We are living in the golden age of banking. It has never been faster and cheaper, to receive and spend money. Bank accounts are affordable and easy to use. Rather than taking 3 days, most transactions take mere hours. Credit cards and debit cards are accepted basically everywhere.
Let’s not forget how Apple Pay revolutionized mobile payments, enabling 100s of millions of people to transact using their iPhones.
However, this hasn’t always been the case everywhere!
In 2019, there were over 200 million unbanked people in Latin America, around 45% of the adult population!
The majority of these people are low-income and legacy banks simply didn’t see the profit potential in servicing them. They were satisfied with high profits and had zero intentions of doing anything to reduce the unbanked population.
This is the environment in which Nu Bank was born!
“Our mission is to fight complexity to empower people in their daily lives by providing accessible, affordable, and easy-to-use financial products.” Nu Holdings mission statement 20F 2023
Nu wanted to empower people, and they empowered 114 million of them!
By 2023, in large part thanks to Nu, the number of unbanked people had fallen to 91 million, 21% of the adult population!
In this 3-part Deep Dive, I will tell you why I think Nu is one of the most promising long-term investments in the market!
In Part 1, I will tell you their origin story, and explain Nu’s business model.
Part 2 will tackle challenges and competition.
I will close out this Deep Dive in Part 3 by taking a look at their opportunities, financials, and valuation!
Let’s begin!
1. The Story of Nu
2. Business Model
3. Competitive Advantage
4. Parts 2 and 3
1. The Story of Nu
Nu was founded in 2013 in Sao Paulo, Brazil, by Colombian venture capital executive David Velez.
David moved to the US in 2004 to attend Stanford University and after working for various large investment banks, he ended up at possibly the world’s most famous venture capital firm, Sequoia Capital.
In 2012, Sequoia was looking to expand in emerging markets and picked David to lead their Brazilian office. This is how David recalled the experience years later.
“In mid-2012, I entered the branch of one of Brazil’s largest banks to open my first Brazilian bank account. As I approached the first bulletproof door that was flanked by armed security guards, I sensed this was not going to be easy. During the following four months I spent long hours in queues, calling the call center, and returning to the bank branch with an increasing number of documents, until finally a bank account that would charge hundreds of reais per year in fees was approved in my name. The entire experience was incredibly frustrating. As I tried to reconcile this experience with the immense profitability of Brazilian banks and the low penetration of banking in this country, I realized that this was possibly the entrepreneurship challenge I had been looking for..” The Spark Of Our Foundation: a letter from our founders. Nu Holdings. 9. December 2021.
Motivated by this personal experience, just a year after moving to Brazil, David quit Sequoia Capital to create Nu Bank.
Latin America
To understand Nu Bank’s story fully, we must understand the region in which it operates.