The U.S. credit card market is profitable but saturated. Europe has become less profitable, as regulators now drive every revenue facet. Asian markets are as exciting as China and India rack up record numbers of credit cardholders. And then there is LAC, a market ready to grow, with tons of opportunity as countries move towards inclusion.
The Buenos Aires TImes talks about Brazil’s Nubank, formally known as Nu Pagamentos SA. There are several important reference points, starting with smart money behind the bank.
- (The venture) is backed by Goldman Sachs Group Inc. and Tencent Holdings Ltd.
- Nubank has nine million customers, and recently sold private shares at a US$3.6-billion valuation
Tencent is a company to think about in the context of LAC. The firm’s WeChat has one billion users, according to the South China Morning Post. Revenue at Tencent has been slipping, but their payments business is promising. TechCrunch reports:
- The “others” category, composed of financial technology and cloud computing, grew 71.8 percent to generate 28.5 percent of total revenues.
- WeChat’s e-wallet, which is going neck-and-neck with Alibaba affiliate Alipay, saw daily transaction volume exceed 1 billion last year. During the fourth quarter, merchants who used WeChat Pay monthly grew more than 80 percent year-over-year.
Goldman Sachs, on the other hand, is hedging its traditional focus of private banking and corporate finance in favor of the consumer business. In the US market, the Apple alignment stands out. Here in LAC, this play could cause a broad range of expansion. Why couldn’t Nubank work in the US market? Can it bring digital banking into other regions?
Latin America, with 33 countries and a handful of territories is prime for innovation and banking infrastructure. Nubank is now the fourth largest credit card issuer in their market.
Throw in the fact that Japan’s Softbank appears to be entering the venture with their deep pockets, you can take this one to the bank: Nubank is set to be a force across Latin America and beyond, after only five years in business.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group