Nubank’s Junqueira on Disrupting the Banking Industry

0:00 Christine, thank you so much for joining us. Your chief growth Officer. So I was going to start by asking about new banks next chapter. Last year, new bank became the most valuable financial institution in Latin America. And then you made some news yesterday helping tee up this question about looking to see just in time exactly about your planned expansion in the US. Can you tell us what you see as the opportunity? Absolutely. Thanks for having me, Caroline and everyone here at Bloomberg. So, yeah, yesterday we had some exciting news we just filed with the FCC. Our application for Federal Bank Charter in the U.S.. The U.S.

0:40 is a very interesting market, a huge market. My partner, David or CEO, he he likes to say that Texas alone has a larger GDP than Brazil. So obviously, it's a huge opportunity. Florida is about to surpass Brazil as well. But this is, of course, like a long term process. You know, regulatory filings do take their time. And it's a process that we take very seriously and one that we're determined to get ahead. So our priority continue to be to grow in Brazil, in Mexico and Colombia. There's still a lot to do, even though we're serving over 123 million people. I think that's the last number from the last quarter. There's still a lot of room for growth even in Brazil, where we're already serving over 60% of the adult population. There's still a lot of room for us to continue to deepen the relationship with the customers, grow revenue per customer. There's many product lines that we're just scratching the surface. So a lot of room for growth still.

1:33 I want to come back to all those markets that you mentioned, but sticking with the US. I think you told me you just moved. Is that. Yes. Yes. I recently relocated to the U.S. while it was getting very hard for me to travel. I've been focused on our international expansion for a little over two years, maybe three years now. So I was overseeing Mexico, Mexican Colombia operations there, traveling very frequently and being based out of Sao Paulo is very tricky. Now I'm based out of Miami, so that's a three and a half hour flight from Colombia, three hour flight from from Mexico City. And of course, that positions me well to eventually oversee our US operation. So you're going to start building something there in Miami about your plan?

2:12 Yeah. So we already have over 150 employees in the U.S. because of certain acquisitions that we've made and also because of the talent pool that we were able to tap into. So we do have a lot of folks that work out of the US, but servicing or Latin America operations. But it is the plan. I'll be the CEO of our U.S. Federal Chartered Bank and I will be based full time in the U.S. and we'll be starting to focus more and more in preparing for that.

2:39 So as you think about that, I mean, who is the customer in the United States for new bank? I mean, how are you defining that? We've seen a number of Brazilian banks expand also in Miami, Miami and elsewhere. But looking to serve sort of the Brazilian expat. Is that who you're going for? How do you see you think evolving? Initially, it's pretty obvious that our early customers are going to be those right, Like early adopters. If you think about the adoption curve, like early adopters are going to be the people that are going to be willing to take a risk very like willing to experiment with your products. And those like it's only fair that those for us are going to be people familiar with the brand.

3:15 So we do expect that quite a large share of our early customers are going to be people from Brazil, Mexico, Colombia. We know already that we have hundreds of thousands of customers of new bank that there already living and working out of the United States. We have over like four or 5 million customers downloading the app and making purchases regularly in the states coming from, again, Brazil, Mexico. So we do expect like a fair amount of customers to be those early on. But frankly, like the pain points that we serve, if you think about, you know, our products are convenient, transparent, simple, like without fees, you know, the serve that that daily banking needs that people have, those are fairly common pain points.

4:01 You know, I think that has a possibility of resonating even with a much wider American audience beyond the Latin America community. So you you mentioned a couple other markets where you have expanded outside of Brazil, Mexico, Colombia. Those are markets where you also have a banking license and you're going for one in the US, as you said. What have you learned from that expansion and how applicable is sort of the new bank model to some of these other markets?

4:29 Oh, for sure. So we have been, as you've mentioned, approved for bank licensing Mexico. The bank will actually kick off operations in 26. So there's an approval and then there's like an implementation phase. So we're going through that right now. But we do operate multiple financing licenses or financially regulated licenses across all jurisdictions, including in Brazil. One of the key learnings is this is a multiyear process. You know, in Mexico, it's been a few years since we filed.

4:58 I remember when we filed. And it's been a long process working with the regulators, which again, is something that we take very seriously. We've always, I think, unlike other fintech companies, we've always embraced regulation. We I remember very early in Brazil, like we went to Brasilia to ask for a bank license and we ended up by going the route of getting a financing license, then complementing with additional pieces on a regulatory framework. But there are other companies that have a strategy of more like evading regulators to try to avoid being regularly. We were never that type of company.

5:28 So it's it only fits that we would kick off the country's number four expansion with the regulatory process just to get ahead of that, because we know this is this can be a lengthy. Is it? At the same time, is it appealing that the you know, the current administration in the US has a bit more of a sort of deregulatory posture than previous ones? I mean, in terms of the timing for why you'd go in now, is that now Fuller. There could be for sure.

