O economics do Nubank nos EUA

The Brazilian digital bank Nubank announced today the beginning of its operations in the United States, aiming at a potential market of 100 to 150 million underbanked individuals. CEO David Vélez stated that while the natural first target is Latin Americans already familiar with the bank, the U.S. operation will not be niche. Nubank aims to be a competitive player in the mass market, according to Vélez.

The bank also launched a global account allowing free transfers among 35 countries, directly competing with Revolut, which obtained a provisional banking license in the U.S. this month. Vélez noted that around 95% of the global financial system is composed of incumbents, and digital banks like Nubank are not the main competitors.

A financial analyst said the global account was a surprise and indicates Nubank's ambition to position itself like Revolut, which has a larger valuation. In the U.S., Nubank operates under conditional regulator approval obtained in January, awaiting full national banking license. Nubank launched a remunerated checking account with a real yield of 3.5% per year, something rare in the U.S., where 60% to 70% of banking deposits are non-remunerated.

Deposits are held in a partner bank, Lead Bank. Customers will also have debit and credit cards with 1.5% cashback. Once the full national banking license is obtained, products currently available in Brazil, such as personal loans, will be offered in the U.S. Eduardo Rosman, who covers Nubank for BTG, sees an "attractive profit pool" in the American credit market, but execution will be crucial.

As in other countries where Nubank operates - Mexico, Colombia, and Brazil - the bank bets on a low-cost structure to be competitive in the U.S. Cristina Junqueira, Nubank's CEO in the U.S., said the American operation starts with around 60 employees and a cost per client of approximately $1, compared to an average of $20 for large local banks.

The U.S. revenue per client is expected to be ten times higher than Nubank's in other countries, due to currency conversion and higher per capita income in the U.S. "If we reach 10 million customers, 10% of the potential market, it will be like having 100 million customers in Brazil," Cristina said. The plan is to consume around 1 percentage point of efficiency index, around $250 million, to find the right product-market fit and grow from there.

Nubank plans to unify the products under its proprietary structure with the global account, replacing the current partnership with Wise, which currently operates the bank's global cards. Nubank will convert deposits in different currencies into digital dollars or euros, stablecoins pegged to the U.S. dollar and euro, with daily yields of 3.50% and 2.20%, respectively.

Vélez said they will understand the needs in other countries and may open banks in those regions. For Brazilians, the account will be available "soon." The announcement did not affect Nubank's stock, which rose 0.2% at the end of trading. The bank's market value is $73 billion on the NYSE.