LatAm neobanks surpass breakeven, signal maturing market

Digital banks in Brazil and Latin America performed strongly in 2023, even as interest rates and a risk-aversion scenario in venture capital put pressure on most fintechs across the region.

Fourth-quarter results from publicly traded neobanks, some of which have now attained considerable size, tell a story of how they managed to withstand the pressure in most cases and successfully pivoted to a profitability strategy during the last year.

Brazilian fintech leader Nubank, which has extended its footprint to Mexico and Colombia alongside its home turf, celebrated its inaugural year of profitability, surpassing break-even and maintaining aggressive customer expansion.

“Neobanks in Brazil and Latin America are now reporting stable profits and going through a clear phase of maturation,” said Bruno Diniz, a São Paulo-based fintech analyst and professor, in an interview with Fintech Nexus. “Most fintechs have already trimmed their operations to achieve a profitable operation, and they have expanded their product mix to grow the average revenue per customer.”

Nubank and first full year of profitability

Following a period of significant operational adjustments in 2022 and the past year, Latam neobanks, known for their lean structures, have capitalized on reduced costs while expanding their customer reach and introducing new products to boost revenue streams.

“2024 will likely be a year of further refining this approach, albeit in a scenario of increasing competitiveness,” Diniz added.

Bruno Diniz, fintech consultant.

Nubank, which was reporting losses when it did a landmark IPO on U.S. Nasdaq by the end of 2021, hauled in a full billion in net income in 2023. The firm booked 93.9 million customers in the region, by far the largest neolender by the number of clients.

“Nu released solid results, slightly below consensus numbers,” notes Bernardo Guttmann, Head of Tech and Financial Sector at XP Inc, a Brazilian online broker. “The Nu thesis, or “Nu formula”, continues to deliver.”

Analysts at the investment company highlighted an increased customer base and engagement among users, which drove the average revenue per customer significantly higher during the period. The fintech also grew its loanbook, and shares responded positively in global markets, trading 10% higher after it published results.

LatAm neobanks: Inter, Mercado Pago and PagBank also booked a strong year

Other digital banks also fared well. Brazilian neobank Inter surpassed the 30 million customer mark in Brazil, solidifying its position as one of the region’s leading neobanks. Additionally, it reported its first full year of profitability, totalling over $350 million.

In a recent interview with Fintech Nexus, the CEO of Banco Inter, João Vitor Menin, underscored Neobank’s achievement. “In the beginning, neobanks were good at onboarding millions and launching products,” he said. “But can they be profitable? We have proved this year that this is a sustainable business.”

Mercado Libre, often dubbed the Amazon of Latin America, experienced a significant year in its fintech sector. The Argentinian company reached a milestone of 50 million customers across the region, boasting one of the continent’s most geographically diversified customer bases. Fintech revenue surged to $1.8 billion during the period, marking a remarkable 73% year-over-year growth as the company continues to capitalize on its extensive customer network.

PagBank, a digital bank owned by Brazilian acquiring company PagSeguros, reported 31 million customers by the end of 2023 and roughly $350 million in net income. It estimated earnings to grow between 16% and 22% this year.

  • David Feliba

    David is a Latin American journalist. He reports regularly on the region for global news organizations such as The Washington Post, The New York Times, The Financial Times, and Americas Quarterly.

    He has worked for S&P Global Market Intelligence as a LatAm financial reporter and has built expertise on fintech and market trends in the region.

    He lives in Buenos Aires.