NUBANK

David Vélez grew up in Colombia, studied at Stanford Business School, and worked at Sequoia Capital in Silicon Valley. In 2012, Sequoia sent him to Brazil to find investment opportunities.

What he found instead was the worst banking experience he'd ever encountered.

Brazilian banks were controlled by five massive institutions that charged outrageous fees — annual credit card fees of $200+, account maintenance fees, fees on fees. Customer service was a nightmare.

Branches required hours of waiting. The banks had zero incentive to improve because they had a captive market of 200 million people and no competition.

Vélez saw the opportunity and left Sequoia to start Nubank in 2013 with Cristina Junqueira (a former Itaú banker) and Edward Wible (a Princeton engineer). Their first product was a purple credit card — no annual fee, managed entirely through a beautiful app, with transparent billing and real-time notifications.

In a country where banks treated customers like an inconvenience, Nubank treated them like human beings.

Nubank makes money from credit card interchange fees (1-3% of every transaction), interest on credit card balances and personal loans, and net interest income from deposits (lending out customer deposits at higher rates than it pays in savings interest). The company also earns fees from insurance products and investment marketplace commissions.

The key insight is that by being digital-only with no branches, Nubank's cost to serve a customer is roughly 85% lower than traditional Brazilian banks.

Nu Credit Card is the flagship — a no-annual-fee Mastercard managed entirely through the app. NuConta is the digital bank account with free transfers and bill payments.

Nu Invest is the investment platform offering stocks, ETFs, and fixed income. Personal Loans are offered based on credit behavior within the app.

Nu Life Insurance and other insurance products are distributed through the app. Ultraviolet is the premium tier with higher limits, airport lounges, and additional perks.

NuPay is the payments solution for merchants.

Nubank grew through word of mouth in a country where everyone hated their bank. The product was so much better than the alternative that customers became evangelists.

The invite-only launch created exclusivity and a waitlist that hit millions. People would beg friends for an invite code because getting a Nubank card felt like escaping prison.

The cost advantage was structural. Traditional Brazilian banks operated thousands of branches with tens of thousands of employees.

Nubank had an app and a customer service team. This let Nubank offer free products that banks charged hundreds of dollars for.

The unit economics were unbeatable — when your competitor has 4,000 branches and you have zero, you can afford to be generous.

Geographic expansion into Mexico and Colombia replicated the playbook. Both countries had the same banking problem — concentrated, fee-heavy, customer-hostile banks.

Nubank launched in Mexico in 2019 and Colombia in 2020. Mexico alone already has over 8 million Nubank customers.

The IPO timing was terrible. Nubank went public on the NYSE in December 2021 at a $41 billion valuation.

The stock immediately crashed as the global tech sell-off hit and rising interest rates in Brazil increased the cost of capital. The stock fell from $12 to under $4 by mid-2022.

Vélez had to spend a year convincing investors that a Brazilian digital bank was worth owning during a global risk-off environment.

Credit risk in Latin America is inherently higher. Brazil has volatile inflation, currency risk, and a large unbanked population with limited credit history.

Nubank's loan book grew rapidly, and delinquency rates spiked in 2022 as Brazil's economy slowed. Managing credit risk at scale in emerging markets is fundamentally harder than in developed economies.

Nubank has since tightened underwriting and delinquency has improved, but it remains the biggest operational risk.

Regulatory complexity across three countries is a constant headache. Brazil, Mexico, and Colombia each have different banking regulations, consumer protection laws, and compliance requirements.

Navigating three regulatory environments simultaneously while growing at speed requires significant legal and compliance investment.

Sequoia Capital, Tiger Global, DST Global, Tencent, Berkshire Hathaway, SoftBank, Dragoneer