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Buffett-backed fintech Nubank to launch personal loans in Mexico

Over the past year, Nubank has undergone a remarkable expansion in Mexico, growing beyond credit cards to offer a broader suite of financial services, including savings accounts, debit cards, and now, personal loans.

Just a few months after launching savings accounts, digital bank Nubank is all set to introduce its brand-new product in Mexico. The Brazilian neobank announced personal loans as part of its strategy to broaden its presence in Latin America’s second-largest market.

Promising loan approvals in under five minutes, Nubank’s Mexican arm, Nu Mexico, aims to enhance access to credit and set itself apart from traditional banks that dominate around 80% of the lending market. This move signals Nubank’s initial foray into this domain, akin to its payroll lending feature in Brazil.

Following Nubank’s modus operandi, the launch of personal loans will be executed in phases. It will commence with a select group of employees testing the product before gradually expanding it to the general market, as outlined in the company’s press release.

This expansion comes on the heels of Nubank’s introduction of savings accounts in Mexico earlier this year, attracting over one million users within a month. The fintech acquired a credit institution company back in late 2022. According to country manager Ivan Canales, this enabled Nu Mexico to take deposits in that country, which is a pivotal step in initiating credit services in the market.

“In Mexico, the problem of underbanking is highly evident,” the executive told Fintech Nexus in an interview earlier this year. “Approximately half of Mexicans do not possess a formal savings account.”

Nubank seeks to bridge the gap left by traditional banking institutions, where millions of Mexicans struggle to secure loans. With a population of 130 million, Mexico ranks poorly in financial inclusion metrics, presenting a substantial opportunity for digital banking enterprises.

Nubank Mexico and customer growth

Nubank, the fastest-growing fintech in Latin America, reported north of 85 million customers. But in Brazil, the neobank market is showing early signs of saturation, and user growth – although still significant- is stalling. For that reason, the fintech has been exploring other markets – chiefly Mexico and Colombia – as new sources of customer growth going forward.

For now, over 90% of its clients are based in Brazil. Users in Colombia and Mexico have yet to pick up. The firm reported 3.6 million clients in Mexico by the end of the second quarter and less than a million in Colombia.

For this reason, executives have expressed their readiness to accelerate rollouts in foreign markets. “We are creating a complete services platform that can accompany different stages of people’s financial lives,” Canales said in a release. “We give the customer full control over their loan, with no hidden fees or conditions. This is how we want to grow our offering in the country.”

The executive said that nearly 20% of the smartphone-connected adult population in Mexico had already applied as a customer, yet he did not provide further details.

Moving past break-even

Iván Canales, general manager at Nu México.

The neobank has focused on lending initiatives this year in order to expand user growth, but also boost profitability. Nubank reported a loan portfolio of $15 billion in the second quarter, almost exclusively based in Brazil.

That number was 15% higher than the previous quarter, but yet small compared to Brazil’s massive loan market.

Growing into lending is critical for Latin American fintechs, as it is one of the most profitable products in the market. It is also one of the most sought-after by financially excluded adults.

But Nubank’s approach has been rather careful. With rising rates and inflation, it has instead pursued a rather moderate growth strategy.

In late 2022, Nubank announced a capitalization of $330 million, bringing total investment in Mexico to $1.3 billion as of last year.

Nubank, supported by Warren Buffett, recorded a remarkable 44% surge in adjusted net income during the second quarter, reaching $262.7 million. This substantial increase reflects the neobank’s ongoing efforts to expand its customer base across Latin America. Notably, Nubank has achieved positive net income for the fourth consecutive quarter.

Nubank books record $262M net income on fast-growing user base

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