Here is an interesting news pickup from Forbes on Fintechs in Brazil, suggesting if Indonesia’s mobile economy is the new tiger of Southeast Asia, then Brazil is the jaguar of South America.
- This huge user base of urban, young, mobile-first consumers has given rise to homegrown start-ups in a variety of mobile verticals, from 99 (ride-hailing) to iFood (food delivery), lending (Creditas), and banking (Nubank).
- Similar to the story playing out Indonesia, many of these local heroes have already grown to unicorn status, fueled by huge infusions of cash from international VC firms and strategic investors from China.
The most interesting development is Nubank. What started as a simple solution to embrace the unbanked has turned into a top virtual online bank.
- And Nubank, the most valuable startup in Latin America, is currently in discussions with global investors on a $1 billion dollar round which would value the company at up to $10 billion, making it one of the largest fintech companies in the world.
- It’s an industry ripe for disruption, and more fintech start ups—370 to be precise—have launched in Brazil than in any other Latin American country.
- They are attacking opportunities in payments/remittances, business and consumer lending, wealth management, insurance, and trading. As these new entrants gain traction, we can imagine how the new financial ecosystem will evolve.
It is not the app, it is the super app.
- The on-demand “local super-app” model has originated in Asia. China’s Meituan Dianping is perhaps the best example.
- Likely the most valuable app you’ve never heard of, $44 billion Meituan began as a group buy platform for local/small merchants of goods and services, expanded to food delivery, and evolved into a platform where over 400 million users access services ranging from restaurant reviews and reservations to hotel and home rentals, to movie tickets and travel booking.
- Brazil’s iFood and primary competitor Rappi are following this script. Beginning with one value proposition – delivering restaurant meals or groceries – they are morphing into platforms that are integrating into both their merchant’s operations and consumers’ financial lives.
- Those who benefit most from this convergence are Brazil’s currently unbanked, who will be brought into the financial fold via these new super-apps and have their lives transformed for the better.
There are a few takeaways. Note the morphing of apps. The model starts out with a simple solution, such as China’s Meituan Dianping. It begins with cooperative buying, and as it gets traction, it expands to adjacent businesses. In this case, to food deliver, then restaurant reviews, then reservations, and onward.
The parallel in Brazil is Nubank. The original application was banking for the unbanked. After a short while, Nubank extended its reach into lending, wealth management, and insurance. This is not the first time you will hear about Nubank, and it surely will not be the last.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group