5:53 Or our approach has always been to work with whatever regulatory, even in Brazil, like where we've seen a regulator that was very much like pro-competition, very innovative. We didn't necessarily benefit from a lot of the regulatory framework innovation. You know, we went through the same process as everyone else. We're regulated in the same way. So if there is something on with the current administration that facilitates the process, great, but we're not necessarily relying on that. How do you think about profitability outside of Brazil?

6:22 Obviously, you've been hugely successful at home. Some people might call that market mature. We'll get to that. But I mean, Mexico, Colombia, I think are not yet profitable. And how do you see reaching that goal? Sure. We see it as a natural step eventually in the stage of maturity. Similarly to Brazil, it took us several years to break even, not because we didn't have a profitable business model like from the beginning. We when we looked at unit economics, when we look at customers on a unit basis, we've always been booking.

6:52 Same thing for Mexico, Colombia booking profitable customers. It's just when you're growing so fast, the unit curve requires that investment in the beginning, like with those customers, whether those are bureau costs, like data costs or printing and shipping the cards or even like a little bit of the cash. Like we do invest a lot of money in marketing. But, you know, there's a little bit there are provisions, right, like for credit losses. So there's a lot of investment that we make.

7:15 So when you're growing our customer base at a very fast pace, that requires a big bulk of investments. So profitability in Mexico is not something that we're worried about. It's going to be a natural conclusion of when we have actually a larger book or a larger portfolio or like a timeline you have in mind in terms of when you want to achieve better for Mexico. They're further ahead than Colombia, I guess, because the operation started sooner. I think we're serving already 13 million customers. So even from a scale standpoint, like we're closer, I guess like then Colombia could be over the next couple of years.

7:46 But one of the things that is important to note is like we're not actively chasing, breaking even, you know, like we're chasing profitable growth. So as long as growth will continue to outpace the margin that we generate, we're going to be good. Now, reaching breakeven. It's we're well capitalized. And so how do you think about the potential for growth in the US? Do you have two years from now a number in mind in terms of customers or margins or how are you sort of targeting that? We're not quite ready to share that.

8:15 We've done, of course, like a bunch of simulations because when we follow the velocity, we need to present a business plan. So that's something that we're going to be discussing with el-Sisi. What I can say is we do expect a lot of our playbook to really be global because when you think about the cost advantage that we've built over time, that should translate into the U.S. market, too, right? Like we now have very robust tech platforms and finance platforms that have scaled and been deployed effectively, safely, compliantly across three markets right now. So we do expect that advantage to be deployed in the U.S. and to also materialize as a cost advantage. We currently serve customers with less than a dollar in terms of cost per serve.

8:58 So we do expect similarly to be able to serve customers very efficiently and or drive is going to be scaled that operation to pass on those efficiencies to customers and no fees, you know, lower rates like all those things that we've been doing for a while. So even though there are adjustments at the margin for the specific specificities of the U.S. market, like we know they're 50 states, some of them have specific regulations that we're going to have to adapt our platforms to.

9:24 And that's what we're focused on right now. But we do expect the model, like everywhere in the world, consumers will want no fees or lower fees or lower rates, a more convenient experience like an app that works, an experience that is beautiful and smooth, and that's what we plan to offer. So let's talk a bit about Brazil. I mean, what how do you see growing margins there? And obviously you have quite a lot of customers already, but but how are you thinking about growth in that in your home market now?

9:52 Of course. So in Brazil, we're serving over 60% of the adult population, which is remarkable. That's about one over 100. 110 ish almost at the stage. So you look at that number, you think, well, you know, they're pretty much done, but we don't really think about that. We look into many other opportunities, continue to grow. Serving the adult population as well as we have been very successful so far, serving a population of teens and tweens. So we're rated the largest financial institution with accounts for under-age customers in a very safe way that allow parents to monitor their financial activity. We just earlier this week announced that we're going to be doing the very first version of a credit card for like 16 year olds and 17 year olds to really help them learn their way into using credit responsibly. So that's something that we expect will resonate very well with customers, and that's on the customer count growth.

10:49 But when you think about revenue growth, we're at about $12 per customer on average revenue per customer on a monthly basis. Our competitors are running at around 40 something. So there's a lot of room for growth. I don't think we're going to get all the way to 40 because they do charge a lot of fees that we don't anty fees. Exactly. But when you look at our older cohorts, sometimes customers that have been with us for even a year, they're already in their twenties. So there's a lot of room for us to almost double our revenue, even with the current customer base only maturing.

11:21 So we're very excited about that possibility. What does that mean in terms of the evolution of the new bank customers? Is it a higher income customer over time, or how do you see that changing? So there are two components here. So one is just even the average customer, which is the average Brazilian, because when you serve 60% of the population, you have a subset of everyone but that customers as they mature, as we get to know them better, we're better, we're able to better underwrite them.

