boasts over 70 million customers. Nubank is also present in Colombia, its third largest operation in Latin America.
In an exclusive interview with Fintech Nexus, Ivan Canales outlines the strategy in the region’s second-largest economy. The executive oversaw the expansion to Colombia first and last year assumed as Nubank’s general manager in Mexico.
“We have actually grown faster in Mexico than we did in Brazil,” Canales told Fintech Nexus. The digital bank started out with its signature product back in 2020 – a purple credit card with no fees. Last year it reported 3.2 million customers.
Savings account is “fundamental” to Nubank Mexico’s strategy
But to continue its upward trend in Mexico, the neobank needed an account product. In December, it concluded the process of acquiring Akala, a regulated entity that allowed the Brazilian digital bank to start taking deposits in the North American country.
“The savings account is a fundamental part of our business strategy in Mexico,” said Canales. “With a credit card alone, you do not get to accept everybody (as a client). Now we can say yes to everyone interested in a relationship with us.”
Just one month after its official launch, Cuenta Nu, reached 1 million users and over 1 billion Mexican pesos (over $50 million) in deposits. The account pays a 9% annual yield on those, which, Nubank states, “is one of the highest in the market”.
The concept of remunerated accounts is not so popular in Latin America. But several fintechs have made a case out of it recently as stubborn inflation eats through savings. Fintechs seek to compete for customers within traditional institutions. “Cuenta Nu solves a very relevant pain point in Mexico, where it is rare to find accounts with good performance,” Canales said.
For Nubank, taking in deposits also provides a source of funding, plus a baseline for expanding the credit offering later on. “The account helps us learn much more about each customer,” he said. “This will give us more information to conduct credit evaluations.”
Serving the underbanked in Mexico
As of yet, a significant part of the 3.2 million customers represented underbanked individuals. Mexico is one of Latin America’s largest economies, yet one of the worst in terms of financial inclusion metrics.
According to Nubank, around half of all its credit-card clients didn’t have a card before signing up. “We know we are pushing the credit card offering within Mexico,” Canales said. He argues just 11% of Mexicans have access to a credit card at a bank, a rate much lower than peer countries such as Brazil.
“The issue of underbanked is much more tangible here in Mexico and will be a more fundamental part of our history in this country,” Canales said.
Shares up 120% year to date
During the year, Nubank shares have been one of the stellar performers in the Latin American tech sector. Its stock is up 120% year to date to a price of $8 apiece. It is, however, still recovering from a sharp repricing last year, which saw its IPO price of $9 per share crumble to well below $4.
The reversal in market conditions has led Nubank to revisit its strategy. It is upholding growth in key markets such as Mexico and Colombia and pursuing a cross-selling strategy in Brazil, where it has already rolled out a broader range of products to monetize.
To be sure, it is not alone. Many financial technology firms, in some cases, backed by traditional heavyweight banks such as Banorte, or retailers such as Walmart or Coca-Cola Femsa, have stepped into the segment in the past few years with digital-only propositions.
At any rate, the fintech ecosystem in Mexico is getting increasingly competitive. But Canales is confident about Nubank’s ability to expand market share. “With a net promoting score of 90, we are well above the rest of the market,” he said. “When people love your product, everything is easier.”