Brazilian digital bank Nubank kicked off the year with a strong focus on international expansion, with its stock gaining momentum as the company introduced two significant initiatives in its Latin America operations.
First, it secured a license from the Colombian regulator, marking a crucial step in enhancing its customer acquisition strategy in the country. Simultaneously, in Mexico, the bank made its entry into the extensive remittance market, a promising yet largely untapped market for financial technology firms.
The company launched this January its own remittance service in partnership with a local fintech, Felix Pago. The new feature will allow its 5.5 million users in the country to receive money from the United States through WhatsApp. In a market dominated by a few traditional incumbents, the fintech hopes it can boost its value proposition by streamlining this process.
“(Mexico) established itself as the second largest recipient of money from abroad worldwide, and this new functionality allows us to continue expanding our footprint by offering a simple, easy, secure and fast option,” Iván Canales, the general manager in Mexico, said.
Nubank remittances: a major bet in its largest operation outside of Brazil
Mexico is Nubank’s largest operation outside of its home country, Brazil. It is the second-largest economy in Latin America and has significantly lower levels of financial inclusion that make it a compelling case for disruption. So far, the company has injected $1.3 billion into the country in the past four years and now seeks to broaden its customer base by introducing new products.
The announcement comes at a time when Nubank is expanding its position in the country. The digital lender received a banking license last year, paving the way for the fintech to accelerate its efforts in the market and roll out products at a much faster pace. While it has managed to garner significant traction, its customer base is still nowhere near its massive market share in Brazil, where it reports nearly 85 million clients.
Nubank pins its hopes on remittances to drive its business forward in the North American market. Money flows from the U.S. play a huge role in Mexico’s economy, contributing approximately 4% to its GDP. Mexican nationals residing in the U.S. sent a staggering $63.2 billion in remittances last year.
In a press release, Nubank explained how the product works. The process begins by creating a money request link within the Nu app, which automatically includes relevant information about the recipient’s Nubank savings account in Mexico. Subsequently, users share this link with the sender through WhatsApp. The sender then engages directly with the Felix chatbot within the WhatsApp platform, and Felix Pago facilitates the transfer of money cross-borders. The first transaction is free, and after that, the cost is $3 per operation regardless of the amount.
A much-awaited license in Colombia
Nubank is also making strides in Colombia, where its pace of customer acquisition has been sluggish so far. But thje digital lender is confident that will change significantly in the coming quarters following regulatory approval for Nubank to operate as a financing company.
As in Mexico, Nubank initially started in Colombia with its credit card, but the license now opens the door to new products like its savings account. The fintech has opened a waiting list, and seeks to attract banked customers to its ecosystem by offering a 13% annual yield on deposits.
“Similar to its strategy in Mexico, Nubank anticipates that the new savings product will enhance customer acquisition in Colombia and set the stage for a more extensive product portfolio, fostering successful and sustainable growth,” the digital lender said in a release. According to Marcela Torres, who oversees the operations in the country, the savings account is a “crucial step” in Nubank’s expansion in Colombia.
Certainly, its expansion figures in Mexico validate this assertion. Following the acquisition of a banking license in mid-2023, the neobank introduced its savings account. Within just one month, a remarkable one million customers had already initiated accounts with the platform.
Share price now close to IPO valuation
The digital bank’s shares have experienced an uptick in recent months, approaching its Initial Public Offering (IPO) valuation when it went public at $9 per share in late 2021.
The digital bank has since suffered a massive drop in market capitalization, as many technological firms have experienced following the rise in interest rates in the United States.
However, the Brazilian neolender, backed by Warren Buffett’s Berkshire Hathaway, has managed to stage a comeback on the heels of strong customer growth and solid monetization of its ample base. News like Nubank remittances product in Mexico have also provided further momentum to the company stock.