11:47 We're we're able to increase their credit lines. We're able to offer more products to them. So think about somebody that started with the account on the debit card and suddenly we're able to give them our credit card and to grow that line over time and maybe underwrite them for personal loans, or maybe they're saving with us. So the revenue just continues to grow. So that's one thing. But the other thing is, of course, like there is a high income segment that we intend to continue to grow our penetration. We're ready to serve over 40% of their high income adults in Brazil. But we've always been kind of like a secondary card, a secondary account, but now, like we've been growing or high income brand called ultraviolet, that ultraviolet that has a very beautiful like metal card that is dark as a black card.

12:28 And there are very, very specific benefits. We're hoping like we're opening VIP lounges or lounge in Guadalupe if know you're flying to Brazil. Yes, I'll make it a point. I'll make it a point to host you in our lounge when you're down there like it's not. I fly all over the world. There's nothing like it. There's nothing like the experience that we're offering our customers within the ultraviolet segment. And that's from brand experiences like The Lounge, or we have a House and the Uber Aquatic Park and so forth. But also from a product standpoint, like we're now offering them a lot of advantages on a credit card for international purchases, for travel at very high points per dollar use, as well as cash back.

13:08 So or whole ultraviolet offer has been has been developed to tailor to that segment and growing very well. So, I mean, you are expanding sort of. Yes. On the higher end. Yeah. Yeah. How would you assess the health of the Brazilian consumer right now and in terms of credit quality, I mean, off and on, there's obviously been concerns about how that would show up. But I think you're underwriting has as surprised people to the upside. Yeah, it's funny since we began the company there's always this kept aren't one credit cycle away from getting we've been through a lot of credit cycles already like I spent 12 years so we've seen GDP contract like 7% in a year or you know low interest rates.

13:48 It was high, very high interest rates. We're coming off of a very high interest rate cycle right now. So we have shown that we have the muscle to be resilient, to credit cycles. On the underwriting side, we continue to build ways in which we help our customers navigate through that and even come out of that responsibly. So even we've had a program to reactivate customers that maybe defaulted on their lines and on their credit cards that have been shut down out of the credit.

14:18 So I think over 2 million Brazilians have been reinstated into our customer base this year on such program. So we continue to monitor, of course, I can, taking credit underwriting very seriously, but cautiously optimistic about our ability to continue to navigate whatever volatility comes our way in Brazil as an economy continues to be surprisingly resilient, like with the level of interest rates that we're seeing. There's employment data that just came out like the Brazilian central bank governor just commented on this earlier this week.

14:48 I think, you know how surprisingly positive the data was. So sticking with Brazil, which has been in many ways the fintech capital of Latin America. I want to ask you about PIX, which you. Interestingly, his seems to have sparked some wrath from President Trump. I mean, how when picks is the homegrown payment system run by the government? I mean, how how key to kind of this ecosystem has that been? And so pizza and instant payments in general, we believe it can be a very powerful catalyst to many positive impacts into the economy and into the financial system.

15:26 So when you think about instant payments and we saw that movement first in Asia, right, like the QR code payments with the super apps, and I remember being in China in 2017 and feeling like I had traveled like into the future because you would see people like, you know, selling stuff on the street or even like, you know, homeless people, like with the QR codes and, you know, that was everywhere. And that's the situation in Brazil today. So that has led to a lot of financial inclusion. A lot of people like being digitalized and brought into the system. A lot of like the a lot of payments being democratized all over the board because now even informal sellers and people that are like in the informal economy, they can facilitate payments in a way that is safe, that doesn't expose them to using cash or potential paths.

16:14 So there's a lot of positive benefits to this. I would love to see this happen increasingly more in other economies. Mexico and Colombia are still a very cash oriented economy, and that's something that we would love to see get digitalized over time. There are so many benefits on reducing tax evasion, even criminal activity when everything flows to the system. Like there's a lot more caution around, you know, how money flows into the system, a lot more controls. So we only see benefits we now have for better. Campos, which is the former governor of the Brazilian central bank and somebody who frankly was kind of like the father of pigs in our board and also as an executive with a team.

16:55 And one of the things that he's excited about is working with governments all around the world to walk them through the thinking behind Pix and the benefits that it could bring to economies. So last question quickly. I mean, obviously you're you face an increasing amount of competition. You've got MercadoLibre also making a push in to Brazil, Revolut making a push into Mexico. I mean, how do you see the landscape for fintech evolving over the next year? It has become more competitive and sophisticated for sure, which is great for consumers if they have more choice.

17:27 But the way that we think about this, the vast majority of people are still being served by mostly income and banks are not as efficient as we are that sometimes are not even in the position of being able to serve them because their cost of service is so high. Like with the branches of the offline model, most people are still paying very large fees there. They have their money part in account like earning zero. So those are the problems that we're focused on solving and surely there's more competition. That's great.

17:52 Customers have more choice, but we're not seeing that impacting our growth so far. So we continue to focus on customers. Thank you so much, Cristina, for joining us. Caroline.