The IPO is Just the Start: Brazilian Fintech Nubank is Set to Become a Global Financial Trailblazer

After initially hoping to achieve a $50 billion market cap upon its arrival on the New York Stock Exchange, Nubank scaled back its ambitions to $41.5bn in the wake of an increasingly jittery equities market following the emergence of the omicron variant of Covid-19.

However, the future looks extremely bright for the world’s most valuable challenger bank, which has recently attracted huge volumes of investment from legendary Wall Street stalwart, Warren Buffett. Berkshire Hathaway, Buffett’s investment firm, invested $500 billion in a fundraiser for Nubank in June to deliver a valuation of $30 billion. Now, if Nubank can reignite its ambitions for a $50 billion market cap as markets settle, Buffett could feasibly see his investment continue to grow towards doubling his money in a matter of months.

(Image: Tanay Jaipuria)

It’s worth noting that growth is something that Nubank has a strong history of undergoing at a rapid rate – particularly over the past four years.

Following the arrival of Nubank’s credit card on the market in 2014, the company has been consistently adopting more advanced financial products which have helped to deliver an accelerated rate of customer adoption – with 48.1 million users accessing the app in Q3 of 2021.

Maxim Manturov, head of investment research at Freedom Finance Europe, believes that Nubank’s success wasn’t an accident – it was the culmination of a concentrated campaign towards positioning the customer as a priority.

“If you think back a little bit to the history of the company, the founders wanted to build a bank without any of the restrictions imposed by traditional banks,” Manturov explains. “The big banks, which occupy more than half of the market, started setting high-interest rates, which was beneficial for the banks themselves, but not for the development of the market.”

“Nubank became successful because of its customer focus, which allowed it to attract customers who had not previously used banking services. The bank’s main objective in founding it was to offer services to as many people as possible, as there is a huge wealth gap in Latin America. The company is also continuing its development, offering new products to customers and investing in its technology and development,” Manturov added.

Despite Nubank lowering its expectations for its IPO, the $8.5 billion downsizing of the challenger bank’s valuation still places it above Itau Unibanco, which had been Latin America’s largest financial institution with a market cap of around $38bn at the time of writing. This means that Nubank’s floatation makes it the biggest bank in the region, but the company is showing no signs of slowing down in driving significant growth.

Community-Centric Growth

Nubank’s financial services have been created with its user base in mind, and this has helped to leverage substantial growth across the company.

It’s possible to see evidence of a community-centric approach adopted by Nubank’s users through the company’s stock market debut, too.

In the buildup to its IPO, Nubank launched a program called NuSócios, which gave users the chance to become active shareholders in the company. NuSócios, Nubank has said, allowed customers to buy “a little piece” of the company ahead of its floatation.

The scheme worked through the distribution of free Brazilian Depositary Receipts. Known as BDRs, these receipts equate to around one-sixth of a class A common share – allowing users to gain exposure to Nubank’s stocks whilst learning more about some of the financial tools at the fintech’s disposal.

The distribution of these BDRs was capped at R$180 million (approximately $33m), with the NuSócios being central to the company’s Brazilian listing.

Furthermore, Nubank is also showing significant signs of growth intent as the company continues to ramp up its marketing efforts to attract fresh customers. In November, Nubank became an ‘Official Regional Supporter’ of the FIFA 2022 World Cup in Qatar – a move that’s set to deliver significant levels of exposure across Latin America throughout the tournament, which will begin later next year.

Developing eCommerce Tools

Prior to its IPO, Nubank teamed up with a range of retailers to develop an eCommerce platform within its app.

The move has paved the way for tens of millions of customers across Brazil to be capable of shopping at major retailers like AliExpress and Magalu via the Nubank app, with more partners set to arrive over the coming months.

Once again, this acts as clear evidence that the company is not only interested in growing, but also growing into fresh industries that fintech still has plenty of room to emerge into.

As it reaches the lofty status as Latin America’s largest financial institution, Nubank will receive plenty of interest regarding its next market moves. With a continued emphasis on community-centric growth that looks to reinvent what financial services can do for their users, the future certainly looks bright for Brazil’s innovative challenger bank.