Nubank, LatAm fintechs pivot to profitability pursuit amid rising rates

Across Latin America, fintech lenders are accelerating profitability strategies amid growing pressure from markets to yield profits sooner rather than later. 

The new scenario has led many firms to relegate growth strategies and aggressive international expansions while at the same time instructing a tighter grip on cost control. 

Nubank, the largest digital bank in Latin America, reported an adjusted net income of $17 million in the second quarter, up from $10.1 million in the previous period. It also booked a massive growth in its user base to over 65 million clients in Brazil, Mexico, and Colombia. 

However, CEO and founder David Velez acknowledged investors’ increasing focus on the importance of profitability.

David Valez headshot
David Valez

“While we continue to make our decisions based on long-term value creation, we are not disconnected from our investors in need to sanity check the profitability engine of the entire model,” he said in a call to discuss quarterly results.

Following ambitious growth strategies across Latin America, the shift in market sentiment is having financial technology companies pivot to a profitability pursuit, moderating developments into neighboring markets or new product verticals.

Short path to profitability

Velez, a Colombian who founded Nubank in 2013 after what he described as a dreadful bank branch experience in Brazil, said the bank was tackling efficiency with the overarching goal of becoming the “lowest cost” financial service provider in the country. 

“The current context reinforces our focus on cost diligence (which) should contribute to (…) shortening the path to very high profitability,” he said.

Amid rising interest rates globally, technology companies have been subject to acute repricing across the board. In Latin America, fresh publicly traded fintechs have not been the exception, with stock prices more than halving in many cases, year to date. Nu Holdings, which did a groundbreaking IPO in U.S. markets last December, is now trading at 60% of its IPO value. 

In any case, Nubank is still a large company by Latin American standards. Worth almost $25 billion in market capitalization, no other online bank in the region has more clients signed up. With 62.3 million clients in Brazil, the Sao Paulo-based challenger bank claims a third of the country’s adult population as a client.

In a recent interview with Reuters, Velez said the bank wanted to triple Brazilian clients and boost profitability. However, he said that Nubank would focus on core products instead and restrain from expanding into new markets. Limiting growth will help Nubank reach profitability similar to retail banking competitors, Vélez reportedly said. 

Enhancing cross-sell

Indeed, a profitability pursuit is no new feature for Nubank. While growing in the number of clients, the bank has also broadened its suite to enhance its ability to cross-sell. It started with a purple credit card as its first product in 2013, then moved to incorporate a savings account, personal loans, insurance, and crypto brokerage services. 

In the second quarter, its monthly average revenue per active customer grew to $7.8 from $6.7 (16.4%) in the linked period and $4.0 in the year-ago quarter (105%). 

“From now on, the institution will expand its suite and seek greater penetration of its products in its current customer base,” Bruno Diniz, a fintech author in Brazil, said. He added that the latest initiatives, such as crypto, are a clear example of this.


But for maximizing profits, many fintech experts argue that credit is a key product. In that regard, the footprint of digital banks in the profitable but highly competitive Brazilian loan market is still trivial. Nubank holds a credit portfolio of $9.1 billion in a loan market of almost $1 trillion. 

However, the bank has been able to grow fast: its loan book doubled in size year over year in the quarter and now reports 4 million borrowers. 

“Our growth bottleneck is certainly not distribution (but) our willingness to underwrite credit and enable this feature for our customers as we tend to go slowly and conservatively with any credit product,” Velez said.

Time to find efficiencies

A more significant concern for profitability and tighter cost control is not limited to Nubank alone. In an interview with Fintech Nexus, Sergio Furio, CEO, and founder of Creditas, a fintech unicorn and one of the largest digital lenders in the country, said that now was the right time for financial technology companies to zero in on efficiencies. 

“It’s time to put your head down and work,” he said in an interview. “To do the things that companies thought they probably would have two or three years to do. To win, you have to survive and to survive. You have to be efficient. It’s the right time to do that.”

In the call, Nubank executives echoed those words. The bank has already anticipated slower personnel growth in the remainder of 2022.

“Despite our undeniable growth orientation, we will never leave behind our cost discipline,” Chief Financial Officer Guilherme Marques do Lago said. “We will try to win this game on cost.”

  • 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.